Cynulliad Cenedlaethol Cymru

Welcome, everyone, to this meeting of the Local Government and Housing Committee. We've received apologies from Luke Fletcher, and Adam Price MS is attending committee as a substitute. Thank you for that, Adam. The meeting is being held in a hybrid format. Aside from the adaptations relating to conducting proceedings in that way, all other Standing Order requirements remain in place. The public items of this meeting are being broadcast live on Senedd.tv and a Record of Proceedings will be published as usual. The meeting is bilingual and simultaneous translation is available. Are there any declarations of interest? No.

Okay. We'll move on to item 2, then, which is our scrutiny session of the Welsh Government's draft budget for the forthcoming financial year, with the Welsh Local Government Association. And I'm very pleased to welcome, joining us here in person, Councillor Lis Burnett, leader of the Vale of Glamorgan Council, and Councillor Jane Gebbie, deputy leader of Bridgend County Borough Council. And joining us virtually, Councillor Charlie McCoubrey, Conwy County Borough Council, and Councillor Dyfrig Siencyn, leader of Gwynedd Council. So, thank you all very much for joining us here this morning.

Perhaps I might begin, then, with a few general questions and, really, to ask for an overview, an overview of the current financial situation facing local authorities in Wales. Some say that Welsh local authorities are in crisis. I think we've heard the leader of the WLGA describe the outlook for local government finances as 'bleak', and he's referred to difficult decisions having to be taken. So, we'd just be interested this morning in your brief overview, really, of the current situation. Who would like to begin?

Do you want me to start off?

Yes, please, Lis. Yes.

Thank you, Chair. I think the general consensus, but I'll leave Charlie and Dyfrig to speak for themselves, has been that this is a situation like no other that we've faced. We can't walk away from the fact we've been dealing with austerity since 2010. So, service reshaping, efficiencies, if you want to call them that, have been happening since then. Our officers do tot-ups of the actual reduction in funding or cuts year on year, and I think we're running at over £70 million now, but that's not real terms—that's just the actual amount. This is a huge focus for me particularly today, because this afternoon I leave here now and I go to our cabinet meeting where I'm presenting our budget. We started off with £38 million cost pressures, and the only way that we've got down to a gap for today of £8 million is by taking things out of the budget. We cannot fund all of our education cost pressures.

So, while we can fund additional autism units for the desperate need that we're seeing, they won't cater for as many children as we would like them to. And we can look at those services, we can look at the things that we're having to do, whether that be reshaping services and in terms of increasing council tax. But I think that, just for us, I will be talking for probably about an hour and half today, and it will be one of the most depressing situations that I've faced in 16 years as a councillor. But I'll hand over to the others. 

Okay. Thank you, Lis. Jane. 

Thank you very much, Chair, and thank you very much for having me here this morning. I've worked in local government and health for all of my adult life, and, even since I've been elected as a member, I have never seen the financial pressures in local government that I see now. And while I appreciate Welsh Government, the consequentials that you receive from Westminster—you know, we can have that debate—however, the pressures are so extreme now that we are—. We're managing to meet our statutory function, but that's by cutting cloth elsewhere, and when I consider that, since 2010, every public service in Wales has increased in their workforce, apart from local government, which has reduced by 40 per cent—. 

So, local government is a bedrock of our communities, and we go out there and we deliver your policies. And I agree with your policies—so, I'm not suggesting that I don't—but we can't fund them. The pressures that we see in education, in social services—. Our overspend in Bridgend this year just for social services alone is £12 million, and that is because of the increase in demand, and pressures on children and young people, an ageing population, an increase in care provision by 20 per cent for our more vulnerable population that are older. I've got problems with children's placements. I agree with the not-for-profit agenda, I really do—I worked in children's services; that was my bag—and what I would say is that a placement now for a child is in excess of £0.5 million a year. So, if I've got more children coming into care—. And my child protection figures are reducing, so that's a good position to be in, but the complexity and the need and the demand is increasing day on day, and it's the same with our elderly population. 

So, I suppose, for me, what I need to consider is: do I go out and deliver best practice, gold standard services? We do need to have a conversation with the public about the demand on our services. We cannot sustain them. With a 3 per cent increase in our aggregate settlement for Bridgend, that does not cover the cost of living, it doesn't cover any of the real living wage for social care workers, it doesn't cover the cost of all our staff, and the only place that we have to make reductions now—because we have no back-office functions to rationalise any more; everything is slower—is going to be reducing our workforce even more. And I am exceptionally worried about that scenario. 

Okay. Thank you very much, Jane. Would either Dyfrig or Charlie, joining us online, want to add anything to what we've heard?

Yes, thank you, Chair. I would concur completely with what my colleagues have said. I think, from a Conwy perspective, we are fairly uniquely exposed. We received, along with Dyfrig, the lowest settlement in Wales, of 2 per cent. We have an over-65 population that’s a third higher than the Welsh average. We all know there’s a crisis in social care, in funding that. But the numbers are stark. We received an additional £4 million, but pay pressures alone are £14 million, so we have to find another £10 million just to pay our teachers and our council staff. Inflation is about £12 million of pressure. Service pressure is an additional £5 million. We receive 15 per cent less per capita than our neighbours in Denbighshire and 10 per cent less than our neighbours in Gwynedd, year on year. That’s about £20 million.

When I joined the council in 2017 we had the lowest reserves in Wales. We’ve had above average council tax rises every year since then, which is incredibly difficult. It's very unpopular. Members don’t want to vote for it. But we’re still in a situation where we have still the lowest reserves in Wales, so our ability to cushion the blow is very, very minimal. Ultimately, I’m not at a stage yet where I’m convinced that I can get enough members actually to put their hand up to support the budget; we shall see. Again, really high rates of council tax—we had the highest in Wales last year. There was a severe backlash. My members were verbally abused by members of the public, and they took that really to heart, as you can imagine. So, asking them to do that again and make absolutely savage cuts to services that residents really value—it’s a very, very tough sell, and I’m not in a position where I can guarantee that I will be able to get a majority to do that. We’re a coalition—independent, Labour, Plaid. There’s no whipping with independent members. So, it’s going to be a very, very tough sell, essentially. Thanks, Chair.

Thank you very much, Charlie. Thank you for that, giving us a flavour of the situation in Conwy. Dyfrig, did you want to add anything to what we've heard?

Thank you very much. In terms of that WLGA conference and the commissioner from Birmingham, I did want to come on, really, and just ask you all whether you think that any local authorities in Wales might be at risk of bankruptcy, as it's termed, via a section 114 notice, and whether there's any scenario planning under way for such situations, as far as you are aware? Would any—? Yes, Lis. 

I think that a lot of local authorities are actually mindful of that situation. At the moment, while people are discussing how they can avoid it, we're very fortunate that we work—. I think you've seen today that we are all political persuasions and, as local authority leaders, we work very closely together. We sit on the same committees, we meet frequently. I think we'll all be in the room on Friday. So, we do support each other, we do share information and the Welsh Local Government Association are also very supportive. The seminar you mentioned was actually organised the day after the autumn statement by WLGA to help local authority leaders to understand the context of that. And having Max Caller there, while interesting, was also a real reality check in terms of—. I think we all took different bits away from that, but one thing that I took away from it was when he said, 'You might be talking statutory versus non-statutory services.' And people say, you know, libraries are statutory—he said, 'A library can be a book in a room.' So, we have to—. I can see Dyfrig there; it obviously resonated with you as well. I can talk about what we did with our libraries back in 2015 in that situation, but those sorts of things you really have to talk about. But we are in frequent contact with each other. We try to be supportive. And also, I think, Welsh Government is particularly helpful in this way. We all work closely together, and we have access to Ministers, we have access, we can raise issues, we can talk to them, they will attend meetings et cetera. So, it's not as if there's a huge disconnect, as there might appear to be in other areas of the country. 

Okay, Lis. Thank you very much. Would any other witnesses like to add anything to what Lis has said on these matters? 

Yes, please, Chair. 

Yes, Jane. 

My portfolio in Bridgend is social services and health. One of the biggest outcomes from Welsh Government is that we need to be innovative and we need improvements, the innovations, but it's the early intervention and prevention. I think my warning—and it sounds very stark, but—is that's not a statutory provision. So, early intervention and prevention is the best way that we can manage challenges in health and social care, but, if we haven't got the funding, that's one of the first things that would go, and that would cost us more in the long run. But if we're in a position of a section 114 notice, which is a frightening position to be in, then we have to prioritise safeguarding over anything else. So, we would only intervene when things got to the point where we couldn't safeguard someone unless we intervened. So, the early intervention and prevention agenda I completely agree with. It's the best and the right thing to do for our residents, but we won't be able to compete with statutory, and it's always, 'What is statutory versus non-statutory?' That's the argument here from members across all chambers, but early intervention and prevention is pre-statutory and we need to consider that fact. 

And you asked specifically about councils in Wales. I am aware of the rumblings already about the possibility of certain councils issuing section 114 notices. And I think that's a frightening position for us to be in here in Wales. We haven't been in that position in Wales previously. When we look across the borders and we see the situation of other authorities, I don't want to be in that position. And you look at the outcomes from that—they're significant and they're detrimental to the residents that we support. Thank you, Chair. 

Thank you very much, Jane. Okay. Again, would either Charlie or Dyfrig like to add anything to those comments? 

Thank you, Chair. As I referenced before, I inherited a council with the lowest reserves in Wales. In our general reserves, we have just a little bit over £4 million. To put that in context, storm Babet cost this authority £1.3 million. We've recently had a—[Inaudible.]—children that are looked after, who've come to our attention; that'll be £1 million a year. So, the margins are very thin. There's a very, very difficult path that we'll avoid a section 114 this year, if I can get the majority of members to put their hands up for a really, really unpalatable budget. But any use of those reserves will leave us completely and utterly exposed and I don't see a pathway next year. I feel very much like the captain of the Titanic when they were docked at port and setting off, realising that they were heading towards an iceberg, and it's very difficult at this stage to see how we change that.

The distinction between statutory and non-statutory is incredibly difficult. I think in the Chartered Institute of Public Finance and Accountancy report, there are over 2,000 statutory duties, but they're very ill defined. People are being asked to pay more in council tax for fewer and fewer services, and not surprisingly they're very, very unhappy about it. So, that pressure on local members just grows and grows and grows. We focus 80 per cent of our service budget on schools and social care, but the sort of core services that people value, such as bin collections—we're on four-weekly cycles, and we're looking to cut nappy collections to put that to four weeks. And it's just stuff that is deeply, deeply unpalatable: fewer grants coming; less pothole fixing; fewer public toilets—we're absolutely slashing those; huge increases in car park charging, which will impact on our tourism, which is our major industry.

So, I don't mind making difficult choices, but we're actually being asked to make bad choices, choices that will have an impact in the long term. Councillor Gebbie talked about the preventative stuff. I'm a dentist by profession and prevention is everything. We, essentially, support the NHS, we keep people healthy, we look after their mental health, we're keeping fit in our parks and our leisure centres. For our social care, we deliver just shy of 0.5 million hours of domiciliary care a year and that's all going to be cut down, which will just put more pressure on the NHS, so ultimately it'll cost the public purse more. So, that is incredibly frustrating. Difficult choices are one thing, but bad choices—it is really, really difficult. Thank you.

Thank you very much. Okay. Yes, Carolyn.

Just on what you were saying then, and Jane as well, we've had debates recently on money going into the NHS—whether all the money should go into the NHS or whether it should go on health and also preventative services. You're saying that the difference of actually investing in preventative services is really important, rather than it all just going into the NHS and health. Also, regarding 114 notices, basically you're borrowing from Peter to pay Paul this year and we're looking at the fact that the settlement next year might not be any better. At the moment, that could mean that, next year, unless there's a significant change, if you're borrowing from Peter to pay Paul, using your reserves, it is likely that councils in Wales could be going bankrupt and facing 114 notices, even though it sounds awful. It really, really is last resort. So, just to really get that feeling from you. You can speak honestly here. I'm hearing things on the ground. I feel your pain, so I just want you to be open about it.

Lis.

I'll take you back to local authority leaders, treasurers, finance cabinet members all sitting in a room the day after the autumn statement, when there was no extra money for public services and there was no extra money for health, and the atmosphere was horrendous. People walked out of that room at the end of the day, even though there'd been collective support, and we all knew the scale of the task in front of us. And, you know, we can't get away from the fact that, yet again, even though it's only 1 per cent, Welsh Government passed on more money to the public sector than they received. Jane talked about social care. We had an overspend of £8 million this year in social services, for which we had to use reserves. If we had not used that to provide care packages, then there would've been increased health costs. Yet, we have to, legally, deliver a balanced budget.

Only this morning, I saw press comments that, having delivered a housing revenue plan, I've been classified as immoral, for a 6.7 per cent increase to want to build council houses for people, and this will continue. But these are the struggles. I know Charlie's situation is absolutely horrendous, and I hope that we all provide as much support as we can, but the situation that a few of our local authority leaders are in is completely untenable, and if you think, there are 22 people that are going to take the brunt of this right across Wales shortly, and we literally are on our own. 

Okay, Lis. I think we'd better move on at this stage, because time is limited and we've got quite a lot of other matters to discuss, but, obviously, they're all relevant to the general financial situation. Sam. Sam Rowlands.

Thank you, Chair, and thank you for taking the time to be with us this morning. It's really appreciated. Just looking back to 2022, when you would have received a multi-year settlement from Welsh Government, I'm just interested to know how helpful that was or wasn't—clearly, circumstances have changed significantly between 2022 and where we are today—and just whether that allowed you to plan any better or differently to usual because of having that multi-year settlement, or was it, in hindsight, a bit of a waste of time?

Who'd like to answer on this? Obviously, we've got Dyfrig and Charlie online as well as—. Jane, is it, or—? No.

I'm quite happy—

Dyfrig had his hand up.

And Dyfrig has his hand up as well.

Oh, Dyfrig, yes. Dyfrig, please.

Thank you very much, Dyfrig. Sam.

I wasn't sure whether Councillor Jane wanted to add anything to that, but—

Only very briefly, and that is: of course, multi-year settlements assist, because I think they give us better planning, but the challenges that we face are so significant—no-one ever foresaw the challenges that we face now. I think the one thing I would say is in relation to projects and pilots that we start, but then we haven't got the funding to carry them on, because we can't afford to out of our revenue budget, but they're making a significant difference. So, then, how do we plan for that? That was just my contribution. Thank you, Sam.

All right, thank you. Carry on, Chair?

Yes, please, Sam.

Thank you. And then you've touched on it already, but I'm not sure whether there's anything further you wanted to add in relation to the types of things that you're having to consider to try and bridge the budgetary gap, especially when you're trying to fund education and social care, whether it be cuts or schemes that you can no longer continue to undertake, or just the ideas that you're having to consider to be able to bridge that budgetary gap. Perhaps you might give us a flavour of what that is at the moment.

Okay. Again, who would like to begin with a response on that?

I'm conscious that we've talked a lot from this end first. I don't know—

Yes, either Dyfrig or Charlie. Charlie, yes.

So, there are lots of things we can reduce the frequency of that will be unpopular, such as grass cutting, the collection of public bins. They bring actually a very small amount of savings. But reduction of library hours, just all these small things. Our schools are really significant. We will have to put £8 million pounds into schools to meet wages, pensions, unfunded pay rises, but their pressures are really extreme. We’re modelling somewhere between 5, 6, 7, 8 per cent reduction in what schools have requested; it equates to about £3.9 million. That is incredibly difficult.

I was at a school governors’ meeting last night in my local high school where they’re short of £600,000. The headteacher resigned, essentially. She said she’d just had enough. She’s a remarkable teacher. She’s turned that school around, with the highest free-school-meal rating in Conwy, but her comment was, ‘I just can’t see how we can run this school safely.’ So, you can imagine being there as a leader and a parent; that’s incredibly difficult to hear. She was in tears, very emotional, saying, ‘I don’t want to leave, but I just don’t see how we can carry on like this.’ Very, very difficult situation to be in. We're roundly condemned for all the cuts that we make. [Inaudible.]—people are being asked to pay more and getting less in return. We try and explain the good stuff we do, but people don’t see that; they’re just seeing a cost-of-living crisis, their bills going up year after year, and we carry the can for that. And I always—you know, I have the finance portfolio, I always take full responsibility for the budget, but that’s really, really difficult. So, thanks, Chair.

Okay, Dyfrig?

Diolch yn fawr, Dyfrig. Okay, Sam, shall we—? We’ve got limited time, we’d better move on to Carolyn. Carolyn.

I just want to ask you about—. I’m a North Wales regional Member—so is Sam—and there’s pressure on about the funding formula, and also I’d like to ask about the funding floor as well. I know that’s helped Gwynedd and Conwy a little, but I just want to know your views on it and also the funding formula. Unfortunately, it brings infighting in a way, doesn’t it? You know, fighting over the crumbs, but is it that the pie itself isn’t big enough? If we look at the funding formula, are there other elements there that would help you? So, if the weightings change, is there anything practical you can give me regarding it, so I can ask those questions to the Minister later? Do we need to look at elements such as older people rather than younger people? Anything you would like to raise on that.

Lis?

Interestingly, this is a conversation that’s happened quite a bit recently, and whether or not there were different pressures in north Wales to south Wales, in rural areas to urban areas, and I think that virtually every area that you look at has its own pressures. In some it’s greater issues of sparsity, and I know that Dyfrig and I are both rural spokespeople for WLGA, and looking at some of the issues on that, but similarly looking at some of the urban areas. And funding formulae are never perfect, and I could take up the rest of it talking about the vagaries of the funding formula, but I think the one thing that we all agree on is that we need to use the floor more regularly, because there are situations where, for some disparate reason, a local authority is adrift of everybody else in terms of funding, and so that needs to be part of the process to make sure that they are not at a level below which they can sustainably deliver services.

Thanks very much, Lis. Does anybody want to add anything to that? I can see Dyfrig. 

Diolch yn fawr. And Charlie.

Thanks, Chair. It's a favourite topic of mine, this one. I completely concur that the pie isn't big enough. There's never a perfect formula, but you have to look at the answer it produces. I live on the border with Denbighshire now, but I lived in Denbighshire for 10 years. I worked in the West End of Rhyl, the worst ward in the whole of Wales, for 25 years, at an NHS dental practice, and I can see nothing—in WIMD data, in our geography, topography—. We share a public services board, so I understand their pressures really well. No-one has been able to explain to me why it costs 15 per cent more per head in Denbighshire to deliver services than it does in Conwy. I ask all the time. We're a rural county, we have a coastal strip with 80 per cent of the population, we have a valley there. There are some areas of deprivation—slightly more in Denbighshire than in Conwy—but there are also a lot of more wealthy areas in Denbighshire than in Conwy. It balances out incredibly quickly. I think this formula—. Well, 30 per cent of it is out of date—all of that which refers to over-65s, some of that goes back to 1991; a lot of it is based on the 2001 census. We've seen really big increases in our elderly population year on year. So, for one thing, I would like it to be up to date. Whether it's fair or not, if that was up to date, at least that reflects the situation on the ground.

The floor will help us a little bit, but I would look at the Scottish model, where the floor is actually much more generous in terms of spreading that around. The Scottish funding formula has about 200 lines in it, which are mostly needs based; the Welsh one has 70. I think it's a very crude way of distributing money. The funding band between 60 and 85 is at £11; for 85, it jumps to £1,900, but 47 per cent of people we provide services for here are under 85. Again, no-one can explain to me that the needs of an 84-year-old are the same as a 60-year-old—it just makes no sense. So, there's a frustration about the actual formula itself—whether it was fit for purpose back in the day, compared with the situation that we're facing now. There's frustration about the data that goes into that funding formula and, fundamentally, I would just like somebody to explain to me why it costs 15 per cent more to deliver services over the border in Denbighshire than it does in Conwy.

We've lost about 400 residents in the last census, but over the last two years, that's cost us £3.5 million in the formula. So, our ability to save that with 400 fewer people is impossible. So, yes, I am frustrated with the formula. I would like it brought up to date, and then I think we need to look at the Scottish model and I think there needs to be more equity in how local authorities are dealt with. But I do absolutely recognise it's the size of the pie more than anything. 

Thank you very much. We'd better move on. Carolyn.

I'll just ask about workforce pressures, if that's okay. I'll roll them all into one, if that's okay. You mentioned earlier that you've lost maybe 40 per cent of the workforce over the last 10 years, with restructuring, reorganisation. We've heard that we could be facing a lot of redundancies as well. Is that something that you would agree with? And the implications for trying to deliver services with the workforce.  

Thank you very much for the question. I do agree with the statement. I think what I would say is that the majority of every council's budget is their workforce. It's not buildings, it's not vehicles; it is our workforce. There's a disparity as well, because we can't retain and recruit staff across the board, everywhere, because they get such a significant increase in pay elsewhere, even our social care staff. We've got social care staff leaving in droves because they want to go and work in a supermarket because they get paid more and they don't really have to work as many unsociable hours as previously. 

I think one of the other things that I would say is that the SCAPE budget from fire and rescue has now gone into local authorities, so we have to pay that. That's the fire and rescue pensions arrangements. And if our pay pressures aren't funded by the Welsh Government, our council tax does not cover our workforce pressures at all. It'll cover the cost of running the civic elements and doing all the bits of bins and road surfacing if you actually equate it, but the majority of our spend is on workforce in social care and education, and we are looking to reduce everywhere.

I think one of the biggest factors for me is the significant impact it's going to have on additional learning needs and fewer available staff to support those learners in education. That's going to be really significant. In Bridgend, we're looking at a 5 per cent reduction in education. We've got no option. Bridgend has never, in all the years of austerity—. Last year was the first time that we ever reduced their budget, but we're looking at 5 per cent this year because we can't sustain it. So, that will have an impact on workforce, not anything else. 

Would anybody like to add anything to that?

I think the only thing that it's worth being mindful of—and I think we're probably fairly ballpark—is that 75 per cent of our budget goes on social care and education. So if, as you should, we protect social care and education, we protect our most vulnerable, any efficiencies that you want to make come out of the rest, come out of 25 per cent of your budget. And that is waste, recycling, roads—well, anything except—

Drainage, litter. 

Yes, and even stuff like supported bus services. And I know, again, in rural areas councils spend an awful lot of money supporting their bus services. All the others take a huge hit. So, 50 per cent of our budget—almost 50 per cent—is delegated straight to schools, and so we're supporting schools to grapple with those costs. But most of their costs are staff related. We're trying to minimise that. We're trying to look at service reviews, we're trying to look at using people in different ways and minimising our redundancies. But there is no doubt that, as service reviews go through, there will be job losses. 

Jane, you mentioned the fire service levy, and both Sam and I have been asking if it could be shown separately on the bill. Would that be helpful for you in getting the council tax through?

Oh, yes, most definitely, just like our police precept is.

Yes, like the precept. Okay.

We've discussed education a fair bit, and it's absolutely right that we should do so. That brings us on nicely to Jayne Bryant's questions. 

Diolch, Cadeirydd, and good morning, everybody. As John has said, we've touched on education and it's been incredibly stark to hear what you've had to say on that already, but I just wanted to touch on a couple more points around that. Firstly, councils are reporting that 25 per cent of in-year school budgetary pressures are related to pay. Perhaps you could explain a bit more around that and what accounted for the remaining 75 per cent.

We still haven't had confirmation that pensions arrangements for teachers are going to be part of our budget; so, we don't know if the Welsh Government are going to fund that. If they don't, there is going to be another £3.5 million, I want to say off the top of my head, in Bridgend, that I and other members of the council will need to look to reduce services by. That is significant; it is enormous pressure. We need some clarity around it urgently; all our treasurers do. Because at the minute, we're running on the basis that we're not getting it, we're not being funded for it; that's an additional cost pressure for us as a local authority. I think that's the biggest one I would pull out straight away.

Say, for example, we've got a 3.1 per cent increase but our pay increases are above that—as, you know, rightly they should be—it means that, in effect, that is a real-terms cut in terms of budget. I would also add, in terms of education and schools, the complexity of need that is being experienced in our schools since the COVID pandemic. We're seeing increases in needs right across the spectrum—whether that be social care, but also education. And that's why I said we have cost pressures of additional facilities and resources that we can only part fund.

Thank you. Again, you've mentioned and warned us about the budgetary impact on education, and, in your paper, about education standards. The paper talks about

'the devastating effect of cuts on educational standards—in particular the pastoral/wrap around work that schools undertake.'

Perhaps you can say a bit more about the long-term risks in the reduction of school budgets and teacher numbers.

I'm chair of governors at a school and one of the things that I can see is the numbers of children that are now coming into—. I don't want to say onto social services' books, but we know that without early intervention and prevention, there's going to be significant pressures later on down the line. But I can't afford the staff now to support them.

The number of schools that are projecting deficit budgets—. The Association of Directors of Education in Wales are already forecasting that the number of schools with irretrievable budget deficits is going to increase. We work with our schools closely, we have a finance team that go out and support them, but there are a number of schools in our local authority where we can't see where they will recover their deficit.

I don't think you can underestimate the damage COVID has done to our young people. I think the effects will be long lasting; you can see that in attendance figures. The work that schools have to do to get those young people back engaged is expensive and it's difficult to do, but we are seeing an increase in need at all levels, so we really should be putting more money into schools, not less. But teacher numbers are absolutely critical, aren't they? Again, I talked about having to make bad decisions; these are some of the bad decisions that I'll have to get our members to support in order to get the budget through.

Yes, it's very worrying. Perhaps you can outline the risks associated with schools taking out loans and falling into deficit. What level of liability do local authorities take if schools can't service those loans?

It's a huge concern. We have 60 schools in Conwy; some are in a much worse financial situation than others at the moment. If we give money to schools, it's given across the board; we can't sort of target it, you can't get it moved around very carefully. We've brought in a system to make accessing loans easier, but it still doesn't actually solve the finance of it; there's still a loan to be repaid. And if you've got falling, low numbers, as we do in Conwy—we lose about 600 young people a year, and we get about 600 older people move in; it's a very popular retirement area—we lose those pupil numbers. So, if you go from a class of 28 or 25, there's no saving there, but for every older person who needs a domiciliary care package it could be £40,000. So, again, I won't bang on about the funding formula, but we have increasing pressures for our elderly population, which impacts on our ability to look after our younger generation. Our capital programme costs of building new schools, school rationalisation, that all costs money. We don't have money to do that. And like Dyfrig, in rural areas, we've seen substantial drops in numbers in rural schools, but actually doing something about is incredibly difficult, and you have to spend money to consolidate that. You have a massive increase in costs in home to school transport. So, these are all really difficult things that we have to face.

I'm really proud of our schools. We've got the best Estyn profile than we've ever had; it's one of the best in Wales. And to get to that position, and then see it sort of slipping away, because you can't fund it, is painful. Thank you.

Yes. 

Okay—

Can I just—. Oh, sorry. 

Jayne. 

Can I just ask one more, final question?

Please.

Just around what Jane mentioned around children's care services, really, and those children who are in care really are at the sharp end, and some of that is expensive. It's a smaller number of people, so people don't realise and aren't affected by it, perhaps, but it is so important. And in your paper as well you talk about the unprecedented levels of emergency placements for residential placements, and the pressures on that. I just wonder if you can say a little bit more about your concerns, particularly around children who are in care at the moment, whether that's in placements, or the children that you as a corporate parent are looking after.

In terms of a corporate parent, I would always prefer our children to be in foster care. They have better outcomes living in a family unit. It's more sustainable as well. We are seeing increased numbers of children coming in and needing placements. At a minimum, that's normally £0.5 million a year for each child. If we can keep them at early intervention and prevention—. And that's all the stuff that we will cut, because we can't do it; I will need to focus on that sharp end. The impact for those young people, their life chances, the opportunities that are going to come forward for them are so significantly limited, that's detrimental to Wales. And if we don't look after those young people, where does that leave us?

And what would you like us to do? You've already heard—and I'm sure all of committee are aware—about the number of councils that are operating without registration in children's placements at the minute. That costs us more money because we have to risk-assess it and ensure that there's appropriate staffing, and that we're looking after them properly, because, above all, we need to safeguard those young people. The amount of children in schools that need that early intervention and prevention, we've been putting more and more funding into that, because it's an outcome of COVID. We've seen attendance figures dropping. We've seen more increased complexity of need from these young people. And when you consider some of these children have never had any sort of social interaction pre COVID, they were coming into school in nappies, which is not normal; they wouldn't come into school; they would not be able to sit down at a table and eat with a knife and fork—it's that limited. And that sounds very extreme, but the behaviours, because they've got no social skills—it sounds very basic—they don't share. How many times do you tell your children at home to share? Well, they haven't got all those skills. The interactions are so limited. I am so desperately worried, it's keeping me awake at night now, because we will have to stop those services. And without a significant increase in funding to local authorities—. 

And I think the other thing around this I would say to committee is, as local authority leaders, we have an expectation that we settle balanced budgets. We have no option. That's a legal obligation for us as a council. And I was infuriated—. I'm also chair of a regional partnership board, so I was infuriated before Christmas, when the local authority were telling me that we needed to cut, this, this, this and this, and it was all going to impact on beds and services to children, and all their funding overspend was cleared by Welsh Government, because they don't have to set a balanced budget.

So, there's something around the equity, and we keep talking about a national care service for Wales. I'm a great believer in that; I think that would be the right thing to do. But one of the biggest concerns that I have is the disparity of pay between health and social care because it is so significantly different. The 'Agenda for Change' in health really helped our health board in Wales stay at a level that is really good, but in local government we're dropping below that level. It's an £8,000 difference for a social worker in a health board than it is in local government. I'm not sure why any social worker would want to stay with local government when they can earn such significantly different money in the health board, and we're all seeing the cost-of-living increases in our pay packets, while paying our bills, and what we can spend in the local economy, and you can see that all around. Thank you very much.

Okay. Thank you. Charlie.

Yes, I agree with all that. We're very proud of the family centres we set up through all areas of Conwy, but they're not statutory. We know they work incredibly well, that really early intervention. In terms of keeping me awake at night, as I mentioned, we have—[Inaudible.]—which is going to cost us an additional £1.5 million. To put that in context, if we shut all our leisure centres in Conwy tomorrow, that would be about £1.8 million, so these are just phenomenal sums, and I'm incredibly proud of the work our officers do. My wife is a child protection social worker, and I know how committed they all are, and we absolutely want to keep these people safe—everybody safe, sorry. But, yes, the figures are just eye-watering, and we're just expected to resolve that and find the money somewhere else, but it is proportionately incredibly difficult. 

We clearly support the removal of profit, but we are seeing an element of profiteering at the moment where they're making hay while the sun shines and just charging ridiculous prices. I've seen my wife on a Friday night desperately ringing around all of England, Wales, Scotland, trying to find placements for children, and just getting—. They know she has no choice but to find a place for that child. So, I think, when we remove the element of that in the long term, that will be great. We're working really hard to increase our in-house provision, but these take time and take more resources.

Diolch, Gadeirydd.

Okay. Thank you, Charlie. Thank you, Jayne. Joel—Joel James.

Thank you, Chair, and thanks ever so much for coming in this morning. Actually, I wanted to talk about social care, which is what we've just been discussing about now. Specifically, I wanted to talk about the social care workforce grant. Obviously, there's a reduction in funding there of £11 million, I think, and I just wanted to get some idea of the impact that's going to have on the sector, if that's okay, and, sorry, the potential consequences moving forward. Thank you.

So, we agree with the real living wage for every social care worker. I don't think we understand, unless you actually need that care, I don't think we understand the vulnerability of those people that we're delivering care to, but we have to pay the real living wage for commissioned provision as well, and with 3 per cent, as an example for Bridgend, that does not cover my social care workforce. I have an ageing population; 20 per cent—in Bridgend—is the increased need in the last year alone for my ageing population, for packages of care. I will need to limit what I am doing in those packages of care. I will need to ensure that my officers limit their time there. I'm sure all members of this committee are aware of the 15-minute campaign many years ago by trade unions. A lot of these people sit at home every day on their own. They can't go to the toilet without assistance; they can't get dressed without assistance; they can't make a cup of tea without assistance; they can't take their medication without assistance. And there's been a long-running battle—I say this politely—between local government and health boards. When we were flush with money as local government—

When was that? [Laughter.]

Twenty years ago, I'm talking—see, social worker. We never worried about the continuing healthcare provision, in who was paying for what. If somebody needed that additional little bit of help taking their medication, local authority would pick it up. We have significant debates with the health board now about who's picking up what of each package of care. I don't want to limit that care. The isolation for that older population increases the more we leave them on their own. There's also something to be said around the complexity of need. We all know that we've got an ageing population, which means that they will need care for longer. There's also complexity around cognitive impairment, so dementia, Alzheimer's; we know that we've got an increase in that health condition in our population. So, the impacts are going to be significant, but I need to ensure that I protect those most in need, rather than somebody that needs a prompt. And as a local authority and health board, we're being really innovative around the way we manage some of those challenges: rather than sending somebody out to give somebody a prompt to take their medication, we'll make a telephone call. But we can't observe them taking that, then, but it is the right thing to do. I would prefer that member of staff to be in someone's home getting somebody out of bed, if that's what they need, or feeding them, if it's just a prompt—. But these are the decisions that we're having to make now. And I think the thing that I would say is, the longer that we can keep people in homes, independent, looking after themselves, with our support, the better it is for our health boards—always.

There is something wrong with the six models of care. Medical competency doesn't necessarily mean you can discharge on that day, because they haven't been through a social work assessment. So, you hear about delays in hospital; sometimes that's not always about timeliness or about the staff that are there that aren't doing—. Actually, that's about—if you're going to do an appropriate assessment for a person in care, you need to give them the appropriate time to do that effectively. So, a med-fit person—there are lots of different phrases that you'll hear around that—that doesn't mean that they've had an assessment for a package of care at that point. And you wouldn't be able to do it until they are medically fit for discharge. Thank you very much.

Okay, thank you, Jane. Dyfrig.

Diolch yn fawr, Dyfrig. Okay. Thank you very much. We'll move on to Adam Price, then. Adam Price, please. 

Yes, Lis, please. 

Diolch. Capital is one of those really interesting things, because we often talk purely about revenue, and I think that we can all talk about the increased costs of our capital programmes. Again, in the last couple of years, whether that be high levels of inflation, COVID or whatever, we've been seeing tenders double the level that we were seeing, and I think we've been really grateful for some of the support we've had in terms of house building. In the Vale, for example, every single secondary school except one has been either remodelled or rebuilt, and we've got one left to do. And therein lies the rub, in that we know that part of the cost of that we will have to borrow for, and that borrowing will deliver a revenue implication for us going forward, and that's actually another serious choice that we need to make. For me, not building the last one is not a choice; I'm going to do it. We'll find a way. But they are very serious conversations that you have with your finance team in terms of, 'Well, this is the implication of trying to deliver that.'

House building similarly. The pressures in terms of homelessness are massive in many, if not all, of our local authorities. Our strategy going forward is to build our way out of it, and whether that be modular units—we're putting 90 onto a site in Llantwit Major currently—or we've got houses being built in places around the Vale, but predominantly in the Barry area. And as I mentioned earlier, because we retain our own housing, our housing revenue account has to deal with the revenue implications of borrowing. It has to deal with the costs of maintenance and retrofitting, et cetera, and that all has to balance as well. So, for us, that meant a 6.7 per cent increase, still 30 per cent below private rental costs, but it meant a 6.7 per cent increase, and that is not an easy decision to take.

So, when we talk about the implications, going back again—going back to 2010—we've had to prioritise capital all the way. It ends up being, 'Is it a health and safety risk?', and then look at other programmes on top. So, we're just having to prioritise more. There will come a time when it stops, because there will come a time when we won't be able to afford to develop things; we'll have to focus on revenue costs.

Okay, and Charlie please.

Yes, I completely agree with all of that. To give you some context, pre COVID, our homelessness spend was around £380,000; it'll be £6 million this year. So, our ability to build is absolutely essential. We talked before about staffing numbers: we've lost about 50 per cent of numbers in our planning office over the last 10 years; project managers have gone. So, we're pulling staff from one task to another task, and that gets more difficult. We've seen our highest rates of sickness and the No. 1 reason is stress. So, you're asking people to do more with less, and that massively impedes our ability to do stuff.

My happiest time as a councillor was during COVID, because we concentrated on our job. We administered about £70 million to £80 million of grants, we took the homeless off the streets and we rehabilitated them. We can do some amazing stuff when we're given the resources, and I think all authorities proved that. But the lack of money to actually drive change is really serious. 

Okay, thanks, Charlie. Adam.

Yes, Lis. 

I think that there are a myriad reasons why local authorities could be declaring a section 114. And a lot depends on why you borrow. A lot depends on the use of that. I think that, in England—. I mean, as I said, when Max Caller came to talk to us, it was a lot of stuff about speculative borrowing and projects, et cetera. But, in England, there’s been quite a move towards commercial ventures by local authorities. We’ve actually done a commercial venture: we turned our catering into a social enterprise, and it’s doing very well, thank you very much. So, you have to think about why you are borrowing. For us, we will borrow in terms of invest to save, so that if we have planned something, like housing, we’ll borrow because we know that we can cover the revenue costs for that borrowing. Ultimately, it will save us costs. And so—surely others will come in here—in conversations with other local authority leaders, that is the prudent approach that we tend to take in Wales, and I think that you’ll find that the difficulties that we’re facing are the long-term and insidious impact of a lack of funding.

Okay, and Dyfrig.

Okay, well, I'm afraid we'll have to leave it there, I'm sorry. Diolch yn fawr. Diolch yn fawr, Dyfrig; diolch yn fawr, Charlie, Lis and Jane. Thank you all very much for coming in to give evidence to committee this morning. There are a few other matters that we'll write to you about that we haven't been able to reach during this morning's session, but thank you very much. You will be sent a transcript to check for factual accuracy in the usual way. Diolch yn fawr.

Item 3 on our agenda is a motion under Standing Order 17.42 to resolve to exclude the public from items 4, 8 and 9 of this meeting to enable us to consider evidence received under items 2, 5 and 6. Are committee members content to move into private session? Thank you very much; we will do so.

Okay. We've reached item 5 on our agenda today, then, scrutiny of the Welsh Government's draft budget for the forthcoming financial year, and our second evidence session with the Minister for Finance and Local Government, Rebecca Evans, and the Minister's officials. Minister, would you like to introduce your officials, or have them introduce themselves, for the record, please? 

Yes. I'll ask themselves to introduce themselves, Chair.  

I'm Emma Smith, head of local government funding policy. 

I'm Judith Cole. I look after the local government funding policy division and some other stuff as well. [Laughter.]

Okay. Thank you very much. Okay. As I'm sure you know, Minister, we've just had a scrutiny session with the Welsh Local Government Association. And I must say, we've heard a very bleak story, really—the reality of what local government faces in looking at, well, the current budget and, obviously, the budget for the next financial year. And some of that seems in danger of putting the Well-being of Future Generations (Wales) Act 2015 into reverse, really, I think, because it's going to be very difficult to take a more long-term view, a more preventative view, given the short-term funding pressures and the need to narrow down spending and concentrate spending on the absolute core that's required of local authorities. So, with that sort of budget context, Minister, I wonder if you could tell committee how you believe that the local government settlement reflects Welsh Government's priorities for local authorities in Wales, as set out in the programme for government.

Great. Thank you, Chair. I'd just like to, really, begin by reflecting on the fact that I absolutely understand the pressures that local government are under at the moment. We have a really good working relationship with local government and many opportunities throughout the year, but particularly around the budget-setting time, to hear from local government on the particular pressures that they're under, and I know that officials work very closely with officers in local government and with the Welsh Local Government Association too. So, just to reflect that we don't underestimate, in any way, the difficult choices facing local government; also, to the question, really, to reflect that local government is an absolutely key partner in terms of delivering the programme for government. You can see that, I think, through the way in which we've prioritised local government through the entire period of this programme for government time so far. So, we had a 4.3 per cent increase in the first year, 3.8 per cent in the second, 9.4 per cent in the third and 7.9 per cent in the fourth, and, in this period now, 3.1 per cent, which is what we'd promised and we have been able to deliver it. At the time, particularly the last couple of years, those settlements were described as being exceptionally good by local government, but, of course, inflation has eroded the value of that and has made for some really difficult choices. But you've seen the work that we've done overall with the budget this year to refocus spending and to reshape the budget towards front-line core public services, including the NHS, and also keeping that commitment to local government. So, I think we've done the best that we possibly can for local government, but, of course, there will still be difficult choices, because, when the budget isn't rising in line with inflation, it's inevitable, I think, that those tough choices will arise. 

Yes. Okay. Thank you, Minister. There is still far too much inequality in Wales, Minister, as I'm sure you would recognise. I wonder if you could tell committee how the unhypothecated budget allocations, such as the revenue support grant, are assessed in terms of their expected impact on inequalities.

I think that the unhypothecated element is really important and, of course, it then gives local authorities the flexibility that they need to address the particular service areas. Of course, social services, education and housing take up the largest share of that.

In terms of understanding the impacts of the choices that individual councils make, that really is a matter for those councils in terms of undertaking the impact assessments and so on, but we do know, of course, that those areas that I've described—social services, education and housing—are the ones that, by their very nature, support the most vulnerable people and I think that, in itself, demonstrates that local government funding is progressive in that sense.

Okay. We know, I think, that council tax is likely to rise quite substantially, and I guess that's inevitable in the current circumstances. I wonder what you would say, Minister, about the likely increases in council tax and the general anticipated impact of the settlement in terms of those most vulnerable, those suffering social and economic disadvantage, and how you will measure those outcomes.

So, of course, the RSG forms only part of the funding available to local authorities. We also have our range of specific grants, which I haven't mentioned yet, as well, which are also really important in terms of supporting service delivery. But raising council tax is a really important local decision, and, as far as possible, Welsh Government will leave that decision to be taken locally by elected members, because it is an important part of local democracy. But we know that that means that really, really tough decisions will need to be taken by councils. But then we have to remember that the councils are raising that money to invest in those services that all of us benefit from, for example, waste collection, but then also services that support the most vulnerable people—social services, education and housing, for example. So, they'll be balancing all of that alongside the impacts that council tax will have on households. It's worth reflecting as well, that, even with the difficult settlements that we've had lately, council tax still remains, on average, lower in Wales than in England. I think that speaks to the relative priority that we've given to local government in recent years in terms of our settlements.

And then also just to mention the council tax reduction scheme, of course, because that is there to support households across Wales. I think it's around 280,000 households now that receive support through the council tax reduction scheme. So, many households across Wales will be paying no council tax at all. I think that there is still a large number of people who are eligible for council tax reduction support but don't claim it, and perhaps that is because some of the changes to universal credit, for example, which mean that the entitlement isn't always automatically applied. So, we are working with local government to find ways to make that entitlement more easily passed on to the individual, but, again, it's a job for all of us, I think, in terms of highlighting the available support locally.

And then just to mention, of course, the work that we're doing overall on making council tax fairer, which, again, will be an important tool, although, of course, it doesn't come into effect for this next financial year.

It would be useful, I think, Minister, if you could perhaps provide a note to committee on that work with local government to ensure that those entitled to help with their council tax bills receive it, because that's quite urgent, actually, in the current circumstances, isn't it, that households that really need that help get it as quickly as possible.

I should say that this is an important part of the work that the Minister for Social Justice is leading in terms of the benefits charter. I think I'm right in saying that there'll be a launch event for that in the next week—it might even be next Monday—working alongside local government to make sure that people are getting everything that they're entitled to, but, more importantly, even, or as importantly, doing so in a way that is simple for the individual and that doesn't mean that people are falling through gaps because they aren't aware of the support.

No. Just in terms of the very worrying situation that we all face and local authorities face in terms of the budget pressures, Minister, and those socioeconomic issues, how will you keep a weather eye, as it were, with local authority colleagues, on the effects of budget decisions, those very, very difficult decisions, on people who are really struggling? Will there be any new mechanism or any new approach that you will employ, given the current circumstances?

I might ask officials to reflect on some of the mechanisms that we have within Welsh Government at official level in terms of that kind of information sharing, but, certainly, for my part, I spend a lot of time doing individual meetings and individual visits to councils, and, invariably, they involve an opportunity just to sit down with the leader and the chief executive and to talk about the pressures locally and the tough decisions that they're taking. Those are always instructive meetings, because they're able to give real colour, if you like, to the decisions that are being made: the positive things the council are doing to support people, but also the areas where they are concerned about the impacts on households and individuals. So, that's always a really good use of time, as are the more formal meetings that we have with all of local government. So, we've got the partnership council, for example, we've got meetings with representatives who attend the finance sub-group. That's always really important in terms, again, of understanding the impacts. And those meetings are never just about the numbers; they're about the people behind the numbers.

Yes.

Did you want to say a bit more about the mechanisms that we have?

So, I guess there's the official-level equivalent mechanism—so, I talk to the Society of Welsh Treasurers, colleagues talk to chief executives—but those go wider than just the local government directorate, because colleagues who work on community issues will be in touch with their contacts there. There's also a more structured kind of reporting—so, there's the annual well-being indicators report—and all of those things get fed together every year when we get to budget round, and they get fed up through established mechanisms like the partnership council and the equivalent. It's not just local government; so, there's also the third sector partnership meeting, which will be feeding through implications on the ground as well from a slightly different angle.

Okay. So, all of that, you're confident, Minister, will put you in a sufficiently informed position to understand the impact on the ground of the current financial pressures and how that translates into help and support for people who are struggling socially and economically.

Yes, I’m confident we’ve got the right opportunities in place, especially because I think one of the benefits that we have—we’re a small country—is it is possible to have those individual relationships with all 22 leaders; it’s possible for officials to have relationships with officers in each of the 22 authorities, and again, of course, we’ve got that kind of open and frank relationship as well. So, that is all in our favour, I think.

Okay. Minister, could you tell the committee what assessment you’ve undertaken in terms of the potential impact of this settlement on the Welsh language, particularly in relation to local authority requirements to meet the Welsh language standards and the duty to promote the Welsh language in their areas?

Yes, so local authorities will have already in place embedded systems whereby they comply with the Welsh language standards and the work that they do in terms of promoting the Welsh language locally. Of course, the overall settlement is unhypothecated, and it will be for local authorities to decide how they deploy funding to support those things locally, based on the finances available to them. Also, it's just worth reflecting as well that local authorities have been complying with the standards since 2015, so they’re well experienced now in that regard, and there’s nothing new that will be coming in in the next financial year that they will need to incorporate or adapt in that sense.

I should also mention the work of the Welsh Language Commissioner, who is working very closely with local authorities. Last year, the commissioner’s office worked with authorities to look at systems that they could improve. They looked particularly at telephone systems, for example; the websites of local authorities; and then also did some work with staff to raise awareness amongst staff of policies relating to the Welsh language, and what that meant for their working practices as well. I know that the commissioner’s currently reviewing the way that she regulates the standards, and has already written to all bodies, saying that she’ll be looking to work more closely with them to co-regulate those things in future years, and to ensure that good Welsh language services are available to people.

And then, finally, there is specific funding available from within the Welsh language and education MEG for Welsh in education, which of course is an important part of our work towards 'Cymraeg 2050'.

Okay. Minister, we’ve heard from various sources, including Welsh local government, that we’re in fairly unprecedented times, really, in terms of budget pressure. I think Welsh Government’s on record as saying that its budget is worth £1.3 billion less in real terms since the 2021 UK Government spending review. I just wonder how you would characterise the situation that local government will face during the next financial year compared to what we’ve seen since 2010, because, obviously, there have been quite a lot of financial pressures during the years of austerity and that extended period, with cumulative impact, really. So, how would you characterise what local authorities face in the next financial year, given what we’ve seen up to now, and the current and emerging situation?

I think there are some differences between the situation that we’re facing now and in the next year, as compared to the situation that we experienced through austerity. And that’s because, during austerity, we saw sometimes local government budgets shrinking. We’re not in that situation at the moment, because we are seeing growing budgets, but what we are seeing now, which we didn’t see during austerity, is the impact of inflation running at the rates it has been. So, that is, I think, a key difference.

Another key difference is public sector pay. Of course, that’s a major source of pressure on local government, as well as the NHS and Welsh Government more generally. But, of course, during austerity, we saw periods where there were public sector pay caps, and we don’t see that now, and again that, I think, is having an impact. Of course, we’ve got recovery from the pandemic, which is a new phenomenon for this period, as is leaving the European Union as well. So, I think that the situations are different, the things driving the situations are different, but the tough choices will be similar in many ways, I think.

Okay, thank you for that, Minister. We'll move on now to other committee members and, firstly, Sam Rowlands.

Thanks, Chair. Good morning, Minister, thank you for taking the time to be with us this morning. I'd be grateful if perhaps you could briefly outline how you see the resilience of councils in Wales at the moment from a financial perspective.

I think the situation is mixed in terms of resilience. So, when we consider the important role that reserves can play in terms of resilience, you see a different picture of reserves across local authorities in Wales—some have significant reserves, others have very little available to deploy. So, I think that that is important in terms of resilience.

I suppose that the underlying question is about comparing perhaps the situation to that across the border, where we have seen a number of councils issuing section 114 notices. So, I think we are in a different place in terms of that kind of longer term support that we've provided to local authorities here in Wales. And we're in constant discussion with local authorities about their particular levels of ability to be resilient.

The role of Audit Wales, I think, is really important as well here in Wales. We've got that single point of audit right across local authorities, which is very helpful to us. We don’t have the huge backlog that they’re seeing in England in terms of audit as well. So, again, that, I think, gives us an important level of assurance about local authorities. But that’s not to say that there aren’t real pressures and strains in the sector as well. I might just pause to see if Judith or Emma want to reflect on any discussions they’ve had with counterparts.

So, I attend the south Wales Society of Welsh Treasurers painfully regularly and as you would expect, this comes up, particularly during the budget, but it comes up during the year as well. We can have discussions with local authority colleagues on a very Chatham House basis about whether they are recognising some of the technicalities that they can take advantage of to balance the books.

But, at the end of the day, an individual local authority balancing its budget and the decisions it has to make are very much for that section 151 officer, and its elected members as well. So, while we can offer advice, and we do—we have offered support through the WLGA programme, there’s been mentoring offered to some officers, and we can offer advice on the technicalities—at the end of the day, though, they have to make those very difficult decisions themselves, and that includes deciding on the level of risk they want to take on their reserves, on their borrowing, and on how they manage service change. So, some of them are very up for service transformation and are quite proud to say that they can do it, and others, I think, still have some opportunities to take to join with others, perhaps, to make some changes that might help them. It’s easier when you’ve got a longer running time for planning. The budget timetable is the budget timetable and that’s not driven by us, and it makes those decisions happen in quite a short period of time.

They do have medium-term financial plans and some of them work very much on the basis that says, ‘We can see the trajectory and we’ll make plans for the longer term.’ Others have more difficult circumstances, from choices they’ve made in the past or from choices they’re making now. And sometimes, it is easier for a larger council, I think, to make those choices because they have more capacity to do that. If you’re a smaller council, you’re trying to make those changes against the day-to-day management of the pressures you’re facing as well. I think I’ve probably waffled enough.

So, with all that in mind, does it concern you at all, Minister, the levels of resilience in councils?

I think that we should all be mindful and we should be concerned about resilience in councils, because I think it's something that we should all be paying close attention to. I do worry about the funding that we're able to provide local government with. But at the end of the day, we're only able to provide the level of funding that we're able to provide, and it's taken an awful lot—you've seen the kinds of tough choices we've made across Government, the kinds of cuts we've had to make in every single part of Government to be able to keep our promise to local government on the 3.1 per cent this year, and to provide health as well with an uplift in line with what it's saying that it needs, even though it will need to make some choices to reduce the deficits, and so on.

So, of course, I would love to be in a position where we gave local authorities a greater settlement and greater certainty for the future, but we're not in that position at all, which is why it's really important that we have those constant conversations, understanding the choices that they have to make. But then also considering what we can do to support. So, issuing a section 114 notice doesn't open up a separate pot of money—there is no pot of money—so it doesn't solve any problems in that sense. What we should be looking to do is make sure that local authorities take advantage of the improvement funding that we have available and to take advantage of the other ways in which Welsh Government can support, for example, through the work that we've been doing through the Centre for Digital Public Services and our support for the chief digital officer for local government. So, trying to support service transformation in a way that gives citizens a better service, but then also reduces costs for local government is important as well.

But, overall, I think that there is a level of concern just because we don't have the funding that local government tell us that they need to be able to provide that. But also, overall, our budget just isn't meeting the needs across a whole range of areas.

And we heard from the WLGA witnesses this morning that they feel as though decision making has moved from being just difficult decisions to make to now becoming bad decisions to make, which of course will have a longer term impact on pressures in the future. So, I don't know whether you're able to respond to that point in particular, but also perhaps outline how you think the current settlement gives some certainty for the medium and longer term. So, rather than just that decisions, as explained to us today, are bad decisions that have an impact on the longer term sustainability of services, whether your settlement is able to mitigate some of that risk.

So, I know local government won't want to take bad decisions, but they might have to take very unpalatable decisions. So, you've heard local government talking about potential losses of or reductions in service, and potential job losses in some areas. I know that they'll be doing everything that they can to avoid redundancies, and—

Sorry, just to explain the point they were making. They were talking about bad decisions, where they're having to, probably, remove preventative services, which will in the long run be much worse for your budgets, as finance Minister, but also of course for the outcomes for the residents that we all represent. So, that's the point they're making. It's not just difficult, or that it's going to be tough to make a decision because it's going to upset some people, it actually is bad because it's going to impact people's lives.

I think there will be choices that local government won't want to take, just like there have been choices that we haven't wanted to take. Across Government, there are areas where we can always do more, particularly in that preventative space. I was listening to the Future Generations Commissioner for Wales giving evidence almost word for word as you've described, really, to the Finance Committee this morning, about concerns about where we can divert money from. I know that there would be things that local government would want to do more in the preventative space that they're just not going to be able to do because they are so busy responding to the existing need that is right there before them now, in terms of the pressures on social care, and so on. But I think, until we get the funding that we need to be able to meet all of those service pressures, then there will be these really tough trade-offs, unfortunately. 

Okay. Thank you, Chair. 

Okay, Sam. Thank you very much. Carolyn Thomas. 

Okay. I just want to ask some questions regarding the funding floor and the formula as well, regarding the resilience of local authorities. This morning, we heard from one particular local authority that having the funding floor has helped them, but their resilience is so bad that they borrow from Peter to pay Paul, their reserves are so low that they can't borrow from them anymore, and they're really worried about next year's budget and the resilience of that local authority. If you could have put a bit more in the funding floor—I think £1.3 million went into it—to increase it to 2 per cent, you could maybe help more local authorities, because it's that resilience now. They've cut everything over the last—. Since 2010, they've cut everything that they can and have been reorganising, restructuring, and they're looking now at delivering basic statutory services and don't know where else to go. So, it's that resilience of those, really—particularly small local authorities, perhaps—being able to deliver those services. So, could you maybe increase the funding floor?

And then, also, the formula: it was mentioned that some of the criteria is out of date; and then, the needs of a four-year-old are different to those needs of somebody that's 60 plus. The population of older people has grown so much as well and their needs have increased very much. So, perhaps, do we need to look at the weighting on that, look at what data you're using? I think they're saying the data goes back to the 2001 census; so, we've had the new census come through, 2021, so, how long will it be before that feeds in? They also mentioned, in Scotland, there's—. I think more goes into it—200 more. I know Judith spoke with us previously about it, so I'm looking at her as well about the funding formula. So, 200 criteria go into it in Scotland, whereas we have 70 in Wales, but they say it's more needs based. So, really, just your view on that, please.

I'll start with the funding floor and then perhaps ask Judith about some of the detail in terms of the funding formula. Normally, when you think about a funding floor, it's to provide a floor below which no authority will fall, rather than a minimum increase, if you like. So, it's quite rare for us to be even thinking about providing a floor when budgets are increasing, but, of course, the exceptional circumstances this year have led us to think that. When we ran the numbers and saw that there were a couple of authorities under 2 per cent, that did seem that it was going to be far too challenging for those authorities, and that made the decision, really, to increase the funding by £1.3 million.

We did look at other options, and ultimately we have to consider what's affordable to the Welsh Government. If we were to increase it to 2.5 per cent, that would have cost £5.7 million. So, this £1.3 million came from the work that we did to reduce budgets across all main expenditure groups. Colleagues went to the bone on so many different things that to go back out to colleagues again saying, 'Look, we need another £4 million or so, please find that from your budgets' was just, I think, going to be going too far, just because there's almost nowhere else left to go. So, it was affordability that really drove some of that decision.

Of course, if local government wanted to redistribute from within the settlement to increase the floor for authorities, then we'd be open to having that discussion, but I haven't had any representations to that point. And I understand why, because it's a tough settlement for authorities across Wales in any case. But perhaps I'll ask Judith on those points about the funding formula itself.

Thank you. Some of this is sometimes about misunderstanding. There is some data in the formula that is 2001, but, actually, the stuff that drives most of it is updated annually. And in particular, population is updated annually. It's updated annually by cohort, so we do actually take account of the fact there are different numbers in different age groups. We are using the 2021 census data in the formula this year, and including, therefore, the change in the number of older people.

I absolutely agree that the needs of a four-year-old may not be the same as the needs of a 74-year-old. Partly, that's why the formula provides an unhypothecated total, so a local authority can choose to devote its resources how it needs to, reflecting its local needs. The formula is derived from measures of what the local authorities have spent. So, in a sense, it is the fact that people spend more on older people and social services that drives that. It is not that we have gone, 'We have plucked a figure out of the air and this is how much we think a four-year-old will cost in services'; it is the other way around. It is that the effect of what local authorities spend has defined the way in which the formula works. We take into account the numbers of four-year-olds, five-year-olds, six-year-olds, et cetera, in the education bit of the distribution, and we take into account different age groups then in the social services bits of the distribution, and those figures are updated annually.

There are some bits of data that we have not yet updated from the 1991 census, and those include, for example, pensioners with a limiting illness in a household. Pensioners living alone, I think, is one of them as well. Those will be updated as the data becomes available to us from the census, and as we do the work to really crunch the numbers. But it isn't instant, and we take it through the distribution sub-group and then through the finance sub-group so that both officers and leaders understand the implications of that, because it has winners and losers every time.

Okay, and—

The numbers of data items in Scotland?

Yes. In Scotland, there are 200 data items, so the question is whether that's a fairer basis. 

We did an exercise a few years ago to see what difference the different indicators—. We ranked the indicators by the difference they made to the formula, and at the time, a good few years ago now, actually, I was suggesting that we should cut off the number of indicators, because when you get to the last 10 per cent of indicators, they distribute very small amounts of money, so having lots more indicators wouldn't necessarily make big differences to the way the formula operates and the distribution. The bulk of it is distributed by client measures, and those things are the ones like the numbers of school kids, numbers of people claiming, numbers of people in different age bands. Road lengths is also another client measure. So, I don't think increasing the number of indicators would necessarily help. We're already dealing with 4,000 data items, so it's not a small number of indicators that we take into account. We also have the problem, technically—

I think they thought that they were more needs based as well, the criteria.

In Scotland? We are due to have a talk with Scottish officials quite soon, and we'll take the opportunity to have a discussion there. I don't want to get into, 'Well, ours is better than England's or Scotland's', but we are definitely better than England's in terms of taking account of needs, because that's the way our process works, but we'll see if there's any lessons to be learnt from Scotland.

I'll just come back on the funding floor. I know there's been an increase from Government, and normally you don't give a big increase at all, but give a funding floor if there's an uplift, but I think it's because of the impact of all the inflationary pressures, isn't it, and an increase in costs for delivering services such as social care. Another point raised was, between the NHS budget and the local authority budgets, because they're all looking at their budgets, this argument or fighting of who's going to fund services like social care. Local government feel like they're picking up the costs now that health might have done previously. Plus also the disparity in pay between what health boards pay social care workers and what local authorities can pay social care workers has come up as an issue raised this morning.

These are issues that are raised by local government leaders, actually, in some of the meetings I attend with them as well. I know that, especially in times of constrained budgets, there is a danger of tensions starting to emerge between two very important parts of the public service. Because when you look at delayed transfers of care, for example, that is an area where, if we're not careful, we might see local government and health pointing fingers at each other, when, actually, the answer will be in working together. So, that is something of concern. And again, I'm just mindful of the issues around pay. You've described the differences in pay, potentially, between health and local government, but then also there are some challenges within local government in pay as well. Somebody might be working in one particular sector and then notice a job that might only just be a couple of miles away from them paying more in the same sector. So, there are issues, I think, that need to be discussed in that space as well. But, yes, those points, I think, are all really important, and it just speaks to doing everything that we can to make sure that local government and health are working in tandem as best they can, really. 

Do you want me to go on to workforce pressures?

Yes, please, Carolyn.

One local authority leader, over the last decade or so, has seen a 40 per cent reduction in staff, when they've reorganised and restructured, but they're really concerned about loss of posts, especially in education, potential redundancies and the impact on that. I know, previously—they didn't mention it today—one talked about needing to make hundreds of redundancies as well. So, really, your views on that, on them actually being able to deliver. I think, today, maybe, they've got lots of vacancies as well; and retention is an issue, so they're probably deleting posts, so not actually being able to carry on delivering services due to workforce spending pressures.

Those are the kinds of pressures that local government raise with us all the time. I suppose I started to explore that in the answer to Sam Rowlands earlier, when talking about some of those tough choices that local government will be making. They've described similar scenarios to us as well. I know they'll be working hard to avoid redundancies, where they can, and try and find natural attrition ways and so on, to try and address some of the challenges. But, ultimately, I think it does speak to the real pressure and the challenge that we have right across the public service, in the sense that 50 per cent of the Welsh Government's budget is exposed to pay. When you look at the NHS budget, a very large proportion of that is pay, and it won't be any different in local government as well. We have a situation where pay awards are outstripping the increases in budgets, so, inevitably, there's a huge tension there.

You can look to all sorts of creative ways to try and meet those pay awards, whilst avoiding impacts on services and those tough decisions around redundancies and so on. I know local government will be trying to work with the unions and have those discussions too. It's a really tough message, but, ultimately, if you're going to pay people more but you don't have any more money to do it, then, inevitably, you have to pay fewer people—that's the only way in which you can meet those pay awards. I know that they'll be trying to find a way to do that in a way that protects as many jobs as possible, and that's been one of the principles behind our budget decisions as well. It's been about protecting core front-line public services, it's been about supporting those who are hardest hit by the cost-of-living crisis, but then also trying to protect jobs as far as possible.

Is there any specific evidence and data you've used to understand what services are most valued by citizens? You said in your evidence that you understand the scale of financial challenge and negative impacts for some areas, but is there any particular evidence and data you've used for that, or is it just conversations with leaders?

We do gather a really wide range of data from the public in Wales in terms of what their priorities are and what their views are on services. We've got the national survey, we've got the family survey and so on. If it's okay with the committee, I'll send a note that sets out the range of sources of evidence that we go to, particularly in terms of those surveys. I know that we also pay for some of the UK-wide surveys to be boosted for Wales. So, when we've got particular interests in an area, we'll get extra data for Wales there, which helps us with our decision making. But I'll perhaps ask the chief statistician to write a note for the committee.

That would be useful. Thank you. Thank you, Chair.

I'd just like to continue one of the aspects that we've touched upon, namely continuing healthcare, and whether a particular case is a matter of continuing healthcare or not, and the relative importance of that, obviously, between the health boards' budgets and expenditure and their financial pressures and those within local government. Because we did hear earlier that, in Betsi Cadwaladr health board, there was an understanding that work is going on that might seek to shift some of that financial burden to local authorities rather than the health board. And you did say, Minister, that you are aware that there are tensions around those areas. So, would you then be working with relevant colleagues to make sure that, as we go forward, local authorities are protected from inappropriate pressures being shifted to them that really ought to be met by the health service?

I know that the Minister for Health and Social Services meets regularly, alongside the Deputy Minister for Social Services, with local government colleagues, particularly those who hold the social services portfolio. So, perhaps I'll seek an update from her for committee about those discussions, because I haven't been directly involved specifically in those discussions, certainly not recently, although I have met with local government and the Minister just before Christmas or just after Christmas to discuss pressures more widely in social services.

Okay. Sam. 

Just a quick question further to that point on the way in which health boards set their budgets. I'm interested—. And alongside, obviously, local authorities as well. As a finance Minister, how do you view that moral position, I guess, where a local authority has a legal duty to set a balanced budget, whereas a health board can easily run into debt and, hopefully, get bailed out by you as finance Minister, or by the Welsh Government? It was an issue raised by leaders this morning that that just seems like such an opposite sort of way of handling budgets in what are essentially two sets of public bodies. How do you view that? Do you think that's acceptable?

I think they're two different parts of the public service, but they're both funded in two different ways. So, it probably is appropriate to the extent that they do have different systems around it. Local government is able to raise money locally in a way that health boards aren't able to do; local government has significant borrowing powers, and they're able to invest in a number of ways. So, they are, I think, different, so you wouldn't expect the same systems to be available for both. But I'm keen to hear what committee makes of that in terms of any recommendations that you might have for us.

Okay. It's always good to have an invitation from the Minister to the committee. [Laughter.] Okay. And Joel. Joel James. 

Thank you, Chair, and it's good to see that we've got an audience now just watching us debate local government finance—the exciting world of local government finance. 

I hope they find it very interesting, Joel. I'm sure they will. 

Indeed. And I wanted to talk about transformation and legislation. Obviously, in your programme for government, you've mentioned strengthening the autonomy and effectiveness of local government to make them more successful in delivering services. I wanted to touch upon and get an idea of your rationale behind that 12 per cent cut to the transformation and legislation BEL, and the impact that's going to have on the Welsh Government's work programme, but also an understanding of the impact—obviously, should it be passed—of the Local Government Finance (Wales) Bill, what sort of impact that might have, and if there were any negative impacts, how you plan to mitigate them, I suppose. Thank you.

So, the finance and local government MEG wasn't immune from the exercise that I've asked other colleagues across Government to do in terms of identifying savings within the MEG. And actually, when you look at the protection we've given to the RSG, there's very little else that you can go at within the finance and local government MEG, because that's where the vast majority of the funding is available. So, we looked at every single budget line and explored what could be released. As you can see, the money that was released within this MEG is actually—. In a number of places, we're talking about hundreds of thousands of pounds rather than millions of pounds.

So, the £0.9 million or the £900,000 reduction to the MEG was offered as part of the exercise. Of it, £0.5 million relates to finance reform. So, as you say, that will reduce the funding available in terms of delivering the reform of council tax and non-domestic rates. Ultimately, it could delay some aspects of the implementation of that Bill, and potentially slow down some of the operational nature of the reforms. But, as yet, we haven't fully worked through what the impacts of that will be.

One hundred thousand pounds of related funding is allocated to support local democracy, and that will mean that some implementation work on aspects of the Local Government and Elections (Wales) Act 2021 might be delayed, and the remainder of the funding that was released was either allocated to some specific projects, which at the time of setting the budget hadn't particular actions attached to them, or where there was some flexibility to take forward some work more slowly.

But in terms of specifically what it means for implementation, we’re not at the point yet where we can make that judgment, partly because of where we are in terms of the Bill moving through the Senedd, and knowing what the ultimate look of the Bill will be.

Okay, thank you, Minister. With that in mind, could I have some idea of some of the rationale behind allocating an additional £8.4 million to the Valuation Office Agency, and £0.8 million to the Valuation Tribunal for Wales? Also, why now? Because they're only due to basically come into any real action in a couple of years' time, should the Bill pass, really. It's predicted in one of the cases, I think, that valuation tribunals—it will be 2028 before they'll need to do what they'll need to do, if that makes sense. So, why now? Is it to build that revised baseline, so that they can then action it when they need to, or to build that resilience? But then I suppose the difficulty is how you justify that when there are other things that need to be done, and especially when you mentioned there that the reduction in the transformation and legislation BEL means that a lot of this Act is going to be delayed even further.

Firstly, in terms of the VOA, the costs for next year are forecast to be £17 million, so that's the same as this financial year. So, it doesn't see an increase in the budget, but what you see in the budget documentation is that it has been consolidated into a single stable baseline, rather than in other parts of the budget. So, that in itself isn't an increase for the VOA.

Some of the longer term cost will be driven by what comes out of the consultation that is going on at the moment, in terms of the scale and the pace of reform for council tax in particular. But you’ll be aware that earlier on in this year—so, it was at the start of this financial year—the new ratings list came out for non-domestic rates. So, obviously, there was some work for the VOA to be doing in that particular year. And then the increase in the valuation tribunal budget line relates to an increase in a budget that has been flatlined since 2018-19, so it was a recognition of the pressures experienced in that area as well. Both of these will be really important in terms of delivering the council tax and NDR transformation programme, a lot of which actually requires a lot of work to be done upfront, before any of those changes are felt in terms of the bills on the council tax side for households.

Thank you, Minister.

Okay, Joel? Are you content? Okay. We'll move on to Jayne Bryant, then. Jayne.

Diolch, Cadeirydd. Good morning, Minister. I just wanted to perhaps touch upon a couple of questions around education and the impact of the budget for local authorities on education. We know that local authorities are receiving an average 3.1 per cent increase in the local government settlement, and obviously they have to adequately fund schools from their core budget, which we heard this morning from the WLGA was particularly challenging, and what we heard was incredibly sobering. They've obviously, out of that, got to fund the pay deal as well, and we heard this morning that councils are reporting that 25 per cent of in-year school budgetary pressures related to pay, and around £10 million of the £41 million in-year pressures are due to that teacher pay inflation, according to the WLGA. We heard yesterday the Minister for Education and Welsh Language telling the Children, Young People and Education Committee that the cost of the teachers' pay deal will be £80 million in 2024-25. How do you see—? Perhaps you could comment on the challenges faced within school budgets around that, particularly when we're looking at schools having challenges in implementing the reforms, and the importance of raising standards within schools.

Education, of course, forms the largest area of spend for local government. Council spend on education services makes up 37 per cent of their budget, so it's already a really key part of the budget. What we have tried to do, bearing in mind that there's no significant additional funding available—you know, only the 3.1 per cent—is to try and find ways for local government to spend the money that it has in a more flexible way, to perhaps either drive efficiencies or to drive greater value for money.

So, some work that I know the education Minister has been doing has been to look right across the whole range of grants provided to local government by the education department and to consolidate them down into just four funding streams, and I think that that has been warmly welcomed by local government as a potential tool to help them manage their budgets better and have greater flexibility to address those local priorities. It comes out of the work that we've been doing as part of the programme for government commitment to reduce the administrative burden on local authorities. When we asked them what their No. 1 burden was, they said almost unanimously, I think, 'Grants, and the administration, the monitoring and so on,' and just to find a more proportionate way to deal with some of this, so that's a result of that work.

In areas where we can't provide additional funding, we've at least tried to provide additional tools or flexibilities. I know that this is for the education Minister mostly, but he would want to say that the choices that he's made within his MEG have been very much focused towards school funding. So, the recruit, recover, raise standards funding, for example, that was due to be tapered off, but he's continuing with funding for that. Some of the other work that he's doing around free school meals, again, is important to support learning. That means, of course, that he's had to take really tough decisions elsewhere in the portfolio around further education funding and so on, so it just shows, I think, the level of priority that he's put on schools and the youngest learners.

Brilliant, thank you. Many authorities rightly assumed that the additional grants for the teachers' pay deal in 2022-23 and 2023-24 will be funded on a recurrent basis with the grants transferred into a funding baseline, and the WLGA paper said that a similar assumption has been made for anticipated changes in the employer rate for teachers' pensions. We heard this morning just around some of the concerns that they had—local authorities had—about clarity on whether that would happen or not. I'm just wondering about your comments on that, around teachers' pensions.

On the pensions issue, it's something that we're aware of and local government has raised with us. We're still waiting for clarity from the UK Government on this, but I have said that in relation to any consequential funding that comes for the pensions issue, we will pass that on to local government. I'll be writing this week, alongside the Deputy First Minister of Scotland, to the Chief Secretary to the Treasury on this point, asking for urgent clarity, but also the fact that in Wales it might cost us more to deliver the same. A Barnett share wouldn't be the appropriate way in which to deal with this; we need the actual amount that it's going to cost us. So, that's something that we're taking forward this week. I'll see whether Judith has any other points to make, but just to say also that we've got the meeting of the Finance: Interministerial Standing Committee next week in Edinburgh and, again, she and I will be making that point to the CST.

It's on scope, and we recognise that colleagues acting in local authorities are having to make the decisions about how much risk to take, in terms of the assurance we can give, until we get a stronger assurance out of the UK Government. On teachers' pay, I think what you'll have seen in recent years is that we have said to local authorities upfront that, actually, the settlement is expected to cover teachers' pay, but that whenever Ministers have been able to, they have identified in-year funds if there are funds available. But, as budgets have got tighter, we have been less and less able to make larger and larger contributions in that space.

But, actually, every year, we have tried to make sure that local authorities understand that they need to think about the effects of teachers' pay in planning their budgets, and then we maintain the ongoing dialogue as the year goes on, so that they can reflect that as things change. If we have extra money, it goes there; if we don't, they have enough time to plan on that basis. It's not a perfect answer, but it at least reflects the relationship that we maintain.

Absolutely. I think that's really helpful, Chair, isn't it, in getting a picture of that, especially from this morning, so thank you for that.

I'm just going to move on to some questions now around capital funding and borrowing. Perhaps you can just expand on the changes made to local government capital funding and whether that allocation of £180 million in general capital funding provides sufficient capital to proceed with projects as planned.

Well, we don't have an increase in our capital budget, so we haven't been able to provide increases to local government. In fact, our capital budget is 6 per cent lower in real terms next year than it is this year. So, there hasn't been anything to allocate. Of course, inflation means that local government is, just as we are and everyone else is, able to deliver less as a result. I suppose that that, really, just means that local government will have to do some important prioritisation work in terms of how they deploy their capital funding. And a flat budget, I know, will be challenging for them in that regard.

And on the issue of decarbonisation, we know that the Welsh Government allocated an additional £20 million in capital funding in 2023-24, and similarly in 2024-25, for decarbonisation. Perhaps you can expand on the settlement in terms of local government—how that helps local government to address those climate change priorities like decarbonisation.

The £20 million is additional to the unhypothecated funding that we've talked about. So, it does have that particular focus on decarbonisation, and the work of the decarbonisation panel, which advises local authorities in this space, is really important in helping to identify particular projects that might be suitable candidates for that. Again, that's something that we would want to be able to provide more money for, but, unfortunately, we can't. I think local authorities don't have to just decarbonise with that money; they can be decarbonising with the rest of their funding as well.

I think the work that Ystadau Cymru does is really important, because decarbonisation is one of their particular areas of focus. They have a thematic approach, one of which relates to decarbonisation. And then, also, in looking at creative ways of procurement, for example, we've seen that, by coming together to purchase electric vehicles, they can improve their fleets, they can improve their decarbonisation, but do so in a much more cost-effective way. Some of the authorities involved would never have been able to have done this without coming together. So, they've got that. And then, there are also some other specific capital grants that are available. So, capital grants through the sustainable communities for learning programme are important, but then, also, there are the interest-free loans provided through the Salix Wales funding programme—that's for public sector organisations. So, there is a range of other areas, and, again, it's an area where we would love to be able to do more, but, unfortunately, our budgets are not enabling us to do that.

Thank you, Minister. Diolch, Cadeirydd.

Okay. Thank you very much. Minister, if we turn to Gypsy and Traveller sites and the capital grant, I wonder if you could tell us a little bit about the process in determining the allocation and whether you believe that that has produced a level of funding that is sufficient for the needs of local authorities and the Gypsy, Roma, Traveller community.

This particular grant is part of the Minister for Social Justice's portfolio, so she'll be able to provide you with a more detailed response to that, but the discussions that I would have with her come through the budget bilaterals that I have with each Minister—we have a series of those where we delve into the portfolios. And I know that the funding that is provided is expected to meet demand in 2024-25 within that portfolio, but I do know also that it's an area where we have struggled to spend the funding that we've allocated to it in the past. So, in this financial year, when we did the exercise that I informed the Senedd about in the statement on 16 October, funding that came from the social justice MEG was identified from within this particular budget line, because, again, it's been difficult to allocate the funding to projects, unfortunately.

Do you know what the final figure was for the budget line for this financial year, the current position?

For this financial year, I think that we expect it to be zero, because, to my knowledge, there were no suitable applications coming through for that fund, and that fund was then returned to the centre as part of that exercise. If I'm wrong on that, I'll inform the committee, but I think it will be zero.

In terms of allocations made and the use of those allocations, then, Minister, will you have a role in trying to ensure that the allocation for the next financial year is fully utilised? I guess you have meetings with Ministers in terms of demand-led budgets and the current situation throughout the year.

I do. I think my role would be more on the side of monitoring the spend and exploring alternative uses for the funding if it's not deployed, and it would be for the Minister for Social Justice, really, to be working with local government to encourage those projects to come forward.

I see. Obviously, we can take up those matters with your ministerial colleague. Minister, the Ukraine programme funding and the changes made, could you expand a little on those and the discussions that you had with local authorities in Wales as to whether the reduced allocation will be sufficient to meet needs?

Yes. This allocation was made well over a year ago, now. So, at last year's budget, which was set for this year, we allocated £40 million for this year and £20 million for next year. At that point, we had to base it on what was probably a worst-case scenario in terms of the pressures that might be arising. Actually, what we have seen is a reduction in the number of people coming from Ukraine and the success of the programme in terms of move-on. So, that's why we've been able to reduce this particular budget. What it does do, though, is it still allows us to have that kind of wraparound support for individuals who are arriving, it allows us to ensure that we work with local authorities to support the move-on work, so it doesn't reduce the support that we're able to provide. It also allows us to provide that increased level of support of £500 for the host families. So, we're still able to do the work that we did; it's just the numbers of people who we're supporting have decreased significantly.

I see. Okay, thank you for that, Minister. We'll turn to Adam Price, then, and some further questions. Adam.

Unfortunately, I think that it's inevitable it will have some impact on the work that Ystadau Cymru does in that space. We had a statement in the Senedd this week on Ystadau Cymru, where I was able to reflect on both this budget issue and then also the wider work of Ystadau Cymru. The funding that goes to Ystadau Cymru is largely to support the asset collaboration programme Wales, and that supports, basically, collaborative projects using the Welsh public sector estate and ways in which to do that more effectively. I was able, in the Senedd this week, to give some really good, exciting examples of work that has been done. The reduction, I think, will mean that there will be fewer projects that are able to be supported in the next financial year. And then, alongside that, though, I should say that lots of the other work of Ystadau Cymru isn’t just through that particular programme that provides the funding for collaboration. It has an important leadership and convening role as well as. But I think it’s inescapable that we will be able to fund fewer projects next year.

Yes. Again, I think the impact of inflation and the fact that we haven’t been able to match that through the budget means that there’ll be less work able to be carried on in that space, so that emphasises really why it’s so important that local authorities are able to prioritise. I would add, though, that the support there is only part of the picture. We undertook that work on the zero-waste review of our capital budgets as part of the three-year spending review period and, through that, you saw the climate change department taking up around half of the capital budget. Now, lots of that goes to local government through grant support for various things as well. So, I think that the work that we did there has been really important—perhaps we wouldn’t have even had the insight at the time that it would have been important in these times of high inflation and reduced ability to meet all of the needs. It has helped us have a budget that still prioritises addressing climate change and that journey to net zero as far as we possibly can, although, inevitably, we’ll be able to do less as a result of the situation.

I’ll just ask Judith to come in on that particular question first.

Thank you, yes. So, most borrowing by local authorities is through the Public Works Loan Board and they do have different rates for different things, and those will apply in England and in Wales, so where the Government is doing something that offers you a different rate, that will apply. The UK investment bank also offers reduced interest rates for green projects. The challenge there is that they only operate on quite a large scale in terms of the total financial package, so they work much better for things where you can bring lots of things together. They’re looking for projects, and I think some of the work that the climate change panel will do is to see whether we can find any way of aggregating projects, so that the UK investment bank might be a way forward as well.

Okay. If there are no other questions, then let me—. Carolyn, yes.

Sorry, just as we’ve been discussing, I was thinking of other things. I get asked by councils that if there are new legal responsibilities, because they’re really struggling now, any new legal responsibilities or pay awards, can they be fully funded. I know we discussed pay awards before, but that’s because they don’t know where to go any more.

And also, we talked about the funding floor before, but should there be a fixed percentage in the range between local authorities? Just your view on that as well. So, if there was a fixed percentage range of just 3 per cent between different authorities, what implications would that have? Just your view on that, please.

I think that could potentially have significant implications for local authorities in terms of their ability to meet needs, because the funding formula itself is partly about the individual, partly about deprivation and also sparsity, and I suppose when you falsely constrain some of that, then it could have significant implications. Of course, it would mean that the relative difference across authorities would be less, but that doesn't mean then that the relative different need would be met. But perhaps Judith could elaborate on that one.

I just think that it would save them arguing, the ones that are top funded all the time compared to those that might be near the bottom all the time. It's one way of resolving that, otherwise you have to get 12 authorities on board to agree to that rejigging of the formula, which could be an issue. But I hear what you're saying about making sure that all needs are met as well. So, I just need to have that reason to go back to them to explain.

I think the Minister is right: it's about responsiveness. The formula is designed to be responsive and stable, and that's the balance we try to strike every year between something that is unmanageable—so, the floor—but responsive to increasing needs. If you look at the police, from the Home Office, that's a flat increase every year. So, if you are seeing much more need, you are not seeing that reflected in your increase. 

It's quite interesting, because you're right that the relative share of the whole bucket across local authorities is relatively fixed—it's quite similar every year—but the change each year can be quite different. So, last year, I think, unexpectedly, Rhondda Cynon Taf, which is normally one of the ones that get quite a large increase, was bottom of the pile, and Monmouthshire, which is one of the ones that normally gets a very small increase, was top of the pile in terms of that increase. So, the responsiveness, I think, is important to councils as well. 

It also makes me think that, actually, what we would be doing if we did that would be the same as a redistributive floor—you'd be saying to some local authorities, 'We're capping you to fund the ones at the bottom', and that, historically, hasn't been welcomed by local government, it has to be said.

Yes, that's what I'm saying—that they would have to get 12 or 13 authorities on board to agree to this, and that's very difficult, because those that are winners don't want to be the losers, because everybody is struggling, in a way. But it's just that those that are consistently making the bottom quartile, if they're consistently towards the bottom end, are struggling to deliver services, and then that impacts on them.

Just to add to that, the top percentage increase was 4.9 per cent, so, if you go from the floor to the 4.9 per cent, that is only a 2.9 range between them.

Thank you.

Thank you very much, Minister, and your officials, Judith and Emma, for coming in to give evidence to committee this morning. You will be sent a transcript to check for factual accuracy in the usual way. Diolch yn fawr.

Great. Diolch.

Committee will briefly go into private session before we break for lunch to consider the evidence that we've just heard.

Welcome back to committee members, and welcome to the Minister for Climate Change and her officials for our sixth item today, which is our third evidence session today on the Welsh Government's draft budget for the forthcoming financial year, 2024-25. Welcome to committee, Minister. Would you like your officials to introduce themselves, or will you introduce them for the record?

Good afternoon. Emma Williams, director of housing and regeneration.

Good afternoon, everyone. Jamie Powell, deputy director of finance.

Good afternoon. Sarah Rhodes, deputy director, housing policy.

Thank you all very much for coming in to give evidence to committee today. Minister, perhaps I might begin with some general questions. Firstly, could you give committee an overall perspective on the extent to which this undoubtedly challenging budget may affect momentum towards achieving the housing and regeneration commitments that are set out in the programme for government?

We've worked very hard indeed to protect most of the homelessness budgets. We've been able to keep the housing support grant flat, for example, and we've protected all of the other core budgets for homelessness. That has meant that some of the other budgets have taken a slightly bigger hit than they would otherwise have done, but we thought it was very important to keep the core budgets going. We are in the process of deciding quite what to do with some of the amalgamated budgets that we're looking at, and we're having a conversation with our local authorities about whether combining grants and freeing up the edges of them, if you like, will make them more efficient so that we don't have quite the same stringent reporting conditions on very specific grants. So, that's an ongoing conversation, Chair, which we think will squeeze out a little bit more value from the budget.

I'm very well aware, in particular for the housing support grant, that a flat budget is an effective cut. So, we will be working with the local authorities to see what we can do on top of that and how we can manage that. There are various pieces of work going on between the draft and the final budget to see what can be managed. But there's no getting away from the fact that it was quite difficult to just protect it at flat, never mind increase it. So, I'm very pleased that we have been able to do that, but very aware that that is a real-terms cut.

We'll be coming on to those matters and others, Minister. But firstly, again, in terms of the general picture, could you give the committee an overview of where the greatest reductions in allocations have taken place and how those decisions were arrived at?

As you know, Chair, my ministerial expenditure group is very broad and we've had to take a view right across the entire MEG in terms of services. So, though you're only looking at the housing and regeneration budgets, you can't really understand what's happened unless you look right across. We have an enormous rail pressure in the MEG and we've had to deal with the rail pressure in a number of different ways. All the way across the whole MEG, what we've sought to do is, where we have funding rounds, keep the funding stream in place, but perhaps reduce either the money in the funding round or the number of funding rounds that we do. That's the pattern right across the whole MEG. So, I'm not able to say, 'We aren't doing this any more'; what we've tried very hard to do is to do some of it, and we've been able to do that, by and large. And then, as I say, we've been looking to see whether we can combine funding streams and just come at it in a slightly different way in order to do that. So, actually, this part of my MEG hasn't seen as many cuts of that sort as other parts, for that very reason. We've had to balance off those two things. The funding streams that have suffered the most are the rounds of things like Local Places for Nature and so on, as part of the environmental parts of my portfolio. So, you'll see small things happening across this one, rather than big, swingeing cuts.

I see. In terms of the housing and regeneration directorate, Minister, and opportunities for income generation, do you think that you've maxed out, as it were, in terms of those opportunities, and will you be doing any more in that regard?

We don't have very much in the way of income generation of that sort in this part of the portfolio; that's largely associated with energy parts of the portfolio and the planning parts of the portfolio, where you'll see we've moved to full cost recovery on a large number of headings. Unless Emma Williams wants to tell me something slightly different, I'm not sure it's made much difference in terms of income here, has it?

No. Thank you, Minister. Referring back to your previous comment about where we've taken the greatest hits, we have looked across this budget line for areas of income in order to avoid having to cut budgets. As the Minister said, we don't necessarily have a large pipeline of income-generation streams; we have a couple of windfalls, if you like, where we've got investment where we can draw down interest from that, and that's been used to offset where there may have been cuts otherwise.

We've got one land sale that we think will come through in the next financial year, which, again, we've been able to use to offset a potential cut, but, generally speaking, the land that we have within the portfolio is there for good reason and we would only dispose of it where it is the right thing to do to generate income and ensure that someone else is building housing of good quality on that land. Certainly, the larger land holdings that would generate bigger income are being looked at for exemplar sites, where we will work with other developers in order to bring them forward.

I think it's worth expanding on that as well. We've worked very hard not to lower the standards in the face of a short-term budget difficulty. I've had lots of conversations right across local authorities and registered social landlords, for example, about whether we would lower the standard for social house building. I'm not prepared to do that. We've already got problems in commercial building, where we've got to retrofit houses built only two years ago, and that's just a ridiculous short-term view of it. So, we've held fast to that. We have, though, put into place the transitional accommodation capital programme, which builds things that are for transitional accommodation, but for longer term transitional accommodation, which are not to the social house standard—the development quality requirement, as it's called—but, nevertheless, are a decent standard of accommodation, we continue to have conversations with local authorities about the edges of that and what that might look like.

But I'll be really open about this. So, people will say to me all the time, 'Well, it's better than bed and breakfast.' But it's not the Government's position that we want to build things that are just better than bed and breakfast. That is a terrible way of looking at it. So, we've held to our standards. The transitional accommodation programme has been really interesting, because we've been able to put reusable, modular housing into a lot of that as well, and meet what are called 'meanwhile uses' on these pieces of land. But we've taken a view—so far, anyway—that that kind of short-term thinking will only stack up problems for later on, and, if we've got to retrofit for insulation or decarbonisation purposes, or for energy efficiency, houses that we are building now, that is not the position that we want to be in.

And then, on top of that, the actual running costs of the houses once they're built is much less. So, from the registered social landlord's or the council's point of view that are running those houses that cost is substantially reduced. And if you look in our budget lines, you'll see that we are very heavy on capital, very light on revenue. So, anything that reduces the revenue call is a good thing. So, we very much look to see if we can do that right across the piece.

Yes, okay, Minister. Thank you very much. We'll move on to committee members, and, firstly, Sam Rowlands. Sam. 

Thank you, Chair, and good afternoon, Minister. Thank you for taking the time to be with us this afternoon. I'm just going to touch on homelessness for a moment; it may drift into other areas, as many things are linked together. I wonder, perhaps, if you could just give us your initial assessment, or current assessment, of the challenges that local authorities are facing in terms of homelessness. 

Yes. So, obviously, we've housed an enormous number of people. I can't quite remember, but it's up to 46,000, is it, at the moment, or just under?

I think 42,000. 

Oh, right, but over 40,000, isn't it, anyway. When you think that, at the beginning of the COVID pandemic, we thought we had about 800 to 1,000 who might need housing, that's quite something, isn't it, that we found that many people in insecure housing right across Wales that need assistance. The cost-of-living crisis is continuing to drive the presentations in homelessness. Homelessness is a statutory duty of the local authorities, but we have been topping that up for some time through COVID. So, we have an ongoing conversation with the local authorities about the best spend for their budgets, and how ours can leverage that, if you like. And we have the transitional accommodation capital programme, for example, which is hugely oversubscribed, and that's one of the budget areas that I'm talking about, where we could have put out another £9 million, £10 million on that, and we just haven't had the money to do it, and it's a real shame. But the programme is still there, so the programme continues; it's just not at the level we'd have liked. 

And so, Sam, the answer is that we've been working with individual local authorities, with the relationship manager, to understand how our combined budget piece can do the best in that local area. Whether that's for actual social build—. So, for example, we've been working with every planning department to understand where the housing in the local development plan is, and how that can be brought forward, and then bringing to bear things like the stalled sites fund, or the—. I've forgotten what the other one's called, the one where we clean up the contamination to be able to do it. What's that one called?

The abandoned buildings fund.

There we are, see. They've all got the same words, but in a slightly different order to confuse the unwary. 

That's about brownfield developments, isn't it? 

Yes, that's right. So, something that can be brought forward for housing, but where there's contamination on the land and it makes it developmentally unviable for any commercial operation, there's a grant available to sort the land out before the build. So, we've been working with local authorities to understand their local development plan process, where the housing allocations are, and then how likely the housing allocations are to turn into housing. So, you'll be very aware that some of the housing allocations just sit there for decades and never turn into housing. So, we've been very proactively looking to accelerate that programme to get the supply side in, because, in the end, the only solution to this is to get the supply side up.

So, there is a huge range of things, and the budget pieces for those are across the MEG. So, there are budgets in planning for that. There are budgets in regen programming for that. There are some budgets in the revenue support grant, in Rebecca Evans's portfolio, that support that, and then we have specific homelessness and housing grants that also support it. 

So, on that specific point of homelessness, and the immediate issues that councils are facing around temporary accommodation in particular, do you think the funding, the budget, that local authorities will be receiving is going to be enough to enable them to meet those immediate demands of temporary accommodation, bed and breakfasts, whatever it might be? 

Oh, 'enough' is a difficult concept, isn't it? I would love to give them more, but what we're trying to do is shift that spend from putting a sticking plaster on the end to the preventative work to stop people becoming homeless in the first place, which is where the housing support grant conversation comes in, bearing in mind a lot of the work that the housing support grant does is maintaining people in their homes in the first place—some of the other work that we do to do that. And then to make sure that people who do come into very expensive—and, sadly, the most expensive is usually the worst type of temporary accommodation—are moved out of that as fast as possible into more economically viable forms, even if it's still transitional accommodation, the longer term ones, which are more efficient, financially, but, of course, are far better housing anyway. So, in human terms, it's a better thing to do, but it's clearly a financially important thing to do.

And then I think, Chair, it's important for the committee to understand what happens when a family becomes homeless. So, if we aren't able to support that family to stay in its home, then it becomes literally five times more expensive. It walks out of the front door of the council and round to homelessness services, where they are immediately five times more expensive. So, putting spend into the preventative agenda is really efficient, both in human suffering terms, but actually just straightforward financial terms. So, we've enabled registered social landlords and councils to do a whole series of things, working with their tenants on hardship, for example, so people who are in rent arrears, people who have all kinds of other financial difficulties, to try and maintain them in their home, because that's actually much cheaper than it is to try and deal with then once they've lost their home, for a variety of reasons. So, I think, Sam, you will see that we've tried to keep the preventative spend in.

The local authorities, of course, want us to put more money into the sticking-plaster end, for obvious reasons, because they're dealing with the immediacy of that, but they have funding for that inside the revenue support grant, as well as just the grants that we give them.

On that particular point, I'm just reviewing the evidence we received from the Welsh Local Government Association, which is in the pack today as well, and I'll quote what they've said in relation to that point. So, they've said:

'This sustained increase in homelessness presentations to Councils in the period since the pandemic means that core homelessness services are overwhelmingly now dealing only with crisis and unable to work to prevent homelessness.'

So, it seems that they've already gone beyond the ability to work in that preventative space, and are, as they say, only able to deal with crisis mode. Do you think, therefore, then that the budget—? Are they not viewing the budget in the right way? Or why is it they're saying one thing, that they can only deal with the crisis, when it sounds like you expect them to be dealing with preventative?

So, I don't want—. I haven't seen that evidence from the local government association, but the evidence we have from our relationship managers and from our work with the local authorities is that it's just not as black and white as that. They all do do preventative work, of course they do, because they deploy their housing support grant funding, for example, and a lot of that is on preventative work; it's about keeping people in their homes. They support a lot of third sector work through the housing support grant, and through other grant systems, to do that. So, that is the preventative work.

I have some sympathy with—. We are still having over 1,000 presentations a month of people who are homeless across Wales. That is a torrent of people, isn't it? There is a small decline in that at the moment, but we'll see. And actually, I guess it depends how widely across the budget you look, because I don't think there is a single local authority in Wales that isn't doing some of that prevention, and we have an ongoing conversation with them—Emma and Sarah will be able to tell you about their conversations all the time—about this very difficult thing, and it's a difficulty across all public services, isn't it, about dealing with the immediacy of the problem and getting behind the problem and trying to stop the flow. I don't think it's fair to say that there's a single local authority in Wales that isn't doing at least part of that prevention, and we have conversations on an individual local authority basis all the time about how we can shift the funding to the preventative end to stop the flow of people coming into housing options or whatever it's called in your local area. That's an ongoing discussion that we're having. Sarah and Emma, do you want to say, Sarah, about—?  

Thanks. Thank you, Minister. Certainly, we know there's some really good practice in some local authorities. They've separated out their prevention teams and they've got a focus team working on prevention so as not to get drawn into that crisis side in terms of that housing options team. So, as the Minister said, there is some really good work going on out there, and, absolutely, every single local authority is undertaking prevention activity. We funded this year—. We provided a discretionary homelessness prevention grant this year specifically to top-up the existing prevention activity that local authorities do—as the Minister says, again, working to ensure that people are supported to stay in their own home, be it through helping with rent arrears or various different things, on top of what we do through the housing support grant. So, it's a difficult balance, and that's part of the conversation we're having with local authorities is how do we get the balance right between relieving the homelessness that's occurring at the moment and ensuring we get more upstream and put more resource and shift the focus to the preventative end, otherwise we're always going to be in crisis, and I think those are the conversations that we're having with local authorities.

And just to add to that on the finance front, I don't know if you've got the charts of the BEL lines in front of you, Chair, but the BELs 1083 and 1120, which are the housing support grant and the homelessness BELs, are being combined, and the whole purpose of that is to move away from the kinds of specific, grant-funded projects, Sam, that you would have been familiar with, into this root funding through local authority partners so that we can make the most of the leverage of the two sorts of funding coming together to get a pathway, if you like, for people. We've been, despite the budget difficulties—and I'm not going to pretend to the committee that they aren't there, they absolutely are, but despite the budget difficulties—we've been able to have decent conversations right across local authority partners with that.

And then just to say that there are obviously local authorities in Wales who have a much bigger problem than other local authorities. So, Cardiff has a much bigger problem than anyone else, because Cardiff is the capital city and it's attracting people. So, we know that a large number of people who are presenting as homeless in Cardiff are not from Cardiff; they're being attracted to the city for a variety of very understandable reasons. So, we're aware that there are pockets in Wales of more difficulty, and we've been working very specifically with those authorities to try and pick that up.

Just to add as well, Minister, the committee might be interested to know that the monthly data that we publish, the next publication is actually going to include a breakdown by local authority area in terms of the numbers in temporary accommodation. So, I think we've mentioned in previous committees a desire to move more to that local authority level data to get a better picture of the position in each local authority area, and that will also include the accommodation type as well by local authority area. So, that will be in the next publication.

Could I ask the Minister, the BEL lines you mentioned again, the numbers of them for me? You said 11—

One zero eight three and 1120 are being combined, basically.

All right. And then, just moving on to the White Paper proposals in regard to homelessness, again, the WLGA, in their evidence, obviously representing the councils, have indicated that they would certainly need any financial implications of the proposals under the White Paper to be fully funded. Clearly, that's not within the next financial year, but I was just wondering if you wanted to comment on that, and also, perhaps, in relation to the White Paper, how this next budget is going to perhaps impact any timeline for implementing proposals from the White Paper as well.

Yes. So, we've published an early working draft of the regulatory impact assessment alongside the consultation, and we've done that on purpose and invited specific consultation responses on that on the potential costs and benefits of the proposed reforms. We've done that on purpose so that we can get a dialogue from the local authority partners and others—RSLs and others—about coming to a consensus view on what the costs of the new process are. There are also benefits, of course. We expect the programme to save money as well as cost money, so it's about working through that. You're right, it's not in next year, but one of the reasons that we've protected the budgets that we've protected in this financial year—and that has not been easy at all—is because we are running up to the Bill, and so we want to be sure that when we introduce that, which will be a revolutionary change to homelessness in Wales—it is the 'everyone in' approach that we've long wanted to do and that we implemented very quickly during COVID and have never rowed back from—we are in a position to have the base for that. Had we cut some of these budgets—. And it would've been a lot easier to balance the MEG if we had, just to be really clear. We've been absolutely determined not to do so, because we want the forthcoming Bill to have that good basis of financial stability.

In the meantime, we are working on that prevention agenda. Obviously, the whole point of the Bill is to prevent this situation that we're in. At what point ever would you cut into this vicious circle? As everyone always says, and I'm sorry for the cliché, the very best time was 20 years ago, and the next best time is now. I'm not prepared to put that off on the basis that it's just all too difficult. What should we do at that point? So, we're working through that. It's very collaborative. We will be working all the way through that with the WLGA and with our RSL partners, with CHC and with Cymorth. There's a whole range of stakeholders on that working group, who work with us on this, so that by the time the Bill comes to committee, we will have a robust financial impact assessment and a robust regulatory impact assessment to go with it.

And then the last thing is nothing to do with budget scrutiny, but I just want to say it out loud: I still bear the scars of the Renting Homes (Wales) Act 2016 implementation programme. I want a Bill that can be implemented immediately, not six years after it's passed, because of all of the unforeseen issues that arose. I think my team are vehemently of that view themselves, and I'm sure the committee would be of that view as well. So, we are doing a lot of work upfront, to make sure that we fully understand the actual, practical implementation issues on the ground, so that we don't have what we had with the renting homes Act. I'm sure you remember, Chair. I don't know how many regulatory subsidiary pieces of legislation we had to put through. It is indeed the gift that keeps on giving, as they say; I think I'll probably dream about it to my dying day. So, with this Bill, we have learned those lessons, we are doing a lot of work upfront, and part of that work is to make sure that the base budgets are robust and in place and we understand the implications for both local authority partners and for the registered social landlords across Wales, all of whom will be impacted by this.

To be very clear, then, you're not expecting the timeline you originally hoped for this proposed Bill to be implemented to be affected. 

No. Absolutely not. We're on target for the Bill. Emma can talk to you for the next 45 minutes about how we're managing that, if you like.

Thank you, Minister. I won't take the next 45 minutes. But it probably is worth reflecting that, actually, the work that many local authorities are doing now to look at how they try to rebalance the prevention, the mitigation, the crisis management and the move-on into long-term accommodation is exactly the plans that they need to do to implement a rapid rehousing approach. They are almost one and the same things. So, in many ways, we're implementing, to a certain degree, ahead of the legislation. Because the way that we're working with our partners around policy in order to address the very real pressures on the ground are the very things that the legislation will seek to embed and bring forward. So, in some ways, we're ahead of the curve, out of necessity, because the only way that we can shift the resource from the crisis management is by getting ahead of the curve and doing the prevention and the mitigation.

Great. Thank you. Thanks, Chair.

It's good to hear, Minister, that lessons will be learned from previous instructive experience within the department when it comes to legislation, because, yes, the committee did give some consideration to that over a number of meetings. We'll move to Carolyn Thomas. 

Does combining the HSG and the homeless prevention grant impact on the ring-fencing of that grant and what's been allocated to the HSG, or have you combined and saved that money to go into the HSG?

It doesn't impact the ring fence, no. The idea of it is to just take away the bureaucracy around which grant you have to apply for and so on. They overlap hugely, and it's just, clearly, administratively easier to combine them.

I know you're aware of this, but we've been told that 67 per cent of service providers are looking at possibly handing in the contracts on homeless prevention, and 75 per cent of providers are working in a deficit. They're really worried about workforce as well, trying to retain the workforce, and the stress they're under as well. I've been meeting with RSLs across north Wales who've also been raising this with me, as well as Cymorth Cymru. There's the impact it's having also on domestic abuse, because that's rising as homelessness is rising, and that pressure of the cost of living as well. So, all that is so important, and this is so valued, this HSG funding. I know you're aware of it and you've fought for that flat cash settlement, but it's such a big, important thing. You mentioned, Minister, that you're looking at ways of making efficiencies in the housing support grant. So, could you provide a little bit more information regarding how that could happen?

We're looking at a whole range of things here. We're looking at joint commissioning between local authorities, a different way of commissioning that we're doing through the ending homelessness national advisory board. We still have the board up and running and working with us. We think there are better, longer lasting ways to commission the services. Some of the things that we drive with our cyclical funding arrangements are actually the very things that we're trying to eradicate—so, short-term employment, insecurity, people not able to understand what their income looks like two years from the point in time when they're employed, and so on. We're looking very seriously at trying to come away from that kind of short-term cyclical funding, trying to have longer term, more impactful contracts across local authorities, because we have a little bit of fragmentation where we have the same organisations working across the piece, but they're having to manage maybe five contracts with slightly different terms and conditions, which is more expensive to run, and so on. So, there's a whole series of things that we're having a look at to try and make that more efficient.

That doesn't take away from the fact that I absolutely recognise that what we should be able to do is put more money into that. It has not been possible to do that at the moment. We are genuinely having to look to see between draft and final budget whether we can squeeze some more money out of somewhere for it, and that's an ongoing conversation. I have met with the director of Cymorth myself, and officials have met with them a number of times. She's absolutely right, but I have, at the moment, no idea where I would be able to get that money from. As I say, we are genuinely looking across the piece to see whether there is anything that we can move around, reallocate or work with local authorities to sigl it about—a good Welsh word there—because we have to squeeze as much out of the system as possible. But there's no getting away from the fact that it's a problem. The retendering of services and how that affects organisations is something we're very concerned about. So, we will be looking with local authorities at what is happening at the end of contracts and how those contracts are being renewed—whether the full tendering process is essential, what the continuity of service provision might look like, a whole range of things of that sort. 

I've rolled all mine about the HSG into one big one there, so I've got the response. Do you want me to ask about housing supply? Was that my next one? 

No. If you're content with the—

Yes, I'm content with the response, Cadeirydd. Can I just add—? It does affect across portfolios, doesn't it—social services, health as well. But I am discovering that there are parts all over that are putting towards housing, so it isn't just working in silo as well. You're working across authorities, but I just wondered if there's something that can be done with health boards as well. 

A very good example of that, Carolyn, is that if you look at the housing policy budget, the allocation remains as it was last year at £1.4 million, but there's a £5 million apparent reduction in that line. That's because it's been moved to independent living across in social services, because that's more closely aligned with care and repair. So, they've been moved across. That is a very good example of the synergy. So, the housing—. I can never remember what that fund has started to be called now—housing with care, is that what it's called? It used to be called the HCF. I can't keep up with the shift in three-letter acronyms. It's the same fund. Housing with care, is that what it's called? 

Housing with care, and care funding. 

Housing and care. There we are. It was the HCF, for those of you who are struggling with the acronyms. Again, you'll see a MEG-to-MEG transfer there the other way, because that's combined, social services and housing. It's housing-based social services. It pays for things like supported living, children's homes, independent living for people with disabilities—a whole range of things that come out of it. 

Just to clarify, Minister, the housing with care fund sits within your MEG, but we have joint governance with social care colleagues, and that particular fund operates through the regional partnership boards in order to ensure that there's that join-up with health services. 

I think I'm right in saying—I'm happy to be correct here, Jamie—there's a MEG-to-MEG transfer the other way. That's the point I'm making. Because that fund sits in my budget, whereas we've transferred the other one—. So, tracing housing spend across the Government is a bit more complicated than just looking down the lines in my MEG. That's the point I was trying to make, really—rather poorly, I agree. 

And that funding is used for enhanced care provision and things like that, is it?

HCF funds accommodation-led service provision that helps relieve pressure on health and social care. Extra care can also be funded through the social housing grant, but residential provision for young people with complex needs, for example, in order to facilitate them not being placed out of county, and those kinds of very specialist provisions.

Very recently I went and opened provision here in Cardiff, which was a series of independent living flats, but with warden-controlled areas, shared social spaces and integrated social care arrangements, for example. That was paid for out of that fund. That's a very good example of it.

I guess what I'm trying to say is it's more complicated, isn't it? You have to look across some of Julie Morgan's budget. Some of Lynne Neagle's budget will also be contributing to this, so some of the mental health budget very much contributes to the homelessness prevention budgets, for example. It's not just what you're looking at here. 

Thank you.

Sam. 

Just a bit further on the housing support grant, Minister, you were absolutely right at the start to point to the fact that your full MEG needs to be understood, a little bit at least, to appreciate the pressures elsewhere. And obviously one of the decisions you made was to shift £125 million into Transport for Wales. So can you understand from homelessness providers their concern at that type of decision being made, and then having a huge impact on perhaps the most vulnerable, in terms of people who are homeless, when we’re shifting £125 million within your MEG to support Transport for Wales and they’re having a cash-flat position?

That's capital. One of the really weird things about my MEG is there are enormous amounts of capital and tiny, tiny amounts of revenue, and that's been one of the most difficult things to sort out across the MEG. Jamie, I can never remember the exact percentages. 

I can explain. In terms of capital, the climate change MEG has approximately 60 per cent of the Welsh Government capital budget, but in terms of revenue it's about 4.8 per cent. 

There are other ways in which that capital could be used to mitigate some of the issues and risks that are being presented within homelessness services, aren't there?

I suppose the answer to that is 'yes', but we think it's also very important to keep the railways running, and that capital is absolutely essential to keeping the core Valleys lines programme running, for example. There are choices to be made in these things, aren't there? So, very difficult decisions have had to be made, I have to say, not just in this year in this MEG—this has been happening in this MEG since it was formed, because we've had a whole series of issues around funding rail and bus services, for example. Again, bus services support essential social services in the area, and so on. All of those things are in the same MEG. There are lots of synergies out of that. It's a very good thing that we have all of those levers for many of the things that we do, but yes, sometimes it means that there are difficult choices. I don't think, though, that that capital would have made any real difference to the housing support grant. That's definitely revenue-funded provision that we've got there. 

I appreciate others need to perhaps jump in as well, Chair, but—

Continue if you want to, Sam. 

There are, obviously, ways in which capital can be used, not specific to the housing support grant, but to deal with some of the pressures that housing support grant-type funding also deals with—I guess that's the point I'm trying to make. I'm not sure if Carolyn touched on it, but we've been made aware of possible contracts being handed back by providers who are in receipt of the housing support grant, and I just wonder whether you have an idea of the scale of that risk and the potential impact of that risk if people just either don't continue with contracts, hand contracts back or just walk away from that. Do you have a feel for what that scale is like at the moment?

I'm not—. Go on, Sarah.

We have dialogue with Cymorth Cymru, so we talk to them about the information and the reports that they've done in terms of what evidence is coming through to the sector, in terms of the potential for organisations to hand back contracts, but I think it's important, in terms of looking at that, that that evidence measures how likely it is that providers will hand back contracts. It's not definitive, and I think that there are lots of different things that are going to impact on how that's managed and how local authorities—as well as through commissioned services and through HSG, but also in terms of how those resources are prioritised across their revenue support grant as well—are able to support services into the next financial year. So, there's a lot of variables. We continue to have the conversations with Cymorth, and it is a risk, absolutely. You know, as the Minister has recognised, the reality of a cash-flat budget means that it does put considerable pressure on services. But, we're having the conversations at the moment in terms of how we can help to try to mitigate some of those risks, including looking at conversations around prioritisation, potentially, of services, if resources are not available and services have to be refocused, then, in terms of particular client groups or whatever. So, those conversations are ongoing with the sector.

Of course, there's a moral dilemma here, isn't there, as well, because we all, around this table, and as a Government, in the Chamber stand up and say that everybody should be in receipt of things like the national living wage, but when the funding seems unable to enable that to happen, it's quite a difficult moral position to be in, I expect. I don't know how you'd want to react to that, Minister. 

You're absolutely right. I'm not going to hide away from that. I'd very much like to be able to pay the real living wage to everybody who works in homelessness prevention services. These are very skilled individuals doing a very difficult job in very difficult circumstances. They absolutely deserve to be paid that. Our problem is that in order to do that, like many of the choices that we've got with a budget that's so constrained, you'd have fewer of them—very considerably fewer of them—and then you go back through the same loop we've just been discussing, don't you?

So, we are very much looking to see how we can raise the pay rates for some of the hardest working, most dedicated staff I've ever met in all my life—I mean, absolutely awesome people—who are out in all weathers contacting people who are rough-sleeping, earning their trust and getting them into services where nobody else has managed to do so. These are the people we're talking about—really hard work. Then, there's a problem, isn't there, because as soon as you raise the front-line workers'—the lowest paid at the moment—salaries, then, obviously, you have to raise the other salaries commensurately because you're asking people to take on a lot of responsibility and so on, so the whole thing becomes more expensive. You know, I'm not arguing with you that it shouldn't be more expensive. The problem is that as soon as it's more expensive, we go back into the same conversation, and I just have not been able to find sufficient money to make sure that that can happen without the services being impacted. There's no point in hiding from that—we haven't been able to find that money. We are still trying very hard to see what we can do to help that, but I have not come here today to tell you that Cymorth is not telling you the truth; they absolutely are.

Thank you. Thanks, Chair.

Okay, Sam. We move on to Jayne Bryant—Jayne.

Diolch, Cadeirydd, and good afternoon, Minister. I want to go on to talk about another three-word grant, which is the housing finance grant. Perhaps you can explain the rationale behind that £9 million revenue cut and, perhaps, outline some of the impact that you think that will have.

Okay, so, the finance grant budget remains at £13 million, and it's for contractual commitments to registered social landlords to support SHG, as we call it—the social housing grant. The budget line is offset by a £9 million income line from the Development Bank of Wales. So, it's a little bit, again, more complicated, I'm afraid, than the single line. This is about investing in building new housing, basically. This is the money that supports registered social landlords to build the new housing that we need and the intervention rates that come for social housing grants. We've got a lot of problems with the intervention rates. We get about four houses per £1 million now as a result of the various inflationary increases that we've had, where we were getting somewhere between five and seven houses for that £1 million. It's been getting smaller the whole time I've been in this portfolio. So, this budget is what supports that programme, Jayne, in order to keep RSLs able to build. They obviously use their income streams, their rental streams, to make up the programme—this is not a 100 per cent funded programme, or not for very many. I don't think we do any 100 per cent funded, do we? No. So, the budget is there to support that build.

Thank you, Minister. You've already touched on the transitional accommodation capital programme, but perhaps you can say a little bit more specifically about that. Obviously, you mentioned the allocation in the budget for 2024-25, but perhaps you can talk a bit about your ambition for that programme as well.

Yes. So, we haven't got a specific budget line for that in the next financial year, but we have asked partners to come forward with their proposals anyway, because, traditionally, this part of my portfolio across the Government has been the part of the portfolio that spends the capital where nobody else can. So, the Government has worked very hard this year right across the piece to over-programme its capital budget to make sure that we do spend it out, but, nevertheless, we stand ready, as we always do at this time of year, to suddenly be told that programmes cannot spend out their capital, and we always have shovel-ready programmes ready to go, and this programme is a very, very fine example of that. So, we've asked local authorities to have lined-up programmes ready to go. This programme covers acquisition of properties, remodelling of existing properties, converting buildings into good-quality accommodation and innovative uses of what's called 'modern methods of construction'—we're going to have to find some other terminology for that when it's no longer 'modern' methods of construction; 'modular' methods of construction, perhaps. So, this is the 'meanwhile use'. I know, Jayne, you've seen some of it and I think the committee has seen other parts of it as well. So, this is where we have a site that's going for planning, longer term, it doesn't yet have planning consent for the permanent build-out, but we can put a 'meanwhile use' on there of very, very good-quality modular accommodation, where people can live while the site gets planning consent and then while it's built out. There's an excellent example of this, if the committee wanted to go and have a look at it, behind IKEA by the gasworks site, which is an excellent example of it happening. So, this is the fund that pays for that programme.

Thank you, Minister. How will the challenging budget affect the way in which the land division manages land within its portfolio? Will there be sales of land and will this affect the availability of land for affordable housing in the longer term?

We've managed to protect the budget again for land division, as Emma alluded to earlier. That's because we have 27 sites that could deliver around 6,000 homes on exemplar sites. So, we're very keen to make sure that we use Welsh Government land to show people what can be done—what can be developed in a way that gives you a decent return on your money, but also really excellent mixed-use developments, mixed-tenure developments, as well. We only sell land—Emma has already said this, I think, Jayne—to developers where that would deliver our site. We usually go into what's called a 'development agreement' and so we keep part ownership of the site in order to be able to control what we're doing. We have different models of doing that on different sites, but it wouldn't be a cash receipt, in that sense; it would be part of the housing development programme. So, the short answer to your question, I suppose, is that it doesn't affect it, because we've managed to protect it. And we've done that because, without it, we cannot deliver the 20,000 social homes for rent that we've committed to.

Thank you. Diolch, Cadeirydd.

Okay. Diolch yn fawr, Jayne. Joel James.

Thank you, Chair. I just wonder if I could ask a specific question about the statement last year when you mentioned Help to Stay Wales. You launched a programme there for mortgage support, and I know that there's been a lot of coverage lately about mortgage prisoners, people who are on high-rated mortgages and they can't leave because other lenders are refusing to sell to them. I was just wondering what specific action can, or if the Welsh Government is looking to, deal with that, really, if that's possible.

Help to Stay is for people coming off fixed-term rates who are suddenly facing enormous interest rate hikes and who would, otherwise, become homeless, and you heard me earlier saying how expensive that is in human terms as well as in financial terms. It's a great deal cheaper to the public purse and, of course, for the human beings involved if we assist them with the mortgage by the Help to Stay funding. That's what that's for.

That's a slightly different scenario to the one you're talking about where somebody wants to move, but the cost of the mortgage is—. They're in negative equity, effectively—that's what you're saying there. That's a much more difficult thing to do, because we wouldn't be able to buy the house off them at above market rate, and the problem you've got there is that the house at market rate is now no longer worth the loan that they've got on it, and that's a real problem of catch-22s. We try very hard to help people in those circumstances, but it's very, very difficult to use public money—we wouldn't be able to buy it at higher than market value in order to get somebody out of that, for obvious reasons. So, that's a much more difficult problem. In order to not get people into that position, that's why we're trying to get the Help to Stay product rolled out as fast as possible. It's been very popular.

Perfect. Thank you for that, Minister. I suppose the other questions I want to—. Sorry, it's the feedback, so when I'm speaking, I can hear myself, and I don't really like how I sound. [Laughter.] It's a bit discombobulating.

I just want to talk about building safety. There have been significant drops in both the revenue and capital allocations for building safety compared with the indicative figures back in February, and I was just wondering what's changed since then, if possible, and then if changing the budget profile will have impacts on expected timings for any of the remedial works.

This is what we call re-profiling, and it doesn't really mean anything outside of public sector organisations, I'm afraid. So, effectively, what's happening there, Joel, is that the scale at which we're able to intervene in those buildings is not as we thought it would be for a various series of complicated reasons. You'll know that we now have a route to remediation for every building in Wales. We have various financial programmes in place to assist that. We expect the big builders to do it at their own expense, so our Government programmes wouldn't reflect the remediation being done by the builders themselves, obviously. We're doing the social buildings, what are called 'orphan buildings'—so, buildings with no discernible person to go after for the money—and we're also assisting with some of the smaller developers, because, as I think I explained in my statement, we want developers to pay for the mistakes that they made in the past, but we don't want to drive them out of business, putting people out of work and so on. So, we're trying to calibrate that so that they pay their fair share, but we don't drive the small firm out of business. Many of them have only ever developed one of these buildings; we're not talking the big developments here. Some of the so-called small developers are small in the sense that they've only developed one building in Wales but are actually huge national firms, so we do expect them to pay up, just to be clear, but we have small, local builders who we don't want to drive out of business as a result of this, but who will be asked to make a contribution to that. So, the budget covers a range of those things.

And then, obviously, we just can't do all of those buildings at once. We have neither the workforce nor the supply chain to do that. So, this is about making sure that the budget spend reflects over the years when those buildings are likely to go into remediation and when the supply chains will be available and the specialist workforce will be available. So, we've recalibrated it on a number of occasions, and this is our last attempt at doing so. That budget will go over way more than next year. You're talking about the next three to five years, really, for that. I don't want everyone who is listening to this who lives in one of those flats to think, 'Oh, dear God, I'm not going to get my building done for five years.' I'm not necessarily saying that; I'm just saying that we know that the profile at the moment is not right. So, as we work with the developers to bring those buildings forward, we'll be able to give people a better understanding of where they are in the programme. So, I don't want to cause mass despondency by saying that, but, nevertheless, we're trying to be realistic about what the likely spend out the door is.

With that in mind, then, what sort of engagement has happened with those home owners about the budget proposals and what they can expect?

We’ve got a stakeholder group that meets very regularly. It last met Monday of this week, I think. Is that right?

No, I don't think it was Monday of this week, but—

This week, I think it was, anyway.

But it meets very regularly.

Very regularly. I’m meeting the developers on Monday next week to talk to them about where they are—with the programmes of big developers, that is. I’m also meeting the managing agents next week. I meet the stakeholder group myself, often. I think one of my other assistant directors briefly appeared on screen. She’s disappeared again now. Andrea Street. She is the deputy director for this area. Her and her team meet very regularly with all the stakeholders. I myself, Joel, have met with a number of groups of individuals from specific buildings, so I’ve met with the Celestia group. I’ve met with a long list of people who have—. Because there’s no one-size-fits-all for this, so each building has a specific set of difficulties. So, we’ve met with the individual buildings, trying to understand where we are with that, and I’m afraid there are as many solutions and difficulties are there are buildings. Each one really is individual.

So, going back to the budget situation, what we’ve tried to do is calibrate it, so we always say to the centre, 'Look, we’re not going to be able to spend this money this year, but please can we have first dibs on it when it’s being divvied up for the year after?' And that's euphemistically described as ‘reprofiling’.

One thing I'd add is that it’s important to recognise that the changes in budget profile don’t have any impact on the progress of an individual building’s route to remediation, because money will go out the door on works completed or partially completed. There is no inference that should be drawn here that in any way, shape or form changing the profile of the budget will change the pace at which we work with individual responsible owners to get that remediation programme going. But obviously, as the Minister says, by the time you’ve got the detailed plan of the works required, you go to procurement, you appoint somebody and the work commences, but we wouldn’t want anybody to think—

And obviously, we pay in arrears on staged payments. We don’t put the money out the door first, so that’s where the profiling’s coming in, as we understand what the contracts look like and so on.

Okay, Joel. Thank you very much. Adam Price.

Yes, so that’s a very interesting point, isn’t it? So, we do absolutely have to do a balance of that, of course, because we’re basically using the rental income of current tenants to build the houses of the future. So, in talking to TPAS and other tenants’ organisations, we’re very keen to ensure that the tenants who are currently paying their rent are getting the services that they require and the decarbonisation they want for their rent, as well as understanding that their rent is being used to support borrowing and so on, to build the new houses, and it’s a very important balance. So, we work very carefully with tenants’ associations and with the registered social landlords and councils to try and strike that balance. It’s how we came to the conclusion on the rent settlement for this year. So, we’d consulted widely about what that might look like and what the impact of that would be on people self-paying, for example. You know that large numbers of people in social housing get some kind of income support for that, but we do have a substantial number—20, 25 per cent—of people who pay their own rent, and so affordability is a really important part of that. So, this is the balance between us making sure that the current housing stock is fit for those people to inhabit, and that they’re getting a good return for their rent, if you like, and also that it’s an investment in the future. So, we think we’ve hit the right balance there with the decarbonisation programme, the fuel efficiency programmes and the repair and maintenance programmes.

I have to say, Chair—I mean, this is nothing to do with the budget, really, but I think the committee will be interested—we have just written out again and reiterated the whole thing about damp and mould, so I really hope that that would never happen in Wales. So, we've just, once again, absolutely underlined—. Emma's written out again to say, 'Can we be absolutely certain that, here in Wales, we do not have people living in those kinds of conditions?' It's already part of the Welsh housing quality standard, but given the recent issues in some of the authorities—it's just appalling, isn't it—we just wanted to really underline that people have a duty and a responsibility to make sure that the living conditions of people in social housing are as they ought to be. So, that is the balance that we're striking.

We've just announced the most recent iteration of the Welsh housing quality standard—that's to get us to decarbonisation. The first part of that is the whole housing stock assessment. So, we're expecting people to take one to three years. There's some dispute in the industry about how long it will take, and I spoke at the decarbonisation conference recently, where a large number of people thought it shouldn’t take three years, but, anyway, one to three years to do a whole housing stock assessment, so that we can then properly calibrate what it will take to get from where we are now to the new iteration as well. And then we can calibrate what the rental stream incomes need to look like and what our grant aid needs to look like to get there. I think it’s fair to say that, given the current settlement, it will take us longer to get there now than we would have liked, but that’s not to say that we won’t be on the journey to do it.

Yes, that was a very important consideration for us. I was very keen indeed to make sure that we weren’t causing people to be in unaffordable housing. Also, as part of the social rent settlement with our social housing providers, councils and RSLs, we have a series of undertakings from them: so, no eviction into homelessness under any circumstances whatsoever. That’s not to say that somebody can’t be moved from their present accommodation somewhere else, because of whatever circumstances, but no eviction into homelessness, including for financial hardship or rent arrears.

So, that means that there’s an obligation on those landlords to work with anyone who gets into rent difficulty, and we have enabled a whole series of intervention measures to do that. I was very keen to do that because, as I said, we have somewhere around 20 to 25 per cent of people who are self-payers. I’m doing this because we don’t actually know the figure. It’s a very difficult thing to track actually, but that’s a good estimate—somewhere around a quarter of tenants are self-paying. We were very well aware of the inflationary cycle that we were then in. We knew that the social landlords—we knew what their requirement to be able to keep the build programme going was. So, obviously, it’s important for them to be able to do that as well, and it was about calibrating that.

But can I just say, I’ve been very clear indeed that it’s a ceiling; it’s not a target? We do not expect people to put the rent up automatically by 6.7 per cent. And we are being very vigilant about what the rent increases look like and why, and what work has been done in each individual authority or RSL to come to the conclusion on the rent settlement. There’s a whole load of other work to be done here. There’s a very complicated set of things around how rents are set. We used to have bandings, for example, and we wanted people to try and get into the banding. We’ve come away from that now, but you’ve still got to make sure that it’s equitable across an area, that it reflects the average rent in the area, and all that kind of thing. So, it’s not quite as simple as just everybody putting a 6.7 per cent rent increase on. And I don’t expect all of them to do so. Some of them just don’t need to do that, given their financial circumstances. So, the team monitor that very carefully, and we had quite a lot of intensive, individual meetings with them to make sure that we understand the affordability, and that they’ve done extensive tenant consultation as well, actually, Adam, to make sure that they are taking that into account.

Yes, so, you've heard me say it, haven't you, lots of times, that what we're trying to do is trial it out, and that's happily going along. We've got quite a lot of good information now about what does work in various houses, and so on, as part of where we've gone with the Welsh housing quality standard. So, we've been having conversations with the Development Bank of Wales about how we might start a loan programme. We've also discussed with a number of lenders who work very closely with us here in Wales—building societies and banks, and so on, who are very helpful in terms of helping us with market analysis and what might be available to people to assist people with loans, or to assist people with upfront funding. So, we know that a large number of people in the private rented sector, for example, would really struggle to upgrade the house, so that's what Leasing Scheme Wales is for. So, we're very much pushing—you've heard me say it many times in the Chamber, haven't you—'Give us your house and we'll help you to do that. We'll give you an income stream from it, but we'll help you to bring that house to standard.'

For the private rented sector, we haven't yet got a wealth of the things that I would very much like to see put in place. But we've got a better understanding of the advice necessary and, frankly, the workforce necessary to be able to do it, because getting a skilled workforce and supply chains, even if you know what your house requires, is not straightforward. Then we would want to work on equity products. So, basically, products that allow the Government to help you pay for it upfront and take a lien or a land charge on your house, for example, in order to do it, because we know a large number of people in the private sector are asset rich but cash poor, so they can't actually afford the investment. And then, frankly, the older you are, the less likely you are to make that investment, because it's not going to pay back in the amount of time you're going to live in your house. So, we've got to do something to decarbonise those houses. So, putting attractive products through the private sector onto the market, where we assist them to take an equity share or something of the sort in order to do that, will be where we go next. But we're just at the beginning of those programmes. 

Chris Joffe, who has been working with us on this, who chaired the original piece of work for us and who I've met with very regularly and my team meet with all the time, is working with us on a range of things that we think might make it attractive for owner-occupiers to start to decarbonise, and I'm very keen to do that. But, for us, we're really concentrating on trying to get the social sector and the private rented sector into the best condition it can be. 

On the private rented sector, we are very well aware that private rented sector homes are often the worst that there are, and that's for a combination of reasons, isn't it? So, again, trying to work with local authorities to try to get their private rented sector teams back up and running—many of them have lost them altogether—and to try to get a better grip on what the private rented sector standards look like, and so on, is one of the things that we really need to do as part of this programme. That's why we're so keen on pushing Leasing Scheme Wales, to be honest.

Yes, yes, absolutely. So, this is very much part of the care and repair core working that we do. We're very, very keen to do this sort of adaptation, both just adaptation to be able to live in your home, but actually adaptation to make your home a healthier place to live, especially if you have long-term health issues. That's definitely one of the things we're very interested in doing. You know, it is self-evident to me that there is a link between having a warm, accessible house and being in good health. Your constituent—I'm afraid I don't have their permission to broadcast who they are, but you'll know the site because it was a filling station beforehand, and it's got a very lovely—. It's a little cul-de-sac of houses and they live in the house right by the churchyard. There's a plum tree hanging over into their garden, which the young man in question was very keen on when I met him. And he had gone from having a large number of inhalers all the time to not using one. You know, it was really emotional, the conversation with them, because, first off, they couldn't believe that they were having that house allocated to them, because it was lovely and they thought it was a private sector development, and they were very effusive to me about the fact that they'd actually been quite rude about it: 'Posh people moving in here and, you know, we're living in—.' And then, being absolutely astonished to find that not only was it social housing, but they were being offered one of them by one of the registered social landlords that built it, and then just the conversation with them about the reduction in their bills, because it was hugely energy efficient, and the fact that it was warm, the fact that, in the summer, it was airy, the fact that it was a quiet, lovely place to live, and the improvement in health of their son was just extraordinary. And if that doesn't make everything we've been doing worth while, then I don't know what does. So, that's what drives it, isn't it, to try and get that for everyone. And then, a programme that allows us to push that out into the private rented sector and drive those standards up by any means possible is one of the things we're most interested in.

You may know that the UK Government had intended to put a minimum energy performance certificate rating on private rented, which they've pulled back from now. Counterintuitively, I'm quite glad they've pulled back from that, because there wasn't any funding with it and we were very afraid that people would just pull out of the sector altogether, and, actually, we rely very heavily on the private rented sector, particularly in city centres, for bigger houses where multigenerational families live. In my constituency, a very large number of the multigenerational families that live in the city centre live in private rented. But figuring out a way to drive that standard up whilst not making it an unaffordable place to live is one of the big conundrums of the age, and that's why we've been pushing Leasing Scheme Wales quite so heavily, to try and make sure that there's a route to remediation for those houses without displacing the families that are in them, because that would not be good.

So, yes, trying to calibrate that in that way, and that's why we've been talking to the Development Bank of Wales, it's why we've got Leasing Scheme Wales in place, it's why we've got some of the other 'empty property' grants. Empty property grants can be used to bring properties that are being lived in but shouldn't be lived in up to standard as well; it's not necessarily that there's no-one living there. We have got people living in some pretty awful conditions, really. So, you know, those grants are available for upgrade, not just for voids, although they are mostly used for voids, to be fair. And working with the sector to try and figure out methodologies for doing that that don't then rack the rent up is one of the things, and you'll know we're together on the co-operation agreement for the Green Paper and so on, to try and work out methodologies for doing just that.

Yes, absolutely. So, the whole point of that funding is, you know, it reduces falls, it reduces pressure on services, it enables people to live more independently for much longer, and, of course, part of that has to be that the house is habitable, right? So, it's not just about being able to get from the living-room to the kitchen; it's about being able to get there without freezing to death. So, you know, that is very much part of the adaptation process. We all know that the vast majority of people want to stay in their own home. That's where they're best off, it's where they're happiest, but making sure that that home isn't unsafe for them and is a place that, you know, is a home for life, is one of the absolute essentials of that scheme. I have to say, I do think the care and repair agencies have done a very good job. You'll know that we've changed the scheme quite a lot, Chair. So, we've taken the means-tested benefits out of the small and medium-sized grants, for example, because we found that people just weren't coming forward. Even where they wouldn't have had to pay, the fear of having to pay was a real barrier. So, that's made a big difference. There is still a contribution for the big adaptions where that's necessary, for obvious reasons, but, for the small ones—the grippers, the handrails, and the things of that sort—there's no means-tested benefit for that. And we have kept an enormous number of people in their own homes as a result of that. 

Okay, diolch yn fawr, Adam. A final question from me, Minister, about legislation, because there are a number of items of legislation that I know you'd like to take forward, and are planned to be taken forward, but the housing policy revenue allocation is being reduced by more than £5 million. And it's that allocation that would fund the legislation, as I understand it. So, are you confident that you'll be able to take legislation forward as planned?

That's the £5 million that's being moved, Chair—

Oh, sorry. Is that what you meant—

—from the fund to the care and repair. 

Right. 

So, the £1.4 million that's in the pot is still there. 

And that's sufficient for what you have planned in terms of legislation.

Well, it is so far, but, as I said to you, there's a large piece of work going on to make sure that we understand fully the cost implications of all of it. This is an invest-to-save proposition as well—I just want to really emphasise that. So, this Bill is not intended to just jack up the amount of money we've got to spend; we genuinely think it is a spend to save. So, people who are displaced from their homes are very, very expensive in human and financial terms. Preventing that from happening would save an enormous amount of money to the public purse. So, it is about what does the upfront of spend look like to get to a position where you're saving a great deal of money. But, yes, with the caveat that we're in the process—and it's not for next year, remember; the Bill's the year after—of working through that, we're happy that that's currently adequate to its task.

Okay, thank you very much. Thank you, Minister, for giving evidence—

Pleasure.