|Adam Price AC|
|David J. Rowlands AC|
|Hefin David AC|
|Joyce Watson AC|
|Lee Waters AC|
|Mohammad Asghar AC|
|Russell George AC||Cadeirydd y Pwyllgor|
|Vikki Howells AC|
|Dean Medcraft||Llywodraeth Cymru|
|Ken Skates AC||Ysgrifennydd y Cabinet dros yr Economi a Thrafnidiaeth|
|Cabinet Secretary for Economy and Transport|
|Marcella Maxwell||Llywodraeth Cymru|
|Simon Jones||Llywodraeth Cymru|
|Abigail Phillips||Ail Glerc|
|Robert Lloyd-Williams||Dirprwy Glerc|
|1. Cyflwyniad, ymddiheuriadau, dirprwyon a datgan buddiannau||1. Introductions, apologies, substitutions and declarations of interest|
|2. Papurau i'w nodi||2. Papers to note|
|3. Cynnig o dan Reol Sefydlog 17.42 i benderfynu gwahardd y cyhoedd o'r cyfarfod ar gyfer eitemau 4 a 5||3. Motion under Standing Order 17.42 to resolve to exclude the public from items 4 and 5|
|6. Ysgrifennydd y Cabinet dros yr Economi a Thrafnidiaeth—Y Cynllun Gweithredu Economaidd a'r gyllideb yn ystod y flwyddyn 2018-19||6. Cabinet Secretary for Economy and Transport—Economic Action Plan and in-year budget 2018-19|
Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.
The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.
Dechreuodd y cyfarfod am 10:00.
The meeting began at 10:00.
Bore da, good morning. Croeso, pawb. I'd like to welcome you all to the meeting this morning, and a welcome to Oscar Asghar, who will be joining us on this committee from the start of this new term. I'd like to move to item 1. There are no apologies this morning. Are there any declarations of interest? No.
In that case, I move to item 2, papers to note. We do have a letter from the South Wales Trunk Road Agent, so I'd like Members to note that paper unless they have any comments. Lee Waters.
Can I suggest that we write back? I think there have been improvements in the way that the trunk road agencies have been engaging in active travel, but I think there's room for them to do more. Highways England have in their contract documents a high-level statement of expectations they have from their contractors, and I think it would be helpful if our trunk road agencies looked at doing something similar so that it's very clear how active travel could be taken on board when they're doing schemes on their behalf. I'd be happy to make some suggestions to the clerk on the sort of response I think we should send.
Thank you, Lee. I'm happy to do that. If you speak to the clerks outside the meeting and then perhaps we could bring a draft back for next week's meeting.
bod y pwyllgor yn penderfynu gwahardd y cyhoedd o'r cyfarfod ar gyfer eitemau 4 a 5, yn unol â Rheol Sefydlog 17.42(vi).
that the committee resolves to exclude the public from items 4 and 5 of the meeting, in accordance with Standing Order 17.42(vi).
Cynigiwyd y cynnig.
We moved to item 3. Under Standing Order 17.42, I propose that we exclude the public from items 4 and 5. Are Members happy with that? Thank you.
Derbyniwyd y cynnig.
Daeth rhan gyhoeddus y cyfarfod i ben am 10:01.
The public part of the meeting ended at 10:01.
Ailymgynullodd y pwyllgor yn gyhoeddus am 11:16.
The committee reconvened in public at 11:16.
Welcome back. I move to item 7, and I'd like to welcome the Cabinet Secretary for Economy and Transport, Ken Skates. This session is in regard to the economic plan and financial scrutiny. Cabinet Secretary, I'll just ask you to ask your colleagues to introduce themselves or whether you would like to introduce them.
Thank you. It's great to be here this morning. I think my colleagues can introduce themselves. Simon, do you want to begin?
Hello. I'm Simon Jones, director of economic infrastructure.
Good morning. Dean Medcraft, director of finance and operations in the economy, skills and natural resources group.
Marcella Maxwell, head of economic action plan.
Thank you, and I appreciate you being with us this morning. I will start first of all, Cabinet Secretary. As it is, the economic contract—you require a business to meet four requirements. What level of proof do they need?
Well, we've already implemented phase 1 of the economic action plan, I'm pleased to say, which includes the creation of the economic contract and the new consolidated economy futures fund linked to the calls to action. Well received by businesses insofar as the economic contract is concerned, this was designed specifically to drive inclusive growth. In terms of the four points within the contract concerned, all businesses seeking financial support have to demonstrate how they are committing to each of the four. There's no escape from any of them.
In terms of the burden of proof, this varies from business to business, and that makes sense because the economic contract is designed as a mechanism to change behaviours and to bring businesses into a position where inclusive growth can be considered alongside the growth of that particular business or organisation—financial growth. In terms of the burden of proof, I think it's fair to say that it has to vary from one business to another because, across each of the four points, setting the same thresholds would mean that, for some businesses, meeting the criteria would be unachievable. For others, it might be irrelevant. So, the burden of proof varies from one to another.
What we're doing at the moment is looking at how we can carry out periodic reviews of the effectiveness of the economic contract. I think, if members of the committee agree, it might be worth you seeing anonymised contracts so that you can assess how effective they are. I think it would also perhaps be beneficial if those who are responsible for putting together the contracts with businesses—some of the account managers—could perhaps talk you through the whole process of beginning the discussion to actually then signing the contract, so that, again, that process of dialogue can be fully appreciated and understood. I'm more than happy to facilitate that, if it helps.
That would be helpful, to see that in practice. Perhaps if you could take us through a case study—an example, if you like—
But it would be useful if perhaps you could do a case study now, if you like. Talk us through the process of specifically what a business needs to do and what happens before that contract is signed in terms of that element of proof.
Marcella will talk you through the process that's followed up to the point that the contract is signed, and then, of course, ongoing monitoring takes place subsequent to that.
The contract is the first stage in the process. There is no money that goes to the business as a result of getting through the contract, but what it does do is then enable them to apply for funding through one of the calls to action. So, we have four definitions against the economic contract, which are around growth, fair work, health, skills and then decreasing carbon footprint. We have a broad definition against each of those and a suite of examples and options, including industry standards and best practice. Checks are then introduced as a core element of the discussion between the relationship manager and the business, and a key element of this process is about a new relationship between business and Welsh Government in terms of exploring how they can better support Welsh Government and business to support business-friendly activity.
The mechanisms, then: we have a formal approach via a one-page document, which sets out the actions taken and the commitments. So, there is a monitoring and due diligence process. It is signed and countersigned by officials, so it is compliant. I'd like to stress that it's very much early days, so what we're doing at the moment is reviewing and monitoring. We've had 44 economic contracts to date, so it's very much about analysing. We have a good geographical spread. We're analysing how these are working, what sort of businesses are coming forward, and that work will be taken forward as we develop the process.
I've asked the social partners group to receive a random selection of contracts, and then feed back with their views on how robust they are. And again, that's something that I'd welcome the committee's work on as well.
And in terms of monitoring ongoing, you've mentioned that yourself about the monitoring process. How will that take place specifically?
Well, it's an ongoing relationship. So, again, the economic contract is the first step, so it enables business then to apply for funding. So, in terms of the monitoring, we would have that ongoing relationship with business, but if they apply for funding through the calls to action, there is another process that then kicks in through the calls to action. I suppose the best way to describe it is that the economic contract is very much around supporting inclusive growth and responsible business practice, and many businesses welcome that—actually, a lot of business are already doing this. The next stage of the process is in applying for that funding through the calls to action; it's about futureproofing. So, it's not just about getting a business that can prove that it can get jobs. It's not just about metrics that is a cost-per-job metric. It's about those wider social and economic benefits as well.
So, my final question, really: you're working on these metrics now and developing them, but—
We've got the framework for the calls to action metrics now. That's been established.
My question would be: wouldn't it have been better to have these established before, at an earlier stage, rather than developing them now?
Well, they are now in operation. That framework is in operation. Some of the projects that have been agreed are legacy projects, but that framework is in place for all of the contracts to be signed and the calls to action support to be provided.
Sure. I suppose I was picking up, really, on a point in your paper that you provided to us that said,
'we are working to develop more detailed metrics and guidelines'.
I suppose I'm referring to that. Shouldn't that have been done at an earlier stage?
It is, and I think it is an iterative process as well, because we are establishing a new relationship with business—a new way of doing business and giving funding. So, it's very much a long-term strategy. So, we have the framework in place. We're learning from that. We're working with the ministerial advisory board as well, which the Cabinet Secretary will probably talk about later, to have challenge and scrutiny around that from an external business perspective as well. I think it's really important to understand that this is something that we're working with businesses on. We've always said that, from the beginning: that we would implement it, but then continue to evolve it as we go through.
I'll go back to the question about the size of the companies that you're talking about being involved in this contract business. Is there a lower size to it? I can imagine that individuals running their own businesses would find this just a little bit too complex, and perhaps a little bit too strenuous, for them to get involved in.
Well, that was a concern that stakeholders had raised early on, when we were putting together the economic action plan, and particularly the economic contract, when that was first presented. I think we've designed a process that is straightforward, transparent, easy to understand, especially given that that process is undertaken with the assistance of account managers. And the contract isn't just about getting a signed, if you like, certificate, to say that you are participating in our drive for inclusive growth. It's about participating in an ongoing dialogue with Government, so that we're able to bring businesses on a journey, collectively, towards a greater degree of inclusive growth.
I fully appreciate that, and I think it's a very good idea, but what about the ongoing process of being monitored, et cetera, for a small business, maybe?
Well, normally, that ongoing monitoring, if you like, comes in the form of account management and assistance, so that wouldn't be an alien relationship anyway to a small business. If it helps, what we can do is provide the detail on the size of the businesses that have already signed up to the economic contract.
Cabinet Secretary, you launched the economy futures fund. Could you give us a figure for the amount of resource that's been allocated in this financial year to the fund?
We've spent something in the region of £6.2 million this year through the fund, in terms of supporting calls to action. I did consider, at the outset, having a ring-fenced sum that we could allocate against the economy futures fund. Over time, I came to—. Because what I wanted to do, essentially, was to move, if you like, to a destination very quickly, which would be to have as much of our funds consolidated into this, and therefore a huge pot of money. It then became apparent, during discussions with experts on the ministerial advisory board, and perhaps, more importantly, the early discussions that I had with businesses, that there had to be, yes, change at pace, but also a seamless transition. And so, we've kept open the support for EFF, so that we are able to flex that out. Why is that the reason? Well, there are a number of important considerations. There are concerns of a perverse incentive if you set a ring-fenced sum of money within a department for that money to then be spent, particularly as you approach the year end, and be spent in a way that it doesn't necessarily guarantee the best value for money. There's also a risk in ring fencing a sum for the economy futures fund, in that it prevents the flexibility that I think is required in order to build momentum, insofar as the economy futures fund and the calls to action are concerned, in order to accelerate the number of business that are applying for support within a financial year. So, my view is that having flexibility in terms of the budget has made more sense than having a ring-fenced sum. Dean, do you have any comments on this?
Just to echo the Cabinet Secretary about spending at the year end, because that's the dilemma we've always been in. And, for example, the £6 million allocated already this year, the profile of that is about £1 million, and it's spread over four years. And I think it's important that the Cabinet Secretary must have that regular dialogue, so that we can see what is available across his entire portfolio. And that gives that flexibility as well, rather than just capping things, which we have tended to do in the past, and like, sometimes, just spending at the year-end as well. So, it gives that flexibility for us.
I think there's also a good story to be told already about the support that's been offered through the economy futures fund and the calls to action. Because, of the 29 projects that have been supported to date—I think there are around 67 that are currently being considered—the vast majority, I believe it's about 22, have drawn down support specifically for research and development and automation. Now, I know that there are, within this committee, concerns over whether we as a country are addressing the challenges and the opportunities of automation with pace. But the early indications are that the calls to action are delivering a behavioural change that we wish to see, and 22 of the 29 support streams covering the calls to action are directed at present through automation and R&D. In the past, largely, it would've been about just buying jobs—it would've been the cost per job that we would've considered. We've moved away from that very narrow assessment of whether a project can be supported to a much broader and holistic set of measurements.
I think it's absolutely right, given that, in all likelihood, we're going to see fewer people employed in any individual business, because of automation and digitalisation, that it's absolutely vital that we channel as much funding through that particular stream in order to encourage the change that's required in the workplace, and so that we can attract more businesses to apply for Welsh Government money in order to change in a way that futureproofs themselves in an age of automation, if you like—the age of industry 4.0.
I suppose there are two things here, then: one is whether you actually set a particular sum of money for the EFF; the other one is whether you consolidate into that single fund or whether there are different pots of money. Just on the issue of the quantum, can you just give us a sense of how much money the Welsh Government gives in financial assistance to the private sector for economic development, so we can have a sense of how big the EFF's current £6.2 million is, compared to what you're giving in any year via other means?
Dean might correct me on the figures, but the budget for business and regions, which is largely about supporting businesses through economic development, is in the region of £50 million, and there's about £3 million for innovation. In terms of consolidating all of the funds, I said at the outset that I wish to see—. I think there were over 40 funds, and I wish to see as many as possible—I think I said dozens—consolidated. It's still my desire to see further consolidation, but what I want to do is make sure that we do it in a way that is successful and that we do have, yes, a speedy consolidation, but also one that brings the business community with us.
So, the picture is a fairly familiar one, isn't it? A Minister makes an announcement about streamlining and consolidating, and then, maybe, the people associated with those individual pots of money think, 'Well, actually, no, there's a really good reason why we want to keep this existing fund'. You say that the direction of travel is still towards further consolidation. You've got six currently—do you expect imminently, in the next financial year, for that to go up to 12 or 15? What's your aim?
There will be more funds that will be included in the EFF. I don't want to be tied down to saying today what number there will be in 2019, 2020 and 2021, but you're absolutely right: I've been guilty of—. When you run a department and try to steer an economy, it's like being in charge of a very big ship. If you run too fast, you run off the bow of the ship, and if you go for the big bang, there's a risk of blowing a hole in the hull.
What we've done is—I guess I've reined in my enthusiasm somewhat in order to achieve that radical change very early, but the direction is very, very clear, and we're not going to move away from that course now. No matter what happens in December, it's my hope—it's my expectation—that the principles of the economic contract and the calls to action will be maintained.
Just a final question—it's a difficult one to answer in any great detail. Of those 29 projects that have already been supported through the EFF, can you give a sense of what's been different? What kinds of projects have been supported for what kinds of reasons that reflect the difference that has been created by the EFF?
We can probably produce more detail on the 29, but in the past what we would have seen is a large number of projects—pretty much all projects—coming forward on the basis of creating jobs. We were chasing jobs, for very good reason. But 22 of the 29 have come forward because businesses have been seeking support in order to get their workforce up to scratch in terms of automation, digitalisation, so concerning improvements in skills, improvements in terms of production procedures. I can provide more detail—I think probably on each of them—but it will have to be carefully provided so we don't disclose how much an individual company has been given.
It's also worth saying about the 29 that, thankfully, we've had a really good regional spread over this. We've had three from Cardiff, three from Bridgend, three from Monmouthshire, three from Wrexham, then we've had two from Carmarthenshire, Conwy, Denbigh, Gwynedd, Newport, Pembrokeshire, Swansea; we've also had Blaenau Gwent and Torfaen and Neath Port Talbot businesses successfully apply for funding through the EFF. But I think the point that Adam Price makes about how this is shifting behaviours, how this is changing the course of the economy is really, really vitally important. It's the reason why we set up the EFF and the calls to action, so I'd be more than happy to provide details of how we are supporting those 29 companies.
Sorry, Cabinet Secretary, you have prompted me to one more supplementary, because you referred to not revealing data on what individual companies have received, and this issue has come up again in relation to Aston Martin. Do you accept—? The Welsh Government does actually provide some data, doesn't it, on organisations, actually, that receive above £25,000, though there are exceptions for reasons of commercial confidentiality? Don't you think that, as a general principle, it would be better to say, 'Well, look, if you are seeking public money then the public have a right to know how much money you're getting from the Welsh Government'? Wouldn't it just be better, including for the companies concerned, actually, that we just have a simple principle that any grant money will be put into the public domain?
And very often businesses themselves will agree to do that. When we make awards, often we'll publicise the awards. But equally there can be on occasions very good reasons why we can't do that. The Aston Martin example is a perfect example of why it was difficult recently to do just that because of the impact that it could have had on the flotation of the company. I don't know whether Simon, who is intricately involved in this—. But that as an example shows why, in certain circumstances, it's not possible to do it. We also have to maintain a clear focus on achieving value for money. However, I do agree that, in the interests of transparency—this is public money, and in the spirit of what I call the 'something for something' transaction between Government and business, wherever possible, I think the level of funding should be known to the public.
Can the moneys from this fund be used in conjunction with funding from the Development Bank of Wales or does one preclude the other?
I think it would depend on the circumstances of each application and it depends on what that funding is being drawn down for.
Just to reinforce the Cabinet Secretary's point, there will be individual circumstances where it's not sensible to release that kind of information. And, as the Cabinet Secretary said, with the flotation of the company on the horizon, it's difficult in that particular circumstance.
In the Aston Martin case, you were then subject to a direction from the Information Commissioner and, as a result of a freedom of information request, you had to release the information. Have you changed the policy in response to that Information Commissioner's judgment so that the Welsh Government won't be in this position again of being forced to do so by the Information Commissioner?
I think we need to review where we are. We haven't specifically changed our policy on this, but I think it's a reasonable challenge to understand—. If the Information Commissioner is going to compel us to provide information in certain circumstances, our policies need to reflect that.
And just for the avoidance of any doubt, finally, Chair, in relation to the most recent Aston Martin announcement, no additional—no new—Welsh Government money was involved in facilitating that announcement.
So, again, I think we're still in that period of time where it's covered by the flotation. So, I think, once we're through that, then we'll be able to make clear what the position was.
Right. But you will make that clear once that—. The sensitivity in terms of a public limited company is what you're referring to, is it?
It's the sensitivity of the flotation that's the challenge for us, yes.
As soon as we can get past that, I think we'll be able to give some clarity.
Not give some clarity, as soon as—you will state whether any additional Welsh Government money was involved.
Again, we'll need to work with the company to make sure that there aren't any other further issues that we need to address before we can do that. But, as a point of principle, I think the Cabinet Secretary has said that this is the kind of information that we want to share. But there may be another obstacle down the line, so it would be difficult to commit to doing that now.
Has the company alerted you to any further obstacles, beyond the flotation?
They haven't. The flotation is the key thing at the moment.
I'm not aware of anything, but I don't want to make a commitment that we're not able then to honour.
But, surely, the decision whether to release this information is ultimately yours. It's not for the company to say, 'Well, actually, we've discovered some other reasons.' Sorry, this is a question for the Cabinet Secretary, really, isn't it?
Yes, but, equally, we need to maintain the confidence of businesses that are investing in Wales. And if there is sufficient reason, good reason, for ensuring that there is confidentiality, then we'll consider that as well. But in terms of—I've already indicated, I'm keen to move deeper and further to the point where we have a reciprocal relationship with businesses, based on the receipt of public funding, so the public are able to benefit and that the public are able to have confidence that the money is being spent correctly. And so, wherever possible—and I know it's a very difficult balancing act, ensuring that you go on securing the confidence of businesses, but equally that you maintain the confidence of the public—it's my intention to ensure that we get a greater degree of balance, and a greater degree of transparency, in the spirit of that reciprocal 'something for something' relationship.
Could I ask as well—this is a technical one, but on the database of Government grants to organisations, could you review the way in which the data is published, and make it consistent with open data principles? Because, basically, you can't search it; you have to look, you have to press on a link for every month, et cetera, whereas, if you wanted, as a citizen, just to see—put in 'Aston Martin' over the last 10 years—you can't do that at the moment. So, it's a simple change to the database, just to make it searchable for anyone who wants to look.
Thanks. You've said previously that you've moved away from the approach of effectively buying jobs and that 22 of the 29 new streams covered automation. Can you just tell us a little bit about, in practice, what's different as a result of that?
Well, it means that businesses are now getting Government support, not necessarily to create new jobs that might not be sustainable, but instead to invest in the workforce that currently exists, in order to ensure that that workforce will be in place as automation becomes more widespread, and to ensure that businesses are able to adapt to the changing nature of the market that they operate in. The big difference is that we're able to do this because unemployment now is at a sustainable low level. This is about the only window, I think, that we've had in recent decades to move away from focusing on buying jobs towards focusing on creating higher quality employment, and ensuring that people in employment are upskilled, in order to either stay in the job that they've got, or to move into another high-quality job, should that job that they currently occupy be lost. Because, in my view, security of work isn't necessarily about the security of knowing that you're going to have the same job for the rest of your life. It's about knowing that you have the skills, the transferable skills, in order to progress from one point of employment to another.
So, the support that we're now offering businesses, and that businesses are, thankfully, drawing down through EFF, enables individuals to gain the skills and to gain the experience in a form of employment that will continue through the fourth industrial revolution, whilst also ensuring that the businesses themselves are adapting to change more speedily than I think they would have done without the move away from the cost per job as the metric to a broader, more holistic one.
Okay, thank you. Could I move on now to the foundation sectors, as you call them? Helpfully, in your paper you give us a bit more detail about what you mean by your approach there. You set out three criteria for what you're trying to do: improving the quality, the sustainability and prospects of the four sectors, which are food, retail, care and tourism; changing perception of work in these sectors; and, finally, maximising the impact of these sectors on place-based and regional economic development. In your mind, how is that different from what's commonly described as the 'foundational economy approach'?
I would hope it's not distinctly different, and I hope that we move closer to that by deciding to have one plan rather than four potentially discrete plans that would potentially throw up the differences that each of those, if you like, sectors within the foundational economy face, rather than one single plan that will focus on the challenges that face the entire foundational economy. So, I think—and this is an admission again—I started at a different point to perhaps you and others on this, and as a consequence of discussions and engagement, I think we have now come much closer to the position that you occupy.
I've asked the ministerial advisory board to put together a sub-group, looking at how we can ensure that our work on the foundational economy delivers change right across the board, rather than just examining the discrete challenges that each of those, if you like, sectors face and then operating in silos within our single department in trying to address those very individual challenges. So, I guess, in the spirit of cross-Government work, and also in the spirit of actually focusing on the whole of the foundational economy, what we're moving to is a single plan to do exactly what you just identified in terms of the objectives.
I think if we'd focused on producing four plans, we potentially as well would have risked some work taking place at a different pace to work that could actually be carried out and be of benefit to the entire foundational economy. For me, the position that we're at now, whilst it's taken perhaps a little more time to get there, is probably the safer and the more correct place to be in.
So, when you talk about the foundational sectoral approach, in effect that's the same as the foundational economy approach, in your mind.
Okay, that's very helpful to clarify. In terms of the silo working, because I'm conscious there are, for example, the Better Jobs Closer to Home pilots, which are, in effect, the foundational economy.
Then there's the work that's going on that Mark Drakeford recently announced on reviewing procurement. So, is the intention to bring these disparate areas together into one approach?
That's it, yes, and that's why I was really keen, again, to move towards the one plan and also ensure that we've got—. I won't throw in too many of these committees that we have, but that's why I was keen to make sure that the cross-Government delivery board consider this at the earliest opportunity as well, along with regional economic development.
I think the role of the MAB and the individuals who are now working with the ministerial advisory board sub-group are going to be really important. I've met with a number of you here. I've met with—. Debbie Green is on the ministerial advisory board. I think it's important that we continue to take advice and also continue to get suggestions. I know that some have been made by Members on this committee. I'd be very keen to hear of any ideas that you have of how we can, in particular, use the £1.5 million that's being allocated to this work, but also how we can, in the coming months and years, look at perhaps pilot projects. I know from the discussion that we had, and I think there is broad agreement, that when we embark on a number of pilot projects, the aim is not going to be to ensure that every single one of them delivers, but actually it's about testing and applying their best practice and applying success.
We've taken a good number of suggestions on pilots and on mapping from people who we've engaged with, so that work will be taking place, but, again, this is just an offer or a request, actually, for committee to get involved in this area of work, because I've got to admit I think it's as a consequence of this committee and individuals who sit on this committee that we have now shifted to place such a strong focus on the foundational economy.
Okay, I'm sure we'll be keen to take up that invitation. Just in terms of the level of resource that's likely to be allocated to that, you mentioned the £1.5 million that was agreed as part of the budget agreement. That's still not allocated yet, is it?
No, we're looking at how we can utilise that, and again we're looking at pilot projects, we're looking at mapping and disseminating best practice.
Right. Presumably that has to be done before the end of the financial year, does it?
Or we'd need agreement to ensure that it is available for the next financial year.
Right. And in terms of the plan that you're going to come up with later this year and the role of procurement within that, is that going to be a specific focus of the plan?
Okay, because I was interested—I visited Preston the other week, and the Preston model has been talked of as a leading exemplar that's been put into practice. One of things I found interesting in what they do is they look at what they call anchor institutions within an area. They've audited the 300 most valuable contracts that each of those anchor institutions had and have examined how elements of those contracts can be redirected into the local economy. So, I wonder if that's the sort of approach that we might learn from—from what's been happening in the rest of the UK.
Yes, definitely. I think there are a few examples in the north-west that we can learn from. Within the economic action plan there's a commitment to look at disaggregating contracts, particularly within infrastructure, to ensure that there's a greater degree of local procurement and more businesses within communities actually securing that work. But the Preston model, I think, is particularly interesting. It's been raised with me now by a number of experts outside of Government. I think it's certainly one that we can learn from and probably apply lessons from more quickly than perhaps designing our own solutions.
Excellent. And then the final question from me is just in terms of the Well-being of Future Generations (Wales) Act 2015 and how this can be aligned to this approach, particularly around procurement. There's already the Public Services (Social Value) Act 2012 that allows you to do many of these things, but I wonder if you're considering aligning the approach taken under this plan, and particularly in procurement, to the future generation goals.
Yes, and the economic action plan as a whole has been designed to meet the obligations and the spirit of the future generations Act. So, the answer is 'yes'.
Thank you. You mentioned the regional regions. Can we discuss the regional approach to your economic plan? In particular, can you provide us further details on the role of the three new chief regional officers? We might be a little bit early in asking this, but can you identify any of their major successes to date?
I think, yes. Thanks for the question on regional economic development and the role of the CROs. The three have been appointed. We've got Rhodri Griffiths, we've got David Rosser, and Gwenllian Roberts. I think the most striking success to date has been that particularly local authorities, but many other stakeholders, now have a single point of contact that is clearly identifiable in the regions. That's important in order to ensure that there is, if you like, a proper hierarchy of advice and support created.
So, they've worked very hard in engaging with our partners across the regions, with businesses across the regions, with representative organisations as well. They've led the co-ordination of strategic projects very early on in their tenure. For example, they've worked on the Tech Valleys initiative and the advanced manufacturing research institute, ensuring that, across the regions and with oversight from central office, we're able to ensure that there's a lesser degree of competition across each of the regions when it comes to particularly research, innovation, development.
They're ensuring that there's a greater degree of collaboration as well and they've also helped, and they continue to help, to develop the regional economic model with regional partners. It's worth my saying to committee today that I'll be taking a paper to Cabinet in November concerning regional economic development. We've been looking at a range of options for how we strengthen—
So, would you say that their role is to pull together all these disparate agencies and projects? Is that their primary role?
Yes, very much so. It's about bringing together, corralling together, not just different bodies and organisations and agencies, but also corralling together the plethora of economic development plans that exist across Wales. And, indeed, their scope can go wider: their role can encompass work concerning infrastructure and transport. We know that there's an important role for individuals, key individuals and leaders, to take in ensuring that there is proper regional transport planning. We're setting up at the moment, through Transport for Wales, regional transport units, business units, but in the meantime, the chief regional officers also have a strong role to play in ensuring that there is a good degree of planning on a regional basis for public transport.
Obviously, one of their primary remits is to develop a regional business plan. Do you have any timescale for those plans to be presented?
Okay. I'll be able to give details of the time frame for the plans, and also the model that we'll have settled on in Government for regional and economic development, once it's been approved by Cabinet in November. I'm pleased to be able to say to committee today that we're establishing indicative regional budgets to ensure that each of the regions are able to secure investment. This money will have to be spent, of course, on the basis of securing best value for money. But I think one of the concerns that I know Members have highlighted in the past is regional inequality in terms of investment. For that reason, I've decided to create regional indicative budgets.
Obviously, the one thing that underpins all this is funding, so are there any specific allocations that have been made during this financial year to support the regional approach to economic development?
Not in this year. But as I've just said, because the roles largely, at present, concern corralling, engagement and ensuring that particularly local authorities are working together with a clear line of sight into Welsh Government, they haven't required budget lines. However, I've prioritised funding in 2019-20 to support the development of regionally focused economic development.
Thank you very much, Chair. Good afternoon, Cabinet Secretary. Since a Labour Government has been in power since 1999, quite a few incentives for economic development have been taken, like business plans and all the rest of it. What in your plan is different to your past ones, because the past ones haven't achieved their goals? You're giving this confidence in this committee that you're going to achieve in your areas. Which is the top priority in your economic development that you're going to achieve it?
This is going to be a bit of a narrative on the economic action plan, I'm afraid, in order to answer your question. If we go back to the 1980s, the 1990s, much of the 2000s, the big challenge that we faced in Wales concerned high unemployment. Unemployment now is at or near a record low, but the challenge that we now face concerns pockets of high levels of deprivation and unemployment—if you like, inequality—within the regions and across the regions, along with our relatively poor performance in terms of productivity and competitiveness.
So, the difference between our strategy in the past and the strategy that we are now implementing is that the focus is not on buying jobs. For many years—I guess this happened under the Welsh Development Agency—the objective was to secure as much employment as possible, even if that employment might have been temporary in its nature or unsustainable because of advances in technology. The idea was to get people into work.
The objective now is to keep as many people in work, but to make that work of a higher quality, a higher standard, and fairer as well. In developing the economic contract, we are delivering on our ambition to make Wales a fair work nation, to drive down inequalities across the regions, and we're doing that by also setting up regional economic development units.
And I think another shift concerns productivity. We know that some of the key factors determining how effective a national economy can be are things like innovation, the diffusion of innovation, the amount that's spent on research and development and innovation, and the health and mental well-being of citizens who are working, as well as other factors like skills and infrastructure. These are covered within the calls to action.
There's also, of course, the big issue, and I think whether you're a climate change denier or you believe that climate change is real, there is no doubting that there are significant opportunities in the green economy. So, decarbonisation is vitally important if we are to leapfrog other nations and become a green nation, and one that is not just fit for the future but is also taking advantage of market opportunities around the world.
So, I'm confident that the plan that we are now implementing is distinctly different to past ones. Also, this isn't the end of a journey—implementation is not the end. This is just part of it, and I'm looking at how we can draw on the experiences of other economies and learn from them. Perhaps other economies can learn from us—I know that there's quite a bit of interest in Scotland and Manchester at the moment in the economic action plan. For that reason, I'm in discussions with the Organisation for Economic Co-operation and Development and I've been out to the World Economic Forum. A member of the ministerial advisory board runs an international organisation called Purposeful Capital—its objective is to drive inclusive growth.
Our focus is clearly now on futureproofing the economy and making sure it can be as efficient and as effective as possible, but at the same time making sure that we drive inclusive growth, i.e. growth in the aggregate, yes, but a reduction in inequalities in not just wealth but well-being.
Thank you very much, Cabinet Secretary, for your enthusiasm on this whole affair, but one thing is concerning me here: in Wales, wages are the lowest in the United Kingdom. The plan has no practical suggestion for improving either productivity or wages. You have mentioned a few times quality jobs and quality businesses, but not everything is quality. We need, yes, the economy to grow with balanced wages like other parts of the United Kingdom that you've just mentioned. We are below par.
Also, the fair work agenda is very important in this regard. If we are to improve wages—average salaries—then we're going to have to deal with those individuals who, sadly, are still not earning what I think they should be fairly entitled to. That means that we have to apply the fair work principles to the economic contract and use the public purse as the carrot—as the incentive—to ensure that businesses are paying a decent wage to their workforce.
But, I think the role that skills have, and the role that higher value jobs have, cannot be underestimated. We do need to make sure that we focus not just on getting as many jobs as we possibly can, often requiring very low levels of skills. Instead, what we need to do is seek out those opportunities that require a higher degree of skills and also that would be more sustainable in future. That's why we are relentlessly focused now, through the calls to action, on those key areas that drive productivity.
Thank you very much. Just finally, now, earlier this year, you mentioned—I think these are your words:
'I think it's absolutely essential that we bring in international bodies to challenge us, to monitor us'.
Tell this committee how much, since January this year—.
Since January of this year, of course, the ministerial advisory board has been established to bring in external challenge. One of the members of that board, indeed, runs that international organisation, Purposeful Capital. I've also been able to meet with experts within the WEF, to whom I was able to outline the economic action plan and also pick up some best practice from around the world. I think it's important, as well, that we utilise the expertise captured within the OECD. So, Welsh Government officials are currently working with the OECD on a proposal that will include the identification of international best practice. The proposal will also look at benchmarks for measuring inclusive growth here in Wales. It will be bespoke, because it will also be aligned to our well-being indicators.
Good morning, Cabinet Secretary. One of the indicators, of course, in equality, is who is acquiring the top jobs. So, within your monitoring of progress, will you also have disaggregated data that can demonstrate that females are not being left behind in this new age of employment, as they were in the previous new age of employment?
Yes, I think it's fair to say that, whilst the work of the Fair Work Commission is ongoing and they'll be reporting from spring of next year, I think it would be extraordinary if the recommendations brought forward by the Fair Work Commission did not capture the very important point that you've made about equality in the workplace, and particularly equality at senior levels. I'd also perhaps go a little further and say that, if we're going to really deal with inequality across society, we also need to make sure that we support people who have in the past faced particular challenges once they reach a certain age and lose their job. Prime Cymru are a great organisation that promote the need to support older people in getting back into work. I think that's absolutely essential. And also, we saw, when the financial crash happened and the subsequent recession or depression, that young people in particular were affected, and long-term unemployment rates in some parts of Britain—not far from Wales actually—increased by up to 2,000 per cent. It didn't happen in Wales because we had Jobs Growth Wales, and, whilst the issue of long-term youth unemployment is less intense right now, we should never rule it out, because we don't know when another unforeseen event could occur that would then impact on young people in particular. And so it's my view that any work that's carried out in terms of fair work should ensure that we drive down inequalities not just between men and women, but also in terms of age brackets as well.
Can I add something?
Just to add to that as well, we know that women are disproportionately represented in certain sectors. So, it's important around care, as one of the foundation sectors—it's about raising the value and the quality of that as a profession, and I think that will then have an impact on women and in driving a more equal basis for employment. That was one of the drivers behind it as well.
Also, in terms of implementing the EAP, I've been very conscious of the implementation of the UK industrial strategy as well, and there are clear complementary interventions that have been unveiled in the economic action plan and the UK industrial strategy. I think one of the problems Wales has faced in the past, perhaps, is in being competitive when it comes to particularly research funding, and in ensuring that we secure UK Government investment in business research and innovation. So, it's my intention to work with UK Government in identifying how we can use our calls to action as a vehicle for businesses, individually or collectively, to secure a greater degree of UK Government funding. I'll be sharing a platform with Greg Clark soon to examine and to present to businesses the complementary elements of the economic action plan and the UK industrial strategy.
So, I'd like to move on to transport. A year ago—I think it was a year ago; time goes fast—the committee took a specific interest in the £10 billion over 10 years of track access charges that the Welsh Government was in dispute with the UK Government on. That, I understand, has now been resolved, but to what extent, and what proportion of that £10 billion has been, effectively, saved?
Well, we've saved £900 million as a consequence of the negotiations and the agreement that was reached with the Department for Transport. I have to say that I think the discussions that took place were amicable, and resulted, certainly, in an agreement that we were very happy with. The two further charges, if you like, they—
These are the charges of £24.8 million in 2018-19 and £71.8 million in 2019-20.
That's it. And that's—[Inaudible.]—spending reviews, that is, so that applies to all of Government activity. So, if you like, that—
It's not necessarily a concession; it's something that's already pre-established because it's part of a spending review.
Well, I wanted to save as much as possible. At one point, it looked like we were going to have to fork out £1 billion. So, spending less than £100 million in order to secure £900 million made sense. It was a very fair transaction, we thought, for the Welsh taxpayer.
You won 90 per cent of the negotiation there, perhaps. Okay. Yet, in your statement, you said that the decision on future access charges would remain with the Secretary of State for Transport.
Yes, that's right. That's because the Secretary of State—. Under the settlement, the devolved settlement that has been established, the Secretary of State for Transport retains the risk and the opportunity that relates to future access charges, and, as a consequence, it means that there will be no negative impact on fares or on service levels.
But does that mean that that's then outwith the Welsh Government's control?
Shall I take that? So, the Office of Rail and Road regulate track access charges on a UK-wide basis, so they set the charges and those charges can fluctuate, and we've seen that over time; the charges have diminished over time. Because they're set on a UK basis, it's right that the UK Government takes the risk on that. What's happened in the contract is the amount that's been paid at the start of the contract by the operator will be the amount that we're held against. So, if those charges increase, then the UK Government will give us more money to be able to pay those charges. If that number decreases, then we'll give the delta back to the UK Government.
Okay. Can I just check that the increase and decrease is based on the assumption that you make—or the amount you're forecasting is based on an assumption you make in your contract, and then an increase and decrease, it could happen, that's a possibility?
Well, it's not—. It's not made on an assumption; it's made on an absolute number that was benchmarked during the procurement process. So, that's the mid point of the control period.
I got the word 'assumption' from the Welsh Government written statement, which said:
'Through this agreement, future adjustment payments between the Welsh Government and Department for Transport, or between the Department for Transport and the Welsh Government, will be determined by comparing actual access charges paid to Network Rail to the payments assumed in our rail services contract.'
Okay. So, that's an absolute number now, the amount that's going to be paid out in the rail services contract. So, we know what the number is that's baked into the contract now.
There's no assumption.
So, whereas you said in June 'if the actual access charges match the assumption', now that concept of an assumption has gone?
So, the absolute number is set out in the contract and it's set out in our agreement with the UK Government.
But that can vary, yes, and we will be compensated or we'll have to pay back the delta between the two.
And to what extent do you think that variation's going to be significant?
Well, it's not in our hands, it's in the hands of the ORR, and, frankly, it now is no longer relevant to us, because we'll be compensated either way.
But, if it's under that, you could end up paying out to the UK Government.
We might do, but we'll be paying less in track access charges.
So, the aggregate amount will stay the same.
Whether it goes up or down, it won't impact on—. That's the settlement.
So, the headline of that, of the discussion we've just had is that £1 billion over 10 years has been resolved—90 per cent of it being saved by the Welsh Government.
Thank you, Chair. Looking at the new rail and metro contract, there was announcement in June of a £2 billion investment programme. I'm just wondering how much of that would be provided by Welsh Government and how much by KeolisAmey.
Okay. Of the £2 billion, I think it's £1.9 billion-something; about £738 million will be provided by us for the metro. We'll be providing something in the region of £50 million for Llanwern, we'll also be paying for the depot in Taff's Well. Eight hundred million pounds will be used by—or paid for by— Keolis to acquire the rolling stock. But it is probably worth pointing out—a bit obvious—that they wouldn't be able to order those trains were it not for the subsidy that we're paying out as well. So, essentially, it comes back to us one way or another. They may be able to contribute more to that sum, but we are contributing nonetheless.
And, of that £738 million, could you give us a breakdown on how that will be spent on the Valleys lines?
All the £738 million is allocated for the metro programme, but there is a contingency figure within that. It's £250 million—
Yes, £230 million of it is VAT and contingency.
Right. Okay. I know that, in evidence from the Cardiff Capital Region Transport Authority in 2017, they suggested that £400 million is earmarked for wider metro aspirations beyond rail services.
Okay. I think £400 million was the—. This relates to the original agreement concerning electrification, rather than the metro itself, and it's since expanded up to £738 million.
Okay. Would you be able to write to the committee providing a breakdown of the total £5 billion investment in the franchise and metro under the new contract, including the funding source, what will be funded, and expected funding per year for each item?
Yes, I can provide that detail. I can give you a broad outline now, if that helps.
This is only very, very broad, I've got to say. About 64 per cent will be used as subsidy for the operating costs of providing rail services, 19 per cent on infrastructure management costs, and around 17 per cent is going to go to upgrading the infrastructure of the core Valleys lines.
That's useful. Thank you. And a final question from me—something that my constituents often ask me—is whether Brexit presents a risk to delivery of the contract. For example, EU funding forms part of the metro investment package, Keolis is a French company, and Spanish firm CAF has been awarded a £400 million contract for rolling stock.
We're laughing because there's a camera in the room that's gone on behind you that is very over-active.
I got most of the question. I think it concerned the potential impact that Brexit could have.
Well, the money for the metro is guaranteed by UK Government if there are any issues with ERDF. So, that's secured. The contract has been awarded and signed, with those involved in it fully aware of the risks that Brexit could pose. In terms of Keolis, we know that they've already got a UK headquarters that's going to be coming to Wales. The international offices are going to be coming to Wales as well. So, we've endeavoured, throughout the procurement process, to ensure that the risk from Brexit is absolutely minimised.
There we are. Thank you. Adam Price has got a question and then I'll come to Joyce.
Yes, you published the invitation to tender. Officials, in a briefing early in the summer, did promise that the redacted version of the contract will be published in due course. When are you planning to do that?
Yes, I think we're trying to publish it later this autumn. So, it will be published this year.
Okay. I'm grateful for that. You'll have seen the press story that some of the new services that you'd already announced may be affected by the lack of rolling stock. Is there anything further you can say about that today?
This concerns, in particular, that first service—the service that was due to commence in December of this year. That's been pushed back to spring. However, I guess one very great positive of the delay is that we've been able to secure agreement of the service. Peak times will be extended into Wales. Rolling stock is incredibly difficult to secure, and there is a delay. I can't recall which order it is that's—.
It's—the 769s they're referred to as, Minister.
The 769s, which are currently being built. There's a delay in manufacturing those for another contract that had been agreed before ours, and, as a result—I don't know whether we're alone in this—but, as a result, delivery of the rolling stock is being pushed back.
Can I just add to that? The initial tranche of those trains was ordered back over a year ago, so, prior to awarding the contract, in preparation for the need to remove the trains from service that are not capable of meeting the persons of restricted mobility regulations. So, we ordered these new trains, they've been heavily delayed in manufacture, as the Cabinet Secretary says, and we're working with the supplier now to get those trains delivered to us in order to be able to meet our needs in terms of the fulfilment of our obligations to PRM.
No, we're not. And all of this lot goes back to the failures of electrification around the UK. There was a hiatus on the ordering of diesel rolling stock across the UK five or six years ago—
There were no diesel trains being ordered five or six years ago, and it takes three years to manufacture a train. And then we've seen the cancellation of electrification schemes around the UK in the last few years and it's not just us that are being affected by this; this has affected franchises across the UK.
It doesn't affect the time frame for the delivery of rolling stock. So, by 2023, every train will have been replaced.
Just one final supplementary: are you able to report progress to the committee on the feasibility study on Aberystwyth to Carmarthen, and secondly the strategic outline case on the Swansea bay and western Valleys metro?
Can you just be brief on that? Because I want to get Joyce in as well for another subject.
We're due to publish that imminently on the reopening of the line. And on the Swansea bay metro feasibility study—.
We're working through that with the local authority, and it's also tied in with the work that we've commissioned from Professor Mark Barry as well on the wider links between south Wales and—
When would you expect something to be published on the Swansea bay and western Valleys metro?
Can we get back to you on that and give you a date on that?
Okay. I know I've got Oscar waiting, but I'm going to come to Joyce for the final subject first, and then if there's time I'll come to you, Oscar. Final question, Joyce Watson.
The final but imminent area is preparing for Brexit, and any steps that the Welsh Government is taking to assess the likely impact of a 'no deal', and also how that might impact on all the levels of business support that we have discussed this morning.
I'd probably need to offer a comprehensive written briefing on the work that we've been undertaking, but also some of the scenario planning and the support that we have been offering and that we're looking at rolling out. You'll be aware of the EU transition fund. Further details of how we're going to use that £50 million will be announced very, very soon, and will concern business support. We've had very regular meetings of the EU exit working group, which is a sub-group of the council for economic development. We've developed—and are going live in the next few weeks—a brand new Brexit portal for businesses, but one of the challenges, one of the problems and one of the concerns that I have is that, at the moment, whilst businesses recognise that they'll need to adapt, and they'll need to prepare for Brexit, because of the uncertainty that they still have, they're not yet implementing any change. I think you can understand that to a certain degree, but my concern is the longer the uncertainty continues, then the shorter the time that businesses will have in order to make the necessary adjustments to a post-29 March environment.
The support that we can offer—I'd liken it to, if you like, a navigator in a car. We'll make sure that the tank is well fuelled. That's what the EU transition fund is for. That's what the general support of Welsh Government business and region support is there for. We'll be there as a co-driver. We'll ensure that we work with as many businesses as possible. We'll try to navigate through what is likely to be a very, very difficult period, and we'll also be pointing to, if you like, safe markers—opportunities that could be exploited in a post-Brexit environment, particularly insofar as exports are concerned, and those areas of activity that contribute to a higher degree of productivity within an economy. Right across Government, we've got the sub-committee of Cabinet, which met today to discuss the very latest developments. Information is disseminated through business representative bodies, and also I think it's worth saying that the social partners that we work with have been incredibly important in not just providing us with intelligence and, equally, for us to provide them with intelligence, but also in shaping our response to Brexit and ensuring that we are very prepared.
One of the big issues that we will face if there is no deal, of course, concerns transport. And I am aware that—. We were working closely with UK Government, but I am aware that non-disclosure agreements are being reached with each of the ports concerning the support that would have to be offered to them, particularly with some of our ports, if there is a situation where we just crash out of Europe. We're working with the ports association as well to ensure that what support we can offer is guaranteed in advance of issues arising. But I think it's fair to say that if we crash out of Europe, then to a certain extent in certain areas there will be chaos, and that's why it's so very important that a withdrawal agreement is reached, that we have a smooth transition period, and that the focus of parliamentarians in London remains on ensuring that we have a Brexit that does not lead to people joining jobless queues.
Obviously, I support the people's vote on the deal, and failing that I think that there are potentially significant impacts that we could see if we do crash out without a deal, and that is the road infrastructure being so snarled up at ports. So, I would be keen to know how on earth we're going to begin to deal with that, should that be the case, but also the impact on Cardiff Airport and any other freight services. You couldn't possibly cover everything here today because the impacts are potential, real and unknown, but I think it would be quite useful to have some comments, particularly on those areas.
So, I think the figure at the moment is around about 90 per cent—the amount of freight that comes in or goes from seaports. Nonetheless, airports are crucially important as well, and freight will become a more important component of the operations of Cardiff international airport.
In terms of roads and port infrastructure, we've been very clear that the UK Government will have to ensure that ports are able to accommodate any snarl-ups, as you identify them, any additional traffic—and there's likely to be considerable traffic. What I do not wish to see happen is for our key arteries, like the A55 leading into Holyhead, to become very lengthy truck parks. And so, it's absolutely essential that UK Government provides our ports with the funding that enables them to build the associated infrastructure to enable vehicles to be parked up so that checks can be carried out. We've heard solutions touted concerning technological solutions concerning different customs checks arrangements. What we don't want to see happen is for any just-in-time delivery to be damaged as a consequence of new customs arrangements.
Thank you. Oscar, if you can ask your question in less than 10 seconds, the floor is yours.
Thank you, Chair. Minister, thank you. It's about the economy; exactly. If there's good infrastructure for transport, we can improve our economy—no doubt about it. But what about airports? We've only got one international. What about the small MOD airfields? Have you got any ideas about recouping them and having these superaircraft, you know, doing short distances? The economy will grow like anything, because we have the most beautiful country in the world.
Well, I think there was an article on this today in the Western Mail, which—
Okay. We're looking at how we can utilise airports, not just Cardiff international airport—
Okay. So, the article is—. You are responding in that article, are you, Cabinet Secretary?
We'll take note of that. Thank you, Cabinet Secretary, for your time, and to your officials as well. I'm very grateful. That brings our session to a close this morning. Thank you.
Daeth y cyfarfod i ben am 12:30.
The meeting ended at 12:30.