Cynulliad Cenedlaethol Cymru

Thank you, I need to declare that I'm a member of Unite the Union and also the Union of Shop, Distributive and Allied Workers.

Diolch, Gadeirydd: chair of Pembrokeshire young farmers and director of the Wales Federation of Young Farmers Clubs as a charitable trust.

Yes. Good morning, everybody. I'm David Chapman, executive director for UKHospitality in Wales.

Bore da. Suzy Davies, chair of the Wales Tourism Alliance.

Bore da, bawb. Good morning, everybody. My name is Michael Bewick. I'm chair of the north Wales regional forum, today representing the four fora. I'm also managing director of JW Greaves, which owns Llechwedd, just outside Blaenau in north-west Wales. 

Good morning, all. Sara Jones, head of the Welsh Retail Consortium.

Thank you very much indeed for those introductions. Perhaps I can just kick off this session with a couple of questions. Perhaps you'd be so kind as to tell us what you think are the most significant challenges or concerns facing businesses in your respective sectors at the moment. Perhaps if I can start with David Chapman.

Yes, thank you, Chair. Well, the last two years have been disastrous, really, for the hospitality industry in Wales. We've had, as you know, with COVID as the background, restrictions and lockdowns. Businesses have used cash reserves up; they've stretched their loan capabilities. They're repaying those loans, and although we had support that we were very pleased to have helped Welsh Government to design, and it's certainly helped keep our businesses going in the 18 months or so up until last Christmas, and the furlough contribution obviously contributed into that, the last set of restrictions, without the equivalent support of furlough, meant that our businesses went through a particularly difficult start to the year, which has just really brought them to the lowest level. So, we're starting from a very low level in terms of the recovery. We're obviously at a competitive disadvantage to businesses just over the border because of those 33 days or so of additional restrictions that began this, and we're now heading into areas where we have got a major problem with recruitment, which seems to have been partly created because of the destabilisation of the industry, if you like—the uncertainties that fell around whether we would be open or restricted or continue or whether each business had the wherewithal for sustainability to be able to continue, on top of other contributing factors.

The recruitment problem at the moment—I know we'll come on to it later, but, essentially, it's around about 30 per cent down on most businesses, and they're really struggling to be able to deliver the quality of services that they're normally used to. And on top of that, we have a serious issue now with costs, which I'm sure is right across both the sectors, but in hospitality is particularly complicated. We have next month, April, a return to VAT at 20 per cent, which we're really campaigning to retain, and we would like all of the Members of the Senedd to support that action with the Chancellor of the Exchequer; it would make a very big difference if we were able to maintain the 12.5 per cent level that we've had over the past year or so. But, if that failed, then the increase of VAT to 20 per cent would coincide with national insurance levels rising, with business rates returning to a 50 per cent ceiling from the 100 per cent support that we had during COVID, and also food and drink inflation, and, worse probably than that, energy inflation, which is absolutely enormous in the sector at the moment. The information I had this morning from members indicates that between 2019-20 and, say, 2023, most businesses will see a 2.8 per cent—sorry, a 2.8 times—increase in the energy bills that they'll be receiving, and that will take them into the higher six figures for a lot of this important hotel stock, in particular, and much more for some of the significant employers that we have in the sector. So, it's a really worrying time, I think, for businesses, because coming out of the—. The cupboard is bare. We're obviously hoping that we will get some degree of Welsh Government support as we go along and I'm confident that will happen. We certainly have had a very good partnership relationship with Welsh Government in the past, and I'm sure that will continue in the future, and we've contributed into the forward-looking plan. But, really, the combination of recruitment problems, which will drive our businesses to possibly only operate at 70 per cent levels of capacity, plus costs, are certainly posing the most significant challenges to us as we go into the recovery period.

Thank you very much for that. Suzy Davies.

Diolch. Yes, can I just reiterate everything that David Chapman said there? We certainly recognise that, and, outside the accommodation sector, within the industry as well; it's not just accommodation. The cost-of-living issue, of course, we're talking about that from the perspective of businesses, but we've got to remember that those cost-of-living pressures are affecting customers as well, and it's Welsh Government's own research that's shown that it's the family budget that primarily dictates if the family goes on holiday at all, or, if they do, what kind of holiday they're going to go on. So, the industry in the round has been affected by the cost-of-living crisis, both in terms of supply and in terms of demand.

I think it's worth mentioning as well that, Welsh Government policies, some of them are being embraced by the tourism industry, or at least would like to be. Certainly, the greening of the industry is proving quite an exciting prospect. Of course, that will need some financial support. But there are other Welsh Government policies that are contributing to the sense of instability and uncertainty within the industry at the moment, notably the announcement yesterday on the changes to thresholds on the difference between businesses and casual lettings, for example, changes to council tax on second homes, tourism tax. All of these are just coming into the narrative, which is—. It's confusing existing members of the market, if you like, and deterring others from coming into that.

And you will also know, Chair, that I've got my concerns about the structure of the industry at the moment—perhaps for another day. But it's a disconnected industry at the moment, and one that we would certainly like to contribute—. It's a problem we'd like to help resolve. Thank you.

Thank you. Michael Bewick.

Thank you so much. I think, echoing both points made by Dave and Suzy, what's happened is that we're coming out of an extremely pressured and difficult time for the industry into what one hoped was going to be a recovery period, but is clearly going to be very testing. Key points, I think, are that balance sheets are under great pressure as a result of COVID borrowing, which means that there will be pressure on investment plans, and that one can't overstate the impact of this business cost inflation. I'm going to give you two examples.

I was speaking to Steve Hughson of the Royal Welsh Show last night, who talks about inflation—real inflation—in his supply chain running at over 20 per cent, and, perhaps more concerning, that some of the supply chain is actually dropping out altogether, due to the pressure on skills that Dave just raised. The pressure on skills itself is in turn feeding into wage inflation, which means that potentially we might see employment falling, while margins are squeezed as a result of the increase in VAT.

And there's another real-life example. A hotelier I was talking to yesterday told me that, as a result of the skills shortage, his revenues were 20 per cent less last summer than they could have been, potentially. Now, of course, last summer, that was mitigated by the VAT change and by the grants that were coming in. There is no prospect, it appears, of that this summer, so one has to echo the call for intense lobbying on the UK Government to try and maintain the VAT rate at its current level. I'll come to what we might do about these things, I'm sure, in time. Thank you so much.

Okay. Thank you very much indeed. Before I bring Sara Jones in, I know Hefin David would just like to ask a very brief supplementary question. Hefin.

Yes. I'd like to focus my question to Suzy, and can I just say it's lovely to see you here, Suzy? You really are much missed; from this side of the fence, that's certainly the case. Can I ask, just about some of the anecdotal evidence we've heard with regard to last summer's bounce back following the—? You know, the staycations, people staying at home, did that not have a mitigating effect on some of the problems and the rather dour picture that's been presented so far?

Well, overall, the number of visitors coming to Wales was still down. It's still well below the 10 million mark that it was before COVID. Certain sectors did better than others. So, self catering, different types of self catering, perhaps did better than the serviced economy, because people felt safer in a self-contained environment rather than in hotels and so forth. Certainly, the attendance and spend was well down in the serviced sector and in hospitality—so, restaurants, cafes and so on. So, while there would have been a staycation bounce in some parts of Wales, and there certainly was, that was not replicated across the whole of Wales, even though things were better generally, and it's certainly not something we can rely on being what the future will look like once the international markets open up again. And you will have noticed, Hefin, that there is really fierce competition at the moment from the cheaper end of the overseas holidays market really gunning for British people to come back to destinations abroad.

Thank you. If I can now bring in Sara Jones. Sara.

Thank you, Chair, and I'll try not to repeat the points made by my colleagues, because all of them, I think, we'd echo as well, as the retail industry.

I could probably bring this into three key areas in terms of the impacts that we're facing at the moment. The first is around lack of customers and subdued footfall. So, those figures are really not anywhere near back to pre-pandemic levels. If we look at the same period from two years ago, we're about 17 per cent down in terms of footfall through our retail destinations. And in terms of people not being back at the workplace, that's been a real challenge for us, particularly in our city centres and our larger town centres. So, the advice to stay at home, work from home, that's clearly had an impact, particularly in terms of office workers, on footfall through those destinations during those busy lunch hours, for example.

The second challenge is the rising cost pressures for retailers, so, again, echoing many of the points that my colleagues have made, particularly looking ahead to the return of business rate liability in April. I know there are reliefs being offered there, but, again, it's going to really impact our businesses as we look ahead.

And the third one, I think, is probably—again, picking up on Suzy's point in particular—the cost of living, the pressures that our consumers are facing at the moment and the way that that's impacting in terms of consumer confidence. So, that's having a real challenge in terms of how we forecast things, looking ahead.

I think just one other point I'd like to raise in terms of some of the current challenges we're facing, and I think it's been picked up in the survey that USDAW have published today, and that's around retail crime and violence against shop workers, and I think that's something we've all got to be really cognisant of; it's really spiked during the pandemic, and it's awful to hear. The USDAW survey references that 90 per cent of respondents said that they'd received verbal abuse, and it very much echoes the surveys that we've done as the British Retail Consortium and WRC. So, that's something I think that needs to be tackled, albeit probably at a UK Government level in terms of the legislation that could be brought for that. Thank you, Chair.

Okay. Thank you very much indeed for that. Obviously, some of you have already alluded to what you'd like to see Governments doing in the immediate term. Is there anything else you'd like to see the UK Government, and indeed the Welsh Government, doing to support your sectors going forward in the short to medium term? Michael Bewick.

Thank you, Chair. I think one of the things I think would be particularly important as we come out of it, and reflecting on Visit Wales's role, is an increase in the promotional budget, which is remarkably modest. I think Suzy's point about the intense competition that we're facing, particularly from the cheaper end of the international travel market, is very true, and we need to be countering that. It's also clear that the huge uncertainty around international travel and geopolitics at the moment means that people will be uncertain about what they should be doing for their travel plans, and so, I think there's a huge opportunity for us here.

I do also, though, at this point, just want to raise the fact—because it's come up from so many of our stakeholders—about the timing of the consultation around the tourism levy or tax, and the sense that this is just not the moment to being engaging in this exercise for an industry that already feels it's under considerable pressure. Thanks so much.

Suzy Davies.

Thank you. I agree with Michael on those points as well, particularly on the point of Visit Wales's own budget; it's not really grown in perhaps the last 10 years in terms of what it might be able to do. I have to say that the quality of what Visit Wales is putting out at the moment in terms of its marketing is high, and that's very welcome, but I think they could still do with some more investment in the way that they engage, particularly with the private sector—that's acknowledged in their own action plan.

I think the two points I would add, Chair, is perhaps some flexibility in the terms of repayment of the loans. David Chapman did allude to those a little bit earlier on. Some businesses are finding it difficult to pay back as swiftly as they might. And secondly, I would love Visit Wales to invest in a recruitment programme. If they're going to be promoting Wales, let's promote the fact that there are brilliant careers in Wales in tourism as well, and see some of those popping up in our social media ads and everything else as well.

Okay. Thank you very much. Sara, did you want to come in?

Yes, just very briefly, then. I think we'd like to see more positive, upbeat messaging from the Welsh Government. Obviously, as we move towards removal of all COVID restrictions, we need to see that positivity, because that will no doubt help in terms of the consumer confidence issue. And then, obviously, and I'm sure we'll come on to it, on numerous occasions, is around business rate reform. That cost pressure is huge for our retailers and we need to have a commitment that reform will take place, because it's the biggest cost that our retailers are facing over the next 12 months.

Thank you very much for that. And before I bring in other Members, I just want to ask you perhaps a general question to finish from me: what do you understand to be the Welsh Government's vision and ambition for your sectors over the next five to 10 years? Who would like to start on that? Sara.

So, we expect the Welsh retail strategy to be produced this spring, and I think that will be key in terms of having that endorsement for our industry from Welsh Government, recognising that the Welsh retail sector is a hugely important contributor to and employer in the Welsh economy. I think our reputation and profile with our key decision makers has really elevated over the last two years, and that's a really positive thing. I hope that the strategy itself will give us a vision for where Welsh Government want to work with us collaboratively to make sure that we can continue to deliver and invest in our Welsh communities. So, I think we're fairly clear of where the Welsh Government is looking to take us as a sector, and that's something we're working on very closely in partnership with officials and the Minister.

Michael Bewick.

Thank you. We understand that we are currently in a transitional period, working with the action plan with Welsh Government, which was presented both to us at the stakeholder forum and also to the regional fora, seeing it very much as a short-term bridge. I think the key thing that I would say here is that I am aware that all our stakeholders and all our regional forum members are keen to see us return as quickly as possible to the 10-year strategy that was outlined, with its emphasis on sustainable tourism and its emphasis on improving revenues in the off-seasons and profitability. Thanks.

Suzy Davies.

Just quoting, actually, from the plans: the need for recognition and reinforcement around the important role that this sector plays at the heart of the Welsh economy. I think that point needs reinforcing that tourism is at the heart of the Welsh economy, and if it continues to struggle like this, it's the whole of Wales and the underpinning of the economy that's going to suffer. It also says:

'to realise tourism's own potential to underpin the economic, social, cultural and environmental wellbeing of all kinds of communities across Wales.'

Again, that's a great vision, but it's not going to happen unless the money goes in to support it and that it actually does include greater private sector involvement, which is something that it is also acknowledging in the action plan itself.

Okay. Thank you. David, anything to add on that?

Yes, thank you. Suzy's point is a really good one. We've submitted a document to the Minister looking at the immediate period, looking at the transitional period and looking at the longer term. In terms of the immediate period, some of the economic resilience funding that applied in the period at the beginning of the year didn't actually stick with some of our members because of the turnover thresholds. So, short-term support for businesses that might require it could be helpful, but we also need investment backing. The Welsh Government's plan has very ambitious hopes for the raising of quality across the board, which we share, and those calls need to be financed by money that really most businesses just don't have at the moment. And that's the sort of nub about how we get back to being not only competitive, but to being market leaders is how we can do that.

Now, some years back, there was a scheme called the tourism investment support scheme, which allowed contributory money from businesses to be matched by Welsh Government money for infrastructural development and that would've raised the quality of the stock. And I've proposed, through our member outlets where we corral their views together and put them forward, this idea that we could look at that sort of incentivisation that would help. And then, going further forward, I think we need to develop a more dynamic partnership with Government that can respond to the changes in the marketplace that will occur to encourage greater investment in the industry and in the promotion of the industry, and to look at how we can probably help develop a live and interactive action plan going forward that can put our industry genuinely at the heart of the economy and at the heart of an economic policy, where it deserves to be. And I think probably the most important view of that would be to look at what happened over the last two years and just how significant tourism and hospitality businesses have been in the communities when restrictions meant that they weren't able to open. So, we need to adapt that thinking and to put ourselves right at the heart of the economy, at the heart of communities and at the heart of Welsh culture and to look at how we can combine all of those elements and to help drive the Welsh economy forward together.

Thank you, David. If I can now bring in Sam Kurtz. Sam.

Diolch, Cadeirydd. Good morning, panel. Thank you for joining us this morning. If we could cast our minds back to just before Christmas when omicron first made itself known and the Welsh Government introduced business support for the period 13 December to 14 February this year, could I ask for your views on the scale, focus and appropriateness of this Welsh Government support? And can I start with you, Sara, please?

Yes. Throughout the whole of the pandemic, support has been pretty substantial and swift from the Welsh Government and obviously we've supported it, particularly around the rates relief over the last two years. That period that you referenced, not hugely impactful in terms of the benefit it brought our businesses because they were still operational, and the restrictions, whilst they did have an impact because it was the return of social distancing, for example, so numbers in store, et cetera, they weren't necessarily seeing the drop in turnover that would have qualified us for some of those business support grants.

I think we're in a period now where we're not looking necessarily for direct support in terms of funding. Again, it goes back to those structural costs, those costs of doing business, which are within the Welsh Government's gift, and I'll repeat again the business rates ask, for example. Those are the things now that we're looking for further support from the Welsh Government with. But, as I say, throughout the whole of the pandemic, the support has been overall very positive and we've welcomed the speed at which it's been delivered to our retailers.

Suzy Davies.

Thank you. Yes, the immediate feedback that we had on this, of course, was that it was most closely welcomed by the hospitality industry where capacity was down in restaurants and cafes because of the return of social distancing guidance and so forth. The main feedback we had was that self-catering properties weren't entitled to apply for this, and while it was probably true that it was the sector that suffered the least, there were certainly some businesses that did lose bookings and had cancellations at the last minute and weren't able to pick up any compensation for that, if you like. As ever, always very welcome. There are always people who slip through the cracks, but it was the loss of bookings last minute that was the area that wasn't covered as well as it might have been. But otherwise, very welcome. Thank you.

Excellent. Thank you. Michael.

Thanks so much. I think, like the other witnesses, we commend the timely interventions that took place, although with the most recent ERF intervention, I have to say, I'm not really aware of anyone very much who benefited from it, because the majority of people were able to operate to some level and therefore weren't caught by it.

I think I would like to bring up the fact that, at a recent forum, there was a very tearful intervention from somebody who operated a small bed and breakfast. And I think we forget at our peril that, whilst we are a large industry, we are large in many ways because we aggregate a lot of microbusinesses and that a lot of those microbusinesses actually did slip through the cracks throughout the entire period, and they are the ones who've been spending their own savings and working very hard to keep afloat. So, I think we need to remember them as well in this point. Thanks.

Thank you. Finally, David.

Yes. In the main, the support was generous and timely and well delivered, and, really, I think, saved a lot of our businesses at the worst times of the COVID crisis. I think the last period, as Michael explained, where there was limited trading and there was a 50 per cent turnover threshold, it meant that many businesses didn't qualify, and the amounts of—[Interruption.]

Sorry, I've just had a call come in there. I should have turned it off; I apologise.

But, in that period, we had a number of businesses that really felt that the level of support was way below what the losses that their businesses incurred would be, compared to the previous times. And that's almost certainly comparable with not having the central Government resource that furlough provided previously, because the set of restrictions this time was probably the first time we had an out-of-furlough set of restrictions in Wales. So, that was a significant amount, because calculations were that it was worth something like £450 million a month to the industry in Wales while that was qualifying, and so there was a very big fall in the real terms of what we had. But, not to labour that point too much, over the 20 months, the support that was developed with us as an industry, was really well delivered, I think, and we were very grateful for that. It does show, overall, the success of the industry-Government partnership that there is in Wales and the regular contact. And Michael and myself, and Suzy's predecessor, sat on an industry taskforce that the Minister had created that met weekly for over a year, and we were able to feed in members' views directly to that. And that was really gold dust, if you like, for us to be able to be able to make those cases so quickly and so directly. And so, that is a real tribute to the Welsh Government's partnership processes.

Thank you. And, Sara, you mentioned it, with regard to future support or future funding for this sector, you'd rather see support in terms of business rates rather than an injection of cash funding into supporting the businesses. But does anybody else on the panel echo Sara's thoughts on that, or are there calls for direct funding towards your sector at the moment? Or is it support in terms of business rates, et cetera, the value added tax through UK Treasury? Is that where the sector's looking for its support at the moment? Suzy, can I start with you?

Yes, I think I mentioned a little bit earlier on that one of the things we will be looking for is an investment in recruitment strategy for the industry generally. Now, that's not direct money to businesses necessarily. I think where they're likely to need the help is in the extension of periods for repaying loans or similar.

I think it's also worth mentioning that there have been issues with supply chains, which were mentioned earlier. If there are ways of encouraging value-for-money Welsh procurement, I'm sure that would go down well as well. I suppose I would say that in terms of the capital investment, there will certainly be need for some work in some attractions, for example, and that's why I have my concerns about the very low amount of £5 million being available to Visit Wales for capital works, when, particularly, it looks as if they've got that earmarked for other plans.

Is there anybody else within that specific sector? I can see you nodding, David.

Thank you. I think it's twofold, really, isn't it? Business rates have been an increasingly unjust system year on year going into this. Sara and myself hosted a round-table with representatives before COVID to highlight how the changing shift in the commercial climate had left property-based businesses such as ours in the hospitality sector adrift when internet-based businesses and out-of-town businesses were increasingly growing, but we were taking an unfair share of the cost base in business rates. So, that's been long term and there continues to be a desperate need to put us on a level playing field with others. The VAT argument Michael made and I made earlier is another important plank in terms of getting ourselves back to a recovery position.

But I wanted to make the point that 'additional support' is probably the wrong word, because it's an investment by Welsh Government. This industry produced something like £3.6 billion in contributions to the Exchequer in the year before COVID. We're not able to do anything like that at the moment with businesses being restricted to operate at, say, 70 per cent levels because of recruitment and because of the way that we're coming back from the crisis. The help that we could get to get us to that level as quickly as possible would be vastly beneficial to the public sector in that more money would be made available for health and education more quickly if we were able to get ourselves back on our feet the fastest way possible. And that's where I believe that a set of cleverly organised investment support grants, in association with industry contribution, will get us to that point quicker and help to bring about that repayment back into the Exchequer, and then, gradually, further grow payments into the Exchequer as quickly as possible. 

Thank you. Michael.

Thanks. I have to reiterate the points about investment and the support for capital investment and the fact that we need more discretionary funding for capital. One of the successes of Welsh Government's intervention in tourism has, indeed, been its support for the creation of quality product. It seems to me that many of the challenges we're talking about around skills and around the development of our visitor economy outside of the key seasons is around investment in quality product.

But we have to note from our conversation today that the limitation on margins means that there's very little available within businesses to invest, and then, when you look at the pressure on margins, the return on investment is starting to look remarkably long for people. You then have trouble raising private money. The issue here is that Government support through capital investment will help develop high-quality product. We've seen it and how it works in terms of the development of adventure tourism here in north Wales and how that's been an absolute game changer in terms of the sort of margins that have been generated and, therefore, the ability to invest and the ability to create year-round jobs that pay sufficiently for people to have mortgages and raise their families.

The other thing I'd like to point out, which is a slightly longer term issue, is about the transition to a truly sustainable visitor economy. I think Suzy mentioned this earlier as well. We're going to need additional support in order to achieve that, and that's, I guess, mostly around supporting the efforts to spread tourism across the year, to spread it across the areas that we have. This both helps sustainable tourism and it also helps to help support our communities, many of whom have felt slightly bruised by the tourism experiences that have happened over the last 18 months. Thanks. 

Thank you, Sam. If I can now bring in Sarah Murphy.

Thank you, Chair. Thank you all for being here today. I'm going to drill down a little bit more into retail, so I'm going to focus on asking Sara questions. There's a section coming up on tourism and hospitality as well, but if anybody wants to come in on anything, can you just raise your hand? That will be absolutely fine. So, to start, Sara, could you tell us the extent to which the Welsh Retail Consortium are involved in the development of the Welsh Government's strategy for the retail sector, please?

We were the organisation that pushed really strongly for a Welsh retail strategy, and we were really pleased that that was included a few years ago in the Welsh economic strategy at the time, which talked about an enabling plan for the industry. Obviously that was sidetracked because of COVID to some extent, but it's great that the Welsh Government has now turned its attention to developing this strategy for the industry. We've always felt like a bit of a cinderella industry; we've felt a bit unrecognised in comparison to some other sectors. So, it's really great that we've got this recognition now. In terms of our engagement in that whole process, yes, we've been involved in it, it's been great. The Welsh Government has set up a retail forum, and we sit on that retail forum with a number of other partners. There's also a specific working group that's developing up the strategy and, again, I sit on that, representing the WRC with a cross-section of other organisations like the unions and also other trade bodies as well. So, we've been very much involved, and we hope that in that partnership approach to developing this, and then obviously implementing the strategy and hopefully an action plan in the long term, we'll have a really strong role in that as well.

Fantastic. Thank you so much. Could you talk to us a bit, then, about the current expectations for the strategy in terms of timescale, focus and resource from your perspective, and also, I suppose, if you can give us any insight into others in the forum?

Our expectation, from what we understand, is that the strategy is likely to be published this spring, which is great. It has meant that the timescales have been quite short, I think, in developing the strategy. On that basis, I'm expecting it to be a strategy; it will be a collection of strategic aims and objectives. But I'd like to see an action plan to follow this. I think that would be our recommendation back to Welsh Government. It will be great to see the fact that retail will be embedded in the thinking, but it needs to have some serious actions behind it. Because retail is so cross-cutting across Government portfolios, it is difficult to capture this, but I think the strategy will help do that and ensure that we don't see that silo approach to dealing with some of the challenges that the sector faces. So, I think, going forward, there'll be a spring publication, but let's ensure that we see action that follows then in terms of a series of action plans. 

Brilliant. Thank you very much. And then, just the last question: what are your views on the fact that the Minister for Economy told the committee that there isn't a pot of money set aside for the retail strategy?

I think in our budget recommendations report that we put forward last autumn we did say that there should be some funding to support the delivery of the strategy, but we totally recognise that a lot of the strategy itself will fall under different areas of activity that the Welsh Government is already working on and that has funding committed to it. To give an example, on high-street regeneration, the Transforming Towns budget has been committed for the next three years within the Welsh Government budget, and that's clearly going to deliver some of the aspirations of the retail strategy. So, there is money committed, it's just in other areas and other pots. But, I do think there needed to be some funding to help launch this strategy and really give it the profile it deserves, particularly in the early stages, as we look towards developing it further over the next 12 months. 

Thank you very much. Suzy, I saw that you wanted to come in too.

Yes, just quickly to say that the retail offer, of course, is a major part of tourism as well and should be part of anything involving tourism. Certainly, the action plan at the moment talks about creating a sense of place and experience of place, and if you have a poor retail offer, that's a deterrent not just for visitors but obviously the community that would be benefiting otherwise from tourism. Diolch.

Absolutely. Is there anybody else who wanted to come in on any of that? Okay. Wonderful. Thank you all so much. Back to you, Chair. 

Thank you, Sarah, and thank you, Sara Jones. I understand, Sara, that you now need to leave us, but thank you very much indeed for being with us as well this morning. If I can now bring in Vikki Howells. 

Diolch, Chair. Welcome to all of you on the panel. I've got some questions this morning around skills. It's an issue that's very close to my heart. I represent Cynon Valley, which is a constituency that has one of the highest unemployment figures not just in Wales but in the whole of the UK, but when I go out and speak to business owners in my constituency, they invariably tell me about labour and skills shortages across the board. I know that that's something that's replicated across Wales as well. Just to start, I'd welcome your views on the causes and effects of the skills and labour shortages being seen in the workforce at present, particularly in hospitality and the retail sectors as well. David, I don't know if you'd like to start on that.

Thank you. A number of things impacted at the same time. We had Brexit, which, obviously, had an effect on migrant labour, but then of course COVID hit, lockdowns, and people were on furlough. I think a number of our workers were realising that they wanted to change direction, and would prefer to have a nine-to-five job or whatever, and they re-evaluated. Other contributing factors came in as well. I think the world changed and people had different ambitions, and I think the uncertainty of closures and restrictions was also something that led people to think that they wanted, maybe, what they saw, what they perceived, to be more secure employment at a time when everything was very precarious.

We've come out of that succession of events with quite a substantial shortfall. We're not the only sector to be in that position, as you know, but we are finding it a bit of a vicious circle, really, because where we have a shortage of employees, we are having to reduce the offer. That leads to less potential for the business to grow, but it also has an impact where we're not able to dedicate, in some places, sufficient time to do the in-house training that we want to do because the business is so stretched. The forward planning of a lot of businesses has been really disturbed by these two years, and I think that's one of the factors as well.

On the positive side of things, we recognised that Brexit was happening and that would be a factor to us, and so UKHospitality spent probably 18 months bringing together all of the partners that were involved in the skills area—that's everything from higher education, further education, to people like Careers Wales and others, including all our industry representatives from different parts of Wales. We set up a tourism and hospitality skills partnership to be able to look at the medium to longer term solutions for this. Because we realised that there was a need to raise the status of the industry and to take away the misconceptions that exist about the industry in the key areas that influence people joining us, right the way through from primary schools, through the careers process, through youngsters, to be able to show them what fantastic opportunities actually exist within the industry, and to give them the chance to be able to feel their way into joining us for what is a lifetime career.

That partnership is functioning and working, and it has helped, I should say, because Suzy's raised the point. To be fair here, one of the asks that we gave of Welsh Government, which sits on the partnership with us, was for help with a recruitment campaign in order to get across some of those misconceptions that exist and to show the quality and the enthusiasm and the enjoyment that people have within the industry. That recruitment campaign came to fruition in the autumn of last year, and was used in different media to project things. Clearly, omicron came along, and that set back the process, but in our discussions with Welsh Government now, there's every intention for that to continue for us, which is a real benefit.

What I think I'm suggesting is that we do have a dire recruitment position at the moment, but the idea for further development of the skills agenda moving forward, with Welsh Government support and with industry support and enthusiasm, is looking a lot brighter than it was maybe three or four years ago already. So, there are big positives there, but in the immediate situation, we have this circle where, without enough employees, we really can't get the industry back into the position that it wants to be in in terms of recruiting numbers.

Thanks, David. That's a really useful answer. You were talking there about changing people's perception of a career in the industry. Would you accept the suggestion from ColegauCymru that there's growing recognition and acceptance that the reality of the culture of the hospitality and catering sectors has to change radically as well in order to attract young people into a career there?

The industry—[Interruption.] Sorry, am I—? We do, but I think the thing to say is that the industry adapts and moves along with the labour market because we want to get the best people that we can get, and to retain those people. So, I think everybody has realised that there is a societal change that's gone on during the COVID period, and we are adapting to that. I think everybody would agree, certainly in the hospitality industry, wage rates have escalated in the last 12 months considerably. That still hasn't produced the numbers that we're looking for, but it has made a difference, and has kept us competitive with other industries and other sectors. But also, the way that people work within a business has changed, and we're offering more opportunities for them to be able to work certain days a week, and how that works. We're very aware that part of the necessary pressures that we're under at the moment could lead to the exemplar people that we have deciding that there's too much work on at the moment for them to be able to do. So, we're very careful, I think, as an industry generally to try to maintain the right balance there, and while there is the demand, that's quite a tricky thing to do. But I think there are absolutely signs of the industry changing to accommodate the needs of people to work within it.

Thank you. Suzy, Michael, anything to add from the tourism side of things?

Suzy, do you want to go first?

You're on camera, Michael, you go first. It's fine.

Thank you, very kind. Look, I think what's really interesting at this point is that it's the whole sector that's struggling to recruit, so those businesses that have the best working conditions and have been prepared to adapt and change working hours and all those things, they are still struggling to recruit. So, there are two fundamental issues at play here, are there not? They are a fundamental lack of availability in the market for staff and also this key issue about perception, which I think, absolutely right, the skills partnership is starting to address—individual businesses like Dylan's, who've got their academy up here in north Wales, and work done by Visit Wales and industry leaders. So, people are doing it, and businesses are working really hard to adapt and change. I think people are offering a four-day week, not five, flexible working, tailored training packages—all of these things—but as an industry we have to accept our structure. Hotels have to be open seven days a week. People have to be there overnight. People have to be there in the early morning. So, it is something that we need to address structurally within the industry, but at this precise moment—I think they've made this point—we are genuinely struggling to find sufficient people to work in the businesses, and that will have a severe pressure this summer.

And, again, I want to really reassure you about how we're changing our approach. I spoke to a hotelier last week who said, 'I'm not an HR person anymore, I'm a salesperson. I'm selling these jobs to people.' We no longer offer interviews, we offer chats. We no longer ask people to fill in forms, because we see the drop off at that point. Many people are introducing packages of incentives, including family discounts and all of these things. So, do you know what? It feels like a moment of good change is taking place, but there's going to be a lag, I suspect, and that is going to have quite a lot of pressure on the industry over the next coming two, three years. Thanks so much.

Thank you. Suzy.

Yes, just on that last point, on the issue of lag, I think that's an important one. Lots of operators within the tourism industry have realised that they need to up their game, if you like, in terms of employee retention. It's an employee's market at the moment and they're able to say, 'I'm only prepared to work so many days or so many hours', and it's something that the industry has to accept. But that's actually a good thing. I think it's opened the eyes of some employers.

In terms of longer term recruitment, yes, there is this perception that this is a low-wage, low-security industry, and it's true to say that there needs to be, or there will always be a need for, some flexible employment here. But I think what's been missing from the recruitment campaign that was pre omicron was the fact that it is also a context place to develop your skills. So, tourism needs lawyers, it needs accountants, it needs construction—it needs a whole range of professional, highly valued input, and we don't really talk about those careers in the context of tourism often enough. If we did that, I think we would take considerable steps towards improving the status, if you like, of the industry, as it is in other countries, actually, where it is seen as a very highly valued area of operation.

It's an ideal area for the development of degree apprenticeships, for example. We are very limited in Wales on where those are offered. And while there is a lot to commend in the apprenticeship space at the moment—Welsh Government has grasped that and is running with it—I think we also need to acknowledge the fact that there are many owner-managers within tourism who don't need to go on long courses, or don't necessarily need to send their employees out on training courses out of the workplace. And there's the idea—I think it's in the action plan, actually—of the development of a hub, a bit like the Hwb in education, where you can access things digitally for short periods of time, little bitesize pieces of really important training, which can be done in the workplace without taking anybody out of the space. 

Thanks, Suzy. That's really useful. Thank you, Chair. 

Thank you, Vikki. And if I can now bring in Hefin David. Hefin. 

I'd like to pick up where Suzy left off there regarding degree apprenticeships, because at the moment, the degree apprenticeship scheme is focusing on science, technology, engineering and mathematics, and is very much in pilot mode. So, you're suggesting that there should be a tourism element of degree apprenticeships.

I just think it's the ideal territory to do this, because it's an opportunity to develop a huge range of skills at high level, including things like destination management, which is something where, at the moment, it's unclear who has got the major responsibility for doing that in the tourism structure that we have, and yet it's where the mistakes get made, if you like. We're talking about high-end vocational skills here, as well as the ability to be a great chef or the ability to be a great front-of-house person. If you haven't got people with not just the experience but the skills to see the big picture, then all of the things that we've been talking about today are unlikely to proceed at pace. 

When I was at Cardiff Metropolitan University, they had a whole department for degrees in tourism and hospitality and some renowned academic experts providing qualifications in that field. So, do you think there's a disconnect between what academia is providing and what the industry is encouraging, perhaps?

Not necessarily. Obviously, you've picked an exemplar there. There are other universities that have now realised that the visitor economy is a place where their young people are going to need to be playing a role in future and have, perhaps, promoted or are starting to promote what they're offering for the visitor economy a little more—'positively' is the wrong word, but in a way that matches the promotion of the more traditional academic subject areas. They need to do more of that, I think. 

Yes. Is there an academic body, a Chartered Institute of Personnel and Development-style body, for tourism?

I couldn't tell you, but I can certainly find out for you. There is probably one at a UK level, and the universities do speak to each other, but whether it's got a title I'm afraid I don't know, off the top of my head. 

I think the fact that we don't know about this suggests that there is a lack of an academic underpinning of—

Well, I don't know, let's put it that way. 

Yes, but I think if there was—. We all know about CIPD, for example, or the Chartered Institute of Payroll Professionals. It just seems that there isn't that kind of high-profile—. Michael is nodding there; were you going to add anything there, Michael? I can't hear you. 

Sorry, I just unmuted myself. I think a lot of this goes back to this really long-term structural issue within the industry. Because if I think about the business I run, which encompasses quarrying, green energy and tourism, now no-one working within the quarrying or green energy business would expect to work at the highest level without some sort of qualification and academic background. That isn't so much the case in the hospitality or tourism element. Now, some good work's been done around adventure tourism because it requires verification of health and safety skill, but the other areas, I think, to my mind, there's an internal ambition issue that we need to address that forms part of this whole big perception issue. So, it's going to take quite some time to address, but it clearly is critical if we are to professionalise the industry. Thanks. 

Okay. And Welsh Government would have a role there in developing things like degree apprenticeships. I'll just come back to where I started, really. 

I think that's true, but I'd also say—sorry, I know David's got his hand up—but I'd also that, again, going back to the point that many, many very small businesses, and, as Suzy said, many owner-owned businesses—. So, I foresee a great role for Welsh Government in bringing together groupings of smaller businesses that are then able to access these sorts of things, because at the moment they're not really perceiving that there's anything for them.

Okay. Did David Chapman want to come in? I've got no more questions so I can round off there. 

Yes, thank you. Obviously, I've put a lot of work into trying to develop the skills side. I also sit on the capital region skills partnership, and in that piece of work, we're looking to bring together higher education with the industry on a much closer basis than it has been in the past. I've attended meetings where there's been an industry person on one side of the table and somebody from academia on the other side of the table, and the person from academia has said, 'We're having real trouble filling work experience positions', and the person opposite said, 'Well, I could do that.' And so that disconnection needs to be resolved, and there's a will on both sides to do more of that. And so we're looking at how we can get the industry together with higher education to develop things like more work experience-related areas, and to utilise the premises that we've got for the educational process as well, because, obviously, we've got a fantastic resource there for people to try in situ work and to learn more from some of the people that are there. The point of the tourism and hospitality skills partnership is to get all of those players together and to maximise their contributions and to add value to that process, and I think we are on the way to doing that. 

The final point I'd like to make is that part of that initial work from the partnership has been to bring in Qualifications Wales. They were due to review the sector from 2023 onwards, and I was able to get them to bring that review forward. Their interim report is now available and it will be a final report in July, and it indicates that there has been a fracture between the industry and the providers that we can resolve, and it's not been for any reason, for any party—it's just that there's an opportunity to get people together and to do it better. 

And I think the other point from the qualifications side of things is that there's an opportunity also to level up all those qualifications. So, where individuals units have been issuing sets of qualifications for people who've come through with skills, they don't always match, and so employers are finding there's a retraining element that is needed to adapt them into their businesses. Hopefully, we can resolve that as well and to make the people who are coming in able to work directly from day 1.

So, there are a lot of advances going on already, I think, in the background, and I certainly feel that with the work I've done in the capital region skills partnerships that the industry is now much more in the process of the Welsh Government and the regional skills partnerships, and how that works, than it was two or three years ago, say, and that's a big advancement.

Diolch, Gadeirydd.

Diolch, Hefin. If I can now bring in Luke Fletcher. Luke.

Diolch, Gadeirydd. If I can just focus specifically on tourism and hospitality with my line of questioning, and if I come back, actually, to the stuff we were talking about—the change in culture, and just a couple of quick comments from myself. I think we've been talking about a change in culture within the hospitality sector, in particular, for decades now. It certainly was something that we were discussing back when I was a bartender when I first started, and something we were still discussing when I left the sector as well. So, I'm actually quite encouraged to hear some of the stuff that's been discussed today, and I actually agree quite strongly with Suzy in what she said about the variety of skills that are needed in the sector, as well as some of those transferrable skills; for example, if you can handle a bar on a rugby day in Cardiff, then you can handle some of the heckling in the Chamber. That's something I've been saying quite a bit, actually, since getting this job. If I can look at the forthcoming action plan for the visitor economy, I'd be interested to learn what involvement the witnesses have had in developing that action plan.

I'm happy—

David, yes.

I'm happy to start with that. We've always been—. Our job is to try to get the information from the industry over to the politicians so it can influence the work that you do, and bring it up to date—up to the minute, if you like—with conditions that we're experiencing. So, we've tried to be—. Since the beginning of UKHospitality, which came from a merger of two associations, we've been trying to be as proactively involved as possible in all stages. We were involved in the 'Let's Shape the Future' work and, as I say, during the course of COVID, we've been involved with things like designing—helping to design, anyway—the economic resilience fund and various other elements. We've had a great reciprocal arrangement there, where that information has been well received and actions have followed.

In this instance—I mentioned it earlier—we've put forward our vision of where we want to be, our hopes for what support we can get and how we can contribute to that process, going forward. I'm very confident that—. We may not get all of the things that we want, but we may be able to discuss that further in the future. But I'm very confident that we'll get a fair listening and an involvement in that. And we'll come back to add—. It's not a finite document, it's obviously a working document, and we'll come back to add to that as positively as we can and as progressively as we can throughout the process.

[Inaudible.]—anything to add there?

[Inaudible.] Sorry. So, the regional fora, as you know, exist to bring together local authorities, the private sector and Visit Wales. Throughout the pandemic period, we continued to meet and consider these issues. The four chairs of the regional fora sat on the taskforce that Dave also referred to. So, I think that there have been many opportunities for us to feed into the process, particularly through the emergency, particularly through helping to design the ERF process, and also to identify any gaps that existed.

I think I mentioned earlier that the forum members now seem very clear that what our stakeholders are looking for is a return to the longer term strategic process, focused on the key issues, key structural issues, for the industry around sustainability and development of profitability, particularly with the out of seasons. That's, I feel, quite a clear direction that's coming from our stakeholders. 

Thank you. Suzy.

Yes. You'll have to forgive me, of course, because I've only been the chair for half a year or so. So, what I understand from members is that they were involved in the—. I think there were roadshows regarding the strategic plan, the five-year plan. But, as for the action plan itself, no, we haven't been directly involved. I think we've had one meeting of the visitor economy forum, which was the first time I was on that, so I wasn't really sure what that was for at the time. But, subsequently, we haven't done that. So, we saw the draft action plan at a regional forum meeting recently. We're not members of these regional fora, as it happens, even though we're the Wales Tourism Alliance, and I'm grateful to Michael for the invitation to go to that particular one.

So, from the small and medium-sized enterprise perspective, I would say that they don't feel that they've been particularly offered the opportunity to contribute in the way that they might have liked to have done. The regional fora—in fact, the action plan itself mentions that the involvement of the private sector needs to be improved. That's no disrespect, obviously, to the chairs of those fora, but it's not an area where the WTA has felt particularly valued or asked for its opinion, and when you consider the number of members—it represents almost 7,000 businesses through its membership across Wales—that's quite an omission in the arrangement, if you like. I'm quite envious, actually, of David Chapman's direct relationship with Welsh Government because the Wales Tourism Alliance doesn't seem to have one of those at the moment. 

I think it's particularly important, actually, for SMEs to have quite a bit of say in this, given their involvement in the tourism sector. More often than not, most of the rural areas of the tourism and hospitality sector is family-run businesses, or even medium-sized businesses, as you've rightly highlighted, Suzy. I saw that Michael did have his hand up. Did you have any additional comments you wanted to add?

Thank you. Yes, indeed. Suzy makes a very interesting point. It's been a challenge for the regional fora to really get substantial private sector involvement. I think, in the north, we're all working hard at that, and, in fact, the four chairs are meeting together and looking at the terms of reference for the fora to try and—. And one of the key drivers for that is to bolster private sector involvement. So, that's something we very much hear, and then, I guess, the next step is really how we develop the continuing relationship that Dave highlighted, the continuing of the very positive and continuous relationship that took place during the pandemic and take that forward. 

Yes, I should add that, during the pandemic, the WTA was involved, but it's been—. It's outside that period I was talking about. Thanks. 

Thank you. Talking about next steps, I'm wondering what your current expectations are for the action plan in terms of timescales. The focus on resources, for example—I note that there isn't a specific allocation in the Minister for Economy's budget for the 2022-23 period to deliver on the action plan, so I'd be very interested to know what your current expectations are. I'll start with Suzy, if that's okay. 

Okay. Thank you. Well, as you'll have seen from the budget, and we've mentioned it before, there's £5 million there for capital spend. There's £1.15 million of revenue spend, which has got a wish list of about eight things that need to be spent on. And, then, of course, there's a separate pot of money, which is the seed corn money for the relationship with the Bank of Wales and loans, which, actually, is where the majority of the money for the tourism package, if you like, looks like it's going to come from; it's not even from Visit Wales. It's not a well-funded bit of a department within a department within a bigger directorate; I think it's a point I've raised before.

And while some of the ambitions in the overall strategy and the action plan are things we've seen and heard of before—raising the status of the industry, as you've mentioned—the timescales for even the action plan are already ambitious. And with the effect of COVID, and now, of course, the new pressure of the cost-of-living crisis, it's going to be a real achievement if they can get through quite a lot of the things they're looking for in the action plan. 

So, it's not that the action plan itself is bad, but it won't work if the money's not behind it. 

David, do you have any additional comments?

Yes, I think the thing is that we recognise that the Welsh Government's budget is tight. It's our job to make the case to get the biggest share we can year on year. And to do that, we've got to work and use industry resources, as well as Government resources. This is not an area—this is what I believe, and our members believe—this is not an area where there's a disconnect. It's not an area where it's sort of us and them; this is about how we can use all of the resources at our disposal to achieve those targets.

Now, there's no doubt—. I've been working in this sector for 20 years now, and I have no doubts whatsoever that the priority of the sector has been escalated in economic terms considerably. A long way back, we didn't even make the top 16, which is absolutely unbelievable, and that was in a programme maybe launched in 2007 or so. We became the top nine. We're now a foundation economy. But we've got to demonstrate the economic benefits and economic importance, our cultural and community importance as well, and I think that came across during COVID and has given us a new way to look at things together. And we are the welcome-to-all industries. We're the port of call where people who cross the border, whatever their purpose, come to stay, and we have a job to do to represent all that is best about Wales and the local communities in that position. And so there's a lot of work that we can do together, and I think we've started that partnership. I think we started the partnership before COVID, but obviously lots of things were on hold as a result when we went into emergency mode. We have a great opportunity now to be able to put together all of those components, with both industry and Welsh Government working closely together on it, and make something that is really quite exciting, I think, in the years to come, and this is the springboard time for us to be able to do that. So, the action plan is a key to the door, and we all hold the opportunities to see how much we can do once we go through that threshold. 

Thank you. Michael. 

I think what I would add to that is to commend the notion that it is fundamentally underfunded as an activity, both the promotion and the capital, but also to commend what Dave was saying about the way we've been working together. So, two additional points to that is: we've been having conversations from the fora about how we can align timescales for consultation with budget planning. Because, clearly, one of the reasons that holds back private sector involvement in any sort of consultation activity is a sense that they're being consulted after the decision has been made, or, indeed, after the money has been allocated. So, it's incredibly important, to give people a sense of real involvement, that those timescales align. And then the other thing, for me, is that each local authority is clearly involved in spending money on tourism promotion and destination management partnership, and getting those things aligned clearly is also very important. Now, again, this is in no way a criticism, because I think people are working together very closely and trying very hard, but it's something that we will need to keep on top of and keep managing. Thanks.  

Thank you. Suzy, I saw you might—. You indicated you might want to come in there. 

Well, just to make the point that, of course, we've lost a Deputy Minister with specific responsibility for tourism, and, when you have a big strategy and an action plan that is almost ready, it would give the industry some comfort, I think, to think that there was an individual member of Government who had the responsibility for driving that action plan forward as a priority. Again, this is no disrespect to anybody in Government at the moment, but they have a lot of things on their plate at the moment, and it would be such a disappointment if this were to slip through the cracks as a priority activity. 

Thank you for that. I know we're tight for time, so I'll move swiftly on. I'd be interested in your views on the significance of the result of the latest Welsh Government tourism barometer survey, which shows that the experience of the past two years has prompted a quarter of tourism businesses to make permanent strategic changes, such as changing the services they offer and the way they operate their businesses. I'll start with Suzy, if that's okay, and then move to Michael and then, finally, David.

Just briefly, because there have been quite a few barometer findings recently, I think the main one that's come out of this is an understanding that, if you can't market digitally, you're not marketing at all, which is why some emphasis on the digital apprenticeships or digital courses has been very helpful. We've also seen, and this is a less beneficial thing, more businesses going for the big global online marketplaces, if you like, your Airbnbs and Booking.coms and Expedias and so forth, in order to get seen. That has many consequences—perhaps, again, for a different day. But if you compare Visit Wales to Visit England and Visit Scotland, who have their own booking systems, if you like, that would help, I think, in the future, avoid the drift from what's happening now onto the global platforms and back on to domestic platforms where that marketing could be done. But you cannot blame businesses for going for what they see as the most effective ways of promoting their business at the moment, and I think, there are—. As I said, there are many consequences to that, but that's something I'd like Welsh Government to think about, recovering some of the space on that. 

Thank you. Michael.  

So, negative first, I think one can see that, in some areas, the impact of the skills shortage has led businesses to consider their service levels, and, indeed, in some areas, to sort of unskill. We have examples here in north Wales of small hotels that are now being offered as large self-catering party venues, which is a step back from full-service provision. But on a much more positive side, I think it's absolutely fascinating the number of businesses that have taken this moment of pause to consider their business planning and really consider the route forward. Because what you're seeing is actually a surprising level of investment in quality coming forward as well.

And one of the other key moves that I see, and I can think of some very good examples here, is where people have taken the opportunity to consider what they provide and enrich the experience. So, taking advantage of the trends in tourism, which is very much about providing people with transformative experiences so that when they return home from here, they feel that their life has been changed in some way, and businesses are really responding to that movement. 

Thank you. David, any additional comments there?

Very briefly. Michael summarised it all pretty near to what I wanted to say. I think there are two things here: one is enforced change and I know that there are some hotels, for instance country house premium hotels—they're reducing capacity because of the recruitment position, and they're adapting some of their offer to be able to function basically. And so that adaptability, though, works the other way around. And just looking at innovations, such as outdoor entertainment and new investment in those areas that probably wouldn't have been done pre COVID, and are now offering other customer attractions into businesses—it shows, I think, both ways around, how resilient, durable and innovative the hospitality business is. And that's why, year-on-year, it survives and sustains itself.

And so with the right support—and it's not only financial support, but obviously that helps, but with the right support and the right partnership working, I think that will just explode over the next three or four years, and that level of adaptability and innovation will be applied into the growth and the getting back to the sort of levels—. I mean, year-on-year, before COVID, we were increasing 10 per cent a year in growth terms. And the economic benefits to all the communities were a result of that and the supply chain, with 140,000 people being employed and another 40,000 in the supply chain being directly linked—that is of great benefit to every community in Wales. So, I think there is a very positive future out there with the way that the industry is capable of being able to reinvent, regenerate, innovate, but it's just this current moment where we need all the help we can get to be able to get ourselves into that next position.

Thank you, David, and thank you all for your comments.

Diolch yn fawr iawn. And I'm afraid time has beaten us, so our session has now come to an end, but thank you very much indeed for being with us this morning. Your evidence will be very useful in our inquiry. A transcript of today's proceedings will be sent to you for accuracy purposes. So, if there are any issues with that, then please let us know, but, once again, thank you very much indeed for being with us today.

And now we'll take a short break to prepare for the next session. Thank you.

Hi. I'm Victoria Winckler, and I'm director of the Bevan Foundation, which is an independent think tank.

Thank you. Shavanah Taj.

Morning, everyone. I'm Shavanah Taj, and I'm the general secretary of the Wales Trades Union Congress.

And Mark Turner.

Good morning, all. My name is Mark Turner. I work for Unite as the community co-ordinator and hospitality organiser.

Thank you very much indeed for those introductions, and perhaps I can kick off this session just with a general question. I'm sure you would agree that hospitality, retail and the tourism sectors are crucial parts of our economy here in Wales, so, in your view, what further support should the Government provide to see the sectors grow in the future? And perhaps I can start with Victoria.

Thank you. They are crucial sectors, and they're also a very mixed bag in that some of them have received considerable support and others, such as retail, for the most part, don't benefit from sector-based support. One of the issues that we would see in respect of fair work is that a lot of that support for the growth of the sectors has been detached from the quality of the work that's on offer, and so it's entirely possible to anticipate that, in fact, growing employment in those sectors could actually increase some of the social and economic problems that Wales faces, unless you address the terms and conditions in those workplaces. So, I would like to see, going forward, that attempts to support or steward those sectors, if you like, are firmly rooted in measures to deal with poor terms and conditions in them.

Shavanah Taj.

I didn't realise I was already unmuted then. Just to add to some of the points that Victoria has already raised, I think for us it's very important that we talk about the low pay and the insecure work, and also the overall poorer terms and conditions that are a massive problem for many workers in these sectors, and it does actually impact people's whole life, including their retirement as well. So, it is important for us to think about the pay, of course, in this area. So, median pay is very low in these sectors. There is a higher percentage of workers who are on very close to the statutory minimum wage, so it's actually a very flat sector as well, and there are also very few jobs where workers can expect to receive the median UK salary. So, for example, in hospitality and tourism it's estimated that 70 to 75 per cent of workers earn below the real living wage, and in terms of terms and conditions as well, this rarely actually goes beyond statutory minimum for workers in the sector. So, for example, 60 per cent of hospitality workers and 10 per cent of retail workers don't actually receive any statutory sick pay when they become ill, because they don't work enough hours so their boss can't actually claim statutory sick pay. So, by focusing on just the hourly pay, we do actually miss that much bigger gap in the overall remuneration package. There have been lots of anecdotal reports of these large pay rises in the wider sector, the wider context for these workers, the vast majority of whom, of course, were furloughed on 80 per cent of their usual pay for many months of the pandemic. So, we have to then actually think about the overall income and how individuals have been hit really badly, and, actually, we know that personal debt reported amongst low-paid workers is at an all-time high as well.

So, this sort of, like, one-sided flexibility, and high levels of insecurity that come with this are a huge problem with employers often shifting a huge amount of that risk on to the workforce. So, for example, we know that one in four workers in accommodation and food services are actually on a zero-hours contract. The use of low-hour contracts that don't actually represent the usual hours, and someone is then expected to work, is common, and, of course, there's all of the informality of many employment relationships as well. That means that lots of workers can be let go without their rights actually being recognised.

So, we see constantly frequent violations of labour rights and employment law. There's a report—it's research that was done on the hotel sector, actually, for the UK Government a few years ago, and even that report actually concluded that the experience of non-compliance with employment rights is common in the sector. Workers' narratives mainly identified issues around pay, working hours, breaks and holidays, or more concretely, actually, unpaid hours and no or limited breaks were the areas identified by respondents as being extremely problematic in terms of violation of employment rights. So, these issues around minimum pay, leave breaks and other aspects of employment are really commonplace in hospitality, and there are, of course, lots of violations that we saw around health and safety in the retail supply chain premises during the pandemic—lots of it was in food-processing sites and in others as well.

So, there are lots of causes of this, and I would say that the employers' ability to take advantage of what we say are relatively weak and complex employment rights in the UK, the underinvestment in enforcement of labour rights, and also the fact that we have very low levels of union membership and collective bargaining coverage—so a relatively disempowered workforce, really.

Mark Turner.

Shav has more or less said what I was going to say. For me as well—the one thing Shav hasn't touched on is training. When you look around Wales at training opportunities for the sector, being honest, it really is low down on a lot of the colleges' and universities' curriculum, so we'd like to see more training. But not just in the hospitality sector itself, but also in workers' rights, because a lot of workers don't understand their rights when they go into the workplace, and, unfortunately, when they go into the hospitality sector—and I'm talking about places as well like McDonald's, Burger King—that's their first experience of work, and what they're getting, actually, is the wrong experience, and we would like to see more workers understand their workers' rights, so that when they're going into the workplace, they can understand exactly what their rights are. This is why we see abuses by employers, this is why we do see people on contracts that, when they bring them to us, really sometimes are laughable—they just do not know their rights and they accept that that is what they've got to work with.

If I can now bring in Sarah Murphy. Sarah.

Thank you, Chair, and hello to you all this morning. I'm going to declare again that I am a member of Unite the Union as well as USDAW.

So, just to build on what our Chair has just asked about fair work and the challenges, how effectively do you think the Welsh Government—? How effective is the Welsh Government in playing a part in responding to these challenges that you've raised, and, in your opinion, what do you think should be the top three priorities going forward? If I can come to you first, Shav.

Yes. So, I would say that we have made some really good progress, actually, in the area of retail, because much of the sector, primarily the larger chain supermarkets, are unionised, and we have got collective bargaining arrangements and, of course, trade union reps in these workplaces as well throughout the country. And that has meant that, during the crisis, Welsh Government did a really good job in regularly bringing together employers and unions around the table to work together to consider what measures and guidance were actually necessary for the sector to keep people safe and to keep the sector running as well. It's very difficult, I would say, to assess, though, what impact it's having in hospitality and tourism, because there are so few structures at the moment in place where joint work has taken place with a clear focus on the workforce, although, of course, unions have recently been brought in to the visitor economy forum structure that's recently happened. I know that Mark is a member, so I'm sure he could talk about some of that in greater detail.

I would say the Welsh Government's top three priorities should really now be focusing on leveraging fairer work outcomes from funding, and, of course, investment in these sectors as well, including considering how initiatives like childcare work specifically for those people in these sectors, and that we have a clearer vision and an honesty about the employment issues that are affecting tens of thousands of workers in these sectors. We often get confused that we're talking sectors down, which it isn't. It's actually about being realistic and having a very clear idea about what the state's role is, but also what is the role of the employer. I think that unionisation is really important, and we're hoping with some of the legislation that we are going to be, hopefully, seeing, as far as social partnership is concerned, that maybe things could change. But I would say that those are the key ones for me.

Thank you. I'll be coming back in on social partnership a little later on as well. Mark, can I come to you next then, please?

During the pandemic, it was actually great to sit down with employers and talk to employers to find out some of the issues that they have got as well. I think we all recognise that, for employees, there needs to be a business, and I think we all recognise that. But at the same time, we want our workers to be recognised for what they do for those businesses as well. I think one of the problems that we've had lately—and it was even more prominent during the pandemic—is we concentrate on the businesses a bit too much, so that the workers are not treated in the way that they should necessarily be. If I was to go to some of my members and say, 'What is the biggest problem that we have got at the moment?', it is the lack of understanding of issues that workers have got. We need to understand what the real issues are.

Shavanah has talked about childcare, but it's not just childcare. There are people in south Wales, in particular along the south-west coast, that have three of four jobs. They might be three of four jobs in a week, they might be three of four jobs in a month, or over a course of a year, because just to work, they have to move from one to the other to keep themselves afloat. There are a lot of people in areas like in St David's, for example—a very tourist area with second homes. You're talking about an area that has got a lot of deprivation when you really get down and look at the problems that we've got in those areas, because of the work relationship that they have with tourism. So, it's getting employers to also understand from a worker's perspective that it's not just about the businesses; there's got to be this inclusion of the workers, and the workers' voice has got to be heard as well.

Thank you very much. And Victoria.

I think the fact that the Welsh Government has now dipped its toe in the water of looking at workforce issues is very welcome. We're, obviously, not party to the kinds of activity that trade unions are, but what I would say is that the interventions have yet to make a difference at scale. So, when you look at the published statistics, for example, they're still not painting a very positive picture on terms and conditions in these sectors. And I should finish off and say, 'I hope they will do.' I hope we will start to see that translate through. So, I'm not being negative, I'm just saying that it hasn't yet reached all parts.

In terms of the top three priorities, I think there is—. For all the inadequacies, I think there are protections in statue at UK Government, and I think those need to be reinforced and seen as the absolute legal minimum. And I think the Welsh Government could do more to make sure that it is not supporting practices that are basically non-compliant—so, workers not getting payslips, people not having breaks et cetera. These aren't 'nice to haves', these are legal minimums. I think that that would be the first thing that I think the Welsh Government can do.

I think it then has a role in respect of education around employee rights. I'm sure that most individuals are far more aware of their consumer rights than they are of their worker rights. I think there's a role there, not necessarily for the general public, but students in further education, apprenticeships, traineeships, even higher education students—they are all supported by Welsh Government funding, and provision of information about their statutory entitlements I see could be part of that.

And then, I think the third area is what I've called 'co-investment'. So, as well as investing in the growth of those economic sectors and investing in the businesses, that must be coupled with an investment in the workforce so that the workforce is valued and not seen as expendable. And in all the work that we've done, that's been the overarching message—that workers are seen as and feel like they're disposable. So, a shift in mindset that sees that the person who greets you in the restaurant isn't just No. 3 waitress, that person is somebody who makes a crucial difference to your experience as a customer, and therefore that workforce needs to be valued, respected, trained and treated well. So, those would be the three areas that we would see as priorities.

Thank you very much. I'll be coming in a bit later. Thank you, Chair.

Thank you, Sarah. If I can now bring in Hefin David. 

Can I ask the panel if you feel that the cost-of-living crisis and recovery from the pandemic is actually going to make it harder to create a fair work environment in the sector, or do you feel that there may actually be opportunities to press the case for fair work?

Victoria, would you like to start on that?

I think it's difficult to tell, and I hesitated because I hoped that my trade union colleagues would have experience from the front line. I think there's no doubt—. I won't bore you with telling you that it's workers in these sectors who are amongst the hardest hit because of their low wages and insecurity. It would be nice to think that they had some leverage in terms of negotiating higher pay rates and other terms and conditions, but I'm not sure that we will actually see that, and, indeed, as other people with disposable income may well cut back, it could be that we have a mini recession in some of these sectors, because they're dependent, to some extent, on disposable income. So, I would like to be optimistic, but I think my realistic view is that, as is so often the case, workers in these sectors are likely to be particularly hard hit.

So, Shavanah, whatever the Government does, if the economy has taken a hit in these sectors, then it makes equality in work harder to achieve.

I would say that we have got some real concerns about the cost-of-living challenges and the impact, of course, on fair work and how we can actually make improvements, particularly over the coming months. I would say that there is a significant risk that it could actually further undermine worker power and that ability to say 'no' to a boss in particular, because it is people's incomes that are being further squeezed. We could also see more people, of course, working dangerously long hours because they are so reliant on that hourly pay rate. And, of course, also, it includes lots of people who are taking on multiple jobs. Building on that idea, aspects of the UK's social security system have already limited the amount of freedom workers have to say 'no' to their employer, and we're really worried that we're going to be possibly seeing people making some really difficult decisions. There is going to be a growing amount of informal work, where people are going to be topping up their income with informal paid work, so that their welfare payments aren't affected and they can avoid falling into debt or homelessness as well. This makes those individuals, then, really vulnerable—extremely vulnerable, I would say—as it's virtually impossible for workers in that sort of situation to ensure that their basic employment rights are being upheld. So, there is that risk that the cost-of-living crisis is going to result in further labour exploitation, and it's going to be very difficult to rectify, given the wider employment rights challenges in the UK.

Mark, did you want to add anything?

We've got real concerns on the cost-of-living crisis, obviously, but in this sector in particular. There's the cost-of-living crisis we talk about, the effect it's going to have on the workers, but it can also have an effect on businesses as well, which will then get passed down to workers; that's one of our worries as well. And what Shav is saying is right; unfortunately, when these things happen, the black money market suddenly raises its head. So, we're going to get members who are going to be really struggling. And the benefit system doesn't really help, because if you earn less this week, you're not going to get it in your benefits next week; you're going to have to wait a period of time before you get it in your benefits. People have to still pay their bills and do all the things that they need to do. So, yes, we see some real challenges ahead for our members and low-paid workers across the board—not just in hospitality but actually across the board.

Diolch, Gadeirydd.

Diolch, Hefin. If I can now bring back Sarah Murphy.

Thank you. I'm going to ask some questions now about social partnership. To what extent has social partnership been used to develop the Welsh Government's retail strategy and its visitor economy action plan, do you feel? And do you think that the fair work issues been sufficiently considered to develop these documents? If I can come to you first, Victoria, this time.

I've got a simple answer, and that is that the Bevan Foundation hasn't been involved in any of those processes. So, unfortunately, I can't really comment, and I think Shavanah and Mark would have a much better idea. Sorry.

No, that's fine. Thank you very much. Shav, if I come to you, then.

I would say that it is very important for us to think about unionisation overall, particularly for this sector, because these workers in particular need that voice, and it seems very unlikely that the UK Government are going to help facilitate this through something like a sector wages panel. But the Welsh Government has got an opportunity to promote unionisation in sectors, particularly these sectors that have such poor employment practices. Because, ultimately and fundamentally, it is about that imbalance of power. You know, I referenced this earlier on: the retail strategy has been a brilliant example of working in social partnership; that is something that has been developed in social partnership, where you've got unions and employer organisations working very positively and jointly. I'd say, in fact, it's an excellent example of how to do social partnership and ensure that investment is a final plan.

There's also some work that's been taking place on the 2020-25 visitor economy action plan. That wasn't initially drafted in social partnership, but now work has happened to bring unions into the discussions about its delivery. As a result, because of the way that it was initially drafted, labour issues weren't considered at the time. And that then, of course, risks investing in employers who ultimately exploit workers. But we're hoping that that can actually change going forward now as well. Because what we don't want is this idea that, you know, Welsh Government has a duty to fund the training for low-paid workers and employers don't even have to pay this for themselves as well. I think if that is the case, that will be very reflective of some of the low aspirations that we have for the Welsh workforce in this sector in particular, and the state having to take on that responsibility. I think that responsibility should most definitely sit with the employer.

But there are some real concerns around the policy issues that we've already mentioned as well, but, like I say, there's a lot of work now that has happened where we've worked hard with officials to make sure that we integrate unions into that visitor economy work, and the officials that are leading on it are better aware of the employment issues that we've identified and that they are working very closely with their colleagues in the Welsh Government fair work directorate as well. So, two slightly different approaches, but I think that both are moving very positively.

Thank you. And Mark next.

Really, just to back up what Shav says. I see there are opportunities there that we need to grab with both hands, and if we allow things to go back to how they were, then we're missing a massive opportunity. All I really want to say is that this is a point at which we can make a big change and we need to make those changes for these people in these sectors.

Can I ask, then—? You've mentioned about employers who don't treat the workforce very well. Obviously, Amazon comes to mind for me, not only do they not treat their workers very well, there are horrendous stories of people working in Wales within plants and in factories and how they're being treated. Not only do they not recognise unions, but they're also heavily anti-trade unions, putting a lot of messages out there to say how awful trade unions are, but they are here in Wales. Is that something that has come up in any of these discussions? What do we do when you have a huge global company like this? Are they going to come and sit around a social partnership table in Wales for us? What do you think? If I can ask Shav first.

So, I would say that we aren't necessarily going to get them around the table, but I think that the model that we now have in terms of what we're trying to do with the retail sector and the hospitality sectors that I've just mentioned, that helps us and that's a significant step forward in terms of actually putting in place a structure to advise what action Government can take in this space as well. But I think that one of the biggest priorities for employers is often to secure further business rates relief, and lots of different companies will apply for that support, and this is something that is very concerning for us as, of all the levers the Welsh Government has to support business owners, I would say this is probably one of the worst ways for trying to leverage any changes in terms of employment conditions. I'm really worried that if this ends up continuing and it continues to be a significant way in which the sector is supported, instead of grant funding and other initiatives, it's going to be quite difficult to see how we'll actually achieve fair work outcomes as a result of that public spend, so this idea of the something-for-something agenda. It's also virtually guaranteed that those employers who actually practise illegal employment practices will receive Government support, because rates relief is so indiscriminate, and labour exploitation, of course, is rife in sectors like these. So, I think that we need to look at this again, and I think that when support is provided to businesses, even if it is during a pandemic, we need to go into it with our eyes open, and we need to be in a position where we are actively clawing back any support that has been provided if we find that bad practices are continuing. But I think that there's—. I'm always hopeful that we can do something better, going forward.

Thank you. Mark, did you want to come in on this?

I completely agree with what Shav says with money going forward, but I think also on the social partnership side, and also for companies that Welsh Government already use, and Amazon being a good example of that. You know, Amazon services in Wales are used by the Welsh Government and I think it's something that they really seriously do need to look at, the partnerships that they have with these companies who are not recognising unions, who've got bad working practices, and it's something that seriously does need addressing.

If we're talking about going forward with things like social partnership, then we've also got to look at what we're doing now. We can't just say 'in the future'; we've got to start now and looking at what we've got now. So, Amazon is a classic example, but there are other companies out there that we know the Welsh Government use. I don't know if this sounds like I'm attacking the Welsh Government. I'm not attacking the Welsh Government, because these are long-term issues. What I'm saying is that we've got to draw a line in the sand at some stage and start saying to these companies that we are giving public money to, 'Are you actually doing the best for everybody within the workforce?' and doing everything by the book for Wales as a whole. Because, if we want social partnership to work, then it's got to come from the top down and we can't expect the small employers to do things if we're allowing some of the bigger employers not to be held to account as well.

Thank you. Victoria, I saw you nodding along. I don't know if you wanted to come in on this.

I think, if we're serious or the Welsh Government is serious about fair work, it has to do more than talk the talk, and it does mean taking some tough decisions, using all the tools at its disposal, and that might mean not buying goods and services from certain companies, it might mean doing unpopular things like withdrawing business rates relief. It is about a mindset and actually doing it, not just talking about it.

Thank you very much. And just my last question: the Bevan Foundation and Wales TUC both called for the establishment of social partnership structures in sectors like tourism, hospitality and retail to improve working conditions. So, what progress has there been from the Welsh Government in establishing those, and would you like to see this model replicated for the tourism and hospitality sectors as well? So, I'll come to you first, Victoria.

As I said earlier, we're not involved in that process. I think social partnership is clearly a very important way forward, but unless that partnership is backed by trade union membership or employee voice in some shape or form, then the risk is it becomes a talking shop. So, the development of social partnership needs to be accompanied by investment on the ground that develops the membership of unions. It's as simple as that, really.

Thank you. Shav, did you want to come in on that as well?

Yes. I'd say that Welsh Government has taken on the advice from the Bevan Foundation, and, of course, this was something that the Fair Work Commission also included within their recommendations, and, of course, others like the Wales TUC. But it was very important that it engaged with both employers and workers if it was going to be producing policy solutions that support successful businesses and better employment practices as well. And, as I say, the retail forum is a direct result of this; it's a significant step in terms of actually putting in place a structure to advise on what action Government can be taking as well. But, for us, there's still a lot of work to be done in terms of further business rates relief. That's really important for us in terms of levers that the Welsh Government has to support business owners, and that's something that I think it's very important that we look at now, going forward.

So, do you think if we had a tourism and hospitality sector-specific social partnership council forum, do you think that that would make a difference? 

I think that will make a difference, because, at the end of the day, having people working together and trying to address some of the difficult issues, you can move things forward. But, there is a role here then, of course, for Government to play as well in terms of how they fund employers, and that something-for-something approach—that whole agenda. And, also, taking action where possible.

Now, I know that there is difficulty because there are limitations in terms of what the Welsh Government can and can't do when it comes to employment rights in Wales, and, of course, enforcement as well, but I think that there are ways and means of addressing some of these issues, as I say, through some of that rates relief and also looking instead at grant funding and other initiatives that can be put in place.

Thank you. And Mark, finally.

I personally believe that us all sitting around a table and talking is the best way forward. We've always said that. And I have to say that, during the last two years, we have met, on a regular basis, with the industry from the workers' side, and that has to continue. I think that there is a benefit to us sitting down and understanding each other's problems. If the hospitality sector is saying that they've got shortfalls in staffing and things, then we can talk to them about those issues. We can tell them to their faces why those issues are there, and we need to develop—. The hospitality sector is a massive sector in Wales. The potential for growth in Wales is also huge. If people don't want to go abroad after the pandemic and they're starting to stay home, we've got a massive opportunity to grow this sector. But it needs to be done in tandem; it needs to be done with not just the businesses, but the workers as well. We need it to be fair and we need it to be robust.

The way that workers were treated at the start of the pandemic, we cannot allow to happen again, and the only way that I believe that that will go forward is if we are around the table talking to one another—all businesses, big or small. So, the different groups are there. We're speaking to UKHospitality, we're speaking to the major chains now, we're doing things in Wales that we didn't do in the past that we need to continue doing, because if we don't, we'll just go back to where we were before. If the Welsh Government can facilitate that and grow the sector—. We're talking about a sector that employs, at its height, 200,000 people, that was bringing in—the figures that I have, but I'd have to double-check—£6 billion to the Welsh economy at one stage. This is big money. We're not talking of a small industry. And the bit for me is that, if you were talking about 200,000 people that were in one plant on a site in Wales—. So, take Port Talbot steelworks, for example, if that had 200,000 people on it and suddenly somebody came along and said, 'Right, we're shutting that down', everybody would have jumped. But we did that to, say, 140,000 people in Wales at the start of the pandemic, and it was just like, 'Well, that's the way it is.' And that's the bit that's frustrating. We need to treat the workers in the hospitality sector the same way as we treat any other working group and any other sector. So, yes, I believe that a forum for the hospitality and tourism sector, really going forward, is a must.

Fantastic. Thank you so much. Thank you, Chair.

Thank you, Sarah. I know we're quite tight for time. I'll now bring in Luke Fletcher. Luke.

Diolch, Cadeirydd. If I could look at pay and quality of work, and this is something I recognise, a lot of the issues, actually, that are prevalent in the sector, from my own personal experience. You know, that power imbalance that we've talked about today is one of the reasons why a lot of these issues exist. We've touched on this already through that something-for-something attitude, something that I think is very problematic in itself: better pay and working conditions shouldn't be a bargaining chip; it should be the standard. But I'd be interested to know from the panel which additional levers within its devolved powers should the Welsh Government use to improve pay and working conditions in the tourism, hospitality and retail sector. I'll begin with Shavanah, and then move to Mark and then Victoria, if that's okay.

Thank you. That's a really important question for us as well, and something that we have been discussing with unions in the sector for some time now. I would say that grant funding is hugely important, because Welsh Government can attach that conditionality, and it should actually use this much more to achieve fair work outcomes. The skills policy should also be far more reflective of the labour market realities. I think that that is very much a key way through which Welsh Government can reach employers as well. So, for example, apprentices are at a very high risk of not receiving statutory minimum pay, so, Welsh Government could and should use the leverage it has here to address this issue. It should also invest in, of course, training—Mark has talked about this many times now—training that will make workers have a safer and healthier experience at work.

But there's also what can be done for low-paid workers beyond the employment setting as well. So, we very much support the measures that have been set out in the Bevan Foundation's cost-of-living action plan, for example, and we believe that the cap on the discretionary assistance fund should be raised so that people can claim more than five times a year. This cap ultimately has failed to take into account what happened to many workers in these sectors over the last two years, and the level of the precarity that defines these sectors, as well.

Finally, in terms of additional powers, this is one of those areas that our commission, the Wales TUC commission, is going to be looking at. Because we want to understand what devolution has actually meant for workers in Wales, and whether a lack of power in specific areas is actually undermining Welsh Government's actions and ability to improve the quality of workers' lives as well. So, I'd say 'watch this space', because I think those conversations that we're planning on having with workers are going to be very important going forward.

Yes, 100 per cent what Shav has just said. I think that the problem we've got is that employment law is UK based. We would love to see, on zero-hours contracts and minimum-hours contracts, some work around that. I'm not saying that we want them necessarily banned, because for some people, that is what they want. But within the hospitality sector in particular, they are used and abused, and something that we really need to look at is the contractual agreements between employers and the workers. 

For me, I think when we talk about what difference the Welsh Government can make, conditionality is a big one. It was disappointing that, in all the grants that were given out, there was no conditionality. If I was a businessman, and I was running a business during the pandemic, all the money I had would have gone into a bank account, because there was no conditionality put on it. There was nothing there to stop a business doing that. As I said in the past, we need businesses to be there for their employees to have a business, but at the same time, we need the businesses to recognise the importance of the workforce that they've got around them. So there are things that the Welsh Government can do within their power, and we would like to see the Welsh Government doing more of that. 

Thank you. Victoria, any additional comments there?

Just briefly, if I may. I think I'd reiterate the point I made earlier about the need for leadership. For example, we don't have a Minister with responsibility for the labour market. Responsibility is currently spread around several Ministers, and although we do thankfully have one now responsible for social partnership, the clue is in the name—it's not all aspects of it. So, skills is over here, and economic contract is somewhere else. I think sorting that out would be a first step.

I think the Welsh Government's lack of powers is overstated. It's more complex than employment matters not being devolved, because employment matters affect whole swathes of devolved matters, and it's that interface where I think the Welsh Government may well find some leverage that it doesn't have at the moment.

As Shavanah said, I think conditionality is important, but there's another side to that. There are also penalties. So, if there are employers who are breaching legal minimums or not complying with their economic contract, there need to be some teeth there, too, there need to be some penalties, and I think there's scope to be much more creative and innovative about compelling and supporting fair work rather than just fretting that, 'Oh, it's not devolved'. I think there's much more that could be done.

Thank you, Victoria. I was about to ask about what the panel would think of the penalties side. I'm not sure if Shav or Mark have any additional comments on that point. If not, I'll move on to the next question. 

Yes, I'd just like to come back on that. That is one of the things that we called for—that you were giving money out as the Welsh Government, but there is no way of either getting the money back or penalising a business that has taken that money and is not being fair with it. That was one of the things we were saying all the way through, that any money that comes from the Welsh Government, there has to be these ways of either conditionality—. If you're not meeting those conditions, then there has to be a clawback. Unfortunately, it felt very much to us that, in terms of the money that was being given out during the pandemic, there was nothing there—it was just going to the businesses. I understand from a business perspective that they didn't know when the pandemic was finishing, and the longer the pandemic went on, it caused more hassle for them, but there was nothing that made sure that workers were looked after. 

Thank you, Mark. My final question is probably more directed towards Victoria, but of course if anyone has any comments they'd like to make, please indicate. The Bevan Foundation has called for the Welsh Government to develop a fair work innovation fund to improve productivity and job quality in the foundational economic sectors. How would this fund operate, and are you aware of any evidence on how this could work in the tourism, hospitality and retail sectors?

The idea came from some work that we commissioned from some academics as part of our work looking at fair work and the foundational economy. They made the extremely important point that in the way in which jobs are designed, there are decisions that are taken by human beings. It's not inevitable that a lot of jobs are routine and have virtually zero scope for autonomy and discretion by the worker. And if jobs are redesigned in a different way, to allow more discretion and more autonomy and more exercise of skill, then that can boost productivity, increase job satisfaction and also help to increase pay rates.

They gave us some examples from elsewhere. I think they were examples from the States, from memory. For example, you could combine shop-floor and first-tier management tasks to create a different role, one we don't have in most retail outlets, and that might be preferable to workers and also better paid. So, our idea was that there would be some quite small-scale but intensive learning from experiments and pilot work like that. I think the crucial thing is that it's not about supporting innovation in, I don't know, Joe Bloggs's shop; it's about making sure that the learning from that experiment is then rolled out across the sector. So, it's not something that I would say can be done in isolation, it's not something that can be done on a large scale, but it's something that needs to have the support of the sector. And I think if it was done well, it could be a win-win for both business and for workers.  

Just to add to that, in terms of how the fund could operate and so forth, I would say that it most definitely would need to focus on labour rights and not just on certain aspects of fair work or the roll-out of policies, because ultimately they just end up existing on paper. We'd be really concerned about further funding, for example, going towards more employers becoming accredited real living wage employers, because actually this gives no further guarantees that working conditions are actually improving or that workers are able to realise their labour rights. This is especially important in these sorts of sectors that we're talking about today, because they have such high levels of poor practice and exploitation. So, this sort of fund must explicitly seek to empower workers and establish those collective bargaining arrangements for the workforce, because that is the only way that you are genuinely going to be able to deliver fair work.  

Thank you for all your comments. Unless Mark has anything additional to add—

I'd just back up what has already been said. Shav is right; you can pay somebody a living wage, but if you then say, 'We used to pay for your uniform but we're not paying for your uniform anymore', or, 'We used to pay for a taxi or transport for you to get backwards and forwards but we're not paying that anymore', then what have people actually gained? And that's where the real concern is, that employers can do certain things and then they can take something else away, and we cannot allow that to happen. We've seen it too many times, and the living wage is a classic one, where we have seen people being given the mark as a living wage employer, but they've actually taken something else away, which is of no benefit to an employee whatsoever. 

Diolch yn fawr iawn, Luke. Before I bring in Vikki Howells, we are over time, so if I could just ask you all to be as succinct as possible. Thank you. Vikki.

Thanks, Chair. Some people might say that the economic contract is perfectly placed as an important vehicle to try to deliver on the fair work agenda. Of course, during the pandemic, the tourism, retail and hospitality sectors have received substantial amounts of funding that required them to all sign up to that economic contract. Is there any evidence that this approach has delivered fair work outcomes in these sectors, and what changes could be made to deliver better outcomes? Shall I go to Victoria first?

I'll be very brief. Boxes are very easy to tick. I'm not aware of there being any changes—there might be at firm level, but not overall—and without checking and monitoring and enforcement, at worst, it's a paper exercise.

Thank you. I can see Mark and Shav nodding there. Is there anything else different you want to add to that? No. 

So, my second and final question, then. Victoria, the Bevan Foundation, and the Wales TUC—so, yourself as well, Shav—have called for fair work conditions to be placed on Welsh Government grants awarded to businesses. Which conditions would you prioritise and how would these add value to the requirements of the economic contract? I'll start with Shavanah first. I think you're still muted.

I think it's really important that we recognise that the economic contract doesn't actually set requirements as such, and it seems to be much more like a process whereby Welsh Government gauge where a firm is at in relation to the contract's pillars, including fair work, and then they agree steps to make improvement. However, these aren't actually a condition of support. So, the economic contract, I would say, is a poorly understood policy. For starters, it's not actually a contract, and there should, perhaps, be some consideration now given to how the policy is referenced, and that we have greater emphasis placed on ensuring that it's properly understood, because this is an issue for employers as much as it is, actually, for us as well.

In terms of the basic conditions, we wouldn't expect any firm that does not permit a trade union in to organise the workforce to receive Welsh Government funds, because anti-union behaviour by an employer should also set real alarm bells for Welsh Government because it means that they don't want their workforce to realise those labour rights that we've been talking about that are really important. And it means that employers, typically, have something to hide and want to keep their workforce disempowered.

We strongly welcome the letter that the former economy Minister sent to all the economic resilience fund recipients to this effect as well. Where Welsh Government actually works on the economic contract with a firm, it is essentially trying to improve practices, and we expect them then to work with trade unions in that workplace, where relevant, to determine what better employment practices actually look like in practice, and how to make that workplace greener, in line with the just transition principle, and so on. 

So, it's still a bit of a point of frustration for us that the economic contract is only actually agreed with the employer, and there's no room at the moment for worker voice. So, we would also expect that, in relation to fair work, those pledges are then based on trying to raise minimum terms and conditions above the statutory minimum. Prioritising sick pay, parental leave, covering things like childcare are also really important, along with secure contracts as well that reflect the usual hours. So, again, a bit of an area I think that's misunderstood, and we need to have some clarity around it. 

Thank you. And Victoria, what conditions would you prioritise for the awarding of Welsh Government grants? 

I wouldn't disagree with anything that Shavanah has said, and I think having been through—. You know, you can come up with a check list as long as your arm of things that should be in there. I think the fundamental thing is that employees have a voice, because that is what underpins the enactment and meeting all other rights and standards. It's at the root of it, I think. So, that, for me, would be the No. 1 priority—that employees have a voice.  

Thank you very much. Mark, I could see you nodding throughout all of that, so I take it you agree with those comments. Anything briefly to add? 

I think workers' voices are important. I know some very good employers that don't pay the best wages but they look after their workers in other ways. So, it is about talking to employers, understanding employers and having a voice. Employers that listen to their workforce usually have a happier workforce than those that don't. 

Thank you—thank you, Chair.

Thank you very much, Vikki. I'm afraid our time has come to an end, so our session has come to an end. On behalf of the committee, can I take this opportunity to thank you for your time this morning? Your evidence will be very useful in our inquiry. A transcript of today's proceedings will be sent to you in due course for accuracy purposes, so if there are any issues with that, then please let us know. But, once again, thank you very much for being with us this morning. And now we'll take a short break to prepare for the next session. Thank you.

Prynhawn da. Good afternoon, James Scorey, vice principal from Cardiff and Vale College. 

Iestyn Davies. 

Arwyn Watkins. Arwyn Watkins. Can you hear us at all, Arwyn Watkins? 

Arwyn Watkins, managing director of Cambrian Training Company and president of the Culinary Association of Wales.

Thank you. And Jeff Protheroe. 

Good afternoon, all. Prynhawn da, bawb. Jeff Protheroe, director of operations at National Training Federation Wales. 

Thank you very much indeed for those introductions. And if we can now go straight into questions, and I'll bring in Hefin David at this point. Hefin. 

Hello? Can you hear me, Chair?

We can. We can hear you, yes, absolutely. 

My signal just dropped out there. Can I ask the panel to tell us about the most challenging skills concerns that are currently affecting the tourism and hospitality sector?

Can we start with James Scorey? James.

Thank you, Hefin. I think the summary of the challenges is obviously that there's a few issues at play that are impacting on the sector. We've obviously had the pandemic and the ongoing recovery from that, but, prior to that, we've also had the issue with regards to Brexit, and obviously how that's impacting on staff shortages within the sector. 

From a furlough perspective, I think around 78 per cent of jobs in the hospitality sector were furloughed at one stage, and, obviously, that's causing significant issues in terms of the sector's recovery. And I think that causes challenges in terms of current staffing within the sector. And from a future perspective, I think what has also happened is, to some extent, we've lost the confidence, I think, of some young people to apply for roles within the sector. And we've seen that, I think, across the further education sector, and, from a CAVC perspective, there's been a 10 per cent reduction in full-time learners this year in comparison to last year, and that's only going to create issues in future years for the sector. 

So, I think that's a quick sort of snapshot, really, of the main challenges that the sector is facing, and how we're obviously attracting people and re-inspiring that confidence for our young people to engage with the sector moving forward from a parent/guardian influence perspective as well, in terms of people understanding that the sector does have a strong outlook in the future, and it is a sector where you can get secure employment and also progress within the sector from a relatively low starting base in terms of the level of qualification that you go in with. 

Does anybody want to add anything before I move on, or—?

If I may, Hefin. 

Everybody does. Okay, that's fine. 

To sum up, the biggest challenge around skills and this sector is that, often, this is seen as something you do while you're training to do something else. It is not seen as a career path in its own right, despite the sterling work the likes of Arwyn do with the Welsh culinary team, despite the many programmes that are available to young people through apprenticeships or through further education, it is still seen as something you do while you study to do your proper job. And unless we can deal with that, I think that all the other things that we're going to address today and have addressed in the past will be secondary. 

Arwyn wanted to come in.

Yes. In terms of—. I'm a person who didn't do this whilst studying for something else. This has been my career since I left school at the age of 16, and it's probably the same conversation I was having with my careers advisers and teachers in 1978 in Builth Wells High School, in terms of, 'This is a low-level job, why would you want to go into that?' There is no definitive career pathway coming through, literally, and I could talk about that, about the whole foundational economy, but, if we were specific about this, you've only got to look at the numbers over the last three years. And there's been a significant change, in terms of we all know what's gone on in the last three years, so that's obviously going to have an impact in terms of the number of people coming into the sector. And with the impact of the last two years, in terms of the first sector to close and the last sector to open, there's this whole conversation about future job security within this sector and working in this sector. 

Okay. Just before I come to Jeff, and thanks to Arwyn, Suzy Davies suggested to us, in an earlier evidence session, that degree apprenticeships might be a way through this to provide a skills pathway, so just bear that in mind. Iestyn would probably want to come back on that as well. But, Jeff, over to you, first. Oh, Arwyn, do you want to carry on? 

Yes, I certainly would want to carry on. The majority of the vacancies that we see in businesses across the whole of Wales are at a national occupational standard, which is the actual operators, the people who are hands-on, the people physically doing the job. And there is this aspiration for this higher level skills agenda, but we do have to look at the economy and the jobs within the economy and the requirements within the businesses who operate within this area. This is something not unique to Wales; it's something not unique to the United Kingdom. I speak with fellow presidents and world chefs from around the whole of Europe and the whole of the world. We could be having the same conversation in northern Europe, in central Europe, in Australia and in New Zealand, America and Canada. It is exactly the same outlook for workers within this sector. 

Okay. Jeff. 

Thank you, Hefin. Yes. Listen, as somebody who is passionate about apprenticeships, then I would wholeheartedly support the development of degree apprenticeships, but as a wider progression pathway. As Arwyn has indicated, the vast majority of the jobs within the sector that are being advertised at the moment are those sort of level 2, level 3, those hands-on jobs. But anything we can do to change the perception of apprenticeships as a route into hospitality, tourism and, indeed, retail, I think would be beneficial, and degree apprenticeships obviously offer that as an option. 

I guess, coming back to your initial question, if I may, I think there are two things to consider there. One, I think, is the issue around a skilled workforce within the sectors. I think there are two particular issues there, which I know colleagues have outlined. One is the perception, not just the perception of individuals looking for a career, but also, as well, the perception that maybe Welsh Government have of the sector and certain elements of the sector. Some of it is seen as a priority, some of it is seen as generic and non-priority, but they both add, or they all add, to the visitor economy.

I think, clearly, there are issues around the pipeline of talent. Arwyn has indicated some of the careers advice that is not happening to promote opportunities within the sector. And, I guess, the specific issue around the skills agenda and what is actually taught to people when they get into the sector to work, then, clearly—. And I know there is work under way with Qualifications Wales to look at, root and branch, the qualifications system and the qualifications therein, and, to coin a phrase, to have a 'made in Wales' approach to qualifications in the three elements of the sector. 

Okay. Iestyn, is it the case that a degree apprenticeship capstone and an academic career path for this sector would address the skills issue? 

I think it would be one way, and, as Arwyn has pointed out, this is not unique to these three occupational classifications we're looking at here. You're going to have this conversation across the breadth and depth of the foundational economy. It's become more acute to us because of COVID and the two areas of major concern within that foundational economy are health and social care, retail, hospitality and tourism. So, this applies equally to you as a committee, but specifically for this area today.

One of the challenges we've got is that there can often be a mismatch already between what we are trying to promote as a through pathway for a career, compared to what employers can often be demanding. And again, I'm not sure if the committee's had sight of it, but we can share with you Dr Rachel Bowen's work, the wonderfully entitled, 'Gammon, egg and chips in a pub night after night', which tries to capture the fact that for the individual aspiring apprentice or learner, for the more ambitiously thinking, entrepreneurial proprietor, they want to see a big, wide range of culinary and other kinds of offers in their establishment. But, in many instances, the kind of place where we have hospitality being worked through, it's a bit like 'chicken ding' catering; it's very low skilled, unfortunately. It's taking pre-prepared foods that are frozen and reworking them in a very high-turnover, low-cost-to-low-reward economy. It's not Michelin star, unfortunately. So, I think we have to see this in that context.

And it's back to that dilemma of: what do we want to supply into a particular industrial sector or occupational sector, and what is the demand for that from some employers, who often want a low-value, low-cost product themselves? And that's the dilemma again across various aspects of the economy. Wales is trying to be a premium visitor destination, to promote provenance and product, and place all those things together, but sometimes those activities, particularly in large retail environments, are at odds with the kinds of higher value product that I think we would want to see being sold and the higher value service we want to see being provided in Wales.

Arwyn put his hand up there as well.

Yes, certainly. Not to disagree with what Iestyn has said, but literally, the dilemma is one of this, isn't it: you end up in a situation if you—. You can follow a single programme of learning in a further education setting, and invariably, you normally end up with two qualifications when you join and come into hospitality. That wouldn't have suited me at all, I've got to be honest. I wanted to be a chef; I never wanted to be a waiter, I never wanted to be front of house.

I think there is a time to really look at that and, if we are serious about the quality of what we offer, we should have a full-time programme and it should be fully funded correctly for food service—giving the proper service in terms of that. And then professional cookery should be just one of the options that are available when going into an FE setting. Because the majority of the businesses that we work with in apprenticeships across Wales, Iestyn's right, there are very, very few that would fit into the professional cookery, occupational-standards model. Very often, they are operating under production-chef model, and the production-chef qualification is not something that is widely offered as a full-time further education programme. And you do get a mismatch then in terms of what the aspirations of the individual are to what the aspirations of the job opportunities are within Wales.

So, that's something that needs to be done. And we've got to remember as well, and it would be wrong for me not to say, that many of these vacancies in the past 12 years have been filled, and not on a low-wage filled, but they've been filled by economic migrants. And literally, that is not the case anymore—that option's not available to us. And I know it comes under your committee, but many, many of our members—many of the employers who we work with across the whole of the United Kingdom—are desperate to see the outcomes of the trade deals and the free movement of people, and they're desperate for the trade deal to come from India, to be honest, so that we can start seeing some free movement of people to fill some of these vacancies.

Diolch, Gadeirydd.

Diolch yn fawr iawn, Hefin. If I can now bring in Luke Fletcher. Luke.

Diolch, Gadeirydd. If I could ask some questions around the culture and working practices. My line of questioning anyway is more focused on ColegauCymru. I was wondering if, Arwyn—sorry, Iestyn, if you'd be able to expand on the suggestion that there is growing recognition and acceptance that the culture of the hospitality and catering sector has to change radically in order to attract young people into that sector.

Yes, and I think this is—. It's not a criticism; it's an observation of the sector, or the sectors under this umbrella. We've touched upon it in terms of career progression. Obviously, there has to be meaningful pay and reward. Otherwise, individuals who perhaps commence a career or commence a learning pathway or an apprenticeship programme will soon divert into other areas in order to make ends meet, to meet the growing cost of housing and mortgages and all the kinds of things that come your way. So, there is obviously the pure economic factor, and then of course, by its very virtue, the visitor economy and the entertainment economy is very much a twilight or an evening economy, and there's not a lot you can do about that, but again that has to have with it sufficient reward based on the demands that we are placing on individuals. Anybody who's been on either side, I think, of the table, whether you're serving or whether you're being served, we have to recognise it's called the hospitality industry or the tourism industry for a reason. It's hard work, it is demanding, but unfortunately it's probably not the case that the reward, financially at least, meets the kind of challenges that individuals have to face. It is a demanding job. It is a hard work job. And I think we need to recognise as individuals and customers, but also particularly as employers, how hard and demanding it actually is.

Thank you. It certainly is a hard-working, high-demand job, and I can attest to that. I think part of the culture issues also revolve around those 60 to 80-hour work weeks. For example, having that coupled with split shifts and weekend working, we often forget that when we have bank holidays it's those in hospitality, those in tourism, who don't benefit from bank holidays in the same way that people in other sectors do. That's a particularly important element to remember. I don't think it's just a financial issue. That work-life balance is all-important, especially now that we've come out of the pandemic and people have realised some of those benefits. I was wondering if you might be able to tell us how you think changing that particular part of the culture might work in practice.

I think it's about job redesign, and again, the points that we would make as ColegauCymru and our understanding of the labour market more widely can sometimes be quite generic. It is about role design. It's about responsibilities and autonomy. It is about reward—financial reward—obviously, as I've said. You're right, Luke; it's about being able to find the balance, and again the same would be the case for many of the essential roles that exist within the foundational economy. We simply don't reward them or esteem them enough, and the ways that we construct, if you like, the working practices around them are actually inhibitors to people progressing or staying within those industries. As Arwyn has attested to, the easy solution for an employer is to wait until the next free movement or the next group of labour in order to flood perhaps a little bit cheaper short-term labour into that space rather than grow it as a profession in its own right. And then, once you've done that and you've looked at the specialism, then you can start constructing learning pathways or apprenticeship programmes that lead in the right direction. So, I think the industry has to rethink itself. I'm hopeful that it will rethink itself, but like all independent sectors and industries, it's beyond necessary for the push effect of providing more young people or new entrants; the demand effect will always have the upper hand in job design.

Arwyn. Yes, Arwyn.

We have seen significant changes to the working practices over the last two years in this sector. The number of businesses through a shortage of people, not a shortage of skills—. This isn't a skills shortage; this is a people shortage and I think we need to be 100 per cent honest with ourselves around that. And nothing that we do over the next five years in terms of bringing people in through a skills system is going to address the number of vacancies that we've currently got in the Welsh economy within this sector. There are certain establishments who currently are sat with over 500 vacancies on their books here in Wales that we've tried to fill, so I just want to emphasise the degree of difficulty and challenges that are faced by this sector. But many sectors, to retain their staff, to retain their quality skilled staff, are working to four-day weeks, three days off, and we can see that's not going to change going forward. I can't recall a time when—. In the 1980s, I might have done 80 hours. I probably do more hours now in the work that I do now than I did when I was a chef, to be frank. I'd imagine a lot of you are similar, to be honest.

But it is about the perception, and I've got to come back to that. I'm not sure how many people are aware, but on the Working Wales website, there is a landing page that is obviously delivered by Careers Wales and funded by Welsh Government, but it is about the experience makers, and if anybody wants to go on that, if any of the committee go on that, you can see some real case studies from young individuals who are working within the business currently to try to change that perception. And I think a lot of it is perception; it's a lot of our past experiences, but it's a lot about perception, and we're working really hard. I sit on the board of the tourism and hospitality partnership here in Wales, which there is one, and it's in its infancy, but this work comes out of that board, and there's representation from further education, higher education, National Training Federation Wales and industry on that board, and we are working really hard to try to make a difference.

Thank you, Arwyn. The long hours that I worked in hospitality definitely prepped me for this job, so I can definitely sympathise with you there. I happen to agree as well—I think it was an important point—that I do think it's more of a people shortage than a skills shortage, and I'm slightly worried that, sometimes, we're focusing a bit too much on that skills element. Before I hand back to the Chair, I'm just wondering if anyone wanted to add any additional comments specifically on specific actions that we can take to address that work-life balance. I can see Jeff has got his hand up.

Fantastic. Thank you, Luke. I can talk from a retail perspective, as a son of a shop owner and someone who spent nearly 15 years within the retail sector. It's got different challenges, I guess, to tourism and hospitality, but I guess if we're looking at things in the round and if we're looking at developing Wales as a nation where we have a really good sort of visitor economy that drives a wider economy, then I think, notwithstanding the issues around reward and retention, et cetera, there's an opportunity here, isn't there, to develop a sort of 'team Visit Wales' approach, so all of those working in the sector currently feel recognised for what they are doing and that they are contributing to the economy of Wales. We're beginning to see that approach being taken in other important sectors, such as the health and social care sector, where individuals working in that sector are being recognised for what they do, and I think it is that time now when if Wales is wanting to develop that visitor economy, we recognise the importance of the workforce and they should be recognised for the contribution that they make. And that doesn't necessarily impact on the business models or businesses operating it, but what it does do is demonstrate that Wales is proud of its workforce, working in the sector. So, just that sort of team Wales approach, I guess.

Thank you, Jeff. Thank you, all, for your comments.

Diolch yn fawr iawn, Luke. If I can now bring in Sarah Murphy. Sarah.

Thank you, Chair, and thank you all for being here today. Our committee actually looked into some of these issues back in September and, again, one of the main things that came through was the status of the sectors, and already today, I think all of you in some way have touched upon that. So, not to repeat things, I suppose, but just to drill down into that a little bit more, and give you all an opportunity to do that: what are your views on the work that needs to be done by businesses and the Welsh Government to professionalise the tourism, hospitality and retail sectors, so that they do become more attractive places to work for all ages? I suppose we're looking here for some clear progression pathway ideas and what that would really look like in practice. So, I'm going to come to you first, Iestyn.

If I can speak about retail at the moment, I think that the Government has historically come under quite considerable pressure from large retailers, large brand retailers, to almost allow them to cash in their chips when it comes to their apprenticeship levy money into what can often be low-skill, low-value, in-house training programmes and badging them as apprenticeships. And I think the Government should be supported by all parties to avoid that kind of short-term thinking and try to establish much more integrated progression pathways, better support between apprenticeship providers and FE providers, and those large retailers in particular, in a way that supports those employers. It's a short-term fix. As Arwyn has pointed about, it's a labour problem. So, if you can encourage turnover from one employer to the other, that might help you as a manager or as an employer in one particular instance, but it doesn't the solve the bigger picture. In fact, that kind of churn compound things. So, I think, making sure large employers and medium-sized employers support—the point that Jeff has made—this idea of a team-Wales approach, rather than allowing them to become almost cannibalistic, if you like, and use elements of Government-funded programmes, be that through the apprenticeship programme or through the apprenticeship levy, or whatever it might be, to just simply do the very least that they can do.

Some years ago, a few of us visited the home of Starbucks in Seattle. They'd also developed programmes where they could support some of the transient labour that they have as well in their settings—so, accepting that you were going to see seasonal labour, you were going to see people perhaps working in the setting alongside their other major areas of study, but, again, because of the unique system in the US, of course, using employment within that large-brand organisation as a means of supporting their three, four or five-year academic programme at college level. Now, that was quite an enlightened approach, and they were the first to identify that that would not work necessarily in the UK because that brand relies solely on franchising in the UK. So, if we can work effectively with large brands who have a genuine commitment to corporate social responsibility, understand that they are a major employer in Wales—not everyone, perhaps, would like to think of it in that way—if we can work with them and work together, rather than simply taking the easy route of just throwing, if you like, the apprenticeship levy back into those employers—. That's tough. That does mean that the employer, the sector and Government need to work together. 

Thank you. That's so interesting. Can I come to you next, Arwyn?

Certainly. We work and I commission across many of those brands here in Wales, to be honest. They are responsible employers and they do use their levy money to actually fund their supply chain, to undertake training within that supply chain as well. The one thing for me about the whole of this is it all comes back to how others see the sector and how policy makers and how decision makers see the sector. And I think it would be fair to say, because it is a manifesto commitment in terms of tourism tax. And, quite clearly, if that's coming to the table, which we firmly believe that it is, and as an operator we firmly believe that it is, then there's got to be the significant kudos given to the sector in terms of how important it is to the Welsh economy. And if the last two years haven't demonstrated how important this is to the Welsh economy—and I listened to some of the earlier evidence that you received—. If the number of jobs that have been lost in this sector over the last 24 months had been lost in any other sector, there would be absolute uproar, quite frankly, and nobody is saying anything about it whatsoever, apart from the employers trying to fill the vacancies. 

There are quite a number of businesses in Wales now that have established their own academies, and there are clear career pathways, but when you give no priority to certain sectors, and we believe that there are certain sectors, where you give no aspiration for people to join a programme at a level 2 apprenticeship programme and they have to join at a level 3, I feel really, really sorry, as a past lecturer, as a past head of catering in South Kent College, for the lecturers who I meet—at the Welsh international culinary championship last week—who are trying to deliver the programme that they're trying to deliver with around about five hours a week of somebody in a chef's jacket, because they've got the GCSEs, the academic bit, then they've got the front-of-house bit. It is impossible to give somebody an equal level of skills to somebody who would have joined straight into an apprenticeship programme, and then both of them coming into an employer at the same level, expecting the same salary but two different levels of competency. I'm not criticising the FE sector here; I'm criticising how we've got this so fundamentally wrong, to be honest—to put an individual and a professional lecturer in that position to try to enable them to do that. So, there is a qualifications review, but, to me, this is about more than just a qualifications review; this is about a whole-change funding review.

Housekeepers: let's just talk about housekeepers. We all stay in hotels. Fundamentally, that is one of the biggest gaps in the labour market in most of the establishments in Wales. Now, there has never been, for a very long time, a full-time housekeeper programme in further education for somebody wanting to be a housekeeper. And it is a skilled job. For anybody to say that that is not a skilled job, to turn out a five-star bedroom to the quality and standard that is needed—. For that to be classified as an unskilled job by people's perceptions, that's the bit that I feel we've got wholly wrong within our economy here in Wales. And that's a plea to you as a committee. This needs to be addressed, otherwise we're never going to address these issues and the imbalance in our economy.

Thank you very much. That's a really useful example too. James, you wanted to come in next.

Thank you, Sarah. Just to follow up on that, I know the point has been made, but I do think that it's a fundamental one, in that the sector, really, is of national importance in celebrating Wales to the world, and that needs to have a profiled campaign, really, to increase the appetite to work in the sector. Within the FE space, we're doing a lot of that, in terms of if you came to not just Cardiff and Vale College, but many other colleges, where we've got commercial functioning restaurants—at CAVC, we've got a commercial spa, and entity and spa management is another area that falls into the gap of chronic shortages—. But, the fact that we're offering these as not just training environments, but actually, it's real, not realistic—to pinch a phrase—whereby these young people are actually in the environment where they are doing what they would be doing in a commercial setting and are supported by very experienced industry staff as well as lecturers and trainers, I think that that has got the bones of a model that will support that future generation that is coming through into the sector.

And there's a lot of synergy, I think, between young people and that generation Z characteristic and what the sector's appetite is moving forward, as well. I think the aspiration for work-life balance is there, the aspiration to invest in young people is there. The sense of ownership with the employer is probably greater in hospitality than what it is in any other sector where you do get that direct reward for serving the people in front of you. So, I do think that there are a lot of boxes that we can tick and there's a huge opportunity to push forward in terms of the aspirations of young people to join the sector, as well as reskilling people who have obviously worked in the sector in the past. Many of us, probably, have got experience of working in hospitality or retail at some level during the course of our working lives, and there's an opportunity there to really try and capitalise on that. We've got an early stage of a concept at CAVC where we're talking about priority sector skills academies, where we can do short, intensive programmes and give the individuals a training allowance as well to forgo some current earnings and to push them further forward into some of these sectors and give them more of a rounded experience and a foot on a ladder, where there are employers with these vacancies that are sat there waiting.

Thank you so much. Jeff, did you want to come in, finally?

Yes, if I might, Sarah, because it's a hugely important question. I think if you look at how other sectors—look at the education workforce, for example—go about professionalising their workforce, there are a number of measures that are taken. One is registration. That's not something that I would advocate for these sectors, but the next thing, then, is undertaking a workforce development planning exercise to understand what the current skill levels are, understand what the roles are and understand, obviously, the plan, or put a plan in place to get people to make those progressions to higher level learning and higher level skills, and higher level delivery of service. So, I do feel that there is an opportunity, isn't there, for Visit Wales, or any sort of body within Welsh Government, to take an overarching view of the whole sector, and, under the banner of team Visit Wales or something like that, start to bring all of that information together.

There is a qualifications review going on, which will understand what is actually taught to individuals, but what we can't forget here is that retail is part of the visitor economy. And just to give an example in terms of perceptions—and coming back to Arwyn's point around policy makers and Government's view—retail is deemed a non-priority sector. It is deemed a generic apprenticeship. Now, anybody working in a shop in St David's is clearly part of that visitor economy, so we've got to change those levels of perceptions. And let's bring everybody under the banner of, 'You are part of the visitor economy, and if you're part of the visitor economy—and that could be demonstrated—then you're priority.'

Thank you. Chair, I'm going to hand back to you, but I do think that other people would like to come in again. But I'll leave that up to you.

Yes. Time is pressing; we don't have much time. So, if I could move on and bring in Vikki Howells. Vikki.

Thank you, Chair, and good morning—or good afternoon, I should say—to the panel. I'll start with a question to Iestyn if I may, please. Could you expand on ColegauCymru's suggestion that a review of qualifications delivery is necessary to ensure that curriculum delivery is fit for purpose and meets the needs of the future of the industry?

Thank you, Vikki, that was kind of a point I was going to make in response to Sarah there, and building on what Arwyn has mentioned. So, obviously, between James and me, we have a particular closer working relationship still with FE colleges, and Arwyn and Jeff will be very, very familiar with what's happening with the apprenticeship routes. Under both is a set requirement of what needs to be taught, what is the underpinning knowledge, what are the trade skills or the craft skills. And, increasingly, and particularly in the FE environment, as Arwyn has alluded to, there's a heavy requirement for general education catch-up, if you like. So, if you imagine a learning programme that roughly will be something around 660, 700 hours of learning, quite a significant amount of that now in an FE environment has to go on addressing, if you like, some residual skills deficits that emerge from school. Now, again, I'm not saying that in order to have it go at schoolteachers, Vikki, or those who were once part of that profession, but simply to say that we are carrying forward some of those, if you like, legacies into the FE environment. So, time spent on remedial maths and communication skills is time you can't spend, as Arwyn will tell you, on knife skills or whatever it might be. So, I think there is a need to look at the whole delivery of a programme, not just the qualification that sits within it.

James will be better skilled than I am to be able to explain how the programme of learning is constructed, but a programme of learning is constructed with a main qualification—a community or core qualification, or a community learning industry focus qualification—and work that's actually related to the actual working environment. That has to be delivered in a very, very narrow time frame, and I believe, James, we're talking probably no more than 665 hours per programme in normal instances. And that's why an individual, if they progress, say, to a level 3 apprenticeship programme, and they're handed over to the likes of Arwyn and his company, their learning progression for their trade skill will more than likely be in a different place compared to those who have done the apprenticeship from day one. So, that accounts for some of the differences. And, again, James will be able to supply more information, through ColegauCymru, to the committee, as we will as well.

You're talking very low programme values in each of these areas, because, as Jeff has pointed out, they're not esteemed by the general public, and neither are they esteemed, if you like, within the programme directory that sets out how much money you can actually pull down, or average in your payments, from Government to deliver these programmes of learning. So, if you deliver more than the 665 hours, you're essentially borrowing from Peter to pay Paul within the FE college to deliver that extra time in the craft skills. So, it's not just the qualification, which Qualifications Wales have reviewed; it's also the entire programme of learning. I'll hand over to James in that sense, because he's the expert in delivering and constructing those programmes and I'm definitely not.

Thank you. James.

Thank you, Vikki. Thank you, Iestyn. I think the point that is important to make here in terms of the qualification review is that we don't move the qualification from what I'll term as its 'vocational rigour' and turn it into something that becomes too academic as a focus, because I think that will only detract from many of the young people who go into these routes through FE. So, I think a really important point, as part of the Qualifications Wales review, is that we have seen in some other sectors, where they've done the vocational reviews, that this has spun slightly further across into the academic side, for example in health and social care, which is then having an impact on, obviously, the throughput of learners who are coming through to the course.

Obviously, in terms of how the programmes are constructed, you've got, I suppose, what Iestyn has termed as any legacy skills deficit that needs to be addressed in terms of maths and English, which, obviously, forms a core part of that FE programme. You've got the core vocational element that is also addressed, and the other thing that we build into that delivery, then, as well, is the focus on the soft skills element, because, ultimately, that's a fundamental anchor for anybody who's going into, particularly, these sectors, that we need to have those well-rounded and developed individuals. So, there is a lot to pack into that, and, ultimately, I suppose, there's a bit that is leaning on almost the moral compass of individuals, really, in terms of making sure that these individuals have the passion to go on, and those, obviously, then, are doing additional hours on top of their programme, in terms of work experience or working in the industry at some level to gain that additional exposure.

Thank you, James, and it was those soft skills, actually, that were going to be the focus of my second and final question. There was so much hope for the Welsh baccalaureate, wasn't there, to improve learners' communication and social skills, and I would imagine the pandemic has somewhat disrupted progress there, with so many of our learners having spent such a long time out of the formal learning environment, but any thoughts from the panel on how that lack of soft skills in many learners can now be addressed? Who'd like to take that? Jeff.

Thank you. Thank you, Vikki. Clearly, soft skills are hugely important, working in all three elements of the sector being discussed. You're right, the Welsh baccalaureate was going to be the answer to deal with all of those issues through the skills challenges and everything that was part of it. Clearly, we can pin some hope on the curriculum reform, trying to make some more capable and confident learners, and the other thing, and it's been subject to discussion with the Welsh Government and other groups, is a fully coherent work experience package to give young people, particularly, an opportunity to go out into industry and develop some of these skills. The only way you develop confidence in communicating is by actually getting out and communicating, and I can say that from my own experience. I think anything we can do to give young people, particularly, the opportunity to expose them to customers, to communicate, et cetera, will clearly give them confidence to develop those softer skills. 

Thanks, Jeff. Any other brief comments on that? Is everyone content with what Jeff said? James.

Just a very brief one. I think we need to also pay tribute to many of the employers in the support that they give to the sector in developing that soft-skill aspect. We run, obviously, a number of live employer briefs or host chef evenings through Arwyn and his network at the restaurant here at the college, and I know that's across the sector, and I don't think we can undermine the contribution that employers do pay in giving back to helping to develop those skills of our young people too. 

Thank you. Arwyn.

I think there's one other thing, as well, in the sector that should be recognised and noted, and that is the importance of skills competitions, and Skills Competition Wales. If you look at what we've done in Wales, especially in this sector, and if you look at who won the UK finals in terms of in this sector, Wales were far ahead of any other of the devolved nations and England in terms of that. So, that's critically important, as well, and that's all about showcasing and profiling the sector.

Thank you very much. Thank you, Chair.

Thank you, Vikki. And finally, if I can bring in Sam Kurtz. Sam.

Diolch, Cadeirydd, and thank you all four for your thorough answers to all the questions so far. So, as I'm conscious of time, I'll keep my question relatively short—but whether you've had any direct input into the development of the action plan for the visitor economy and the strategy for the retail sector, both of which are due to be published very soon. Jeff, can we start with yourself? 

I'll keep my answer short as well, Sam: no.

That was short. Arwyn.

Yes, I have, with the visitor economy plan, and I was also heavily involved with the tourism recovery plan as well. One of the things that I've insisted that they bring forward in the tourism plan is that the skills and the people bit remains as a priority. One of the things that we've managed to secure for hospitality and tourism within the apprenticeship sector is we've managed to remove the barriers in terms of the 25-year-old age category across the whole board of apprentices, and we are demanding to see that continue to help support the sector recover in terms of that, which is something that's very promising. I mean, if I can report back that, by the end of this year, our apprenticeship starts on the commissioned programme for hospitality and catering will be somewhere near 2018-19 levels, which is brilliant, and it's this sort of work that's enabled us to do that, and let it continue. 

Iestyn.

From our point of view as ColegauCymru, like Jeff, the answer is a no. I would hope somebody writing these strategies has engaged with the FE community somewhere along the line, but it certainly hasn't been through us. So, maybe James is going to give the fulsome answer.

Thank you very much. And, finally, on to you, James.

I'm not aware of anything directly, I'm afraid. I'm happy to take a look at it, but no, not aware of anything. 

Okay, excellent. That's something that we can explore as well from a committee point of view as well. So, I'm happy to hand back to you, Chair. Thank you.

Yes. Thank you very much indeed, Sam. I'm afraid time has beaten us, so our session has come to an end, but, on behalf of the committee, can I take this opportunity to thank you for your time this afternoon? It's been very, very useful, your evidence as far as our inquiry is concerned. A transcript of today's proceedings will be sent to you in due course for accuracy purposes, so, if there are any issues, then please let us know, but, once again, thank you very much indeed for being with us this afternoon. Now we'll take a short break to prepare for the next session. Thank you.

Michael, can you hear us?

Sorry, did you want me to introduce myself there?

Please, yes.

Sorry, my apologies. Hi, I'm Professor Michael Gasiorek. I'm an international trade economist, and I'm director of the UK Trade Policy Observatory, based at the University of Sussex.

Thank you. Sam Lowe.

Hello. My name is Sam Lowe. I'm a director who runs the trade policy work at Flint-Global, which is a business advisory.

Thank you. And Emily Rees.

Hello. Emily Rees. I'm the managing director of Trade Strategies and a senior fellow at the European Centre for International Political Economy in Brussels.

Thank you very much indeed for those introductions, and perhaps I can just kick off this session just by asking a general question to outline your views, really, on the impact of and opportunities presented by the agreement on businesses in Wales relating to trade and goods, and how do you think can the UK and Welsh Governments support businesses to actually maximise opportunities and mitigate any impacts. And perhaps I can start with Michael Gasiorek.

Thank you very much for the question and also thank you very much for inviting me to give evidence to the committee; I'm very grateful to do so. In answer to the question, the Government's own scoping and impact assessment suggests that the impact of the agreement with Australia is going to be very, very small—around 0.08 per cent of gross domestic product. Simulations and modelling that we've done at the UKTPO are of the same order of magnitude, so it's a very, very small overall impact for the UK economy, and that, therefore, also applies to Wales.

There are some estimates in the impact assessment for Wales, and they're also very small—about 0.09 per cent of value added in Wales. Now, what does Wales primarily export to Australia? Well, it turns out the biggest export in goods is medicinal and pharmaceutical products, which accounts for around 18 per cent of exports, and that's already got a very, very low tariff on exports to Australia. So, in terms of the tariff reductions, there's very little scope for, I would have thought, much gain there. There's possibly some gain in other sectors, such as cars and vehicles, where Australian tariffs are 5 per cent, and there may be some gains from reduced regulatory barriers. But my overall assessment, that the impact for the UK economy as a whole, and equally for Wales, certainly on the export side, and I know later on we'll talk a little bit more about the import side, and in particular in regard to beef and sheep, but the overall impact is likely to be very small.

Shall I—? I'll follow on by agreeing with Michael that the overall impact is small, but I'd also go one step forward and say that this isn't unusual for trade agreements. If we look at the aggregate impact on the economy of most free trade agreements, the impact is usually quite small, and particularly if we're talking about a trade agreement between two countries that are already quite liberalised. Tariffs are, on average, fairly low, and we're also talking about quite large distances involved.

In terms of Wales-specific issues, I did think I would flag steel, because whilst the UK-Australia agreement does lead to the day 1 reduction of nearly all Australian tariffs, when it comes to steel, those tariff reductions will be phased in over five years, and there's an initial 5 per cent tariff. There's also, if you look in the footnotes of the agreement, a slight caveat, which is that this gradual phase-out on the Australian side will only begin once the UK removes its existing tariff safeguards on imported steel, which are a legacy of the Trump trade wars. So, actually, there are a few extra conditions in place before steel is liberalised, and there are also some questions about whether all steel products produced in the UK will be able to qualify for tariff-free trade under the agreement because of the rules-of-origin provisions. So, for example, my understanding and my interpretation of the rules-of-origin provisions suggest that rerolled steel would not necessarily qualify for tariff-free trade. I grew up in Llanelli, but I'm not sure exactly what sort of steel production happens in Wales in all of its intricacies. If that were to be how some steel is produced in Wales, there could be some issues there.

But the point I would make to your final question, which was how can Government in Wales and also across the UK ensure that businesses best benefit from this agreement, is that if we're talking about exports of manufactured goods, for the most part, with a couple of caveats—as I mentioned, Australia has removed all tariffs as part of this agreement—the market access question solely focuses on rules of origin, which is the question of whether products produced within the UK are local enough to qualify for tariff-free trade, and there are product-specific rules covering every distinct product. So, in terms of what the Welsh Government can be doing, it is communicating with companies how best to ensure that their exports do actually qualify for tariff-free trade, and if they don't, giving guidance on some of the alternatives available to ensure that they do. That could be reorienting supply chains slightly or it could just be accepting that you're going to have to pay the tax. But that's the sort of discussion that you should be having with companies. 

Thank you. Emily Rees.

Thank you, Chair. It's a pleasure to be with you today. Thank you for the invitation. This, in a way, is the first fully fledged, I would say, or first fully new, UK free trade agreement that we're analysing today. So, in a way it's more of a strong indicator of the sense of travel of UK trade policy, and it's under that light that I think that we can draw some conclusions. As already was mentioned, the actual gains out of this agreement remain quite small on the whole. When we often talk of free trade agreements as being ambitious and deep free trade agreements, that's really not particularly the case in this particular free trade agreement. It appears to be much more simple, in a way.

We know that Australia's exports—and I'm sure we'll have time to delve into that at more length today—are dominated more by raw materials than agriculture, and so those goods account for 80 per cent of their exports. So, what we'll need to see here is really what the impact will be, for instance, in Wales, where we know that food and drink do account as the first employer in Wales, and what impact that can have. Talking about the opportunities there, I think there was a missed opportunity on the SPS chapter, the sanitary and phytosanitary chapter, to seek a bit more ambition, and also for the export of Welsh food and drink products, so that's certainly something that I'm sure we'll have time to discuss. But in terms of opportunities for Wales, certainly the promotion aspect now is going to be very important. So, how do you promote Wales as that high-quality producer in the Australian market? That actually is what will drive the exports of tomorrow. 

Thank you very much. If I can now bring in Hefin David. Hefin, can you hear us? If I can bring Hefin in. Can you hear us, Hefin? No. I'll come back to Hefin, then. Perhaps I can bring in Luke Fletcher first, then, and I'll come back to Hefin.

Diolch, Gadeirydd. The agreement will remove all tariffs on Australian beef and sheep meat exported to the UK after the staging period. Does the panel share the concerns raised by the agri-food sector on the potential impact of these tariff liberalisations on this sector? I'll start with Sam first, then move to Michael and then Emily. 

Thank you. I find this a slightly complicated question, as they all are, insofar as I don't think this agreement, taken in isolation, will—. There will be some additional competition, there will be some effect at the margin, but I'm not expecting huge inflows of Australian produce as a result. But that's not to say I can't understand why Welsh agriculture but also UK agriculture as a whole has some concerns. Because if I was just to give my blanket analysis as to the direction of travel for British agriculture, if you look at the revealed preference of the UK Government, which is to reduce levels of support on the whole in terms of subsidies, which is to restrict exports to the closest market in the context of the new barriers to trade facing companies selling produce to the European Union, and to reduce or remove tariffs on goods entering the UK from elsewhere, you have to conclude that there is going to be increased competition in the sector. And in terms of the long-term implications of that, I would suspect that, in 15 years, you will have a lot of consolidation, which will lead to UK agriculture becoming more competitive, with the introduction of more automation. But, that will hollow out some of the middle of the industry, and then, at the other end, you will still have part-time and niche producers existing, selling specialist products. But that's a big change to how we do things. So, I understand why that does concern some people. 

I share much of what Sam has just said, in particular the general point that, in a way, it's quite a hard question to answer without considering the broader context. So, if one was to take just the liberalising of market access into the UK market in, for example, beef and sheep on its own without taking anything else into account, then I would probably not particularly share in aggregate the concerns that some of the producer associations have raised on this. Historically, 90 per cent of UK beef imports come from the EU and only about 1 per cent comes from Australia. So, it's hard to imagine that that's going to have a very big impact.

And that's just with regard to imports. In fact, most of the domestic consumption of beef is from domestic production and not from imports. So, the fact that we've increased barriers between ourselves and the EU is probably going to have a much bigger impact on agricultural production, on beef and sheep meat, in the UK and in Wales than is the agreement with Australia. We already know, one year on from the introduction of the TCA, that agricultural imports from the EU are down by about 25 per cent to 30 per cent, and that's consistent over the year. That's going to have a much bigger impact on UK agriculture than the agreement with Australia. 

And then the final thing I would add to this is that we're going to see changes in agriculture and agricultural policy over the next five, 10, 15 years, and those, too, are likely to have a much bigger impact on farming and on agricultural production in Wales than this particular agreement. 

I have to concur with both speakers there on what has been said about the cumulative impact. I think that's really what we want to be looking at in this particular framework. In a way, there has been a liberalisation—and I'll get into the numbers very briefly—of two subsegments of agricultural goods, which are cattle and sheep, and those do represent, respectively, 26 per cent and 18 per cent of Welsh agricultural production. I think Michael very clearly outlined that the issue is not necessarily the trade impact from Australia and that the relationship with the EU is much more important within that framework.

Perhaps allow me to go through what this agreement foresees in terms of this liberalisation, because it is a staged liberalisation for those two subsegments. From year 1 of the entry into force of the agreement, what we'll see is that Australian beef, basically, over 10 years, will start slowly gaining access, and then there's a safeguard mechanism that kicks in for a further five. So, there's a first instalment of 35,000 tonnes in year 1, and it reaches 110,000 tonnes in year 10. Anything that is not within that quota—so, in those instalments—will continue to be traded on World Trade Organization most-favoured-nation tariffs, meaning the tariff that's applied to everyone that does not have a free trade agreement with the UK, and then they are effectively eliminated. 

I think it's important to keep in mind that the liberalisation does not include specific conditionalities, for instance on animal welfare. I know that that's certainly been a concern from the farmers. So, something to keep in mind there. On Australian sheep meat, it's also afforded full liberalisation over a 10-year period, followed by five years of surveillance and potential safeguards. And again, the tariff rate quota volumes rise from 25,000 tonnes in year 1 to 75,000 tonnes in year 10, again, with the out-of-quota tariffs remaining on a WTO tariff during that time, and then are eliminated with the introduction of the safeguard provisions. Again, in the case of sheep meat, what we see is a liberalisation that does not include conditionality. I think I'll keep it at that. We can talk about the specific safeguards. I see Michael wants to intervene.

I agree with absolutely everything that Emily's just said. I would just add one other thing to those statistics, as it were, which is, looking at the quota, it's clear that the quota is bigger than the current level of imports, so that suggests that imports from Australia could potentially rise. But also, if you look at the data for the last few years, it is rarely the case that Australia has filled its existing quota. So, it's not as if Australians appear to be pushing against the door and trying to fill their quota; that's not what's been happening.  

Thank you. On the animal welfare side, the agri-food sector has outlined their concerns about the lack of a level playing field in production standards because of the higher UK animal welfare and environmental standards as well, compared to Australia. I know that it's a source of pride for Welsh farmers that our animal welfare standards here are very high, and I know it's something that they would never move on. It's very core, I think, to Welsh farming. 

I take the points that you've all made, but would the panel believe that the UK Government should have insisted on minimal animal welfare standards in return for tariff liberalisations on the agricultural sector and its goods, and perhaps not necessarily just in this trade agreement but in all trade agreements, really? I'll start with Emily on this one, if that's okay, and I'll work my way backwards from the previous list. So, I'll start with Emily and then go to Michael, and then Sam. 

Thank you very much. It's an excellent question on the conditionality of these tariff-free quotas, or the liberalisation of these particular sectors. Allow me to separate, because there are two basic animal welfare provisions that we're looking at when we're looking at this trade deal. On cattle, the main, I would say, standard that's not enforced in Australia is hot iron branding. That's a practice that's still permitted in all states and territories of Australia, and that's banned in the UK. That would be, I would say, the key standard for cattle.

When it comes to sheep, there is, I think, perhaps a more important provision here, which is that of mulesing. It's a pretty painful practice. It's a scarring of crescent shapes of skin on the sheep to avoid fly attacks. It's basically done with very sharp shears—not particularly nice. It results in wounds for the animals, and as it heals, basically, it creates scar tissue that avoids the attraction of blowflies.

The reason I mention this is because, if we look at those two practices, could we have put in a conditionality on trying to see whether any produce being imported under this trade deal would not be using those particular production and processing methods as part of the liberalisation? Yes. However, I would have to warn about the question of the level playing field in this case. If we look at those particular practices, they aren't something that provides the Australian producers with a competitive advantage. The producer in Australia doesn't gain a competitive advantage by using these practices; they're just something that we wouldn't do here. So, in that sense, I think we have to be quite careful in being able to distinguish why we want particular animal welfare conditionality to be included as part of a liberalisation process. Is it for the welfare of the animal or is it to maintain competitiveness? Those really are two different objectives.

Thanks for that, Emily. If I can just come back on that for a second, I take your point on those two particular practices, but, for example—and correct me if I'm wrong here—I believe that there are different rules in Australia around transporting animals, and that they can be transported for longer hours in greater numbers and in smaller areas than in the UK. Surely, that would provide a competitive advantage, in terms of the cost of transportation.

Well, first, you would have to see whether the transport of these animals is contributing to competitiveness and whether those particular animals are being exported. I think it's slightly more complex. There isn't an automatic link between the animal welfare practice, or lack thereof, and competitiveness. Those items would need to be calculated in order to come with any firm statement.

Okay, thank you. I'll move to Michael and then I'll finish off with Sam. 

Emily has explained really, really well what the underlying issues are, in particular the distinction between whether one wants a policy on level-playing-field grounds, competitiveness grounds, or whether this is to do with animal welfare or not. It's important to point out that what the agreement does not do is it doesn't lower standards; it simply doesn't impose any conditionality to say, 'We do not want to import beef or sheep where certain standards or certain processes have been used.'

The question was whether the Government should have insisted on higher minimum welfare standards. Well, that raises a broader question, which is to do with what we, in the UK, generally want with regard to our standards and our trade relations with Australia, and that involves a wider, I think, conversation and consultation within the UK as to what we want across a range of areas to do with trade policy.

If you ask me, personally, whether I think it would have been good to try to insist on higher animal welfare standards, then my answer would be, yes, I think the Government could have done that. Should this have been make or break—whether or not the agreement should be signed or not—is a much more difficult question. Imagine, hypothetically, the Australian negotiators said, 'We refuse to sign up to this, and if you insist on this, we won't have a trade agreement.' Well, that then becomes a much more difficult question as to what the trade-offs are, overall, within a trade agreement. 

The final thing I would point out is that even if that conditionality were there, at the moment the animal welfare standards are not part of the dispute-settlement provisions in the agreement. So, even if there were contravention of those processes, the mechanisms for raising disputes and for resolving that issue are far from straightforward.

Thank you, Michael. So, I suppose that's more of a moral question than an economic question, then, in terms of signing that trade agreement based on that. Yes, brilliant. Finally, Sam—I know we're tight for time here.

Thank you. If the question is whether the UK could have included greater conditionality or tied tariff liberalisation to meeting certain production standards, I think the answer is, yes, theoretically, it could have. Would it have made the negotiations more difficult? Also 'yes', and, of course, we know that the UK Government was prioritising expediency over many other things in these negotiations. But I do think it was possible.

I do think we have to be careful with language here, because we do need to differentiate between production standards or animal standards, so the discussions we've been having about hot cattle branding, and food safety rules, because we must also clarify there's nothing in this agreement that requires the UK to change its food safety rules. And these two issues get conflated.

But, yes, going to your question as to whether the UK Government could have made tariff liberalisation conditional on meeting certain animal welfare rules, I think, yes. Would it have been possible in the context of the negotiations? I also think 'yes' because of how good the UK's offer is, but I think it would have taken longer. 

Thank you, Sam, and thank you, all, for your answers. It's incredibly helpful and useful. Back to you, Chair. 

Thank you, Luke. If I can now bring in Sam Kurtz. Sam. 

Diolch, Cadeirydd. Good afternoon, all. I just want to reconfirm my links with Wales Federation of Young Farmers Clubs, for the record, and as a beef farmer's son as well, this is obviously something that I've taken close interest in over the last couple of years. But, if I may ask you: with regard to the general bilateral safeguard mechanism, which applies to the products, and included in the agreement, to protect industries from serious injury, the National Farmers Union have argued that the bar to trigger this under the safeguard clause is set high and will be difficult to apply. So, panel, could I just see if you agree with the NFU's view on that, and outline what you believe are the practical effects of these safeguards measures? And I'll start with my namesake, Sam. 

If I could be blunt, I would actually recommend starting with Emily on this point, if that's okay. 

Yes, no problem. Emily, over to you. 

Thank you. Maybe just a reminder of what the safeguards are, just to kick off this round of responses. So, for beef, which I understand is the main interest here, from the eleventh year until the end of the fifteenth year of the application of this free trade agreement—so, we're quite in the future here; there is time to prepare—Australian beef would be subject to what we call a 'product-specific safeguard measure', and that allows the UK to impose 20 per cent tariffs on any products that are covered by the tariff rate quota when a volume threshold is reached. And, so, those thresholds are 120,000 metric tonnes in year 11; 137,000 in year 12, moving up to 170,000 tonnes in year 15. 

For sheep, actually, it's slightly different. So, what happens is we have the same system of a triggering of safeguard mechanisms based on the ceiling quantities, which is from 85,000 tonnes in year 11, up to 125,000 tonnes in year 15. But, unlike the beef quota, sheep meat benefits from further protections, which is interesting. So, in any two consecutive years following that first 10-year of liberalisation, and guaranteed the safeguard measure is not applying, if the sheep meat exports reach 95 per cent or more of the tariff rate quota in two consecutive years, then you can see the following year's quantity reduced by 25 per cent. I know this sounds incredibly complex, but it comes back to Michael's earlier point, which is: will the Australians really be sending this much quantity? And the answer is probably not. And we will end up in a quota underfill situation because there are markets that pay a premium for these animal proteins, and they're mostly located in the south Asian region, which geographically is closer to the Australian production market. 

Now, when we're looking at trying to evaluate the threshold for serious injury that would trigger off the safeguard mechanism, my understanding is that that is well defined under the UK taxation Act—but I'd be very glad to stand corrected on that—and so, essentially, it's already enshrined in trade remedies, the legislation governing trade remedies in the UK. So, a priori, it seems to be quite a fair way of dealing with an escalating liberalisation. 

So, in short, you would say that your assessment of the NFU's concerns aren't replicated by yourself?

They might be an overstatement.

Okay, I appreciate that. And, Sam, I can understand now why you suggested Emily go first with such a thorough explanation of that, so thank you, but moving on to you, Sam. 

Well, Emily is one of the leading experts on all of these issues, so I'm certainly very happy to defer to her on that, but I do also have some opinions on this as well, insofar that I, if I'm speaking bluntly, don't understand why these safeguards are there. As Emily said, it's very unlikely these thresholds are going to be breached, so it's very unlikely that these safeguards are going to be triggered, so, therefore, including them is slightly pointless. And I suppose the political argument is that the UK Government included them so as to try and reassure the farmers that their interests were being listened to. But, as you've said, the NFU have looked at these, and said, 'Well, these safeguards are pointless, they don't protect us.' So, I don't even understand what the political benefit to the UK Government was of including them. My personal preference is that if you aren't going to effectively—. If you've decided that you don't want to effectively safeguard a product, don't have safeguards; that's what I'd say. If you decide you do want to have safeguards, because you are concerned about a rapid influx of imports, then have effective safeguards. Pick one of those two options. What's in this agreement, to me, just seems a bit pointless. 

Michael, can you hear us? 

I can now.

Yes, yes. Over to you.

I have very little to add to what Emily and Sam have said. It seems to me that—. I can see why politically the Government introduced the safeguards; whether they are effective or not depends on one's belief or what one thinks is likely to happen to future imports. Clearly, myself, Sam and Emily don't think that imports will reach those levels, and, therefore, they'll never be effective, and, therefore, probably, the NFU's worries here are—'unfounded' may be a little bit strong, but maybe 'exaggerated' is the right word.

Excellent. Diolch. Over to you, Chair. 

Diolch, Sam, and if I can now bring in Vikki Howells. Vikki. 

Thank you, Chair. Looking for views, really, as to whether the impact assessment provides sufficient detail regarding the potential impact of the agreement on Wales and other regions and nations of the UK, and also—we can ask this separately, if you want—if there are any examples of international best practice that could be drawn upon of estimating regional impacts of trade agreements. I don't know who wants to start with that, maybe Emily. 

I'll defer to Michael and Sam, who are great experts in this field, but maybe just a couple of opening remarks on that. Trade impact assessments exist and are great. They provide us with a direction of travel, but they certainly shouldn't be considered as the crystal ball into trade flows. Economic modelling is full of uncertainty, and suffice to say that, if we look at the recent invasion of Ukraine, this last week, it also shows us how quickly and rapidly exogenous shocks can rapidly change trade patterns. So, it's nice to have these studies, but they aren't predictions, is what I would want to say.

Now, the choice in the way that the impact assessment was made for this trade deal was to go with computable general equilibrium modelling, and that looks at the interaction of agriculture with other parts of the economy. What it doesn't do so well is look at specific parts of agricultural sectors at a regional level, which is what—. If we look at the way that, for instance, the European Union does these impact assessments, you would find that they would go and have that CGE, but would also back it up with another type of modelling that looks at cumulative impacts, but also for sub-sectoral impacts at a regional level, which is what we would call NUTS 2, so for Wales. But we would actually go a bit further down in NUTS 3, which would be Pembrokeshire, for instance, where you would actually look a bit further, and you can do that through partial equilibrium. But, again, I'm actually much more interested in hearing what Michael and Sam have to say on that because I know that they are experts in this field.

Thanks, Emily, that was an interesting start. Michael.

Thank you. This raises, I think, a broader question, and I'll try and answer both the narrow and broader questions, and the broader bit is what Emily was talking about at the end there, which is how much faith one should have in these sorts of models and how to use them and interpret them. And I should hold my hand up here—part of what I do is modelling and doing these sorts of projections, if you like. And Emily's absolutely right—these are not forecasts. Crystal-ball gazing is really, really hard. They give you indications of, to use a phrase that was used earlier, directions of travel—directions of change—and, typically, a good modeller will give you a range of estimates, depending on slightly different assumptions and so on.

So, generically, from the amount of information that we have about those impact assessments, I think the techniques that are being used are sensible and are reasonably well done, probably. I say, 'probably' because there is a lack of information within those impact assessments to enable really full scrutiny and assessment of them. So, for example, we know that the model is supposed to be based on 62 sectors, but we're only given results for about 20-odd sectors. So, what were the assumptions that were made about all those other 60 sectors? What was the size of the experiment? How big were the tariff reductions? How big were the non-tariff—? There's a lot more detail that one would like to see in order to be able to assess it properly.

Moving specifically on to the question of whether there is sufficient information about the potential impact of the remit on Wales, well, having seen the question in advance, I decided to do a quick search of the impact assessment, and, in the 90-page document, I believe Wales is mentioned 14 times, including in tables, which is not very much if you think about it. What you get is some information of the share of Wales in imports and exports to Australia, forest as a share of land area, and so on, but the actual level of detail with regard to the impact on the Welsh economy is actually very small.

The way this is done, and let me just explain this a little bit—the way all those regional impacts are done in the Government's impact assessment—is to say, 'What has been the impact on each sector, in textiles, clothing, agriculture, or whatever, for the UK as a whole?' Then, using information on either the share of the output or the share of employment of those sectors in each region and, by proportionality assumption, to assume that if textiles increases its exports by 10 per cent for the UK as a whole, then you apply that measure to the increase of Welsh textile exports. But if textiles is a bigger share of the Welsh economy than it is, let's say, of Yorkshire, then you can see how you get differential regional impacts. And that's because we don't have the data—not quite true, but data on what Wales is actually exporting and importing with Australia is much harder to come by, and it's not fitted into a model that includes trade between the regions of the UK and so on. So, part of the reason for these proportionality assumptions is to do with complications involved with the modelling and the data. 

Now, Emily is absolutely right that one can do better than that. There are other models, for example—[Inaudible.]—that you could do in much more detail than focus narrowly on certain sectors. So, overall, my answer would be that I don't think there's enough detail given with regard to the regions, including Wales, and I think more could be done and more detail could be given to the reader, to the analysts on this.

Thanks, Michael. I'll just see if Sam has anything to add to that. Sam.

So, the only thing to add, on top of those excellent articulations of the issues modellers face, is that when I'm looking at this—and because you asked about Wales, but also other regions of the United Kingdom—the actual region I'm most disappointed in, in terms of this analysis, is Northern Ireland, because the Northern Ireland protocol actually means that Northern Ireland interacts with UK free trade agreements differently from the rest of the United Kingdom. It is entirely covered by these trade agreements in respect of exports, but not necessarily in respect of imports, because there are extra conditions that apply and decide whether the EU tariff or the UK tariff applies or not. And I think that not taking that into account does a general disservice to the quality of the product, which, as per Michael, I think is good, subject to the condition that we haven't seen all of the assumptions that have been made, but, knowing some of the people who do this modelling in the UK Government, I've got no reason to think that they weren't good ones.

Thank you. Thank you, Chair.

Thanks, Vikki. Sarah.

Thank you, and hello, everybody. Thank you for being here today. I'm going to ask some questions now specifically about the environment chapter, which affirms both the UK and Australia's commitments under the multilateral environmental agreements, and this does include the 2015 Paris agreement. Sam, I know that you have stated that this is the first Australian free trade agreement that does commit to the Paris agreement, so that's good news of course, but I just want to know all of your views on that and, also, what else you think could or should have been included in the environment chapter specifically. So, I'll come to you first, Michael.

Thank you. I suspect that Sam will have more to say on this than me, but let me just make a few comments on this. The environmental chapter is fairly wide ranging. It covers quite a lot of ground, and, in some sense, that's a good thing. On the other hand, a lot of it is aspirational and doesn't involve actual commitments and obligations. It was quite instructive and interesting, because we had the announcement of the UK-New Zealand free trade agreement on Monday of this week, and if you compare those two chapters, you can see that, in the New Zealand agreement, for example, we've got specific commitments with regard to an environmental goods list and a reduction of tariffs on environmental goods, and we've got specific obligations, for example on coal and fossil fuel subsidies, which we don't have in the Australia agreement. So, could more have been negotiated? It's a bit similar to the answers that—. I think it was Sam that gave this answer earlier. Yes, the Government could have tried to negotiate more. I think it's probably doubtful that Australia would have agreed to much more than this, so that probably would have scuppered the agreement, but the Government could have tried. But I wouldn't say it's a very ambitious agreement on the environment.