Cabinet meeting: 3 June 2024

• Rt. Hon. Vaughan Gething MS (Chair)
• Rebecca Evans MS
• Lesley Griffiths MS
• Huw Irranca-Davies MS
• Jane Hutt MS
• Julie James MS
• Jeremy Miles MS
• Eluned Morgan MS
• Lynne Neagle MS
• Ken Skates MS
• Mick Antoniw MS
   
• Dawn Bowden MS
• Jayne Bryant MS
• Sarah Murphy MS

Officials

• Andrew Goodall, Permanent Secretary
• Rachel Garside-Jones, Interim Director Office of the First Minister
• Matthew Hall, Head of Cabinet Division
• Toby Mason, Head of Strategic Communications
• Catrin Sully, Head of Cabinet Office
• Alex Bevan, Special Adviser
• David Hagendyk, Special Adviser
• Madeleine Brindley, Special Adviser
• Darren Griffiths, Special Adviser
• Haf Davies, Special Adviser
• Sara Faye, Special Adviser
• Sam Hadley, Special Adviser
• David Hooson, Special Adviser
• Phillipa Marsden, Special Adviser
• Owen Jones, Special Adviser
• Maddie Rees, Special Adviser
• Victoria Solomon, Special Adviser
• Mary Wimbury, Special Adviser
• Tom Woodward, Special Adviser
• Christopher W Morgan, Head of Cabinet Secretariat (minutes)
• Damian Roche, Cabinet Secretariat
• Kathryn Hallett, First Minister’s Office
• Helena Bird, Permanent Secretary’s Office
• Nia James, Director Legal Services
• Tracey Burke, Director General Climate Change & Rural Affairs
• Sioned Evans, Director General, Public Services and Welsh Language Group
• Tim Moss, Chief Operating Officer
• Judith Paget, Director General Health and Social Services
• Andrew Slade, Director General, Economy, Treasury and Constitution
• Tom Nicholls, Chief Economist (item 4)
• Andrew Jeffreys, Director Treasury (items 4&5)
• Emma Watkins, Deputy Director Budget and Government Business (item 5)

1.1 Cymeradwyodd y Cabinet gofnodion y 13 Mai / Cabinet approved the minutes of 13 May.

Infrastructure Act

2.1 The First Minister informed Cabinet that he and the Cabinet Secretary for Housing, Local Government and Planning had, earlier that day, attended the sealing ceremony for the Infrastructure (Wales) Act after it had gained Royal Assent.

UK Parliamentary Election

2.2 The First Minister referred to the UK General Election, which had been called on 22 May, and a paper outlining the approach to be taken by Cabinet Secretaries and Ministers, which had been tabled as a paper to note.

2.3 During the campaign, the majority of the government’s work would be unaffected, and it would be business as usual. However, constraints would inevitably be placed on some activities.

3.1 Cabinet considered the Plenary grid and noted that voting time on Tuesday was scheduled for 7:25pm and around 5:55pm on Wednesday.

4.1 The First Minister invited the Chief Economist to provide Cabinet with an economic and fiscal update.

4.2 Tom Nicholls advised Cabinet that his presentation would focus on the challenging period ahead and the outlook for economic growth. Lack of productivity growth was still the main underlying cause and economic inactivity rates and recent trends were concerning. Even with the potential change of Government in Westminster, the difficult fiscal position would remain. Given this, the Welsh Government’s role should be to assist and manage expected key demographic and economic transitions.

4.3 The recent UK quarterly GDP index demonstrated subdued UK economic growth, with a poor outlook. The economy was forecast to be almost 10% smaller by 2029 than compared to previous long-term trends, fuelled by a lack of ‘good’ growth and productivity. This would have an impact on living standards along with tax revenues and the availability of resources for government.

4.4 In terms of the Labour Market, Wales had experienced a long-term positive trend of narrowing the employment gap with the UK, according to the Annual Population Survey, although the figures from the Labour Force Survey, which might not reflect an accurate picture, suggested a more recent deterioration.

4.5 The main labour market issue in Wales was economic inactivity, the gap with the UK rate had narrowed but the long-term declining trend had stalled. Around a quarter of the inactive were students, with a fifth looking after the family home, but a third, around 147,000 were classed as long-term sick. Whereas the unemployed numbered around 57,000.

4.6 In terms of fiscal prospects, the Welsh Government resource settlement for 2025-2026, and beyond was still unknown but was likely to be difficult. Slow growth constrained the scope to increase public spending, which meant the focus was likely to be on borrowing and taxes. All main UK political parties likely to have similar fiscal rules, which would be challenging to meet even with current, modest spending plans. Given the low growth, high debt and no clear changes to taxes, there was very little scope for increasing spending by any future UK government.

4.7 It was recognised that even though UK tax levels were historically high for the UK, they were still lower than in some comparator countries.

4.8 The Welsh Government’s current resource budget, per head of the population, was just 4% higher in real terms than in 2010-2011 and was likely to be little different in 2028-2029 when compared with 2022-2023. Capital budgets were forecast to fall in real terms by more than 7% across the next spending review period. However, there was likely to be a net gain from devolved taxes over the period of £200 million to £300 million, without which the position would be worse still.

4.9 There was some positive data relating to net zero, as carbon emissions were now reducing while GDP was rising, albeit slowly.

4.10 There was some concern about demographics, with a slow rising population but a marked increase in those of 65 and over and only a slight increase in the working age group. However, net cross border and net international migration was, in some respects, expected to offset the natural changes.

4.11 Cabinet thanked the Chief Economist for his presentation.

5.1 The Cabinet Secretary for Finance, Constitution and Cabinet Office introduced the paper, which asked Cabinet to note the context for the Welsh Spending Review and agree the proposed approach.

5.2 Due to the economic and fiscal context, as previously outlined by the Chief Economist, there would be a difficult number of years for public spending, at least in the first few years of the next Spending Review period. In response to this, a different approach was proposed.

5.3 The government had faced incredibly challenging experiences of both the in-year re-prioritisation and draft budget preparations.

5.4 The announcement of a UK Parliamentary election on 4 July suggested it was more likely a UK spending review would take place in the autumn. If this was the case, work as part of the Welsh Spending Review programme would need to feed into this year’s the budget exercise.

5.5 Cabinet welcomed the proposed approach to the Welsh Spending Review as set out in the paper.

Cabinet Secretariat
June 2024