Pwyllgor yr Economi, Masnach a Materion Gwledig
Economy, Trade, and Rural Affairs Committee12/01/2023
Aelodau'r Pwyllgor a oedd yn bresennol
Committee Members in Attendance
|Jack Sargeant AS||Yn dirprwyo ar ran Hefin David|
|Substitute for Hefin David|
|Luke Fletcher AS|
|Paul Davies AS||Cadeirydd y Pwyllgor|
|Samuel Kurtz AS|
|Sarah Murphy AS|
|Vikki Howells AS|
Y rhai eraill a oedd yn bresennol
Others in Attendance
|Dean Medcraft||Llywodraeth Cymru|
|Gavin Watkins||Llywodraeth Cymru|
|Gian Marco Currado||Llywodraeth Cymru|
|Jo Salway||Llywodraeth Cymru|
|Lesley Griffiths AS||Y Gweinidog Materion Gwledig a Gogledd Cymru, a’r Trefnydd|
|Minister for Rural Affairs and North Wales, and Trefnydd|
|Sioned Evans||Llywodraeth Cymru|
|Vaughan Gething AS||Gweinidog yr Economi|
|Minister for Economy|
Swyddogion y Senedd a oedd yn bresennol
Senedd Officials in Attendance
|Aled Evans||Cynghorydd Cyfreithiol|
|Claire Fiddes||Dirprwy Glerc|
|Lara Date||Ail Glerc|
|Manon Huws||Cynghorydd Cyfreithiol|
|Sam Mason||Cynghorydd Cyfreithiol|
|Stephen Davies||Cynghorydd Cyfreithiol|
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 09:33.
The committee met in the Senedd and by video-conference.
The meeting began at 09:33.
Bore da. Croeso, bawb, i'r cyfarfod hwn o Bwyllgor yr Economi, Masnach, a Materion Gwledig. Mae Hefin David wedi ymddiheuro, ac mae Jack Sargeant yn bresennol yn ei le. Croeso cynnes i chi, Jack, ac rŷn ni'n edrych ymlaen i gael eich cwmni chi heddiw. A oes yna unrhyw fuddiannau hoffai Aelodau eu datgan o gwbl? Sam Kurtz.
Good morning. Welcome, everyone, to this meeting of the Economy, Trade, and Rural Affairs Committee. Hefin David has sent his apologies, and Jack Sargeant is present as a substitute. A warm welcome to you, Jack; we're looking forward to having you here today. Are there any declarations of interest that Members would like to make at all? Sam Kurtz.
I'm an honorary member of the British Veterinary Association.
Diolch yn fawr iawn. Unrhyw un arall? Na.
Thank you very much. Anyone else? No.
Symudwn ni ymlaen, felly, i eitem 2, sef papurau i'w nodi. Mae yna nifer o bapurau i'w nodi, ond byddwch yn falch o glywed dwi ddim yn mynd i fynd trwyddyn nhw i gyd, ond oes yna unrhyw faterion hoffai Aelodau eu codi o gwbl o'r papurau yma? Nac oes.
We will move on, therefore, to item 2, which is papers to note. There are a number of papers to note, but you'll be pleased to hear that I won't be going through each and every one of them, but are there any issues that Members would like to raise from the papers to note? No.
Symudwn ni ymlaen, felly, i eitem 3, a heddiw bydd y pwyllgor yn cynnal dwy sesiwn i graffu ar gyllideb ddrafft Llywodraeth Cymru ar gyfer 2023-24. Sesiwn gyda'r Gweinidog Materion Gwledig a Gogledd Cymru, a'r Trefnydd fydd y sesiwn gyntaf. Felly, croeso cynnes i'r Gweinidog, ac a gaf i ddiolch iddi am y papur mae hi wedi ei anfon inni fel pwyllgor ymlaen llaw? Cyn ein bod ni yn symud yn syth i gwestiynau, efallai gallaf ofyn i'r Gweinidog i gyflwyno'i hunan a'i thîm i'r record. Gweinidog.
We will move on, therefore, to item 3, and today the committee will be holding two scrutiny sessions on the Welsh Government's draft budget for 2023-24, and this is a session with the Minister for Rural Affairs and North Wales, and Trefnydd. So, a warm welcome to the Minister, and may I thank her for the paper that she has sent us as a committee beforehand? Before we move to questions, perhaps I could ask the Minister to introduce herself and her team for the record. Minister.
Thank you very much, Chair. I'm Lesley Griffiths. I'm the Minister for Rural Affairs and North Wales, and Trefnydd. On my right is Gavin Watkins, who's the interim chief veterinary officer for Wales, and on my left is Gian Marco Currado, who's director in the climate change and rural affairs directorate, and online is Dean Medcraft, who's director of finance.
Thank you for those introductions. Perhaps I can just kick off this session first of all with a general question: how confident are you that the money allocated to your portfolio in this draft budget is sufficient to meet your priorities going forward, especially given the financial pressures many are facing at the moment?
Absolutely. Well, you'll know that, even with the additional funding we had in the autumn statement, our settlement is worth up to about £3 billion less in real terms, and up to £1 billion less next year. So, it's tough. I think it's fair to say—you know, I've been a Minister for quite a while, and it's the toughest budget we've had and I've ever been involved in. I think the reasons are obviously very well rehearsed. So, there is no more money, so we have to manage as best we can. You'll appreciate, within my portfolio, that I have a lot of statutory responsibilities and commitments; I have very little flexibility apart from rural investment schemes et cetera. So, I have a very, very rigid budget, if you like; I don't have the flexibility that perhaps other portfolios have. So, it's about prioritising, it's about balance, and I think it's also—. We're very agile at being able to, perhaps, adapt as the year goes on. So, for example, if farmers tell me they want a scheme in relation to horticulture, you can adapt it, and if we see a scheme that's perhaps not got as many applications as another scheme, again, we can move money around there. But, apart from that, it's quite a rigid budget. So, we'll have to make sure that we manage it to the very best of our abilities. But there is no more money.
And how are you actually planning for inflation and higher prices going forward? Are there any particular areas susceptible to price increases within your department, and how will your department actually deal with those challenges?
It's a very challenging time for everybody; it's a very challenging time for farmers, because, if you look at the price of food and fuel and fertilisers, again, we know that they've had some significant increases. So, there's a massive impact on our farmers, as there is for everybody, our rural communities, with the cost-of-living crisis et cetera. So, what we do is we monitor the position very carefully. Officials work very closely. We do this on a UK basis, which I think is the right thing to do, and we have the UK agricultural monitoring—
Market monitoring group.
—market monitoring group, which meets regularly, which officials are always very involved in. So, we work very closely with our counterparts. We work very closely with our delivery partners, so the Animal and Plant Health Agency, for instance, which obviously Gavin and I work very closely with. So, they've had some difficulties with their budgets. I think a lot of that was negated because they had a lot of staff vacancies that they didn't fill, so I think we were able to, again, look at moving money in relation to APHA and looking at the service level agreements that we had with them.
We've had lots of costs increase because of things like the COVID pandemic, because of inflation, because of even leaving the European Union, so we've had to adopt that flexible approach to projects that I mentioned in my previous answer, in a way that perhaps—. I think we've always done that; I think we've always been able to look at schemes that are being oversubscribed and ones that are being undersubscribed, but we've been doing that much more lately, I would say.
What's really important for me is that we fulfil our programme for government commitments—that's obviously the priority, and other ministerial priorities.
Yes. You mentioned earlier that your department can be flexible, of course, when it comes to some of these budgetary pressures. But, if you do need to scale back within certain budgets, how will that actually impact on outcomes for you as a department? And within those circumstances, how would you actually prioritise your objectives in those circumstances?
So, we manage things very closely, and we divert funding if we think that's the right thing to do. So, I meet monthly with Dean and the rest of the finance team. We look at latest forecasts; we look at budget movements. We need to make sure that the budget is on track to deliver my priorities as a Minister and obviously the programme for government commitments. We always take into account any budgetary pressures.
And can you give us, perhaps, examples of where your department has had to reprioritise your budget in light of this draft budget? Can you give us specific examples of where you've had to do that because of some of the financial challenges that your department is facing?
So, one of the things I've done, and I think it was absolutely right to do, is protect the basic payment scheme. So, our farmers in Wales haven't seen cuts like they have over the border in England. So, I suppose that's one example. I mentioned before about horticulture. So, farmers told me they wanted to see more funding in horticulture, and we had two schemes that we brought forward. So, I suppose that's one way of explaining how we look at moving money around, but, as I say, it is very limited, because of my statutory commitments.
And how far do you think this budget has impacted your long-term objectives as a Minister and as a department?
So, I suppose, because it's such a tough budget, it's really hard to look in the long term. You've just got to try and keep on track as best you can. So, obviously, one of my main things at the moment is looking at how we get to the sustainable farming scheme—that transition from BPS to SFS. We've been short-changed from the UK Government, and it is very, very difficult. And I think the best way we can do that is in the way I described. And that does seem very short term, I appreciate that, and what I'm trying to say is we're doing it on a monthly basis. It's really, really tough. As I say, I've never been involved in a budget like this.
So, I think, obviously, you have to keep your long-term priorities. You know that Welsh Government is very focused on the climate and nature emergencies, and you've always got to have that in mind as well. But I do find you're constantly looking in the short term because you just want to make sure that you deal with the pressures that everybody is feeling as best you can.
Yes. You mentioned earlier as well that you've got statutory commitments, obviously, as a Minister. Will you be setting financial targets alongside, then, your priorities going forward, to ensure that you're actually on track to achieve what you actually want to achieve as a Minister?
As I say, we meet monthly. You make sure that, the budget position, we take account of the budgetary pressures to make sure that you're doing that. So, if you look—
So, your monthly meetings will act to make sure that you're actually on track for some of these commitments.
Yes, absolutely. So, I meet every month. Obviously, if something occurred in that month—. And I meet every week with directors—obviously with Dean and the team—to make sure, if there was anything, they could highlight it to me. But I suppose the best way of answering your question is those monthly meetings, when we look at the budgetary pressures we have and if there is anything we need to do.
Okay. Thank you very much. I'll now bring in Jack Sargeant. Jack.
Diolch yn fawr, Cadeirydd. Good morning, Minister.
If I could focus on the fisheries, in particular the Welsh marine and fisheries scheme, which has replaced the European fund: £3 million over two years, plus a further £800,000 as a challenge fund for coastal communities. I don't think it's quite clear within the draft budget itself, and your paper to the committee, exactly where that £3 million and the £800,000 are allocated from. I wonder if you could enlighten the committee as to where that is, and how those schemes are being funded, and whether or not they've been prioritised over other schemes. And if they have—which it seems they have—what evidence has made that decision?
I wouldn't say it's been prioritised. So, basically, we get this lump sum from the UK Government, which has replaced the money that we would have had if we'd have still been in the European Union. So, the £2.1 million for the Welsh marine and fisheries scheme, and coastal capacity building, sits within the total resource budget. So, we've been allocated—. So, it's a non-Barnett consequential, that £6.2 million that you see in the paper, and that level of funding really is consistent, as I say, with the funding that we had from the European Union previously. So, we've just built that into the budget baseline. So, we haven't deprioritised other areas within the marine and fisheries budget to be able to deliver that scheme. There's been no deprioritisation in other areas.
What I think we have done with the scheme is designed it so that the interventions that that scheme will support will support ministerial priorities, programme for government commitments. There'll be periodic funding rounds in the scheme, so, again, going back to what I was saying, really, about the farmers—and it's the same with fisheries—if there are windows that aren't been fully utilised, then you can adapt and bring something else forward.
Thank you for that. I think that clears up the point I was trying to make. Just with regard to adapting to ministerial priorities, and, of course, budget pressures are hard at the moment and decisions have to be made—difficult decisions for Ministers, I'm sure. You mentioned in your answers to the Chair, Paul Davies, earlier, that the Welsh Government is clearly focused on the climate and nature emergencies. We've also seen the deep-dive on biodiversity from Welsh Government. With those periodic reviews, what does that look like? There is a mechanism in place, then, to allow Government, and particularly Ministers, to make the decision periodically to focus on the recommendations with biodiversity. That's happening now, and you're—what am I trying to say? You're happy that those mechanisms are in place and that they will meet the commitments or the prioritisation of your department.
Yes. I am happy that they're in place, and you mentioned the Minister for Climate Change's biodiversity deep-dive. So, what is really important is that those funding rounds are reviewed, they're evaluated, and they can be adapted if there is anything that comes forward. Obviously, that funding is there to support our coastal communities, and that coastal capacity building will deliver many of the recommendations that the biodiversity deep-dive has brought forward. So, we want to make sure that there are more opportunities for our fishers. We want to make sure that there are more opportunities for marine and freshwater nature recovery. So, we can broaden the scheme, if we want to; we can make the scheme smaller, if need be.
When you're reviewing that, is that a consistent review, or is that a periodic review? Over the two years of the funding, would you expect to wait two years, or is there is a mechanism in place to—?
Oh, no, yes. Sorry, I see what you mean. Yes, no. Again, when we meet with the director, if Gian Marco said to me, 'This is happening here'—
It can happen immediately.
—we would be able to do it, yes. We wouldn't have to wait at all, no.
If I can add, Chair, the Minister is absolutely right. What we tend to do is—. Well, there are two mechanisms. One is within the fund management itself, so we tend to look at funding rounds. We'll look at what's been delivered, we'll look at the take-up and we'll look at the feedback we get from stakeholders. But within the wider biodiversity deep-dive, now that that's concluded and we have the action plan, we've got basically a programme structure around that, chaired by the Minister for Climate Change, that ensures delivery of all the actions. So, within that broader structure, the actions that have been delivered, partly through the Welsh marine and fisheries fund, will be evaluated within that broader set of objectives from the deep-dive. So, in a way, there are two complementary mechanisms for doing that.
Thank you, Chair.
Thank you, Jack. I'll now bring in Sarah Murphy. Sarah.
Thank you, Chair. Good morning, Minister.
I'm going to follow on with some questions about the replacement EU funding. We've been told that Welsh Government has calculated that there is going to be a £21 million shortfall from the UK spending review for agricultural support, and this is obviously going to impact the draft budget allocations. So, following on from my colleague Jack Sargeant's line of questioning, was anything deprioritised to fill this funding gap?
Thank you. Well, that £21 million shortfall was because the UK Government netted off EU receipts, so, we know that, over the period of the spending review, our rural communitites and our farmers are going to lose out about £243 million as a result of that deduction on any forecasted EU spend, from what they consider to be full replacement funding. So, what I've done is use the funding that we've been given for the new programme. We do know, unfortunately, that that will mean less investment in our farming sector and in our rural communities, but I haven't deprioritised, if you like; I've just used the money I've got to bring forward the new programme.
Thank you. We're aware that there is an ongoing disagreement around this. Is there a possibility that the Welsh Government will invoke the dispute-resolution process to contest the UK Government's replacement EU funding for agriculture?
We continue to press them. This isn't a conversation that I've given up on yet. At our regular inter-ministerial group meetings—our next one is a week on Monday—finance is always on, and I continue to press the point that they promised us EU replacement funding in full. So, I think it is our hope that, through the inter-governmental work—sorry, the framework that we've got, that we will be able to get further funding. You'll appreciate that it's been quite difficult dealing with the UK Government this year. I'm hoping now that things will get easier and, certainly, in the last couple of IMGs we've had, it has been encouraging to see how the new Department for Environment, Food and Rural Affairs Secretary of State wants to engage with us. So, I do hope that a bit of pragmatism can come in here and we will see some further funding. But, obviously, the dispute resolution is there; at some point, we might decide to use it. But, I'm very happy to keep committee informed. If we can get a change in the methodology that's being used in relation to funding, then we'll continue to press that, but I haven't given up yet.
Thank you. And my final question, then, is about the sustainable farming scheme, which, as we know, is ambitious and a huge priority. So, Minister, have you started any discussions with other departments about movement of budget to support those ambitions if sufficient funds aren't available from HM Treasury?
I suppose I go back to the answer I gave to the Chair—that that's very long term. The crisis is here now in relation to the budget, and we deal with things as we do. I was promised that I would continue to have that funding, and we will continue to pursue that. It is very ambitious to go from BPS to SFS. As you know, we haven't got the whole design of the scheme yet; we're still going through that process. What we will do is we will publish the economic analysis when we are ready to do that, before we transition. I've always said that we would not have that cliff edge that other countries around the world saw when they stopped their basic payment scheme, or whatever it was called—in New Zealand, for example, back in the 1980s. We will transition properly and we will not transition until the SFS is ready to go. So, we're talking the rest of this decade. So, those discussions about what will happen if we don't get funding, really, I haven't had as yet.
However, I think we need to be very clear, and I always have been with farmers, going back to 2016, that we haven't had to argue—my predecessor, myself and people who come after me have never had to sit and argue for funding for agriculture; it just landed in our budget from Brussels and went straight out. Those conversations are going to be very difficult. I sit around the Cabinet table where Ministers come—let's say health, for instance. We know, don't we, the pressures on the health budget. So, every Minister is going to be in that position.
Absolutely. Thank you very much, Minister. Thank you, Chair.
Thank you, Sarah. Before I bring in Vikki Howells, can I just come back to this £21 million shortfall? You've obviously recognised there's a shortfall, but you're telling us as a committee that there is no funding gap at the moment because you're actually filling that funding gap. Is that right? Because you said earlier that you're actually filling that gap with funds that you've got. What do you mean by that?
So, the funding that we have had we are using for the new programme.
So, if we just say I would have had 20 windows if I'd had all the funding; I've got 19. Do you know what I mean? We're using that money to adapt within the schemes. But, there is obviously less money.
Right, okay. Okay. I'll now bring Vikki Howells in. Vikki.
Diolch. Thank you, Chair. Good morning, Minister.
We're obviously living through times where costs of raw materials and inputs are changing really rapidly, and that will be affecting our farmers in Wales. So, given those changes in costs and the other challenges of the cost-of-living crisis, how is the Welsh Government managing to assess accurately the needs of the agricultural sector at the present time?
Thank you. I mentioned earlier that officials attend the UK agriculture market monitoring group meeting; that's where we do most of the monitoring. So, we do monitor the position very carefully. No-one is getting away from the cost-of-living crisis, unfortunately. Everybody's affected, and our farmers are no different. You mentioned the input costs, and we say 'the three Fs', which are food, fuel and fertiliser, and certainly we've seen significant increases in those. But, what we do is monitor it very closely at a UK level, because, again, it is a UK-wide issue. We've had discussions at inter-governmental level about what we can do in addition and those conversations will continue. I suppose what I've done is, to try and provide some certainty to farmers at very, very uncertain times, is commit to the BPS funding and retain that. As I say, they've not seen the cuts that they've seen over the border.
Thank you. And how would you consider equality, then, when you are examining the impact of the pressures on our rural communities?
Well, we do a full, integrated impact assessment and that's obviously inclusive of equality impacts. That's been completed. I published that alongside the agricultural Bill introduction last year into the Senedd, so, that's there for everybody to see.
I should also say, one thing we've done, which I think has been widely appreciated, is we've published an information hub on our Welsh Government website for the agricultural sector to give them the information I think that they need. As I say, we monitor it very carefully. So, we can direct farmers to advice and support on that hub and I think that's been widely supported and recognised as something that's good practice.
Thank you. And you mentioned the BPS there, the Farmers Union of Wales has obviously called for allocations not only to be maintained, as the Welsh Government is doing, but to be increased in light of the current financial pressures and the inflation rate and the energy crisis as well. So, what is your view on that? Is the BPS enough?
Well, I don't have any more money, so, I'm afraid it is what it is, and, as I say, I think I've given some certainty and, certainly, the farming unions welcomed the announcements around BPS. The money is what I've got and it goes straight out and I think by announcing that and announcing it again for next year, that's been really helpful, but I've tried my best to protect it in the best way that I can.
Chair, If I can add—
Yes, by all means.
—around the BPS, there are obviously the rural investment schemes as well and the Minister announced last year £227 million-worth of schemes that, again, farmers can access for all sorts of things—we've talked about horticulture—and the schemes on various things, including support for capital investment. So, there is BPS at the heart, plus the rural investment schemes supporting that as well.
Thank you. And one final question from me then. You talked about those three Fs there at the start, Minister, so, if you take fuel out of the equation, because maybe that's far too difficult to try and control, but I know that several EU countries have provided financial assistance and incentives for food producers and for fertiliser manufacturers as well, given the increased costs throughout the food supply chain. Is that something that you have considered or could potentially consider for Wales?
No, I haven't. I don't think I've got that flexibility in my budget to be able to do that. Maybe if we'd still been in the European Union, I would have done, but I can't think of any other countries that are out of the European Union that have done that.
Thank you, Chair. Thank you, Minister.
Okay, thank you, Vikki. I'll now bring in Sam Kurtz. Sam.
Diolch, Gadeirydd. Good morning, Minister.
I'm interested about your discussions there on BPS. I will focus on the rural development plan, but your Government moved the maximum amount of money away from BPS to pillar 2 funding; had you not done that, that money would have been there to support farmers. The Audit Wales office obviously raised its concerns around £68 million of RDP funding previously—how it was given directly without competition. In terms of funding, can Welsh agriculture trust this Government to fund agriculture correctly, given historical things such as this where farming has come second to other issues—Gilestone farm, the most recent example of that as well? Can Welsh farming trust this Government to deliver for it?
Well, I certainly think they can. And I have to say, in my discussions with the agricultural sector over the past—well, I'm thinking back to the Royal Welsh Show, so, perhaps six or seven months—many of them, and I'm talking about very high-profile farmers, have told me how grateful they are that they're in Wales and not in England, particularly around the BPS, which has been protected and has not seen the cuts that they've seen in England. And you refer to the movement of pillar 2 funding—that was even before me, and I've been in the post for six years, so we're talking about many years ago. So, I certainly think that they can trust us. I think they recognise that. I'm very keen to work with them to make sure we make the best of that funding.
Gian Marco just mentioned the significant funding we announced last year for our rural communities and the way we can adapt to that. If they come to me and say, 'We'd prefer more windows in this scheme rather than that scheme', or more rounds, we'll adapt to it, absolutely. Gilestone farm is something that's obviously going through a process at the moment, not in my portfolio, and I think the Minister—. Once everything has gone through that formal process, if it doesn't come to fruition in the way that maybe it's planned for now, there are other plans for it. So, I absolutely think—. I've worked very hard with local authorities, for instance, to make sure they can try and maintain their local authority farms, looking to see what we can do to support them. So, yes, absolutely they can trust us.
When RDP, that European spending round, comes to an end this year, how much money is left unspent?
It's all committed. It is overcommitted, in fact. You learn with the RDP that it's best to overcommit, and even though sometimes it gives me sleepless nights when I think of the overcommitment, invariably, it comes in. I will do absolutely everything I can to make sure every penny is spent. But at the moment, the programme is overcommitted, so we expect all those projects to deliver. But of course, sometimes, there is slippage; I think that's why it has to be monitored very, very closely.
And how much is it overcommitted by, by the way?
I'm not sure of that figure. Do you know that figure?
I think, off the top of my head, it's about £50 million.
I was going to say 50, so if we both think 50—
I can check for you.
I can come in with some examples of the pillar 2; as you say, Minister, there was a fairly historical decision. But I think in our area of animal health and welfare, that pillar 2 money has benefited farmers. Although it's not a direct payment to them, we've managed to fund some things that I think have put our farming sector in a much more secure place. For example, our bovine viral diarrhoea eradication programme came out of pillar 2, and I don't think it would have been possible to have a BVD eradication programme without that. I think it's necessary for the sustainability of our cattle sector. And we've got other, I think, quite good examples of where that money has benefited farmers, although indirectly, rather than directly.
I know that, Minister, you're making a statement on BVD and sheep scab in the coming weeks, and as someone who's done the BVD test at home with cattle—so I'll declare that interest—helping my father, I think it has been good, and that has helped.
My concern is—. In that indirect payment, in that indirect way, farmers have benefited, with pillar 2 funding being available without the maximum transfer. Could those BVD schemes have been completed with the money that was originally allocated to pillar 2, and not had the wastage of £68 million-worth of projects going without competition? Could those projects have been completed without the need to transfor more money away from BPS? I know this predates you, Minister, but it's the same Government, as such. What I'm trying to get into is whether that transfer of money from pillar 1 to pillar 2 was necessary to complete the projects that pillar 2 has delivered, in essence.
But in terms of RDP, then, what do you see the replacement of RDP being, given the concerns that the Wales Audit Office had around its expenditure, and what lessons have been learnt from that to ensure none of those failures are going to happen again?
You always need to learn lessons. I think one of the things that we did learn is that you do have to overcommit to make sure all the money is spent, because invariably, as I said, there is slippage with some projects. And obviously, with the pandemic, again, it was obvious that there were some projects that hadn't spent the money as much as we thought they would do et cetera. So, I think you just need to learn lessons. It's really important that officials monitor it closely, because you want to spend absolutely every penny. As I say, I will make every endeavour to ensure that every penny of that funding available is spent.
What are the internal checks and balances that will be available on that?
Obviously, we've taken all the work that Audit Wales has done very seriously, and we've committed, and we are implementing all the measures in place to make sure that we address some of those issues that were raised with us. A lot of that happens through Rural Payments Wales, which reports directly to me. There is a set of controls and measures in place now that looks at both the management of the grants and the awards, but also looks at then the evaluation and the process that happens afterwards, which then comes back and feeds back, as the Minister said, to advice that we give to the Minister on the best way to allocate the money that is available. I do think that we've done a huge amount of work over the last few years to address some of those issues.
In terms of the £8.9 million reprioritisation from the rural economic and sustainability programme budget expenditure line, why was this particular BEL deprioritised and what will not be funded as a result?
As I've already mentioned, we're still making £258 million available for our rural communities. You will have heard me say already that I've got very little flexibility in my budget. When as a Cabinet we had the reprioritisation exercise, there were very few places for me to go in my budget. This was, in fact, I think, probably, our first line where we could possibly do it. This is the reason why the funding, the £8.9 million, came out of this BEL.
As you know, I work very closely, particularly with the Minister for Climate Change, so there's a bit of additional funding in this area in relation to woodland schemes, for instance, that's come from her budget. I think it's over £6.5 million. That will, obviously, help there. Obviously, it had to come from somewhere. As I say, I had to find some funding. Every Minister had to find funding as part of the reprioritisation exercise. Because my budget is so statutorily committed and demand led, this was the only area I could find it.
Just following on, then, from my question on the business statement earlier this week around Natural Resources Wales, knowing it's not in your portfolio, but the letter in which you responded to me before Christmas on the increase of prices. Given NRW's budget has been cut in real terms by the Welsh Government, are the farmers picking up the tab now for NRW by the sheer increase of costs, or is this purely cost neutral, the increases in NRW around the specific agricultural charges that have been increased?
As you know, we spoke in the Chamber about this, and I said to you it was about—. I'm not quite sure if it's cost neutral, but it's certainly about making sure they have cost recovery. I didn't commit to, but I will be writing to you further on that. I don't know if Gian Marco can say any more about that.
There's a set of charges of which some of the agriculture activities are part. It's not just that; there are some charges relating to water companies and some charges relating to waste. In effect, NRW have not amended those charges for a very long time, and, therefore, the current charging regime does not cover their costs. What they've done is they've gone through a process of looking at those, consulting very widely with the various sectors to ensure cost recovery, in essence so that the budget that we give them as grant in aid is spent on the activities that Ministers direct them to through the remit letter. With some of those, I know that the rises look quite significant—
Four thousand per cent—
I know, and part of the issue there is that they've been, in effect, underfunded for a very long time, so the work that's needed in NRW has not been reflected in the charges. As I said, I know they've consulted very extensively with all the various sectors and they're still consulting now before taking a final decision.
As you are making a statement on sheep scab further on, and sheep scab disposal of chemicals comes in under the charges that are increased, I think this could have a negative effect on animal health in terms of sheep scab, and that's something that I'll—. You've got a taster of what I'll be asking you in terms of that statement coming up.
I think I could have worked that out.
Moving on to Farming Connect, it's often held up as a great example of Welsh Government involvement with farming. I've heard fantastic stories, case studies from those who've used Farming Connect and, unfortunately, one or two where they found it not delivering what they were intended, or finding the advice that they were getting too narrow and constraining for the type of farming industry that they were looking to support. So, what are your plans for Farming Connect, given its high prevalence in the sustainable farming scheme?
As you're probably aware, we've got a new Farming Connect contract coming into being on 1 April this year. That will run for two years, to the end of March 2025. I agree with you, I think it's looked on with envy from farmers across the border. I think it's very innovative; I think the way it disseminates knowledge and activity really does benefit our farming community. I've never heard a negative thing said about Farming Connect from farmers. I think it is really very well supported, very well used, it's available to absolutely every farmer in Wales, it's easily accessible. You're absolutely right, it's going to be very important as we take SFS and as we take our sustainable land management objectives forward. So, as I say, we've just got a new contract starting on 1 April—
How much is that new contract?
How much is it? I don't know. It's funded through the RDP.
I don't know if you've got that figure off the top of your head—
I would argue, given that it's got a higher prevalence in the future schemes, that it's had a financial increase—its contract is now worth more.
I honestly don't have that figure off the top of my head. Gian Marco will see if he can find it.
If not, can we get a copy—?
We can give you the figure.
If you don't have that figure, perhaps you can provide us with it.
It's very much part of my plans and my priorities, because I do think it is going to be incredibly important as we go forward with SFS. But it is funded through the RDP.
Excellent. Apologies, I've got another set of questions around avian flu now, given that I've asked questions on this in the Chamber as well. The last time I asked you, Minister, you mentioned the inter-governmental meeting that your colleague Julie James then attended. I read the follow-up note from that and submitted a question to her directly. From your discussions with the Minister, have you considered making any exceptional market conditions regarding the avian sector, given the impact of avian flu?
Fortunately—there is no wood, I don't think—in Wales, we haven't been impacted in the way they have in England. For some unknown reason, and maybe Gavin—. No, he won't be able to explain, because I don't know. The year goes from 1 October—the year for reporting. We had, obviously, 1 October 2021 to 2022.
Is that due to the migration of birds?
It's something to do with the migration of birds, yes. So, from 1 October 2022 to today—or yesterday, maybe—we've only had to cull 36 birds. When you look at the figures in England, we have been very, very, very fortunate. As I say, if there was wood, I would certainly touch it. The current position at the moment is I've written to Mark Spencer, the Minister for Food, Farming and Fisheries in the UK Government, to urge him, really, to use those reserve powers under the Agriculture Act 2020 to consult with the industry to see whether a legislative solution is required to address those persistent issues that are coming up now between our primary producers, between the packers, between the buyers within the poultry sector. I haven't had a response yet. I'm sure we'll be discussing it a week on Monday at IMG, and if there is anything further, I'd be very happy to update committee. I think it is a UK-wide issue. I don't think we would do it on a single-country basis; I think we would do it together—
Sorry, just taking from that point, then, given that only 36 commercial birds have been culled, could it be the basis, then, that because the issue could be so prevalent in another constituent part of the United Kingdom, the United Kingdom as a whole could declare exceptional market conditions?
They don't seem very—. Well, I think, over the past few months, DEFRA certainly haven't been very keen to do that. At the moment, and I think it's the same in England—. I'm looking at Gavin. I think we are seeing a bit of a decline—
It's slowed down a bit.
—certainly in affected premises at the moment. Again, we've had such a torrid time of it. I'm not sure they're keen to do that, but that would be a discussion we would have to have.
And then, in terms of the impact this has had on APHA, and APHA's resourcing to look at this, despite the few birds culled in Wales, because of the biosecurity element of it, it will still have an impact on APHA. You've mentioned that in discussing it in the Chamber previously. What's the impact in terms of APHA's delivery of potentially elements of their portfolio, or their budget?
I think it's fair to say, even though we haven't been as impacted in Wales, we have allowed our vets to go over to England to help. I would expect the same thing to happen if it was the other way around and we were more severely impacted than England, so we've allowed our vets to go and help cull in England. I think it's good for our vets to do that. I think it's good for us to build up our capability and our capacity in that way, because we just don't know what's coming down the line. So, we have loaned vets there.
Obviously Gavin and the team work very closely with the Animal and Plant Health Agency to make sure that the priorities we have—if they need to scale back or they need to reschedule, that we work to ensure that we still deliver on our priorities. I mentioned—I think I did, in the beginning, to the Chair—that because there'd been some staff vacancies in APHA, I don't think the budget was oversubscribed in the way that we thought it might. APHA has had a new chief exec, who I met. There were some concerns about the budget, but I think that's been negated by the fact they've had some staff vacancies. I don't know if Gavin wants to add anything else.
Yes, I can, just a very little bit. APHA has something called the business critical activity list. So, in emergencies, we work up through that list in terms of dropping work. Now, I've been very clear with APHA for this year that although it's a balance, we need to help with the overall avian flu effort. This is the longest outbreak of a notifiable disease we've had; it's been going on longer than foot-and-mouth disease in 2001. So, we've got to help, but not in a way that damages our long-term animal health and welfare objectives, particularly our TB testing programme. We've drawn a red line there, in releasing resource and managing the budgets to ring-fence the TB programme, so that we don't get that long-term negative impact from what hopefully is a short to medium-term emergency.
Okay. That's a helpful explanation. Thank you. Thank you, Chair.
Thank you, Sam.
Can I just say—? Sorry, Chair. We don't have the Farming Connect figure, but we will send that in a note.
Yes. Thank you very much, indeed. Before I bring in Luke Fletcher, can I just take you back to the £8.9 million reprioritisation from the rural economic and sustainability programme budget expenditure line? Did I understand it correctly that you mentioned that £6.5 million is going to be transferred from the climate change department into your department, and effectively, therefore, you'd only have a shortfall of around £2.4 million? Is that what you're saying?
No, it won't be transferred to mine, but there is a woodland creation scheme.
Would it be offset then, as far as your department is concerned? Is that how it works?
In effect, there is about £6.5 million from the climate change budget that is spent on woodland creation that's outside the woodland creation scheme. So, it supports the wider objectives, but it's not—
It's not transferred.
It's not transferred, but you'd offset it in that sense, from your perspectives. So, really, you'd only have £2.4 million shortfall, as far as you're concerned. I know that's semantics, but that's the way it works.
That's the impact on the rural investment scheme.
Yes. All I would say is, because some of the Minister for rural affairs' budget under the rural investment scheme is spent on woodland creation, what we're saying is that that's not the only money that's going to woodland creation; there's also £6.5 million that's spent under the climate change main expenditure group. So, in effect, in total, the outcomes we're trying to achieve, our woodland creation, are supported by both MEGs, if that make sense.
I understand. Yes. Okay. Thank you for that clarification. I'll now bring in Luke Fletcher. Luke.
Diolch, Cadeirydd. Good morning, all.
I was going to ask a couple of questions around the community food strategy. The timeline for developing and publishing the strategy is still a bit unclear. I was wondering if you would provide any clarity for us this morning on that timeline.
One of the difficulties is that the timeline for the community food strategy is being impacted by Peter Fox's Food (Wales) Bill, because the same official is working on both, if you like, at the moment. So, the timeline is being a bit impacted by that at the moment. Obviously it's a programme for government commitment, a community food strategy, so I've got the £1.8 million baseline budget for it. The funding is there, but the timeline is not as fast as I would like it to be, I think it's fair to say, at the moment.
Are you able to give any indication in terms of how long that is going to be? In the private session—I probably shouldn't really be saying what we've been discussing in the private session—but I think we were all in agreement that, if projects are going to take a little bit longer than usual, transparency, surely, would be the best policy, just so that the industry and the sectors can plan for that.
As I say, it is really difficult, but it is a five-year term of Government, and we are committed to bringing forward the community food strategy and delivering on it in the five years. We are only in year two at the moment.
I would like it to be much quicker, because I think that there are lots of advantages that a community food strategy would bring forward, in linking in perhaps smaller producers. I don't see this having a massive impact on farms, for instance. I can see that on the agricultural sector per se it will, but this is more about community. Well, it says it on the tin, really, doesn't it? It's more about small-scale producers, procurement, things like that. So, it will be delivered before the end of the five-year term, but I can't give you much of a timeline because, as I say, at the moment, the food Bill is having an impact on that.
Okay. So, you mentioned—
But the budget's there.
Well, you mentioned, of course, the funding, and you have set out your objectives, in terms of what you hope the strategy will achieve. Do you think that that funding is going to be sufficient, in terms of reaching those objectives?
Yes, I would think so. So, when was it? It will be two years in May, won't it, since the election? When I came back into the portfolio, there was no budget, so we managed to find that budget and that's now in the baseline budget. So, yes, I think that that's enough. It's about empowering communities. I think that it's very exciting. It's quite hard in the beginning to make it tangible, but I think that we are getting there now.
I'd like it to be much quicker, and hopefully this year we will be able to bring some more plans forward, so that people do understand what it is. I think that that's an issue as well: people don't really understand what we are trying to achieve from it.
Yes. I can see a lot of advantages to it, in terms of how it can run in tandem with the free school meals policy—
—bringing in those kids who will receive those free school meals. Knowing where their food comes from, I think, is going to be quite important as we go forward.
We have heard a lot as well this morning from you that there is no more money, and that the budget is tight. Of course, we have pressures coming from all angles, really, don't we? We have pressures on the food system, pressures on your budget from the Ukrainian war, as well as the cost of living. How are you reviewing and prioritising within that budget relating to the strategy, considering those pressures?
So, as always, with any strategy, you have to consider value for money; that's absolutely—. So, that would then be assessed against other priorities within my portfolio. I think that you are right: there are so many other things that it can link in with, such as free school meals. I mentioned, in my earlier answer about procurement, that I think that we have missed a trick for quite a while around using Welsh food produce in our public services—so, free school meals, hospitals.
For those of you who have been here as long as I have, and I'm looking at the Chair, you will have heard me say, when I was health Minister, that we couldn't afford Welsh lamb in our hospitals, which is crazy, isn't it? You really need to be able to make the most of that fantastic Welsh food produce. That's one of the things. But I am saying that, for me, the community food strategy is more at a smaller scale than our big farms, for instance. I think that it's about making sure that our communities are able to be part of that procurement in a way that, perhaps, we haven't been able to before.
So, in terms of trying to get that value for money, then, what are the mechanisms, essentially, that you are using to review the budget?
So, as we go forward—and you asked, 'Is that budget enough?'—obviously, we will have the monitoring and checks in place that we have with all value-for-money assessments of schemes. But, as I say, we are not there yet.
Thank you, Luke. I will now bring back Sam Kurtz. Sam.
Diolch, Gadeirydd. Bovine TB. So, how is the budget for bovine TB amended or changed, and how does it reflect the new strategy due next year?
So, it's demand led. It's a very difficult budget because, obviously, we have commitments. We have to compensate our farmers. As you know, we are looking at a refreshed TB eradication delivery plan. You asked me this week again when that's going to be brought forward, and I certainly hope to be bringing it forward by March. As you know, Gavin is currently the interim CVO, and we have a new CVO starting in March. I think that it's only fair, because it's a five-year plan, that he is able to have a little bit of input into that. So, it probably will be March when I bring it forward. We’ll have the TB eradication delivery plan, we’ll have the oral statement, and hopefully the two will be in parallel, or maybe a little bit—. The delivery plan may be a little bit later.
Our indicative TB eradication programme budget for 2022-23 is set at £8.3 million and that increased from £7.5 million in 2021-22, and in addition we’ve got approximately £10 million of expenditure for the animal health and welfare delivery payments and services budget. Obviously, if you can drive down disease, then you save money, and I think that’s what we want to do. It’s not just about the money, I absolutely appreciate that—TB is a horrendous thing for a farmer to have to cope with—but there are limits to what’s within my control within that budget. But, invariably, I’ve had to go and ask for additional money from central reserves at the end of some of the years since I’ve been in portfolio. But we always manage it.
Yes, I agree with you, and I’ve raised that point before, that the best way to save money on TB is to eradicate TB, and I don’t think there’s any disagreement there. But in terms of monitoring the new strategy when it comes forward in March, yes, ensuring it delivers value for money, but also eradicates TB, what are the key performance indicators or elements that you’ll be looking at? If it’s a long-term strategy, as you mentioned, what are the incremental points that you’ll be looking at along the way to make sure it's successful—financially and in eradicating TB terms?
There’s a huge amount of statistics available in relation to TB that are published—is it quarterly? I think it’s quarterly reports that we have, and we have statistical and epidemiological analysis of the incidence, of the prevalence, of the recurrence, and anything else that’s relevant. So, we’ll obviously have those statistics. We have monthly statistics that show numbers of new incidents, for instance, how many animals have been slaughtered for TB controls, and how many tests have been carried out. We’ve got annual reports, we’ve got the surveillance report that’s published annually, and the delivery plan, again, will be reviewed every year, just like the previous one has been. So, we’ll have that and I get an update every year on that, and I obviously do a statement to the Senedd every year as well. Hopefully, new policies, new tests, new treatments, everything will be coming along, and obviously as those come in each year, they're also analysed and taken into consideration. I don’t know if Gavin wants to say any more.
I don’t have much more to add because I think you know quite a lot about it, but where we have local areas where TB isn’t going in the right direction, where it’s going up rather than down, basically, such as Pembrokeshire, part of the strategy—we’ve already started it, and thanks, because you’ve helped us with that—will be to pilot some new approaches to drive out TB from persistently infected herds. And within the budget—we spoke earlier about being agile, and the need to be agile within our budgets—we’re putting funding into some of those new approaches to drive down TB in local areas, and, yes, that will be part of the strategy that the Minister announces.
That’s helpful. Thank you, Chair.
Thank you very much. I’ll now bring in Vikki Howells. Vikki.
Thank you, Chair. I’ve got some questions on the animal welfare plan. I know that we’ve got a good track record in Wales with animal welfare, and it’s certainly something that constituents are always keen to discuss with me, but none of the commitments that we’ve made come cheap. So, my first question is quite simply to ask how the budget allocations support the actions included in the animal welfare plan for 2023-24.
Thank you. So, as you know, I’ve got a five-year animal welfare plan for Wales, and an additional £1 million has been built into the baseline budget last year, and that’s obviously there, and I’ve protected it this year. I would say most of that money probably goes to local authorities to help them carry out their inspections and enforcement, et cetera, but I have protected that £1 million again this year.
Thank you. And were the Wales animal health and welfare framework group consulted? Did they feed into the decisions on the budget allocations to ensure implementation of the animal welfare plan?
They certainly gave their advice, any evidence they’ve got; they provide a steer, I think, on all aspects of the plan. I'm not sure that they feed in directly to the budget discussions, but certainly, we listen to what they say and what they think we need to do. And they have oversight of that plan, and they advise on the implementation of the plan, but I don't think they have specific discussions around the budget, no.
In terms of the role played by local authorities with enforcement, do they provide feedback to you as to whether the resources that they've been allocated are sufficient, or if they feel that there's any need for any changes there?
Well, there's never enough money, is there? I think that's fair to say. I wouldn't say that they feed back on whether the budget's enough; they feed back on the work that's done. This work has been led by Monmouthshire County Council, as you know. There's never enough money, I think it's fair to say, but no, I wouldn't say that they specifically say anything about whether the funding is enough.
And would they share best practice with each other about how the challenges around funding could be overcome to ensure that the commitments are still enforced?
Yes, absolutely they do. So, that was one of the reasons we brought that local authority project together, because it was such a varied picture across Wales. You've got 22 local authorities with 22 ways of doing things, and there was certainly a very, very mixed picture. And Monmouthshire, to me, were one of the best, and that was why I asked them to lead this three-year project for me.
Thank you, Chair. Thank you, Minister.
Okay. Thank you, Vikki. I know that Luke and Sam would like to come back on this topic as well. Luke.
Diolch, Cadeirydd. The Minister will be aware of my particular interest in canine welfare.
I'd argue that we're currently in the midst of a bit of a pet welfare crisis at the moment. We've got shelters full to the brim and struggling to cope with the amount of dogs that are coming through the door. We are having councils telling us that they're struggling to keep on top of some of the illegal dog breeders out there as well. I was wondering what additional support the Government is providing not just to local authorities, but also to those animal welfare shelters that are struggling to keep up with demand at the moment.
I don't think that we're providing any more financial support. Certainly, officials are working very closely with the third sector and with the shelters. You're right, we've had a bit of a perfect storm, haven't we, because we had the pandemic when many, many more people decided to have a pet, predominantly dogs, and then, of course, people have had to go back to work, and now we've got the cost-of-living crisis. Keeping a dog is not cheap—I know that myself—and unfortunately, we have seen an increase in that. So, I don't think we're providing any further funding, but we're certainly providing support, with officials talking to them, which I know doesn't help with the cost that they're unfortunately having at the moment.
So, that support is in the form of, essentially, conversations and working on, potentially, strategies—
And seeing what we can do to help, yes.
And, actually, it doesn't happen very often, Chair, but I've got the Chairs of both the committees I sit on in the same committee room with me, and the reason I'm referring to that, of course, is—
—Jack Sargeant is Chair of the Petitions Committee, and the Petitions Committee has recently reported on greyhound racing. I know you've eagerly been awaiting its publication. I was just wondering, has the report had any influence yet on the Government's plans, and what is your reaction to the report?
Thank you. I think the report told me what I knew. I certainly read it with interest. I know that the report is with one of my officials now who's leading on this piece of work. We have a debate scheduled, which I'm very much looking forward to. We have to make sure that we have the evidence for any policy we bring forward, so it will be very interesting, I think, to see how this work progresses.
And as it currently stands with greyhound welfare, has that been reflected at all in the animal welfare plan sufficiently enough?
Well, it's not specific in it, but obviously, again, you can adapt plans and strategies, and, obviously, animal health and welfare is what it is, and a lot of people have concerns, don't they, about the welfare of greyhounds, and it's absolutely—. We are very proud—I think Vikki said we're very proud of our animal health and welfare policies and legislation here in Wales, and it's really important that we react to any concerns that we have.
And in terms of some of the concerns around, well, to be fair, the only track in Wales, have there been any conversations with the Valleys track around their practices there in terms of vets at the races, for example?
Yes. I've met with the manager and the owner myself and raised concerns. They have just recently provided me with some data, which, again, is with officials. But they know the strength of feeling, I think. They know how many people have signed the petition; it's a big petition. As I say, I've met with them myself, and that contact will be ongoing. I've met with the third sector, who have got, obviously, some concerns about it and raised those concerns directly with the manager myself.
Right. And, as that data becomes more apparent or more—I'm trying to think of the right word—numerous, I should say, is there a possibility that that could be shared with both this committee and the Petitions Committee as we go forward?
Yes, absolutely. I can't foresee any difficulties. I will certainly check and I'd be very happy to do that.
We'd appreciate that. Thank you very much.
Thank you, Luke. Before I bring in Sam, just for clarification, then, has the animal welfare plan for 2023 been amended at all in light of this draft budget?
It hasn't. Okay. Thanks. Sam.
Diolch, Cadeirydd. Coming back to your point around the animal health and welfare framework group and Monmouthshire County Council's involvement. In Pembrokeshire, we've got two ports and, at present, Monmouthshire animal health team inspectors are coming down to check those ports at great expense with overnight stays. In terms of cost efficiency, wouldn't it be better to train someone up locally, given that Monmouth and Pembrokeshire—east and west—given that the two ports in Pembrokeshire are in Pembrokeshire? There's no other reason not to train someone locally, I would say, to have the skill set available to be able to do the job locally in Pembrokeshire, rather than the great expense of the overnight stays, the infrequency of the sailings, given that Pembroke and Fishguard sail at different times, so it's a complex rota schedule, from my understanding. I'm just thinking about the rationale behind—. You've given your assessment that they gave best practice, but can't that practice be taught to someone more local?
Well, one of the reasons for having the project, as I say, was to make sure that that best practice was shared in a way that I don't think it had been before. In answer to your question, that seems eminently sensible to me. I will certainly make enquiries.
I sometimes try to be sensible—thank you. It's not often. [Laughter.]
Sometimes, you're presented with things and you think, 'Yes, why does that happen?' I don't have the short answer. I don't know if Gavin does, but I'd be very happy to look into it.
No, I don't, but likewise, we'll go away, and thanks for the information. I think the whole issue of our borders and what happens at our borders is currently being reviewed across all of GB, and there are some probably big decisions that are going to be made over the next several weeks as to what comes in, through which ports, and what checks they're subject to. So, that's all active work, and the Minister's meeting your counterparts next week, I think. So, I think this whole area has been on hold, really, for probably too long, but it's moving now.
Yes. So as Gavin said, I've got a meeting next week, certainly with the UK Government Minister—I don't know about devolved administrations—around the target operating model. So, it could be something that we could look at within that new model, going forward.
Okay. But specifically on the point in terms of Monmouth and the overnight stays and the cost of that.
Yes, yes. We can look at that.
Yes. Anything that you can share with us subsequently, we would be very grateful. Thank you.
Okay? Thank you, Sam. In your paper, Minister, you make it clear that the,
'Welsh Government wide reprioritisation exercise led by the Minster for Finance and Local Government took place to target allocations to protect frontline public services, Programme for Government and help those effected by the Cost of Living Crisis.'
Now, it's been put to me that the budget settlement has everything to do with what the finance Minister has asked for, to support other Ministers, and little to do with what rural Wales needs. How do you respond to that?
Well, everybody had to take a little bit of money out of their budget to reprioritise for front-line public services. So, it means that our very scarce resources are focused on health, education and local government. So, even the health Minister had to find funding for the reprioritisation. So, this was a piece of work that the Minister for finance led on. I don't see it as an assault—or whatever word you used—on rural communities because everybody had to do it. So, if it was just me who had to do it, well, fair enough, but it wasn't, it was absolutely everybody. I think everybody sitting around this table would say that our front-line services need that additional funding. I've heard in the Chamber this week calls for more money for nurses, more money for ambulance drivers. That money's got to come from somewhere, and we have—. I don't think I can say it too clearly: I've been in Government a long time, and this is the most difficult budget I've ever, ever been involved in. It's just very hard to see how we can give more funding for different areas from the scarce resources we've got. We've all got to take a bit of the pain. Now, the funding I've taken out is out of the rural investment scheme. And the fact that the word 'rural' is there, I understand where you're going. But, because I have very few areas in my budget where I could take that funding from, that had to be the place. But, in my defence, I would say that that is the area where you can have that flexibility in the way I've already described to move the funding around.
Okay. Thank you for that explanation. Are there any other questions for the Minister and her team at all? No. There we are. Our session has therefore come to an end. Thank you very much indeed for being with us this morning. It's been very, very useful and helpful. Of course, as usual, a copy of today's transcript will be sent to you in due course, so if there are any issues with that, then please let us know. But, once again, thank you for being with us this morning.
Thank you very much. I will send you a note on Farming Connect funding.
Thank you very much indeed. We'll now take a break to prepare for the next session. Thank you very much.
Gohiriwyd y cyfarfod rhwng 10:42 ac 11:11.
The meeting adjourned between 10:42 and 11:11.
Croeso nôl i gyfarfod o Bwyllgor yr Economi, Masnach a Materion Gwledig. Fe symudwn ni ymlaen nawr i eitem 4 ar ein hagenda, a sesiwn gyda Gweinidog yr Economi fydd yr ail sesiwn a gynhelir i graffu ar gyllideb ddrafft Llywodraeth Cymru ar gyfer 2023-24. A gaf i groesawu'r Gweinidog i'r sesiwn yma? A gaf i ddiolch iddo fe am y papur y mae e wedi'i ddanfon i'r pwyllgor ymlaen llaw? Cyn ein bod ni yn symud yn syth i gwestiynau, a gaf i ofyn i'r Gweinidog a'i swyddogion i gyflwyno'u hunain i'r record? Gweinidog.
Welcome back to the meeting of the Economy, Trade and Rural Affairs Committee. We'll move on now to item 4 on our agenda, and a session with the Minister for Economy will be the second session to scrutinise the Welsh Government's draft budget for 2023-24. May I welcome the Minister to this session? And may I thank him for the paper that he has provided to the committee beforehand? Before we move straight to questions, may I ask the Minister and his officials to introduce themselves for the record? Minister.
Thank you, Cadeirydd. My name is Vaughan Gething. I'm the Minister for Economy in the Welsh Government. And, if we go through our officials, I'll start with Sioned.
[Inaudible.] director of business and regions.
Sioned really is the director of business and regions. [Laughter.] You didn't get all of that because of the mike being unmuted. And Dean Medcraft.
Good morning, everybody. Dean Medcraft, director of finance operations.
And Jo Salway.
Jo Salway, I'm the substantive director of social partnership, employability and fair work, and, also, the acting director of skills, higher education and lifelong learning.
Thank you very much indeed for those introductions. And perhaps I can kick off this session, first of all, with a general question, Minister. How confident are you that the money allocated to your portfolio in this draft budget is sufficient to meet your priorities going forward, especially given the financial pressures that many are facing at the moment?
Well, I think the budget's really challenging. It's an incredible challenge. But the whole of this has to be seen in context, the context of the fact that we're expecting—we are already in recession, and the recession is forecast to last about a year. The depth or the shallowness of that recession is not certain, but we do expect that there'll be some really challenging times, and we've got a budget settlement that isn't providing significant amounts of extra cash in real terms. That's very much at the heart of a number of issues that we are facing. And, of course, as well as the economic conditions, the Government here in Wales has made a choice to prioritise investment in our NHS, social care and local government, including education spend. Now, we have, and will have arguments outside this committee about whether there's enough resourcing going into those from the Welsh Government, but that is the overall priority, and putting additional money over and above what would otherwise be flatlining across everywhere means that there are consequences for other parts of the Government, and that has an impact on my budget too.
That's the reality, and, as we've rehearsed many times before, the loss of former EU funds, and the fact that they aren't being replaced like for like in terms of the overall volume is a real problem for us. And in my area of Government activity, that's a really significant problem, which I'm sure we'll go into in more detail. So, it's a really challenging environment, which is why, within the settlement that we've got across the Government, I've made some priorities within that. I'm trying to prioritise some of the spend we can still maintain in employability programmes and I'm trying to prioritise skills as a significant part of that. And across the whole area of responsibility, we're also making sure that we meet some of our capital commitments. Those are more in the Deputy Minister's area, with another committee leading on the scrutiny for that. That does mean that there are really difficult choices in other areas. It also, I think, helps to underscore why I've chosen to maintain the Business Wales service. That's meant taking money from other parts of the Government, but as we are facing a year-long recession, I think reducing the Business Wales offer would have had serious and significant consequences. So, it will be an uncomfortable time for many people in the world of work, running businesses or working in those businesses, and it will be a difficult time for me and my department in facing up to those challenges.
Thank you for that explanation, Minister. I just want to understand, though, what is the likely impact on the outputs and outcomes that your department will be able to achieve in 2023-24 as a result of these decisions.
Okay, so, the context changes what we would otherwise be able to achieve in any event, and that's self-evident and apparent, isn't it? Having a recession means we won't see growth and recovery in some areas of the economy. Because we know it will be uneven, though, there will still be areas of the economy that will continue to grow, and part of our task is both supporting those businesses that we can help to survive—some of that will be advice; some of that may be in the finance arena, either directly through ourselves or the Development Bank of Wales—but we won't be able to save every single business that will face difficult times in the recession. We have to balance that against still promoting areas of growth within the economy. It's not a straightforward balancing act. The reality is that we will have less money in a range of areas, so we will be able to do less, and that's unavoidable, and you can see that in a range of areas in the portfolio where we will have less resource, we will be able to achieve less than if we had more—it's quite straightforward in that sense. It means that there are fewer businesses that we can support; there are fewer businesses we can invest in to help them to grow, and there is less we're going to be able to do than I would have liked to have done, for example, in promoting trade. We'll still have opportunities to promote Welsh businesses in Wales and around the world, but we could have done more if we'd had more resources. But you can't take an approach that prioritises the priorities that we have as a Government, and broadly, I think Members in different parties agree that the Government should be putting more resource into our health and care system. Well, that has direct consequences, given the size of the overall settlement the Welsh Government has been given.
Now, I'm sure you'll agree with me that the impact of the recession is likely to be uneven in terms of who, how and where it hits hardest. Can you give us specific examples of how this has been taken into account in deciding the allocations for your department in this draft budget?
I think I said in answer to your previous question that I certainly anticipate that the recession will be uneven; it won't have an even impact on every single sector of the economy and every single business. Some of that is a consequence of where individual businesses start the recession from. Some are in a better trading position than others. So, again, that's a bit self-evident. I think the challenge will be how we're able to support different sectors and what we're still able to do. So, the choices that I've made on Business Wales, for example, to maintain our core offer on business support, but we're still going to go forward with the areas of Business Wales on efficiency—that will be really important. That will, I think, be even more important because some of that will be both about meeting our twin targets on carbon reduction, but at the same time reducing costs in a more energy-efficient way for businesses. So, the choice that I make to maintain that service is really important in the advice function. The choice that I make to try to maintain our employability programme support levels, that's also really important as well, because we expect that more people will need the advice, support and guidance of those employability programmes as some people do lose their jobs.
The difficulty, I think, is giving you a, 'Here is how every single sector of the economy will be affected', 'Here is how each individual choice can be made', in almost like a mathematical certainty way, because I don't think that is sensible or realistic, because some of the programmes we run are demand led. ReAct+ is a good example of a demand-led programme that is responding to demand in the economy for people facing up to the risk of losing their job or potentially having lost their job as well. So, we'll still be able to maintain programmes of support, but we're going to need to react and flex in the way we deliver some of that support because there isn't mathematical certainty about which areas of the economy will be hardest hit. But, areas of discretionary spend are already suffering in terms of the way that we are making choices as consumers. And so, some of that is both promoting opportunities in those areas and, at the same time, it will be understanding what we can do to support them within a context where pieces are moving around us, including this week, obviously, the energy support scheme, where the UK Government have announced there will be a significantly less generous settlement. That will directly impact a range of businesses across quite a wide range of sectors.
And can you tell us how you'll be monitoring the effectiveness of this draft budget, and will you be setting financial targets alongside your priorities to ensure that you're actually on track to achieve what you want to achieve as a Minister?
Well, I think there are two slightly different things there. One is the job that Dean and, indeed, our wider team of directors do with me in making sure that we are balancing our budget and living within our means. So, there's a point about making sure that we don't take an approach where we're overspending without the opportunity to bring that back, because that always causes challenges. And the second then is making sure that we're getting value for where we are spending that money. So, for example, I know that we have less money than we would have wanted to invest in supporting Welsh businesses to grow. That could be both investment projects of a scale where we won't be able to support all the ones that we might otherwise have done, it would also be about what we can do to support small and medium businesses here as well. Now, that doesn't mean that we won't be supporting those businesses, but it doesn't mean that we'll be able to do as much.
So, the value of what we're doing and the test that I think we've set ourselves on the smart risks we're taking in who and how we support people will be more important. But, you'll see that in a range of metrics about the impacts of the recession, where they're in the areas where we think we have opportunities to invest and secure future jobs, and really good jobs as well—whether we're doing that. And a lot of that is working alongside stakeholders in those areas. We don't run a command and control economy where the Government decides, 'This is what will happen', and then makes it so. We have to work alongside partners in business organisations and, indeed, our trade union partners to understand what's possible and then try to make choices to support the future of the economy.
And one of my big priorities and challenges over this year is whether we're still able to make progress on our employment plan and our employability plan, and then, when we have our Net Zero Wales plan published as well, whether we're able to make further progress on that. That is both about the economy in the here and now, but it's also about the future, when we start this recession with a very tight labour market where lots of jobs are looking for people to go into them. This twin challenge of, at one end in the labour market, not having enough people available with broadly the skills and potential to acquire the skills that businesses are looking for, and at the other end on trying to get people into the world of work and make sure that they don't drop out of the world of work on a long-term basis. We have a different challenge, with a bigger challenge than other parts of the UK. So, all those things are there, and they're obvious in a whole range of economic commentators and what they're saying. So, it's our challenge to both meet that and to provide the best possible outcomes across the economy.
Thank you for that. And I believe—
I can see Dean wants to come in. He probably wants to make sure that I'm not giving too much away about budget management.
Thank you, Minister. No, just to say to the committee that I meet with the Minister and Deputy Minister on a monthly basis, with the other directors, to go through the in-year position, the forecast for the year end and future years as well. The Minister is very proactive in going through all the budget lines. Also, we meet as directors to go through programme for government targets, outcomes and also if there is a chance of redistributing resources to where they're needed, and also looking at pressures across the wider MEG, et cetera. It's a very proactive approach that the Minister and Deputy Minister have taken, just to reassure the committee.
Thank you very much for that. I'll now bring in Jack Sargeant. Jack.
Thanks, Chair, and good morning, Minister and colleagues. Given the current climate, and you've set out the position that we're in, it's perhaps more important now than ever that employability programmes like the young person's guarantee are delivered and are delivered successfully. Where we are within the world and within Wales right now, can you tell us, Minister, how you've planned for the delivery of the young person's guarantee, and also how you will protect any future challenges that may arise given the current climate that we are in?
I think it's worth reflecting on the fact that, when we designed the young person's guarantee at the outset, it was because we expected that, post COVID, we would see a different economic picture than the one we had. We thought that there would be higher levels of unemployment, and our challenge would be how to support younger people who would be out of the world of work in larger numbers than we found. What we actually found was that the labour market was incredibly tight, partly because a lot of people left the labour market at the other end. And we still have this challenge of older workers who have left, sometimes because they've chosen to for reasons that we all understand through the pandemic—because people have looked again at what they're doing with their lives and have made a different balance and have either left the labour market or reduced their time limit.
And also, and this isn't all about COVID, and it's one of our challenges still moving forward, is that the biggest reason that people have left the labour market permanently is for health reasons. Now, often, we've lost really experienced people in the labour market. That means the market is tighter, with challenges in having enough people for all the jobs that are available. So, we've had a different challenge for the young person's guarantee. What we're actually looking at now is the real prospect that we will see some people losing their jobs in the recession. And I think in a previous committee, I ran through the variation in the forecast—I think it goes from roughly about 20,000 to about 40,000 people who could lose their jobs over what is expected to be a year-long recession.
For young people and the guarantee and the offer that's made in that, it's to make sure that we don't leave people behind and that we give people opportunities to make sure that they can access the labour market. Our bigger challenges are actually those people who are further away from the labour market. It's why there's more focus on the work of Jobs Growth Wales+ to make sure that 16 and 17-year-olds get opportunities to access the labour market and the support we have for them to do that—not just the money and the opportunity to support their employment, but it's actually about the mentoring and the coaching and working with them as well. It's also why our work around young people who are at risk of not being in education, employment or training is really important as well. And some of that is about the earlier identification, so, the youth engagement and progression framework is really important—the work we've done with both the Deputy Minister for Mental Health and Well-being and indeed the Minister for Education and Welsh Language on that as well—and that's about joining up the different potential interventions at the earliest possible stage. And it's also, and this is exacerbated by the pandemic, the reality that one of our big challenges that we're going to need to address through our young person's guarantee work and the broader support for young people, is that there is a much more significant mental health challenge.
Now, young people do feel more uncertain about their future now than 10 years ago, and so, that's part of the challenge that we're going to need to address in how we design those programmes. So, the young person's guarantee, I think, is actually still really, really important, but we're meeting a different challenge to when we initially designed it, and that does go into some of the budget challenges that we've got and how I've tried to protect, not just that programme, but skills provision within it. And we're doing that against the backdrop where we're going to lose about £50 million a year in the funding we used to get from EU funds for employability programmes. And that goes into why, if we're filling that gap, there's money in other parts of our budget that can't get spent in how we would otherwise have done it.
But the young person's guarantee is one of my key priorities to protect and maintain to make sure that the offer is there, and you'll see that in detail about what we're doing—I think I said in my previous committee session that I'd publish an annual report to give more detail on that, and it will remain a commitment of mine in future budgets. But what I can't do is give a cast-iron guarantee that there will be absolutely zero impact, if the broader budget position doesn't improve. And that's both about choices we make within the Welsh Government, and it is also undeniably about the broader budget envelope that we receive in the overall UK settlement, which is still seeing a real-terms reduction in the spending power of the Welsh Government budget. And there's no way of hiding that, I'm afraid.
Can I thank the Minister for that answer? And you're right in what you say: there are difficult decisions that are going to have to made by Ministers and I don't think that anyone in this committee envies the decisions that are going to have to be made, but I think we certainly welcome your priorities and the young person's guarantee being one of them. If we stick with skills provision, then, however long this recession is going to take and when we get—sooner rather than later we'll get—out the other end, we need to come out the other end with the right skills and talents ready, and the Minister will know and colleagues will know I'm a big believer in apprenticeships. I was lucky enough to have studied and undertaken an apprenticeship right the way through to degree level, and I must say that was very much because of the Welsh Government, the role that they played in supporting apprenticeships at that time. But there have been some concerns raised with the committee about the financial pressures stakeholders, industry, will feel over the next few months to come and years to come.
Can you just inform the committee—you have, in your written evidence, but perhaps you could expand on it—how is this budget offer, this draft budget in particular, how is that ensuring the provision of apprenticeship delivery and work-based learning, including degree-level apprenticeships? How is this budget—? Is it giving confidence to those stakeholders, like I've suggested, in our industry partners that apprenticeships are the right way forward and the Government will support them for as long as they possibly need?
There are perhaps five things to say. I'll try and run through those briefly, so I'm not accused of talking out the time. The first thing is that in response to challenges that we know exist within apprenticeship and other delivery providers, I have agreed a one-off cost increase for those providers to try and address some of those challenges. What I don't want is that we say, 'We want to maintain high-level targets to increase significantly the number of apprenticeships we achieve', and we then find people are leaving the sector, because they don't have the staff to deliver it. So, I have made a decision around a one-off cost increase for those providers, which should help with that.
The second thing is that, in this budget, there's an extra £18 million going into apprenticeship delivery, and that's really important, together with the money that we are protecting and maintaining for ReAct+. So, at the one end, the proactive, we want to give people these skills for the future, and, on the other, we've put some more money into ReAct for those people who are at the more challenging end of the labour market and potentially losing their jobs.
The third thing is that we're maintaining our commitment to degree apprenticeships. That is within the budget. In terms of reallocating all of our challenges, it's not just part of the programme for government; you'll see that there is an additional sum within the degree apprenticeship programme to allow an increase in the number of degree apprenticeships, so it's not just flatlining; it's still increasing.
And I think that goes into my fourth point, which is about maintaining the mix of provision, so making sure we can still continue to increase our apprenticeship delivery from the last Senedd term, but also doing that on a basis where we're not sacrificing quality for numbers. Because we could have made a choice to sacrifice some of those higher level degree apprenticeships and others and to increase our numbers by providing lower level provision. We've chosen not to do that, and we're also responding to the feedback we've had directly both from trade unions and businesses, that, as well as having the longer course provision, they're also interested in an increase in the shorter course provision—so, that's important both for people entering the world of work and people already in the world of work, as skills and aptitudes and requirements change, to have shorter course opportunities. That's why it's important that, between myself and the education Minister, there's been protection for the personal learning accounts line in the budget. Because that really does matter to meet that exact need, and we're going to need to take account of that in future skills policy to make sure the mix is right.
And the fifth and final point is there's a bargain here to be struck between the Government and the public funding of these opportunities and what businesses themselves will do to keep on investing in the future. It's often said that training is one of the things that is first sacrificed when people are looking to cut costs, but, actually, if we see that investment being cut out, then we know we'll face even greater challenges at the end of the recession, so it's something about what does the future of co-investment look like, and what do businesses themselves do when it comes to investing in their staff, and lots of companies are prioritising the fact that, if people have the right aptitudes, they will help to train them and give them the skills. That's all adding to our bargain about where we want to be by competing on being a high-skilled economy in a range of areas, including your former life as an engineer, and others, and making sure that we're not sacrificing quality to simply pile up numbers in this area as well.
Thank you, Minister. I think you've cleared that up excellently, actually. The £18 million additional funding is very much welcome, and, in your closing to your contribution then, the importance of engagement with stakeholders and working collaboratively with other Government Ministers is something I raised just yesterday, and long may that continue, because we can't come out of the recession not having the skills ready that we need to see to bring Wales back to a really world-class economy. I'll leave it there, Chair.
Thank you, Jack. Before I bring in Sarah Murphy, Luke Fletcher wants to come in on this. Luke.
Diolch, Cadeirydd. Good morning, Minister. Good morning, all. It's really important, and I've said in the Chamber a number of times I'm totally supportive of the Government's objectives when it comes to the young person's guarantee. It's great that there's definitely a desire in Government to, as well, expand that offer, increase the spaces and, of course, focusing on quality over quantity, as the Minister said. But one aspect of this that continues to worry me a bit is how do we—? Once we've created these apprenticeships, how do we ensure, then, that people stay on those apprenticeships? We know that there is definitely an impact from cost-of-living pressures; we had evidence from ColegauCymru as well as other colleges that they're seeing a drop-off, because the reality of the situation is that people feel and know that they could earn more money going into a workplace than staying on to train. I've advocated for increasing education maintenance allowance as one example of trying to rectify, or at least mitigate, this issue. I'm just wondering: what scope does the Minister see in terms of the work he's doing with the education Minister to increase or improve some of the offerings we have for students?
I think there are a number of different points there, because EMA is part of what we've done to try to make sure that post-16 education is a real option, as opposed to an illusion, for a number of people in different communities. It's not that the talent doesn't exist, but the practical access is really important for us. It is part of the challenge of having a budget with some of the constraints we do have.
I actually think that one of our bigger challenges is actually making sure that people see the opportunities that are available, and it comes back to this point of businesses in a range of sectors where there is a really healthy future still have a challenge in making sure that younger people see the opportunities that exist in those areas and can see that, at the end of it, there is not just an apprenticeship or a training course, but, actually, there's a career that would be rewarding, not just financially, but for what people want to do. You can see that in a range of sectors. The tech sector in all of its glory and all of its challenges is one of those areas where we should still see growth in the economy, and part of our challenge is making sure that younger people, not just at the age of 16 or 18, but much younger still, think of the skills and think of what is possible there.
Now, there's that and, indeed, there's what we're looking at about maintaining the EMA, which is a high-spend programme. So, that's really a question for the education Minister. I don't want to stray into speaking for him, I'm sure he's perfectly capable of speaking for himself, but it's why the conversations we do have about things like personal learning accounts, across our boundaries, are part of the world of work as it is now, as well as trying to make sure that young people have a future in the world of work. It's why I made the comments about the work that I've done with the Deputy Minister for mental health on recognising that how young people see themselves and their concern about the future has significantly increased post pandemic compared to before, and it's part of why we're investing in making sure that there is a proper wraparound for young people's interests and their needs. Some of that is uncomfortable for people like me who definitely aren't young any more. But we've got to find a way to make sure that what we're designing and delivering actually meets the needs of younger people as well.
The other thing that I think is worth reflecting on is that we certainly do look at things like our completion rates. Previous skills Ministers in various forms—Ken Skates, Julie James and Eluned Morgan have all had that brief in the past—have always been able to highlight the fact that we have better completion rates than across the border, and there are certainly things that I'll continue to look at to make sure that not just are we getting people into those schemes, but are they successfully completing and what does that then mean, because the economic end is very clear that if you complete a course like that, then your economic outcomes are likely to be significantly better in areas where we do have a real and pressing need for more people with those skills in the economy.
In terms of the success of this guarantee, it is, in my opinion, hinging on that retention element. With respect, I think young people know the advantages of going into certain sectors, they know the advantages of training and education, but, when we look at the future, when you're in a family that is struggling to put food on the table and when you feel that pressure to have to contribute to the family's bills, the future, more often than not, is the next day, rather than further in the future, and they simply don't have a choice other than to go into the world of work. So, I want to make the point that, I think, actually, the retention and supporting those students on the apprenticeships is going to be key to the success of this. And, of course, I know the Minister recognises that and I know that he's keen to make sure that that happens, but, for me, it has to be the priority, if we want to see the young person's guarantee succeed.
Well, look, we're talking at some different audiences, aren't we? For some people, they are aware of the opportunities and, in fact, most young people go through a traditional route successfully in the sense that there are opportunities at school, or at further education, and our challenge with the guarantee is making sure we're maximising those opportunities for those people where, actually, that access to and understanding that information is more challenging. It's part of the feedback we've had with the national conversation around the young person's guarantee, about making sure that people that don't see all those opportunities do have access to them. It's why the work we're doing on making sure that, for example, young parents have access to those opportunities is really important. It's the mix we've got in the ReAct+ programme to make sure that there's additional support for people to access training if they have childcare needs as well. And it's also why our Jobs Growth Wales programme, which takes on board lessons from the previous Jobs Growth Wales programme, which is now Jobs Growth Wales+, and traineeships, looks at that broader support, to make sure people have opportunities to complete their placements. And sometimes those placements end in employment outcomes, and sometimes they end up in people taking on additional training and skills provision, but the actual placement through Jobs Growth Wales+ and the support provided around it is what helps to lead to the points around completion and practical support.
So, we've got to be able—. Part of our challenge is tailoring that offer to make sure that we understand the needs of the young person. Some will have much more significant needs than other people, and it's how we try and help them through to make real choices and that they understand that there are some choices that our traditional learners, who, I'd say, broadly successfully complete education up to 16 and beyond—. We're not getting to all those people in a way that makes sense for them to understand the opportunities that exist. So, it is both about completion, it is about the realities of people who don't always have those opportunities, and it's still about making sure we're getting people into areas that really can be successful for them. I think it's a multifaceted challenge, that is what I'm trying to get over, and the offer in the young person's guarantee is how we're trying to address that.
Diolch, Luke. I'll now bring in Sarah Murphy. Sarah.
Thank you, Chair. Good morning, Minister—just about, yes. I'm going to follow on now with some questions around research and innovation. Your paper notes that there is no overarching need for research and innovation, but that the innovation strategy will
'harness interests going forward in support of greater transparency.'
So, can we ask how have you worked across Government on an approach to support research and innovation in this budget?
Okay. So, this really is not just about the budget, it's actually about the work we're doing on the innovation strategy, which is trying to do just that, in terms of your question: how do we draw together the different parts of the Government, different departments, different Ministers with decision-making responsibilities, to make sure we have more coherence around our offer? And actually, that work started in the previous Government when trying to identify and understand where we were, and the Reid review was an honest attempt to try to get somewhere better. At that time, I was a Minister with a different responsibility, in the health department, with a significant research and innovation budget within that department.
So, in the strategy, what we're trying to do is to have that greater coherence, bearing in mind the shifted picture that we've got. When Reid was published in 2017, we still expected that EU funds would be replaced—there was a clear pledge about that—and we know that that hasn't happened, and that's directly affected some of the sources of funding. We also know that the overall budget the Welsh Government has got has reduced in real terms since then as well, because Reid recommended not just that we had a greater presence in London, some of which we are already doing; there was also a recommendation that the Welsh Government found resources within its overall budget to make sure that there is, if you like, more core funding as well, as well as how to use the post-EU settlement.
What we have found is that, actually, our budget is reduced and the EU funds have gone, and we are in a very different world. So, it's part of the point that I am making: I have lost £50 million for employability programmes, I have lost money that would otherwise have gone into the innovation budget directly, which we would have used. That's having a direct impact on higher and further education—higher education especially—and I'm afraid we've got people who are unlikely to carry on in those research-funded posts in higher education in the new financial year.
What we are trying to do in our innovation strategy is reflect and take on board that honest truth, and at the same time, to say, 'This is how we need to draw together and have a more coherent whole from the Government.' It's how and why we need to work right across our system, with private sector research partners, as well as higher and further education. We need to be much better at securing money from UK funding sources. Former EU money was a significant benefit, but we didn't see our own institutions being as successful as, I think, we need them to be, especially now, in gaining money from those sources. The strategy will both try to give us a framework for where we see our major strengths and opportunities in Wales, so that we will be able to set out, 'This is our view on where Wales can be really successful, and this is how and where we want public money to go', and at the same time working with those sectors to make sure that we get a much better deal out of UK funding sources.
I do think that, once the strategy is endorsed, we will then have to make sure—. We are intending to have an action plan after the strategy is drawn up, which I think will address the second part of your question, around how does that then lead to budget choices, and the coherence not just in the strategy but in the practical choices to be made around that too. So, the first part of your question I think I can answer. The second part, I think, will really come with that action plan and future budgets.
Thank you. My follow-up question was going to be did you expect there to be changes to the budget when the strategy is published in 2024-25. But at the moment, you can't give any—.
What I certainly do think is that, once we have got a strategy, it will make it much easier to then say, 'So, how do we make budget choices explicitly, once that strategy is agreed?' It's very hard to anticipate everything when the strategy isn't quite complete, but the engagement in the latest round of consultation has been really positive. It's part of what's in the co-operation agreement. We have had direct conversations on that, and I have attended, together with the leader of Plaid Cymru, one of our consultation events with a range of expert interests around the field of innovation and research. But we will see more in future budgets. So, the action and strategy will already help us to do that, but I wouldn't want to give the impression that there is no attempt to have greater co-ordination across the Welsh Government, or that actually, we are not having serious—. I think 'arguments' is probably the wrong term, but we are making serious representations about the way that UK funds are currently allocated and how we ought to intervene to make sure that it's not just about geographical equity, if you like, broadly levelling up, it's also about the fact that we think that there is excellence, and opportunities for excellence in Wales, that we don't think are currently being recognised. But we have to be more successful at making a better case to do that. So, it's a range of things. The challenge that we have in the way that post-EU funding has been allocated in terms of the form and the nature of how that money can be spent has not just cut out higher education, together with the money; it also means that there's a real imperative to be more successful in the future.
Absolutely. Thank you. You have sort of anticipated my next question as well, Minister, but I will try to wrap it all up here. Universities Wales and the Institute of Physics have been in touch with other committees as well, just to highlight how concerned they are about not being able to keep pace in the fields that they are in. So, with the research and innovation funding being spread across ministerial portfolios, as we've heard, what assurance can you give to stakeholders involved in research and innovation about financial support from the Welsh Government, as you have said, particularly in the context of ongoing uncertainty around the future of EU partnerships and the need to keep pace with that UK Government funding?
I think the first point is the depressing but necessary honesty that we have less money to spend in this area. There is less public money available to spend in this area. I made that point in the Chamber yesterday about the Sêr Cymru programme. We simply don’t have access to that money, and because our overall budget has reduced as well in real terms, and because we have the whole Government prioritising health, social care and local government spend, that means that there is just less money available. That’s part of the context in which the innovation strategy is being highlighted. I’ve had direct conversations with higher education and others, and they know that’s happening. I think they’re being direct and honest with people about what that means for a range of funding programmes.
Within that, that’s why the strategy for the future is more important, it’s why accessing UK Government funding is more important. And that UK Government funding, or those UK Government-allocated pots, some of them are England only, but actually a number of them are competitive UK funding sources. So, we need to make sure that there are both bids going in from Wales, and high-quality ones, and that we’re then monitoring and making sure that the relative success of those is being understood too. It’s why I spent time with UK funding bodies like Innovate UK and others, to talk about where we are and what we’re looking to do. And actually those were constructive conversations. There’s a recognition there that you can’t simply use previous funding sources and outcomes and expect there to be satisfaction across the UK. But we both have to make that case and then make sure that we’re doing what we could do across Wales, so that Wales plc is making the best bids possible for those funds to come in here.
So, in some ways, it isn’t keeping pace with UK Government funding—I’d say it’s more about making sure that we access the UK funding pot. Because the UK Government has said there’ll be more money on a long-term basis for research, development and innovation, and we need to make sure it doesn’t simply go into the golden triangle around London and Oxbridge.
Thank you very much, Minister. Thank you, Chair.
Thank you, Sarah. I’ll now bring in Vikki Howells.
Thank you, Chair, and good morning, Minister. Thinking about support for business, I know that in December, as a result of the current economic challenges, the Minister for Finance and Local Government announced a £460 million package of business rate support for the next two financial years. Have there been any allocations from your own department to provide additional support to businesses during 2023-24? I’m thinking particularly there of support for businesses in rural areas and in those non-locked-down sectors.
What the finance Minister’s announcement has done is it’s meant that eligible ratepayers will receive 75 per cent relief in the next financial year. There is a cap, as we’ve done previously, to make sure that you don’t have a large business soaking up lots of extra support. That means we provide more generous support for the medium-sized businesses in the range we’re talking about. And it also means that businesses in those sectors in Wales aren’t disadvantaged compared to similar businesses in England. I think that is really important. We’ve actually had to spend more in Wales than in England per head because our tax base—the size and scale of who we’re supporting—is different. We broadly have more small and medium enterprises, so supporting that range of people costs more. Otherwise, we would not just tolerate geographic distinction, and there being a more generous package in England, but with the challenges we face we’d be likely to see more of those businesses not be with us. You and other Members who I know are taking a keen interest in not just small and medium businesses but the broader foundational economy will know that, actually, those people, a number of them, would go under without the package that’s on offer.
What we’re then doing is, rather than having an additional sectoral approach in what we do over and above the things we’ve discussed in the past—. For example, we’ve got tourism businesses that have access to a range of support in additional investment funds. We’re not saying there’s going to be additional sectoral assistance over and above. That’s where we’re looking at what’s going to come in through the reality of support opportunities. Maintaining a Business Wales offer is a key part of that, and maintaining the support we have on skills and opportunities, and making sure that sectors access those where we are. So, I wouldn't say there's an additional sectoral approach that's being taken. What we are doing, though, is trying to make sure that we support and understand the challenges facing the economy both to survive—because in some parts, it will be about surviving and getting through this—as well as not losing opportunities to grow.
Thank you. You mentioned Business Wales there. Certainly, with a recession, the role of Business Wales is probably needed now more than ever. Your paper to us notes that, as a result of the end of the structural funds, Business Wales will have no ability to do anything over and above the core offer of delivery. So, could you just talk us through what that will mean in practice for businesses who are seeking support at this current time, and as the recession is likely to progress?
The core offer is a significant one in any event. Sioned may want to come in after me if I've forgotten anything or get this wrong, but Business Wales provides advice for start-ups, microbusinesses and SMEs. It helps to provide work, together with others, for social enterprises. It helps to support entrepreneurship, and it's a single point of contact for business information, advice and support. It runs a digital offer that's available as well. I think you made the point that businesses in different parts of Wales may find access difficult if you had to go physically to a place. So, the telephone and the digital support is important. It also helps to provide support to the skills gateway and Farming Connect, and it also provides, and will continue to provide, the accelerated growth programme. So, there's a range of things that it will still do.
What we can't do, though, is say that we have the additional flexibility to provide an additional layer of added support over and above that. If the recession meant that there was a sector of the economy that we needed to provide extra and additional support to, we'd have to flex our resources within Business Wales to be able to do that. That's the point I'm trying to make: the offer that we had is the offer that we're going to need to maintain through where we are, and if we need to move away from that, that will mean moving money around in other parts of either Business Wales or the rest of the portfolio.
As I've said on many occasions before, Business Wales has previously been funded with support from former EU funds, and maintaining Business Wales has meant I've had to make difficult choices in other parts of my department to make sure that the Business Wales offer isn't denuded. That's what I'm trying to get over in saying that we won't be able to go over and above the core offer. We can't expect that there's additional fat that I'm keeping back to expand the Business Wales offer in another three months' time. That wouldn't be an honest presentation to you or, indeed, to the public.
Thank you. That ties in, really, with the figures from Cardiff Business School's research on the economic impact of Business Wales, where they found that every £1 invested in the core service can be linked to around £10 of net gross value added uplift per year. That's a very impressive statistic. And also, for the accelerated growth programme, that actually rose to £18 of net GVA uplift. So, were those sorts of figures and that research taken into account when you were deciding the allocations for the service over the next two financial years?
Yes. Those things were certainly in my mind, and in the advice I get in having to balance that and then make choices, when the choice was made to maintain the Business Wales offer. Because, as I said, that comes at a cost to other parts of the department. None of this is consequence free. But when you see that if you reduce that, then, actually, the point I've been trying to make about how do you support people to survive and, at the same time, look for opportunities to grow—. I don't think you can do that by significantly reducing the Business Wales offer. Sioned, I think you've got some more on not just the value in terms of the uplift, but some of the feedback we've had from people about the value of the service and how satisfied they are with it.
Yes, indeed. There's quite a lot of evidence around how many businesses remain operational beyond the normal term with the Business Wales support. So, from that perspective, it's not just around some of the offer that's there, which, as the Minister has outlined, is really, really broad. The other thing I wanted to say was that Business Wales isn't a static service. So, whilst it is there for a period of time, it's funded for a period of time, and the Minister has been incredibly brave, really, in taking money from elsewhere in the portfolio in order to support Business Wales because of the stats and the return on investment they've shown, it flexes throughout the time that it's operational, and therefore it is able to adapt within the core service. So, whilst there may not be expansion in the core service, within that, it has a history of adapting really, really well to support what needs to be supported while maintaining those key drivers.
I watched a lot of Yes Minister when I was younger, so I always get worried when civil servants say, 'The Minister's being brave.' [Laughter.] Some of you might be too young to remember Yes Minister, but—
I remember it, regrettably.
I certainly remember it.
Thank you, Chair. Thank you, Minister.
Thank you, Vikki. I'll now bring in Sam Kurtz. Sam.
Thank you, Chair. Yes Minister—that's all a bit Dutch to me, I'm afraid. But, no, I do know what it is. With regard to sectoral and regional support, Minister, can you set out when the retail delivery plan will be published, and clarify whether there will be any budgetary implications associated with it?
So, the retail delivery plan is a piece of joint work between us, businesses and trade unions. The Union of Shop, Distributive and Allied Workers are the main trade union in the sector, and they've been really clear that they don't want a hard deadline of when it should happen, but they actually want to be able to get it right. So, that's the direct feedback from the retail sector itself. But I do expect that the delivery plan will—. It's not going to be something that's going to drag on and not happen for the whole of the year. I'd like to be able to give you a hard time frame of when it's going to be, but, as I say, I don't think that's appropriate. We think it's a matter of weeks and months rather than going into the end of the year, because stakeholders in the sector want something to move forward with for the rest of the year. And you can expect that, in the delivery plan, there'll be actions and timescales that will look at what each of the different partners can do to try to implement the plan. And some of that will be about influencing people's behaviour, about how people make choices about where they're going to spend money in the retail sector. And in that part, I hope that Members, on a cross-party basis, would be supportive, because a lot of this is about supporting retailers within each of the communities that we're privileged to represent.
Fab. Because, looking at the likes of Next, Whitbread plc, which, obviously, runs Premier Inn, Sainsbury's and JD Sports, their stocks are recovering very well from 2022. They're all retail, so I'm wondering—this recession period could be potentially shallower than we're anticipating—in terms of the retail delivery plan, what data you are using in the implementation of that plan, or the creation of that plan, and making sure that data is not then out of date when this strategy looks to be implemented.
Well, actually, we heard some really interesting—. In a session that I attended together with the Deputy Minister for Social Partnership, we had a presentation from the main retail association themselves on some of the unevenness in what it means in terms of those areas that have done relatively well, those areas where there's a challenge, and what that means overall: they're still seeing some of the challenge around not having as good a Christmas trading period as they would have wanted to overall; there's a difference between some city and town centres; some out-of-town retailers have done better than others as well. So, you have this challenge of unevenness, and one of our honest challenges is how we maintain a vibrant high street in local communities. So, JJB and Whitbread and Premier Inn tend not to be in the middle of our smaller or larger towns in terms of some of their locations. So, that, I think, highlights some of the unevenness across the retail sector.
So, we are looking at the data that is as up to date as possible about consumer trends and habits and how that shapes what we're looking to do, and the overall pictures around consumer confidence and consumer behaviour as we look to the future. Most consumers are price sensitive and yet other people have slightly different aspects in the offer, and what we're going to need to do is to make sure that we can have a delivery plan that tries to make sure we maintain the variety and the vibrancy of the sector, because it really does matter. And I've always thought this about a sense of place, and if you don't have a retail offer as part of what a town or a community has, that really can affect people's sense of place and the value of being somewhere and how it's seen by people who both live there and externally too. So, it's important for retail but, I think, on a wider sense as well. And I know the Member will see that in his own constituency as well.
Thank you. With regard to the £10.6 million that is allocated to the tourism resource budget expenditure line for 2023-24, this is down £1.3 million, or 11 per cent in cash terms, compared to the final budget in 2022–23. What impact do you think this will have, this cut in funding, on the support provided to the tourism sector?
So, obviously it means that we're going to have a reduction in what we would otherwise have been able to do. That goes back to the opening questions and exchange with the Chair and others. When you have not just whole-Government priorities, but priorities within our budget and a reduction in resource from former EU funds, there are unavoidable consequences. What I think it will mean is that we're unlikely to have the scale of marketing we would otherwise have had for some of our European markets through the next year. We do, though, have, if you like—and I'll be looking at the data of this and the monitoring of it—some benefit from the fact that we were in the FIFA World Cup for the men and the fact that there's been a profile for Wales that we wouldn't otherwise have had. Some of what we did during that was to target some of our European markets as well as North America. So, it isn't that there will be no activity, but it does mean that we're relying on some of what we've done already.
We're also going to have to look at what we do when it comes to the tourism investment fund. We're still maintaining that at the same size and scale, but there will be challenges. This is one example of the reality that if you have less money, then it means you can do less. It doesn't mean you do nothing, but it does mean that you can practically do less.
Interesting that marketing was one element you mentioned there. That coincides with the potential tourism tax, which I think would double hit the economy. I know you and I disagree on this. But, seeing that if Welsh Gov is going to be marketing Wales less, adding on an additional tax at the end for those tourists who are coming here seems to inflict double punishment on a tourism industry that we're looking to see flourish and grow in Wales. Wouldn't you agree?
I think, actually, if you look at the—. Part of the reason why we shifted and did so much around the men's football world cup was because it was Wales on a giant, global scale, and to get a profile that we wouldn't otherwise have had. Last year, I put money into an overseas marketing campaign because, broadly, overseas visitors spend more, they're more determined to come, and, when they're here, they're much more likely to look for ways to use their money, and that's a good thing for us. Now, in putting resource into the world cup, that meant that I took resource from other areas, so not just to support our presence but what that then means in the return for the visitor economy as well. So, I've made choices within this financial year to reprioritise resources to help support the visitor economy and try to maximise the opportunities that come from the football world cup. So, it's part of this point about balance.
And, as the Member knows, on the visitor levy, I don't share his view. We're talking about something that is being designed now for delivery later within this term and is entirely normal across a whole range of areas, including visitor economies right across lots of Europe, and, indeed, North America. If the Member has ever visited North America, he'll probably find he's paying two different visitor levies. Often, you have a state and a city visitor levy, depending on where you visit, and it's part of what you do, and it goes back into reinvesting in that local community, in that local economy, which is exactly what we want to do to improve the offer that our visitor economy has. And, as I say, that's us doing what we said we'd do in the last Senedd election, and I still can keep the promise in that.
Sadly, Minister, I've not been to North America. But, moving on, in terms of the Development Bank of Wales, with regard to its funding and support for decarbonisation of businesses specifically, how was the £10 million capital allocation for 2023-24 decided? What considerations were given to allocating a greater amount of funding in light of the Welsh Government's own ambitions around a net-zero economy?
So, the allocation came from conversations that we have had. I say 'we' in the global sense, because my officials have lots of the detail of those conversations with the development bank around what we could do. It actually comes from proposals that are being developed to help support decarbonisation. One of those is agreeing the business loan scheme that I announced in October, and that's due to launch in the coming weeks. That's featured in questions in the Chamber from a number of the members of this committee. So, they're looking to test some of the new products that the development bank has been putting together to help support business decarbonisation. Again, I think it's really important to see this as not just for decarbonisation, but what we're able to do to support businesses to reduce their costs as well. Some people will do the right thing because there's a consumer expectation that you are visibly looking to decarbonise the way that your business operates, and, for a range of other people, in terms of survival, reducing your costs and reducing your bottom line will be really important, and you can do both things at the same time. And this is part of the development bank looking to help deliver £125 million of investment in the next financial year. So, it's within that wider context.
So, the size of the money comes from both what we think is available, but it also comes from the judgments made in the development bank around what they will need to do something that is real and meaningful, and the sort of investment they'll be able to deploy. So, it isn't quite a figure plucked out of the air; it is something that genuinely comes from conversations with the development bank, my officials, and the professional advice that I then take account of in making a choice that I'm then accountable to you and the public for.
So, in terms of this £10 million capital allocation, that's specifically targeted, then, surely, at your SMEs rather than your big industrial units, your main polluters, potentially, across the south Wales corridor, for example, because £10 million wouldn't touch the sides for some of those decarbonisation projects.
This is about how we try and persuade people across the economy to shift into decarbonisation. When it comes to the south Wales cluster, they've already got a significant programme looking at decarbonisation for the south Wales industrial sector, and so we're looking to influence where we can. If you're talking about, for example, steel, if you're talking about the refinery in your part of the world as well, and thinking about how we get through supporting those sectors to successfully reduce their carbon footprint, we are talking about a different order and conversation that inevitably involves partners in the UK Government, because there is a larger scale required there.
But the practice that we're looking at here is part of what everyone else is looking to address, and they also have direct engagement with high-street banks and others around what they're doing in this space to make sure there's capital coming into Wales—because that's part of the challenge, in that there's an unevenness when you look at the whole UK economy where capital is deployed—as well as making sure that those high-street lenders continue to provide capital that is targeted at supporting decarbonisation and energy efficiency. And that was certainly a feature in the last round-table that I had with the major lenders and high-street banks.
Okay. So, with regard to setting your allocations for supporting regional economic development for 2023-24, and ensuring the greatest impact—bang for your buck—how have you taken into consideration the activities of the shared prosperity fund, city and growth deals, and individual plans of local authorities across Wales?
As you know, the shared prosperity fund isn't really a multi-year programme because of the way that the money has to be spent on an annual basis. And because, when we were developing our budget, not all of the decisions had been made—. I think, when Dehenna Davison announced the choice that had been made, we already were, essentially, at the end of our draft budget process. What we do, though, is, we have regular conversations with those stakeholders in our economic regions. We have regular conversations with city and growth deals, and we're looking to try to make sure that we can talk positively around what is happening in shared prosperity investment plans.
The frustration is that we haven't been able to be properly involved in the development of those plans. The time frame for responses from UK Ministers has been significantly extended, and it means that not all that money can be spent within this financial year that we're near the end of. And my concerns about the shared prosperity fund all remain, I think, current, and are being realised, I'm afraid. But what we want to do, despite all of that, is to try to make sure that we do continue to work constructively with our partners to understand how we can do more together. And in the range of the investment proposals that we've got from our economic regions, they align well with Welsh Government priorities. There's more work for us to do around what's happening in the shared prosperity fund to make sure that it doesn't become something that gets atomised and becomes less and less strategic, because, actually—and the Chair will know this, given his previous time in scrutinising Welsh Government activity and European funding spend—we have been looking to learn from previous rounds of spend to become more strategic and less individual project focused. And part of my concern is that the way that this design has been undertaken means that there's not just less money, but the approach could end up being less strategic because of the rules around it. So, there's some challenge in the shared prosperity fund that we're going to try to work through. I'm a bit more optimistic, though, about city and growth deals, because that's a multi-year funding settlement, where there are proposals moving at slightly different paces in different parts of Wales, and I look forward to undertaking another round of engagement with those, with our partners, and, indeed, comrades in the Wales Office.
Thank you, Sam. I'll now bring in Luke Fletcher. Luke.
Diolch, Gadeirydd. If I could turn to trade, the allocation for the export, trade and inward investment expenditure line is down compared to the final budget for 2022-23. I was just wondering if the Minister could indicate what he thinks that impact, in terms of the cut in funding, would be on support for businesses.
It really means that I don't think we'll be able to expand the support that we have into different markets. We were looking at some expansion in the programme. That is going to be much more challenging. We'll still have a significant programme of support. We'll still have a range of Welsh Government-sponsored trade missions. We'll have support in market activity. We'll still look to work with the Department for International Trade offices around the world, and we'll still look to see where there are opportunities for Welsh companies to export successfully.
I'm really pleased; I don't know if the Member and committee members have seen it, but there have been a number of stories recently that reflect our overall experience that companies that do take part in the trade programmes that we run are very positive about it, about the impact it has on their business, and it's about the level of support we can provide. So, if we had more resource, we could do more of that. This, again, comes back to what I've said on multiple occasions here, and I'm sure I'll have to say again, that the reality of having a smaller real-terms budget and having to make choices in Government means we can't do everything that I would otherwise have wanted to do, but what we are going to do is even more important, we're going to get real value from that expenditure and support for the economy.
So, in terms of working with a reduced budget, I imagine that there's a need to prioritise where the Welsh Government focuses. How is decision making around what isn't and is a priority made?
In this area, some of that comes from the direct engagement with our trade and invest team. I meet with them. I look at the programme that they propose putting forward. I discuss where and why we have opportunities that we can take up in different markets. And that comes on the back of direct engagement with businesses and business organisations. It isn't something where there are lines on a map drawn up by a civil servant or a Minister, saying, 'I fancy going there', it really does come from business intelligence about where we've already got activity, the value of that activity, and the prospects for growing that trade as well. It's part of the reason why I went to Washington at the start of the FIFA World Cup, because we know that we already have trade there and we know that we have opportunities to do even more trade there, and the visibility that we had meant that it was a good thing to do not just for Wales but actually for a range of businesses, and on the back of that, I think we will find that there is more activity with a range of people in North America. So, the programme we provide comes from that process of business intelligence, engagement with those businesses, looking at where opportunities are, and then designing a programme to try to maximise those things.
When it comes to what we can and can't do, they all come down to really difficult choices, because in every single area where I've made reductions, it's my name on the sheet that signed those things off and said, 'We will have less money in these areas to put more money into others.' And we talked earlier about the brave decision to maintain the Business Wales offer. Well, to do that, you have to make choices in other areas. You can't simply say, 'We'll accept no reductions,' because we have to have a budget that balances, and this is part of that bargain, and not a single one of those choices is easy.
Thank you for that, Minister. If I could move to inward investment, £4 million is allocated to deliver the export action plan. Could the Minister confirm how much funding is specifically allocated to deliver the Government's inward investment priorities?
It's not quite as simple as that. Our export action plan is designed to do exactly that—to help Welsh businesses to export successfully and to grow their businesses, it's a key part of, actually, businesses becoming more profitable, successful exporters and our businesses having a good rate of return and offering good jobs at good rates. The inward investment priorities—some of our international activity is about promoting exports, but it's also about trying to help deliver inward investment. So, for example, when I was in the United Arab Emirates earlier in the term, we were doing both of those things. Now, that won't necessarily show up in the export action plan, because it's not strictly part of that. But, whenever Ministers go abroad to support that activity, there has to be a good reason for a Minister to go there, and that is both about supporting exports and seeing whether there really are inward investment opportunities that come from that.
Now, that isn't the full picture either, because in Sioned's team, for example, lots of what we do is we support opportunities to grow businesses. Some of those are businesses that are here already, some of those businesses are foreign owned, and some of those are new business opportunities for new inward investment. Now, that won't show up in the export trade and investment budget line, and it certainly won't show up in the export action plan budget line.
If you think about Japan, we've recently celebrated 50 years of the first direct investment from Japan into Wales. We have thousands of jobs that are reliant on Welsh-located companies with Japanese headquarters and ownership. And if you look at the programme of work we're doing with Bridgend and the Marubeni Corporation on the future of green hydrogen opportunities, that programme again is with an inward investment partner. You won't find that necessarily in one of these budget lines that we're talking about now. And if you look at a recent significant investment made in one of our areas of significant potential growth despite the recession in the semiconductor cluster, the KLA Corporation, with headquarters in California, announced, I think, a 350 million—I can't remember if it's dollars or pounds, Sioned, but a significant investment in the KLA site in Newport itself is going to result in what we understand will be 750 high-paid jobs. Now, we're part of making that investment happen to lever in those hundreds of millions of pounds of investment and long-term investment in jobs themselves. And that's what I'm trying to get to. It doesn't neatly fall into this; it will fall into some of the regional budgets that we have, it will fall within some of the central budgets that we hold, and also some of the advice that we give straightforwardly through our Business Wales service. So, I'm sorry that it's not quite as straightforward as to identify a single budget line that only deals with inward investment priorities, but I hope it's helpful to explain how that works in reality.
So, if I was to look for the figures for inward investment from Welsh Government, there is no handy one place, a one-stop shop to find that.
Well, we do have figures on foreign direct investment, but that in itself I don't think covers the full picture—Sioned may want to come in here—but we do have figures that come out on an annual basis around Wales and other parts of the UK on where direct foreign investment comes. But, I don't know if that necessarily neatly captures the additional investment for people who are already here. So, that's part of our challenge in giving you the picture that you might want on its fullest basis. But, certainly, new foreign direct investment, there are pictures each year and, in the last couple of years, we've done relatively well compared to the rest of the UK, but it's an unusual time. We're thinking about a year-long recession ahead of us and where those opportunities will come.
Thank you for that, Minister. If I can move to border control posts, I was wondering if the Minister could outline when he believes it will be possible to estimate the annual costs for running border control posts in Wales, as well as the costs to set up the arrangements. I read with interest that there was no funding allocated in the budget for the cost of building BCPs in this current budget. I'm just trying to understand why. I know there are tensions between the Welsh and UK Governments in terms of who is paying for what. Is it just a matter of not knowing what you're budgeting for?
So, we have had some money come across from the UK Treasury for money that we'd spent at risk on getting ready to create border control posts. And as we've discussed, both in the Chamber and in this committee, Holyhead is further advanced than the south-west Wales ports. We're confident that we will need to create some border control infrastructure there to be compliant with our international obligations and our responsibilities for those areas that are devolved. The Treasury continue to say that there's a guarantee for the necessary build costs; the challenges are around the running costs, and the running costs are, at least in part, dependent on what the operating model is going to be: what we're going to be checking for, how and why. And so, the policy position isn't settled yet, and that's why you can't give a definitive answer now around what the running costs will be and the model around who runs each of the posts, as well as, if you like, the state function of checking the goods we need to check, because they have a system for checking.
There is also a point around the infrastructure to be created and the costs around that. If you think of it this way: when you go to an airport, assuming you do, you will find border security staff in any jurisdiction, however they're described—that's a state function. All the other stuff around the airport isn't, but you have the state function embedded within the airport itself. All of the necessary cost to make sure that you can have that state function run effectively are not all borne by the state, but the direct costs of, for example, the border control post staff there are where we would have to make sure that that is available, but we need to make sure that it's within a set-up that is going to be sustainable. So, the charging model is not resolved yet. It's possible we'll have a charging model that would work in a high-volume port but would not be successful for smaller ports—not just those in Wales, but across the UK as well. So, we need to understand a range of issues that are still not resolved.
I'm about to write again to Baroness Neville-Rolfe, who is now in the Cabinet Office. Discussions have been much more constructive since she came into post—it's honest to reflect that, but there are still some unresolved areas and we need to give people time, not just in the decisions, but then those people actually operate in this area of the economy, so, we're not telling them, with a week or two's notice, that there's going to be a change in the process and that they need then to take account of it. So, yes, some things are still unresolved and we're still looking to make sure that the UK Treasury don't move backwards on the promises they've made to fund the necessary build costs, and the transfer of some money into the budget for that is helpful. The running costs are less certain around how they will be covered by the UK Treasury or otherwise. And if that is an extra pressure on the Welsh Government budget, it is not something that is going to be inconsequential.
Are you concerned, Minister, that Holyhead is still in the design phase? I mean, we're two years after Brexit and we still have no idea really what's going on with BCPs in Wales. I accept it's a UK-wide issue, but Holyhead is the second busiest roll-on, roll-off port, and, of course, you touched on ports in south Wales, they're nowhere near as advanced as Holyhead. Is that something that concerns you? And I know that, of course, the Government is looking for those reimbursements around the work done at Holyhead, but it is slightly concerning that we still seem to be none the wiser as to what's going on and when we're going to see a lot of this in place.
It is positive that the UK Treasury have provided money for the work that we're already doing around Holyhead. I won't say that we have no idea, because we've made progress on [Inaudible.] contractors and some of the broad points around the model, but it's undeniable that every time there is a shift in trading conditions and every time there is a shift in deadlines, it affects what we are able to do and how long we're able to do it for.
We've been clear that we think we need about 12 months to construct a permanent border control booth. The reduction in trade especially in south-west Wales means that—. I should note there are constituency interests for the Chair and Sam Kurtz in this because of where those two ports are, but we were previously, as everyone will know, talking about an option in Johnston, where we didn't think it would be possible to maintain border control posts within the overall curtilage of the two ports in west Wales. It's possible, because of the reduction in trade, which isn't a good problem to have, that those options can be re-examined. So, the shifting of the reality of the economic position and the trading position affects the sort of infrastructure that we could and should create. So, I'm not entirely sanguine about that uncertainty, but that's the reality of the position that we face. It's why we look for resolution.
It's why some movement, apparently, on the information sharing around the Northern Ireland protocol is really helpful, and we'll look for more constructive movement so we can have some certainty for me to make decisions on behalf of Wales in this area, and it's why we continue to say that we should have greater involvement in the Northern Ireland discussions, because there are very practical impacts for us here, and it's also why we need to keep on our practical and constructive conversations with both the UK Cabinet Office and the UK Treasury to allow us to deliver something that is fit for purpose for people here in Wales, whether it's at Holyhead or the two ports in Pembrokeshire.
Diolch, Luke. I know that Jack Sargeant would like to come in on this point. Jack.
Yes, thank you, Chair. Minister, just picking up on Holyhead and the border control there, one of the previous Home Secretaries—six months ago now; it's hard to keep up with who it is at the time—announced, the UK Government announced, the pilots of contactless borders. I just wondered if you think one of the pilot schemes could be Holyhead and, if UK Government were to invest in the infrastructure digitally on the island of Ynys Môn, and across north Wales, that, actually, this could be a way forward for Holyhead. Would you agree with that sentiment?
It's one of the potential answers to do more of this digitally, but that's why the apparent movement on information sharing is important in practical terms. To be able to do that digitally, you have to share information on what's coming. You also need to have common systems that talk to each other, and you then need to make sure that if we're going to have a coherent approach, which is my objective, and what I prefer for GB, you need to make sure that Wales, Scotland and England are signed up to it, and there's an understanding about what's going to happen on Northern Ireland and the island of Ireland as well. Those things need to be resolved, as well as the potential for digital infrastructure, and I'd certainly be constructive about the potential to see something piloted through Holyhead, because it is such a busy port and it's one of the key areas where doing that I think may help us to design something, but we've got to get some certainty in a range of areas before that, and we should be involved in the design of that here in Wales and not simply having a conversation at the end of a process where the UK Treasury, DEFRA and the UK Cabinet Office have spoken to each other. And it's got to work for people moving goods through the island of Ireland, whether it's the Republic or Northern Ireland, as well as for us to discharge our own responsibilities.
So, I've never ruled out digital infrastructure as being part of it, but it can't be assumed that every problem can simply be resolved digitally, because you've got to need to have physical checks on things like livestock. I can see how, for example, with chilled goods, you might be able to do some of that checking in a different way. So, some honesty around where it might be possible, as well as some genuine collective endeavour to try to design the right answer, I think, would be very welcome.
Thank you, Jack. Are there any other questions for the Minister and his team? No. Our session has therefore come to an end, so thank you to you, Minister, and to your team for being with us today. As usual, a copy of today's transcript will be sent to you in due course. If there are any issues with that, then please let us know. But, once again, thank you very much for being with us today.
Good to speak to you, as always.
Thank you very much.
Symudwn ni ymlaen, felly, i eitem 5 ar ein hagenda, sef ystyried y memwrandwm cydsyniad deddfwriaethol diwygiedig a'r memorandwm cydsyniad deddfwriaethol atodol ar y Bil Ffyniant Bro ac Adfywio. Y dyddiad cau ar gyfer cyflwyno adroddiad ar y memorandwm diwygiedig a'r memorandwm atodol yw 16 Chwefror. Byddwn ni fel pwyllgor yn trafod y mater ymhellach mewn sesiwn breifat heddiw ac yn ymateb maes o law, ond a yw Aelodau eisiau gwneud unrhyw sylwadau i'r cofnod cyhoeddus o gwbl? Nac ydynt.
We'll move on, therefore, to item 5 on our agenda, namely considering the revised legislative consent memorandum and the supplementary LCM on the Levelling-up and Regeneration Bill. The reporting deadline for this is 16 February. As a committee, we'll be discussing this further in private session today and responding in due course, but are there any Members who would like to comment for the public record? No.
Felly, symudwn ni ymlaen i eitem 6, sef y memorandwm cydsyniad deddfwriaethol ar y Bil Technoleg Enetig (Bridio Manwl). Mae'r memorandwm yn ymwneud â Bil a gyflwynwyd gerbron Senedd y Deyrnas Unedig ym mis Mai y llynedd, ond ni chafodd ei osod gerbron Senedd Cymru tan 8 Rhagfyr y llynedd. Fe'i cyfeiriwyd at y pwyllgor hwn, gan nodi 16 Ionawr fel y dyddiad cau ar gyfer cyflwyno adroddiad. Oherwydd yr amserlen, mae wedi bod yn amhosib cynnal unrhyw waith craffu ystyrlon ar oblygiadau deddfwriaethol y Bil i Gymru, na'i oblygiadau o ran polisi. Nawr, byddwn ni yn trafod ymateb i'r memorandwm hwn mewn sesiwn breifat heddiw, ond a oes unrh