Cynulliad Cenedlaethol Cymru

I'd like to welcome Members to the committee this morning. Item 1: we have had apologies from Lee Waters. There is no substitute in place. Vikki Howells and Hefin David will be joining us shortly. Are there any declarations of interest? There are none.

In that case, I move to item 2 and we've got a couple of papers to note. Are Members happy to note those papers? Thank you.

In which case, I move to item 3. Item 3 is in regard to our inquiry on research and innovation in Wales. We have a short video presentation to watch, which Members watching in will be able to watch also. This is in regard to comments from small businesses in regard to business and innovation.

Can I thank the citizen engagement team for taking that evidence for us? Can I ask Rhayna—and, just to remind Members, we are still in public session—how did you locate the businesses for the film?

We worked closely with the FSB to source and find businesses that had worked with universities on research and innovation projects so that we could get a good idea of how they'd worked from beginning to end. So, that's how we sourced those particular businesses. 

Okay, thank you. Do Members have just any brief points on the video, or any brief questions? We are over time for this, but if anyone's got any brief points. Bethan? No. Okay. Thank you, Rhayna—appreciated.

I'd like us to move to item 4 and, under Standing Order 17.42, can I resolve that we exclude the public for item 5? Are Members content? Thank you.

I move to item 6, as regards our second-week session with regard to research and innovation in Wales. I would like to welcome our two witnesses, and, rather than introduce you, if you could introduce yourselves for the public record, I'd be very grateful.

David Anderson, director general, National Museum Wales.

Richard Bevins. I'm head of the natural sciences department, but I also have the overall remit for research in the museum and HEI partnerships.

Right. What impact does the research that you conduct have on Wales? What is the impact of what the museum produces?

Right. Okay. Well, I should say that, in terms of quality of research—and I will spare my colleague's blushes, I hope, on this—Richard Bevins, for example, is the researcher who has identified exactly the origins of the Stonehenge bluestones in Preseli and has been responsible, therefore, for bringing completely new understandings to the Stonehenge site. I'm quoting that as an example of a world-recognised area of research, really, which the museum and its particular expertise has enabled us to contribute very significantly. I hope I've represented you accurately there, Richard, on that. [Laughter.]

Thank you, David.

That's, if you like, something that almost anybody in any newspaper across the world would recognise. I think, looking, if you like, more specifically, Richard is a natural scientist and he can talk about this from a natural sciences point of view, and then I'll come back on one or two other areas, if I may.

I know we have only got a short time this morning as well, but please just bear in mind we've got some questions as well.

If can give a couple of very quick examples—

Thank you, Richard.

—which might just give an indication of the impact of some of the work that my colleagues do, particularly in natural sciences. I've got a colleague who works on diatoms; they're freshwater algae. She's been working on water quality for the Usk and the Wye, and the diatoms reflect the water quality. So, she's feeding directly into programmes to have liming or programmes to improve the water quality. So, that's a direct impact on the environment.

Another colleague is looking at the invasive species coming into Wales, particularly marine invasive species, as a result of, almost certainly, climate change, and what impact those invasive species are having on our ecosystems and what species are suffering as a result. And we've got the collections that have the long-time record of the environment in Wales. So, we can compare current ecosystems with ecosystems that we've got represented through the collections.

Perhaps I could add, then, that, with the Welsh Government's Fusion programme, we are the lead partner, with the knowledge and analytics team in Welsh Government, on the research and evaluation of Fusion on behalf of the cultural sector. The work we've been doing at St Fagans, which is itself a very innovative cultural development, has been part-funded by the Paul Hamlyn Foundation, and the Heritage Lottery Fund as well. So, we do look outside the research council's funding to other bodies who recognise our work as well.

I'll reserve my questions because they might be picked up later on in the session. Oscar Asghar.

Thank you very much, and good morning, gentlemen. My question direct to Richard is: how does your research differ from the university research?

Richard, do you want to start?

Fundamentally, our research is based on collections, and the universities don't have those collections. In my team, I have people who are expert taxonomists; taxonomy has largely disappeared from the university teaching and research. The research councils don't fund taxonomic work directly, so, that's an area of research that is very, very different. What we find, then, is that we can partner with the universities because we're bringing something that's very different from their expertise. So, we have, unfortunately, a project that is under embargo, so I can't release the details of it—there's going to be statement from Whitehall—but we're going to be involved in a £5 million Biotechnology and Biological Sciences Research Council-funded project. That's coming to Wales—we're the only Welsh body represented on this consortium. And that's based on our very unique expertise and collections.

In terms of that embargo, when will that be published?

I had hoped before today—imminent.

Okay.

It has been awarded and—

It'd be useful if you could let us know or send us a copy when it is published.

Certainly. Absolutely, we fully intend to.

Okay, thank you.

Could I add to that answer as well? The other major area where, I think, we offer something that almost nobody else could offer is in relation to our research on public behaviour of visitors, engagement and our social justice work, for example, at St Fagans, but at our other sites as well. The museum in Llanberis is another example, and Swansea too.

We have 1.8 million visitors at our seven sites, and it's a massive opportunity for research into public engagement with culture, but, actually, also with the disciplines, like history, science, art et cetera. I feel that this is a hugely underdeveloped area for research and research funding, but it's vital if we're going to deliver on the future generations Act. So, I think all of the evidence that's coming to you, which argues that there is a sort of area, which is often in the public sector, but not only in the public sector, like us, that has got great research potential to help to achieve the goals that the Welsh Government has set.

Thank you. David Rowlands.

What challenges do you face as a museum when conducting your research? Could we make any recommendations to the Welsh Government—I'm sure you'll want to answer this—to help with those challenges?

Yes. I would say first of all that we should note that we are an independent research organisation, recognised by UK Research and Innovation as such. This means that we can bid alongside the universities—we have the same status as the universities—for funding. However, I think that the priorities for funding, as Richard has said, don't necessarily always cover the areas that we would be very strong on. So, I think it would be great if, through this inquiry, there is a way in which organisations that are not themselves universities are more strongly recognised as contributing to the research programmes in Wales, and also that the areas where we can uniquely contribute are recognised more formally, if you like, as being important for Wales as well.

Personally, I feel that there is a need for a shift towards the social agenda work that Wales is really leading on already. If you were to ask museums across the UK who are leaders in socially embedded research, I would hope very much that they would be recognising us as being the leaders, or among the leaders, in that work. In this, we work in partnership with the Arts Council of Wales and other arts and cultural bodies. I think we have a unique opportunity to do research that is really highly valued, that has resonance not just within the rest of the UK but across the world.

As you will know, your remit letter actually tells you that you have to get involved in research, as such, and you've touched on the business of external funding, which you're able to bid for. Do you think the Welsh Government ought to be helping you in putting together those bids?

We work in partnership with the Welsh Government on certain projects already, so, in a sense, we are getting support on that. I think that the major point I would make would be about the cultural sector altogether, of which we are a part. I don't think we'd want to argue for us being uniquely distinctive in the Welsh cultural ecosystem, and I think some of the great strengths will be in partnerships between us and other cultural bodies, as well as higher education institutions. So, I think the major thing, really, is that the mechanisms are put in place that more clearly support the areas of strength for the cultural sector.

Could I also—?

Yes, of course, Richard.

Obviously, all of our research is around Wales and what our collections and research expertise tell. That's very different from the universities sector, where colleagues in Cardiff University in earth sciences are working around the world. How much of that is Wales-facing? Well, our research is Wales-facing. Therefore, it doesn't necessarily comply with strategies from, say, the Natural Environment Research Council, which are global challenges supporting overseas development agendas. So, that's a difficulty for us to apply for that direct funding source.

Right, okay. So, you're very funding-specific, then, in what you have to apply for, or are able to apply for.

Yes. I don't think, first of all, that the challenges Wales faces are adequately covered at the moment by the research funding structures in the UK, and I think that also we do very much support what the Learned Society said about saying that research should be viewed from a cultural as well as a utilitarian perspective too.

Thank you. I've got Joyce, then Bethan and then Vikki waiting—in that order. So, Joyce Watson.

Good morning. That brings me quite nicely, following on, to where we just left off, because the Welsh Government has proposed setting up the research and innovation Wales committee, and yet we have looked and we can't see any mention of the museum on there, and it's much wider in scope than the Higher Education Funding Council for Wales was previously. We invite comments about that.

Well, I would assume we'd be as one on this one, really, and I don't think this is just a selfish comment, really. I think that, worldwide, museums are recognised as being central to research in certain areas. I should also say that we regard research as being something that we should be doing for everything the museum is active in. So, it's around collections, it's around public, it's around social engagement. Every member of staff's work should be research-informed, and many departments—although, clearly, curatorial are very strong on this—are being encouraged to be research-active. So, at the moment, we're supporting four of our learning staff in doing PhDs. We want to really push the academic development of our staff very highly. So, I would say that any research programmes that are blind to the potential of culture, and including museums, are going to miss opportunities, to the cost of Wales.

Okay. I think we've got the message.

Thank you. Bethan Sayed.

Can I pass that to Richard, who is leading on developing partnerships with universities?

I think—because I've worked in the museum for quite a long time—traditionally, the contacts have been researcher to researcher. That's healthy, that's fine, but in the last three or four years we've looked to be much more strategic, and to have the dialogue at vice-chancellor level with my director general, to get partnerships in place that have the high-level buy-in, which is critical. The role I've been playing is then facilitating to make sure that those partnerships have meaningful activities and outcomes. What's interesting is, across all the universities that we have dialogue with—so we've got a memorandum of understanding with Cardiff University, with Aberystwyth University, Swansea, Glyndŵr, the University of South Wales, which we're just about to sign—each university partnership is different, and that's healthy, because we can identify niches where we can support a student placement, say, in the creative industries, working with us. We offer something very unique that the University of South Wales are very interested in; with Bangor or Aberystwyth, it's another area. So, the partnerships are proving to be stronger, and I feel very much more equal, because it used to be, 'What can we supply the universities?' and it was rather one way. You only have to say you've got an expertise, and it's like, 'Will you give a five-week course on such and such?' Well, can we be a bit more imaginative than that? You know, 'What can you offer us?' So, at the minute we have 10 collaborative doctoral students with the universities in Wales. That's healthy for us, because that's new information, new insights for us, interpreting the collections in different ways, and that can feed through to our exhibition programme. So, the public are getting a different story, an innovative story, that is right up to date in terms of current research.

I would agree, yes. I think that Richard's point, however, that we need to be very clear about the terms of engagement with universities is very well made. Obviously, if we're to grow and develop our research capability, we do need to get the funding streams in, and that means that partnerships with universities have to be equitable, really, there, including the distribution of funding. And that is a change from, perhaps, the traditional model that museums have adopted, where they've been a resource rather than a partner. I also think that the universities are very much more recognising the value of what we have to offer, as impact has become much more important. The fact that we're on the front line of working with the public means that we're also very often the leaders on the impact side of the equation as well.

And I do want, if I may, Chair, to make a slightly wider point in saying this, which is I came from a museum, the Victoria and Albert Museum, which was very focused on design and was very well aware of the contribution that the collections at the V&A and the expertise at the V&A made to the economy of particularly London and the south-east in working with the creative industries. I was concerned when I first came to Wales and looked into, if you like, the trajectory of the design and creative industries in Wales to see what seemed to be really great challenges there because of the gravitational pull of London particularly. And for me, one of the key roles that the museums can play, if we're looking at the innovation side of the equation as well on this, is that we should be doing more to encourage the creativity of the population. In other words, what I think I'm saying is that a creative economy needs a creative society. There needs to be an environment around the creative industries in Wales that is very supportive. We've got a job in supporting children in family groups as well as schools, students and others, to actually be creative on our sites. In a sense, this is why the cultural participation and the cultural democracy is so important, because it actually then gives the opportunity for young people to experience what it's like to be creative, too, in all sorts of different ways. 

And I would put it the other way around as well: a creative society needs a creative economy. And we can be one of those public hubs, really, for the bringing together of the research around the various disciplines that feed into that but also the public engagement that's so necessary for that to have a wider impact on society. It's a tragedy for me that so many designers go out of Wales after they've been trained and that some of the economic benefit of our work actually goes outside the country as well. But that takes a team effort, if you like, across higher education, the cultural sector, Government and others to actually see this as a building process. We're key to that development, I think. 

Richard, do you want to—?

Likewise, I felt we were notable by our absence, and I think we do have a significant contribution to make. I think we're already making a contribution, as David said, on the cultural side and I would argue strongly on the science side, but that's perhaps not being captured and used to its best advantage. When it's not being optimised, then opportunities are missed, and I just think we have a more—

Why do you think that is, though? Why do you think you're not getting that profile that others are clearly getting?

Just to say, clearly, part of the responsibility for that is ours. And one of the reasons we were very, very keen to come to this committee was to change that perception, if you like, about museums and their potential. So, we do take responsibility and we will try and change on that.

But I do think also that, inevitably, sectors see themselves much more closely than they are aware of other sectors, inevitably. And, therefore, those who are within the higher education sector will see the higher education sector more clearly than they might see people like us, but we've got a job to do.

And, as part of building the partnerships with universities, one thing that we've been instigating is getting a group of geographers from Swansea University to come over to St Fagans and look at the collections, and then the number of projects that have spun out of that engagement—. They said, 'We never knew you had that material, and we never knew you had that—.' So, as David said, we're partly responsible, but we are actually being proactive and trying to get it known what we have and what we do.

If I could have a tiny question to end—

As it happens, yes [Laughter.].

It wasn't a planted question, but I wanted to know.

Yes. I'll just give you an example. If you go into the national museum in Cardiff at the moment, there are three pilot augmented reality screens that you can take from the shop for a small fee. And, as you take those around the natural sciences galleries, you see the animals coming to life and swimming around you in the room; you can go into Monet's garden and you will see Monet himself and the whole area come to life. So, I think I'm right in saying we're certainly a UK first and we might even be a world first in applying this technology to museums. It is actually a really quite dramatic experience. I carried one around in the natural sciences galleries there and there were families coming up to me all the time and asking me what it was and where they could get it from and things like that, and the kids were absolutely blown away by it.

So, I suppose that this comes back to what's special about museums, because we have these really object-rich, socially engaging, free—in the sense of the spaces, the museum is free—public environments. And that's a really, really unique research base to be in. So, I think, yes. We actually have—and again, I'll be discreet on what I say on this—an offer from a Chinese billionaire to help us to develop that much more widely as well. 

If I may just end by giving another example.

Just briefly, because we've only got a few minutes left.

Yes. Tomorrow, I'm down in Swansea University at the advanced imaging materials laboratory, because we're looking at—we have a temporary exhibition coming about snakes and some of the imaging—. Some very, very advanced imaging techniques they've been using has been revolving around snakes, and we're going to see if we can incorporate some of their work into the exhibition. So, that'll be Swansea University that will have, in fact, delivered a different experience. 

Do you think you should be able to access or be included in the future of Wales fund? [Laughter.] I expect you won't even answer.

I'll be honest, actually, I think it'd be scandalous if we're not. Can I put it that bluntly, really?

That should just be on the record, right.

Yes.

Vikki Howells.

Thank you, Chair. You've already told us a lot about your research ambitions, and I was pleased to see you've got over 200 research projects currently on the go. But, I was just wondering how they might fit into the Welsh Government's prosperity strategy, if you could tell us a little bit about that.

Okay. Perhaps I could pick up on St Fagans here. I've been in the museum game for longer than I would wish to declare for age reasons. But, I know that we've got a world-class museum there, and it's not just me who is saying that; we've had people coming from the United States, Latin America and others, and going out and saying afterwards in conferences that it really is exceptional.

We generate £84 million of gross value added to the Welsh economy, and that was the 2015 figure. I'm sure now that we've opened St Fagans and we do another piece of audience research that we're just getting going on that that figure will go up, and I will speculate it will be over £100 million there. So, some of that comes from people coming from outside Wales to come into our museums, and that number is increasing. It went up by 250,000 in one year between 2016-17 and 2017-18, for example. That is a lot of value to the Welsh economy. The more cutting-edge we are in the museums we provide and the more we invest in the research that leads to innovative museums, the greater the tourist income is on that site. That's only one area of the financial impact of us. I think that if we can also be much stronger, for example, on design—I'd love to create a design gallery in the museums in our group and, for example, give a showcase for current Welsh designers, give a place for dialogue with students and represent their innovation as well—then that'll also feed into the Welsh economy but in a longer term, albeit probably very powerful, way.

Joyce, briefly, do you want to come in?

I was at St Fagans a couple of weeks ago, and you had food stalls straight outside with all-Welsh products. I did quite well in tasting things. But, more importantly, I discovered products being made in Wales that I have now since purchased that I didn't know existed, and they were in my own area. So, maybe there's something there that needs to be further explored when you're counting your money and your influence.

Yes, I would agree. I think the general principle behind all this is that we as an organisation have made a shift in the last 20 years from seeing ourselves as being another UK museum to being absolutely focused that we are here in the service of Wales—unequivocally, 100 per cent—and that we should stand or fall by the contribution we make to Wales socially, economically, in every way, in all areas of research. That is what we're here for, for the service of Wales, and it's a message we give our staff very, very clearly as well. Our research agenda is now very, very much more sharply focused on that need.

Do you have any further questions, Vikki? No. Have you got anything further you want to add that's not been drawn out in questions, either of you?

I will say one thing: I want you to give us a hard time. I want you to set us a tough challenge. I want you to expect us to really deliver for Wales on the research, and in return we want the mechanisms that'll enable us to do that.

Right. Bethan.

We know that there is no innovation fund at the moment, for universities especially. I'm just wondering whether you thought that, if—you know, there are people on this inquiry calling for that fund to be re-established, but if it was re-established would you like it to be re-established in a different way so that you could then apply directly for that funding as opposed to it sitting with the universities?

Yes, absolutely. Again, I think we have to look at the research—

Because the idea was that it be going to HEFCW again, which obviously—

Yes. Which means you go back into the old—yes. I still feel that we are moving from a twentieth century model of how research is done and how innovation is supported, I hope, into a twenty-first century one. So, I think the answer is 'yes'. I think 'researchers' should be broadly defined. I think 'research and innovation' should be broadly defined, and we should all be inside this large tent.

But you'd like to have targets and some sort of clear strategy or vision so that you know where the Government wants you to go on these things.

Yes. I think that the future generations Act has given us a great opportunity in this direction. I think the move towards challenge-led research is great for us because we're out there in society. We should be responsible for some of the solutions to those challenges.

It'll have to be a 30-second question and answer.

Just a very brief one. Given the number of foreign visitors—you say that's increasing here—should we be charging? [Laughter.]

That would be an ecumenical matter. [Laughter.] I think that equity is absolutely our core foundation and benchmark. We believe absolutely in the need for us to diversify our visitors more than we have at the moment. We are a lot better than the London nationals on that, and I know that with absolute unequivocal certainty, but, nevertheless, there's more to go. There are groups who are not major visitors. So, I wouldn't want to do anything that would stand in the way of us achieving that goal. When that's achieved, then we are happy to charge for things that will be add-ons, if you like. But the foundation has to stand, in my view.

Thank you. We'll have to end that session there, but can I thank you both for your time this morning? We're very grateful. A transcript of the Record will be sent to you to review. If you feel that you want to add to that then please do let us know. Thank you very much.

Thank you very much for the opportunity to give evidence as well.

We'll have a short break, and then we'll be back at half past 10. Thank you.

We move to item 7. This item is in regard to budget scrutiny with the Cabinet Secretary for Economy and Transport, Ken Skates. I'd be grateful if your team could just introduce themselves for the public record.

Hi, I'm Simon Jones, director of economic infrastructure at Welsh Government.

Marcella Maxwell, head of economic action plan.

Good morning. Dean Medcraft, director of finance and operations. 

Thank you for your time this morning. First question from Vikki Howells. 

Thank you, Chair. I'm interested in how the draft budget supports highways, and particularly the funding for active travel. I notice that there is a significant allocation there. I was wondering what was the basis for that allocation and what evidence base have you used to assess that this funding is appropriate and sufficient.

Well, I'm really pleased to be able to allocate additional resource to active travel. It's been done on the basis of the integrated network maps having now been designed and delivered, and that means that we now need to deliver what's contained in them. I think—in fairness to local authorities, they've carried out a lot of work in putting together the maps, and one of the concerns that were regularly expressed by our colleagues in local government was the concern that there might not be the resource available to deliver the maps. That's why I was particularly keen to make sure that we allocated additional resource for active travel, and the £60 million, I think, is not the end of the objective. What we wish to do, and I've stated it many times before—we wish to see a significant increase in per-head-of-population spending on active travel. 

In terms of the programmes that can now be taken forward, of course, each one will be assessed based on the criteria attached to the projects associated with those maps. We'll make sure that value for money is delivered in accordance with Welsh transport appraisal guidance stages and also in delivering on the integrated network maps. I'm confident that, with that additional £60 million, we will be able to begin a significant campaign to shift behaviours from motorised vehicles to active travel. 

You mentioned WelTAG there. Will that be part of the way in which the active travel fund will be allocated or monitored or evaluated? Are there any other measures that would be used as well?

I can provide a note, if you like, on the guidance that informs the actual investment and then how they'll be monitored. Monitoring takes place on the basis of data on the outcomes of investments. You're right—WelTAG appraisal will be applied to active travel projects, and there will be—in terms of our engagement with local authorities, we meet regularly as an active travel board, and that takes in wider groups and stakeholders as well, with the primary aim of sharing best practice and assessing how much value for money is delivered on each of the projects, and then, based on that intelligence, we're able to design better ways of working in the future. I do have, actually—I've brought it with me just in case you're interested—I can obviously provide a link. It was commissioned by Transport for London, and it's a really interesting document on the economic benefits of active travel. I just thought that this committee—I don't know whether you're planning on any future inquiries, but it would be really interesting to take a look at this document, and I'm more than happy to provide a link to it. 

We'd be very grateful for that, because we are doing a piece of work on that in the new year. So, thank you. 

Pleasure. 

Thank you. And how will the criteria applied to the active travel fund differ from the wider Welsh Government grant programmes that support the active travel infrastructure investment?  

Well, that's absolutely right: this is one dedicated fund, but there are many other resources available to deliver active travel objectives, including resource within health, within education and, of course, within the transport and economy brief as well. For example, the local transport fund, there is some overlap with active travel, and I'm pleased that we've been able to increase the amount of money that's available for the local transport fund as well. I think it's important to not view active travel solely as a transport matter. This is something that touches on health, on education, and connected communities. It's also about building resilience into communities and, of course, it touches on decarbonisation—very much so—on the decarbonisation agenda. Simon.  

It might also be worth adding that, as well as the active travel grant itself, there's the road safety grant, which has got a significant weighting now for active travel, alongside the local transport fund. But also capital works that we undertake also have a significant element of active travel in them. So, it's important not to just look at the single line that says 'active travel' because, actually, there is a variety of other levers within the MEG that deliver active travel outcomes as well. 

Can I just say as well—[Inaudible.] That's one of the criteria, and also connecting communities and improving air quality. That's the common theme running through them all. 

Thank you very much. Moving on to road maintenance, on what basis have you balanced investment in road maintenance with investment in new road infrastructure in the draft budget allocations? 

Okay, well, there is a considerable amount of resource allocated to road maintenance; it's more than £140 million. I think that's essential, given that roads play an important role in connecting communities and ensuring that people get to and from work and leisure facilities. But I think there is an important role to play in making sure that we don't just maintain roads, but that we ease congestion. And therefore the capital programme for, if you like, something like building new routes, new roads, I see it as addressing congestion. That's absolutely vital, and I don't wish to move away from examining how we can address pinchpoints and congestion on our trunk road network.   

You'll be aware that the committee's recent report stated that we believe that maintaining the network should be prioritised over building new roads. To what extent do you agree with the committee's position there? 

I'm afraid I don't entirely agree, because—. Well, there's a big difference between building new routes and addressing congestion, and a huge number of what might be classed by the committee as new roads are actually projects that ease congestion and deal with pinchpoints. For example, the Newtown bypass is about easing congestion through Newtown and dealing with that pinchpoint in the town centre. There are other projects: Northern Gateway, for example, is a project designed to open up industrial space. That's absolutely crucial for the economy. That might be classed as a new road; I consider that to be an economic development objective. I'd also point to the Llandeilo bypass: is that really a new road, or is that a congestion-alleviating scheme? Bontnewydd bypass as well is a programme designed to alleviate congestion through that particular community and to address a pinchpoint there.

So, actually, I think it's more complicated than just deeming capital programmes where you see tarmac and concrete poured as new roads. It's often a case of actually alleviating congestion through providing a bypass or overtaking provision. And would you really want to see projects like Northern Gateway, Newtown bypass, Caernarfon-Bontnewydd bypass cancelled in order to pour more money into road maintenance, especially given that—? There was the inquiry into the state of roads. The trunk road network generally is in a fairly good condition, and so I think we've got the balance absolutely right. 

There are other examples that I could point to that demonstrate that investment in new road surfaces can open up huge economic opportunities—Harbour Way, for example, in Port Talbot. Would anyone really call for that investment to be halted, because that's going to be hugely important in improving the economic prospects of that particular community? And so—. And another example I could point to, a recent example, is the Wrexham industrial estate link road. That was hugely important in order for that particular region to remain competitive, given that Chester is within 15 miles of Wrexham, and has a very good business park with excellent access onto the A55. In order for Wrexham's industrial estate to remain competitive, that link road was hugely important. So, I think we've struck the right balance between road maintenance and what you might consider to be new roads, but which I consider to be either economic development imperatives, or congestion-alleviating investments. Simon. 

Can I just add to the point about congestion? So, congestion is one measure, and that's about journey time, reliability improvement and journey-time improvements more generally, which have got a measurable economic benefit. But some of these schemes are also about air quality improvements, noise improvements. Some of them have significant carbon reduction improvements as well—so, instead of having vehicles idling in stationary traffic, you can reduce the carbon emissions. So, they have a wide range of benefits, these kind of pinchpoint type schemes that we are increasingly focusing on. 

I could offer another example there, actually, the A494, which is—for those of you who have not driven up the A494, it's quite a steep route, dual carriageway in both directions, with homes within 30 metres of the road. And that is a particularly nasty carbon corridor. The purpose of what we're calling the red route, the Flintshire corridor red route, is to reduce congestion, improve air quality in that intensely urbanised area, and to protect people from toxins that are coming out of the exhaust systems of, I think it's around about, 60,000 vehicles that use that road every day. 

Thank you very much. One final quick question from me: we know that local authorities are always seeking additional resources for road maintenance, particularly post winter, and that ring-fenced funds in times of austerity can be very beneficial for them. So, I'm just interested in the local government public highway refurbishment programme, and how that funding will actually be allocated to local authorities. 

Again, that's a significant sum of money, and I think, in all fairness, local government colleagues have raised with me on numerous occasions concerns about the cost of not addressing poorly maintained roads because of austerity. I think everybody will recognise that the cost of claims against councils is significant for unattended potholes—£60 million is a significant sum. It will be delivered through the local government budget, and it'll go straight into the revenue support grant. 

Okay. 

I'm pleased it's going to be difficult for you to cancel the Newtown bypass, given that it's about to open. 

I'm delighted that it is, and I was very pleased that the run went well.

Yes. I missed you there. I was hoping I was going to be able to run it with you, Cabinet Secretary. 

I promise we will run it together at some point. 

Right. Okay. [Laughter.] 

Do you understand our committee's report in regard to prioritising maintenance over funding new schemes, simply because, as a committee, we just don't feel it's appropriate to say you should be spending more money without recognising where that comes from, where that funding's allocated from? So, there is this balance. You believe you've got that right, but do you understand why as a committee we would make that recommendation?

I do. I do, but it's really complicated, and we also—whenever we consider investment in new road surfaces, we consider the revenue implications of maintaining those particular new routes. But, equally, if we're going to grow the economy, we need to ensure that our connective infrastructure is improved. And so the growth of the economy can be linked then to tax receipts, and, in turn, to road maintenance provision. 

Okay. Thank you. I've got—. Just to let Members know, I've got Joyce and David, then Bethan and Oscar so far. So, Joyce Watson. 

You say in your—. I'm moving on to the rail franchise now. We're off the road; we're on the rail now. You say that in the new franchise that you have ensured that there will be investment that will produce value for money. We're very interested to know (a) how it's going to be enforced, and (b) how it's going to be monitored. 

Okay. Well, first of all, in terms of value for money with the new contract, as a consequence of having competitively procured the new contract, value for money in the aggregate has been baked into and assured at all stages of the procurement exercise, and at every level now. I think the important point that you raised concerns the monitoring and enforcement, and we've got a live financial model that's going to be used right throughout the 15-year period of the franchise, and that's going to allow Transport for Wales to accurately assess the cost, or indeed cost savings, driven by potential future changes to the franchise. And so that will be a constant monitoring assessment that's going to be taking place.

Okay. And you said that there would be 'opportunities and requirements' that emerged through the procurement and that you had to frontload some costs and that will require additional resource in the short term. Could you say how that's being funded, and would any other policy areas lose out as a result of that frontloading?

You're absolutely right: we have frontloaded the investment, and that's for good reason. That's to ensure that we get some cost savings further down the line. It makes perfect sense to invest now in, for example, the modernisation of the fleet, better maintenance of the fleet, to make sure that there's early investment in integrated ticketing schemes. But the actual cost upfront of that has been met from central reserves, so there are no other opportunity costs to the rest of my portfolio. And I think it's also worth stating that, even with these upfront additional costs, it's still going to cost us less in the early years than what the old franchise agreement cost.

Okay. So, that—

Can I just say—? There's an opportunity cost to Welsh Government, but that was the priority for the Cabinet, basically, so it came from central reserves.

Okay. There has been a transfer of £900 million from the UK Government to the Welsh Government that will accompany the transfer of ownership of the core Valleys lines to the Welsh Government. On what basis will you, or do you, believe that that will be sufficient, given that latent defects might lead to significant future liabilities?

I'll let Simon go into some of the detail, but just to say that it's worth recalling that, back in 1999, with devolution, we took on all of the trunk and motorway network of Wales, and there was no analysis of any latent defects. We took it on, really, rather blindly, but we did it because, in the devolution settlement, we believed that we could maintain roads better and that we could deliver new road schemes better. And I think we've been able to demonstrate that—with the rather intensive work that's taken place with Network Rail in assessing the rail asset, I think that we're actually making great strides beyond what was taken in 1999 on the road front. Simon.

So, the £900 million figure is, if you like, an abstract number—we won't get a cheque for £900 million; it's about movements on the UK Government balance sheet between the Department for Transport and us. So, it's moving the value of an asset from one UK Government department to us. So, that's where that number comes from. The actual value is based on how Network Rail values its overall asset. So, if you like, it could have been £1, it could have been £900 million—it's an accounting treatment, essentially.

So, it's a paper exercise.

But it reflects the value that the DfT have ascribed to the overall UK rail asset and the proportion that's going to be coming to us.

It's also worth saying that we did require bidders to recognise the current level of funding available in the situation that we were in with regard to the core Valleys lines asset.

Okay. And I don't think we could move on without mentioning the fact that there have been problems on the line almost immediately and that there has been impact on people using the service, but also on the trains themselves. Are you confident, given those very early challenges that have been faced, for one reason or the other, that there isn't going to be a negative impact, financially, on the taxpayers of Wales?

I am fairly confident of that, yes. I think it's worth saying that I was speaking with the chief executive of Transport for Wales this morning, concerning the challenges that we've faced in the last four weeks. Autumn is probably the worst time of the year to take on a rail franchise. Generally, leaves are a bigger problem than snow because they lead to wheels being flattened, and that in turn requires rolling stock trains to be taken off the network. Notwithstanding this, I am determined to ensure that Transport for Wales address the problems that we've seen in the past few weeks and to, if possible, look at improving temporarily capacity on the network. By the end of next year, though, all those pacers will have gone, and by 2023 every train will have been replaced. This does not affect the £800 million investment in replacement trains for the Wales and borders network.

Okay, thank you. 

Thank you, Cabinet Secretary, for your comments just now. In regard to Transport for Wales, I know, back in June, you talked about groundbreaking transformation across the network within months. We're one month into the franchise. When do you think that you will achieve that groundbreaking transformation that, back in June, you said would happen within months? When do you think that's likely to be seen by passengers?

The programme of deep cleaning the stations is beginning. A new route was meant to have begun back in the summer, when I stated that. The first new route was due to commence in December. You're well aware of the reasons why that particular new route has not commenced or will not commence next month, but it will begin in the spring. In part, as a consequence of the delay to the new route, it's now going to extend beyond Chester and into Wales. So, passengers will see new services begin then. And, as I've just stated, the pacers will be disappearing next year. I think that is an important signal that what people have tolerated up until now, they will not need to tolerate from 2019 onward. 

And in order for those pacers to be replaced, there will be a programme of refurbished rolling stock appearing from the spring of next year. So, people will see trains that are refurbished, new to this franchise, appearing in the spring of next year in significant quantity. 

I've got David and Hefin on this point, and then you're going to come on to—. Just on this point David, and then I'll come to you, Hefin.

This is tied in with what Joyce was talking about, with disruption and obviously the cost of the rail. How have you managed to insure your new assets, because, obviously, Network Rail would have had greater purchasing ability with insurance. Have you done it through Network Rail?

This is something that we're discussing with Network Rail at the moment—the possibility of retaining the option of insuring through them.

But we're also looking at, before we get to that point, what the condition of the asset is before it gets transferred to us. So, we will be requiring Network Rail to remedy as many of the defects that we can identify before transfer as possible. 

I think it's worth putting on record as well that, recently, talks with Network Rail have been incredibly constructive. I've noticed quite a shift in terms of the awareness of Wales and the transport needs of our country in recent weeks and months. 

Hefin David. 

Just regarding the reference you made to the refurbished rolling stock, that's the stuff that was already bought and refurbished by Arriva.

No, there are additional trains coming on top of that. So, there are the class 230s, the Vivarail trains, that will be running on the Wrexham-Bidston line, and that will liberate the trains currently there to be used elsewhere on the network. There are the trains that you refer to—

So, that stuff that's has been bought, it's already paid for by Arriva and is ready to be deployed by Transport for Wales.

The manufacturer is having some difficulties with that. That manufacturer has had well-documented difficulties, if you're sad enough, like me, to read the railway press. I think Arriva trains north are first in the queue for those trains, and they're waiting for those to come on. We are told that we can expect to see those trains in the springtime, but in addition there may be some additional of those on top of what Arriva originally ordered as well so that we get a significant quantity of trains.

But it is just worth stressing again that demand for new rolling stock, and demand for existing rolling stock, across the UK is really, really very intense, and it is incredibly difficult to identify and secure additional rolling stock.

But I thought that rolling stock had already been allocated by Arriva Trains Wales, as they were, to the Wales franchise.

So, it had been. It was going to provide additional capacity as well, but we're now—

But that's not the case now.

Well, those trains will be arriving, just later than they were originally due to arrive.

And that was technical issues with the—

Technical issues, yes. In answer to your earlier question as well, we are also expecting by the end of next year the replacement locomotives and carriages for the express north-south service as well, so that will provide three services a day instead of the two at the moment.

Can I just come back, Simon Jones, on your answers to Joyce Watson's questions in regard to the £900 million? I know that previously, Cabinet Secretary, you wrote to the committee to say that that was part of the £5 billion investment in the franchise, if I've got that right. But can I ask how much the Welsh Government has actually received in cash terms to fund the Valleys network?

So, I guess there are two questions. There's a capital question, so that's the balance sheet issue that I was talking about earlier on—

My question's referring to maintenance.

To maintenance. So, we are still working that through with the Department for Transport. So, the transfer is scheduled to take place in the summer/autumn of next year. We are working that allocation out at the moment. As you can imagine, it's quite a tense negotiation between us and Network Rail and DfT to make sure that we get the right share of the money that's allocated to the Wales route to be able to pay for those Valleys lines that are transferring to us.

When do you expect to be in a position to know the outcome of that?

I think we're going to need to know that by late spring in order to be able to proceed with the deal.

Okay. Thank you. David Rowlands.

Can we concentrate for a moment on Transport for Wales? Could you describe to us the actual structure of Transport for Wales, and specifically the relationship between Transport for Wales, TfW Rail and KeolisAmey?

Sure. Transport for Wales is a wholly owned subsidiary of Welsh Government. It's a company delivering on a not-for-profit basis, and it's managing all of our rail services for Welsh Government. There's potential in the future for it to take on additional responsibilities. Transport for Wales Rail Services is the day-to-day operating name for KeolisAmey, which is the operating and development partner, and Transport for Wales Rail Services is the body that is employing the guards and all other staff. It's what's providing the day-to-day train services and managing the rolling stock.

Okay. So, Transport for Wales Rail is the name we'll be seeing on the stations, is that right, for the operating—

Yes. That's going to be consistent. It'll be Transport for Wales.

Okay. Fine. Can we have some details of the corporate capital and revenue budget allocations for Transport for Wales, that is as opposed to funding for the rail franchise and Transport for Wales Rail, and how have you arrived at that budget? 

Well, we arrive at the provision of the resource based on the business plan that's provided by Transport for Wales. Fifteen million pounds is being provided this year. That is higher than what would normally be required because of all the work associated with the procurement exercise.

Okay. Can we have your response to the suggestion that there is currently a lack of transparency in the role of Transport for Wales?

Okay. Well, I know that the committee have been very concerned about this particular area of rail delivery. I think it's fair to say that good progress has been made. Interim remit letters are now available on the Welsh Government website. Transport for Wales is publishing all of the minutes from the company board meetings on its website. The management agreement and the company business plan are going to be published in due course once they've been translated. The exercise of finding a new permanent chair for Transport for Wales is very transparent and is under way. Transport for Wales will also be publishing a report on its activities, and that will begin in May 2019, covering the period of this financial year.

Obviously, within that, perhaps this lack of transparency has been the fact that it's being set up anyway, and it's been, obviously, that side of it. What mechanisms require Transport for Wales to implement the Well-being of Future Generations (Wales) Act 2015, and how do the organisation's governance arrangements require it to align to the Welsh Government's well-being objectives and the Act's five ways of working? How will this be monitored and assessed?

Just going back—sorry, Chair—to your previous question, it's also worth stating that Transport for Wales has to, of course, comply with the requirements of the Companies Act 2006, but it's going beyond that, at our request, in terms of the information that's provided in a transparent way to the public. I can provide a note on the additional information that we're requiring Transport for Wales to publish, if that's helpful.

In terms of the well-being of future generations Act, this is referred to in the framework agreement between us and Transport for Wales, with regular monitoring and evaluation. Is there any more to add to that?

Well, it's embedded in the remit letter, and because they're effectively a subsidiary of the Welsh Government, any obligations under the future generations Act that apply to Welsh Ministers cascade down to TfW.

So, it's included in the remit letter.

That's right.

So, for example, one thing they've established is a sustainable and ethical procurement panel that includes representatives from Welsh Government and also the voluntary action and co-ordination council. They're doing things in accordance with that as well, so it's really good stuff.

You'll be able to see the work that complies with these requirements in the published business plan. It's also worth stating, Chair, that there are fortnightly monitoring meetings that take place between Transport for Wales and Welsh Government Ministers, and, of course, part of the monitoring that takes place covers this very issue.

And have you submitted the remit letter to Transport for Wales?

The draft business plan, I believe, is being considered by the board at the moment, ready for—

Yes. The business plan is produced on an annual basis, so, when we approve the business plan, which is being produced at the moment for the next financial year, that will be published, and then a remit letter against that will also be published.

Shall I just run through the process?

Has Transport for Wales received the remit letter from you yet?

Yes.

And is that public yet, for us to see?

Yes. So, what happens is, as I said, it's published on our website.

So, the remit letter is now published.

Yes.

Right. Great.

And then they respond—. The way that they respond is, they produce a draft business plan that is then considered by their board. The board then approves it, that's submitted to us, we then issue a final remit letter, and they then issue the final business plan.

And the business plan and the business case, are they the same?

No.

Explain the difference.

There's a business case being produced at the moment to look at the future activities that Transport for Wales might undertake. So, at the moment, Transport for Wales is remitted to manage the rail services contract and associated activities. The business case is looking at whether there should be other functions, like bus, for instance, or other activities—highways or what have you—that might fit in there.

And I'd welcome the views of the committee concerned with this particular consideration.

And the contract, is that yet published?

The rail services contract?

Yes.

The Cab Sec gave a commitment to publish that by the end of this year, so it will be published by the end of this year.

Okay. Had you finished your questions, David?

With your indulgence, I'd like to ask a question. You mentioned earlier that you've met with Transport for Wales, and you seemed to suggest that it was the issue of leaves that had created the most problems. At what point do you say to them, simply, 'This isn't good enough'? They're in the process of coming up with a business plan now. I would say that it's more entrenched than leaves; I would say trains being cancelled doesn't really tell me that that's a problem with leaves on the line. There has to be more systematic problems there at the moment with the transfer. At what point do you say to them, 'We need to see firmer and stricter action here, so that the people of Wales can be assured that your service is going to deliver for the people of Wales?'

Generally, leaves are a major issue, but another problem associated with that is the wheel sets that are often damaged as a consequence of leaves on the line.  

So, that has been the main issue here, then—the main issue with the new franchise.

The main issue has been inheriting rolling stock that is old, as everybody knows and, historically, I believe that insufficient wheel sets have been ordered in preparation for autumn. As I said earlier, we inherited it probably at the worst time of the year to inherit any rail franchise. 

Did you have control over whether it was done now, or whether it was done sooner? 

So, no, because the contract with Arriva expired in the middle of October. Our only option would have been to extend the Arriva contract, and that would have taken us closer to the deadline that we have for upgrading all of the trains to be compliant with the persons of restricted mobility regulations. So, it was a kind of devil and the deep blue sea decision for us. 

The underlying problem here is that, in the previous contract, there was no allowance for growth, so the number of people using the rail services in the 15 years of the previous contract doubled. The amount of rolling stock didn't increase. We've got more people using the trains than we've got trains to be able to deal with them. The new contract, which we've spent the last two or three years procuring, allows for considerably more rolling stock to be provided, so there will be a huge amount of new trains provided, but these trains take three or four years to manufacture. 

So, there is a plan for dealing with the underlying problems; it involves buying new trains. We've talked about the temporary fix of buying in some additional trains, refurbished trains, in the short term. Those are under order and will be beginning to arrive in the springtime. But this whole problem is going to take some time to sort out, because we've got to wait three or four years for the new trains to be manufactured. 

Okay. Well, I'm sure we'll scrutinise that when we can. I wanted to go way off piste. At the moment—

Can I just ask one question on the remit letter, before you come back on your—? Because you've got some specific questions as well. 

Yes.

On the remit letter, I'm just looking at your website now. Just to clarify, because it's important for the committee to have access to that remit letter. The remit letter that's published ends on 30 September 2018. Is there a remit letter beyond that point? Is that published on the website, because I couldn't find that? 

So, there is a remit letter to cover us until the end of the financial year. I'm not sure why it hasn't been published yet, but there is a remit letter for that. 

And there's no reason why that can't be published. 

No, there's no reason why it can't be published. 

Okay. If you could send that to the committee if it's not on the website, then I'd be grateful.

Of course, yes.

Bethan Sayed. 

Yes. The committee I chair, last week, had Dafydd Elis-Thomas in and he said that it wasn't his responsibility in relation to the funding for film in Wales. He did mention, of course, the set-up of Creative Wales, but I wanted to ask you, as the Cabinet Secretary with responsibility, what is happening with that fund. I've had evidence from production companies who are telling me that they don't know that they can apply. Dafydd told us that it hasn't closed, but it is changing. Will the fund be the same in terms of allocation as it was under the media investment budget, or will you be looking to do something differently? And can you give assurances as well to those wanting to apply to the newly founded Creative Wales that they can do so now, in the interim, because that wasn't clear from our scrutiny of Dafydd Elis-Thomas?

Yes. As part of the consolidation effort that's under way in Welsh Government in our department, resource can be applied for by businesses operating in the creative industries. The media investment fund is something that was put on pause, pending the best delivery vehicle to take it over; Creative Wales is that vehicle. We are working tirelessly to build Creative Wales and recruit the human resources that are required, in order to begin making investments through that particular funding system. But in the meantime, any businesses looking for support can come straight to us and apply under the consolidated economy futures fund.   

Okay, so the budget line will be the same as it was before under the media investment budget in the previous round, or—. 

We're trying not to silo budgets now. What we're trying to do is to ensure that any fund that is accessed by a business complies with the economic contract, or the business complies with the economic contract, and we're increasing the amount of money that's poured into the economy futures fund. I don't wish to predict when other funds will be immersed into the economy futures fund, but it would be my intention, where creative industries are concerned, for Creative Wales to manage a budget line, which will be proportionate and will reflect what the demand of the sector—

When will you decide on that then?

That will be something for the next financial year. There are legacy programmes that are being funded at the moment, but it's something that we'll consider once we've had a business plan from Creative Wales, but Creative Wales needs to be established before that takes place. 

Okay. The other question I had, again it's to do with education to an extent, but obviously, innovation would come under this committee as well; we are looking at it. And we know that you agreed to give money in relation to the £25 million higher education innovation fund-style fund that the Reid review proposed. But in evidence submitted to the children and young people's committee, you said that there was no funding for the Reid review for the 2019-20 draft budget. Could you explain why you've come to that decision, considering that we know that at the same time as this budget was cut, external income for our universities went down? Everybody I've talked to since being on this committee has said that that innovation fund would go a long, long way to helping Welsh industry. I raised it with Carwyn Jones last week, and he said he would consider looking at it again, and I'm asking you again whether you would commit to that. 

Well, it's with the Leader of the House and Chief Whip. Certainly, I can raise this very query with the leader of the house, but it's a responsibility that she holds, albeit with, I believe, resource assistance from my department. 

So, the leader of the house met with the four DGs, basically, last Monday to look at that particular issue. 

What's a DG, sorry?

Directors general of the portfolio areas across Welsh Government. To look at what is the existing funding within the portfolios, in the main expenditure groups, basically, and how we can pool some of that together to support the leader of the house and take forward that aspiration. 

So, when will we hear more about that?

So, we are taking that forward in the next few weeks, basically, so I can't give you a date, but that's the work that we've been committed to do by the leader of the house now. 

And can you commit to letting us know when that work will be done?

Yes. 

Okay. Thanks. 

Oscar Asghar.

Thank you very much, and good morning, Cabinet Secretary. My questions will be around a couple of questions regarding the rationale behind the restructuring of the business support budget lines. So, basically, in deciding the restructure of the business support budget lines, what consideration, Cabinet Secretary, did you give to the potential impact on transparency and ease of scrutiny of the budget lines?

Well, I think it's far simpler having that unconsolidated economy futures fund. I think it's far easier having a business development budget line. Businesses—and the changes were carried out following widespread engagement with the business community—told us that they don't particularly care for complicated wiring behind, if you like, the front door of accessing Welsh Government. What they want is transparency and simplicity. They want to remove any complication, duplication, and just know what it is that they have to do in order to get support from Welsh Government. And, so, in the past, we had multiple lines associated with sectoral activity; what we're moving to now are the calls to action—that new lens through which businesses are able to see opportunities to get funding resource. And the calls to action are very simple—five points to the calls—and that, I think, makes it far easier for businesses to understand how they can draw down support from Welsh Government.

Thank you. Your paper says that the economy futures fund

'provides businesses with a clearer line of sight to funding'.

How does the fund achieve this, given that the fund is not at present separately identified in the budget tables?

Well, I've not heard any business express concern about how it's identified in budget tables. What businesses have expressed concern about, which is what this addresses, is that it can be difficult to navigate through a large number of funding programmes. And, therefore, there's a need to consolidate, which is exactly what we've done. And in consolidating the various funds, there's a need to ensure that it can be clearly understood how they go about accessing the support available from us. As I said, those five points to the calls to action reflect exactly what's required in order to futureproof the economy, and ensure that businesses remain competitive in a ferociously competitive world.

Okay. I have another. Objective 3 in the Welsh Government's strategic equality plan is to

'Identify and reduce the causes of employment, skills and pay inequalities related to gender, ethnicity, age and disability'.

Can the Cabinet Secretary provide examples of how this objective has informed specific allocations in relation to business support?

Yes, absolutely, the economic contract. The whole purpose of the economic action plan is to drive inclusive growth, to reduce inequalities, whilst at the same time raising the spirit level of wealth and well-being. Within the economic contract, with the four points of the economic contract, there's a commitment and a need to demonstrate the commitment to fair work. There's also a need to demonstrate how, as an employer, you are improving the health, skills, and the mental health of the workforce as well. Equalities run right through the economic contract as the primary means of delivering inclusive growth. And any business seeking our support will have to sign up to the economic contract.

And every major change in the budget will go through an integrated impact assessment as well. So, all those equality issues are evaluated at the time of change, basically.

So far, about 100 businesses have signed the economic contract. It's my intention to widen the economic contract, or, at the very least, the principles of the economic contract, to include procurement and also to include sponsored bodies, for example, and businesses seeking support by another means. Perhaps we could look at extending it to the Development Bank of Wales, for example. Because, if we are to drive inclusive growth across all of our economy, then we need to capture all means of supporting businesses in our economy.

Bethan Sayed. Oh, sorry, do you have one more question, Oscar? Go ahead.

Yes, just a little question. Thank you, Chair. Cabinet Secretary, looking through your economy and transport structure for future planning, concessionary travel has been reduced drastically from £40 million to £27 million—around about that. That's the plan. Consider though these people, senior citizens, they do travel and they have the capacity to spend money in the economy, in the local shopping area. Why are you thinking of reducing that area?

Sorry, what area is it?

Concessionary travel.

Ah, okay, this is really interesting. We have very little power in terms of being able to impose a policy in this area, and to generate a price that we are comfortable with—you have to undergo considerable negotiation with the sector. So, for example, with the youth concessionary fare scheme, we reached a budget agreement, which was for £10 million, I believe it was—

It was £15 million over two years.

It was £15 million over two years. And we went to the sector, and said, 'How much would it cost to deliver this?', and they said, 'Ah, £15 million.' We've been able to negotiate a better deal for an extended and expanded scheme this year. So, I think it shows how we've been able to drive a harder bargain.

Just on the concessionary fares point, the budget actually comes from both the capital and the revenue lines. So, the £27 million you're referring to might just be the revenue element of it, rather than the capital element. So, the aggregate amount is still around the sort of £60 million that we've traditionally been spending.

Thank you very much.

Thank you. Bethan Sayed.

It's carrying on, really, in relation to the economy futures fund, and what proportion of the total allocation for business support in 2019-20 does it actually cover. Could you give us the figure?

I believe it's around about 8 per cent at the moment, but that's largely because this is so new, and there is quite a bit of legacy investment within the works. That will taper off, and therefore the proportion associated with the economy futures fund will increase in future years.

Is that because only six different funds have been consolidated at this moment in time or—?

It's largely because, when an investment decision is made, it can take some years to come to fruition and then the provision of resource can be spread out over multiple financial years as well. So, the proportion associated with the economy futures fund will continue to be affected, if you like, because of those legacy programmes, but, over time, more will shift towards the economy futures fund and, as a consequence, the proportion of the overall budget that that consumes will increase.

So, what's the timeline or the plan for this because, of course, it's only six at the moment?

I appreciate that. So, when we spoke to businesses, I was open-minded about how many funds we put into the EFF. Businesses told us, 'Just get it right. Start off, get it right and then move forward with an expanded economy futures fund offer.' I wouldn't want to set an arbitrary date for increasing the number of funds that are consolidated into it, nor would I want to put a fixed sum, if you like, on the destination of that particular fund instead. We're taking a progressive approach, making sure that the fund operates as businesses wish it to operate, and then, once we're confident of that, we'll pour in additional money from other funds as well.

But the business community will know at the moment, if they're not a part, that if they can't appeal to that fund, that they carry on appealing to the funds that they've already—

Yes, that's right. They'll be signposted—if the economy futures fund is not applicable, it could be something else. They could be signposted, for example, to the Development Bank of Wales or to Business Wales for wraparound support.

Okay. You've already touched on it, but it's on the detail around the economic contract—72 businesses have signed up, but I was on the Equality, Local Government and Communities Committee, where we had quite a bit of a hard time coming to conclusions, considering that nobody actually knew the definition of 'fair work', and we still won't know until the spring of 2019. So, when they're applying for this economic contract, with 'fair work' still up in the air in terms of a definition, it's the other elements then, I presume, that they are complying with. How will you make an assessment of whether they will be within this 'fair work' definition? Because we've had issues with regard to women coming back form maternity leave, flexible working, and all of these things should be seen in the round, and I don't want that to be missed when the definition still isn't there.

I think I've already given a guarantee to the committee that I will share details of the contracts and the assessments already. You're absolutely right: we've got an interim position until a strict definition of 'fair work' is applied. The figure has now arisen to over 100 businesses that have signed up to the economic contract. I'm not sure whether we provided a briefing note on the process of assessing and then signing up to the contract. Have we provided that to committee?

We are undertaking a stock take at the six-month point, which will give us that kind of information and a better analysis. It's early days still, six months in, but we are undertaking that analysis and we'll be able to provide—. I think we've provided some quite basic data information—the clerk's nodding—but there will be more working that we're undertaking. We're doing that with the ministerial advisory sub-group that's looking at the economic contract and also with the social partners strategy group. So, there is quite a lot of work in looking, not just at the contract, but the whole process and what we call the new operating model—so, the calls to action, the economy futures fund, how it's all working, and what's working well and what's not working well. On the 'fair work' point, as we said, there's an interim position on that, but we will wait for the Fair Work Commission and then build that in as appropriate.

I didn't want to delay on implementing the economic contract. It's not ideal to only have an interim position on 'fair work', but I think it's better to have commenced work on the economic contract than delay it until we've got the definition agreed.

Thank you. Hefin David.

Just picking that up, I hope you won't take offence if I say that some of the language in the memorandum that you presented to the committee is so opaque as to generate some very weird images. So, for example, you say: 

'I have been clear that we are taking an iterative approach to implementing EAP, working with our partners...It is important that decisions are not made now that limit our scope in these areas.'

That generates this idea of 'iterative' going around in circles until you have improved to a point when you decide to stop and then make a decision, but that doesn't give us any specificity.

Okay. Well, maybe it should have been described as 'progressive'—that we've set the course and we will be, in some respects, intensifying, and in other respects, we'll be building what has already been agreed. But we're not going to roll back on anything, we're not going to go around in a circle and—

I was thinking that a reflective learning cycle is what you're talking about, but at what point does that cycle stop and you make a decision?

Oh, no—we've already made the decisions on the course of direction, but in terms of—

You say here:

'It is important that decisions are not made now that limit our scope'.

Yes, but in terms of, for example, the economy futures fund, I think it's important that we just recognise what is working within that particular intervention, and if any tweaks or any changes need to be made then we'll make them. It's also important to recognise what additional funds are suited for that particular consolidated fund. The alternative is just to go and do it and then to evaluate and then to rectify. But, actually, what businesses told us was, 'Start with a programme and then assess how it works, how it can be improved and what should be added to it.' Likewise with the economic contract—at stock-take point, what we'll be doing is assessing how effective it's been, how we could intensify the ask or increase the ask and how we could expand it across other areas of Government activity. 

Does that give you the advantage, then, of also not spending money or spending money over a longer period of time?

No.

Okay.

I think it's just worth noting as well that this is an agile approach that will be flexed to meet the demands of the economy. There could be economic shifts, so we would be able to flex our approach. We've always been really clear that this is something that wouldn't just be set in stone forever. I think the other point worth noting is that our business support extends beyond giving money to companies and businesses—

Can you just be specific about what you mean by 'agile' and 'flex'? What does that mean?

Well, in terms of being able to adapt what we do, so the funding could be adapted if there is an economic crisis. For instance, in terms of Brexit, the Development Bank of Wales—we've got funding going in there to enable businesses to respond in terms of liquidity issues. It's just having that ability to respond and not have something that is so set in stone that we wouldn't be able to adjust it or tweak it. As the Cabinet Secretary said, the core principle of the approach is set—it's about something for something, about businesses giving something back before they receive funding. That approach doesn't shift. 

If we go back to when the last economic strategy was published, that was just around about the same time as the economic downturn. That particular strategy had set the course, which never really happened insofar as grants versus loans are concerned. What we took from that experience was the need to ensure that you, if you like, build into an economic strategy automatic stabilisers that can be deployed if you have a severe downturn. We developed the economic action plan, fully aware that, in March of next year, we'd be leaving the EU. Therefore, you have to build into it mechanisms for financial support to be steered swiftly in the direction of what businesses require.

I think in consolidating money within that—and Mohammed, I think it was, raised concerns about whether it's clearly identifiable. Well, by having a larger pot that you can then steer towards any given challenge, I think that enables you to be more agile and responsive to what businesses require, rather than have multiple sector-based budget lines, which you cannot shift so easily because often they are committed for several years down the line, because of the nature of the investments of many businesses.

Is that what you mean by 'iterative'?

'Iterative' is about building on what we've commenced already, so building on the economic contract, moving the economic contract out to other parts of Government and other activities. Being agile is about having the ability to use our financial resources in a way that responds to a crisis or a deepening challenge. The pre-existing situation would not allow us to do that with those sector-based budget lines. 

Okay. It's helpful to understand that, because that's not really what 'iterative' and 'agile' mean to me. Having that clarity is helpful.

So, with regard to the foundational sectors that you mention in your report, you say on page—I can't actually see the page that comes from your memorandum, but it's pack-page 51, in the pack that we've had:

'Within this Draft Budget the revenue Business Development BEL of £11m'—

I think it's £11.742 million—

'in 2019-20 is available to support enabling initiatives. This does not mean additional resources from my budget.'

What does that mean? 

So, enabling schemes include things like Wales Rally GB, other programmes that aren't necessarily—

Industry Wales. 

Industry Wales. It's not specific to the new work on foundational sectors.  

So, how much is going to foundational sectors from that £11.742 million? 

Well, we've got the £1.5 million as part of the deal with—

But that was announced last year. 

—Plaid Cymru, which is going to be utilised in the coming year. 

Okay. So, money announced last year is being spent this year. So, there's no new money for the foundational sectors. 

There's no new money at the moment because the plan has not been produced. But, once the plan has been produced, we would then be able to utilise funding from within business development. But I don't want to put a figure on how much we're going to be using for interventions in the foundational sectors until we've got the plan and we know exactly what we're going to be doing with it. 

So, that BEL that reflects £11.742 million—of that—is repeating £1.5 million that was already announced last year for the foundational sectors.

It was for two years. 

It was in two-year funding. Okay. So, that £11.42 million this year is consisting of a two-year funding programme of £1.5 million from last year and this year. 

That's in there. 

Okay. That's helpful to understand, when you say it doesn't mean using significant resources. Sorry—

'Does not mean additional resources from my budget.'

That's what you're honestly saying. Okay. All right, then. And when do you expect to deploy that? 

Well, consideration of programmes concerning care are under way at the moment. I can provide an update as and when interventions and pilot schemes are agreed. I can't give a definite date at this moment.

We're really not sure where that £1.5 million is going to be triggered and when it's going to be spent and on what. 

I don't know exactly what it's going to be spent on at the moment because the pilot programmes are being considered right now, so I can't give a definite answer to what will be taken forward. 

And when will you be able to give that answer? 

That work is under way. We're working with care colleagues on that because the agreement with the £1.5 million was around the care sector, so there are some limitations in terms of what we can—

But you don't know what you're going to spend it on. 

Yes, we have some proposals that we're working with colleagues on so we will have something. 

This does exemplify the concern that I had that the foundational sectors were put into the economic action plan at the last minute after pressure from backbenchers, and it seems that there hasn't been a great deal of consideration on how that money's going to be spent. 

I think it's worth pointing out the importance of the enabling plans in defining the longer term arrangements for the foundational economy and that it is one of those truly cross-Government approaches. It's not something that just sits within this Cabinet Secretary's portfolio, so it's not something that you can just rush. So, we are taking our time in developing—

You're taking an iterative approach to it. 

But also, we're working with partners—this isn't something that's top-down from Welsh Government, so we're working with partners outside who have a lot of knowledge in terms of foundation economy and what that means. You can spend a lot of money on it and not get many results, so it's really important that we get this right. The £1.5 million is in hand. There is— 

Which partners are you working with? 

The foundation network is the big one, with Karel Williams. Also on the ministerial advisory board we have Debbie Green and she's leading the sub-group looking at the foundational economy. So, there's a tremendous amount of— 

So, the likes of Karel Williams and Kevin Morgan are advising on how that £1.5 million will be spent. 

They are being involved in the process.

Okay. When can we expect to have more information? That's a reasonable question. 

Well, I don't want to give a specific time and then not be able to deliver it, but I would expect us to have something in the new year—we should be able to have some idea of what the spend will be on specifically. I know there are some—. The issues we have are around the technicality of the spend at the moment and the definition of what we can spend it on, which we're working through. So, I don't want to give an answer, but I think early new year we should have something to be able to report back to say, 'This is what this £1.5 million will be used for.' 

It's been allocated since 2018—since the 2018-19 budget. You allocated it some time ago is what I'm saying.

Well, I didn't, but it has been, yes. 

It was allocated, then. 

Noted. Noted—yes. 

Okay.

Cabinet Secretary, if I could ask you quickly—you wrote to the committee last month and you said that the UK Government must take responsibility and:

'Make funding available to assist in the transition to a post-EU exit environment.'

What are the implications on your budget if that money isn't sufficient and what's your contingency plan? We're out of time, so I'm looking for the headlines, really.

Okay. Well, we'd need to reprioritise, and it would be a challenge. There are considerable sums associated with EU funding in my portfolio projects in the current round that amount to £0.5 billion, and we've been clear throughout that we would expect transition to a new funding programme to be as seamless as possible. But decisions must be made in Wales and there could be an opportunity for us to reduce bureaucracy and better align the resource that traditionally has come from Europe with Welsh Government priorities and programmes.

But do you have a contingency plan? Is this something that you've worked up already, or are you going to wait until you know what you've got coming and then revise your plan?

I wouldn't wish to give UK Government any opportunity to reduce the amount of money that we would reasonably expect to have. And so, a contingency plan would, I think, probably be an early admission of defeat, and we are going to be fighting for all we can, to make sure that that resource is delivered to Wales as we, I think, rightly, should expect it to be.

Okay. I thank the Cabinet Secretary. We've got more questions, but no time. So, if we write to you, is it possible to receive a fairly swift reply given the limited time we've got before we debate these issues in the Chamber? Thank you.

Absolutely. Lovely. Thank you. Cheers.

We'll take a four or five-minute break, but we have to start back within five minutes. So, a five-minute break.

We move to item 8 in regard to a research and innovation evidence session. We've got a panel of business experts in front of us this morning. I'd be really grateful if you could introduce yourselves for the public record, and the organisation that you represent or your business, if I could start from my left. You don't need to press the buttons either. 

My name is Simon Gibson. I'm the chief executive officer of Wesley Clover. Wesley Clover is an investment fund with interests in tech companies. We've started 126 companies to date. We've invested £500 million, which has returned £13.5 billion in returns. We've accounted for tens of thousands of jobs that have been created. We also manage a property portfolio of 4.5 million square feet, which, if you do the maths, is like a small city. There are 80,000 people who work on that park in Canada, with 95 per cent of the world's tech companies—the major brands—operating on that park. We've also got interests, as you know, in hospitality. We're just about to open the convention centre next year in Newport. Thank you.

Thank you, Simon Gibson. Ian.

I am Ian Courtney. I also work for Wesley Clover. You obviously know what Wesley Clover does from the preamble by my colleague to my right. I am the director of external affairs.

Good morning, all. My name's Ben Cottam. I'm head of external affairs for FSB Wales—the Federation of Small Businesses—an organisation representing some 10,000 members across Wales.

Hi, I'm David Notley. I'm here in my capacity as co-chair of the Innovation Advisory Council for Wales, but I also run a business called Impact Innovation, which is a boutique advisory firm supporting high-growth companies. I'm also a private investor in technology companies in particular: cyber security, financial tech—that kind of thing.

Lovely. We really appreciate your time with us this morning. We know you're busy people, but, as a committee, we feel that we've got an opportunity here to influence Government policy. The Government are thinking these issues through at the moment, and we, as a committee, have got that scope to influence decision makers, so we feel in a good position in that sense. We, as a committee, hope to make recommendations in this area, so we're looking to you to give us evidence to support our report.

You don't all have to answer every question that Members put to you, so please bear that in mind, because we've got quite a bit to get through. Research innovation Wales—how should that new body engage with business and industry? Ben.

If I can just start, we welcome the creation of research innovation Wales, not least because it provides a focus for this kind of activity—it provides an excuse for a new conversation. I think the key for us is the extent to which it and its agenda engage the vast majority of businesses in Wales, and I mean across the whole of Wales. There is an opportunity to have a conversation, particularly around innovation—not just research, but innovation—and the way in which businesses deploy innovation, go about innovation, and create within them, actually, innovating behaviours. I want to make the distinction between the process of innovation and the creation of innovating behaviours, which leads to innovation—it's a little bit similar to the conversation about entrepreneurship versus entrepreneurial behaviours. But we think that there is an opportunity to use this as a vehicle to engage the vast majority of businesses that aren't already captured within this conversation. We know from our own work with our members that, actually, the vast majority of businesses are innovating, but this is quite often under the radar of the current structures that we have, and the current determination of innovation that we have. So, we see it as a positive move, but the extent to which it reaches out and really engages businesses is where we think we will get the biggest return.