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The Westminster Government’s agreement to spend an extra £1bn in Northern Ireland to secure the support of the DUP is “absolutely unacceptable” and “corrosive to the UK”, Finance Secretary Mark Drakeford said today.

The Welsh Government minister was answering questions during an economic briefing jointly hosted by CBI Wales and Barclays at the St David’s Hotel in Cardiff Bay.

He said he had agreed with his Scottish counterpart to write separate but parallel letters to the Treasury setting out their objections to the agreement.

He added: “It is absolutely unacceptable, not only from a financial point of view but if you are interested in the future of the United Kingdom, that a UK Government should ride absolutely roughshod over the rulebook that is there for how we deal with funding matters in the United Kingdom.”

He said he had told the Chief Secretary that if the UK Government was going to invest in Northern Ireland “for purposes that are exclusive to Northern Ireland”, he’d have no complaint.

But if the UK Government was going to give extra funding for Northern Ireland for things that are also devolved to Wales and Scotland, “everything in the rulebook tells you we should have a commensurate share.”

He added that it was “corrosive to the United Kingdom” that communities in Wales, Scotland and England would receive less to spend on schools and hospitals while those in Northern Ireland would get more.

Mr Drakeford also said that he would “continue to press” to have air passenger duty (APD) devolved to Wales.

He said: “We have unsuccessfully argued with the UK Government for APD to be devolved to Wales. It’s a nonsense, it’s devolved in Northern Ireland, it’s devolved in Scotland, yet it’s not devolved to Wales.

“The UK Government has so far declined to publish the evidence on which it has said it has made this decision and we continue to press them both to show us the books and to make the general case for APD to be part of the very modest suite of devolved fiscal responsibilities that we have in Wales.”

CBI chief economist's outlook

(Image: Roger Donovan / Mediaphotos)

Earlier the audience heard CBI director of economics Rain Newton-Smith give her outlook for the UK economy.

She said the Grenfell tower block fire and other recent tragedies had demonstrated the resilience of communities, and “shone a light on some of the challenges our country has and the importance of improving living standards around the UK and funding our public services particularly at a local level.”

She said there had been a lack of debate during the referendum about “the difficult policy choices that have to be made as we go forward.”

The last quarter of 2016 had seen growth of 0.6% driven by the “great British shopper”, she said, but there was now a “shift down in gear” across the economy.

The main factor behind that, she said, was the weaker exchange rate since the referendum feeding through into higher inflation.

Exporters were feeling more competitive with export orders for manufacturers rising to a 22-year high in May, but the flip side was the higher cost of imported goods, with input prices for manufacturers rising 19% on the year in January.

That rise in input costs is now easing off but is feeding through into consumer prices.

“It’s going to feel a lot different for households for the next couple of years than it has,” said Ms Newton-Smith.

“With inflation around 3%, what we’re seeing is pay on average won’t keep pace with that, so standard of living on average will slip back over the course of this year.”

The CBI expects consumer spending to fall back this year and again next year.

Ms Newton-Smith said the impression she got from travelling around and visiting businesses was that companies are still investing, particularly in technology.

But “people are feeling more uncertain about what our final relationship will be with the EU and businesses are more cautious about making bigger, long-term decisions,” she added.

The impact of the election was adding to this uncertainty, she said.

She said there was potential for a “more pragmatic Brexit to take shape”, adding that “business voices are getting more involved and listened to.”

“We want an easy transition to our new relationship and time for businesses to adjust,” she added.

But businesses don’t want the domestic agenda left behind during the Brexit negotiations, and that means making the critical decisions on things such as infrastructure and following through on them, the Oxford educated economist said.

“There’s a pretty compelling case for having a decision made on the tidal lagoon” and the M4 relief road, she added.

Karen Thomas, Barclays head of business and corporate banking for Cardiff and the south Wales Valleys, said: “Events like these in partnership with CBI Wales provide valuable economic insight and access to senior representation from Welsh Government, something which our customers tell us they appreciate and value. I left the event better informed and clear on the challenges ahead, but optimistic that Welsh business can navigate the choppy waters and prosper in a post Brexit economy.”