Pwyllgor yr Economi, Masnach a Materion Gwledig

Economy, Trade, and Rural Affairs Committee

26/05/2022

Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

Hefin David AS
Luke Fletcher AS
Paul Davies AS Cadeirydd y Pwyllgor
Committee Chair
Samuel Kurtz AS
Sarah Murphy AS
Vikki Howells AS

Y rhai eraill a oedd yn bresennol

Others in Attendance

Ceri Cunnington Cwmni Bro Ffestiniog
Cwmni Bro Ffestiniog
Chris Noice Cymdeithas Siopau Cyfleustra
Association of Convenience Stores
Dr Deborah Hann Citizens Cymru Wales
Citizens Cymru Wales
Dr Llŷr ap Gareth Ffederasiwn Busnesau Bach Cymru
Federation of Small Businesses Cymru
Dr Steffan Evans Sefydliad Bevan
Bevan Foundation
Jackie Blackwell Cyngor ar Bopeth Ynys Môn
Ynys Môn Citizens Advice
Leighton Jenkins Cydffederasiwn Diwydiant Prydain yng Nghymru
Confederation of British Industry Wales
Yr Athro Mark Shucksmith Prifysgol Newcastle
Newcastle University
Shavanah Taj Cyngres Undebau Llafur Cymru
Wales Trades Union Congress

Swyddogion y Senedd a oedd yn bresennol

Senedd Officials in Attendance

Aled Evans Cynghorydd Cyfreithiol
Legal Adviser
Gareth David Thomas Ymchwilydd
Researcher
Isobel Pagendam Ymchwilydd
Researcher
Lara Date Ail Glerc
Second Clerk
Robert Donovan Clerc
Clerk
Robert Lloyd-Williams Dirprwy Glerc
Deputy Clerk
Rhun Davies Ymchwilydd
Researcher

Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.

The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.

Cyfarfu’r pwyllgor yn y Senedd a thrwy gynhadledd fideo.

Dechreuodd y cyfarfod am 10:09.

The committee met in the Senedd and by video-conference.

The meeting began at 10:09.

1. Cyflwyniad, ymddiheuriadau, dirprwyon a datgan buddiannau
1. Introductions, apologies, substitutions and declarations of interest

Croeso, bawb, i'r cyfarfod hwn o Bwyllgor yr Economi, Masnach a Materion Gwledig. Dwi ddim wedi derbyn unrhyw ymddiheuriadau y bore yma. Oes yna unrhyw fuddiannau yr hoffai Aelodau eu datgan o gwbl? Sam Kurtz.

Welcome, all, to this meeting of the Economy, Trade and Rural Affairs Committee. I haven't received any apologies this morning. Are there any interests to declare? Sam Kurtz.

Diolch, Cadeirydd. I'm a director of the charity Wales YFC, which has been in receipt of Welsh Government funding.

10:10

Diolch yn fawr iawn. A Sarah Murphy.

Thank you very much. And Sarah Murphy.

I'm a member of the Bevan Foundation, and also trade unions. I don't know if you need me to list those.

No, that's fine. As long as you refer yourself to your register of Members' interests, that's fine. Thank you very much.

I should declare that I'm also a member of the Bevan Foundation.

I can declare I'm—[Inaudible.]—foundation, and a member of the Bevan Foundation.

I think I should also declare that I'm a member of the Bevan Foundation.

Okay. Thanks very much for all that.

Unrhyw beth arall? Na.

Anything else? No.

2. Papur(au) i’w nodi
2. Paper(s) to note

Symudwn ni ymlaen, felly, i eitem 2 ar ein hagenda, sef papurau i'w nodi. Dwi ddim yn mynd i fynd trwy bob papur, ond oes yna unrhyw faterion yr hoffai Aelodau eu codi o'r papurau yma o gwbl? Nac oes. 

We'll move on, therefore, to item 2 on our agenda, namely papers to note. I'm not going to go through each paper, but are there any issues that Members would like to raise from these papers at all? No.

3. Costau Byw - Gweithlu
3. Cost of Living - Workforce

Symudwn ni ymlaen, felly, i eitem 3 ar ein hagenda. Dyma'r cyntaf o dair sesiwn banel heddiw a fydd yn cymryd tystiolaeth ar gyfer ymchwiliad i bwysau costau byw. Mae nifer o bwyllgorau'r Senedd wedi bod yn blaenoriaethu gwaith craffu ar faterion costau byw, ac felly mae ein hymchwiliad yn canolbwyntio ar faterion sy'n ymwneud yn benodol â chylch gwaith y pwyllgor hwn. Rŷn ni'n edrych yn gyntaf ar faterion y gweithlu. Gaf fi, felly, groesawu'r tystion i'r sesiwn yma, a gaf i ofyn iddyn nhw gyflwyno eu hunain i'r record, ac wedyn gallwn ni symud yn syth i gwestiynau? Efallai y gallaf i ddechrau gyda Deborah Hann.

We'll move on, therefore, to item 3 on our agenda. This is the first of three panel sessions today to take evidence for our inquiry into cost-of-living pressures. A number of the Senedd committees have been prioritising scrutiny of cost-of-living issues, and so our inquiry focuses on matters that specifically fall within this committee's remit. We are looking first at workforce issues. May I, therefore, welcome the witnesses to this session, and may I ask them to introduce themselves for the record, and then we can move straight into questions? Perhaps I can start with Deborah Hann.

Good morning. I'm Dr Deborah Hann. I'm a reader at Cardiff Business School, but, for the purposes of the committee this morning, I'm co-chair of Citizens Cymru Wales, which is a broad-based community organising group.

Bore da. Dr Steffan Evans ydw i, pennaeth polisi gyda Sefydliad Bevan, yn arwain ar ein gwaith ni ar dlodi.

Good morning. I'm Dr Steffan Evans. I'm the head of policy at the Bevan Foundation, leading on the work on poverty.

Diolch yn fawr iawn. A Shavanah Taj.

Thank you very much. And Shavanah Taj.

Bore da, everyone. I'm Shavanah Taj, the general secretary for Wales Trades Union Congress.

Thank you very much indeed for those introductions, and thank you for being with us this morning. Perhaps I can just kick off this session with just a general question. Perhaps you could outline to us the key economic and social impacts of the cost-of-living pressures on households and communities across Wales so far, and perhaps you can also tell us how different groups within society have been affected by cost-of-living pressures and, in your view, which groups have been hit the hardest. Perhaps I can, then, start with Deborah Hann.

So, I'm sure the Bevan Foundation have got figures on this, but certainly from the anecdotal evidence that we're getting from the communities we work with—and I think it's important to stress we work with a range of communities across Wales—we're hearing particular stories in relation to housing costs, food and fuel costs, people struggling to feed their families, making really hard decisions about whether they pay their bills this month or feed their children. We're hearing stories about foodbanks that are being used increasingly, frequently, and really being stretched in terms of the resources that they can offer.

In terms of the groups that are particularly struggling, it's the lower-middle-income groups, and that is a group that is predominantly female, young workers, ethnic minority workers, those that are subcontracted and on variable jobs. So, really, those who were struggling prior to the pandemic, prior to the cost-of-living crisis, but are increasingly struggling now.

I'd agree with what Deborah said there in terms of which groups are feeling the pinch the worst. We've been commissioning YouGov to undertake some polling on our behalf to try and maybe get some numbers on this. We're in the process of trying to secure funding to run an updated version, but in the most recent version we did in late November, we found that nearly four in 10 households in Wales were reporting that they struggle to afford anything beyond the basics, and of those, about 165,000 households—so, more than the number of households we've got in Cardiff—were reporting that they sometimes or always struggled to afford the basics. So, very, very high numbers, and that was before the more recent rise in energy bills and other increases we've seen, obviously, in the last few months. And, yes, from that data it was clear the groups Deborah mentioned: people on low income, disabled people, people from minority ethnic groups, households with children—these were the groups that were feeling the pinch the hardest. And we were seeing quite significant numbers of people—about a third reporting that they'd cut back on their utilities, how much utilities they were using at that point, and about a quarter cutting back on food for adults, and high numbers of people also borrowing money and falling into debt. So, the picture was quite grim then and we think it's worsened. I guess the one other group that I should mention, a specific group that I want to touch on, is people in rural areas. They didn't really come out in that polling, because of the way that the data is broken down, it's quite difficult to gauge that, but we know that some of the inflationary pressures are likely to be affecting rural communities harder due to higher reliance on private transport et cetera, and being off grid as well in terms of energy costs.

10:15

I'm actually streaming from Llandudno, it's our congress—four years it's been since we've done this face to face. But what I can tell you very clearly is that there hasn't been a debate where we haven't been talking about the cost-of-living crisis, and, actually, it's a cost-of-living emergency—that is the reality. Because the way that people have been very clearly explaining—and, you know, you've been asking who exactly is being affected by this—we've always known that, actually, it is people who are low-income workers particularly, who are going to be hit the hardest, but actually we're hearing much more so about the people who are public sector workers, those in-between people, who are very much now being squeezed. We've heard, over the last couple of days, particularly people who work, for example, in schools, teaching staff, teaching assistants taking on additional jobs in the evenings, working extra hours in the hospitality sector, taking on additional shifts in retail as well, in supermarkets and so forth as well. And we have a genuine concern about the debt that is rising. We've actually been talking about the harms of gambling, and over the last couple of days, we've been hearing from people who were saying that they are dealing with personal cases from their members who've begun gambling as a means to try and pay off a gas or electricity bill. So, actually, there is this real, interconnected issue that we do need to think about, and the harm that that is causing in terms of people's mental health and well-being as well.

I've got to say, it's hard—it's hard for us, in Wales, to then hear from UK Conservative MPs who make really bizarre statements like, 'Well, if you want to get paid more money, go and look for a better job. Use value brands.' I mean, people are doing these things already. As I say, people are really struggling and with inflation being so high, the crisis—being cold, that's the reality. So, I'm hoping that we hear some news today from the central UK Government and that the Chancellor does step up and deliver an emergency budget. Because I did an interview yesterday with the business owner for the pier here in Llandudno, and actually, we were very much on the same page, because he's struggling, he is now saying, 'Even though I am now paying the real living wage, because my staff are struggling to pay their basic fuel bills, I don't know what more I can do. I'm doing everything that I possibly can.' So, I'm hoping that we have that windfall tax on oil and gas companies and energy grants for struggling households—that's what we really desperately need right now, and we need investment in our economy.

Okay, thank you for that. If I now bring in Vikki Howells to ask a few questions. Vikki.

Thank you, Chair, and good morning to the panel. Noting, of course, that many of the levers here are not devolved, could I begin by asking how effective you think that the cost-of-living support already announced by the Welsh and UK Governments is likely to be? I'm not sure who wants to take that first. Steffan looks like he wants to.

Yes, I'll take that first. Yes, I think it's fair to say that the measures taken to date by the UK Government haven't been sufficient and they haven't been targeted at the people who need them the most. So, we know that there's a clear, clear link between your income levels and how likely you are to have to cut back on something or fall into debt because of rising costs. So, that hasn't been the case to date. We'll see this morning whether there is further action that might be able to go some way towards that, but at the moment, absolutely, it hasn't been sufficient and it hasn't been targeted at the right place. Looking at a Welsh level, I think there's a different problem. So, I think the Welsh Government are trying to target the right groups of people, broadly. Maybe we can have a conversation about the council tax payment, but broadly, it has been pretty well targeted, and it has put in quite significant money. I'm aware of work from Cardiff University that shows that the Welsh Government has put in more money than UK Government has in England for comparable schemes. So, you know, it is positive.

I think the challenge at a Welsh level has been the delivery challenge. So, we know, for example, with the fuel support scheme—. I'm not sure of the latest take-up data, but I know from comments made by the Minister for Social Justice in Plenary in mid February, where it was sounding like we were struggling to get to about 50 per cent take-up on that payment, and I think that's where the real challenge is in Wales. There is obviously more that we'd like to see Welsh Government do, but also it's about making sure that the commitments that are being made, the positive commitments, are being followed through and that that money is actually getting to the households that need it.

10:20

Thanks, Steffan. And my next question is going to be looking at the different groups, so maybe I'll come back to you then and we can expand on that issue of harder-to-reach groups and getting the money out there. Deborah.

Thank you. I wanted to pick up on a couple of points that Steffan said, because I think he's absolutely right: I think there are lots of important supports that are out there, and I don't think any of us would say that any of them are wasted. But it's the targeted nature in the support that I think needs careful consideration in ensuring that support going forward is directed at the groups who are particularly impacted by the cost-of-living crisis, so those lower-middle-income groups. I wanted to flag something that is within the Welsh Government's remit, and that is around the real living wage. I did ask the clerk to circulate a graphic that explained the difference between the real living wage and other forms of wage regulation. But just for clarity's sake, when I'm talking about the real living wage, I'm talking about a wage level that is calculated to take into consideration cost of living, and it is the only wage level that is calculated to take into consideration the cost of living. It is 40p an hour higher than the national living wage, which is not technically a living wage. In 2019 the First Minister of Wales did commit to organisations that are in receipt of significant Welsh Government funding accrediting as living wage employers. We've seen success in the higher education sector, so we've seen all of the HE institutions being accredited as living wage employers. And as a result of that, we saw over 2,000 people get an increase in their pay to a cost-of-living wage. So, this isn't a luxury wage, this is a wage that will allow them to address cost of living. If we saw similar increases in local authorities, that would be approximately 14,000, 15,000 people in Wales who would have a wage at a level that would allow them to address cost-of-living issues. The Welsh Government have already committed this funding publicly, and it would be very easy for the Welsh Government to deliver that in local authorities, health boards and further education, and you could be talking tens of thousands of people who, very quickly, would have support mechanisms that would allow them to address cost-of-living issues.

I think that first of all I just wanted to say that the Wales TUC and the union movement have again, over the last couple of days, re-endorsed the recommendations by the Bevan Foundation as well, with regard to what Welsh Government should be doing to support low-income households. But what I would say is that the fact of the matter is that what Welsh Government can offer is not comparable to what we should be still be seeking from the UK Government as well. Because, ultimately, they hold the biggest levers here, because the Welsh Government, really, is in a position where they're being forced to pick up some of the pieces but, actually, the responsibility lies at a UK level. Because £380 million is a very significant amount to invest, but it's actually a sticking plaster in real terms. And the real issues that we need to be fixing right now are low pay, high housing, utility costs, inflation, and an inadequate, broken social security system, which the Welsh Government doesn't have direct control over. Also, the decisions, such as removing that £20 uplift in universal credit, have massively—it has just made things even worse for working people. So, we want to make sure that we remain very clear that the responsibility lies at a UK level.

We will work with Welsh Government to do everything that we possibly can to make sure that workers in Wales are in receipt of the real living wage as a minimum baseline, but the fact of the matter is that lots of employers in Wales don't necessarily recognise trade unions. There are certain sectors, particularly, for example, in parts of hospitality, where there isn't any collective bargaining, and when you don't have collective bargaining, having an Investors in People or being proud of the fact that you pay a living wage is all fair and well, but if you are still continuing to operate your business on the basis of, in most cases, zero-hours contracts, precarious work, that doesn't make the situation any better for that individual. They're constantly in flux, it's really hard for them to be able to make decisions about whether they heat or eat. We've been hearing that slogan bandied about for a very long time, so I'm hopeful today that we actually get some genuine answers, because, as I say, the Welsh Government is coming up with some good ideas, but it's not going to deliver everything that we need.

10:25

Thank you, panel, and, Chair, I'm conscious of time and I don't want to stray into the next set of questions on the cost-of-living support scheme either. I think the answers so far have been thorough enough to cover what would have been my supplementary on different groups in society, so I'm happy to move on. Thank you.

Thank you, Vikki, and before I bring in Luke Fletcher, just to clarify, Deborah, you mentioned, obviously, that you've forwarded graphics on to the committee. They will be published on the committee's website as well in due course. If I can now bring in Luke Fletcher. Luke.

Diolch, Gadeirydd. I want to touch on—moving on from Vikki's set of questions—the actual ability of households to access the cost-of-living support. We have touched on this, and the key thing is, of course, to get that support to those who need it as soon as possible. I was just wondering how easy it's been for households to take up the cost-of-living support provided so far and are there any lessons that can be learned for future support. I'm aware that, for example, some councils have been slow in pushing out the council tax rebate. Could I start with Steffan in the Bevan Foundation, and then I'll move on to Deborah and then Shavanah?

Yes, no problem at all. I think there are a lot of lessons to be learnt on this, and a lot of these lessons, we knew what they were even before the most recent problems. So, I'm sure many of you might be aware of the work that the Bevan Foundation has been doing on the concept of a Welsh benefits system for quite some time, and we could have unpicked—. We started to look at that because when you have conversations about social security, whilst it's true that the big, big levers might be at Westminster, there are a heck of a lot of things that we do in Wales that are essentially benefits, so things like free school meals and the council tax reduction scheme. They're either providing cash or service in lieu of cash to people on a means-tested basis. We found that a lot of money was being spent on these before COVID, and we knew that take-up was a problem, because eligibility criteria were slightly different, people were having to submit multiple application forms to get similar support. I think what COVID has done, and the most recent crisis, is to exacerbate those issues that already existed.

So, I was having a look the other day at the support available. If you're a family in Wales on a low income and you're eligible for the various schemes, and you've got a child aged two and a child aged seven, there are about five or six different support schemes that you are eligible for just from Welsh Government, and there could be another two or three discretionary schemes that you could be eligible for. So, that's potentially eight or nine different application forms that, in some parts of Wales, you might have to be filling in just to get everything you're entitled to. And there's a wealth of evidence that shows that the more people have to fill in forms, the more people have to do that sort of stuff, the less likely they are to claim all of it. We know that the take-up rate for some of these is really quite low.

I think that has maybe undermined take-up for some of the new schemes as well, because what that's meant then is that local authority staff—staff who were already stretched—are now having to manage extra schemes on top, which means then they haven't got the resources to be doing the proactive promotion work or going out to communities and getting people aware of this stuff. So, being able to move that onto one footing, onto one system where you are getting everything you're entitled to, and that support is sufficient, would make a real difference, we think, in terms of actually being able to get take-up and get people to use the support they're entitled to.

10:30

Thank you for that, Steffan, and before I move on to Deborah, if I can just come back to that one-stop-shop, singular, Welsh benefit system that the Bevan Foundation has been talking about. Indeed, I think it was part of your written evidence to the committee, and something I've taken a great deal of interest in myself. I was just wondering if you could give us a bit more detail on how you would see this operating, and if the Welsh Government has taken any of this forward so far.

So, there is work going on in Welsh Government at the moment, which we're pleased to see. There's a group working to explore how to take some of this stuff forward. Obviously, we'd like to see that done quicker to get this set up and running as quickly as we can. I think it's understandable, but we might need a degree of flexibility, because pressures in different local authorities might be slightly different. There's a risk, sometimes, by creating a model that people who don't quite fit into neat boxes miss out. But I think what we'd be keen to see is something set, that this is an expectation of local authorities that this is what's going to happen. So, it's not through guidance, it's not that you should be doing this, because we know from experience that that doesn't always happen. What we'd like to see is this put in statutory guidance, and an underpinning that gives people the right then, so that if local authorities aren't doing this best practice that's being developed within Welsh Government, that there's some recourse then, that people can take that and then that's more likely to see this being fully implemented. So, looking at that footing, I think, is really important to make sure that any move towards this has real teeth and can make a real difference to people's lives.

Great. Thank you, Steffan. If I could pass on to Deborah, in terms of the ability of households to access that cost-of-living support, and if there are any lessons to be learnt.

I don't know if I have too much more to add beyond what Steffan said. I think the kind of anecdotal evidence that we're getting from the communities we work with, again, is that people are just confused, for want of a better word. There is an awful lot of complex, form-filling, red tape to get through, and a lot of the time, the success in getting through that is dependent on friends, family and community members helping you to understand how to get through that. That means if you're well connected, if you're well networked, if you've got friends and family to support you, you're lucky. My concern is for those that don't, frankly. So, I don't have huge amounts to go beyond what Steffan said. I think getting the system easier and more comprehensible to individuals in need is a huge part of it.

Thank you, Deborah. I completely agree with that analysis. Shavanah, did you have anything additional you wanted to add?

Yes, just to say I agree with a lot of what's already been said and what Steffan was saying in particular. That definitely lands with us. There was a lot of confusion. So, when support was available for people who needed to self-isolate—the emergency support—a lot of people didn't know that it existed. Lot's of people didn't know, for example, that there was discretionary assistance support. So, we were working through our union reps to make sure that the information was out there and people knew how to access it. We had union reps sitting down with people, helping them fill out these forms. That's how difficult it was.

But one of the things that I would just add is that when it comes to the social security offer in Wales, sometimes I think that maybe there isn't a real understanding of how insecure work is for people and what the reality is, because the amount of proof that you have to provide proves to me that, actually, I don't think there is a genuine understanding of what labour exploitation looks like in Wales. I think that that becomes a problem, because the truth is that lots of people don't have a written contract. And so, the only thing that they may have is a text message from their boss, particularly if they work in hospitality, saying, 'You've got to come in and this is your shift today', or, 'Your shift has been cancelled.' So, text messages, for example, those types of things, we should be much more flexible in terms of proof of the fact that 'I was due to be in work.' I think those are the types of things that should definitely be factored in and be considered.

Thanks for that, Shavanah. You've given me some flashbacks to my time in hospitality then, but thank you all for your answers. Back to you, Chair.

10:35

Thank you, Luke. I'll now bring in Sarah Murphy to ask a few questions. Sarah.

Thank you, Chair. If I could just start by asking Shav, please. Specifically, when you gave evidence to the committee in March, you raised concerns that there was a significant risk that it could actually further undermine worker power and that ability to say 'no' to a boss, in particular, because people's incomes are being further squeezed. Also, you think that people are having to work dangerously long hours and take on multiple jobs to deal with this cost-of-living crisis. So, our question was: are you starting to see evidence of this? And how should the Welsh Government respond with its devolved powers?

So, I would say that some of the concerns, really, are that some bosses are now starting to reference rising costs and high inflation as a reason as to why they're unable to offer anything as close as possible to a real-terms pay rise. This is quite difficult to judge across a majority of the private sector, I would say, as collective bargaining arrangements aren't necessarily in place. We simply don't know what the situation really is for employers, because there isn't that relationship; you haven't got open-book collective bargaining, where there is a requirement for them to provide us with the data and with the information that they're holding, and for us to see what their financial situation is like. So, you are operating on the basis of how we would try and organise unorganised workers, like a greenfield site, we would say, where you don't necessarily know exactly what is happening. That then means that workers can't negotiate their fair share of bosses' profits, either. So, I think that makes it really hard.

I would say that a key long-term solution is therefore that we genuinely are going to have to strengthen workers' rights, but Welsh Government are limited in terms of what they can do over industrial relations, in particular. I'm hoping that, with the introduction of the social partnership and procurement legislation, we will be able to have a bigger conversation with people who are outside the public sector, maybe whose services we are procuring out from local authorities, or whether that's through Welsh Government as well, and that we will be able to promote the benefits of trade union membership, also including advising businesses too, on how they can work with us to improve workers' conditions and recognise the positive side of collective bargaining. I think, during the pandemic in particular, the fact that we had that tripartite shadow social partnership structure at the time, and we had employer representatives and organisations—from the Federation of Small Businesses, the Confederation of British Industry, chambers of commerce, the unions, the local authorities—lots of different people working in collaboration, meant that there were even times when business and unions were making representations jointly to Welsh Government on potential solutions.

I'm hopeful that, moving forward, there is something better that we can build. It's been 20 times now that we've had broken promises from the UK Government about having a new employment rights Bill come through as a piece of legislation. We're still waiting on that one, but whilst we're waiting, I think that there are things that we can do in moving forward with how we operate. We always talk about the Welsh way; I think that now is the time for us to make that a reality. And for me, what's been really good, and it proves that things are changing, is that some data came out yesterday about trade union membership across the UK, and 30,000 additional new workers have decided to join a trade union in Wales, and we haven't lost one member. So, I think that that really does demonstrate the way that we have been operating, and the fact that we are reaching out to unorganised workers. We still have the Wales union learning fund. We've been using that as a means to access parts of the private sector where we don't necessarily have collective bargaining, and that's been really positive. Employers have responded positively. So, I'm really hopeful for what the future looks like.

10:40

Thank you so much, and that actually leads me on to a question to all of you, then, which is: what is the scale of the gap between pay rises and cost-of-living increases that you're seeing, and how do you think Welsh Government should support increased pay, particularly, of course, for the lowest paid? So, Steffan, if I can come to you first on this one. 

From the data we've got, there is clearly a significant gap that is developing. And yes, as Shavanah mentioned, there are limitations as to what Welsh Government can do in the private sector in particular, given the devolved powers. There are obviously more opportunities within the public sector in terms of—. There are a lot of low-paid workers in the public sector, and I'm thinking of social care in particular, and in the health service, et cetera. So, there are opportunities there to make a real difference to people by raising those salaries. Obviously, I'm aware that the tension for the Welsh Government will be that, if it doesn't have extra funding, is that going to impact on services. I'm aware that is a real tension, but if we want to make sure that people have got wages matching these rising costs, then making sure that we do use the powers that we have within the public sector, and also, as Deborah mentioned earlier in terms of large companies that are procuring from Welsh Government, is one obvious tool available for Welsh Government to try to make sure that people are having those incomes rise, and that could put pressure on some private sector providers then who might feel that they have to match it so that they don't lose their staff to the public sector, if that's going on.

I'm not sure I can talk about pay rises specifically, because I don't have the data available, but I'd certainly come back to this notion of the real living wage. And if we're talking about the scale of the gap, the scale of the gap between the real living wage and the national living wage, which for a lot of people is the baseline salary that they're on, is around £700 or £800 per year. And that gap reflects a lack of ability to just meet basic costs. We're not talking about luxuries here; we're talking about a living wage. And I would, again, go back to the point that I made earlier and which Steffan has picked up on around the public sector, there is a real opportunity now for the Welsh Government to put tens of thousands of people on a living wage that meets the cost of living. And they have committed to doing it publicly since 2019. So, for me, that's a really easy and obvious win for tens of thousands of people. 

If we look at the Bridgend local authority, for example, who have literally been accredited very recently as a living wage employer, around about 1,000 people will have got a pay rise as a result of that accreditation. If you rolled that out across Wales, if you rolled it out to health boards, if you rolled it out to further education colleges, which again there have been public commitments to do, you would very quickly come up with solutions that would make real differences in large parts of Wales. 

I think that the fact that we've got a social care forum for Wales means that introducing the real living wage has been possible. We are now looking at wider terms and conditions and looking at contracts and so forth, as well, to see if we can align as many people as possible. But the reality is that workers are now telling us that, actually, with the cost-of-living crisis, real pay has fallen by at least £16 a week between March 2021 and March 2022. There are 139,000 more workers on zero-hours contracts, mainly women, as well. That's the figure here for Wales.

And I think that a tight labour market isn't actually delivering real pay rises because there are still low levels of collective bargaining coverage, which has resulted from anti-union legislation and hostile employers. Sometimes, what really is concerning is when you see parts of the UK Government that are pandering to bosses who think that, actually, sourcing cheap labour is a better option because it actually gives them more profits, and using prison labour in particular. And I think that the fact that, here in Wales, we talk very openly about wanting to be a fair work nation, we need to stick to that trajectory and not fall backwards.

And the other thing that I would say is, again, addressing wages is one thing. When it came to public sector pay, we did see some better deals done here in Wales, but they would have been even better if there was more money that was actually available to the Welsh Government to be able to award public sector workers more money, but that didn't happen. And so, we are, I think, stuck between a rock and hard place at the moment. I think, with the cost-of-living crisis and with the amount of debt that people are already in, we're not seeing the pay rises that people really want. There are real concerns over the fact that we are being told by people—by bosses, the Bank of England, and so forth—that workers shouldn't expect pay rises, but, at the same time, inflation is at the rate that it is, and we're hearing really awful stories on a daily basis.

And, of course, we haven't even talked about people who are pensioners who will be forced to return to work, actually, because their pensions are now not worth what they thought they were going to be, because of the cost-of-living crisis. That's really the conversation that everyone is having and what we've been discussing today. So, I think that there's a lot more that can be done, but one thing that's for sure is that the trade union movement is going to be backing every single worker, and we're going to continue unionising. Industrial action is always the last recourse, but if that's what it takes, that's what it takes. 

10:45

Thank you very much. Thank you, all, very much. I'll hand back to you now, Chair. 

Thank you, Sarah. I'll now bring in Hefin David to ask a few questions. Hefin.

Diolch, Cadeirydd. Those of us who grew up in the 1980s will recall the three evils of inflation, high interest rates and unemployment, and we haven't really seen that kind of economy since the early 1990s. But, now we're expecting unemployment to start picking up and increases in unemployment. The public sector hasn't really been prepared for that in recent times. So, how can the Welsh Government prepare in the short term, medium term and long term for an increase and pick-up in unemployment in Wales over the next three years? That's to the whole panel, by the way, so anybody who wants to go first, I don't mind.  

I'll kick off. We've now got the levelling-up fund that's going directly to councils. The four regions are now meant to be identifying four different projects where, potentially, there is going to be opportunity for growth. About a year ago, we had some independent research done that said that, actually, there's an opportunity to create at least 60,000 jobs in the next two years—good-quality, green jobs. Sixteen projects were identified. I think that what we need to be seeing is investment in broadband, in our transportation system. We need to have better insulation for homes. If those things are happening—. 

The worrying thing, I think, for me is that we've had now—. We've seen what's now the infamous Sue Gray report, but, at the same time, we're hearing that the UK Government has taken the decision to potentially cut 91,000 civil service jobs. And once that starts happening, and given that, of course, Brexit has happened too—Brexit is still a very real reality—and so there are pressures on particular areas, particularly on the Border Force, for example, how is the public sector going to survive if we go down the route of making cuts to really important services? 

So, I think it's going to be tough for Welsh Government, but I'm hoping that they will work with the trade unions and with the local authorities and the devolved public sector to do everything that they can, as they always have done, to cushion the blow, because it's going to be tough. 

Yes, thanks. I think one thing at the moment that we risk underpricing in the conversation is that the low headline unemployment rate is masking a lot of what's going on, because what we've seen is that economic inactivity has actually increased pretty significantly since the outbreak of COVID. So, actually, the number of people who are not in work has gone up, but they're just not looking for work, they're out of the workplace entirely. There's still some work going on to try and work out why that is. Is that because people have had their health procedures delayed, or long COVID, have people's conditions become so they can't work, or is there something else going on? Are people who are approaching retirement age reassessing their priorities, et cetera? I think there might be a piece of work there for Welsh Government to try and consider what's going on there, because there's a risk, if you see unemployment rise, do we see that trend continue? Do we see more people move into this 'economically inactive' group, rather than in the 'unemployed but looking for work' group? Because if that continues, then we risk going back maybe to something we did see in the 1980s, which was that trend—people were leaving work but they were just not looking for work, they moved on to benefits and there wasn't support to bring people back. So, I think there's definitely something there that Welsh Government should probably consider and have a look at, and I think also thinking about which sectors are likely to feel the pinch maybe on some of the employment stuff as well, and whether there's something more that could be done on that as well.

So, thinking about what sectors might be vulnerable to job losses coming up, if we're seeing more and more people cutting back on non-essential spending—because they have to spend what they've got on food, gas, electric, whatever the case might be—in a way, lockdown gives us a very clear indication of what sectors are going to feel the hit here. Because, by default, the sectors that were locked down were non-essential. So, things like restaurants, et cetera, those are likely to be sectors that are also going to feel the pinch here again as people cut back. Some of those businesses might not be in a particularly robust state because they've had two quite difficult years. So, have they got the financial resilience to be ready to ride this out? Is there something targeted that could be considered in some of those sectors, but obviously bearing in mind some of the other conversations we've been having about making sure that those protections are passed on to staff as well, because otherwise it's not protecting people from the effects of the pandemic as well, or the cost-of-living crisis, as the case might be?

10:50

Can I say, Steffan, and perhaps Deborah might want to come on to this as well, that the public sector in Wales is a very big employer? It doesn't really have the capacity to take up the slack from those private sector increases. Is that the case, or do you see that there are opportunities for the public sector in Wales through the Welsh Government's initiatives to do more to take up employment? Steff, if you want to respond, and then Deborah, because I can see you nodding, go ahead.

Yes, I guess some of the other panelists might have more expertise on this than me anyway, but stuff like Jobs Growth Wales, we know, has had some success in the past. So, is there stuff like that that we can look at replicating, but maybe changing to meet the different circumstances that we might be looking at now as opposed to maybe when that was developed in the first instance?

I was nodding in response to the point that the public sector is a large employer, and it's why I keep coming back to the fact that that is a location where the Welsh Government does have an opportunity to make an impact. I don't think I have a huge amount more to add, other than I think I would echo Steffan's point, in that my concern is less about unemployment—which obviously I think is a big issue and is something that needs to be taken seriously—but that I think the Welsh Government needs to ensure that it has a very nuanced understanding of what's happening in the employment market. We see things like the increases in in-work poverty, which I think is equally concerning. Those people don't feature in unemployment data—they're officially employed, but actually they're not earning a wage to live. We see increasing numbers of self-employed people, but are they genuinely self-employed, and if they are self-employed, are they earning a wage that they can live on, because things like minimum wages don't apply to people who are technically self-employed? So, I think it is important that the Welsh Government concentrates on unemployment, but equally I think there needs to be a really nuanced understanding of the data that's surrounding what's happening in the labour market at the minute, because I think there are other groups that need support and consideration as well.

Diolch, Hefin. If I can now bring in Sam Kurtz to ask a few questions. Sam.

Diolch, Cadeirydd. Panel, thank you—it's been very fascinating listening this morning. Based on your judgment of how the cost-of-living pressures will affect Wales over the coming months, what additional support should the Welsh and UK Governments be providing? There's talk in the press this morning of additional support from UK Gov, but how much flexibility does the Welsh Government have within its own budget to deliver additional support?

Steffan, allwn ni ddechrau gyda ti?

Steffan, could we start with you?

10:55

Dim problem. Rŷn ni'n aros i glywed beth rŷn ni'n mynd i ffeindio mas gan Lywodraeth Prydain y bore yma. Dwi'n credu, fel rŷn ni wedi sôn, o ran cynnydd mewn cymorth, os yw'r cymorth yna wedi'i dargedu ar y bobl ar yr incwm isaf, byddai hwnna yn gam mawr ymlaen o ran sefyllfa pobl nawr. Ond, yn amlwg, rŷn ni i gyd yn aros i weld beth sydd yn hwnna cyn ein bod ni'n gallu dweud bach yn fwy amdano fe, ac a ydyn ni'n meddwl ei fod yn mynd i fod yn effeithiol ai peidio. 

Ar lefel Gymreig, fel dwi wedi sôn, mae yna'n sicr mwy o waith i wneud yn siŵr bod yr hyn maen nhw wedi ymrwymo iddo yn barod yn cael ei ddelifro, ei fod e'n cael ei roi i bobl ar lawr gwlad, bod yr arian yn cyrraedd pocedi pobl. Ond mae yna hefyd efallai le i wneud mwy gyda rhai cynlluniau eraill sydd gyda ni. Un o'r pethau ddaeth lan mewn rhai o'r sgyrsiau dŷn ni wedi'u cael gydag awdurdodau lleol yw, 'Peidiwch â dod lan â chynlluniau newydd o reidrwydd achos bod ein capasiti ni yn rili stretched. Trïwch ddefnyddio y cynlluniau sydd gyda ni yn barod a rhoi mwy o arian trwy fynna achos rŷn ni'n fwy tebygol o gael yr arian mas.' So, pethau rŷn ni wedi nodi o'r blaen yw pethau fel discretionary housing payments sy'n rhoi arian ecstra i bobl gyda'u costau tai.

Mae'r arian yn dod oddi wrth Lywodraeth Prydain, ond mae modd i awdurdodau lleol roi mwy o cash mewn eu hunain i hwnna. Yn yr Alban, mae Llywodraeth yr Alban wedi ymrwymo i gyfro'r arian ychwanegol yna i gyd. Mae Llywodraeth Cymru yn mynd i roi peth arian ychwanegol mewn yn fwy, ond gallan nhw fod yn rhoi hyd yn oed yn rhagor mewn i wneud yn siŵr bod mwy o arian yn cyrraedd mas i bobl. So, y pethau fel yna, dwi'n credu, yw ble y dylen ni fod yn targedu ar y foment yng Nghymru. Yn amlwg, os oes cyhoeddiad heddiw bod yna swm enfawr arall o arian yn dod i Gymru, wedyn efallai bod yn le i edrych eto am beth i wneud. Ond, mae angen targedu, cael yr arian mas i bobl drwy roi mwy o arian yn y cynlluniau sy'n bodoli'n barod, pethau fel y discretionary assistance fund hefyd, a hefyd gwneud yn siŵr bod yr arian rŷn ni wedi ymrwymo'n barod yn cyrraedd y bobl yna. 

No problem. We're waiting to hear what we're going to find out from the UK Government this morning. In terms of an increase in support, if that support is targeted to people on low incomes, that would be a big step forward, I think, in terms of people's situations now. But, clearly, we're all waiting to see what's in that before we can say a little bit more about it, and whether it's going to be effective or not. 

On a Welsh level, as I've mentioned, certainly, there's more work to be done to ensure that what they've committed to already is delivered, and that it's being given to people at a grass-roots level, and that money gets into people's pockets. But, also, perhaps there's room to do more with some of the other schemes that we have. One of the things that came up in some of the conversations we've had with local authorities is, 'Don't introduce new schemes necessarily because our capacity is quite stretched. Try and use the schemes that we have already and put more money through them because we're more likely to get the money out.' So, we were talking about things like the discretionary housing payment that gives people extra money for their housing.

The money comes from the UK Government, but there's a way for local authorities to give more cash themselves. In Scotland, the Scottish Government has committed to cover this additional money, the whole of it. The Welsh Government has put some additional money in, but they could be putting even more in to ensure that more money is getting out to people. So, things like that, I think, are what we should be targeting currently in Wales. If, clearly, from today's announcement, a massive amount of money is coming to Wales, then perhaps we can look again at that again. But it's about targeting, getting money out to people, and putting more money into the schemes that we've got already, such as the discretionary fund, and also ensuring that the money we've got is getting to those people. 

A allaf jest ddod nôl yn glou? Rŷch chi'n sôn am discretionary housing payments a'r math o system sydd yna yn barod. Ydy'r ffaith bod grantiau wedi cael eu rhoi mas yn ystod y pandemig—? Oes mechanisms drwy hwnnw i helpu pobl ynglŷn â hyn, neu ydy hwnnw yn targedu busnes, nid pobl eu hunain—unigolion a theuluoedd?

Can I just come back quickly? You were talking there about discretionary housing payments and the sort of system that's there already. Is the fact that a grants have been given during the pandemic—? Are there any mechanisms through that to help people regarding this, or are they been targeting businesses and not individuals and families themselves?

Dwi'n credu bod yna rai. Mae lot at fusnesau, ond roedd pethau gyda ni fel cinio ysgol am ddim pan oedd yr ysgolion ar gau, lle roedd yr awdurdodau lleol wedi gallu cael cash mas. Yn y rhan fwyaf o awdurdodau lleol yng Nghymru, gwnaethon nhw roi arian mewn i bank accounts teuluoedd pan roedd yr ysgolion ar gau, pan doedden nhw'n ffaelu mynd mewn i ysgolion. So, mae hwnna'n dangos bod systemau'n gallu cael eu creu. Mae hwnna'n system oedd gyda nhw fanna. Beth rŷn ni wedi gweld gyda'r dreth gyngor yw limitations peth o hwnna. So, gyda'r arian treth cyngor ychwanegol, yn ôl beth dwi'n deall, beth sy'n digwydd yw bod pobl sy'n talu gyda direct debit wedi cael y cymorth, neu yn cael y cymorth eithaf clou. Y bobl sy'n talu bob chwarter, neu bobl sydd ar y council tax reduction scheme, yw'r bobl sy'n colli mas, ac mewn gwirionedd, nhw yw'r bobl sydd ei angen e fwyaf fel arfer o ran pwy sy'n talu ym mha ffordd. So, mae yna rhai systemau fel yna, dwi'n credu, wedi dod trwy COVID y gallen ni fod yn eu defnyddio. Hefyd, efallai y dylen ni fod yn meddwl, 'Beth wnaethon ni wnaeth weithio gyda rheini mor effeithiol?', achos gwnaeth y system cinio ysgol am ddim weithio'n rili dda. So, beth wnaeth weithio gyda hwnna? Sut ydyn ni'n gallu gwneud yn siŵr bod hwnna wedyn mewn lle i rai o'r taliadau eraill yma sydd gyda ni hefyd?

I think there are some. There are many for businesses, but I think we had things like free school meals when schools were shut, where the local authorities got cash out to people. The majority of local authorities in Wales put money into families' bank accounts to provide them with money because of the schools being closed. So, that shows that systems can be created, and that is a system that they had then. What we've seen with council tax is perhaps a limitation on that. So, with the additional council tax, as I understand it, what's happening is that people paying by direct debit have received that support or get the support quite quickly. People who pay every quarter, or who are on council tax reduction schemes, are the ones who are losing out, and they're the ones who need it most. So, there are some systems, I think, that have come through COVID that we could be using. Also, perhaps we should be thinking, 'What did we do that worked so well with those?', because the free school meal system did work quite well. So, what worked with that? How can we ensure that that then is in place for some of these other payments that we've got?

Dyna ni. Diolch.

That's it. Thank you.

Deborah, can I bring you in?

I'm not sure I have much to add in terms of extra financial support, but one thing I'd flag up, as was in some of the questions we got ahead of this committee meeting, is thinking about additional civil regulation, for want of a better term, that the Welsh Government could consider. One of the things that we were asked about was the community jobs compact, which is something that started out in Butetown about five, six or seven years ago now. One of the reasons I flag that is it comes back to a point that I think Shavanah made earlier, which is one of the things the Welsh Government can help do, and I think is really important in terms of the cost-of-living crisis, is around stabilising working time, and making that really transparent. 

When you have a contract, you know that you have a 20-hour-a-week contract, or a 30-hour-a-week contract. And within the community jobs compact, that is one of the elements that major employers throughout Cardiff—it is just a Cardiff-based thing at the minute, but, obviously, it has aspirations to go more broadly—commit to, being open and transparent ahead of time about a minimum level in the contract, and then ensuring that any changes are given with plenty of warning and in agreement with the employee. So, I think there are things that the Welsh Government can do that are limited in terms of cost and don't require legislation changes. And, I think, driving through private regulation, in conjunction with employers. Certainly in terms of the living wage, we've seen an increased appetite from employers to sign up to these kinds of schemes, and indicate themselves as good employers, at a time when things are really, really tough. I think there are opportunities for the Welsh Government to work in conjunction with those kinds of voluntary regulation schemes when we don't have the capacity to come at the problem any other way.

11:00

One of the things that we had negotiated many years ago, and sometimes I think people forget about, particularly for use in the public sector, although it would be good for it to be expanded to other parts, particularly as we now look to procure, and it should be anyway, is that if you are working for an employer and you are on a temporary contract, if you can prove that you've been working there on very similar hours for between eight and 12 weeks, you should be entitled to ask for a permanent contract. I think that there are some agreements that already exist—the uncontracted hours agreement. I think it would be really beneficial for us to dust that off and remind people that that exists already.

From my perspective, I would say that the Bevan Foundation have done excellent work, and I genuinely say that—not just as a board member, but as an individual, having spoken to lots of people over the last couple of days. Because the recommendations that they have made about what Welsh Government can do, in terms of further developing our aspirations for having a social security system, at least within the parameters in which we can operate now, would be really helpful. And streamlining that, making it as easy as possible for people to access, is going to be really important.

But, ultimately, we are campaigning for a better deal for workers. On 18 June, we've called a national demonstration in Westminster, where we're going to be going out and campaigning with lots of different organisations and members of civic society. And we're going to be demanding a real pay rise for every worker, but also respect and dignity, because we saw what happened with the P&O situation—that saga. Fire and rehire—being fired over Zoom—should not be the new normal. We do really need a decent sick pay system as well. We have got a race equality action plan, an anti-racism action plan, for Wales. We've now got a disability one and an LGBT+ action plan. I would like us to work through that. I think that that in itself—those plans—need to sit alongside all of this other work that we are looking to do as well.

But we've got to bring back that £20 uplift to universal credit; that is really what we absolutely definitely need. I'm hoping that we see that windfall tax and we see some taxing of the energy profits, so that people can pay their bills, but also that we see that employment legislation that we've been promised. Because, the more workers that are able to be recognised through the purposes of collective bargaining and have their rights protected at work, I think the better.

Thank you. We were given a suggestion by Action in Caerau and Ely that the scale of the cost-of-living crisis requires eligibility criteria for support to be extended, particularly for families who earn just above the limit to qualify for benefits. Steffan, is this something that you would agree with?

Yes, absolutely. People on the lowest income, so the people out of work, are the people who are being squeezed the hardest, and then the group above them, the people who are in work but on low pay, are also being squeezed really, really hard. And then, pensioners, maybe—pensioners who are just on the state pension. That group definitely needs more support. At a Welsh level, there's definitely more we could do—things like free school meals. We're obviously welcoming the commitment that Welsh Government has made to expand that, but until that's fully rolled out in primary schools—. And it's still going to be the case in secondary schools that if you earn more than £7,400 a year through work, you do not get free school meals, and that is such a low bar for people who are working and who are going to be feeling the squeeze. So, there are obvious wins like that that we could do within the Welsh context to make those schemes more generous.

I think on the UK level, that's where you've got stuff like the taper rate and all of that sort of stuff that comes into it. We did see some movement on that from the Chancellor, but also can we see more so that people do get rewarded if they work more—that you don't lose that and that we do try and extend that. Because universal credit is a gateway to a lot of these other schemes. So, I think absolutely at UK level and certainly at a Welsh level—. There's definitely lots we could do at a Welsh level to make these schemes more generous. If you're deemed to require benefits from the UK Government, our view is that you should be entitled to receive benefits from the Welsh Government as well.

11:05

I can see, Shavanah, that you've got your thumbs up. So, I'll come over to Deborah first. Deborah, anything specific to add?

No, I don't really have anything to add, other than, yes, again, if we're talking about a living wage pegged to the cost of living, that's £19,000 a year. So, if we're setting a bar of £7,000 a year for free school meals, that's way below a salary that allows you to live. So, yes, if we're saying £19,000 a year is a cost-of-living salary, that's where the bar should start.

I fully support what Steffan has said. We actually had a motion at our conference on this issue as well and it's been debated and discussed. There are lots of people who are public sector workers who have become those sort of 'middle squeeze' people. They are the ones who are spending in the local economy and they are genuinely really struggling. More people are relying on foodbanks and on fuel banks, and people are in a lot of debt. So, as I say, it's affecting people's mental health and well-being and so forth as well. If we can do that in Wales, I think that would be massively welcomed. It would be really popular.

Just my final point—and this could be a very quick answer or a very long answer, depending on your examples. Is there anything being done elsewhere within the devolved nations that Welsh Government could replicate or adopt here that may cause assistance or may help those who require it? Steffan.

One I've already mentioned is around DHPs, so putting that extra money in. It's about that sort of stuff, I guess. It's stuff like the Scottish child payment—that's another thing that you might want to look at, but obviously that would take time to implement. So, I think we'd be keen to look at that, but it's that sort of short-term stuff that we can do quickly—that's what you really might want to prioritise now over the summer ready for the autumn and winter.

Again, I'd also point to Scotland and I'd point to their use of social licensing with regard to procurement, where, as part of their procurement rules, they kind of require consideration of the real living wage as part of the procurement processes. So, again, it's not just the public sector that has pay rises through the living wage, it's those that are connected to the public sector. So, yes, again, I'd point to Scotland as a great example that we can learn from. 

I agree with what Steffan's already said. We have got the economic contract in Wales. Some of this stuff that we're talking about is referenced in there. Sometimes, I don't think people know that it exists, so that is a bit of a problem. But now that we are, as I say, about to hopefully introduce the social partnership and procurement legislation, that's going to be an opportunity for us to address some of these policy gaps as well. 

Thank you, Sam. As we've discussed, the UK Government could be making further announcements today to alleviate the cost-of-living pressures. So, we will probably write to you as a committee asking you for your views on that announcement, should it be made. Nevertheless, I'm afraid time has beaten us, so thank you very much indeed for being with us this morning. A copy of today's transcript will be sent to you in due course for accuracy purposes. If there are any issues, then please let us know, but once again, thank you very much indeed for being with us this morning—it's been a very useful session. We'll now take a short break just to prepare for the next session.

Gohiriwyd y cyfarfod rhwng 11:09 a 11:13.

The meeting adjourned between 11:09 and 11:13.

11:10
4. Costau Byw - Busnesau
4. Cost of Living - Businesses

Croeso yn ôl i gyfarfod Pwyllgor yr Economi, Masnach a Materion Gwledig. Fe symudwn ni ymlaen nawr i eitem 4 ar ein hagenda. Dyma ein hail sesiwn banel heddi, a byddwn ni'n edrych ar effaith pwysau costau byw ar fusnesau. Gaf i groesawu'r tystion i'r sesiwn yma? A gaf i ofyn iddyn nhw gyflwyno eu hunain i'r record, a wedyn gallwn ni symud yn syth i gwestiynau? Efallai gallaf i ddechrau gyda Leighton Jenkins.

Welcome back to this meeting of the Economy, Trade, and Rural Affairs Committee. We'll move on now to item 4 on our agenda. This is our second panel session today, looking at cost-of-living pressures and the impact on businesses. May I welcome the witnesses to this session? May I ask them to introduce themselves for the record, and then we can go straight to questions from Members? Perhaps I could start with Leighton Jenkins.

Hi. Leighton Jenkins, assistant director, Confederation of British Industry.

I'm Chris Noice, communications director at the Association of Convenience Stores.

Dr Llŷr ap Gareth, pennaeth polisi, Ffederasiwn y Busnesau Bach.

Dr Llŷr ap Gareth, head of policy, Federation of Small Businesses

Well, thank you very much indeed for those introductions. Thank you for being with us this morning, and perhaps I can just kick off this session with just a general question, and perhaps you can outline the key impacts of cost-of-living pressures on businesses across Wales so far, and perhaps also you can tell us how are these challenges impacting on post-COVID recovery, and perhaps I can start with Leighton Jenkins.

11:15

Yes, thank you very much. Well, it's very clear from the work we've done with our members that inflation—[Inaudible.]—7 per cent—we forecasted around 8 per cent in April—is going to be higher for longer, and I think the national insurance contributions increases have also impacted our members. Energy bills for firms are four times what they were a year ago, and I think that's a particular concern for energy-intensive industries, who are particularly struggling because they did a lot to mitigate their costs on energy prior to the pandemic.

In terms of supply chains, I think we've had a real shortage that started at COVID and has continued. I think the labour shortages are the biggest challenge, I would say, for many, and, obviously, Ukraine has kind of added to that.

In terms of pay increases, I think we've noticed about 7 per cent to 30 per cent pay increases going to employees in Wales. That's kind of depending on a variety of things, and obviously 7 per cent is below inflation levels.

We're also seeing a real issue with recruitment, as has been reported elsewhere. We have one firm that's got 300 vacancies, and they are in a professional services firm, and they're really struggling to find the right candidates, and others are reporting headhunting, with pay being offered about 50 per cent more than the current pay that they're giving their employees. So, there's a real range of impacts, and that's just the beginning, really.

I would certainly echo the things that we've heard already and probably the most significant impacts are around energy costs and significantly increasing energy costs for convenience store retailers, which are typically quite high energy users, both in terms of gas and electricity, so the twofold, threefold increases in energy costs have been a significant problem.

Obviously, over the last 18 to 24 months, we've had lots of bumps in the road when it comes to the supply chain. I think some of the longer-term issues around the cost of fuel and the cost of getting goods out to retailers in Wales, especially those that are in more rural areas, are really becoming an issue. We're seeing not just increased costs for supplying to stores, but reduced availability, and significantly reduced availability—so, some retailers telling us that they were previously getting four deliveries a week, now only getting one, or some suppliers not even making the journey out to some rural stores because it's not financially viable.

And then, on employment, we're seeing, again, similar things. There's perhaps a bit of a split between urban and rural areas. So, rural areas previously had quite a big influx of people looking for jobs, and that—retailers are telling us—has dropped off quite a bit now, but, in urban areas, it seems to have gone the opposite way, in that it was previously extremely difficult to get colleagues in and now there's a recent influx in people applying, based on the feedback that we've got. Obviously, I'd be happy to go into more detail as we go through the session on these and some more areas.

Yes, thank you. I'd echo much of what's been said already, but, in terms of the impact, economic recovery is likely to be stumbling, when it's barely past the first hurdle, basically, and we're hearing quite a lot about the cost-of-living crisis, but I think it's quite important that we also acknowledge there's a cost-of-doing-business crisis that goes alongside that and is part of the same phenomenon, and, for a lot of the small business owners, there'll be a doubled impact in terms of that will impact on their income, the money they get on in, while also, in their personal lives, and in their household bills, everything will be going up as well. So, I think it's important to note how those are linked.

In terms of some of the issues for smaller businesses, in terms of—. There was a sort of cocktail of spiralling costs, really, that have been coming into play since April, which is both the energy costs, fuel costs, supply chain costs, but also that side of—. The end of the business rates relief at 100 per cent has an impact, the VAT reduced rates going back up to 20 per cent, and also the national insurance contributions, of course. So, I think it's—.

When looking at some of our survey work for the first quarter, which only takes us up to April, in Wales, 80 per cent of small and medium-sized enterprises were already reporting increased costs at that point. I'd imagine that's higher now. And around that same point, Cornwall Insight was saying there was a 250 per cent gas bill hike in the last year for small businesses. Again, that's only likely to have got worse. We're also facing late payments, reduced lending capacity of banks—our survey is suggesting that access to finance through banks is down to its lowest since 2016 now—and, of course, less household discretionary spending will also further cost pressures. So, yes, this means, in general, from our latest surveys, that 11 per cent of businesses are planning to close, sell or downsize in the coming year in the UK, and that equates to about 500,000 businesses across the UK.

So, that's the general picture. It's pretty bleak in that sense, and it's important, I think, that the committee understands all those pressures on businesses, the impact it's having on those small businesses. And basically, if you are a small business at the moment, it's probably feeling pretty bleak even in comparison to the last two years. It's looking pretty tough out there.

11:20

Thank you for that. I'll now bring in Vikki Howells to ask a few questions. Vikki.

Thank you, Chair, and good morning, panel. Thank you for the overview that you've already provided for us. If I can try and dig down a little deeper now about the different types of businesses that have been affected by the cost-of-living pressures, and which sectors you feel are being hit the hardest. I don't know who wants to start with that. Chris, you're looking ready.

I'm happy to start, probably because we're a bit more specific in that we have convenience stores. So, just 3,000 convenience stores in stores, for context, employing just over 25,000 people and generating just under £3 billion to the Welsh economy in the last year. I think the stores, as I mentioned in my opening remarks, that have been the most hardest hit coming out of the pandemic have been rural stores, partly because of the reasons of supply chain issues and employment issues, but also investment as well has been a big issue for rural businesses, because they're coming from a place that's further behind their urban counterparts when it comes to things like connectivity and being able to invest in services.

I think, overall, though, it's important to stress that, the survey work that we've done on sales and staff hours and optimism over the last year or so, it's a pretty bleak picture across the board for convenience stores in Wales. Obviously, sales were peaking during the pandemic, through 2021, when there was, obviously, more of a demand for local shopping, with people working from home and those kinds of things, but, as people have returned back to normality, we've had these two areas of stores getting fewer sales because people are changing their habits, to an extent, and then a huge increase in costs. And the one thing that all convenience stores in Wales and the rest of UK are looking at is, 'How do I invest in reducing costs in my business?', which is a potentially risky thing, because convenience stores, typically, will want to invest in ways to improve their offer to customers, and, at the moment, they just can't afford to do that. So, it's a real challenge. 

Thanks, Chris. I'll come back to you on some of those points later. Maybe Llŷr next.

Well, from our study, there's quite a lot of problems that come from the sectors that have been particularly hit by COVID as well, in that they are in a less resilient space, and I think tourism, retail and hospitality are particularly exposed in that sense. But there's also the side that this is a different thing to perhaps some of the aspects of COVID in that there's an universal element, where these spiralling costs are hitting across so many sectors.

I was doing a focus group yesterday, which wasn't specifically on this, but was on tourism, and we were discussing how they are now having to pass on the costs and prices. And nobody really wants to do that and we can see that from the fact that, at the moment, the cost of inputs for us, for SMEs, is rising far higher and far more quickly than consumer inflation, which shows that businesses are trying to absorb those costs, but there's a point at which that's unsustainable. And I think that that's true pretty much across the board. So, there's an element here where people who have been particularly hit already are probably in a more vulnerable space and are unable to absorb the extra costs and more debt, and so on. But there's also that need to understand that there's a universal element here.

But, of course, microbusinesses in particular, when in negotiation with energy companies, are in a more precarious position in general than, perhaps, bigger businesses, in that they are more prone to facing changes in their contracts and that sort of thing, and they don't have the same protections as we as consumers have. So, that's also an issue there, in that they are in a particularly vulnerable position as microbusinesses in facing and trying to negotiate their way around these spiralling costs.

11:25

Thank you very much. As has been said, really, it is retail and hospitality, as you'd imagine. We represent the larger chains, and they are suffering as people still stay away from hotels in particular.

In terms of manufacturing, I think there is an impact. While orders have been quite decent over the last quarter, our industrial trends survey—the last one came out in April—showed that pessimism for future growth was the worst it had been since 1975. So, I think that when we look at why that is, it is around barriers to trade; it's not about customer demand. So, it's around supply chain issues, it's around costs of doing business. And, you know, we're talking large companies—automotive manufacturing and things like that—and within that, you've got energy-intensive industries and primary materials, which are, again, having no issue with demand, but are being priced out of markets that they've been in for decades. And there's no short-term solution to that, as we know, with cheaper energy.

Finally, on a more positive note, we have got sectors that are doing very well. The obvious one is the semi-conductor cluster, where they're expanding and the new site that they are building keeps on increasing by 25 per cent every month because of the kind of demand that they are getting from around the world. So, there are some good-news stories in this rather kind of depressing picture.

Thank you. It's refreshing to hear the good-news stories as well. So, my follow-up question, then, is to ask what support you'd like to see introduced by the Welsh and UK Governments to assist those individual sectors that are particularly affected by the cost-of-living challenges. So, I'll go around in the same order that I did with the first one, so, Chris.

Thank you. I think there are a number of things, picking up on my previous point, about investment; I think supporting businesses to invest is going to be absolutely crucial over the next 12 to 18 months, and, for some, will make a difference between them being able to carry on in the long term and not. I think we're potentially heading into a really problematic business rates environment in the next year. So, with the multiplier looking like it could be 10 per cent or higher come September for the following year's business rates increase, that's particularly problematic and we'd like to see that either frozen or capped, or dealt with in some way to give businesses a bit more certainty. And I think a recognition of what good employment looks like. I mentioned at the start that convenience stores provide over 25,000 jobs; those are local, sustainable, flexible, secure jobs, and we're very keen that the policy landscape reflects and recognises, and whether it rewards or incentivises, good work and good employment as part of the landscape.

I would just pick up on a couple of things about access to finance as well. We've heard from some retailers that there are some very strange things going on in that we had a retailer contact us earlier in the week, saying that he was refused a COVID recovery loan on the basis that his business lost money during the pandemic, which seems a bit perverse. So, things like that need to be addressed. As I say, it's all very well having the schemes, but if they're not accessible to people who need them, then that's problematic.

And then, just being perhaps wary of policies that are coming into force in the coming years, and the policies that are in the pipeline at the moment. In England, we've been dealing with the introduction of high in saturated fat, salt and sugar regulations; I know Wales is currently considering options on that. That's a significant cost for retailers in England at the moment who are dealing with that in the next few months. And also, we are dealing with the introduction of deposit-return schemes, which, of course, are in England and Wales and Northern Ireland, and we're currently looking at trying to get a sensible approach to the application of VAT on DRS schemes, because that is something that could, for a lot of retailers, push that into being a loss-making endeavour, if VAT was applied. So, some specifics there and some more general ideas, but, yes.

And one thing I would say, and it's been raised before, but the idea of some sort of consumer cap that extends to microbusinesses on energy would be extremely helpful. I appreciate that's very difficult to do, and one thing I would stress is that that 'microbusiness' definition must reflect Ofgem's definition of being an 'or' definition. So, for those who aren't aware of Ofgem's microbusinesses definition, you can have either 100,000 kWh of electricity, 293,000 kWh of gas or up to 10 employees, and you only have to meet one of those criteria to be considered a microbusinesses. And it's really important that that definition is carried over, if there were a cap introduced, because we've got lots of stores that don't employ that many people, but they do have quite high electricity and gas consumption. So, I'm very keen to see those included.

11:30

Yes. In terms of UK Government's responses, I think what we're looking for is to take the best of how we responded to the previous crisis recently in terms of the COVID crisis, in having that sense of urgency and a shared purpose, as well as an understanding of the impact on businesses and then how those are key to the communities in which they serve, and all the amenities and employment they provide on that basis. And, obviously, in terms of the UK Government currently—today—we're in a bit of flux today in trying to work out what will be coming. But I think there needs to be an acknowledgement that those small businesses, and the costs of production in those places, are key to the economic recovery, and it needs to be addressed as well in terms of where the spending resides.

In terms of support, I think that there are three things that Welsh Government can have a look at doing. How they do it will of course depend on what's happening elsewhere as well, but we can look at how it can use the grant funding to help those businesses most affected by adverse energy costs, and look at the microbusinesses following the definition that Chris just gave as well, looking at what are the best means to do that, using what we've learnt over the last two years.

Secondly, there's a need to ease the pressure brought by that constricted bank lending, by looking at low-interest emergency loans funding through, perhaps, the Development Bank of Wales, and looking to see what can be done in that regard, following similar ideas again. For example, DBW had a £100 million pot to use during COVID, and whether it's possible to look at doing that, with the idea that that would, of course, be access to finance rather than grants, so maybe a bit easier to get to. And during a time of constricted lending, such as now, and where there seems to be market failure happening, this is exactly the point at which the development bank should be a comparative advantage for us in Wales and should be able to look at supporting businesses in that regard.

The other thing that we've been calling for since December and the draft budgets, really, is to look again at reinstating the 100 per cent rates relief for hospitality, retail and leisure. Now, it was understandable during the drafting of the budget that that was put at 50 per cent, that made sense, but even at the start of the omicron crisis, we were arguing that that might be premature, given changing circumstances, and circumstances have changed dramatically since then as well. So, we're looking at how that's possible and looking also at where we can use any money that's left over from the COVID support schemes to repurpose that for emergency support during this cost-of-living crisis.

11:35

Thank you. In terms of support or things that the Government could do, I think there's quite a bit. On decarbonisation, it's anecdotal, but one firm that we know was planning to invest substantially in solar panels stopped because their business rates would go up and their headquarters said that, in order to sign off the investment, they would need to find a cost-saving equivalent to the business rates increase. It's not something that they have to deal with at their other sites around the world.

The other thing is around Welsh Government's quite proactive and forward-looking zero-carbon policy, it's just, 'Don't back down, stick to it.' I think it is paying dividends. There's a strong focus within boardrooms right now on environmental, social and governance, the strongest I've ever seen and the CBI has ever seen. We spoke to one institutional investor that has over £100 billion under their control, and they are singling out the Welsh Government for its environmental strategy and looking to invest in Wales because of that leading approach, which wouldn't have happened a few years ago.

Again, on energy-intensive industries, it's around the EII compensation scheme that the UK Government is doing. Now, they've extended that, which is welcome, but we just would like that to be kept under review.

The shared prosperity fund, I think it would be good to have clarity on that, both in terms of governance and the various strategies that exist that outline the priorities for the regions. They are all brilliant strategies, there's just a lot of them, and providing that vision and clarity for business would really help with unlocking the investments they're considering making.

The other thing is around hybrid working. The CBI is a big fan of hybrid working. Our members in Wales fully support it, are fully utilising it, I've not heard a single member say it's a bad thing. The one thing that's interesting, which is a bad thing for them, but a good thing for the employees is that they are obviously able to look at companies further afield. What we're noticing in professional services is what's called a virtual London, in that lawyers and others in Bridgend and in the Valleys, who would primarily work in Cardiff, are now getting jobs in London, with the pay twice as much, and working at home for a large part of the time. So, that's interesting, and I think there's something there for the Welsh Government to lean into. Its excellent hybrid working strategy provides that platform really well.

And finally, it's around COVID testing; it's actually providing that free COVID testing as we go into the winter. The Welsh Government has obviously continued to do that longer than England, but it would be interesting to see how much it's cost them to extend that and whether it's feasible to extend it still further.

Thank you. I'm really conscious of time, but your evidence there, Leighton, has brought to mind a specific question that several businesses in my constituency have been asking me about, so if I could, just very quickly, go round all three of you and ask: do you feel that there is room for Government to provide more support in the form of grant funding or other funds for business to become more energy efficient, whether it's putting solar panels in or investing in more energy-efficient machinery as well, as part of this? I'll start with Chris, and go round again. Very quickly, please.

11:40

Sure. Yes, grant funding for energy-efficient measures is absolutely welcome and would be snapped up immediately. It would free up any other funding for retailers to be able to improve their stores and offer other products and services, whereas, currently, that's where all the money is going—to try and pay that off in the long term.

Yes, I agree, and Leighton's mentioned the perverse incentives that come from the business rates system as well, but a crisis is also an opportunity to shape things for the future. Clearly, when we're looking at energy prices, looking at what kind of green energy we can push, providing greater resilience in that respect for the future is surely something we should be looking at doing.

Yes, I think it would be good to think innovatively about this, whether there's private sector provision, because the Welsh Government is under significant pressure with funding, or whether we can utilise the shared prosperity fund. So, I think the Government would do it if they could afford it, but how do we find the way that we meet the needs that are out there, which are significant?

Thank you. Has any member of the panel had any conversations with the First Minister about the fact that he said that the cost-of-living support to businesses will be done through adjustments to existing programmes?

We haven't, specifically on that side of stuff. We're still trying to get the picture about what's happening there and where the priority should be, but that's definitely something we'll be looking to have discussions with Welsh Government on at the most senior level, I hope, as soon as possible.

We have spoken to officials about this and we're aware of what they're doing and we understand the direction of travel.

Can you elaborate on that, Leighton? What do you mean by you understand the direction of travel? 

It's a difficult balancing act, with a limited amount of money to decide between supporting cost-of-living issues and supporting businesses. So, I don't know what decision will be made, but that's a really difficult decision I'm glad I don't have to make.

Okay. Llŷr, with regard to the fact that you were calling for unspent funding for the coronavirus crisis to be repurposed, what have you got in mind with that?

Well, it's looking at it with the idea of where we can repurpose it, possibly using the same sorts of grant-funding mechanisms through local authorities in order to support the businesses that need it most. It's a starting point rather than a full answer, I know, but this is a similar point at which, at the UK level also, we know that there's been a lot of unspent funding, which needs to be released, really.

What we would like is also clarity about how much of that funding there was. It was a little unclear. The last we heard about it was mid February, towards the end of the omicron funding period. So, in terms of the amount, I would like to know, in terms of the clarity from the budget, how much was carried over, what it was used for, and whether we can look at using it, not just for cost of living for households, but also for businesses.

Okay, that might be something the committee might wish to explore in more detail. What about extending the cost-of-living support to small businesses? Is there more that can be done there as well—particularly microbusinesses?

Yes, what we've been calling for is the use of similar ideas as to what has been done with households, via the council tax system, to use the non-domestic rates system to do a similar sort of thing. So, obviously, the amounts will be—. We need to understand what the levels are and where we can target them, and who needs them most. Now, whether that's by size or by sector, I think it's a difficult thing to say, whether it needs to be targeted or more universal, and what's the pot of money we have to play with in order to do that most effectively? That's obviously there and needs to be discussed, and needs to be worked through, really, because these are pretty difficult decisions. But what I would say is that it's really important that we look to communicate from Welsh Government that they understand the pressures, that they understand that things need to be done urgently, and that would provide in itself a little bit of certainty that businesses will be expecting some sort of support. I think that would be a good message to start with, and then we would be looking at how to best do that support. Understanding all the pressures that Leighton has noted, by the way, what's important is that we don't let the pursuit of the perfect get in the way of the better. It would be useful just to show willing and show impetus to move on stuff.

I'd just quite quickly like to come back to a point that Leighton made on the shared prosperity fund. I think that clarity is really important as well in terms of cross-Governments. I think at the moment there's a very real danger that what's happening is that, because the business support regime as a whole is in flux, and we're waiting, essentially, to understand what's happening, that causes some element of policy inertia, in that nobody's too sure who's responsible for what, where that's being delivered and how. So, I think one element of thinking in this, similar to using what we've learnt from the COVID mechanisms that have been built up over the last two years in terms of support and delivery, is that we look to have that sort of space of shared purpose, of an urgency to address the needs of businesses, and that being the key part of responding to a crisis rather than carrying on waiting and waiting to see what will happen. And the trouble with that lack of clarity in the long run as well is it mitigates against that strategic thinking in terms of moving and transitioning to net zero, which we've discussed as being something that would be useful for the long term. But without a long-term understanding of what we're going to be facing, it's quite difficult to steer delivery and support with those strategic long-term aims in mind, so I think that's an important part of what we want, and you will have seen reports we have done on that, in the spring.

11:45

Diolch, Cadeirydd. At the beginning there was mention around rural businesses and the effects on rural constituencies most prevalently, but many rural areas are reliant on sectors such as hospitality, tourism and retail, which are dependent on non-essential spending, and therefore may be more affected by the pressures that are being seen at the moment. What support can be given by Government to protect high streets in these areas and specific businesses? Chris, I'll start with yourself.

I mentioned a couple of areas on rural shops previously, and you're absolutely right, they are potentially more adversely affected in this time. I think there are three things that the Welsh Government can do to support these businesses. The first is around supply chains, and ensuring that there is sufficient support for what I think is essentially support for hauliers to be able to get product to businesses. We've heard, as I say, of not just reductions in the frequency of deliveries out to these businesses, but also a significant increase in the cost of delivering, which for many has made that just unsustainable, so they have to look at other options. Or in some rural areas in Wales, we've had retailers that are banding together with other businesses on their high street, or other businesses on their parade, to get deliveries collectively, but then that brings in the other issue of storage and then the cost of storage. I think, as we know, storage at the moment is a bit of a commodity. So, it's supporting the supply chain, whether that be reducing the cost of fuel for that kind of business, or some sort of incentive in that way.

Investment is something, obviously, we've talked about a lot, and supporting rural businesses in being able to invest in the products and services on offer. Services for rural businesses are extremely important for their communities; they are often the only place where they can get those services. So, making sure that investment is still there is really, really key. And then just a plea to continue the direction of travel when it comes to investment in connectivity, because a lot of this can only be delivered if rural businesses have the capacity to be able to offer these services through reliable—things like fast broadband, access to 4G, 5G networks, and those kind of things as well.

I think, while there have been lots of challenges for rural businesses, one bit of good news, I suppose, is that, when we've been looking at the community activity of retailers in Wales, that has diverged from the rest of the UK, in that, through the second half of 2021 and the first half of 2022, retailers in Wales, and especially those in rural areas, had been increasing the activity in their communities, whether it be through fundraisers or providing support for local meetings, that kind of thing. Now 90 per cent of retailers in Wales are active in their communities—perhaps one bit of good news on top of all the other stuff.

11:50

Helpful. Thank you, Chris. 

Llŷr, unrhyw beth i—?

Llŷr, anything to add?

Oes. 

Yes.

In terms of following on from Chris there on community activity, I think it's quite important to note that that increase in social capital, if you like, is really, really important to responding to crisis, and might be a side of resilience that's important in responding here as well. We published a report recently on town centres and high streets, with the idea that it's important that we ensure that the power and finances available at the local level, at the local town level, for them to shape their own responses, and to understand the market conditions and where their comparative advantage, if you like, as towns resides.

Now, that doesn't quite respond to everything you're asking, though, but, in terms of for rural areas, obviously, businesses there, and individuals, are more dependant on cars, vans, use of fuel in terms of supply, as Chris has noted. Public transport options, then, are also more unreliable generally, so then you also don't have the option to choose a different way of travelling from the car as well. And also, in terms of fuel use, premises are more likely to use oil, I think, as a heating source. So, there's a whole host of reasons, as well as the use of fuel, where rural areas will be more hit by supply, and freight and so on. And there's a need to look strategically at this, I think, as well in terms of local supply hubs and storage, possibly looking at where those can reside in out-of-town areas and so on, and maybe localising some of those supply chains as well. But that's something that's probably further along.

The other side of it, of course, in the long term, is looking at making sure that we look at EV charging points in a way that is not about agglomeration and following the money where the all the people reside. It's vitally important that rural areas—that their needs are met in that regard. And I think that needs to be a priority.

I'm not going to take up much of your time. The CBI doesn't really have rural retail businesses in membership, but we would, in general, support what Chris and Llŷr have said.

Thank you. I know we've talked about the supply chain side of the business structure, but if we're looking at the opposite end of that, the introduction of things like a tourism levy, tourism tax, and the changes around self-catering holiday criteria, do you see those having a material effect on the ability of these businesses and areas, rural areas, where this will predominantly hit the ability for them to make back that money that they're spending at the pinch end due to the increases in costs? I'm happy to open up that up to anybody on the panel.

Well, when we've responded to that, it's been important to make sure that we don't add to the cocktail of costs at this particular time. Now, obviously, the tourism levy, in whatever way and shape it happens, or doesn't happen, is quite a few years away, but from our members we're hearing that the problem there is one of perception as well—that people are not necessarily hearing that it's years away, because what we're hearing constantly on the media is that there are taxes coming in. So, there's an element there where it needs to be made very clear that that's not going happen. We would like it to be clear that, if it's going to happen, it's not going to happen until businesses are in a good place where they can take on any costs, and there's a clear plan around it if it happens at all, in that it's linked to a tourism strategy and tourism development.

In terms of the holiday lets, there are obviously a lot of things that need to be worked out in terms of how that's going to affect what's happening this year on anything that's linked to it next year, and we've discussed it in our consultation responses on that. If we are looking to do a response to that, we need to have evidence about why the thresholds are where they are, whether they're the right ones, whether there's a way to taper them if need be, in that we can, maybe, raise them over time rather than do them all in one jolt, so that we can understand, then, what the market is now, which is in flux at the moment, between the staycation market, whether that's something that's here to stay—to use a bad phrase—. At the moment, we really don't know what the tourism market is going to be in the next two or three years, as there's still a lot of uncertainty around. And moreover, of course, there are areas that have more tourism and less tourism. Some will want to attract more tourism, and I think it's important that we have a system that is, perhaps, able to respond and flex as need be to try to move tourists to new places or to places where we want to get more and more tourists in or to disperse them around from honey-pot areas. So, that's sort of where we're looking at.

11:55

That's very helpful. Chris, Leighton, anything to add on those points?

No, not at this stage.

No. That's fine, thank you. The Federation of Small Businesses has highlighted that rural businesses have less ability to reduce their overall costs and adapt to these things, so what would you suggest as steps that could be taken for rural businesses to help them? I know we've suggested the supply chain issues, but in terms of reducing the costs to themselves, what do they need to improve their ability to reduce the costs, per se? Chris.

I think it's a longer term issue, unfortunately. Short-term reductions in costs are difficult, which, obviously, we've discussed, and the limited resources available to the Welsh Government. And for a lot of our members in rural areas, they're already receiving, in a lot of cases, 100 per cent relief, so there's not really that much from that side of things to be able to reduce their costs. It's just being able to give them some long-term certainty that they will be able to invest in making their businesses more energy efficient, which will, in turn, reduce those costs. 

Yes, it's—[Interruption.] Sorry, Samuel.

In terms of that side of things, you have to think that SMEs and rural businesses, in many ways, are like individual consumers in this regard, where they're more dependent on infrastructure, whether that would be energy infrastructure, whether it's transport, roads and so on. So, as Chris notes there, there are a lot of aspects of that that are long term and not easy to respond to straight away. 

In terms of what we're looking for in the short term, it's what we've discussed, really—it's that targeted intervention to support firms, by extending energy support through the tax system to small businesses, through the NDR system, and, where possible, to have the energy cap discussed. So, it's those sorts of things. As we've discussed already, there are obviously a lot of things to discuss in terms of how we target the balance, whether it's sector size, but also there's a question about the location side of rural areas—if they need it more, whether they should be seen as a proxy for targeting, if you see what I mean. So, that's a side that probably needs discussion, but there are so many things to balance and a need to understand the details that it's not possible to say which is preferable at the moment, to be honest. But the point is to show the impetus to move towards making that support available.

The only rural businesses—. I've got factories that are in rural areas, and that's kind of the nearest thing we get to. For them, it would be around grid connection, planning for major onsite renewable projects, port infrastructure to allow them to import and export at a greater rate, and innovation support, because some of them have, as you would imagine, improved the energy efficiency onsite to the limits of the laws of thermodynamics, and they need millions of pounds-worth of investment to look for new ways of reducing the energy consumption of their plant and machinery.

12:00

Thank you, Sam. And I'm afraid that time has beaten us. There were perhaps a few questions we would have liked you to address this morning, but we will send you a letter, and perhaps you'd be very kind to address those questions when you receive the committee's letter. Thank you very much indeed for being with us this morning; it's been a very useful session. A copy of today's transcript will be sent to you in due course for accuracy purposes, so if there are any issues with that, then please let us know. Otherwise, thank you very much indeed for being with us this morning. We'll now take a lunch break for half an hour. Thank you very much indeed.

Gohiriwyd y cyfarfod rhwng 12:01 ac 12:32.

The meeting adjourned between 12:01 and 12:32.

12:30
5. Costau Byw - Cymunedau gwledig
5. Cost of Living - Rural communities

Croeso nôl i gyfarfod Pwyllgor yr Economi, Masnach a Materion Gwledig. Fe symudwn ni ymlaen nawr at eitem 5 ar ein hagenda. Dyma'n trydedd sesiwn banel heddiw, a byddwn ni'n edrych ar effaith pwysau costau byw ar gymunedau gwledig. Gaf i estyn croeso cynnes i'n tystion y prynhawn yma? Cyn inni fynd yn syth i gwestiynau, efallai gaf i ofyn iddyn nhw gyflwyno eu hunain i'r record, a gaf i ddechrau, efallai, gyda Jackie Blackwell?

Welcome back to the meeting of the Economy, Trade and Rural Affairs Committee. We will now move on to item 5 on our agenda. This is our third panel session today, looking at the impact of cost-of-living pressures on rural communities. May I welcome the witnesses this afternoon? Before we go straight to questions, perhaps I might ask them to introduce themselves for the record, and may I start with Jackie Blackwell?

Diolch. My name's Jackie Blackwell and I'm the chief officer for Ynys Môn Citizens Advice, and I'd like to thank the committee for inviting me today. So, my focus and experience is local, however, our experience is very much in line with national pressures.

Hello, sut mae, bawb? Ie, Ceri Cunnington o Flaenau Ffestiniog yng ngogledd Cymru. Dwi'n gweithio fel gweithiwr datblygu i fenter gymunedol o'r enw Cwmni Bro Ffestiniog. Rydyn ni'n rhwydwaith o 15 o fentrau cymunedol, efo gweithgareddau yn amrywio o opera i ganolfan beicio mynydd. Rydyn ni'n cyflogi dros 150 o bobl yn y gymuned leol.

Hello, how are you all? I'm Ceri Cunnington from Blaenau Ffestiniog in north Wales. I work as a development officer for a community initiative called Cwmni Bro Ffestiniog. We're a network of 15 community initiatives and enterprises, with activities ranging from opera to a mountain biking centre, and we employ over 150 people in the local community. 

Hello, I'm Mark Shucksmith. I'm a professor at Newcastle University studying rural poverty and rural development. The mother's side of my family is Welsh speaking, but unfortunately I don't speak Welsh.

Thank you very much indeed for those introductions, and thank you for being with us this afternoon. Perhaps I can just kick off this session with a general question. Perhaps all of you can outline the key economic and social impacts of cost-of-living pressures on rural communities across Wales so far, and perhaps also you can tell us, in your views, what are the key differences between the cost-of-living challenges faced by households in rural and urban areas. Perhaps I can start with Mark Shucksmith.

Thank you. We've just conducted a big study of rural poverty in England and Scotland—unfortunately, not in Wales, but many of the issues will be similar. Our study found many rural households already experiencing poverty and financial vulnerability who will be hard hit by the substantial increases in energy costs occurring in 2022 and by rising inflation. Many face fuel poverty, higher costs of living, insecure employment and poor access to services as these are increasingly centralised and digitalised. The impacts on consumers will include the energy prices, both in terms of domestic fuel and transport, as well as food inflation and other general costs. And these impact more, of course, on lower income households and more on rural households. There will be impacts on producers, too, through rising costs of production, energy inputs and wages.

There is a lot of research on the key differences between the cost-of-living challenges in rural and urban areas. Loughborough University, who produced the living wage metrics, have done this work for the Joseph Rowntree Foundation and, most recently, for the Scottish Government. The cost of living varies by type of household and by settlement, and the main difference is the higher energy costs, as I said, both domestic heating and transport. And in Scotland, food, clothing and household goods are also more expensive in rural areas. The Scottish Government in 2021 reported that the additional minimum living costs for households in remote rural Scotland typically add 15 to 30 per cent to a household budget, compared with urban areas of the UK. And that disparity, of course, will grow much higher in 2022-23, with the forecasts we have at the moment. Interestingly, dual energy vulnerability, as this is called—both domestic heating and transport—has recently been mapped by Robinson and Mattioli, and it shows very clearly that that vulnerability is highest in rural areas. Thank you.

12:35

Thank you. So, mine's a very coalface experience and analysis that I can give you. So, on the front line, we are seeing the effects of the cost-of-living crisis, similar to the rest of the country. For the first five months of 2022, we've seen records broken for all the wrong reasons. So, for example, every 40 seconds, a Welsh bill payer is making a call to us at the Citizen's Advice service helpline about their fuel bill. Energy debt, as you would expect, has spiked and it's become one of our top issues, alongside the deeply worrying trend of more people being referred for crisis support. So, by that I mean needing referral to food banks and charitable support and grants. While the number of people seeking help for council tax debt and rent arrears dropped slightly in April, it still remains well above average in the numbers.

I'd like to talk about the energy support that we receive. In the past, it was all around comparisons, and we actually saved lots of money for the majority of our clients. Now that's not the case. There are no savings to be made, and we're talking about managing debt. So, I just wanted to clarify that as well. Thank you. 

I can only talk on a really local level of what we're facing and what we're trying to do as community enterprises within the community, and we've bracketed it into food, warmth and welfare in how we're working across the community. So, with food, the food bank has been enhanced and expanded. We've got community fridges, the local community shop does a delivery system, with low-cost carveries instead of meals on wheels. We're actually wheeling the meals to people. The social thing is really important, bringing people together. There are 'cooking inexpensive meals' lessons, volunteers are taking villagers to cheaper town shops and supermarkets. So, between everything, there are loads of things going on.

We've got a community vehicle programme and weekly clubs, because the socialising thing is really important as well. Sorry, I'm rambling, but I can only talk about—. Places like Blaenau Ffestiniog have always been in crisis, really, since de-industrialisation, or the heavy de-industrialisation, and we've always had to do things for ourselves. So, in a way, it's just brought us closer together. We have capacity. We can do it as communities; we just need better support from the local authority and other agencies. Sorry, that's a bit of a ramble, but it's how I see things ar y llawr. I didn't know if that was a question, or if I answered with the answer. 

No, that's perfectly appropriate, Ceri. And on that point, what sort of support would you require either from local authorities or, indeed, from the Welsh Government in order for you to carry out your work?

Well, it's the support that happened during COVID, where instead of trying to control communities, there was a sense of releasing communities, because the local authority couldn't react as quickly as communities could. And if a community has capacity—.

Mae'r gallu—. Beth ydy 'gallu' yn Saesneg? 

The—. What's 'gallu' in English? 

I think every community in Wales has the ability to respond positively to crises like this, but we just need a level playing field as regards where the investment is going. I know we can't tackle the big issues, but, in a place like Blaenau Ffestiniog, we create 133 per cent of our energy needs just through a little hydro. So, there's a massive—. As regards the grid connection, as regards Scottish Power, as regards inequalities like that—. We do have gold in these communities; it's just not being shared evenly. Yes. Sorry, another ramble.

Our services have been stripped in a town like Blaenau Ffestiniog, so we've had to fill the gap as social enterprises. I'm not saying that's necessarily a bad thing, because 'downstairs', from where I am now, the Warm Homes discount—yes, the Warm Homes discount—. I think Nyth, I think 25 per cent of the referrals in Wales came from 'downstairs', because it was delivered at a local level, because people trust us. Yes. Sorry, I am rambling—I've just come 'upstairs' for this. 

12:40

That's fine. Thank you very much indeed for that, anyway. If I can now bring in Vikki Howells to ask a few questions. Vikki. 

Diolch, Chair. Thank you, panel. Thank you for your time this afternoon. I'm interested in your views about how effective the cost-of-living support already announced by the Welsh and UK Governments is likely to be in supporting rural communities within Wales. So, maybe if we start with Jackie with that. Is that okay, Jackie? 

Yes, that's fine. I'm just checking I'm off mute. Yes. Just bear with me. Okay. So, people are struggling, even with the level of additional support already available, I'm afraid, from our experience. We feel that Welsh Government must continue to find ways to get money to those on the lowest incomes. Fundamentally, the easiest way to do this is for the UK Government to uprate benefits such as universal credit in line with current inflation. We saw on Tuesday that Ofgem are predicting another energy cap rise, to £2,800, and that's £1,500 more than last October. Already, there are record numbers of people coming to Citizens Advice for energy and debt worries and crisis support, such as food banks and grant help. So, it's case of, 'Thank you, we're really grateful for the help so far, but it's not quite enough.' There still needs to be more help, going forward.  

We just need to listen more, I think, to what actually is going on on the ground. We need an understanding and trust between communities and public bodies. I know we've been shouting from here for the last 10 years, since Communities First, really, and we have developed a lot of social businesses and stuff that I've done, mynd i'r afael â'r her—facing the challenge. But, like I said—. I don't know. Nothing much has changed. It's getting slightly worse, but this place has always suffered from lack of investment and stuff. Yes. Sorry, I can't answer your question, really. We're just getting on with it, if you know what I mean. So, yes, we're helping ourselves. 

Thank you, and I very much endorse what Jackie was saying earlier on. I can't really comment on the support from the Welsh Government, but the support that has been announced by the UK Government before today—and I haven't caught up with today's announcement yet—has really been inadequate to the scale of the challenge, and it's been poorly targeted. It hasn't really been addressed at low-income households. A number of different analysts, like the Institute for Fiscal Studies and the Resolution Foundation, have demonstrated that quite clearly. There are quite a few barriers that face people in rural areas trying to gain support. We've found—a number of colleagues over the years have found—that eligible households for welfare benefits, universal credit and so on, are less likely in rural areas to actually claim their entitlements. So, for example, a study on the take-up of pension credit found that the proportion of eligible residents not claiming pension credit were 35 per cent in urban areas, 43 per cent in villages, and 54 per cent in hamlets and open countryside.

Our 'Rural Lives' research was conducted, of course, prior to this year's cost-of-living crisis, but we identified several barriers to rural households receiving support from the state in time of need. One of the issues is that advice and support is increasingly centralised and digitalised so that people without the transport to get into the main centres or without the digital skills or the literacy skills to work online are disadvantaged. There's also social stigma and cultures of self-reliance in small communities that deter claiming unless there are very sensitive ways of reaching people. Poorer households in urban areas are more likely to have social landlords, but in rural areas people are much less likely to be in social housing and therefore to have landlords who inform them and assist them. And of course only mains gas and electricity prices are regulated by Ofgem, leaving those with oil or LPG unaided.

12:45

Can I just come back quickly on that, Mark? I completely agree, and that's what we found with localising these services 'downstairs', like the Nyth programme and stuff. They've come to people they trust; they were scared maybe to access it online, if you like. I think we've had 3,000 people in a town of 6,000 come in over the last 12 months to ask for different kinds of support, from the bus pass to fuel vouchers. So, I think the communitisation of these offers—beth bynnag ti'n galw nhw—is really important, especially in rural places. 

Thank you. If I can just quickly go back to Jackie and ask if there's anything that you want to add around how easy or difficult it has been for rural households to take up the cost-of-living support that's been provided so far.

Yes. So, I think extending the eligibility for the next winter fuel support scheme to build on pension credit was welcome, but I think more work is needed to improve take-up across all eligible households. I think we should use all routes. For example, this should include reaching out to those on social tariffs for their water or energy who may be eligible for the winter fuel support scheme, and, I think, working with local authorities to better target support where take-up for the last winter fuel support scheme has been low.

I wanted to give a few examples—good examples, actually—of how we've been working, or how our council on Anglesey have been extremely proactive and how much hard work the tackling poverty team have acutely been doing over the last couple of years and particularly at the moment. So, I think one of the things that we've identified is that we can't allow the reliance and the dependence on the food banks as it is to continue, because the food banks simply can't cope with it going forward. So, we created a new community initiative called Bwyd Da Môn and that initiative is to intercept food bound for landfill. We have members paying £5 a week, but they get about £20 to £25-worth of food, but also we can do subsidy for people who are really struggling.

In winter, we were getting clients coming to us who needed somewhere warm to go in the evening. They couldn't afford to put the heating on during the day or in the evening because they had so much fuel debt, they were too scared to put the heating on. We were getting asked, 'Where can we go to keep warm?' So, we created Caffi Cwtch, which is a place for people to go in the evening, but we also worked with Môn Communities Forward to provide hot food and hot drinks for people who hadn't eaten all day either.

We meet monthly with the food banks to ensure that there is enough food coming in, and where there isn't we work together to raise funding to actually make sure that they can help those who are most vulnerable. We're currently working on period poverty, so we're making sure that that's addressed right across the island.

What we've also done—. Because we know we need to get out to the community and make sure that they know all the partners are here to support them, and more importantly what's available and how they can actually reach us. So, we've done a series of posters, we've done a series of digital stuff, but we've also done some clips, really focused clips, on different areas that people might need help with, and that has also been led by Anglesey County Council.

They've also decided, our council, that all qualifying recipients for the cost-of-living support scheme will receive a letter through the post, with a voucher barcode to present at the local post office, together with proof of ID, as stipulated in the letter. Once the vouchers—. The vouchers can only be cashed once, and they'll expire a month after issue. They anticipate such letters to be sent out this week, actually. And this is a very different system to others across Wales, where councils have paid the payment directly to bank accounts for those who they hold the details for. Those households without details held by the council have to register. Given that the £150 is not a rebate on the council tax, it is a payment to help with the rising cost of all utility bills right now, it does slightly feel out of step that people who are eligible and already had their details held by the council have had to wait much longer, and we've also got some people who live in really, really rural areas, where the transport isn't particularly reliable. So, to travel to a post office if there isn't one in the village, particularly for elderly people, is going to be quite challenging. Thank you. 

12:50

Thank you, Chair, and thank you all for being here today. I am just going to ask a few more questions—and I think all of you have touched on this—about fuel poverty. And my question is: with higher fuel poverty in rural areas, as we've heard, and in the written evidence we've seen, being partially caused by many properties not being connected to mains gas, what should the Welsh Government do to support off-grid households over the coming months? Ceri, I could see you nodding there first, so I'm going to pull you in first, if that's okay.

I think insulation is really important, but, long term, we have got a community energy enterprise as well, and we're trying to work with the North Wales Economic Ambition Board, with local energy supply and distribution networks. Like I said earlier, there are hydro schemes in the area; Blaenau Ffestiniog is enwog for its rain. But, yes, an estate just down the road is off grid, called 'Hafan Deg', which, before the crisis, suffered 46 per cent fuel poverty, I think. I think people need to get angry. I think the housing associations have a lot to answer for, because, in October, it's going to get even more scary. But there are simple things to do. I know this sound really ridiculous, but 'downstairs' we knit snakes and we put them under the door for draft exclusion and stuff. But these houses need to be upgraded. We've got pre—. We've got quarry housing stock and stuff like that, so—.

We can only do so much as communities, but, like I say, we are working with the local housing associations, Welsh Government energy service and the North Wales Economic Ambition Board, but we need local energy district heating networks, if you like, and local heating, because everything is being exported, and we just really need to look at that. But it's a massive—. It's Ofgem, and it's much bigger than—. Yes. We are looking at stuff locally, but there's only so much we can do. 

That's really helpful. Thank you very much, Ceri. Jackie, I'm going to come to you next. 

Thank you. In more rural communities, the energy issue has been made worse, as 20 per cent of households are reliant on heating oil or liquid gas for their home and water heating, so, basically, off grid. We're presented with people now who—. I'll give a personal example here. So, two months ago—I'm off grid—I went to see how much it would cost me to put 1,000 litres in, and it was £365, and I thought, 'Oh, I'll do that; I'll do it next week.' So, a couple of weeks later, I suddenly remembered and I went to actually order the oil, and it was just short of £700. And I went in last week to check how much the same amount of oil was, and it was £1,000. So, you can see. And people just don't have that kind of resilience, especially if you're off grid and you're more vulnerable and you're reliant on benefits. So, that's really, really worrying. 

Clients have reported that the cost of heating oil has more than doubled over the past two months, and, as I've just explained, I can give personal evidence of that. A delivery of 500 litres that cost around £340, now costs around £750. I'm aware that Julie James and Jane Hutt have written to Greg Hands, the Minister for energy in the UK Government, to ask him to intervene with Ofgem and the Competition and Markets Authority. Some oil suppliers are requiring the price to be agreed at the point of delivery, rather than at the point of order. This puts pressure on household budgets at a time when people are already struggling.

On energy more broadly, north Wales was hit with the highest increase in standing charges for domestic energy in Britain, with up to 102 per cent being applied to household bills from April, and in south Wales, standing charges up to 94 per cent, so the fourth highest in Britain. I've written a couple of things down here. I think one of the asks would be, with DAF and LPG, where there is now the ability to get help through DAF for people on LPG and oil, it's currently temporary, and we'd like to suggest that's made more permanent. And also regulation in the markets for the priority services register for those on LPG and oil—that that be changed as well.

12:55

Jackie, can I just ask, you say 1,000 litres—just to give me some idea, how long does that last? How long do you have to do that and how often do you have to do that?

It depends. Personally, there's myself and my husband in the house, and that will probably last me about six months, but we don't have the heating on very often. So, if you're living with a family and you've got somebody who's maybe elderly, who needs more heating, it depends—it could be anything from three months to six months. I think it's more about finding that sum of money. If people can't afford, there's no disposable income, and they've got to find £1,000, or basically they don't get any heating—. We're really fortunate on Ynys Môn, again the Isle of Anglesey County Council have had discussions about this for quite a while, and we've managed to find a pot of money, where Citizens Advice can identify those most vulnerable, and we can negotiate with the suppliers to deliver about £250-worth of oil. But it's a sticking plaster, again. It's not infinite, is it?

Quickly as well, we have a local log bank—so we're collecting wood in local log banks, so people can help themselves to wood. So, we're drying that at the moment. If there's anyone here who has tried to be in touch with Natural Rerources Wales about fallen wood and stuff like that—. So, we have got four banks across the town, and then we're drying it at the moment, so people can help themselves to wood. So, small, practical stuff.

Another great idea, that's brilliant. Thank you, Ceri. Mark, did you want to come in on this as well?

Yes, thank you. And, of course, filling the oil tank lasts quite a long time at this time of year, but it won't last anything like as long as that when winter comes. The forecasts for fuel poverty as a result of the April rises in prices are frightening in rural areas, and I'd be very interested in what the calculations are once this week's Ofgem forecast of what's going to happen in the autumn is included in the modelling. But there are a number of measures that could help address these high levels of fuel poverty—many of them up to the UK Government. Bringing oil and LPG gas supplies within Ofgem's price cap would be a matter for the UK Government, for example. I don't know how feasible that is, but it would be a great help and would be much fairer for people in rural communities, as would be increasing the support to poorer households through universal credit and legacy benefits, as Jackie said earlier, or raising tax thresholds, as recommended by the Resolution Foundation and others.

The approaches open to the Welsh Government might include support for home insulation in rural Wales, boosting that support. What seems to be particularly successful in that respect is the combination of targeted grants and funding local project workers who could also maybe arrange benefit checks through CAB when they visit households. We've seen quite a few examples of that sort of partnership, helping to overcome the stigma of requesting a benefit check. If you're having somebody to come and talk to you about home insulation, that's much more acceptable, and if a benefit check happens on the back of that, then that's great.

A related model, which has been successful in Northumberland, is warm hubs, which sounds a bit like one of the things Jackie was talking about, where people have a warm place to go and get a hot meal and stay in the warm, and talk together—it addresses social isolation as well. In the warm hubs model, the organisers also take the opportunity to bring in energy advisers, or people to talk about home insulation, or people to talk about benefits. So, it can also be a gateway to these other sources of support as well. It's proving quite successful. 

Just finally, and as Ceri was saying earlier, in the medium term, another avenue might be support for local renewable energy generation and importantly, enabling the residents of these areas to benefit from the cheaper energy produced there.

13:00

Thank you all so much, you really gave us a good idea of the scope of the issues there and also a comprehensive list of ideas and potential solutions, so it's very much appreciated. I'm done now, Chair. Thank you.

Diolch, Cadeirydd. Os gallaf ddechrau gyda Ceri, os gwelwch yn dda. Mae diddordeb gyda fi i ddeall pa heriau sy'n wynebu mentrau cymunedol sy'n rhan o'ch aelodaeth a sut gall Llywodraeth Cymru neu awdurdodau lleol eu cefnogi gyda phwysau costau byw.

Thank you, Chair. If I could begin with Ceri, please. I have an interest in understanding what challenges are facing the community enterprises that make up your membership and how the Welsh Government or local authorities can support them through the cost-of-living pressures.

Ie, mae'r heriau'n rhai amlwg—o ran costau cyflogi, sy'n un peth mawr. Fel arfer, mae'r mentrau'n byw o ddydd i ddydd, yn trio cynhyrchu incwm a ballu ac wedyn, maen nhw'n talu cyflog teg neu gyflog mwy na theg, so pan mae costau cyflogi’n codi, mae pwysau ar y fenter wedyn yn flynyddol. Mae gennym ni un fenter o’r enw Seren, sy’n gofalu am bobl efo anghenion dysgu, ac wedyn mae eu costau cyflogi nhw wedi codi £100,000 blwyddyn yma, yn flynyddol. Maen nhw'n cyflogi dros 60 o bobl. So, mae yna bwysau aruthrol ar y mentrau.

Ond buaswn i'n dweud, o ran cefnogaeth, mae jest angen agor y drws a'r deialog o ran pwy sy'n gorfod darparu'r gwasanaethau craidd yma. Mae cymunedau yn well am ddarparu rhai gwasanaethau, buaswn i'n dadlau, a dŷn ni wedi clywed am hynna y bore yma, sef cyngor ar ynni efo help pobl fel CAB. Ond ar lefel leol, mae pobl yn ymddiried yn ei gilydd ac mae'r wybodaeth yn cael ei rhannu'n well, ac wedyn mae'r awdurdodau lleol yn well am ddelifro rhai pethau ac mae'r Llywodraeth yn well am ddelifro pethau eraill. Ond rôl y Llywodraeth ac awdurdodau lleol, yn fy marn i, ydy hwyluso cymunedau i ffynnu, dim trio rheoli a datblygu prosiectau eu hunain, boed yn rhai adfywio a ballu. Mae'r atebion yn y cymunedau, ond mae'r gallu gan yr awdurdod lleol a'r Llywodraeth i hwyluso'r gweithgaredd yna.

Fel dwi'n dweud, mae gennym ni gynlluniau yn amrywio o dwristiaeth gymunedol i ofalu am bobl efo anableddau dysgu, a dŷn ni'n gweithio ar draws y gymuned ac yn ymateb i'r heriau o fewn y gymuned. Ond buaswn i'n dweud, does yna ddim magic wand, nag oes, oni bai am annibyniaeth? [Chwerthin.] Sori, roeddwn i'n gorfod lluchio hwnna i mewn. Ond dwi'n meddwl, ie, jest cydweithio'n agosach—rhannu, gweld a gwrando, dwi'n meddwl, ydy'r ateb i fi.

Yes, the challenges are obvious in terms of employment costs—it's one big thing. Usually, the enterprises live from day to day, generating income and so on, and then pay a fair wage or more than a fair wage, so when employment costs rise, there is pressure on the enterprise then annually. We have one such enterprise, called Seren, which looks after people with learning needs and their employment costs have increased £100,000 this week. They employ over 60 people. So, there is huge pressure on those enterprises.

But I would say in terms of support, we just need to open the door and the dialogue in terms of who has to provide these core services. Communities are better at providing some services, I would argue, and we've heard that this morning, namely the advice on energy with the assistance of people like CAB. But on a local level, people trust each other and the information is better shared amongst those people, and then the local authorities are better at delivering some things and Government is better at delivering other things. But the role of Government and local authorities, in my view, is to facilitate communities to prosper, and not to develop and manage their own regeneration projects and so on. The solutions are in the community, but the local authority and the Government have the ability to facilitate that activity.

As I say, we have initiatives ranging from community tourism to caring for people with learning needs, and we work across the community and respond to the challenges in the community. But I would say that there isn't a magic wand, is there, unless we went for independence? [Laughter.] Sorry, I just had to throw that in there. But I think, yes, we just have to collaborate more closely—to share, look and listen, I think, is the answer for me.

Diolch am hynny, Ceri. Jest o ran beth oeddech chi wedi'i ddweud ynglŷn ag agor y drws i drafodaeth, ydw i'n iawn i gymryd o hynny, felly, fod yna le i wella o ran y cyfathrebu rhyngoch chi a'r Llywodraeth ac awdurdodau lleol?

Thank you for that, Ceri. Just in terms of what you've said regarding opening the door to discussion, am I right to take from that that there is room for improvement in terms of the communication between you and the Government and local authorities?

Yn eironig, yn ystod y creisis, mae cyfathrebu wedi gwella. Mae'n rhaid cydnabod hynny. Yng Ngwynedd ydw i, ac mae yna fframwaith adfywio newydd sy'n rhoi'r cymunedau'n gyntaf. Ac mae'n rhaid imi ddweud, mae gen i berthynas eithaf da efo Llywodraeth Caerdydd hefyd. Maen nhw wedi bod yn gefnogol iawn o ran cynlluniau fel yr economi sylfaenol, y ganolfan gydweithredol a ballu. So, mae yna o hyd lle i wella. Ie, mae yna o hyd lle i wella, oes, ond buaswn i ddim yn dweud ei fod o'n ddrwg. Mae yna berthynas eithaf da—mae yna ddulliau cyfathrebu eithaf da, buaswn i'n dweud.

Ironically, during the crisis, communication has improved. We do have to recognise that. I'm in Gwynedd and there's a new regeneration framework that puts the communities first. And I do have to say that I have quite a good relationship with the Government in Cardiff too. They've been very supportive in terms of planning, such as the foundational economy, the collaborative centre and so on. So, there is room for improvement. Yes, there is room for improvement, but I wouldn't say that it's a particularly bad picture. There are things that are quite good—there are good communication methods, I would say.

Grêt, diolch, Ceri.

Great, thank you, Ceri.

If I could open this up to the rest of the panel now. FSB Wales has described rural areas as being more reliant on sectors, such as hospitality and tourism, which are dependent on non-essential spending, and, of course, as we move into the cost-of-living crisis now, people are going to be looking to cut non-essential spending. To what extent do you believe that rural economies will be impacted by the challenges these sectors may face over the coming months?

Os gallaf ddechrau eto gyda Ceri. 

If I could start again with Ceri.

If I can start with Ceri, and then I'll move on to Mark and then Jackie, if that's okay.

Dŷn ni'n rhedeg canolfan ymwelwyr a chanolfan feicio mynydd sydd yn ddibynnol ar dwristiaeth. Ar y funud, dydy pethau ddim i'w weld yn ddrwg i gyd. Ond beth dŷn ni wedi bod yn gwneud, ers degawd bellach, ydy defnyddio arian twristiaeth a'i fuddsoddi fo nôl yn y gymuned. So, ar hyn o bryd, dŷn ni'n prynu adeiladau ar y stryd fawr—pedwar adeilad—a dŷn ni'n eu troi nhw i mewn i dai i bobl leol ac uned fusnes i rywun gael cychwyn busnes.

Dydy hynny ddim yn ateb y cwestiwn o ran faint yn ddibynnol ydyn ni ar dwristiaeth, ond beth dŷn ni angen bod ydy bod yn greadigol a ddim edrych ar bethau mewn seilos o ran y diwydiant twristiaeth. Dwi ddim yn meddwl ein bod ni'n mynd i ddioddef o ran twristiaeth, dwi ddim yn meddwl. Wythnos diwethaf, roedd gennym ni 3,000 o bobl yn ymweld â safle Zip World yn Llechwedd. Ble dŷn ni'n mynd i ddioddef ydy os ydy'r arian yn mynd oddi yma. Mae yna ddigon i fynd o gwmpas, jest ein bod ni angen ei rannu fo'n well. Sori, dydy hynny ddim yn ateb. Fedrwn ni ddim edrych ar dwristiaeth mewn seilo i gymharu â'r economi ehangach yn yr ardal yma. So, dwi ddim yn poeni'n ormodol am dwristiaeth, achos dŷn ni ddim yn gallu bod yn ddibynnol arno fo.

We run a visitor centre and a mountain biking centre that are dependent on tourism. At present, things don't seem to be all bad there. But what we've been doing, for a decade now, is using tourism funding and investing it back into the community. So, at the moment, we buy high-street buildings—we've bought four such buildings—to turn them into homes for local people and a business unit for somebody to start their own business.

That doesn't answer your question in terms of how dependent we are on tourism, but what we need is to be creative and not look at things just in siloes in terms of the tourism industry. I don't think that we are going to suffer in terms of tourism. I don't think that that's the case. Last week, we had 3,000 people visiting the site of Zip World in Llechwedd. What will have an impact is if the funding derived from that tourism leaves the area. There's enough to go around, we just need to divide it better. Sorry, that doesn't answer your question. We can't look at tourism in a silo as compared to the wider economy in this area. It's all inextricably linked. So, I'm not overly concerned about tourism, because we can't be dependent on it.

13:05

Na, diolch, Ceri. Rwy'n credu iti ateb y cwestiwn—paid poeni am hynny.

No, thank you, Ceri. I think you've answered the question—don't worry about that.

Mark, if I could move on to you, do you have anything additional you'd like to add?

Sorry, are you waiting for me?

Yes, if you've got anything additional to add. Sorry, I think the mike might not have picked me up. Sorry.

Sorry, I wasn't getting the translation then. I don't know so much about the effect on businesses. Clearly, hospitality and tourism were badly hit during the COVID pandemic and then bounced back during the staycation boom, but it's hard to know whether squeezed budgets will lead people to divert from foreign holidays so that they go and have more staycations, or to cut out holidays and hospitality altogether.

I noticed the head of Marks & Spencer yesterday said that he expects consumers to go on their foreign holidays this summer, because of all the pent-up demand and desire to get to the sunshine, and then to cut back spending significantly this autumn, after their foreign holidays and when the rise in energy costs hits them, with the cooler weather. So, I think it's hard to predict exactly what's going to happen.

Thank you, Mark. Jackie, did you have anything you'd like to add, additionally, to that?

Yes, just a couple of things. Our clients come to us because they have no flex, there is no flexibility in their budget, so to even spend a small amount on non-essentials is proving quite challenging. They're working hard, so they're out there working really hard for the family, and it's still not covering their bills. So, in a rural community, a car or a self-reliant transport system is essential, because of the lack of public transport. So, I think, thinking off the top of my head of a wish list, if we could have some more community transport, so the free transport that goes around the communities to help people who can't afford it or are unable to access it, I think—.

We need to lower people's bills and get money in their pockets right now. I think another way, potentially, on Anglesey to lessen the dependency on tourism is to look at a different infrastructure. So, maybe—. One of the things that we really, really need is a better digital infrastructure. We've got notspots on the island. And there was another example I had the day before yesterday, where I was doing a whole day of interviewing remotely, and one young man telephoned to say that he couldn't attend the interview because he couldn't get a steady internet reception, and that was quite common for him. So, thinking about that, that person could have lost out on a job, but more importantly, how is he ever going to connect from his home with the outside world or be able to work remotely and have those equal opportunities, if we don't improve that? So, in Llangefni, for example, there is a free Wi-Fi for a certain area, and I'd like to see more coverage across the island of that for people. But also I think we need to look at investing in training our workforce on the island in more high-level IT specialisms, so they don't need to leave Anglesey or leave Wales to go to these jobs in England for IT; they can actually stay and do it in Wales from their own home. They were just my thoughts on that one.

Just to add to that, I would also say that's true about communities as well. I think 130 young people are bussed from Blaenau Ffestiniog daily to tertiary colleges outside of the area, and so are encouraged to leave the area as soon as they leave school. If you want to make a success of yourself, you have to leave the area, you have to leave the community. So, we're working on training schemes now, where we try to work with the young people and make the opportunities available for them within social enterprises and local private businesses in the area. It's called 'Dim yn dwp', which means 'not the DWP'—which translates as 'dim yn dwp'.

So, I think raising the aspiration of the young people and connectivity and all of that comes together. But the fact that young people are encouraged at an early age that, to make a success of yourself, you have to leave your community is something we need to challenge as well. Yes, sorry.

13:10

Na, na; cytuno—cytuno, Ceri. Ond diolch, pawb.

No, I totally agree, Ceri. Thank you very much, all.

Thank you, all, for your contributions. Very much appreciated.

Nôl i chi, Cadeirydd.

Diolch, Luke. And I'll now bring in Hefin David to ask a few questions. Hefin.

I never know whether I should unmute myself, or whether I'll be unmuted. I think I'm unmuted now, though, am I?

Okay. Can I speak to Professor Shucksmith about the 'Rural Lives' report that he contributed to last year, which highlighted the need to address lower wages and insecure work that people in rural communities are facing, and whether he can think of some things that the Welsh Government could do based on that report to deliver those fair work improvements that could help? I'm not expecting him to know detail about devolved competencies, but it would be interesting just to hear the views, really.

Thank you very much. Our 'Rural Lives' study revealed the flexible and irregular nature of the rural labour market and of individual household incomes. Because of this irregularity and volatility, if you like, of incomes, welfare benefit claimants in rural areas experience unnecessary payment delays or overpayments with clawback, basically because the online claim system can't deal with that volatility and irregularity. So, this often means some not just volatility in the income from your own work, but also indirectly to considerable hardship and debt as a result of the welfare benefit system's inability to handle this.

There are all sorts of other aspects to good work as well, but you've asked about approaches the Welsh Government might take. One would be to encourage employers in rural areas to sign up to the principles of the good work agenda to ensure that these are applied in rural areas in the same way that they might be in urban—for example, by offering and being supported by the Government to offer training, upskilling and career progression opportunities for those in rural employment.

Another thing that could be done is diversifying rural economies beyond tourism and land-based work to generate a good mix of good employment and self-employment options in rural areas—I don't mean to limit tourism employment, but to try and build up alternatives as well.

An important aspect of good work is work-life balance and affordable childcare provision, and this may require additional financial support both for private and voluntary sector childcare providers in rural areas.

And finally—and I'm sure there are all sorts of other good ideas as well—the other one I have to suggest is we found in our study that quite a lot of people indicated that they'd got into difficulty because they'd never learned how to budget. I know this is a contentious issue at the moment and I'm not saying that learning budgeting skills is the answer to all problems that are going to come from rising energy prices and inflation, but it is an important element as well. So, training and support on household budgeting, perhaps by resourcing existing advice and financial support providers like CABx, credit unions, money advice services accordingly, and perhaps putting this as something that people learn when they're at school as well might be a possibility.

That was a pretty thorough and comprehensive answer, and I think that's really useful. Would Jackie or Ceri like to add anything, or are we happy to—? Yes, Jackie first.

Yes, that was a very comprehensive answer, Mark. It covered everything, and I think I just wanted to add onto that regarding the financial capabilities or the budgeting element of it, that it—. Over the years, it's one of the things that's been my little baby. I absolutely love financial capability. I think if you can get in really early with young people and give them the knowledge to make informed choices, when they transition from education to independence, whatever that independence may be, you help them to avoid falling into debt, you help them to understand what bills they're likely to face with any situation, going forward. And I think, if we could have a programme, a more robust, consistent, quality marked programme, going forward, that would make a massive difference for future generations. Thank you.

13:15

Diolch, Cadeirydd. I'm conscious that everything we've been discussing today has now become ever so slightly out of date, given the announcement by the Chancellor in the last half an hour, 45 minutes, which has changed things dramatically, I think. But what I was going to come on to was how will cost-of-living pressures be exacerbated for rural communities across Wales over the coming months, and what would be the key factors to that. Jackie, we can start with you.

Okay. I'm sorry, I've been in meetings all morning, so I'm not sure what the update is.

No, no, it's literally just happened in the last half an hour, so don't worry, honestly.

Okay. Even accounting for Welsh Government's more generous support package, following Ofgem's latest estimates of £2,800 price cap, Citizens Advice Cymru estimate that, currently, more than one in six people in Wales—that's the equivalent of 460,000 people—won't have enough money left, after paying essential bills, to pay for the predicted £64 a month rise to come in October. And we picked this up quite early on. So, about three months ago, we were getting clients in a situation where, even us, as Citizens Advice, couldn't help them. It's extremely distressing for both—obviously for the client, but also for the caseworker, when, in the past, we've always been able to help somebody. So, I actually led and set up an energy summit for north Wales, and we got AMs and MPs et cetera to attend. And what we wanted to achieve from that was, 'This is how it is. This is how it is and we can't do anything, and can you, please, take it to you relevant Governments and influence them, because we're teetering on a cliff edge here?'

So, people who pay for their energy on prepayment meters are likely to see even bigger price increases, with an average household on PPM facing monthly bills of around £291. That's over £9 a day. And in December 2022, it's likely to be nearer to £313 per month, or £10 a day, following Ofgem's statement on Tuesday, which estimates a £2,800 price cap. So, that same usage would cost them £147 more than in December 2021.

And I was going to go on to what's coming in additional months, but, I think, if there's been an announcement, it's probably rather out of date, so I think I'll leave it there. 

Just to add, today someone came in and they're putting £50 a week in, instead of £20, on their electricity, and they're getting £77 jobseeker's a week. But maybe that's out of date as well. But it's still an issue, obviously.

Diolch. Unrhyw beth arall i ychwanegu, Ceri?

Thank you. Anything else to add, Ceri?

Just that we live an area where I've got Engie hydropower station 20 yards down the road—a massive private sector energy organisation, and then we've got a nuclear site just down the road the other side. So, with these massive companies, maybe influence them in regards to their socioeconomic responsibility to areas like this as well. Maybe that should be on a Government level.

There was discussion previously in relation to nuclear. I think communities near a nuclear power station would potentially have lower costs. I think that was floated around in some of the—

I think they floated that in the 1950s and 1960s as well and said that would be free. 

We had people who worked in the nuclear industry actually come 'downstairs' asking for help with their fuel bills. That's another discussion to be had, where it's about, maybe, public ownership of these energy—

Yes. In terms of what's coming down the line, of course it depends on what the Chancellor has announced today and whether he has actually targeted his help on lower income households, and whether he's done anything to address the greater difficulties that people in rural areas face because of being on oil and LPG and because of the difficulties in getting advice and support, and so on—all the things we've talked about today.

What I'm expecting is that there'll still be real cuts in benefit levels after benefit freezes and tax threshold freezes; that there will be rising costs of energy and inflation more generally—food and so on; that, in the public sector, there'll probably be real wage cuts because of controls on public sector wages; that there will probably be cuts in service provision, including public transport, because of the pressures on the public purse and on local authorities; and, of course, rising job insecurity. So, I see this as a perfect storm facing rural communities, particularly those on lower incomes, but middle incomes as well. I can see people already choosing between heating their home and feeding their children, and whether they'll have to cut their car use, whether they'll have to give up their broadband contracts and cut themselves off from the digital world, which is so essential today. I think it's really worrying for the future, and I do really hope that the announcements that have been made in the last half an hour or so address some of these issues.

13:20

Thank you. So, just as a quick summary, Chair, in a tweet that's been put out, most people will get £550, pensioners will get £850 and the most vulnerable will get £1,200. I don't know the context around that, I haven't looked into it, but those are some of the figures that are being discussed at the moment. But would the panel know of any examples from other areas, either devolved nations or elsewhere, because we're acutely aware that there are price pressures everywhere in the world at the moment—other examples in rural communities of things that Wales could replicate in our rural communities? Is there an example that comes to mind? 

Ceri, unrhyw beth?

Ceri, anything?

Bethesda have an Energy Local scheme, where they've got a local hydropower station that actually supplies energy to local houses. The community organisation gets a better price for its electricity, and it's like the houses club together and use electricity at a certain point. So, there are examples of Energy Local schemes that could be replicated in communities in Wales, I think, because we are a producer of energy.

We export too much of it, I think.

Just on that same tack, in Scotland, you'll be aware of the broad movement of community-based land reform where rural communities have taken the ownership of the estates on which the houses and crofts exist, and, often, one of the first things they've done is invest in community energy—community windfarms mainly. And in some cases, the electricity from those community windfarms goes to the people in the area—in fact, the owners, because the community are the owners of those—at zero price, or low prices, and then surplus is sold into the grid, of course, depending on whether there's an interconnector and whether that has the capacity to sell it to the mainland. So, that's very effective; in a sense, it insulates people from global energy prices and I think that that would, in the medium term, be a way forward. 

Yes. I just want to go slightly off remit here, because we've talked a lot about monetary help and support in that way, but what I think we also need to be very considerate of is the mental health and well-being support. The impact of all this on people's mental health is quite something, and Citizens Advice Ynys Môn run a low-level mental health service called iCAN, which is funded by Betsi Cadwaladr University Health Board, and that's right across north Wales. So, what we're doing there is, for people who wake up in the morning and they maybe get a really large bill, or something happens that causes them to be in crisis, they can just contact this service immediately and somebody's there to talk to them, not necessarily deal with the problem right there and then, but talk to them and refer them, whether it's a warm transfer to our specialist services or to another partner who specialises in certain areas. For employers, I think it's really important for employers to talk to their employees about how they're coping with the cost of living. So, what I've done with my staff is say, 'Look, I know the situation everybody's in. If you're really struggling, come and talk to me.'  We also have, every Wednesday, Well-being Wednesday. So, everybody puts down tools, we all either log on remotely or meet in the office, and we do anything that's not work related. So, baking a cake, doing some knitting, crocheting, whatever. So, I think it's really important that there is investment consistently across Wales for that.

And the other thing that we're also doing is the community support hub. So, Ynys Môn were the first to go live with the pilot, which was known as the lateral flow distribution centre, but they've morphed into a community support hub. So, we're going around the different communities where there are existing hubs. We're working with those hubs, so we're not duplicating or creating something new, and working with them to say, 'Well, what do you want? What do you want in your community hub? How can we help you?' And then we're facilitating that. Now, that might mean going in ourselves and doing some energy specialism, some budgeting help, some debt advice, but we're also bringing in the Department for Work and Pensions to help people. We're also bringing in Welsh Water. We've got an energy company coming in a couple of weeks to do a great big event on Anglesey. So, I think, as well as the monetary things, there's the mental health support that we need to maintain going forward.

13:25

That's a really good point. Thank you. Chair, I am all out of questions, so I'll hand back to you.

Thank you very much indeed, Sam, and I'm afraid that our session has now come to an end. But, on behalf of the committee, can I thank you for your time this afternoon? It's been a very, very useful session. 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 indeed for being with us this afternoon.

6. Cytundeb Masnach Rydd rhwng y DU a Seland Newydd
6. UK-New Zealand Free Trade Agreement

Symudwn ni ymlaen, felly, i eitem 6 ar ein hagenda, sef edrych ar y cytundeb masnach rydd rhwng y Deyrnas Unedig a Seland Newydd. Oherwydd bod rhai o'n tystion yn methu â bod gyda ni heddiw, fe fyddwn ni felly yn aildrefnu'r sesiwn yma i'r dyfodol.

We'll move on, therefore, to item 6 on our agenda, so looking at the free trade agreement between the UK and New Zealand. Because some of our witnesses cannot be with us today, we will therefore be rearranging this session in future.

7. Cynnig o dan Reol Sefydlog 17.42(ix) i benderfynu gwahardd y cyhoedd o weddill y cyfarfod
7. Motion under Standing Order 17.42(ix) to resolve to exclude the public for the remainder of the meeting

Cynnig:

bod y pwyllgor yn penderfynu gwahardd y cyhoedd o weddill y cyfarfod yn unol â Rheol Sefydlog 17.42(ix).

Motion:

that the committee resolves to exclude the public from the remainder of the meeting in accordance with Standing Order 17.42(ix).

Cynigiwyd y cynnig.

Motion moved.

Fe symudaf ymlaen wedyn, felly, i eitem 7 ar ein hagenda, a dwi'n cynnig, o dan Reol Sefydlog 17.42, i benderfynu gwahardd y cyhoedd o weddill y cyfarfod. A ydy Aelodau'n fodlon? Ydyn, dwi'n gweld eu bod nhw. Felly, derbyniwyd y cynnig ac fe symudwn ni i'n sesiwn breifat.

I'll move on, therefore, to item 7, and I propose, in accordance with Standing Order 17.42, that the committee resolves to exclude the public from the rest of the meeting. Are Members content? Yes,  I see that they are. The motion has been passed and we'll move into private session.

Derbyniwyd y cynnig.

Daeth rhan gyhoeddus y cyfarfod i ben am 13:27.

Motion agreed.

The public part of the meeting ended at 13:27.