Pwyllgor yr Economi, Seilwaith a Sgiliau - Y Bumed Senedd

Economy, Infrastructure and Skills Committee - Fifth Senedd

15/11/2017

Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

Adam Price
David J. Rowlands
Hefin David
Lee Waters Yn dirprwyo ar ran Hannah Blythyn
Substitute for Hannah Blythyn
Mark Isherwood
Russell George Cadeirydd y Pwyllgor
Committee Chair
Vikki Howells

Y rhai eraill a oedd yn bresennol

Others in Attendance

Dean Medcraft Cyfarwyddwr Cyllid a Gweithrediadau, Llywodraeth Cymru
Director, Finance and Operations, Welsh Government
Eluned Morgan Gweinidog y Gymraeg a Dysgu Gydol Oes
Minister for Welsh Language and Lifelong Learning
Huw Morris Cyfarwyddwr Sgiliau, Addysg Uwch a Dysgu Gydol Oes, Llywodraeth Cymru
Director Skills, Higher Education and Lifelong Learning, Welsh Government
Julie James Arweinydd y Tŷ a’r Prif Chwip
Leader of the House and Chief Whip
Simon Jones Cyfarwyddwr ar gyfer Seilwaith yr Economi, Llywodraeth Cymru
Director for Economic Infrastructure, Welsh Government

Swyddogion y Senedd a oedd yn bresennol

Senedd Officials in Attendance

Gareth Price Clerc
Clerk
Robert Lloyd-Williams Dirprwy Glerc
Deputy Clerk
Siân Hughes Ymchwilydd
Researcher

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

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

Dechreuodd y cyfarfod am 10:00.

The meeting began at 10:00.

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

Croeso, pawb. I'd like to welcome you all to committee this morning. I move to item 1 and I congratulate Hannah Blythyn and Jeremy Miles on their appointments to Government. Lee Waters is here as a substitute this morning. Just to outline today's session, we will be going into private for item 3, if Members agree, and then at 10.15 we'll be back into public session where Julie James and Eluned Morgan will be before us with regard to budget scrutiny. There's been a slight change to the agenda and Cabinet Secretary Ken Skates is now likely to be with us next week, rather than this week, for budget scrutiny. 

2. Cynnig o dan Reol Sefydlog 17.42 i benderfynu gwahardd y cyhoedd o'r cyfarfod ar gyfer eitem agenda 3
2. Motion under Standing Order 17.42 to resolve to exclude the public from item 3

Cynnig:

bod y pwyllgor yn penderfynu gwahardd y cyhoedd o'r cyfarfod ar gyfer eitem agenda 3 yn unol â Rheol Sefydlog 17.42(vi).

Motion:

that the committee resolves to exclude the public from item 3 in accordance with Standing Order 17.42(vi).

Cynigiwyd y cynnig.

Motion moved.

So, if I move to item 2, and under Standing Order 17.42 can I resolve to exclude the public for item 3? Are Members content with that? Thank you.

Derbyniwyd y cynnig.

Daeth rhan gyhoeddus y cyfarfod i ben am 10:01.

Motion agreed.

The public part of the meeting ended at 10:01.

10:10

Ailymgynullodd y pwyllgor yn gyhoeddus am 10:14.

The committee reconvened in public at 10:14.

4. Gwaith Craffu ar Gyllideb Ddrafft Llywodraeth Cymru ar gyfer 2018-19—Sgiliau a Gwyddoniaeth
4. Welsh Government Draft Budget 2018-19—Skills and Science

I move to item 4, which is the Welsh Government draft budget 2018-19, and I'd like to welcome this morning Julie James AM, and Eluned Morgan AM. I'd be grateful if you could just, for the record, introduce yourselves and your new titles, and your officials also. 

10:15

Good morning, I'm Julie James. I'm Leader of the House and Chief Whip.

I'm Eluned Morgan. I'm the new Minister for Welsh Language and Lifelong Learning.

I'm Dean Medcraft, director of the finance, economy, skills and natural resources group.

I'm Simon Jones, director of economic infrastructure.

I'm Huw Morris. I'm director for skills, higher education and lifelong learning.

Lovely, thank you. Can I ask, first of all, with regard to the Well-being of Future Generations (Wales) Act 2015, how has that influenced policy in your portfolio area? I'm looking at both of you.

It's had a profound influence on the way that we look at the way that we support particular things, and it's influenced the entire way that we do policy planning, really. So, before we move any policy forward now, we consider all of the headings in the well-being of future generations Act, and it's getting extremely well embedded.

So, for example, we have completely changed the way that we do infrastructure development for superfast in terms of the business exploitation programme, with a view to pushing forward the goals in the well-being of future generations Act. So, it's become more than an infrastructure project. As you know, we've been doing the business exploitation that goes alongside that and we're starting to look at it as a rural regeneration project in the second phase, and that's as a direct result of trying to line ourselves up with the goals.

I think what is clear is that we want to remain focused on, in particular, young people. If you lose young people at the beginning of the process of skills development, then the evidence suggests that actually it's more difficult to get them back engaged in the workplace later. But in terms of skills development, we are acutely aware of the changing nature of the employment situation—the move towards automation and all of that now is being considered and, of course, all of those things have an impact in terms of future generations. We need to make sure that we're preparing our current generations for what is coming in the future, and, in terms of the jobs that we're training people for today, we need to make sure that we're flexible enough so that they can adapt to the future workplace.

Under the obligations of the Act, is there anything that is going to incur extra cost that you've encountered over the past 12 months?

I wouldn't say it's an extra cost. We've moved some costs. So, for example, the way that we've worked with universities has changed in some instances. But it's not an extra cost, no; it's a different way of looking at it, effectively. So, if you were to start with a zero-base budget and build it up, then you build the budget up in a different way. It doesn't put an increased cost into it. It's a different way of thinking, effectively. So, that's how we've approached it. Across the board really, you're not talking about additional cost; it's a different approach to policy—so, for example, in working with a university and the way that we approach the overall way that we work with a university in terms of commercialisation, for example, or the way that we talk about exploiting a public sector arrangement. So, if you think of the PSBA, for example, we've been having long conversations about how we might get extra value out of the public service broadband—sorry, I'm using acronyms all over the place. So, previously we've thought of that as just a pipe into the organisation that allows them to connect to broadband, but now we've started to think very much in terms of what other community use might be got out of that and what other future generation aims and goals we might be able to facilitate using that infrastructure, which we hitherto hadn't really given much thought; we just thought of it as a straightforward infrastructure project.

Thank you. As you know, continued investment in science, innovation and life sciences is a Welsh Government commitment in 'Taking Wales Forward'. In your evidence, you state:

'The Life Sciences sector forms part of the wider Sectors Action where budgets have been reprioritised and aligned to support capacity building and investment targeted to maximise the budget available.'

That is a candidate, if ever there was one, for a plain English award for gobbledygook, dare I say. Can you explain what that means in lay person's terms?

Yes. So, for example, one of the things that we've done in life sciences is end the proof-of-concept bridging fund. We decided to evaluate the programme before we took it forward and then, in future, we'll have a look to see what the evalution looks like with a view to rolling it out. I'm not very keen on us running continuous pilots and then not taking the time to evaluate them and just continuing them forward. So, that's a very good example with life sciences.

Because we've stopped the fund at the moment, it's contributed to the overall savings in the budget, but it doesn't mean we can't relook at it in future years, once we've got the evaluation, to restart it up once we've had a good look to see whether it actually achieved any of the goals that we set out for it. That's a different way of looking at it. We have hitherto kept pilots running during the evaluation phase. I think this is a better way of approaching it.

10:20

Yes, I think this whole issue about how you treat pilots and how you regard them—what's the point of calling something a pilot if you aren't going to evaluate it at the end and then look to see whether it could be extended or not? We have tended in the past to run pilots and then keep them going. If you've got some evaluation criteria in place—. So, if the pilot's a long pilot, over three years, for example, you might be able to have evaluation from years one and two to do that. But, with lots of pilots, actually, that doesn't work. So, I do think it's a different way of approaching some of these things.

We also have, in the past, had good pilots but we failed to look at them properly in terms of whether they are good in their own area—so, they're place based, they're very located in their place—whether they can be scaled or whether the place is essential to them. So, whether a pilot that's successful in the middle of Swansea could be picked up and put down in Wrexham and have the similar effect. There's lots of other evaluative things that we need to look at, and the well-being of future generations Act has forced us into those ways of thinking, which of course is the purpose of the Act.

Capital funding in 2017-18 is £9.7 million. We understand that capital funding will be, in future, £3.7 million over three years. Revenue funding is reduced by £696,000. How will, in your view, that impact on life sciences in Wales?

That's a very technical issue, which I'm going to ask our technical officer to deal with, if you don't mind, Dean.

Thank you. The reason for the reduction in capital is because significant, large capital projects have now been delivered. So, the advanced therapeutic medicinal products facility down in Bridgend is nearly there, basically, and the Welsh Wound Innovation Centre as well. So, the big capital hump is over with. So, the profile now is in line with programmes going forward. So, that's the reason for going from the £9 million to the £3 million, basically, over the next few years. So, we've delivered on those programmes.

Okay. Again, you've referred to realignment of projects in line with delivery requirements. You've given us some examples. Are there any other realignments that are reflected in—

One of the biggest developments in life sciences is the repurposing of the life sciences hub. We're very pleased with the way that that's going so far. The idea was to allow life sciences developments to be commercialised in Wales in line with NHS requirements. The committee will remember that I've spoken on a number of occasions about the difficulty of NHS procurement and what happens to companies in which we've invested who then struggle with the NHS procurement arrangements. So, the repurposing of the hub has been very much to line those programmes up. That's not to say that we wouldn't do innovative life sciences research that the NHS was not yet contemplating, but that we line it up to make sure that, if it is something the NHS wants to do, the path into NHS implementation is eased. That hasn't always been the case in the past. That's been an ongoing piece of work for several years and we've very pleased with the way it's going.

And finally from me, in terms of the processes you've used to reprioritise the funding, in the context of the well-being of future generations Act, which you've already referred to, how are you futureproofing against what happened over what used to be called programme bending, for instance in the context of Communities First, which is essentially the same? It was designed to get different agencies and sectors to change the way they worked, to come together to focus on areas and issues, rather than follow their sectoral paths separately. It's effectively the same model. Are you conscious of that and protecting against it?

Yes, very much, and we've got a large number of models working across the Government that are designed to look exactly at that problem. I'll leave the new Minister for skills to talk about the employability programme. That's a very good example of that being taken forward, and there are a number of others. The idea is to make sure that programmes stay fit for purpose and we don't continue to invest simply because the programme exists and that we're able to put the evaluation criteria in place as early as possible to make sure that we don't get those outcomes. 

If I can turn to innovation and science, what effect will the change to the innovation budget have on the Welsh Government's priorities? And if you follow on again from the evaluation that we've been talking about a little earlier, how does the Welsh Government evaluate the outcomes of its funding for innovation projects?

10:25

So, we've got a number of different, really good examples. For example, we spent £10 million capital on the Menai science park, £3 million capital for the Egin development in Carmarthen and £300,000 revenue for the university of Saint David's SA1 partnership. Those are all examples of big-ticket items that the innovation budget has held for the Welsh Government. We do assess at each stage the merit of the application in the first place and then we have looked at output specs for that and a whole range of other measures. Obviously, we carefully evaluate whether the projects have met those criteria. We try to follow the European Union's Smart programme criteria as well. We have had some reductions in this budget but they tend to be because the big-ticket items are coming to a close.  

Are there any actual changes to the budget for science, because it's a little confusing, some of the words that are used, as to whether there is a change in the budget for 2017-18?

This is one of the areas that's no longer in my portfolio, Chair. It's one of the things I was saying to you earlier, so I'm going to ask the financial officer to deal with that.

One of the biggest reasons for the change in the revenue is that we've had to switch it from revenue to capital in line with Treasury guidance. That's why there's a £3.8 million reduction as well. So, there's a corresponding increase in capital then as a result of that. However, that's offset because some of the big-ticket items have now been delivered. But we've got enough money in there, I believe, to deliver the Smart programme.

I think there's a small change. There is a change of about £1 million over other priorities.

It's down. Fine. Do you think there's sufficient flexibility within the budget to meet the potential costs arising from the refreshed 'Science for Wales' strategy that you hope to—?

Yes, and we will discuss with the new chief scientific adviser—

Yes, indeed. And also we're in the process of recruiting a new chief scientific adviser and we're very hopeful that we'll be able to continue the Sêr Cymru funding into a further round because that's been hugely successful.

As you say, there's been a bit of a reallocation between revenue and capital for accounting purposes, so it's probably easier for scrutiny purposes to actually take the combined expenditure on science and innovation together. I've done that, and you are right, I think, in what you submit. Science spending, taking the two together, is about £250,000 less, I think, in the next financial year. If you look at innovation, your total revenue and capital allocation set out in your figures is about £17.5 million in 2017-18. In 2018-19, it goes down to £4.8 million. That is by no means an insignificant cut. That is, by my reckoning, is it not, a 78 per cent cut in the total? 

That's big-ticket items coming to fruition. That's the big capital items that I was talking about ending. 

Let's look at that for a second. So, about £10 million of that is in the revenue funding. The fact of the matter is that, in the co-operation between academia and business, there's about £11.7 million that goes down to £1.6 million. But in terms of understanding the relative importance, the priority the Welsh Government is giving to innovation, that's pretty shocking, isn't it? At a time when the UK Government has just put an extra £2 billion a year on average—the biggest increase in innovation funding since 1979—and the Welsh Government is cutting innovation funding by 78 per cent.

But it's because the capital funding is changing. There's nothing to stop us putting more capital bids in in the future, but these capital projects are finishing so they're no longer shown in the capital budgets, because they've completed basically.

So, if this committee were to recommend, for example, that we create in Wales a higher education innovation fund similar to the one available in England, so that we can create research and development and technology centres in our universities, is that a recommendation that you would consider?

10:30

Certainly, we'd consider it. One of the big issues is, of course, that this is tied up with the way that we're looking at the changes for the tertiary education authority in the education portfolio, which I know that this particular committee doesn't look at. A large number of these items will have to be looked at across the piece in light of the legislation that will come forward for that. I don't know, Huw, whether you want to make any comment on that.

You mentioned the increased expenditure by the UK Government for UKRI for research and innovation. That funding is equally available to institutions in Wales, so they can bid for that money.

Yes, but some of it requires match funding. I mentioned the lack of a higher education innovation fund in Wales, for example. That means that our institutions are disadvantaged because they haven't got the match funding available to draw down capital funding, for example, from some of the research councils.

The match funding doesn't have to be from a specified fund of that sort. Obviously, we'd be looking to support any innovation bids from our universities or, indeed, from any other sector of our economy.

But if it's not in your budget, how are you going to be able to provide that match funding?

We have pockets of money that are available for match funding across the Government. The whole point of working across the Government is that we can look at the best way of utilising some of that funding.

Can I just add also that that is a central focus of the Reid review of research and innovation, which is scheduled to be completed by the end of this year? It is looking at other sources of match funding, including the quality-related research funding that universities receive through the education MEG.

I understand the Reid review is fairly imminent—I think he's briefing in Cardiff this week—but why are you cutting the innovation fund when you're creating, supposedly, an innovation sub-committee, whatever it's going to be, within the new tertiary body? It's going to have no ability—no financial ability—from the very beginning.

No, I don't think we are. The reductions you're looking at are specific to capital coming to an end in the natural course of the programmes that were being funded.

That isn't the way we've approached it. If the committee wants to look at recommendations for that, we can certainly look at that, but that isn't the way we've approached it. At the moment, we bid into the central capital pots on a range of items. Because this particular capital programme has finished and has completed—and has been very successful, by the way—that doesn't mean to say that we can't do that in the future. It's just not shown in the budget because it's not currently there for those particular projects.

Thank you. You're obviously the Minister for digital. Your paper focuses entirely on ICT infrastructure action, so I just wondered, before I go into some of the detail of your proposals, whether or not there is activity within the department on service transformation—of using the infrastructure you're investing in to actually deliver change, rather than focusing just on the kit.

Yes, absolutely. There are three different elements to that. There's the public services transformation projects, which we're looking at. The public services Minister has also just changed, so we'll have to have conversations with the new Cabinet Secretary for that. We have conversations with the finance Minister around some of the transformational aspects internal to the Welsh Government—the way that, for example, we plan policy using data and some of the ways that we're actually looking actively at transforming the way we use data across policy planning across the Welsh Government. Also, we have been, with the previous Cabinet Secretary, looking with local government at the way they might transform service delivery and service planning using digital and data capabilities both. There's a huge agenda for the use of big data, for example, in policy planning.

The third aspect of that is economic transformation using digital and data techniques, both in terms of skills, which I'm sure the new Minister will want to add something about, but also in terms of business capability and business exploitation. The Cabinet Secretary for economy and infrastructure and I have been talking about the best way of getting—I can't remember the exact name of it—the data and digital group together across the economy to look at exploitation for economic purposes for private sector organisations, coupled with public sector investment to enable that. So, yes, there's quite a large agenda that goes with the infrastructure.

There is not very much budget allocated for that at the moment. We have concentrated on infrastructure roll-out. We're just turning to the exploitation phases of that, and in an earlier answer, as you heard, I was starting to talk about some of the transformational things we might do now the infrastructure is in place. So, for example, with the public sector broadband that we've rolled out to every public sector organisation in Wales—and I think I'm right in saying that every GP's office is now connected as well—what else can we do with that now that it's there? It's the next stage. We are still concentrating on infrastructure roll-out across Wales, because in some parts of Wales, as the Chair of this committee frequently likes to remind me, it's not as universal as we'd like it to be. But as that programme rolls out, for example, the business exploitation programme comes behind it, and we have really good reporting from businesses about transformational business practices—not just, you know, slight increases because they've digitalised some of their old paper systems.

10:35

So, do you anticipate that by this time next year you will have a plan in place and a budget allocated in order to carry out the service transformation, not just the infrastructure?

Yes, absolutely, and one of the things we need to do is look at ways of joining those three elements together in Wales—after all, we're only a small country—so that SMEs can take advantage of new public sector innovation in terms of the use of its data, for example. One of the things I know you're very interested in is, for example, how we can use big data that we hold to ease transport congestion—so, you know, real, live-time information coming from publicly sourced Wi-Fi systems to direct people in different ways on particular routes and all the rest of it. Those are very much where we're going with this agenda.

I was just going to add that we have actually invested £12 million already in an exploitation project to support SME businesses across Wales, so that's an ongoing programme of activity. And just to add to what the Minister was saying then about the use of data in a transport environment, I think there's a—. We've invested quite a lot of money in creating a traffic model for south-east Wales. Actually, there's potential to expand that for all of Wales so we can understand movements on public transport and the road network as well.

There are some other things to add to this as well, Chair, which we'd be very happy to come and have a session with the committee on, should you want us to, around how we organise data in Wales, for example, and how accessible it is. You may have heard me going on about open data standards and all the rest of it. It's a huge issue for us.

I'm sure we'll want to return to that, but I feel obliged to go back to the budget—sorry, I've sidetracked us. In terms of the budget, there does seem to be a not insignificant decrease in the amount of money that is allocated. I wonder if that's for the same reason as you've just outlined to Adam Price. But the ICT infrastructure capital allocation is down by nearly 40 per cent, and the ICT infrastructure revenue allocation is down by some 10 per cent. Can you explain why that is?

It's the beginning of the end of the first superfast programme, and the money available for the second stage of superfast, which we know is considerably smaller than the first superfast programme, because obviously what we're trying to achieve with it is also smaller. That's made up of a whole complicated series of different pots of money—some from the gainshare from the first BT contract—and, again, I always take every opportunity to emphasise that if you can encourage people who have got that option to take it up, we obviously get the gainshare continuing. It's from some European money. There's a small amount of UK money in there, and there's Welsh Government money as well.

So, in terms of superfast, because there are only some five or six weeks before the so-called drop-dead date, can you tell us how that's looking?

I'm still being assured by BT that they will make it. I've expressed my concern that that is unlikely in this committee. We are having extremely regular meetings with them about roll-out and committed resource, and we're not yet in quite a position to say. They will certainly get—. If they don't quite make it, they will get very close. There is a large amount of penalties in the contract if they don't do it.

And the gainshare that you're anticipating you'll have—do you have a rough idea of how much that will be?

We think the pot will be about £80 million—the combined pot. Obviously, that shifts a little depending on where the gainshare gets us.

Perhaps it's just worth adding a bit of detail about that. So, the contract says the gainshare starts paying back to us when take-up gets to 21 per cent. We're at 39 per cent now, so actually we're in a positive situation. We've got seven years—or six years, now—to recover that money. So—

It isn't, but we've committed that we will spend it on the continuing roll-out of infrastructure.

10:40

Well, we're currently in a position where we're about to release the results of the consultation on phase 2, and then we'll be looking at procurement of phase 2. We intend to spend that money on phase 2 in various arrangements, which I can talk for another 45 minutes about, Chair, if you want me to.

And in terms of the successor scheme, just finally, do you have a funding model in mind for that and how that will work?

No. We're just analysing the results of the consultation responses. We have a number of different issues that we need to address, and once we've got an idea of how we're going to roll out the second phase, then we will be consulting on that as well. It's most unlikely, I would say, that we will have a single model that fits the rest of Wales. We will have around 95,000 premises to hit at the end of this period, and we think they'll probably cost around £1,200 per premises, so we're only going to get to around slightly over half of those, so we will still have a problem at the end. So, a large number of innovative things will have to be done in order to get to as many people as possible in the next phase.

Right, but you've had this voucher scheme—this ultrafast connectivity voucher scheme—to address just that. Has that been good value for money so far?

Yes. The people who take it up are very happy with it. Our difficulty is that a large number of people don't take it up as early as they might. An example I always give is of Puffin Produce down in Pembrokeshire who waited for superfast to arrive, and were delighted when it did. It was sufficient for their needs for a very short period of time and they then upgraded to ultrafast, which, of course, they could have done a lot earlier. And, so, our business exploitation programme is also helping businesses across Wales understand whether superfast is sufficient for their needs and understand whether, actually, they ought to invest upfront in the ultrafast, because, actually, superfast was never going to be enough for them when it got to them. So, the business exploitation programme is designed to increase uptake of that voucher for that purpose. 

And, as I understand it, our digital infrastructure report and recommendations—I think you're due to report on that this week.

You've just given us some figures for your understanding of the proportion of people who have been able to access superfast and who will be in the second phase and so on. Have you factored in the numbers of people who've contacted me, and no doubt others, who have received a letter from you saying that they're now connected, only to then find they're not? So, presumably BT have told you that they would be within the reach of the cabinet, but because of rurality, topography, or mountains in some cases, they're not connected.

Yes. We have had a small number. We've sent thousands of those letters out. I'm aware of a small number—in tens—of people who aren't connected when we have thought they are. We take up each individual case with BT and investigate whether they've been paid and whether that's correctly done, and also a solution for the individual in question. So, we're dealing with those on an individual basis at the moment. 

I can give you some advice on that. I think I send you about three e-mails a day, don't I, Minister? Hefin David. 

The apprenticeships and traineeships budgets for 2018-19 and 2019-20 show a reduction, but the statement is made that the European funds will raise it back up. That's a steady state, is it?

Yes. I mean, I think that the amount of money will remain more or less the same, but we're making up for that difference with European social fund funding, and, of course, because of the exchange rates there's actually more money in that ESF pot now than there was before, effectively. So, what's important now is that we keep on that target of 100,000 apprenticeships—

But the net effect will be that the budget will be steady across those three years. 

The level 3 and 4 apprenticeships are more expensive than the previous focus on the level 2. Are you confident that that will then be sufficient to meet those higher level 3 and 4 apprenticeships?

Yes. I think what is important is that we are focusing on quality apprenticeships. It's not just about numbers. And if you look at the success rate, we've got about an 80 per cent success rate, which compares very well with England. If we're talking about quality, I think what's important is that we are interested in driving up the standards. Productivity rates need to be driven up, and this is part of that attempt to do that, but one of the things we're trying to do is to make sure that by driving up those standards we're also making sure that we are delivering the right kind of apprenticeships that are good for not just the individual but obviously for the companies that they'll be going into.

10:45

So, how are you measuring success, completion and progression at this point in time?

We absolutely are measuring its completion, which is really important, and it is important that they finish the course. So, that's all built into the system.

You mentioned qualitative measures yourself, so are there any other qualitative measures you might include in that assessment that go beyond completion and progression—soft skills development?

One of the things we do is to make sure that there's self-assessment. So, we insist on that from the point of view of the providers, and that's got to focus on improvement of performance and delivery. So, there is a self-assessment built in, but, of course, we are very clear in our letter that we give to these contractors in terms of what we expect in terms of return and that driving up the standards is something that we are very clearly focused on.

Okay, and how do you measure things like transferability of skills and things that might be an outcome of those higher level apprenticeships?

I think that's something that we would include in that self-assessment, so I think that's something that perhaps we could do a bit more work on. I don't know if Huw has something to add.

Just to say that we are working our way through the frameworks to make sure that they meet the needs of employers and learners. We're doing that in conjunction with Qualifications Wales and, where appropriate, the sector skills councils. In all of the frameworks we have for apprenticeships, unlike some of the standards-based schemes elsewhere in the UK, there is a strong emphasis on transferability of skills and developing competencies or capabilities that can serve a person in more than just the job that they're currently doing.

Okay, thank you. The move away from level 2 would have, as you've recognised in the paper that we had, a disproportionate effect on female apprentices. How are you going to mitigate the effect on female apprentices?

Well, we're making sure that we work with referral agencies to focus on this particular area, but we are also working with organisations such as Chwarae Teg to inspire women to go for those higher levels. But there's a lot of work to be done in terms of giving people the confidence, and in particular women the confidence, to go for those higher levels. So, there is a bit of hand-holding work to do. The other thing we're doing is that we've got a special programme, 'Have a Go', where we take people into schools and we get women in particular and girls to try out the kind of work that they perhaps might not think about. So, I think that's really important. The more I speak to employers, the more they tell me that, actually, exposing people at quite a young age to careers in school is really, really crucial. So, I think that's a path that we'll probably be—

Because you're talking about a cultural change, aren't you, at a very early age. So, when might that feed through into something visible?

I think that's probably something that we need to make sure that we are measuring. I don't know if you've got anything to add to that, Huw.

We monitor particular providers, and we're aware that some are very much more successful than others. We're seeking to spread that best practice. We do monitor that. With level 2 and the changes in particular, we're not dumping level 2; we're saying to people that, for their career progression, for the productivity of their organisations, they need to consider what they do after level 2. So, the emphasis is on enrolling people onto level 2 programmes with a view that they might progress to level 3 or 4 and beyond.

And let's not forget that level 2 is an entrance way, and a lot of these people are a long way from the market, and we need to build up their confidence. Actually, sometimes, that level 2 is really, really crucial. It's crucial to giving them the confidence and then building their confidence to allow them to understand that they can go for level 3 and higher.

Yes. I just think that there might be a period of time in which you're open to criticism because you're talking about a change in culture here as much as anything else, but, you know, you've answered it.

With regard to traineeships, the Welsh Government did its own analysis of some of the weaknesses of traineeships between 2011 and 2015. Have you taken into account that analysis and made changes to traineeships as a result?

The answer to that is 'yes'. We did systematic evaluation. There were a number of areas where things could be improved, and, in the proposals coming forward for Working Wales, the strand that covers what were previously known as traineeships embodies those changes.

So, Working Wales is going to be the kind of big new gleamy machine that we're going to have to deal with all of these things, and I'm looking forward to having a bit of time to shape that. I don't know, it'd be interesting to know if this committee's done any work on that. But I think it's really important that we get that right and that we prepare an umbrella, all-embracing, cross-departmental Government approach to training in Wales.

10:50

Hoffwn i ofyn cwestiwn ynglŷn â'r rhaglenni cyflogadwyedd—i gael yr ynganiad yn gywir, ontefe—sydd yn cyfro cyfres o raglenni yn cynnwys ReAct, Twf Swyddi Cymru, hyfforddiaethau a'r rhaglen Sgiliau Cyflogadwyedd. Mae'r Llywodraeth wedi sefydlu bwrdd a bydd yr holl waith yn y maes yma'n cael ei ad-drefnu, fel rwy'n ei ddeall, o Ebrill 2019 ymlaen o dan ymbarél Cymru'n Gweithio.

Y cwestiwn, yn syml iawn, o ran y gyllideb—mae yna ad-drefnu eithaf sylfaenol yn digwydd, ac, eto, mae'r arian yn fflat, felly a oes yna ddigon o fuddsoddiad yn y llinell gyllideb yma er mwyn gwneud y gwaith datblygu, siŵr o fod, y bydd ei angen ar gyfer y cynlluniau newydd?

I'd like to ask a question about the employability programmes—if I can get the words out—which cover a series of programmes, including ReAct, Jobs Growth Wales, traineeships and the Employability Skills programme. The Government has established a board and all of this work in this area is to be reorganised from April 2019 onwards under the Working Wales umbrella.

There is quite a fundamental reorganisation happening and, in terms of the budget, the funding is flat. Therefore, is there sufficient investment in this budget line in order to do that developmental work that will be required for these new programmes and plans?

Rwy'n meddwl ei bod yn bwysig ein bod ni'n datblygu'r golwg yna ar y dyfodol. Os ŷch chi'n edrych ar Jobs Growth Wales, ReAct a'r rheini, mae'n bwysig ein bod ni'n eu plethu nhw mewn i'r rhaglen newydd. Beth sy'n bwysig i fi yw nad ydym ni'n colli golwg ar beth sy'n digwydd nawr yn yr ymdrech i'w chael hi'n iawn am y dyfodol. Mae yna unigolion allwn ni ddim eu gadael i lawr, ac mae'n rhaid inni sicrhau nad ydyn nhw'n colli mas yn yr ad-drefnu yma.

Rydw i yn meddwl bod yna ddigon o gyllid ar gyfer yr hyn sydd gyda ni mewn golwg. Fel rŷch chi yn ei ddweud, nid yw hwn yn dod mewn tan Ebrill 2019, felly mae digon o amser gyda ni i edrych ar hynny. Wrth gwrs, erbyn inni gyrraedd y nod yna, bydd cyllideb newydd yn dod mewn.

I think it is important that we develop that view to the future. If you look at Jobs Growth Wales, ReAct and so on, it's important that we assimilate those into the new programme. What's important for me is that we shouldn't lose sight of what's happening at the moment in the great effort to look to the future, because there are people doing these traineeships now and we must make sure they don't lose out in this reorganisation.

I think that we have sufficient funding for what we have in mind. As you say, this won't be coming in until April 2019, and so we have sufficient time to consider this. Of course, by the time we reach that objective, a new budget will be coming in.

Thank you, Chair. Looking at Careers Wales funding to start off with then, I know that the funding allocation for 2018-19 is £18.8 million, which is the same as it was for 2017-18, but, in the recent past, Careers Wales has seen a 58 per cent budget reduction and a halving of its staff. So, do you feel that the level of funding available to Careers Wales is sufficient for their role now?

We do think it's sufficient but I think there are opportunities for it to work better, and there has been a wholesale reform in Careers Wales. They do have this new strategy now, 'Changing Lives'—I think it's important that we keep an eye on that.

Again, I think what's important is that we, where we can, make synergies with successful organisations. So, there is a strategy at the moment to look at whether we can build some synergies, in particular with Business Wales. There's an evaluation being undertaken at the moment where there is a five-case plan to see what is possible, and we don't know the results of that yet. I think that there may be opportunities for us to really see some building together, and I think Business Wales has—. I think we've got to, where we can, link into organisations that have successful brands. I think that's really important as well. The bank of Wales, I think that is also starting to build a better brand. Where we can use those brands to feed off each other, I think that's really good. I think Careers Wales has had a fairly difficult time in the past few years, but there's a new chief executive, we have a new approach and I think we need to have a look at how that pans out now.

I recently met with their new chief executive and was very impressed with the level of optimism for the future, really, and particularly around the notion of potential close working between Careers Wales and Business Wales. And I understand, as you said there, that the process of their review is ongoing, with a decision to be taken in February. So, is it too early to ask you now whether you think there's any potential for financial savings if there was that closer relationship between Business Wales and Careers Wales?

10:55

I think it probably is too early. We're waiting for those evaluations to take place. We do need to look at how they get efficiency gains. So, there are obvious areas where there are synergies. There are a lot of back-office staff and things there. Very often you can get things to work together. I'm sure there will be, but we need to go through that process and see how that comes out in the end. Of course, digital services: I think that's going to be quite important for Careers Wales in the future as well. That's an area where there are obvious synergies to be made as well.

And it's not just cost benefits; it's also policy outcome developments. So, if you've got businesses going to Business Wales, saying, 'I want to expand', then to be able to direct them directly to an organisation that has a connection would be really useful, I think. I think we've got to be careful that we don't lose sight of the difficulties for people, for example, who are economically inactive, that we may need to deal with in a slightly different way. But all of these things will be undertaken in our review, and we'll wait to hear the outcomes.

Okay. Well, my final two questions—I apologise in advance because I think that Adam may have asked some of these. I had a problem with my translation equipment as well, so please forgive me if I'm going over ground that's already been covered and just let me know. Looking at the Welsh Government's Working Wales programme, and also the new curriculum, with the Careers Wales 'Changing Lives' vision, which has already been set out for 2017 to 2020, do you feel that their priorities are now fully aligned with the Working Wales programme and the new curriculum, or do you think there's still further work that needs to be, perhaps, done there?

Well, the Working Wales programme—we're just beginning on that, really. What's really important is that we have this cross-departmental approach, and that's particularly true for, I think, the economically inactive. So, we have about 118,000 people who are economically inactive in Wales. A lot of them have health issues. We need to build some synergies with the health system—mental health issues, in particular. So, there are real opportunities, but I think we're just at the beginning of that process. We have got until April 2019, but we do need to be starting to think about the building blocks. I'm new in the post. I hope that we can have some really creative ideas in terms of how we can build that programme, but I wouldn't either want to lose some of the good brands that we have. So, I think Jobs Growth Wales is a really good brand. I think it's important that we keep our options open on some of those things as well.

And, finally, just to narrow down into the Valleys taskforce agenda as well, I understand that Careers Wales have been invited to participate in that, with some widening out of the ReAct provision, which I know, for instance, has been hugely beneficial in my own constituency. Will there be room in Careers Wales's budget for this? Because my understanding is that the taskforce itself hasn't got a specific budget.

I know that that's something that will be considered, but maybe, Huw—could you add to that?

Yes. So, you're right to say about ReAct and the possibility of relaxing some of the conditions to enable more people to take advantage of that and lengthening the period of time from which they may have been out of work, but thereby eligible. What we've been trying to do for the Valleys taskforce is to get organisations like Careers Wales to work much more closely with other organisations in the Welsh Government, in local government, but also through Jobcentre Plus, so that they can share resources so that they can do that together. So, there's quite an extensive process of looking at the opportunities for co-working and co-location to release some resource to enable that to happen more effectively.

Thank you. Cabinet Secretary, in regard to skills policy and engagement, your budget line for expenditure identified is the same, I note, as last year's. Is that going to impact on delivery at all?

Well, I think we're not doing badly in terms of delivery. I think we're on course to get those apprenticeships, for example. Is that your question?

Well, my question was that the budget line, going forward, is the same budget line figure for the previous year, as I understand it. So, in that case, will there be an impact on delivery?

11:00

No, I think we're in a stable situation now, and I think the delivery will be—it's been fairly successful in some of the projects that we've been looking at in detail here—

So, you believe that you'll be able to have the same outcomes with the same budget line without any increase.

Along that same line, the 'Our Valleys, Our Future' delivery plan has a very specific set of calls for skills development. Given the steady state of the budget, how can you be sure that you are going to be able to deliver those demands from that report?

Well, I think what we've got that is still bedding in, but is already starting to bear fruit, is these regional skills partnerships—so, identifying what skills employers are looking for. We've got to be making sure that we respond to the market demand, and, obviously, that skills partnership that covers the Valleys should be feeding into that. Is there anything to add to that, Huw?

Just to add that Government isn't the only source of funding for training and development, and one of the things that we've seen that's been a significant benefit over recent years is the massive expansion of employer spend in that area. That has been something we've consciously encouraged through the regional skills partnerships. The employer spend per person trained in Wales for the last years I have figures for is £2,800, which is £300 more per person than the equivalent figure for England. We've seen a steady increase in the number of employers who are prepared to take on apprentices. Clearly, they pay the wages for those apprentices; we support the training costs. We've seen a significant increase in the number of employers training staff. So, all of those things are increasing the amount of resource available and enabling Government to focus on the things where there are real pressure points. As the Minister said, a key part of that for us at the moment is those who are economically inactive for some time.

Eluned, you correctly said that the success of upskilling programmes depends on an early engagement with the future generations. Careers Wales, we've heard, has had some difficulty in its engagement with schools in the past in certain areas. Are there strategies in place or being put in place to alleviate those problems, going forward?

That 'Changing Lives' strategy is part of that, and there is very much an emphasis on that engagement in schools. Of course, there's a statutory duty on the Welsh Government to provide for careers advice in schools. So, I think that's important, but what's important is really quite young intervention. By the time you're 15, you've already chosen your options, and your pathway in life has been determined. We really need to make sure we get in there quite early, and, in particular, I think encouraging, for example, girls to go into engineering—we need to expose them at 14 or younger to what those opportunities and skills are. It's not all about dirty, oily rags; actually, you need sophisticated chemical engineering to make lipstick. I just think we need to sell this whole approach to engineering, in particular, and science, technology, engineering and mathematics. We need to package it and think about how we encourage people to go into those—in particular, women. I'm very keen to see that as something that we drive forward.

In that context, I'd urge you to revisit the 2003 'Lost Children of Wales' report, which is exactly about how to reach these particular groups of young people. The beauty of that research is it didn't just ask employers, it asked the young people themselves.

But, moving on, last Friday—

The 'Lost Children of Wales' report.

Last Friday, I visited my local Jobcentre Plus office, and heard that they were working with Careers Wales, and that Careers Wales even has a presence in the office for part of each week, which was encouraging. But how are you ensuring that your current and future programmes, with the roll-out of the new employability schemes proposed to 2019, add to, rather than replicate, UK Government schemes? I think particularly with Remploy now securing the Work and Health Programme for everybody unemployed more than two years and, voluntarily, disabled people and people with health conditions, but also the new personal support coaches that are in the JobcentrePlus offices— so that you're adding to that rather than replicating.

11:05

It's in Eluned's portfolio now; I was the one who had a series of meetings with the various UK Goverment Ministers and officials in order to ensure that those synergies were taken advantage of. Indeed, I met with the new contractor for the new programme for the UK Government, actually slightly before it went public that the contractors were Remploy, about how we could maintain those synergies. We've handed over—obviously, we're in the handover period—a set of good relationships around how we can get the synergies to be maximised between those programmes. Because their health—I can't remember what it's called—their worker health programme kicks in quite late on in unemployment, our programmes will be picking people up well before that. So, we'll be working very hard to make sure. But we've had good co-operation with the UK Government. I had a series of very good meetings with the various Ministers; I'm sure Eluned will have a similar relationship, and we'll be taking that forward together. It's very much a joint aim.

I think that relationship is crucial, and it's in their interests to work with us. If we can get people off unemployment benefit, or disability, then it's in their interests financially and economically. So, it's a mutual benefit, I think, for us to be really co-operating. It's certainly something I've asked for an early meeting on with them. 

I would urge all Members, if you haven't done so already, to take up the invitation to visit a JCP office, just to ask your own questions at the coalface. 

Cabinet Secretary, can I go back to the line of questions Lee Waters was taking up, which will be no surprise to you? You've got cables in the ground and overhead, but there do still remain some issues of capacity, and people being able to access fibre technology. What are you doing to ensure that there is sufficient capacity on the line in those enabled areas?

So, that's not part of the contract, actually. At the end of this contract we'll have a series of issues we need to discuss with BT. BT will have a number of resources. They all have very arcane names, so, 'stranded resources', where, for example, they've built the whole infrastructure, the cabinet and all the rest of it, but they haven't got power to it because they have wayleave issues or whatever. We'll have to have a discussion with them about what we're going to do with resources such as that, and where they have a cabinet, for example, that's reached capacity early on and they need to recapacitate—I'm not sure that's a word, but anyway, you know what I mean, put more capacity into that cabinet—similarly, a discussion. That's actually a commercial decision for them at the moment, but it will be something we will be discussing. 

So, am I right in thinking that it's important that the Welsh Government does release that, make sure there is capacity, because there's an issue with gainshare, isn't there, with all this, that you're going to lose out as a result of it?

So, we'll have an ongoing conversation with them, but, at the moment, it's a commercial matter for them what capacity they put in. We put the hard infrastructure in, effectively. 

The last thing that's happened is that it is taking quite a lot of time for people who we tell have  fibre-to-the-premises potential connections—from the point they order it to the point they're connected is taking quite a long time at the moment. The reason for that is that we really are pushing BT to get to the end of this programme in premises passed. So, they've diverted a large number of their engineers onto getting the network out into Wales. I wish they'd diverted those resources earlier in the programme. So, it is taking quite a long time for individual orders to go through at the moment. That will improve, I'm sure, once this programme ends in December and those engineers are redeployed into the connection bits. 

But there are a number of—I'm searching for the right word—mop-up things, snagging, whatever you want to call it, that we'll have to discuss with them once the programme has come to an end to make sure that we've got the best value for money for us, and that we aren't paying them for things they should do themselves. It will take several months after December for us to have conversations around exactly who's being paid for what, and how many premises they actually make, because, as you know, on 31 December we won't know the exact figure. We've got to go through our verification process and so on. So, it will be some months into next year before we've got to the end of the mop-up phase. 

Well, three or four months, minimum. It might be longer, depending on how many issues there are and how many arguments we have about how many premises they've actually passed and so on. So, that's going to go on for quite some time. 

In the meantime, of course, we'll be designing the second-stage programme, and they're clearly going to be interested, we hope, in bidding for at least parts of that, because it's their network that's being extended, and so we'll be having simultaneous conversations.

11:10

From a scrutiny point of view it's frustrating, because there was the June date, there was a drop-dead date and now there's another date. 

So, the June date was—they had to have started the build to the premises in June. They are supposed to have completed the build by December. Obviously, we have a lag in the premises passed, so it takes six to eight weeks, is it—    

—for us to verify their claim. So, they put a claim in, we verify it and, obviously, those numbers switch up and down. We've done some postcode verifications as well, so they've claimed a whole postcode and we've gone back to see if that's true. Some of the letters that have been coming in that Mark Isherwood mentioned, for example, have caused us to go back and re-evaluate where we've agreed that premises have been passed and actually they haven't been. So, there's a whole pile of snagging things going on with that. 

Probably the most significant part of that, actually, is reconciling the financial side of it. So, we will be presented with a pile of invoices. We've been going through these invoices as the project has gone on, but we've got to reconcile that, actually, what that invoice represents is something that is eligible for us to pay for, and it's delivered some premises at the end of it. That's quite an involved task, and it's that that will probably take the most significant amount of time. 

Shall I just explain the postcode issue? Because I think committee might as well know it. When the contract was put in place, the successful contractor told us how many premises in each postcode they would get to but, actually, they haven't turned out to be accurate. So, often, there are more premises in that postcode that got superfast than was included in the contract. They don't get paid for those extra premises. So, we have a large number of 'free' premises as well floating around in the system. There's a conversation all the time about which of these premises were included, which weren't, how many of the extras, what do they count towards, and so on. So, it's quite a complex process. So, I wanted to explain that to make you understahd why it takes us so long to get to the definitive point. It will be three or four months at least before we're able to definitively say what the final is. We'll have a good idea in January where they've got to, but we won't have a definitive figure as in right down to the last premises that we're going to pay for, until well past that period.  

That's great, by the sounds of it. Mark, did you want to come in on this point? 

Just on that point, and given what you've just told us, how would you respond to a constituent who e-mailed me and his other four AMs last night with photographs from the superfast website showing you where you are up to on your postcode address—a photograph this summer saying, 'Fibre installation started' and a photograph yesterday saying that work hadn't even begun. 

Okay. So, what happens with that sometimes is that they begin the process, they immediately encounter a major problem, and stop. We've had serious problems with communications issues with BT, as you know. It's one of the most common topics of conversation I have in my very regular meetings with them around what they would describe as 'over-optimistic forecasting' and what we'd describe as 'extremely frustrating forecasting', and that's why people are moved all the time in that way. So, effectively, they start a build, so once they go over the edge of the postcode they put it up as 'fibre is coming', and then that building encounters a major problem—a wayleave, blockages in the ducts, some other engineering problem—and they stop. They're very slow to change the communication, and that's been very frustrating. 

The committee, I'm sure, will recommend something on communication. We are very keen to ensure that we have better comms in anything that goes forward. So, I share the frustration of your constituent and—. Well, the contract is actually very good from the point of view of how many premises we get to but it has a number of flaws, one of which is definitely the comms strategy and I understand that. 

Cabinet Secretary, can I say—it was remiss of me not to say at the beginning—congratulations on your appointment as well to the Cabinet, and to Eluned Morgan, congratulations on your promotion to Government as well, and we look forward to working with you as a committee and being a critical friend? Is there anything you want to add in terms of your general priorities?    

No. I'm obviously just trying to come to terms with the brief. But just to say I think it's a really exciting brief, and I think that skills are absolutely central to driving up productivity in Wales and to improving economic outputs. But I also think that, whatever happens, we are in an economic cycle at the moment where we've got an opportunity to really focus on those hardest to reach people, and now is the time we should be doing that. So, really, a lot of hand-holding is—. I think now's the time to be engaging in that. 

And can I ask as well, in terms of the Cabinet reshuffle, has this been difficult in terms of preparing yourselves for budget scrutiny?

11:15

I think it's fair to say—I can only speak for myself—that I've lived through amongst the worst weeks I've ever had in work in the last week or so. It seems more like a decade since the reshuffle. I, for one, have not got my head around my new portfolio, where its edges are, how it interacts with the economy and infrastructure, because all of us have been caught up in one of the worst tragedies we've ever had to deal with in work. So, we're not in a position to say that, as we normally would be at this point. By the next time we come to the committee, I sincerely hope we will have sorted ourselves out and we'll have a better story to tell in terms of the edges of the portfolios and so on. These things do always take a little time to bed down and this has been an extraordinary few days. 

Yes, I appreciate it's been a difficult time. And I'm grateful for your offer at the beginning of the meeting in terms of helping us in terms of our budget scrutiny on the economy and infrastructure portfolio, and perhaps we can have a discussion on that a bit later this afternoon. 

Can I thank you both for attending, and your officials for attending the meeting this morning? Thank you very much. Diolch yn fawr.

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

We move to item 5 and we've got a number of items to note. Are Members happy to note those items? Yes. Great. 

6. Cynnig o dan Reol Sefydlog 17.42 i benderfynu gwahardd y cyhoedd o weddill y cyfarfod
6. Motion under Standing Order 17.42 to resolve to exclude the public from the remainder of the meeting

Cynnig:

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

Motion:

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

Cynigiwyd y cynnig.

Motion moved.

And we'll move to item 6: under Standing Order 17.42, I resolve to exclude the public from the remainder of the meeting. Are Members content? Yes. Lovely. Thank you.

Derbyniwyd y cynnig.

Daeth rhan gyhoeddus y cyfarfod i ben am 11:16.

Motion agreed.

The public part of the meeting ended at 11:16.