Pwyllgor yr Economi, Masnach a Materion Gwledig

Economy, Trade, and Rural Affairs Committee

13/12/2023

Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

Buffy Williams
Hefin David
Luke Fletcher
Llyr Gruffydd Yn dirprwyo ar ran Luke Fletcher am ran o'r cyfarfod
Substitute for Luke Fletcher for part of the meeting
Paul Davies Cadeirydd y Pwyllgor
Committee Chair
Samuel Kurtz
Vikki Howells

Y rhai eraill a oedd yn bresennol

Others in Attendance

Andrew Gwatkin Llywodraeth Cymru
Welsh Government
Dean Medcraft Llywodraeth Cymru
Welsh Government
Duncan Hamer Llywodraeth Cymru
Welsh Government
Gian Marco Currado Llywodraeth Cymru
Welsh Government
Jo Salway Llywodraeth Cymru
Welsh Government
Lesley Griffiths Y Gweinidog Materion Gwledig a Gogledd Cymru, a’r Trefnydd
Minister for Rural Affairs and North Wales, and Trefnydd
Richard Irvine Llywodraeth Cymru
Welsh Government
Vaughan Gething Gweinidog yr Economi
Minister for Economy

Swyddogion y Senedd a oedd yn bresennol

Senedd Officials in Attendance

Evan Jones Dirprwy Glerc
Deputy Clerk
Gareth David Thomas Ymchwilydd
Researcher
Katy Orford Ymchwilydd
Researcher
Lara Date Ail Glerc
Second Clerk
Robert Donovan Clerc
Clerk

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.

Dechreuodd rhan gyhoeddus y cyfarfod am 10:02.

The committee met in the Senedd.

The public part of the meeting began at 10:02.

2. Cyflwyniadau, ymddiheuriadau, dirprwyon a datgan buddiannau
2. Introductions, apologies, substitutions, and declarations of interest

Croeso, bawb, i'r cyfarfod hwn o Bwyllgor yr Economi, Masnach a Materion Gwledig y Senedd. Dwi wedi cael ymddiheuriadau gan Luke Fletcher ac mae Llyr Gruffydd yn dirprwyo ar ei ran yn y sesiwn gyntaf yma. Croeso cynnes, Llyr, rŷn ni'n falch iawn o gael eich cwmni chi yn y sesiwn gyntaf yma. A oes yna unrhyw fuddiannau yr hoffai Aelodau eu datgan o gwbl? Samuel Kurtz.

Welcome, everyone, to this meeting of the Economy, Trade and Rural Affairs Committee at the Senedd. I've received apologies from Luke Fletcher, and Llyr Gruffydd is attending as a substitute for the first part of the meeting. A warm welcome to you, Llyr, and we're very pleased to have your company in this first session. Are there any interests that Members would like to declare? Samuel Kurtz.

Diolch, Gadeirydd. I'm an honorary member of the British Veterinary Association.

3. Papurau i'w nodi
3. Papers to note

Fe symudwn ni ymlaen felly i eitem 3 ar ein hagenda, sef papurau i'w nodi. Mae yna chwe phapur i'w nodi. A oes unrhyw faterion yn codi o gwbl o'r papurau yma? Na. 

We'll move on therefore to item 3 on our agenda, namely the papers to note. There are six papers to note. Are there any issues arising from those papers? I see that there are not. 

4. Craffu Cyffredinol ar Waith y Gweinidog: Y Gweinidog Materion Gwledig a Gogledd Cymru, a’r Trefnydd
4. General Ministerial Scrutiny: Minister for Rural Affairs and North Wales, and Trefnydd

Felly, symudwn ni ymlaen i eitem 4 ar ein hagenda, sef craffu cyffredinol ar waith Gweinidogion. A'r Gweinidog cyntaf sydd gyda ni y bore yma yw'r Gweinidog Materion Gwledig a Gogledd Cymru, a’r Trefnydd. Gaf i estyn croeso cynnes i'r Gweinidog a'i swyddogion? Cyn ein bod ni yn symud yn syth i gwestiynnau, gaf i ofyn iddyn nhw gyflwyno eu hunain ar gyfer y record? Gweinidog.

Therefore, we'll move on to item 4 on our agenda, namely general ministerial scrutiny. And the first Minister joining us this morning is the Minister for Rural Affairs and North Wales, and the Trefnydd. Could I extend a warm welcome to the Minister and her officials? Before we move to questions, could I ask them to introduce themselves for the record? Minister.

Thank you. So, on my left, I have Gian Marco Currado who is director of rural affairs, and, on my right, I have Dr Richard Irvine, the Chief Veterinary Officer for Wales. And I think, on the screen, I have Dean Medcraft, who is director of finance for the climate change and rural affairs portfolio.

Thank you very much indeed for those introductions. And thank you for your paper that you forwarded to us as well, as a committee. Unfortunately, we did receive it after the deadline, but, perhaps in future, if we could receive that information in time, then that would be useful for us as a committee.

If I can just kick off this session with a few questions, why was the Habitat Wales scheme designed so quickly, given that we did leave the EU a few years ago?

So, I was able to extend Glastir contracts for our farmers. Even though we'd left the European Union, there was still funding available to do that. So, I was able to extend Glastir contracts on an annual basis, but I had made it very clear that I wouldn't be able to do so after 2023. So, it would come to an end on 31 December, so, at the end of this month.

I would say that it was probably about June—certainly before the Royal Welsh Show—I made it very clear, I made an announcement, that it would be ending for sure. I think it was definitely before the Royal Welsh, so, probably in June or July. And then I had discussions, obviously, particularly with our farming unions about what we could do to ensure there wasn't a gap around the agri-environment schemes and that we didn't throw away the good work that we'd done and could we possibly have some sort of scheme.

So, five months might sound a long time, but to actually get a scheme designed, up and running, expressions of interest et cetera—. You'll all appreciate—I won't rehearse—the very difficult financial situation the Government's in. So, I was unsure about that. I think it became apparent with those discussions and then at the Royal Welsh Show that we did need to bring forward a scheme. So, that was the reason why we did it—some people might not think it's very quickly, five months; I think it's very quickly. For officials to have to do a significant piece of work, on top of everything else, I think we've done it very quickly.

10:05

And can you tell us, then, what modelling was done about the potential impact of the scheme itself?

Well, we didn't really do modelling, because we just had to design a scheme very quickly. So, there wasn't really any modelling. I knew it would not be anywhere near the amount of funding that we had for Glastir; there was no way there was going to be that much funding. And, obviously, I'll be announcing, after the draft budget is laid next week, what the funding is. 

Yes, there's been a lot of discussion about the fact that there's just over two weeks to go until the Habitat Wales scheme actually starts, and yet Members are still asking for clarity about the budget for the scheme itself. And, of course, this lack of transparency is very worrying, especially for the farming industry. So, why have you failed to confirm what the budget for the Habitat Wales scheme is and will you now take the opportunity to tell us what the budget will be?

No, I'm afraid I won't. You'll have to wait until the budget is laid, and then I will be making my announcements. I cannot do it ahead of the draft budget being laid. 

That's for the next financial year, but surely payments will be made in this financial year, given that the scheme is going to start on 1 January. So, surely an allocation must have been made in this financial year for the payments. 

So, yes, that is correct, but you'll be aware of the cuts that we had to make in-year as well to support, obviously, other parts of the Government's budget. So, I'm afraid I cannot say anything until after the budget is laid next year—next week, sorry. 

So, how much has been allocated in this financial year, then, for the Habitat Wales scheme?

This is not dissimilar to the basic payment scheme. Because the contracts will run annually, from January to December, the payments will actually be made out of next year's budget. And it's not dissimilar to the basic payment scheme, where the period runs annually but the budget tends to come from the subsequent year. So, the reality is that, until there is clarity on what the Welsh Government budget is for 2024-25, the Minister is unable to clarify what it is. 

So, there's no budget from this year. It goes on a calendar year, rather than on the next financial year. 

I understand what you're saying, but that's of no comfort to people who are none the wiser in terms of what they can expect, because, clearly, if you don't get a decent budget, then the payment is going to be reflected in that way, isn't it? It's not really the way to do planning, is it, for any kind of business or any kind of sector.

It's a very uncertain time, but, as you will have heard me say on many occasions, if they wanted to keep the seven-year predictability of the European Union budget, they could have stayed in the European Union. This is the reality of life and we are really going to have to get used to annual budgets. 

—as somebody once said, and I think throwing it back at that is a little bit of an abdication of your own responsibility, because we are where we are, and it's incumbent on Government to manage that situation. Surely there was a way of being able to at least give a degree—a greater degree—of certainty. 

So, I suppose, if we hadn't found ourselves in a position where next year's budget across the whole of Government is going to be worth £1.3 billion less than when we had our budget allocated to us in the last comprehensive spending review, perhaps we wouldn't be. But the fact that we have had to—. This year, we have had to make in-year cuts. That is really difficult. You know yourself, if you have to do it in your household budget, if you look at your budget and what you've planned to spend and then suddenly everything's thrown up in the air and you have to look at in-year cuts—. I think, as a Government, the work that we've done over particularly the last three months around next year's budget is to hopefully prevent that happening again next year, because you're right, that's not the way to do business. But, unfortunately, that's the reality, and people need to recognise that. 

So, can you give us a sense, then, of what your budgetary priorities will be for next year? What are—in order, if you like, if you can—your priorities in terms of protecting those particular budgets? Because you could have—. In order to give the sector confidence, you could have said, 'We will be protecting Habitat Wales', in order to give you the certainty that you need to get on board and to avoid a situation where decades of agri-environmental work is being thrown away.

10:10

I think the answer to that question is I have prioritised my commitment, what I've said, about supporting the agriculture sector per se.

Well, across the whole of the budget. I've got several budgets, obviously, for agriculture.

Thank you, Chair. Minister, in response to a letter that Llyr, Jane and myself penned to you earlier last month, you mentioned that over 3,200 farmers submitted an application for the Habitat Wales scheme, and, in written questions, 3,254 was the number who'd expressed an interest. How many of those who have expressed an interest do you think will become full contract holders?

Well, that data is being analysed at the moment, so I don't really think I can give you—. You know, I wouldn't want to guess and then you throw it back at me, so I'd rather—.

It's not to throw it back at you, it's just to understand that, following 3,000 Glastir contract holders—. And now the Government has—yourself and the First Minister have—expressed excitement that this scheme has been opened to those who were not initially Glastir holders, but there will be potentially 50 per cent of Glastir holders no longer receiving support on this; I'm just wondering if the Government have understood the analysis as to the rowing back on some of the environmental schemes and support for farmers and the negative impact that could have.

So, I haven't had that data yet, but one of the pieces of data I have had, and I'll ask Gian Marco to say a little bit more about that, looking—. Again, I'm not going to give you a figure, but looking at the expressions of interest—as I say, officials are analysing at the moment—there are more hectares of habitat land that could potentially be supported than was greater under Glastir agreements. Am I correct? Glastir Advanced contracts.

That's correct, Minister. So, as the Minister said, we're looking through the expressions of interest at the moment, and, then, obviously, contracts will be offered and it will be up to the farmers, obviously, whether they accept the contract or not. All I would say—and it's partly coming to your earlier point, Mr Gruffydd—is that we were very clear about what the payment rates were in advertising the scheme, so I would hope that farmers who have applied have at least had a sense of what the payment rates would mean for their holding. But, as the Minister said, the current data that we're working through suggests that if you look at the expressions of interest—and, obviously, subject to those contracts being accepted—we would be bringing more habitat land under management than we were managing under Glastir Advanced. If that transpires to be the case, I think that's really positive, given that that was the aim of what the scheme was trying to do.

We've seen on the analysis, yes, there's a payment rate included within this, but some farms have made their analysis that they could be seeing an income reduction of 50 per cent from these payments specifically. That's a massive drop. So, there will be some who will meet be making the decision between signing up to this new agri-environment scheme, Habitat Wales scheme, and increasing productivity to cover the loss, therefore undoing the good work that has been done through their years of Glastir contract—their years within a Glastir contract—so, undoing what the Welsh Government actually want farmers to do by this scheme not being sufficient. Is that—

But surely that's best farming practice, and we would expect farmers to be doing that anyway.

But they're not being paid to do so, are they? So, farmers have been reliant on Glastir as an income stream for a number of years, that income stream has been removed or altered or negatively impacted.

It ended, yes, and I'll come to that point separately. But the Habitat Wales scheme is not a sufficient response to what the Glastir payments were. So, farmers are having a negative impact on their income, so they will make the decision either to sign up to the Habitat Wales scheme or to say, 'No, I'm not going to do that', and increase productivity, undoing some of the schemes that they were involved in during Glastir, therefore undoing positive environmental impacts that they've had over the tenure of the Glastir, undoing what Welsh Government want farmers to do.

But I've tried to say that I made it very clear from the outset that we could not just plug that gap that Glastir ending left. There's just no way. If I'd have had the £238 million that the UK Government took off me when they netted that agricultural support, I could have done it, but everybody has to accept that this is the reality; if I haven't got the money, I can't give it out. We're all in the same position. And, you know, as I say, I don't want to rehearse again the Welsh Government's financial position, but what I'm trying to do is make sure we get as much support out to our farmers as possible. Now, I've been told lots of times on farm visits, and I'm sure you have as well—. In fact, the last farm I visited, he said, 'It's great; I was never able to be part of Glastir—it's really good that I'm able to be part of Habitat Wales.' Now, I appreciate that not everybody who was in Glastir is going to be able to be part of Habitat Wales, if that's their choice, but unfortunately—I go back to what I'm saying—it's the reality. I don't have the budget to be able to plug that Glastir gap.

10:15

Just a final point, Chair, if I may. On the point that you make, that Glastir was coming to an end and we knew that Glastir was coming to an end, yes, the payments were from the European Union, but is there anything within the 'rules', in inverted commas, that prevented you from rolling over Glastir contracts at a reduced rate?

I suppose, if I had the money, I could have perhaps—. I don't think there's anything in the rules, but we just did not have the funding.

But then there's funding being made available in the next financial year for the Habitat Wales scheme, so Glastir contracts running from January, as Gian Marco said earlier, would be coming out of next year's budget, which is due to be announced, so there would have been money for it.

Minister, if I may—there are two elements of it. I think, one, clearly, is the budgetary constraints, and we took the opportunity, in looking at Habitat Wales, to look again at the payment rates. Again, going back to the question around analysis, we did get the payment rates externally validated to make sure that they did cover what the income forgone and the costs incurred were of managing the habitat, so there is an element of that. The legal framework situation is really quite complicated with exiting the European Union, so an extension of Glastir contracts was just not a viable possibility.

So, they couldn't have been rebadged it as something else but the actual mechanism of delivery would have been very similar—there would have been a new scheme, just where the bare meat of it would have been extremely similar to Glastir, so a lot of these farmers, who are now not going to receive support under the Habitat Wales scheme, wouldn't be facing the cliff edge, which you've previously said they wouldn't face.

When I said that about 'no cliff edge', I was talking about BPS specifically.

Just to say, that is exactly what we tried to do. We tried to take the key element of Glastir, which was the habitat management, and tried to create a scheme that provided interim support in 2024 ahead of the sustainable farming scheme coming in, to make sure that not only did we not lose habitat that was already under management, but ideally that we brought more habitat land under management. Now, as I said earlier, if the preliminary figures that we have turn out to be final figures once contracts are issued and accepted, and if the scheme has brought a greater area of habitat land under management, I think that has to be welcomed, because that is a step forward in terms of bridging that gap, if I can say that, to SFS coming in.

Because at the moment it's significantly higher, but we need to work through the expressions of interest, obviously.

I'll pick up on SFS. I'm just wondering, moving on to SFS, then, when are we likely to know what the budget is for the SFS and what the payment rates are likely to be, because you've indicated that that won't be part of the consultation.

No, it won't be. We'll be launching the consultation tomorrow. I don't think I've actually said that anywhere else. We'll be launching the SFS consultation tomorrow, which is very exciting, and obviously we'll have a 12-week consultation for SFS. I'm completely unable to confirm the payment rates until the scheme design is finalised, so it's very likely to be next summer, when the payment rates will be confirmed. But the consultation does include detailed information on the proposed methodology we will be using for the universal layer of this scheme, and stability payment, as you'll know. I've been working with your designated Member from Plaid Cymru as part of the co-operation agreement in relation to this. So, that will help farmers understand how we propose to calculate their payments throughout that transition period from 2025, which is when SFS will start, up until 2029. It's a meaningful consultation. I don't want anybody to think decisions have been made. So, the responses to the consultation—. Obviously, other factors, such as the budget, for instance, will have a key role to play. That will inform the final scheme, and that will obviously then impact on the payment rates and the methodology.

So, can you confirm that when you are in a position to articulate what the budget and the likely payment rates are, that there will be stakeholder consultation on those rates—that it's not just going to be a Government saying, 'This is what you get'?

10:20

Well, obviously, that—. Let's see what comes out of the consultation. There'll be ongoing discussions with stakeholders. I'm not sure we'll be going out for formal engagement. I don't think that's—

That will be a discussion after the consultation responses, I would say, as to whether we need further—

You must accept that not knowing the quantum of any funding associated with some of these activities does undermine slightly, doesn't it? And I know we don't live in an ideal world, and I get it, but it does devalue, slightly, this process. And I'm not questioning your integrity around listening to what you get back. But it is a bit of a flaw in the system, isn't it, and it grates, I'm sure, on you, as much as people outside, that you're not able to give people the full picture when you ask them questions about the future of their industry.

So, I think one of the reasons for having the stability payment is that that will provide support for SFS in advance of additional income from the next two layers of SFS, so the optional and collaborative layers. And I want to provide as much stability in the very unstable and uncertain climate that we're in—as much as possible. So, what my commitment is is ensuring that no farm or farmer that enters SFS will receive less financial support than they would have received if they hadn't entered the scheme. So, that's the reason for having that stability payment, so that at least they have that certainty. 

Sure. So, can I ask, then, because, obviously, those participating in the SFS will be paid for certain activities and delivering public goods—. Now, the whole income forgone principle is one that we're familiar with, but we have a situation where you may be asking farmers to plant trees on their land. Now, obviously, you will provide an income for that activity, and to recognise the fact that, maybe, they're not doing other things that they could be doing. But in what way will the future system recognise the potential devaluation of that land, because land with trees on it isn't as valuable, is it, as land that you might use for grazing cows for dairy, for example? Where in the system is that loss, effectively, to that individual farm recognised?

You see, I don't come at perhaps the angle that you're coming at. I don't see trees as being devaluing to the business, to the farming business. So, there's this constant—particularly in the summer, when trees was sort of the hot topic, if you like—'I'm going to have to choose between food production and trees.' And that's not the case at all. We're not asking them to plant trees—. Well, we want them to help us reach the target of the new woodland, but it's also about farming for the future, isn't it, and having trees as shelter in very difficult climate situations and the weather events that we have. So, I don't see it as that, and I don't think that's part of what we're trying to do, that devaluation—[Inaudible.]—process.

But you can't deny that land will be less valuable if it has trees on, than if it was pasture land that's used to graze cows for dairy farming. There are people out there who've actually done this assessment, in terms of valuing, potentially, what their land would be worth, and it's considerably lower if it has trees on it. So, all I'm asking is: if you're asking these people to plant the trees, then how are you recognising that in the financial way that they're supported?

Just to say—. So, we will be setting out in the consultation our thoughts on the payment methodology. And I think part of that, as you've said, is to look at costs incurred and income foregone. One of the areas that we have talked about in the past, and will be asking for views on, is around social value as a part of that methodology. And I think, for us, setting out our current thoughts in the consultation is very much an opportunity to hear back from stakeholders about what their views are in relation to the methodology. Because what we can't do, until final decisions are taken by Ministers on the design of the scheme, which won't be taken until after the consultation is done—we can't, then, do the payment rates calculations, because the payment rates are based on the final actions that will be included. So, there will be elements of the methodology that will look at things like social value, or we will ask questions around social value, and it's very much an opportunity, I think, for stakeholders to engage in that discussion. 

Social value and land value are two different things, aren't they? So, where in the consultation—. So, will you be asking about land value, and the impacts—potential impacts—some positive, possibly, in some contexts, but certainly, in terms of tree cover, potentially negative?

10:25

There's an opportunity for stakeholders to look at the methodology and to come back with comments, including on areas like land value, if that's what is—

Okay, thank you, Llyr. Now, you mentioned, obviously, you're launching the scheme tomorrow. Any particular reason why you didn't make an oral statement in the Chamber on this issue? Because, obviously, it's a very important issue.

It is a very important issue, but we've had lots of statements around it, and this is just the consultation, so I don't think I needed to make an oral statement about the consultation. I've done an oral statement on the sustainable farming scheme ahead of—. I'm trying to think when I did it—this term or the previous term. But this is just the launch of the consultation. I don't think you need an oral statement just on the launch of the consultation.

Just quickly, just following up on that point you mentioned at the beginning around the Habitat Wales scheme—that announcement was on 21 July, which was a Friday, which, again, avoided the statement within the Senedd. I think I wrote to you on that point—

And, again, tomorrow we're hearing that the sustainable farming scheme consultation is being launched. I just think, given that the sustainable farming scheme is going to be the single biggest policy change for agriculture in a generation under devolution, a step away from the common agricultural policy, a step away from BPS, that it's not being oral a statement—I just think that's a sad state of affairs, that we're not given the opportunity to scrutinise the consultation, when it's launched, in the Chamber. That's just my personal opinion as a lay backbencher.

Well, my personal opinion is it's a consultation. If you look at consultations that have been launched—we're constantly launching consultations. I don't see the necessity to have one. We've had lots of opportunities to discuss sustainable farming. We've just had the Agriculture (Wales) Act 2023. What was the principle underpinning that? It was sustainable land management. So, we've had lots of discussions about it. This is a consultation. I'd be very happy to do an oral statement after.

Just going back to Habitat Wales, I mentioned how quickly—. I really want to put on the record praise for officials who did it so quickly. I was trying to remember whether it was it June or July when I had that discussion with officials about, 'We do need to do something.' I thought they did it really quickly. There just wasn't the time. If you look back at my many years in Government, I rarely, rarely do written statements on a Friday. It's something I absolutely avoid. But, unfortunately, because I had committed to doing something before the Royal Welsh Show, we had to do it then. And I don't think there would have been anything to scrutinise, really, at that point, about Habitat Wales, and we've had lots of scrutiny, obviously, since then, and I'm sure we will continue to have more.

Diolch, Cadeirydd. Can I ask about the rural development programme and funding allocated to that, and the extent to which that is being able to be spent this year? We've heard some good news. I'd like to hear from the Minister about it.

There's excellent news. I haven't been asked about the rural development programme for a little while. I think because I said I was a 100 per cent confident that we would spend all the money, people weren't interested in it. So, I'm very glad to be asked that.

As you know, we've got to spend all the funding by the end of this month, and it's a significant amount of money. I'm not quite sure what date this was. I think it might have been 1 December, so we've still got another month to make sure all our beneficiaries spend the money, but the total programme to spend has exceed £842.7 million, which represents over 99.6 per cent of total programme value, of which £562.16 million is EU funds. So, again, a massive 'thank you' to my officials, but also to all the beneficiaries who've managed to spend that money within that period of time, because there were lots of challenges, particularly COVID, where we had to make sure that beneficiaries were able to spend that money after, obviously, a period of, perhaps, when they couldn't spend it. So, I am really pleased to be able to share that good news. So, thank you for asking me that.

I suppose we could interrogate what happened with the 0.4 per cent. [Laughter.]

Thanks, Chair. Just before I move on to agricultural pollution regulations, just on organic-specific support. You've mentioned before, in the Chamber, dedicated support for organics, as that's missed in the Habitat Wales scheme. Have you got any further information today on dedicated support for organic farmers?

So, I will be bringing forward some dedicated support. Again, it will be announced—. Well, I'm hoping to announce it next week, but certainly in January, if I can't next week. As I say, it won't be a significant pot of money, but I felt it was important to do that. Certainly at the Royal Welsh I was lobbied very—not aggressively—assertively around organic farming, so there will be some money, but, again, it will be tied up in the draft budget.

10:30

Thank you. Moving on, then, as I said, in a written statement on 5 October 2022, you mentioned, on the co-operation agreement and agricultural pollution, that you're also making available up to £20 million extra funding, and then, in the Chamber last week, during scrutiny, I asked you about this and your words were:

'The intention with it is to open a further window for the yard coverings scheme, and we will also consider further application windows for 2024, once the budget availability has been confirmed.'

Does that mean that that £20 million announced back in October 2022 is at risk?

Well, I said in October 2022 'up to £20 million'. I'm looking at Gian Marco now. I think it was always the intention that the majority of that funding would be next year's budget. I think we've spent some this year. 

That's right. We've made some available this year, including things like yard coverings, but the majority—

—was intended to be next year.

So, that £20 million wasn't a £20 million pot, but it was £20 million distributed amongst other schemes.

You told us earlier that there's no way that you could predict that you could have money for the next financial year. Now you're saying you've already allocated some.

Yes, that's the point I'm making. But you weren't able to give any commitments on money for next financial year in other spheres, because you don't know, you told us, what you're going to get.

No, but we knew it was part of—. It wasn't a specific budget line, for instance; it was part of rural investment schemes. Am I right?

There is also an element that a lot of this investment is more likely to be capital than revenue, which makes the situation slightly easier.

Thank you. Will there be any guidance for the enhanced nutrient management approach published before Christmas?

Okay. Are you content that the timings are appropriate for the scheme to start on 1 January?

Yes. Let's wait for the guidance, and if people have any concerns, obviously we can answer their questions, but they will have up to 31 March. Farmers will have three months to submit a notification to Natural Resources Wales. So, yes, I'm confident there'll be plenty of time.

Coming back a step, then, to the analysis undertaken for the licensing and non-licensing schemes for the derogation limit, I think the word used is more 'pragmatic' than issuing licences. I'm just wondering what analysis has been undertaken to show that the approach taken, via yourselves, through the co-operation agreement, does lend itself to being more pragmatic than the issuing of licences around derogation.

You'll be aware the regulatory impact assessment was published alongside the regulations, and I think with the enhanced nutrient management approach that we've taken, the impact on the effectiveness of the regulations is likely to be minimal. That's because it's going to be a temporary measure, just for the next calendar year, just for 2024. There are significant controls to mitigate environmental impact, and they're more proportionate, I think, to the time-limited nature of the approach. We did explore the licence approach at length. Certainly myself and Cefin Campbell looking at it thought it was too much of a burden for everybody, I think—for farmers, for Government, for NRW—and this was a much more measured approach. And certainly for NRW, I think it could have had some potential impacts on their budget, particularly at the current time. So, I think that that was the balance that we decided upon.

Have you done any analysis as to how many farmers will be seeking to use the higher level of derogation in compliance for the next 12 months?

Did we do anything specific? I remember we did about the licensing. That figure's in my head, but I don't know if we did it on the—

We have some internal figures that I don't think I'd be confident enough to share publicly. If I may, Minister, I think part of the benefit of the licensing approach will be for us to better understand, actually, the number of farmers who feel that they need to apply above the 170 kg limit because of crop need on their holding. It is one of those areas where, whilst, as I said, we've been able to make some indicative internal figures, we don't have very strong data. So actually, part of the enhanced management of nutrients approach will be able to show us how many farmers actually, based on their own calculations, feel that their crops need above the 170 kg. 

10:35

So what happens in 12 months' time when this derogation reverts back to 170 kg? Is that the plan—that within 12 months it reverts back to 170 kg, and the upper derogation limit no longer exists for farmers?

Well, that's the plan. Obviously, it's a temporary measure for 2024. We'll have to start the review of the regulations. Obviously, we've committed to reviewing the regulations every four years. We'll have to start that, so I suppose that will be taken into consideration during the review. 

Has any analysis been undertaken on the competitive disadvantage Welsh farmers will have with those across the border, where the derogation limit is still at the upper level, and the disparity between Welsh and English farmers on that?

No. So, English farmers reaching a higher derogation limit are able to potentially have a greater return. There's no analysis been undertaken on the competitive disadvantage.

Okay. Assessing alternative approaches is something that I’ve pushed on previously, having—us as a committee—visited Gelli Aur. Just assessing where we are on alternative approaches. 

The assessment’s been done on—. Was it four we had? Four or five? I'm trying to think. Officials have had a look at that. Others are coming forward and I understand that they will obviously be assessed as well. I haven't received any advice from officials for quite a while now on alternative measures, so I'll be very happy to perhaps update Members in the new year. I think it'll probably be well into the new year. 

Is the door still open to a change if an alternative measure comes forward that satisfies what the Welsh Government are looking to do and the deliverability for the agricultural community? Is that door open?

Okay. And then the statutory review within the first 18 months—I'm just wondering what approach you'll be taking with stakeholders to assess their feedback. Will there be a formal consultation? Will there be a generic feedback process? What are the Welsh Government looking to do to assess with the statutory review following the first 18 months?

We'll begin that review in the new year. Initially it will be engagement with Natural Resources Wales and with stakeholders. I would imagine at some point there will be a consultation, but I wouldn't think that would be the initial response—it will be informal, with, as I say, NRW and our stakeholders. What we need to look at is the effectiveness of the existing regulations, and the alternative measures and proposals that we've got at that time. As I say, officials will be giving me advice then. We need to take account of scientific and technical data at that point as well. Obviously, we've still got March 2025, when we could amend the regulations, so there's that opportunity there as well, depending on what comes out of next year, and the temporary measure that we've brought in for 2024. 

Diolch, Gadeirydd. We had a very informative session from the chief veterinary officer, Dr Richard Irvine, back in—. I think it was about two months ago. I have to say, his breadth of knowledge was very impressive and reassuring. But there are a number of questions that emerged from some of the discussions we had from him. First of all, on the UK exercise to assess preparedness for animal disease outbreaks, which he referred to, can I just ask you whether there are any gaps identified in preparedness, whether there's work being carried out as a result of the exercise, and whether there's sufficient capacity for an effective system of keeping out notifiable diseases in the UK and Wales?

Thank you. I'm sure Dr Irvine is very happy to hear you say that. He's been with us—. When did you come? March?

So he's settling in very well. As you say, his expertise is very much needed and welcome. Obviously, he attends the national preparedness events, and there was one in London back in September that I'm sure he told you about at the technical briefing he did with committee members. It's particularly around gaps, and I'll ask Richard to say a bit more, but there are further workshops that are required, for instance to discuss vaccination. So obviously, the focus of the preparedness is on the disease—I even hate to say the name 'foot and mouth disease'—and what would happen if we had an outbreak of FMD alongside another disease. This one, I think, was avian influenza, which, as you know, has been a massive issue for the last two years right across the UK, not just here in Wales. Richard attends many events along with the other CVOs from across the country. I know a two-day live play exercise is going to be held in the spring. I remember when we had one in Wales, before your time, Richard, but you go to it and you get completely—. You think it's really happening, and it's a really good way of preparing Government should such an awful event happen. So, I think the main gaps were around vaccination and—. I don't know if you want to say anything else, Richard.  

10:40

If that's okay with you. Thank you, Chair. Diolch. Bore da, bawb. As the Minister quite rightly described, we had a national table-top exercise that was held for two days during September. That was UK-wide, looking at concurrent foot and mouth disease and avian influenza. As a result of that, there are some ongoing workshops, as the Minister said, to continue to assess specific areas—so, vaccination being one, and other matters relating to things like licensing being another. That is work that is ongoing. When those workshops have concluded, there then will be a summary report on findings from the two-day exercise, as well as the additional workshops that have been specifically designed to further evaluate areas that came out from the table-top.

As the Minister rightly said, we continue to grapple with avian influenza across the UK. Thankfully—I am very thankful and touching wood, keeping fingers and toes crossed—we are in a very different position with the epidemiology of bird flu this winter, as compared to the last two autumn-winter seasons. Bird flu risk across Great Britain for wild birds is currently assessed as 'medium', which has reduced from 'very high'. That 'medium' does not mean that it has gone away. 'Medium' means 'occurs regularly' and that's what we are seeing through wild bird surveillance for avian influenza—periodic detections in different parts of GB, which demonstrate that infectious virus that threatens all poultry is still out there. Thankfully, also, the risk to poultry has reduced to 'low'. And again, 'low risk' does not mean 'no risk'. So, fundamentally, the key tenet to protect all flocks, whether you've got five birds in the backyard or 50,000 birds in a commercial system—. The fundamental tenet of 'keep it out' remains as relevant today as it has for the last several years. I thank all poultry keepers for their strenuous work to keep disease out and protect their flocks. Only by maintaining stringent hygiene and biosecurity measures on a daily basis can we ensure the protection of those birds.

Can I just ask, how do you disseminate that latest information to poultry keepers? 

Absolutely. Over the summer months, we held three workshops and webinars, which were tailored to specific poultry sectors: one for commercial poultry keepers, one for keepers of game birds and one for backyard keepers—so, small flocks, as the name suggests. We also had a small seminar session at the Royal Welsh agricultural show, where we invited key stakeholders and 'players'—actors in the poultry sector—to join us. We continue our comms through the Welsh Government website, and also the Animal and Plant Health Agency are continually providing communications out through their channels. Crucially, one of the key ways that poultry keepers can ensure that they receive information is to be registered on the poultry register. So, I, again, thank those poultry keepers who are registered. If you own, currently, at the current state of play, more than 50 birds, it is a mandatory legal requirement to be registered. If you have one or more birds, it's a voluntary requirement up to 50, but again, if you have that small number, please do register, because it means that you then will receive those notifications and information. And, as I say, we continue to provide those communications on a regular basis, and particularly at this time of year, when we anticipate bird flu. But as I mentioned earlier, the risk levels are thankfully lower, not gone away, but different and, therefore, we're not seeing the number of confirmed cases in poultry flocks that we have in previous years.

10:45

Okay. And with regard to the development of a possible bovine TB hotspot in Anglesey, what are the reasons for that? 

The evidence and data that we have at the moment are that cattle movements account for at least three quarters of new herd breakdowns on Anglesey. As you know, we've had a project on Holy Island, where we do know that there is a badger population. We've just finished the end of year 1 of a four-year vaccination programme, because we want to make sure that it stays on Holy Island and we are able to manage that. So, unfortunately, that is the data that we have at the moment. So, Richard and the team are dong a significant piece of work around Anglesey, because, as we know, it is a low TB area hotspot. I think I'm right in saying that there was no TB at one time on Anglesey, so, unfortunately, we have got that hotspot now and we are doing a significant amount of work around pre-movement testing, et cetera, but we do know that it is absolute fact that three quarters of new herd breakdowns are due to cattle movement.

Okay. And with regard to the process for farmers dealing with TB when they've got an outbreak, the National Farmers Union says that farmers really want better contact with their case vet and also their private vet being involved in the development of cases. So, how is the Welsh Government communicating with the NFU on that and how would that be facilitated?

Well, that's absolutely what we're doing. I absolutely accept that partnership working is really important; nobody can eradicate TB on their own—no Government, no vet, no farmer. We really need to work together, and so that sort of triad of farmer, Government vet and private vet is really important. So, you'll be aware, perhaps, of the Pembrokeshire project, Hefin, that we've had, specifically, and Sam was part of that work that we did to bring the project forward, and that's absolutely the focus, because, obviously, we've got a hotspot in Pembrokeshire and that triad of working together is at the heart of it and it's really successful, I think. We've got, I think, six veterinary practices working with 15 farms around that, but I think that partnership is vital. NFU Cymru know that that's our position as well. I'm meeting with both the farming unions tomorrow and I know that TB is always, unfortunately, on the agenda. 

You'll be aware, perhaps, that we've got—I've forgotten what it's called, TAG—a technical advisory group being formed that Glyn Hewinson, who is an expert in this field, is going to be chairing. I think we've been very, very fortunate to have Glyn to do that. Obviously, they will be looking at this issue for us as well. I made a statement—I'm trying to think when it was—just last month, I think, on the next stage of the five-year eradication programme. So, it's an area that keeps Richard and the team incredibly busy, but we still have that ambitious target of eradicating TB from Wales by 2041.

Okay. Thank you, Hefin. Before I bring in Vikki Howells, Llyr, just very, very briefly on this.

Do you agree with Labour's shadow DEFRA Secretary, Steve Reed, when he said that culling badgers showed, and I quote:

'enough reason to see it was a way of "preventing transmission"'?

No. Not from the evidence and advice I've seen and the discussions I've had.

Do you not look jealously at the situation in England, where the last quarterly figures show a 21 per cent drop, I think, in slaughter rates, which is 10 times higher than here in Wales?

10:50

No, so I'll expand a little bit, if that's all right.

Just very briefly. I'm conscious of time. We've got another few areas we want to cover as well.

I appreciate that very much, Chair; I'll be brief. I think when we're looking at TB statistics, one of the key things is to ensure that we've got direct comparison like-for-like on data. So, I accept that there are lots of statistics published, and Welsh Government publish those for Wales on a quarterly basis. Anyone can look at those. But that crucial element is ensuring that there is that like-for-like comparison when assessing data of any disease, but crucially TB, because of its import and impact. It's obviously one that gains a lot of focus.

Diolch, Cadeirydd. Good morning, Minister. You won't be surprised to know that my questions to you this morning are on animal welfare. And firstly, with regard to the Animal Welfare (Kept Animals) Bill that was unfortunately withdrawn from the UK Parliament, I was just wondering what the Welsh Government will do now to tackle the issues that the Bill aimed to address in Wales, that are within competence.

It's a real disappointment to me that the Bill did fall. You could see it coming, unfortunately, because we'd done a great deal of work, particularly officials with their counterparts in DEFRA, but also at ministerial level we'd done a huge amount of work around that, so it was really disappointing. But I'm pleased that we are able to work in collaboration with DEFRA. I haven't had the opportunity to meet the new Secretary of State yet, but I'm very keen to continue that work, and I'm sure the officials are, on the Animal Welfare (Import of Dogs, Cats and Ferrets) Bill. That's now a private Members' Bill and the First Reading took place last week, and hopefully by the spring we'll have the Second Reading and, as I say, officials are working on that.

Interestingly, the previous Secretary of State has now brought forward a presentation Bill on livestock worrying, which is fascinating, because it didn't happen when she was the Secretary of State, but I'm very pleased to see that, because we know livestock worrying is a matter of huge concern for our farmers. I don't think personally that the legislation is fit for purpose, so I'm really pleased to see this presentation Bill coming forward, but I've made it very clear to DEFRA that Wales absolutely wants to be part of that Bill. I think it's really important to say that.

The banning of live exports for slaughter and fattening Bill is also making its way through the LCM legislative process. Again, it's a DEFRA Bill, but it will apply to Wales. So, those are the three main parts of the Bill that fell that we're working on at the current time.

Thank you for that update, Minister. And if I can move on to responsible dog ownership next, and I know that you recently held a multi-agency summit on that. Could you give us some reflections on that summit and the next steps, please?

Yes, thank you. Well, I did have the summit. It was really beneficial, I think, to bring everybody together, because, again, sometimes people can perhaps work in silos, and I wanted to make it very much about the levers that we have as a Government and what more we can be doing around responsible dog ownership. I did publish a written statement last week—I don't know if you've had the chance to look at it—around the outcomes of it, and I think one of the areas—. The police were at the summit, and I think it's really important that they look at how we can ensure that all dog attacks are reported, because I think at the moment, there's a definite underreporting. We looked at what we could do to update and futureproof the dog regulation regulations. We want to introduce formal recording of dog attacks and livestock worrying. I'm going back to what I was saying about the piece of legislation that's currently—well, not currently—but the presentation Bill that Thérèse Coffey is bringing forward. We're considering dog control notices and also identifying funding for the Wales-wide serious organised crime illegal breeding investigation and intelligence work, which I think will really help us here.

We are going to have another—. I thought 'summit' was probably too grand a word for the next step, but we're certainly going to bring everybody back together. As you know, just before we had the summit, there was an announcement a bit out of the blue around the Dangerous Dogs Act 1991, in particular in relation to XL bullies. I welcome that announcement. I think it was very important that the UK Government have at last taken some action. I am concerned about unintended consequences, and we are starting to get a little bit more information about that. So, Richard and the team, again, are working very closely with DEFRA around that.

We were very fortunate at the summit, and it was thanks to Hefin, to have Emma Whitfield there, whose son tragically was killed after an XL bully attack. She brought another level to the summit in a way that was so powerful. So, my observation of the summit was just how good it was. It goes back to what I was saying about partnership working, bringing everybody together to make sure that we as a Government—. Because a lot of the legislation is reserved to the UK Government, but we've got powers too and we need to make sure that we're absolutely using them all in the right way.

10:55

Thank you, Minister. I know it's an issue that is of concern up and down Wales, so thank you for that update.

My final question is on 'Our Animal Welfare Plan for Wales 2021-2026'. Dr Irvine told the committee that work has started to evaluate that plan in preparation for the next animal welfare strategy. So, have you got any reflections on this evaluation and would the committee also be able to have sight of that evaluation at the appropriate time?

So, obviously, I wasn't at that technical briefing, but I can't imagine that's what Dr Irvine did say. I'm sure—. Were you talking about the framework?

Yes, okay. So, there are two different things. So, the animal welfare plan is the plan that I brought forward in November 2021, which is a five-year plan and it's based on the manifesto that we were elected on, and that's to bring in all the programme for government commitments and all the other work that's taking place across the animal welfare part of the portfolio into a five-year plan. 

I think what Richard was talking about in relation to an evaluation was the animal health and welfare framework—

Yes, which is a 10-year plan that finishes in 2024, and I think at the moment, we're looking to procure an outside organisation to evaluate that for us. I think that will be done at the end of 2024, probably going into 2025. I would imagine, that, yes, it will be published.

But the animal welfare plan is what I work on with officials to make sure that we deliver all the commitments that were in our manifesto and other things, so, looking at codes of practice, looking at the dog breeding regulations. We've just gone out to consultation last week on the animal exhibits. That includes looking at greyhound racing. So, that's part of the welfare plan. So, that's not being evaluated. That's just, obviously, every year, we look at what we've done in that year of government. So, we've come to the end of the second year now in November 2023 and then we've just started the third year. Does that make sense?

It does, yes. Thank you very much, Minister, for that clarification and that update. Thank you, Chair.

Picking up on the UK Government's Animal Welfare (Livestock Exports) Bill that was in the King's Speech, what's the Welsh Government's view on that? Because, obviously, it is going to limit export for farmers in Wales and that'll mean more supply on the domestic market pushing prices and incomes down.

So, I am in support of it because I think it's very important how we do manage animal health and welfare from the point of view of looking at how they're transported. So, I am in support of that and we're looking at that very closely, obviously.

May I add one specific point? It's important to remember that that piece of legislation relates to live exports for slaughter and fattening specifically. So, I appreciate that the committee are well versed, but there is an important distinction, as I say, as the phrase goes, to be exporting product on the hook rather than on the hoof.

Yes, no, I understand that fully. Okay, thank you, Chair. There we are, maybe I shouldn't have asked.

Moving on to fisheries, Minister. Can you give us some more information on what you described as

'gradual but positive effect of additional quota'

for Welsh fisheries? Can you tell us a bit about the uptake and the value of the additional quota maybe?

So, you'll be aware that I've got a new ministerial advisory group on fisheries, and officials are exploring—. We've had early meetings and discussions with stakeholders around that, making—. Because, for me, it's really important that that additional quota is caught by Welsh fishers. So, we're looking at what advantageous opportunities can be levered in by trading our additional quota stock. So, the function that officials are looking at with the stakeholder group is how we make sure that that absolutely happens. So, we will be bringing forward a formal policy at some point, and they're looking at how that additional quota is distributed to make sure the more established members of the industry are able to benefit from that. But I think what I want to do is make sure that sustainable development continues to be underpinned. I think we were ahead of the game, really, when I used to go to December council. If we were still in the European Union, I'd be getting ready to go to December council in Brussels. So, I want to make sure that that still is underpinned, going forward.

11:00

So, how are you promoting this amongst the sector, then, and what are the barriers maybe that might be in the way of fishers taking up these opportunities?

So, I think the main barrier is probably the market chain, and that's really difficult to overcome. But, as I say, we have discussions with that ministerial advisory group, we make sure that the industry is aware of what's going on. We've obviously got the Fisheries Act 2020, we've also got the joint fisheries statement that we published to make sure the information that we have is very transparent and open. But the group is probably the main way we communicate that information. 

Okay, thank you. So, what's the Government doing to encourage and influence the development of operational agreements for fisheries policy management, specifically the power to determine fishing opportunities?

So, again, officials—. There's a senior steering fisheries group now at a UK level, and my officials sit on that. They have oversight of the development of the suite of operational agreements. It's very much a part of that steering group work programme. Every administration feeds into that. So, collectively, we've signed off control and enforcement and UK fisheries monitoring centre operational agreements. We've progressed work on international and funding OAs and, just last month, a memorandum of understanding was agreed with the Isle of Man. So, this is part of the common frameworks programme that came out of leaving the European Union.

You mentioned you have officials contributing to that. How are Welsh stakeholders' voices reflected or gathered in terms of their involvement in this as well?

So, I go back to the group. That's our main vehicle. And I think that's why we had to change it a bit. I think the group had got a bit stale and it was really important, after 10 years, to bring forward new—. I think we just rearranged the letters of WMFAG to MAGWF, but it was really important, I think, to have a little bit of a refresh. But that's our main way of—.

Okay. And then, obviously, we're particularly keen for Welsh interests to be represented in the development of the current draft joint fisheries management plans. How is that being—

Really good. Really good. So, it's a hugely challenging and ambitious piece of work. I think there are around 30 FMPs, so what I've said to officials is that they need to concentrate on the ones that are the most applicable to Wales. So by, I think it's the end of—. Well, I think it's before Christmas—I've certainly signed my bit off—the bass and king scallop ones—. Those are the first two, so a huge amount of work has had to go into it, but I'm really pleased with the way that work has progressed. It has been quite challenging, we've had to have ministerial bilaterals to wade through a few of the problems, but I think officials work very well and they've been very much engaged as appropriate—on other ones as well, but those are the two that I thought were most important for our fishing industry here in Wales. 

Minister, just to add, I know Welsh stakeholders are very much involved in the process as well, including through the consultation on the two draft fisheries management plans, so we feel we're getting a good airing of the issues that are specific to Wales in the development of those two plans. 

Yes. And I think, once they are published, we need to then make sure we've got specific stakeholder groups around—so, one around bass and one around king scallops to make sure that we're absolutely at the heart of those discussions. 

Thank you, Chair. Thank you for joining us this morning, Minister, and I apologise for my late arrival. I have some questions around food policy. Could you provide details of discussions that have taken place between the Welsh Government and the future generations commissioner on food policy since the fall of the Food (Wales) Bill, please?

Yes. So, you'll know, as part of Peter Fox's food Bill, I was very keen to have discussions with—. We had a new future generations commissioner who came into post this year. I've met with him three times now. So, I met with him initially probably before the food Bill fell. I then had another meeting with him at the Royal Welsh, and I last met him probably at the end of September, I would say. He is very keen to look at how he can work with me and my officials—and my officials have met with him far more frequently than I have—to see how we can work together to raise issues around food—which is a really complex issue; we all think it's quite straightforward, but it really isn't—particularly around public services bodies and public services boards as well. So, he has published a report called 'Cymru Can' where he sets out his long-term vision. And I do think, looking at that vision he brought forward, it really does help public services boards recognise what needs to be done in relation to food issues and policies.

11:05

Okay. Thank you. We know in the past you've not been persuaded by the suggestion of a national food strategy; could you provide a response to the commissioner advocating that the Welsh Government develop a long-term food strategy?

I still don't agree with that. I think it's fair to say Derek and I have agreed to disagree. You know, that's his view; my view is that we don't need a strategy. I think we both respect that. What would a strategy do that we can't do already? And I think that was—. Peter Fox had some really good ideas. I met Peter just a couple of weeks ago, I'm still having discussions with him, because what he brought forward in the food Bill, a lot of it, we were already doing, we could already do and we didn't need legislation to do it; so, it's really important to build on that work that Peter did. Obviously, we've got the community food strategy as well and I think it would be good to link those two together. I don't think we need another strategy that might just sit on the shelf and not do anything.

Okay. Thank you. On the development of the community food strategy, what are the potential policy opportunities identified by the work on drawing together all the Welsh Government's food-related policies into one document, and how will they be addressed?

So, we have done that. So, obviously, again, it's part of the co-operation agreement with Plaid Cymru, and Cefin and I have been working on this to bring a paper forward around all the food policies that we have across Government; so, that's one paper that is more or less ready to, probably, go out. The community food strategy, again, it was—. I think we had a bit of a slow start. Mainly because you can't do—. You know, every programme for government commitment, you can't do it in the first year of Government, but I think the co-operation agreement has given us a bit of an impetus and Cefin and I have worked on it over the last year particularly. So, we are hoping that we will be able to publish it next year, so, in year 3 of the Government, but it won't be published until we're both happy with it and when it's ready to be done. I think, again, it's about partnership work and it's about bringing our stakeholders in to make sure we can focus on ways of working together, we make sure we enable others to work—it's very much a bottom-up strategy, I think it's fair to say—and we can advance that shared agenda. I don't see it as being a sort of traditional, boring old strategy where Government tells people what to do; I think it's very much about working together.

Okay. Thank you. The committee would be grateful for further detail on the cross-portfolio forum of senior officials on food matters. How often does the forum meet, how long will it be in place and are agendas and minutes published for transparency?

Okay. So, this was an internal meeting. So, the first meeting was an internal meeting of every Minister who has food in his or her portfolio; and I think practically every Minister was around the table because everybody's got a little bit of food in their portfolio or interest in the way that food policies are formed. So, the First Minister chaired that. Out of that came a senior official group, which I think probably is—. Which Gian Marco chairs, so he'll be able to tell us far more than I can around that. I think it's met a couple of times, but, as I say, I'll come over to Gian Marco in a minute. So, again, out of that, we're going to look at—. We don't want Ministers working in silos around food, we want to bring it together, and that was the whole point of the First Minister bringing it together in the first place. Again, I will produce something to be able to share with colleagues, hopefully early in the new year—I think I was hoping to publish it at the winter fair, actually, but, because of budget issues, it was deemed to be best to wait until after the draft budget next week—but I will ask Gian Marco if he can give us an update on the group he chairs.

Yes, very happy to. As the Minister said, it brings together, basically, senior officials from across Welsh Government who are involved in food-related policies. The discussions so far—we've had two meetings. The discussions so far—. And there's a lot that happens, obviously, outside of the meetings in terms of co-ordination. But the discussions so far have been based around those two products that the Minister has talked about, so bringing together all the food-related policies that Welsh Government is involved in into one coherent document for clarity and transparency, and then looking at which of those activities and where the gaps are in relation to the community food strategy. So, the aim of the group—. And we have got a terms of reference and all the internal documentation that you would expect. But the aim of the group is very much to help bring that co-ordination and that strategic overview on the various issues, and then I don't think there is a specific commitment for Ministers to meet again, but, if it's needed on an ad hoc basis, the Minister for rural affairs has agreed that she will bring together her colleagues, if needed.

11:10

Yes, I will. I would do that. I wouldn't—. I think the First Minister will leave it to us now to deal with.

Just one very quick question, if I may. I was just wondering if there will be funding from 1 April for food partnerships. I know they've been quite successful and they're starting to make an impact. That benefit could be lost if the rug is pulled out of it. You've mentioned support before; does support stretch to financial support from 1 April? 

So, I think that sits in the Minister for Social Justice's portfolio. I have been having—. Obviously, going back to what I was saying about so many Ministers having—. So, we are having that. But I'm sure that will come out after the draft budget next week.

Thanks, Sam. I'm afraid time has beaten us, unfortunately, so our session has come to an end. Thank you for being with us this morning. It's been a very useful session—useful for us as a committee in scrutinising your policies, going forward. 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.

Will do. Thank you. If I can just say, I wasn't aware that the evidence paper was late. I will certainly look into that and find out what happened. Thank you.

Thank you very much indeed for that, Minister. Now, we'll take a short break to prepare for the next session.

Gohiriwyd y cyfarfod rhwng 11:12 ac 11:20.

The meeting adjourned between 11:12 and 11:20.

11:20
5. Craffu Cyffredinol ar Waith y Gweinidog: Gweinidog yr Economi
5. General Ministerial Scrutiny: Minister for Economy

Croeso nôl i gyfarfod o Bwyllgor yr Economi, Masnach a Materion Gwledig. Fe symudwn ni ymlaen nawr at eitem 5 ar ein hagenda, sef craffu cyffredinol ar waith Gweinidogion. A'r Gweinidog nesaf sydd gyda ni yw Gweinidog yr Economi. A gaf i estyn croeso cynnes iddo fe a'i swyddogion? A chyn ein bod ni yn symud yn syth i gwestiynau, a gaf i ofyn iddyn nhw gyflwyno'u hunain i'r record? Gweinidog. 

Welcome back to this meeting of the Economy, Trade and Rural Affairs Committee. We'll move on now to item 5 on our agenda—general ministerial scrutiny. And the next Minister that we have is the Minister for Economy. And could I extend a warm welcome to him and his officials? And before we move on to questions, could I ask them to introduce themselves for the record? 

Bore da, Cadeirydd. I'm Vaughan Gething, Minister for Economy. I'll move from left to right for my officials to introduce themselves. 

Bore da. Good morning. Duncan Hamer, director of operations. 

Jo Salway, director of employability, fair work and social partnership. 

Bore da. Good morning. Andrew Gwatkin, director of international relations and trade. 

Thank you very much indeed for those introductions. And perhaps I can kick off this session with a few questions. Now, Minister, at the start of the sixth Senedd, you said that your priorities for the portfolio included needing more people to work, and to be in good work, and well-paid work. If that's a priority for the Welsh Government, why didn't you set job creation targets when you published the four priority areas of your economic mission last month?

I think there's a difference between setting targets and actually setting out what our ambition is to achieve, and, actually, because there's a number of measures to make about the progress we are making. So, you know there are measures about the number of people in work. There is also survey data about the range of salaries as well. So, actually, you can see whether we're delivering the shift we want to. If you think about the sweep of devolution, we started when unemployment rates in Wales were higher than the UK average. We had a really big gap in productivity. We still have a gap in productivity, but we've narrowed that gap compared to the rest of the UK. And we're also, now, expecting to be at or under the UK figures when it comes to unemployment. So, you can see the shifts that take place, and there's a range of measures that different people use. 

The challenge in trying to set job creation targets always is whether your tying us up to something you're not in control of, and you're not actually, then, measuring the success of the Government in fostering a broader ecosystem. We also know that we're part of a difficult period for the UK economy. Growth has been flat for a number of years, and, of course, the Office for Budget Responsibility downgraded its growth forecast for the UK as well. Despite that—and this is part of the challenge in our economic mission—we know we've got challenges to deal with, we know the budget settlement is really difficult for the whole Government, so we're going have to manage with less for a period of time, and we need to be honest about that, and, at the same time, be able to point out, 'Here are areas where we think we're going to be successful, here are areas where we think we can grow, this is what we're going to do about it.' And at the same time, we're also going to have to balance that against the reality that some people will be in businesses that fail, and there'll be a number of people that need support from the Welsh Government, and, indeed, the UK Government, to get them back into work as well. So, it's the immediate period, and the medium term, where I think we can be more optimistic. 

So, can you tell us which specific actions you will prioritise taking forward over the next six months to start delivering on your four priorities, which you announced last week?

So, it's about being an active industrial partner. So, of course, there are a range of other parts of the Government that contribute to this as well—taking forward the childcare offer, the extra work on creating new homes, also the work that's been done through climate change Ministers as well on the retrofit programme. All of those will have job consequences. But also, still, then, looking to invest in skills as well—not at the rate we would have wanted to do before our budget challenges,  but we'll still be investing in reskilling and upskilling a range of areas of the workforce. 

So, we're trying to set out what we're looking to do to make sure Wales is playing its part in actually looking at areas of the economy that are stronger, and where we can grow, looking at how we do that with the four priorities on the sort of fair work nation we want to be, and actually working alongside our partners as well. And you can see that in the choices around investment zones and free ports, you can see that in the way we worked alongside the semiconductor sector as an active partner as well, and you can also see that in some of the areas where we support small and medium-sized businesses too. 

One of the points about the four priorities as an ambition is about the clarity that we do want to grow the economy in Wales. Every now and again, I think, some people say that talking about growth is problematic, and, yet, actually, if you look at Wales and our economy, if we don't have that ambition to grow it, then, actually, we're essentially accepting that lots of people who live in Wales won't actually have an improved quality of living. So, you've got to go through all the things you expect, how we'll make choices, and this sets out what we want to invest in, and how we want to do that. But there is also a framework to say 'no' as well, which we're going to have to do to some people, because we have less money—the £1.3 billion we don't have in real terms compared to two years ago was three times the size of my budget in day-to-day terms. And this year, European funds finally come to an end. They run off from the previous funding rounds. So, the £375 million loss crystalises fully, moving forward, and that gives us a range of challenges, but we can still set out what we aim to do for the future.

11:25

Minister, your latest oral statement made it clear that you were holding an economic summit on 30 November, which, presumably, brought together partners, businesses, trade unions and stakeholders. Can you provide an update on the summit and any outcomes that were reached from it?

I think it was a really constructive event. We went to Thales in Ebbe Vale, which is a good example of how the Welsh Government investment can lever in additional private investment. Thales wouldn't have come to Ebbw Vale without the Welsh Government looking to partner with them. That investment, though, that Thales is making, is, I think, firmly grounded there. So, if you go back to the immediate pre-devolution and at the start of it, the criticism that was made—and I think you might have made this in your life as a Senedd Member—was that, actually, we didn't provide investment that stuck to that area and, potentially, people could leave too soon afterwards. Thales is a good example of where that's embedded, not just for the work they're doing across cyber and more, but actually the fact that they're helping to develop an ecosystem with other businesses and they're investing in schools as well. So, you can see it's a really good example of what inward investment can deliver to help support the surrounding economy. We did have people from a range of businesses—small, medium and larger businesses. You're right, we had a range of other stakeholders and partners too. And what it did was it crystalised, for a number of people, what we're looking to do, so they understand how we're going about it.

We will have a series of outcomes from the day about suggestions that people made about how we take things forward, and I'm more than happy to share that once we've got more in from partners who were there. But also, we were able to make some progress on how we're going to run through some of the deep dives. You may or may not want to come to that later. But that is actually about looking at the areas of opportunity we have. So, for example, our pathway to net zero is a challenge and an opportunity, economically. It's actually a significant part of the reason that underpins the freeport bids, and looking at how the economy will shift and change, and so, actually, some of that is about making sure that, within the Government, we have different departments lined up in the some direction, and I'm very keen that we have some external challenge and input into that to make clear about what an external view looks like and how we do then understand, in a way that is stable and predictable, what the Government will do, what we expect others to do, and it's key about that point about levering in investment. It goes through a number of the other areas we've got to as well. I don't want to talk at you for all of the time, so perhaps I should pause there, Chair.

Now, Minister, one of your refreshed economic priorities is a platform for young people, fair work, skills, and success. Stakeholders have made it very clear that they're worried about the future of apprenticeships. And so, given that you've committed to making skills a priority, can you confirm what the budget is going to be for skills, and also apprenticeships in particular?

It's a very politely worded attempt to get me to pre-announce the budget that the finance Minister is going to publish, so I'll decline that opportunity to upset my good friend, the finance Minister. But you will see that, within every area of this department and every department in the Government, there are really difficult choices. It does mean we're not able to invest everything we would otherwise have wanted to do, and I think that's really clear. As I said, £1.3 billion that we don't have is three times the size of the day-to-day spending of this whole department. So, that does mean that, in some areas, we need to be able to achieve what we want to with less money. It means slowing down the pace of what we might otherwise be able to do. It means we can't help support as many businesses that we would otherwise do. And it reinforces, therefore, the value of the choices we do make. So, we will still invest more in skills and apprenticeships. We will still be investing money in that area, but not at the pace we would otherwise have done.

So, perhaps that's a polite way of telling us then that the apprenticeships budget will be cut, because stakeholders are telling me that it could be cut by 24 per cent in the forthcoming budget.

Well, actually, that brings us back neatly to European funding, because part of their concern is the cliff edge we now face in European funding, the fact that we don't get any of it—not just the fact that we're not going to get any of it in the Welsh Government, but there's less money available in Wales. That is really going to bite. And it also gets back into the otherwise dry subject of how levelling up funding, including the shared prosperity funds, have been deliberately designed. When I had a sit-down meeting with Neil O'Brien, who was then a Minister in the Government dealing with levelling up, and somebody you might have heard of called Sue Gray, and a range of other officials who were sat in the room looking at what they were proposing, it was the first time we'd had direct engagement, and it lasted two weeks, the input we had. We made a series of points about how we thought the funds should be directed, including a greater sense of priority for our least advantaged communities, and we made points, as indeed did Welsh local government, about the fact that you could use more of this money efficiently if you had all-Wales programmes and apprenticeships, and the key example we gave of that—an all-Wales programme that actually delivers real value for individuals and for businesses. And it was a choice not to have an all-Wales programme, not to allow different parts of Wales to pool their money together to support an all-Wales approach.

Now, that means that European funding ends and the replacement, such as it is in shared prosperity, of a lesser amount, can't be used in a way to fill the hole that's been left. And the Welsh Government budget, bearing in mind that £1.3 billion hole we've got—actually, there aren't the funds to do everything that Members in this room and beyond want to do, and to make up for all of that loss of European funds. So, we have got a real problem, a real challenge, and it's unavoidable. The only way to get around that challenge would be if the 'not a penny less' had been kept, and if that money could be used in a way that, again—and I know that you're in this position personally, Chair, given your previous experience of European funding programmes—is going to have more strategic approaches to how that money is used, then I'm afraid that the design of shared prosperity doesn't allow you to do that. It's also why the annualised approach to funding is such a problem as well: you need the flexibility of a multi-annual settlement to do this properly and effectively, and it's a choice not to allow us to do that.

And, look, if a design choice had been made that had a different role for the Welsh Government, that allowed all-Wales programmes to be delivered, I think, actually, together with local government, we could have designed something that would have put money into apprenticeships in the way that I think all areas of local government and all leaderships of political shades in local government would have wanted to do, but that choice was taken away from us. So, we're now in a very different position, and the reality of those choices will really start to bite in the years ahead.

11:30

Diolch, Gadeirydd. You understand how this looks, though, Minister, right? I mean, you set out your economic priorities. Apprenticeships, as part of that, are part of priority 2, and then within the month, then, we're seeing the 24 per cent cut being reported, which will lead to roughly 10,000 fewer apprenticeships across Wales. So, how is that actually delivering on that priority? It does seem to me that, really, nothing is going to happen in that area, is it?

No, within this Senedd term, I still think we'll deliver as many apprenticeships as we did in the last Senedd term. So, our track record compares favourably with our neighbour in terms of the scale and the size of our apprenticeship offering. What it means is we won't be able to deliver the expansion that we wanted to at the pace that we wanted to, and that means that we won't get people into an apprenticeship with a value that delivers for them and for the wider economy in the pace and the scale that we would have wanted to do. So, this still does point out that we will invest a significant amount in the apprenticeship programme in Wales. What it means is our ability to do what we would have wanted to at the start of this term, when every party had a pledge on apprenticeships—. I mean, your neighbour, in geographic terms, in this room, was part of a campaign that suddenly wanted 150,000 apprenticeships, but there's nothing like the money to do that, and that just isn't possible. So, it's honest—. It's the honesty that the budget will set out, what we still can do, and it still means we're investing in skills and apprenticeships. I'd like to have a reliable partner at a UK level that wants to invest in apprenticeships across the UK, and recognises the role of devolved institutions in being able to deliver and design effective all-Wales interventions. We don't have that yet. I think we should get that in the not-too-distant future, and then the Welsh Government can make different choices about the scale and the pace that we want to go at. So, it's really important that this is one of our priorities, that we set out honestly what we can do in the here and now, but it also signals where we want to be in the future.

You reminded me of my neighbour's pledge around apprenticeships; can you remind me what the Welsh Government's pledge around apprenticeships was?

If funding had kept pace, if the pledges that had been made about us not losing access to that money had been kept, I'm confident we could have delivered 125,000. I've already said to this committee that I don't think we'll be able to do that. That's the honesty in this, isn't it? You can either say, 'We'll do it—ignore the reality of the world around us', or you can level with people. And, actually, our stakeholders on the trade unions side and in businesses want the Government to be straight with them, and that's what we're doing. So, we're still investing in apprenticeships. We'll still have a large number of apprenticeships through this Senedd term, but it won't be the scale and the pace we could have done if pledges on replacement European funds had been kept, not just to this Government, but to Wales.

11:35

You say that stakeholders want the Government to be straight with them, but the Government wasn't straight with them around the cuts to apprenticeships, though—funding—was it?

Not according to FE colleges. I mean, what would you say to FE colleges now, who are looking at this cliff edge and are really going to struggle, going forward, to actually provide the courses that the Government wants it to?

There is no basis to claim that this Government has not been straight with people about the realities of our budget and the choices that we are trying to make, and having to make. I don't think it is fair at all to say that I or my officials have been anything less than straight with colleagues.

Perhaps we should double-check with the FE colleges on that, then, Chair.

Diolch, Cadeirydd. The conversations I've had with FE colleges have been pretty constructive on this. One concern that has been raised is the impact of the apprenticeship levy, and I think there's more the Welsh Government could do to explain how the UK tax that is the apprenticeship levy in Wales impacts on the delivery of apprenticeships here. So, can I just invite the Minister, first of all, to do that?

So, the apprenticeship levy is a UK employment tax. So, every business over a certain scale in the private or the public sector has to pay it. That means that devolved public services, as well as businesses based in Wales, all pay the apprenticeship levy. That then goes back to the UK Treasury. Now, what that then means is that, if you're a business, you have a hole with the additional tax; if you're a public service, you have a hole. We don't get that money back in the way that it's Barnettised, so you don't get a real additional sum of money back. So, actually, you get a tax taken off you and then, broadly, you get it back in the way that money comes in. So, there's no additional money coming in at all. That does then mean there's a hole in the Welsh Government budget, though, and you either decide to replace that or you don't. And equally, access to the apprenticeship levy—. In the way that it works in England, businesses get an individual account. Now, that's from the tax they've already paid. So, they've actually cut baseline apprenticeship funding in England, so our Barnett consequential has gone down. They then give businesses back an account for them to use and it's time limited as well. So, if you're in a business that isn't taking on apprenticeships but you've paid the apprenticeship levy, you may not be able to spend all of that money that is time limited. Now the apprenticeship levy takes money out of our system, doesn't replace it, and we don't get additional funding, and I think that is one of the frustrations of businesses and, indeed, public services.

Some of the conversations I've had are that, 'Look, you've got the apprenticeship levy, surely you could just use that £150 million, or whatever it is, to make up the gap from the European funding.' What we would like to see are detailed figures to show how that doesn't happen, because the UK Government would say it's Barnettised. So, would you be able to provide us with the detail around this, in a way that perhaps hasn't been provided to the committee before?

Yes. I think we can set out in a note—I'll ask Jo Salway to come in now—both about what's happened to the cuts to apprenticeship funding taking place in England and what that's meant for our budget, also what then happened with the levy and about the fact that you can't even tell, now, how much is and isn't coming in the levy. But, overall, it'll show that Wales does not get an increase in spending power as a result of the apprenticeship levy.

That is—. Just before you introduce your civil servant, I think that is a significant issue, and I have to say to you, Minister, that is not understood in the sector where I'm having those conversations and where Luke Fletcher is having those conversations. I think a greater understanding of that in the sector would be very helpful.

The challenge in terms of numbers is that we no longer have a separate identified sum of money that comes because of the apprenticeship levy; it's part of the Barnett formula and part of the block grant. So, we're not going to be able to give you something that says, 'This is the amount that comes in and this is where it goes', but we'll certainly look into what we can do to provide greater clarity on the situation.

I think the other issue to point out is that, of course, the levy came in before we lost the EU funding, so it was already in the system, so it's not a money that could backfill that anyway. There is less money in the mix with the end of EU funding, and that's the situation that we're trying to respond to. Working with Welsh Treasury colleagues, though, Hefin, we should be able to give you some confidence about the levy payments that have gone from public services, in particular, and the fact that that hole hasn't been filled, and also an approximation of what levy contributions would have looked like, certainly when it started, and about the fact that we haven't seen additional money come in. And that's the point—if this was a tax that raised additional money that went on top of the apprenticeship system, that would be one thing, but if you're getting public services having money taken out of them in the apprenticeship levy you're not then seeing that replaced in the block grant. So, the rest of the Welsh Government is having to make up that money for public services, in a way that I think everyone here—. If you think about schools, and I think about FE colleges, think about the NHS—that money is taken off them and then goes back into the Treasury without there being an additional sum being returned to us.

11:40

I think, just to finish, Cadeirydd, it would be helpful to understand what the Welsh Government would like to see in place of a levy, if an incoming Government was to be able to—incoming UK Government was able to—introduce something different.

Thank you. And before I bring in Buffy Williams, Luke would just like to come back on this very, very quickly.

Diolch, Cadeirydd. I'm just returning to the broader priorities, then. What exactly is new then in terms of these priorities? Because a lot of what I heard at least is very similar to what the previous economy Minister was focused on. So, what exactly is new here?

What's new is we've had to refocus down to four priorities. We've had to think about the way the economy—

It's hardly a refocus if the previous economy Minister was doing the same.

Well, actually, we've got fewer priorities than the mission had before. We've also had to take account of the shifts that have taken place in the last couple of years. When we exited the pandemic, lots of people were concerned, generally, about a really significant increase in unemployment. Actually, we found the labour market got tighter, and there was a real challenge over getting people into jobs. We don't need to go through all of the reasons for that, but that's the position that we found ourselves in. We've also found it harder to get investment into the UK, for a number of reasons. The UK Government have undertaken a review on foreign direct investment, actually, that recognises a range of challenges in that space. So, we're in an environment where international competition has increased, the reality of inflation, wars across Europe, the impact that's had, and the much lower growth in the UK compared to other comparable economies, and the challenge in the trading environment.

This is about refocusing and looking at what we can do. And actually, the point around what the previous economy Minister has said—if you talk to businesses and stakeholders, one of the things they regularly say is, 'If you get a new politician, we don't want everything else thrown up in the air. We want predictability and consistency.' And none of those stakeholders have come back and said, 'We need an entirely different approach.' They're actually positive about the fact that, in the refocus, we've got a narrower area of priorities, they've got more clarity about investment choices they can and will make, and they see the Welsh Government as a reliable partner. And I don't think you should underestimate the power and the value of that. So, actually—. I appreciate the Member is here to scrutinise the Government, but, actually, our stakeholders are positive about the refresh of the mission and where we're looking to go and the signals we're giving about the future.

But this was trailed by the Government as its new strategy on the economy and very little changed. You've set out the narrative well, but there is nothing new here, is there?

No, I think what's definitely new and what has changed is the reality of the economy around us and where we see opportunities for Wales—

But that's the narrative; what I'm talking about here is new policy, new direction.

But I think that's a misunderstanding of what your strategy is for. The strategy isn't saying that we're going to have seven new policies to launch. You've actually—

You've actually got to have a strategy that sets out where you see your biggest opportunities, what the Government will do as a partner in that, how the Government proposes to act, and how that then brings in and enables stakeholders to make a difference as well. And actually, within that, that really does matter. Because if you're going to say, 'We're going to refocus what we're doing and have seven different priorities', well, actually, that would be really difficult from an investment and a creating wealth and jobs point of view. What we've done is we've narrowed what we're looking at, to be much clearer and much more focused on where we see our opportunities. And I think that will be a real positive when it comes to investment choices; it will lead to the more jobs and the better jobs that I'm sure everyone around this table wants to see in the economy here in Wales.

Thank you, Chair, and thank you for joining us this morning. I've had a lot of my questions already answered here this morning, so I'll just ask the ones I have remaining. What is your initial response to recommendations from the review of vocational qualifications, and when will you publish a formal response? Specifically, could you comment on the recommendation that Welsh Government should develop a national strategy for vocational education and training and why there isn't one in place already?

11:45

Well, part of the reason why the education Minister asked Sharron Lusher, the former principal of Pembrokeshire College, to lead a review on vocational qualifications was to look at where we'd got to, the reality that there is a difference in approach progressively between different UK nations, and to make sure that the qualifications we have are fit for purpose.

So, the review makes a series of recommendations, and when the education Minister provided a written statement in response to those, he's indicated that we're looking at each of those recommendations, including the point about making sure we have a coherent approach to vocational qualifications. It's the point around making sure the qualifications make sense for the individual and for the area of business that they want to go into, the area of work, and also we do need to think about how those qualifications are achieved as well, to make sure we're not putting people out into an alien environment. To be fair, it’s a point that Vikki Howells has made previously about, in the care sector, making sure that your qualifications don’t put people into an environment that doesn’t make sense to how they’ll use that skill and that knowledge in the future.

So, that’s the reason why—. That underpins why the review took place, and the education Minister, because we’re talking qualifications, is the lead Minister for the Government, but it does make a difference to the skills area here as well. So, I actually think when you get to our response to the review and its recommendations, you will see all of those questions answered. I don’t want to pre-empt the response of the education Minister and the wider Government on what that looks like, but we obviously will be interested, and there’ll be joint work between officials, and it’s helpful that Jo and some of our other officials actually work between both departments as well. 

Okay, thank you. Given what we've heard here this morning, how confident are you that you will still meet the 125,000 target of learners? If the underspends mean there's no impact on delivery of this commitment, what does this say about the robustness of initial forecasting?

So, the starting point is we will not in this Senedd term get to 125,000 new apprenticeship starts. The financial position means that is impossible. If we hadn't had the extraordinary budget position we're in, then I think we could have made real progress, but, actually, given the challenges that both individuals and businesses had for the last year and a bit, we haven't seen people looking to take up the apprenticeship offer, and so, actually, because it’s a demand-led programme, we were looking at what would we do alongside people to get more and more people to take up the offer. Now, given the budget pressures we have, I still think we’ll get to essentially the same number of starts as in the previous Senedd term, but it will take longer to get to the 125,000, and that is a budget reality.

When it comes to the original forecast, I don’t think there’s a challenge in standing back from those, because at the time I think those forecasts were reasonable, and if we'd had budget certainty then I think we could have done more and gone faster. In all of this, we then need to look at how apprenticeships fit in with work-based learning and the appropriateness of that, because for some people the apprenticeship is the right thing to do, and we want to encourage more people to take it up—people of different ages. For other people, though, upskilling and looking at their qualifications whilst they're still in work is really important. So, take, as an example, if you’re 25 and you’re looking to gain more skills in your workplace, you may well have responsibilities that mean that you can’t move on to an apprenticeship framework, but actually the shorter work-based learning courses that help to provide people with skills in the workplace will be part of the answer as well, and I think there’ll be a policy challenge for everyone looking at the future about how do you describe apprenticeships within the space of what work-based learning allows you to do for that individual and for the skills needs of the country as well.

Diolch, Cadeirydd. The Diamond review recommended maintaining quality-related funding, QR funding, for universities at a constant level, but we have seen a real-terms cut using 2016 as a baseline, the time of the review. Can you therefore outline the impact that's had on universities, and the conversations that you have had with universities about QR funding?

11:50

I need to be careful here, because I'm not the Minister who makes direct choices around QR funding, but I've got lead responsibility around innovation in the Government. So, we know that it's been a really challenging environment. When we had the Reid review, we were expecting, at that point, to not end up in the position that we are, with materially reduced sums of money available to Welsh Government. So, the context has changed significantly.

Within that, we've made progress around some of the other recommendations: so, having a London office, looking at what we are doing to make sure we've got greater profile and presence with UK decision makers. But I do accept that it's a really challenging environment for higher education, and there are a number of different aspects to the challenge that takes place there. So, there are difficult choices around the funding model. There are difficult choices around our access to UK resources and, of course, the reality of inflation in that area as well. It really, for me, reiterates the importance of not just the innovation strategy, but the central aspects of that, about making sure that we do much, much better with UK funding sources.

Even when we were within the European Union, and when we had access directly to those funds, we had a framework that delivered money into higher education and further education and beyond that meant that we could invest in innovation and research. At that point, though, we still weren't good enough overall in Wales at being successful in competitive bidding rounds in UK funding sources. So, we had to make that up. The urgency of doing that is even more because of the funding challenges that we have. That's why what we've done with Innovate UK and UK Research and Innovation is so important—getting joint work agreed with them, getting them to recognise that there's a need to invest more and there's real quality here as well. We're not asking people to invest on the basis of simple geographic equity; actually, there's real quality for them to invest in as well. That does then mean that our Welsh institutions need to be better at both bidding, in terms of the volume, but also maintaining the quality.

The good news is that, in terms of the approval rate, it's not really different to other parts of the UK, when Welsh universities do bid. Our challenge is needing to get more and maintaining the quality and expecting a return on that. But I know that there have been difficult choices around QR funding that have had to be made.  

Moving on to small businesses accessing research and innovation funding, we've heard from small businesses, talking about the challenges they face. What do you perceive those barriers to be, and how would you overcome them?

Well, what we've tried to do with our new approach to small business innovation access and the flexible investment approach that we're trying to take, is to open up innovation funding to a larger group of businesses. We've actually got a funding round going out on capital, to be spent within this financial year.

The challenge, always, is understanding what businesses are telling us, and how much this is anecdotal or qualitative. But, in each of those areas, there's learning for us to do about the practical access. I've had an e-mail from a business in my constituency, and so I'll be asking them to go and have a conversation with officials in my constituency role. But, from my ministerial role, that's still the same approach, I think. It's about how do we learn from the experience of those businesses, are there things we can do to better explain or to think about how the process works to make sure that small businesses can access the money that is there for them, or are there things where, actually, we've just got a choice to make. Because, in some of this, you've still got to be able to demonstrate how and where you're spending money and the value that you are getting.

The director general always gets the opportunity to go to the public accounts committee and account for how the money is spent. So, you've got a balance in all of this about a system that makes sure that you can be clear about how and why you're spending the money and the value you're getting, and a system that is genuinely flexible and allows small businesses that don't have the same capacity as larger institutions to go through some of the same bidding processes as well.

So, that's the balance we're trying to deliver. If you want more detail, Duncan is the official who's with me who can tell you more about what we're doing and how we're trying to go through some of that. 

Well, I've brought specific cases to you in the past, Gweinidog. So, I'll stop there, Cadeirydd, keeping in mind time.

Thank you, Chair. Good morning, Minister. Firstly, I've got a question for you around the two new investment zones that will be coming to Wales. They were announced by the UK Government last month. So, what are the next steps in taking these forward, and when do you see them becoming operational?

11:55

Okay. So, as you know, I made a statement to the Senedd in the case that we were positive about having two investment zones, and the location of them and the broad purpose around them as well. So, it was good news. Looking at some Members in this room who say we never talk about good news from the autumn statement, there was good news that there is agreement on those two investment zones taking place. It's also clear, though, that the investment zones are around growth in the economy; it's not about rebalancing the economy. The specific lines around them from the UK Government were about where and how to grow. So, we've now had joint meetings between my officials and the department for levelling up. There have been initial meetings with both of the regions, and I've had a constructive letter from Michael Gove.

So, in governance terms, the corporate joint committees, led by local authorities, will be the bodies that house the governance around investment zones. I'd envisage that being a sub-committee of the CJC, because it'll be focused in an area of it. They'll need to design something that looks like a business plan, and we're looking at how that'll be done, because you can have a business plan process that takes a very long time. If you think about the business planning process, for example, on rail infrastructure investment, it takes a long, long time to get there. I don't think that's going to happen, because I'm pretty clear that, for a number of reasons, the UK Government are keen to see investment zones active and having the ability to use funds from the end of this year / start of the next financial year. Now, I don't think that's problematic from our point of view because we'd want to see investment zones active.

So, in the areas, we've got to be clear about their focus, about the buy-in from different partners, about how they'll deal with the governance to provide a business plan that will be jointly assessed by my officials and officials in the department for levelling up. Then, I'm hopeful that, in the new year, we can provide a public statement about where we are in each of those potential zones. I had a direct meeting with north Wales this week; I expect to speak to the team leading in the south in the not-too-distant future as well. So, I'm broadly positive about where we are and I should provide more clarity for you and the wider public in the new year. 

Thank you. And in terms of the time frame, would you like to see the time frame for the Welsh zones increase from five years to 10 years, as has been announced in England?  

I think the five to 10-year move for investment zones is less problematic than for freeports, because what the UK Government have done in their offer is they've essentially offered to derisk and to cover some of the funds that would otherwise be there, and that has helped us to get over the line as well. Again, looking at the Chair, it shows an area where we've been pragmatic and constructive with the UK Government. Freeports are more challenging, and I need to have a conversation with the finance Minister, because that then still is about income forgone, and so that's more of a challenge over the 10-year period of time. We haven't bottomed out both of the areas, but, as a broad indication, I think the investment zones announcement is less of a challenge for us to get to agreement than the freeports one. But, as ever, my objective will be to be as pragmatic as possible to try to make sure that the investment that can take place in the Welsh economy and the leverage it can give for more and better jobs is taken up. 

Thank you. And in terms of those freeports and investment zones, we know also—it was announced in the autumn statement—that there is a £150 million investment opportunity for those, and you seemed to suggest in your previous answer you haven't had discussions with the UK Government on that yet, but, certainly, as a committee, we're interested in any discussions that you may have in the future and how you feel Wales might be able to benefit from those things.  

Well, I think it's really important that, when you talk about UK investment fund opportunities, Wales is there. We at least want to get our fair share, and, if you think about some other areas, we haven't seen that. In this, though, our officials are meeting today with officials from the department for levelling up. So, it's good news that that meeting has taken place relatively quickly to understand what those opportunities look like. We'll then need to see what we can share with stakeholders and, indeed, with this committee about the stage of those. But I'd like to be clearer about how the fund will be deployed, whether there will be competitive bidding or whether there will be an allocation, in the way that freeports were a competitive bidding process, and that means you have to disappoint lots of people who've put energy and real financial resource into the bidding process, or whether, in the investment zones process, where it's been allocated, that then means that some people are disappointed they've not been chosen, but it probably leads to a faster choice and it probably leads to less wasted resource as well. But we'll need to understand how the funding will be used, what the parameters are and whether Governments will be involved properly in the design of it, or whether, actually, there'll be information for stakeholders to bid into, as opposed to being allocated. We will see, and I'll be happy to report back when there's more clarity.

12:00

Thank you. I'd like to move on to the Tech Valleys programme now. Your paper highlights that the Tech Valleys programme has helped to create sufficient floor space for 600 potential jobs in Blaenau Gwent and the wider Valleys communities. Can I ask when you expect those 600 jobs to be created and what further investment is planned to achieve the programme's aim of creating 1,500 sustainable jobs in the long term? 

So, I can't tell you when 600 jobs will be created. We're clear, though, that creating the employment space is really important, because we know there's a shortage of high-quality employment premises in most areas, especially across the Valleys. And it's part of the reason why the capital region itself has had a premises and sites fund that we put some money into at the start of this Senedd term as well, because we know that there is a real demand from small and medium-sized businesses for new and better premises. That also helps to deal with some of the carbon footprint issues, and, for some of them, though, it's actually about dealing with the bottom line of reducing costs. We also know that there is interest for larger sites as well, and it's part of the reason why, in some of the bigger unemployment events, part of our focus has been on the jobs, but also on protecting the sites as well, because we don't want allocated employment land to get moved across for housing purposes. I know that that's a conversation we've had with the Member for Rhondda about what's happened with UK Windows & Doors, making sure that there are still employment sites for the future. So, there's a well-understood shortage of high-quality employment sites and we know that those shortages exist in the Valleys. And, actually, if the Government had not intervened, the market wouldn't have delivered those sites, so it's another good example of an active industrial policy from the Government that actually should have a real return. If you had the leader or the economy cabinet member for Blaenau Gwent here, I think they'd tell you exactly the same.

Thank you. And a final question from me: you talked there about the importance of creating the floor space within the Valleys and units of the right size as well, would that be the main thing that you've learnt from the Tech Valleys programme, or would there be other key lessons that you have learnt along the way that you might apply more widely to other programmes in your portfolio?

I think there are a couple of things. One is that you're right to make a point about the scale and the size of the employment units created. The other, though, is that, if you're going to take a genuine place-based approach, it takes time to do that, and you've got to be prepared to stick the course and not to change policy within a couple of years, and that's always a temptation for politicians newly appointed to an area, to say, 'I want to change everything and have my personal stamp on it.' The difficulty is that, actually, that upsets partners who want the stability and the predictability. And having that longer term vision really does matter. So, investing in shared goals between partners really does make a difference and I think as we go through the next few years on our approach to Tech Valleys, you'll see a number of those sites filled. It also gives confidence to other people who want to come in and use their own investment purposes as well. We know that there are a couple of potentially larger employment opportunities from the private sector in the Valleys, and, again, I don't think, without the active investment from the Welsh Government alongside local authorities, we'd have seen those, as well. So, there are definite lessons to learn about the scale and size of what you do and the patience to see a real return delivered, but also having a clear and long-term commitment with partners to enable you to deliver what will actually make a difference.

Diolch, Cadeirydd. Thinking around the Development Bank of Wales, and in particular the remit letter that the Minister issued around increasing the flow of funds into Wales, I think back in 2021, how successful has the development bank been in meeting that ambition of increasing the flow of funds into Wales?

I think we've been successful. The development bank has helped to put, I think, £124 million into businesses across Wales, and that's levered in additional money from those businesses. It's also part of what has often been an investment purpose, where those businesses often bring in funds from outside Wales too. So, without the development bank, I don't think we'd have seen that. Again, it's a market intervention that the Welsh Government took to create this. The market wasn't doing this on its own, and, actually, with UK Government interventions, the British Business Bank and others, it's shown that this is an approach that can be successful. I also think it's shown that we haven't filled the market with DBW, so, actually, the additional investment from the UK in this should add to what we're doing, and the challenge has been in making sure that genuinely adds to what we're doing rather than competes for the same space.

If you look at some of the points that we've looked to deliver on, the scale of different businesses, we've got small and micro businesses, we've got larger businesses as well, I think we can be really positive about the impact that the development bank has made. There are jobs in literally every constituency, in every region in Wales, that would not exist if the development bank was not part of the case for and they delivered intervention into investment.

12:05

I think the development bank and the potential behind it are quite exciting in terms of what we can do with it. You mentioned that you view it as being successful, so how exactly are we measuring that, then? You could argue that any increase of inflow of funds, whether that's a small increase or a large increase, is meeting what's set out in that remit letter. So, are we looking at comparable development banks of similar sizes as a way of measuring how successful the development bank's been?

I think the difficulty with that is that the context in which each development bank operates is different, and this was an area that was capitalised with former EU funds, and so, when that stopped, we've had to think about how do we take an evergreen approach to what the development bank has. So, we haven't been able to scale it up as we might otherwise have done before. And it's then how and what you want to compare yourself with, because some development banks have a more mature system. If you look at the German banking system, it's got an entirely different approach over a much longer run of time. So, I think that looking at an institution that is five years old and trying to compare that, I don't think is a fair test, but if you look at the money that's been invested, the jobs that have come to Wales, that's a fair test of looking at how successful it is.

And also, it's one of those things where flattery is the most sincere compliment. You see it in other interventions that are looking to take place in other parts of the UK. The FSB regularly call for something like the development bank to exist in regions of England. They also call for something like Business Wales to exist in England as well, so it shows the value that really is there within the business community. The thing about understanding the development bank's success is it has to report every year, and every year we're able to provide figures on the amount of investment that's gone in, but also the number of jobs we think have been created or safeguarded by this activity, and it's when you get a useful set of metrics to understand what that is. I'd be quite interested to look at international comparisons, but my concern is that we won't be comparing apples and apples, it'll be apples and pineapples.

I take the point, but, obviously, you can aspire to at least get to the same level as some of those development banks. But just thinking again about increasing the flow of funds into Wales, obviously the British Business Bank announced its Wales investment fund, so have you included that in the metric for measuring the success of increasing the flow of funds into Wales?

So, I'll ask Duncan to come in just to explain the relationship between what the British Business Bank is doing and what one arm of DBW is doing, because there's been a choice made by the British Business Bank in a number of the funds it's deploying, where there is a partnership with the development bank on one of them, and they've chosen, I think deliberately, to have different partners managing some of the other funds, so you don't get, if you like, an approach where there is only DBW in the space. I think you can understand from a reasonable point of view why they've done that. Duncan, do you want to explain what's happened with that relationship and how FW Capital is delivering as well?

Yes, certainly. You mentioned the recent British Business Bank and FW Capital, which is a wholly owned subsidiary run by the development bank. It was successful in securing, I think, one of the three funds that the British Business Bank offered; it's around a £30 million fund, £6 million a year. They're delivering that through FW Capital as a Financial Conduct Authority regulated body, and, as the Minister said, that is about BBB wanting to have a wider offer, if you like, in terms of providers, and, yes, we would count it as part of the remit of their securing additional funds. That fund will need to work as part of that broader—. So, the Minister, for example, has put in very significant funds into the bank, and it works to broaden the offer to SMEs in Wales. We're really looking to work actively with the British Business Bank to provide the collective impact of all those funds that deliver for the benefit of Welsh SMEs. So, it's early days. I think it launched two weeks ago, so we're working that through. We're really trying to understand and develop that, and I think it builds on a previous relationship we've established with the British Business Bank. We've historically delivered start-up loans and others through it, and we'd really like to continue to extend and develop that.

12:10

I met with the leadership team of the British Business Bank when they were thinking about their approach, and it was helpful to set out that we wanted something that would align with each other and not have unhelpful competition and duplication. So, I think we can be positive at this point, and we'll see how that works in practice, and like I said, I hope it adds to the capital that is available for Welsh businesses here.

So, it's safe to say that you'll be looking for further co-operation with the British Business Bank.

Yes, that's what we want to see and there's no reason to think that won't happen, given their approach thus far. As I say, I think it's helpful to see an additional intervention that recognises if you're having something called a British Business Bank, it needs to be active in the different nations, but it needs to be active in a way that takes account of what is already there.

Diolch yn fawr, Cadeirydd. Good morning, Minister. I'm talking about the trade and co-operation agreement, if I may. In your statement on the outcome of the recent inter-ministerial group on UK-EU relations, you mentioned a number of issues relating to UK-EU trade where the Welsh Government had raised concerns. I'm just wondering, following the relevant trade and co-operation agreement meetings, whether you can provide an update to the committee.

Those are ongoing. We're not directly engaged in all the meetings that take place. On some of the sub-committees, there are officials that attend, but we're looking to work through the concerns we have, whether it's shellfish or whether it's seed potatoes, a whole range of areas, and different parts of the UK have an interest in some of this as well; the Scots are very active in terms of what happens with seed potatoes, for example, as well. I think potatoes were one of the first measures passed by the Senedd, actually, in terms of regulations. So, potatoes have a special place in our institutional memory. [Laughter.]

But when I can give a more useful update, I will do. I'm hopeful be able to do it in the new year. We've looked at the way internally we look at those things, so it'll be more coherently housed within this department, looking at both the TCA and indeed the wider approach to new trade deals as well.

Okay, thank you. The EU is proposing an extension to the rules of origin in relation to electric vehicle batteries. Just wondering about the Welsh Government's view on this announcement by the EU, and any implications for industry here in Wales, if you've made any analysis.

So, the fact that they've proposed an extension is good news for us, because at the moment, I don't think every sector is ready to deal with the rules of origin, and these are things that naturally flow from the trade and co-operation agreement, the deal that was struck with Lord Frost as the chief negotiator at the time, and the EU. So, actually, the extra delay is good news. Otherwise, we could potentially have a real challenge in either not being able to export or potentially some areas of export not being financially viable. So, that's good news, and we always then look to see what will happen.

I think the EU have indicated there'll be an additional £3 billion for EV manufacturers and others, so our challenge will be what the UK Government proposes to do in making sure that there is a level playing field for the investment that we all want to see attracted. That's part of the point in all this; it's in all of our interests to see the UK be a good place for investment in the future, and there are a couple of car manufacturers that are investing in the future. We know the deal that's been talked about with Jaguar Land Rover, so this is an area where actually in Wales as well, given our opportunities for renewables and battery storage, the future of a range of these linked areas is really important. But we also still have a very healthy auto sector. If the propulsion unit changes, then you're still going to need tyres, you're still going to need brakes, you're still going to need a range of things. You're going to need to change things about the powertrains. We've already got work in that area both in heavy goods and others, and of course, you're going to need lots of semiconductors.

So, on the negotiations to ensure a new equivalency agreement for UK-EU organic products, can you provide an update on those negotiations?

My understanding is we've reached agreement, and that should be in place in January, so, in the new year. That should provide continuity, and DEFRA have been in contact with Welsh Government officials around that. The important point is the provision of continuity in the agreement, which, I think, again, is good news.

12:15

Okay. And finally, well, not finally, penultimately, in your evidence to us on 11 October, on the UK target border operating model and Windsor framework, you identified a number of issues where conversations were ongoing, including in relation to the introduction of pre-notification from January of next year—in a month's time—the charging model and co-ordination of implementation of physical checks on the western seaboard. I was just wondering if you could provide the committee with an update on the state of play with regard to these discussions.