Finance Committee

I'm Andrew Jeffreys, director of the Welsh Treasury.

Lovely. Thank you for being with us today. We have quite a short session together in the understanding, of course, that we spent some time with you before the summer for the first supplementary budget. I guess, since then, Cabinet Minister, you described that there's been some exceptional circumstances that you've been having to handle as Cabinet Minister over recent times, and that had been at quite short notice, with the notice of the supplementary budget. I wonder, perhaps, if you could describe what those exceptional circumstances have been and why you could not give more notice of this second supplementary budget.

To start, I guess the story of the first supplementary budget is well known, in that the vote on that supplementary budget was not accepted by the Senedd. Therefore, over the summer and into this term, as a Government, we've sought to find agreement with a political partner in the Senedd to enable the introduction of a second supplementary budget for the Senedd to consider and, hopefully, to pass. These are quite exceptional. I think it's the first time that a supplementary budget has not been accepted by the Senedd. The spending allocations that we had in that budget were then at risk, and as the year progresses, that risk increases in terms of spending against unallocated commitments and unpassed by the Senedd, not approved by the Senedd. Therefore, the combination of those two factors, the fact that the first supplementary budget was scrutinised fully by this committee, and discussed in the Senedd—. And there is only one additional change to that budget, and that is the agreement between the Government and the Labour group on a £60 million allocation within this supplementary budget. That's the only change to the budget that was scrutinised in the summer. Therefore, that, to me, is exceptional, and we wanted to provide time for the committee to look at this one change to the budget. But also, I was very conscious of the fact that we're moving into the annual budget as well. And in scheduling this for a debate and vote on the first week after recess, then that allows a period of time before the draft budget itself is laid as well.

Thank you. If you were in our shoes, or not in the Government, would you think that three weeks is enough time to scrutinise this change?

Given the change of just one small part—£60 million, yes, but just one change from the previous budget as scrutinised fully by you—then I think it's proportionate. I'd say that, in thinking about this and in having been outside of Government and thinking about complying with Standing Orders, then this complies with Standing Orders. It's exceptional in the circumstances that have brought it about. I also, believe it or not, not only had in mind the time that Government would have to introduce this supplementary budget and work towards the draft budget, and accommodate next week's UK Government budget as well, but also in providing you as a committee with enough time to do your preparation work for the draft budget as well. I know that I also this week did make a statement and did lay a piece of legislation that your committee also needs to involve itself in.

You're keeping us very busy, Cabinet Minister, which I'm sure we're grateful for. I noticed you talked about unallocated funding for a moment in your first response. I know, Cai, you had a question around unallocated funding that, perhaps, you want to bring in here.

Yes. You've obviously got a lot of unallocated funding, but less than you had in the first supplementary budget. You mentioned in the Finance Committee on the first supplementary budget scrutiny that there was £300 million of financial pressure within the NHS during this current financial year. Is that still the case?

Yes, you're right to point to the financial pressure in the NHS and the pressure that puts on the in-year position of the Welsh Government. There have been financial controls put in place across the Welsh Government, but also, in particular, the health Minister has been working with his officials and others to bear down on that financial pressure within the health service and across the health boards. So, that work is continuing and we are making progress on that work, but there remains continuing pressure on that budget. I don't know if you want to give more detail, Andrew, on the nature of the work.

Definitely, health is the big pressure area still. Some progress is being made on managing that pressure but it's still relatively early in the year in terms of calling exactly what the outturn will be. It's probably worth adding that it's not only that pressure that we're having to manage in terms of the unallocated funding, there's also a range of unbudgeted commitments that need to be considered. The obvious example of that is the cost of the Senedd elections; that's not in the budget yet and will, obviously, need to be funded this year. So, that's around about £20 million in the current year. There are a number of things that are not yet in the budget that will need to be funded, as well as those pressures that the Minister talked about.

If you knew that there's £20 million for the election, is it appropriate to move that from the unallocated funding?

We don't tend to budget for that until we're very sure about exactly what the costs are. What we tend to do is we hold money in reserve until we know what the actual costs are and then we put the money into the budget in a later supplementary budget, once we know exactly how much is needed.

Just coming back to the NHS financial pressure, where is the £300 million coming from, or is that not going to be dealt with?

It will be dealt with by continuing to work with the health boards and other health organisations on their pressures. That work is continuing and that is being sought to be addressed. As you know, various health boards in areas right across Wales are looking at their budgets at this point. They know that there's an expectation for them to reduce their financial overcommitment, and therefore that work is continuing.

I'd also say at this point that it's not just in the health service that there are pressures. Andrew has referred to the election spend that's not currently allocated, but also there are pressures within the education and transport budgets, I'd say, within year as well. Both of those ministerial responsibilities need to work on how they are able to fund within the allocation that was allocated. But there are pressures, as we know, in different areas of the education budget.

Thanks, Cabinet Minister. I have to bring others in at this point. Huw, do you want to come in? And then Lyn, I'll come over to you in a second. Thanks.

Thanks, Chair. I think it's fair to acknowledge that I have had conversations with the Minister in relation to agreeing a way forward on the supplementary budget. I'm grateful for those conversations and grateful that, with the additional funding made available for ALN, we're in a position politically to enable that to continue. We've been clear we'd like to see more ALN funding unlocked, and the key to unlocking that, as I understand it, is driving down pressures and overspends in the health budget and elsewhere in order that that remaining unallocated sum becomes available. Like Cai, if I may just return to the NHS question, because I think I asked you in the Chamber, Minister, about the overspend as forecast at month 2. I think it was about £333 million. I'd be really interested to understand where have you got to in either driving those costs down, or have they, in fact, increased? What are we—month 4? What is the month 4 position?

The most recent figures I've seen have been down on where that position had been. We are retaining, as you know, in this budget unallocated money that will be considered later as we know how the work on working within budgets has worked, both in health but also in those two other areas that I spoke of with particular pressures on, and this need to ensure that we have adequate funding within the Welsh Government budget to meet the pressures that we have in-year. I've spoken about how significant those pressures are.

There is a combination of factors at play here. One is the need to bear down on those pressures, but also to retain a degree of confidence and flexibility within our in-year management. The supplementary budget passing will give us some confidence and lessen our risk on how we proceed with spending, but also we have retained an unallocated piece of the budget to also give us some flexibility, should we need it.

But the emphasis from me as the Finance Minister to other Ministers in the Government is that we need to be looking, as a new Government in particular, on where the spending is within these particular areas, and how we can do so more effectively in this financial year. But I have a particular eye on how we can develop efficiencies into the NHS over a period of years as well.

Do you have anything else on that, Huw? I'm sorry, Lyn, you can come in in a second, but Dan wanted to come in on this particular topic first. Is that right, Dan?

It's on the NHS.

Come in on this now, and then we'll come to Lyn.

Thank you, Chair. Cabinet Minister, the supplementary budget has allocated £34 million for the NHS workforce. What consideration has been given to providing for graduate midwives? Because your colleague a few days ago said that all student nurses and midwives will be guaranteed a job. But the Royal College of Midwives has said there are still 66 student midwives who are left without a job at the moment. There's no job for them. They've just started a petition. I've just noted that you've got £34 million allocated for the NHS workforce. What portion of that could be used to guarantee those midwives a job, even if it's just for the next 12 to 24 months, which would then give the service time to have long-term sustainable funding for all student nurses and midwives? Because I think you would agree that these students have been going through the education system now for some years in the hope of having a job. There is a shortage of nurses and midwives, and it's an absolute priority for us to make sure that they have certainty for their medical careers.

Okay, thanks. Minister.

You'll have to explain to me where the £34 million for workforce is. So, if you can—

It's in 'delivery of core NHS services'. There are three lines: 'Workforce (NHS)', 'A Healthier Wales' and 'Other NHS Budgets', which is £16 million, which is—

So, they're not new allocations. Sorry, that's what—

No, it's not a new allocation, no; I beg your pardon.

That's in the core budget.

But it is a new development. Sorry, Cabinet Minister. It is a new development. Your colleague put a press release out saying that all students will be guaranteed a job, but the Royal College of Midwives are saying that's not the case. So, I'm just talking about that £34 million—some of that could be used to guarantee those students a job at the end of their training.

That will be a matter for the Minister for health in particular. It's not an allocation that this supplementary budget has brought about. The allocation for the NHS in this supplementary budget has been in particular around the waiting list initiative and the £100 million towards the reduction in waiting lists that the Minister has also announced.

In terms of the general workforce of the NHS and how the NHS budget relates to that, obviously, the Minister has made other announcements this week on the progress on nursing employment. These two issues have been issues that have been inherited by this Government, and the Minister is actively looking to see how the matching of those people that have trained in Wales are able to be found places in Wales. So, I'd refer you to the health Minister to give you a more detailed response than I'm able to give at this point. It's certainly something that the Welsh Government is continuing to focus on as part of our delivery of our NHS budget and practice within this year, and making sure that midwives that are trained in Wales have a job opportunity in Wales is something that the Minister wants to see.

Okay. I think we will put it to the health Minister as well. So, thank you.

Can I just ask: has the health Minister lobbied you for extra funding for this?

The allocation of the supplementary budget is as is in front of you, as agreed by the Welsh Government. The imperative for the supplementary budget in terms of additional allocation was on the waiting list initiative, and that's outlined here. The work in terms of ensuring that there is adequate provision of job opportunities for midwives in Wales is work that the health Minister does on a day-to-day basis in running the NHS in Wales. So, that's a matter for him to see within the priorities of the budget he has.

Okay. Thank you, Chair.

Thank you. Lyn, and then we'll come to Sera. Lyn.

We recognise that there's only one change in the budget since June. Can you outline why no other allocations have been made?

Well, the first part of the answer to that refers to the initial aspect of the questioning on the in-year pressures that the Welsh Government has on the NHS and other pressures. We do need to ensure that we have a degree of flexibility and unallocated funding as well, as we move to managing the budget in-year.

I think it's also true to say that we wanted to keep this budget proposal as straightforward and simple as possible in order to meet the three weeks that we've discussed earlier, just providing that one change and seeking agreement of the Senedd in order to allow the allocation of these budgets to spend according to allocation. The simplicity of that was what made me decide to make no other changes other than the £60 million allocation to additional learning needs.

There will be a need, as there is always a need, to have another supplementary budget towards the end of the financial year, which is the supplementary budget that will make the changes in line with where the pressures and where the spending has been managed towards the end of the financial year.

Okay, thank you. Sera.

Diolch. Weinidog Cabinet, fel rydych chi'n gwybod, mae ADY yn bwnc sy'n bwysig iawn i fi, felly mae ail gyllideb atodol 2026-27, sy'n dyrannu £60 miliwn ychwanegol ar gyfer ADY, dwi'n falch o weld hynny heddiw, a chydweithio gyda'r grŵp Llafur hefyd. Pa asesiad o bwysau ADY sy'n sail i'r dyraniad ychwanegol, a pham y barnwyd mai £60 miliwn oedd y swm priodol?

Byddwch chi'n ymwybodol o'r drafodaeth oedd yna ynglŷn â chynnig gan y Llywodraeth ynghynt yn y flwyddyn i ddyrannu £40 miliwn ar gyfer anghenion dysgu ychwanegol. Roedd yn amlwg doedd ddim mwyafrif o fewn y Senedd i gadarnhau hynny. Felly, yn dilyn trafodaethau, mae'r cynnig yna wedi cael ei gynyddu. Rydyn ni'n derbyn bod yna bwysau difrifol iawn ar ysgolion a cholegau o ran darparu ar gyfer pobl ag anghenion dysgu ychwanegol. Mae'r cyfraniad hwn yn fforddiadwy am eleni, ond rŷn ni'n gwybod—fel dwi'n meddwl bod pawb yn gwybod o gwmpas y bwrdd yma—fod angen cyrraedd lle ble mae yna ddealltwriaeth o beth yw'r gofyniad hirdymor ar gyfer darparu addysg arbennig. Felly, dyna'r bwriad, i 'stabilise-o' y sector i ryw raddau eleni. Roeddwn i'n awyddus, felly, i wneud y cyhoeddiad am y dyraniad yma mor gynnar yn y flwyddyn ariannol yma ac y gallem ni, i roi'r amser i ysgolion a cholegau fedru gwario'r arian mewn ffordd oedd yn rhesymol iddyn nhw. Mae'n bwysig hefyd i nodi, yn y dyraniad yma o £60 miliwn, fod yna £1.5 miliwn ar gyfer partneriaid awdurdodau lleol i wneud mwy o waith ar gynllunio i asesu'r ddarpariaeth hirdymor sydd ei hangen arnynt yn eu hysgolion a cholegau. Mae honnao'n elfen bwysig o'r gwaith mae'r Llywodraeth angen ei wneud nawr gyda phartneriaid ar gyfer cyllidebau i'r dyfodol.

Anything else on that, Sera?

No, diolch.

Elfed, was there anything you wanted to pick up?

A gaf i jest ehangu bach ar yr £1.5 miliwn yna rydych chi wedi rhoi i un ochr ar gyfer cynllun cynaliadwy? Beth ydych chi'n gobeithio fydd canlyniad y gwariant yna?

Wel, byddwn i'n dweud taw arian yw hwn i awdurdodau lleol i weithio gyda phartneriaid ysgolion a darparwyr er mwyn sicrhau eu bod nhw'n cychwyn cynllunio ar beth yw'r ffordd o asesu'n glir beth yw'r angen yn lleol—mae hwnna'n para yn fater sydd yn her yn y ddarpariaeth yma, ac angen sy'n cynyddu—a hefyd gweld sut mae darparu mewn ffordd sydd yn fwy cynaliadwy. Rŷn ni'n gwybod bod lot mawr o ddarpariaeth, ar gyfer yr anghenion mwyaf dwys yn enwedig, yn gallu bod yn ddrud iawn i awdurdodau lleol ddarparu, pan mae angen gofal y tu allan i'r sir ar unigolion ac addysg y tu allan i'r sir. Felly, mae eisiau cynllunio ar gyfer darpariaeth sydd yn gynaliadwy i'r awdurdod lleol a'r ysgolion ddarparu'n lleol, er mwyn osgoi rhai o'r darpariaethau drudfawr yma sydd yn y system, a sicrhau bod y gynhaliaeth yna sydd yn darparu digon o staff a lleoliadau addas o fewn y siroedd yn gallu cael ei darparu. Felly, cynllunio ar gyfer hynny yw bwriad y gwaith yma, nid ei ddarparu yn uniongyrchol. Wedyn, fe fydd gwell asesiad gan bawb, gan gynnwys y Llywodraeth, ynglŷn â beth yw'r gwariant sydd ei angen ar y sector yma i gyflawni yn well na beth sy'n cael ei gyflawni ar hyn o bryd.

Okay. I'll bring Huw in next, then Cai. Huw.

Can I just ask, as far as local government is concerned, two questions, really? One, are you satisfied that the allocation formula for the additional ALN funding is fair and appropriate? Because I've been made aware of concerns from council leaders suggesting that the formula is being distributed on a population level rather than on a number of ALN pupils level. I wonder whether you've got any reflections on that.

I also wanted to pick up on a question raised with the education Minister yesterday around the pay negotiations with NAHT, which obviously entered a period of intense negotiation over a two-week period, and, in the middle of that period, the Government then decided to stick with this offer of a 3.5 per cent pay award for teachers whilst those negotiations were ongoing, and then, obviously, NAHT had written to say they were withdrawing from those negotiations and proceeding to ballot for industrial action. So, I wonder if you could just explain what the Government strategy was in proceeding on that basis.

I probably am not the person to explain in detail the Government's negotiating strategy with the teachers union, other than to say that the Government is very keen for those negotiations to continue. The allocation of funding within the budget that was passed by the Senedd would have been based on a 3.2 per cent public sector pay allowance. Obviously, the Government has moved to a 3.5 per cent offer to teachers now. That's continuing. As far as I know, in terms of the Government, the 3.5 per cent is our negotiating position and we're continuing those negotiations. Further than that, I wouldn't like to jeopardise negotiations by saying something that is unwise at this point, other than to say—

And on the ALN distribution?

ALN distribution. I'll leave you to talk about the distribution formula, Andrew.

I wouldn't pretend to be an expert on this particular thing, but I think my understanding is that the funding has gone out in two main chunks. One is direct to schools, which I think is about 80 per cent of the funding, and then there's a chunk that's gone to local authorities. The chunk that's gone directly to schools is allocated based on pupil numbers, and that's how we tend to allocate funding directly to schools, partly because the data that we have on ALN numbers is not fantastically robust, and those kinds of numbers are better appreciated locally, I think. So, some of the money that has gone to local authorities can be used for topping up those schools that local authorities feel need a bit more of that funding than perhaps pupil numbers would suggest. So, that's how it's been distributed.

And before I bring Cai in, I know time is really going on, so perhaps be brief for my own question on this. You've used the language of 'direct to schools', but actually what's happened is that the money has gone to local authorities to pass on to schools, hasn't it?

My understanding is that—. We can perhaps just clarify this in a note, but my understanding is that the bulk of the money has gone directly to schools, through local authorities to be distributed.

Okay. I'm just not sure of the mechanism.

Via the local authority education grant is my understanding of it, but I'm not an expert in how that works.

Okay. Time has gone on, and probably for that bit of detail we might pick it up separately, and it might be clearer with a note as well. Cai, do you want to finally come in on something, and we'll wrap up?

Yes. Just coming back to the unallocated funding, given that it is so significant—£186 million—it's quite hard to scrutinise where that money goes, but it sounds like you guys do have some plans about where you're thinking it may go. Is it possible to request a document on, roughly, what the plans are with this money, because it's so significant?

Well, I guess that the time for scrutiny of that is particularly at the second—well, it'll be the third—supplementary budget, because at that point that funding will have been allocated in some way. I've already indicated as clearly as I can the various pressures, and especially the NHS pressures, that we are seeking to manage. It is a matter for in-year management, effective in-year management, by the Government in how we deal with the allocation that's required where pressure on budgets has not been able to be reduced. So, that's a matter for the Government to work on in-year, and it will be ultimately a matter for this committee and the Senedd to scrutinise us on when we bring the final supplementary budget in front of the Senedd.

Could I just add here that it's not unusual to be holding a contingency at this stage of the financial year? There's a lot that can happen between now and the end of the financial year. So, whenever we do a first, or second, in this case, supplementary budget at this time of year, we do generally hold a chunk of funding unallocated.

But it would be useful to be able to understand what the plan is with that money, to have some sort of document that says, roughly, there's about £30 million that goes to that campaign—

Yes, so that'll be the third supplementary budget that this committee will see in a couple of months' time, I suspect. That detail will be in there—is that right?

Yes, and I'm clear in what I've said. I've outlined where the pressures are. You've referenced the particular pressure that our health boards have announced publicly themselves, where they are on their annual assessment of their pressures. And on both transport and education, there are in-year pressures to meet. The responsibility first is on Ministers to ensure that they are able to fund the pressures within their budgets and then the reaction on behalf of the Government will be where those pressures have been too significant to be done in any way. Having the flexibility and the contingency of a reserve is the way that those will be dealt with. And ultimately, you will be able, as a committee, to pass a view on how the Government has done that work during the year.

So, is it fair to say—

Sorry, Cai, we'll have to finish there. Sorry, the time's gone. Thank you for your time this morning. I appreciate that. And thank you for sharing the evidence, as we requested. We think we will write to you just on a couple of those technical—not technical, but more detailed—points around ALN funding in particular as well. Thank you very much.

That's fine. Diolch.