Y Pwyllgor Cyfrifon Cyhoeddus - Y Bumed Senedd

Public Accounts Committee - Fifth Senedd


Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

Jenny Rathbone AC
Mohammad Asghar AC
Nick Ramsay AC Cadeirydd y Pwyllgor
Committee Chair
Vikki Howells AC

Y rhai eraill a oedd yn bresennol

Others in Attendance

Adrian Crompton Archwilydd Cyffredinol Cymru
Auditor General for Wales
Cerys Furlong Prif Weithredwr, Chwarae Teg
Chief Executive, Chwarae Teg
Matthew Mortlock Swyddfa Archwilio Cymru
Wales Audit Office
Mike Usher Swyddfa Archwilio Cymru
Wales Audit Office
Yr Athro Dylan Jones-Evans Dirprwy Is-ganghellor Cynorthwyol, Prifysgol De Cymru
Assistant Pro Vice-chancellor, University of South Wales
Robert Lloyd Griffiths Cyfarwyddwr Sefydliad y Cyfarwyddwyr yng Nghymru
Director of the Institute of Directors in Wales

Swyddogion y Senedd a oedd yn bresennol

Senedd Officials in Attendance

Claire Griffiths Dirprwy Glerc
Deputy Clerk
Joanne McCarthy Ymchwilydd
Meriel Singleton Ail Glerc
Second Clerk

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

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

Dechreuodd y cyfarfod am 13:15.

The meeting began at 13:15.

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

Welcome to this afternoon's meeting of the Public Accounts Committee. As usual, headsets are available for translation and amplification. Please turn off any phones or put them to silent. In an emergency, follow the ushers.

We've received a number of apologies today: from Neil Hamilton, Rhianon Passmore and Adam Price. No substitutions. Any declarations of interest that Members would like to make at the start of the meeting? Okay.

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

Item 2, and papers to note: first of all, Welsh Government have written to advise of the details of a successful operator, Eastern Airways, following the recent tender for the Cardiff to Anglesey air service. The contract has been awarded for four years. The contract will seek to discharge the two remaining recommendations, that's 7 and 9, from the previous committee's report of July 2015. Happy to note that? Good.

The Welsh Government has also responded to my letter of 29 March in which I asked for further information on the National Procurement Service and business intelligence. I also asked for an update on Dawnus. We need to note that.

Turning to the scrutiny of accounts, 2016 to 2017, Sport Wales have provided a comprehensive update on recommendation 14 in the committee's report on the scrutiny of accounts. The recommendation asked that Sport Wales share the outcome of the evaluation of their young people's programmes with the committee, which they've done. So, we need to note that letter.

Also, in relation to our interest to what they said, Sport Wales have invited members of the  committee to view the work of the young people's programme to see the positive impact that the report highlights. So, I suggest that, if Members wish to take up that invitation, the clerks will advise Sport Wales and we can find some convenient slots for Members to go.

3. Craffu ar Gyfrifon 2017-18: Trafod ymatebion i adroddiad y pwyllgor
3. Scrutiny of Accounts 2017-18: Consideration of responses to the committee's report

Okay. Item 3, and the scrutiny of accounts 2017-18. It was published in March 2019. The committee made 40 recommendations to the four public bodies invited to give evidence to Members in respect of their report and accounts. All four public bodies have now responded to the report and specifically the recommendations we made. In addition, the Assembly Commission have written to advise that they have agreed an increase to the establishment cap of six posts from 491 to 497, principally to meet the challenges of Brexit.

There are a couple of issues arising, which I saw from the responses to the accounts. Firstly, the Commission's response on the establishment cap of six posts. I think that could probably have a little bit more meat on the bones. Also, there's an increase in severance payments from £800,000 to just over £1 million, which has happened in a relatively short space of time, which I don't think seems to be adequately explained or transparent enough.

Would any Members like to raise any points or shall I bring in Jo McCarthy? Jo, your view.

Well, specifically, if I talk a bit about the responses, essentially, the committee made 40 recommendations in its report. Whilst all responses haven't been explicit in saying whether the recommendation was accepted, in broad terms, all but three of those 40 recommendations were accepted or information has been promised to the committee or has actually been provided.

If I turn to the exceptions, the first relates to the Assembly Commission. The committee recommended that the Commission set a broader and more ambitious target for cost savings or efficiencies that reflected all of its activities, not just its procurement work. The Commission's response noted that it had agreed a new set of corporate performance indicators that continued to align with the Commission's goals and its priorities, but that it did not consider that setting an arbitrary target for annual cost savings was necessary or efficient and, in fact, notes that it could actually lead to a perverse incentive to increase the annual budget purely to deliver a year-end saving and to meet the target. The response doesn't set out information about those new corporate performance indicators, and hence, it's not really clear what targets it has set for financial performance and whether those targets are sufficiently ambitious.

The other two exceptions relate to recommendations made to the Public Services Ombudsman for Wales. The committee recommended that to promote independence, the ombudsman appointed an independent member to his advisory panel, who did not sit on the audit and risk assurance committee. The ombudsman sets out a range of information in his response about the responsibilities of his advisory panel and the audit and risk assurance committee. He invites the Chairs of this committee, the Finance Committee and the Equalities, Local Government and Communities Committee to meet, at his offices in Pencoed, with himself and the independent chair of the advisory panel, Jonathan Morgan, to actually discuss the arrangements. So, obviously, it's for the committee to consider whether it would wish to take up that invitation.

The third exception, again, was in respect of the ombudsman. The committee recommended that the ombudsman explains to the committee the reasons for making special payments in 2017-18. The committee will recall that the 2017 accounts disclose that three payments, to a total value of £94,000, had been made by the ombudsman during 2017-18 to former staff. The committee asked that the ombudsman provide information about those payments and explain why they were subject to a confidentiality clause. In his response, the ombudsman confirms that those payments were not subject to non-disclosure agreements, so there was nothing in those agreements that prevented any member of staff making any information public. But he does conclude that he is unable to provide details of the specific individual cases. So, he doesn't provide any more information explaining the reasons for those payments and what assurance he actually obtained that they provided value for money.

Turning, then, specifically to the Assembly Commission and the voluntary exit scheme, as the Chair has outlined, the budget for the voluntary exit was increased. The initial budget was £800,000; it was subsequently increased at the executive board to £950,000, and then, further on, to just over £1 million. The Commission notes that the final cost was within the agreed budget, as well as within the Cabinet Office scheme approved budget of £1.5 million. So, the Commission notes that it's confident that the process has followed best practice and that it took account of the lessons learnt and it considers that the scheme has been effective in delivering its aims, as well as providing, and I quote,

'a significant opportunity to make valuable organisational changes to improve efficiency and effectiveness.'

However, the Commission's response doesn't explain how the scheme has been informed by the Assembly Commission's capacity review, and that was part of the committee's recommendation.


So, it's within the agreed limits of the budgets at each level—I'm not saying it isn't—but there's a lack of transparency, I think, or clarity, and they haven't exactly addressed the issues that we would be concerned about.

I think we should be concerned if the public ombudsman was spending £1 million on getting rid of people who may or may not be performing inadequately. We don't know the detail, obviously, so it just seems that—. I can't understand why he hasn't clarified what this money was spent on and why. There may well be a good reason; perhaps somebody became very, very ill or some matter of that nature, but not to reveal—. We don't necessarily want to publish individuals' names, but not to give a reason for why this money was spent and why it was over and above the budget seems a bit odd.

Yes. I mean, it doesn't—. It's certainly lacking the additional information that we would've liked to have seen. I know that he had issues to start with about providing some more, but it really hasn't touched the sides. Auditor general, did you want to come in on that?


Just to be clear, I think you might be conflating two responses here. I think Jo was talking about the Assembly Commission's severance scheme, but there are some separate questions.

Sorry, I thought you just made a link to the—because we are considering it all. 

The ombudsman— it was three payments to a total of £94,000 that were made in 2017-18, and the ombudsman has said, for confidentiality grounds, he's not able to provide any more information. Sorry, I then moved quite quickly on to talk about the Assembly Commission, and the voluntary exit scheme. It's the Assembly Commission that has recently agreed—I think it's 24 people that are due to leave by the end of September 2019, and the total budget for those voluntary severance agreements is just over £1 million. 

Really? And is that just about a failure to properly manage people's performance, and simply just to try and get rid of them because—

I don't think—it's not performance related. I think it's a scheme that the Commission, along with other organisations in the public sector, operate from time to time. It's not linked to performance. 

I think it's a way that—the Commission explains that it's a way to change their staffing, change their organisational structure. Other organisations in the public sector equally offer such schemes.

[Inaudible.]—pointed out as well that there's a £90,000 cap on the individuals. So, you can do the maths—some have clearly exceeded that, I would say. 

Chair, the pertinent question is about the savings that will be realised from that expenditure as well. So, we would expect to see there may be an organisational workforce redesign rationale for it, which means that you are changing posts entirely, from one post to another, but somewhere in the calculations we might have expected to see some indication of the payback periods that the Commission was expecting, and this links back to the point around efficiency savings more generally, and some transparency around: does that £1 million investment deliver a revenue-saving cost in future years because of staff leaving, and because of that workforce redesign as well. 

On workforce efficiency, which you just mentioned, if the money is not there—. There are two points there. One is the funding, whether there's any business plan that's put in place, and the funding is coming from that. Or that this is something—you just mentioned savings. Maybe productivity is not good. They're not efficient, they won't give the right sort of service. It means the cost saving means—they are talking of austerity measures for a long time, the Government people, and this money's going just like that. It should be accountable. It's not just a free hand—'Here you are'—£90,000 is serious money.

That's the point that Matt's just made. It should be transparent, and from our point of view, it should provide value for money.

We should be having a complete explanation of how it was approved and on what basis. 

I'd agree, and my understanding is that the Assembly Commission's internal assurance service is looking at the scheme as well over the next couple of months, and so perhaps by the summer there'll be some further assurance coming your way from that work as well. 

So, in all these areas we can pick this up later in the autumn term, when we continue our work on accounts scrutiny. But we do have an offer from the Permanent Secretary to provide a private briefing, so we can look at that too. But I suggest later in the autumn term is probably an appropriate time to look at it. 

Sorry to flit back and forth, but if I could just make one point for clarification in respect of the ombudsman's response—it's on page 35—to the committee's recommendation 29 about publication of performance data in the reporting accounts, the response is that the auditors, i.e. the WAO, 

'were able to confirm that our accounts do reflect best practice.'

Just to clarify, what we are able to confirm is that the accounts have a clean bill of health and have followed all the necessary reporting and accounting standards and Treasury guidelines in that respect. I think where the committee was coming from was in the presentation of performance information, transparency, clarity of the report. And those are two very different things. So, we have not provided any assurance to the audit and risk committee that the accounts follow best practice in that regard, but merely, as I said, that they followed the required standards in terms of accounting and reporting, and the minimum standards that must be followed. 


And the thing is that, if there is no transparency, there is some sort of grey area there.

Well, a clean bill of health from our auditing perspective. I think what the committee was pressing for was something beyond that in terms of the clarity of the narrative and the performance information that is included on top of the financial accounts themselves. 

4. Cymorth Ariannol Llywodraeth Cymru ar gyfer Busnesau
4. Welsh Government Financial Support for Business

Item 4 will be our session on Welsh Government financial support for business. One of our witnesses is on her way, so we'll proceed anyway with the existing two until she arrives. Prynhawn da. Good to see you. Thanks for being with us today. I'll let you get settled first, before I ask any too-complex questions. I don't need to explain about translation to you, do I? You've been here a number of times before and don't need any of that information. 

When you're ready, do you want to give your name and position for the Record of Proceedings?

I'm Robert Lloyd Griffiths, and I'm the director of the Institute of Directors here in Wales. I also chair Business Wales's strategic board, which oversees the delivery of business support in Wales. 

I'm Dylan Jones-Evans. I'm assistant pro vice-chancellor for entrepreneurship at the University of South Wales. 

Great. As I said, thanks for being with us today. This session is a background, scene-setting session. It's not intended to be a scrutiny session, as such, but to help us scope the inquiry and identify areas that Members may wish to explore with future witnesses. So, I'm sure the discussion will evolve, but there are a couple of potential areas that I've identified to discuss with you, ranging from general high-level areas, strategic-approach-types of funding and availability and outcomes. So, if I kick off the discussion with some questions on the general high-level areas, in terms of the committee's understanding of the Welsh Government's role in providing financial support to business and economic development, how would you see that role as being, and how should that role be? Robert.

In terms of what they should be involved with, or—?

Yes. So, where they are at the moment in terms of the type of support that they give—is that roughly in the right ballpark?

Well, via Business Wales, there's a huge tranche of business support available to businesses, and Business Wales then works very closely with the Development Bank of Wales, and I suppose it depends on the individual needs of a particular business as to the type of support that they will need. Often, they will need a variety of different levels of support and guidance as to who to look for and where to turn, and Business Wales will provide that advice and input into their particular plans. And they will work closely, as I say, with the development bank in order to identify and ascertain the most appropriate levels of finance support that's available to them. 


I suppose the general principle in this is where and when should Government intervene. So, if you look at how business support has evolved over the last 40, 50 years, it tends to happen in terms of areas of market failure. So, when, for example, small businesses cannot afford in terms of, for example, say, grants towards innovation, that they can't afford to actually invest heavily in research and development, so Government will come up with different programmes and initiatives to support that. In terms of accessing information, clearly, large companies can actually employ people to do this, whereas small businesses cannot do so, and that's why Government set up schemes such as what we have here in Wales—Business Wales.

And in terms of what I think is one of the areas we should be looking at, and hopefully discussing today, is skills and training, which is probably the most important element in terms of financial support that any Government can offer—how do you actually incentivise businesses to take on the talent that's needed to grow the Welsh economy? 

Do you think there's—? You mentioned how, traditionally, it's been an issue of Government stepping in where there's been market failure. Do you think that there's an understanding of that in the business world, or do you think there's been a growing tendency of thinking, 'Well, the Government's there to support in all sorts of areas', which, traditionally, would have been filled by banks, I suppose, or other providers?  

Certainly, in terms of—. You could argue that there has been element within the Welsh economy of an expectation, shall we say, by businesses that Government will support them regardless of what the, shall we say, political imperatives of that Government are or, more importantly, what the economic imperatives of the Government could be in terms of what they want to do in terms of job creation or wealth creation. So, I think there's been that expectation. Whether that's the case any more, obviously, it's something that you need to look at, because the term, shall we say, 'non-repayable loan' actually is another word for a grant, except it's not called a grant anymore. And there is then this exception that if you have a non-repayable loan that businesses won't actually pay that back ever.

I think if we have this process of if, as you see from the papers that, obviously, the audit office provided on various schemes, you see that, like I said to you, where the market failure in terms of funding tends to be towards supporting small to medium-sized enterprises, the majority of the funding by the Welsh Government has tended to go to larger businesses. I think about 55 per cent, 56 per cent of funding over the last three to four years has gone to businesses employing more than 250 employees. So, you've got to ask the question. Those are the sort of businesses that can actually get that sort of funding on the capital markets whereas, clearly, smaller businesses can't, hence why we have, first of all, Finance Wales, and then the Development Bank of Wales. Those were set up to provide that funding, but if you have the majority of funding, particularly non-repayable funding, going towards larger businesses, you've got to start questioning why that is actually happening.

More importantly, though, I think that again comes down to what, strategically, the Government wants to do. One of the key areas of the Welsh economy over the last—. Well, since the recession, the growth in the Welsh economy—. The Welsh economy has done exceptionally well. It's just second behind London and the south-east of England in terms of growth in gross value added per head, and the majority of that growth has been driven by the manufacturing sector. So, if you look at the statistics, if the funding is going to actually attracting a more vibrant manufacturing sector into Wales, both by attracting new companies, as we've seen with Aston Martin, or in actually developing existing manufacturing plants, as we've seen with investment in places like Tata Steel in the north-east of Wales, then you could argue that that is a good use of Government finance. But again, like I said at the beginning, it all depends what are the political and economic imperatives of Government, and that's how that fits in in terms of overall finances.   

I think Dylan's hit on a really important point in terms of the perception of financial support being grants or non-repayable loans. I think, over the years that I've certainly been involved with the Institute of Directors, that has changed. It is changing, and there's a much greater understanding, which has been identified in the 'Prosperity for All' policy of the Cabinet Secretary, in terms of having a contract for actually being involved and actually receiving financial support. So, I think things are changed. I think that the development bank's portfolio of the types of funds that they are lending to businesses has changed as well over the years, from the Wales technology seed fund, life sciences, technology, flexible funds, property funds. There's a range of different funds. So, you might like to look at those as well going forward—the types of funds that are available to businesses now. But I think it's changed from the perception of being a grant to an actual something back as well—a bit of skin in the game. 


Do you think they'd be better off getting away from this term 'non-repayable loans' and just calling it what it is?

I suppose, maybe. The question, as I said, is what you look at this for in terms of why you provide grants. The reason regions and nations provide grants is that they're competing with other regions and nations for this investment. I think there was a recent paper looking at this in the USA, which found that the net contribution to the USA was zero from all these grants because essentially they were just moving from one state to another. So, you'd lose, say, 1,000 jobs in this state because they moved to another state. The net contribution to the US economy was exactly the same. Actually, as I say, it was zero.

I think that's the challenge you have in that Wales now sees itself increasingly as a competitor to the other parts of the UK. So, how do you compete, shall we say, if there's a major technology investment that comes into the UK, which comes in via the UK Government? You're looking for Wales to provide that additional support—this evolution dividend that many of us have been talking about by having a Welsh Government and a National Assembly for Wales to be able to provide that. But how do you provide that? Is it the case—and I think this is possibly a question you need to look at—is it the case that businesses actually want cash? Is that what really attracts them? Is that just seen as a token of commitment from, say, the Welsh Government to bring them over here? Or are there other things that they're looking for? For example, access to infrastructure. I know that the CBI and the IOD have been pushing this very hard. Is it access to advanced technologies like the UK's first 5G broadband infrastructure, and how important that is? Or is it—and I would be saying this as somebody who works for a university—access to talent and skills.

What we've seen—and the research on this area has seen—is that when companies make an inward investment decision, the money is not that important; it's those other elements. And yet we still have the situation where Government feels it has to offer this, because, if we don't, Scotland might do it or the north-east of England might do it, or Northern Ireland. But actually, it's the more intangible elements, shall we say, in terms of finance that are important, if not more important than the provision of, as you said, a non-repayable loan.

Do you think that they're going in the right direction with the development bank?

Well, considering I spent three years of my life getting to the point of creating it, yes. I think yes. I think the real acceptance there is that if you go into business and you're borrowing money, then you have to repay it. That's the basic element of any business, and if you're not in a position to do that, then should you be actually starting that business or not? As you know, we won't rehash all the elements that were challenging about the way that Finance Wales, its predecessor, was being managed, particularly in terms of the cost of finance to businesses. That has quite rightly come down, as it should have done. I think the business community now is far more comfortable with the Development Bank of Wales as the provider of finance to the SME sector than previously, mainly because I think there is this acceptance now that their role is there to really support the small business community in Wales.

If that is the case, then I can see that role growing over the next few years, but, again, the challenge is—and we pointed this out in at least two of our papers, on access to finance and the new development bank—that you have a big tranche of funding here from Welsh Government, which is being provided in the form of grants or non-repayable loans or repayable loans by Welsh Government itself, and then you have the Development Bank of Wales actually providing funding as well. In a small country and a small economy such as Wales, should you have those two operating separately, differently? If I was—I'm assuming this is the case, so you can check this out—. I'm assuming, if I'm a business, and I'm thinking, 'I'm going to apply to Welsh Government for some money, because the money's available, and they want to give it to me, and then I'm going to make it up by going to the development bank'—do I have to, basically, apply twice, go through two different evaluations, and therefore cost me as a business far more? And then, on top of that, I may also go to a bank for funding, so I may end up having to produce three due-diligence exercises for one amount of funding that could have been provided, shall we say, through one conduit. I'm not saying it doesn't come from different pots, but to be able to do that, you can imagine the cost, both financially and professionally and personally to a business to have to do that in three ways.


I hear exactly what Dylan's saying. I think in reality, it works a little bit differently. The development bank works very closely with Business Wales and banks and other sources of finance as well to have a one-stop shop. So, for example, if you were going to access finance and you approached, in the first instance, Business Wales, and you didn't have all your ducks in a row, you didn't have your pipeline of activity, you didn't have your marketing plan, your balance sheets all in order, Business Wales will assist you in getting that together prior to you accessing funds from the development bank. I think the development bank then, if somebody will approach them directly and they don't have all their ducks in a row, would refer them on to Business Wales in order to actually get everything in line and ready to become lending ready. And I think that's really an important element of it. I conducted a review a number of years ago, and the critical aspect of actually getting everything together was highlighted in that review. So, get your work-in-progress, get your balance sheets, get your marketing plan together, and Business Wales work very closely with businesses in order to get that in line and ready for action, as it were.  

As a one-stop shop, which is what Business Wales was established to do. I know that Business Wales then work very closely with the development bank. Certainly, the board that I sit on—a strategic board—also has a representative from the development bank as well. I know that senior officials from Welsh Government will be in attendance at development bank meetings, so that there's much greater cross-fertilisation of activity, so that each of those organisations knows exactly what's going on, what's coming up in the offing. And I think it works very well at the moment.

But the question that I was asking—and again, this is the issue—is whether, for the business, there are separate elements, or, shall we say, separate exercises in due diligence, depending on the source of that funding. If, as Robert's suggested—I don't think it is, because I'm assuming the structures and the rules and regulations for Welsh Government funding would be slightly different to that for the Development Bank of Wales. What you're suggesting is if I went to Welsh Government, I'd only have to basically do one due diligence exercise. I don't think that is the case. But if that could be the case, that could be very, very efficient, and it could be a way of actually getting businesses to be able to, shall we say, spend less of the money on that due diligence and actually spend it more on the business itself.

So, currently, going back to what you were saying, you'd go to the Government, they would give you so much, and then it would almost be topped up by the other one, but you'd have to go through a separate process rather than a single application.

As I was saying, that's what I believe to be the case. It would be worth you seeing if that is—. Because, obviously, you can imagine, if I was going to, say, a high street bank, and I'd had that high street bank, and then I go to the development bank, again, there are two different processes. The question is, how do you actually limit that or minimise that due diligence so it's like, shall we say, one business plan, one decision, and therefore you get the funding?

I'm not disagreeing with Dylan, but what I'm saying is that if you are a business that is in need of funding, you will go to Business Wales and they will design and suggest to you the most appropriate way and route to go down in order to access the variety of funds available, whether it be supplied by the Welsh Government or it be provided by the development bank, or, indeed, other sources of finance.

I'm interested in pursuing this idea that we're triplicating effort, because I'm struggling to understand why any Government would take an analysis from the financial sector as something they should pay much attention to, given the history of lending money to anything that moves, and then we had the 1982 crash and then 2008 et cetera. Surely, Governments have to analyse risk from a completely different perspective. I mean, the finance industry—they'll give money if they think they're going to get money back. But surely, the Welsh Government needs to have a more strategic view around which areas of industry they need to get developed.


I wouldn't disagree with you on that. I think the irony in what you've said is that it's actually far more difficult to get money out of banks these days than it is out of Government. The reason that, initially, the access to finance review was commissioned by Mrs Hart was the fact that there were complaints that small businesses weren't accessing funding from the banking sector, and there was evidence of that across the UK—that the banking sector had slowed down in terms of the funding that it was giving. It certainly wasn't the carnival that it was in 2007, when all you had to do was turn up at a bank and they would just give you the money regardless of what your business plan was. So, you know, the real question is that what I'm saying is—. I'm looking at it from the point of view of the business. So, every time that due diligence exercise is done and there's a contract, it's the business that would have to pay for the due diligence, the lawyers, the accountants to look through the business plan. The whole idea is, if you can actually minimise that and have one source, even though each of them fits in with the requirements of the providers, you would make the process more efficient, more effective. I'm just suggesting that perhaps that's something Welsh Government and the National Assembly for Wales should look at, in terms of, shall we say, streamlining the system so it actually costs the business less, rather than the banks.

But you've still got to avoid groupthink, though, you know, and the fact that the auditing industry is dominated by four companies, and they're all in it for a whole variety of reasons.

Yes, but it wouldn't be that, you see. What tends to happen is you tend to get the next tier or even the third tier of accountancy companies to do the due diligence for it. It's very rarely in terms of small businesses you'll get, shall we say, for example, the PwCs and the Ernst and Youngs doing that sort of due diligence on a lower level.

But it's still quite expensive for businesses to put together a bid, and that's normally added—and we're talking anywhere between £10,000 and £20,000 for an application for funding.

So, do you think that the risk would be minimised if we were looking at small businesses, a size of turnover that was quite small in relative business terms, where obviously the possibilities of groupthink are going to be minimised?

One of the challenges we had, when we did the research for the work that led to the Development Bank of Wales—. We analysed all of the data that had been gathered by what's called the SME monitor, which, every quarter, gathers data on the financing needs of businesses across the UK. It wasn't surprising to find that those businesses who find it difficult to access funding are either new businesses, obviously, because of the 'liability of newness', as we call it, or microbusinesses. But in many cases, when you think about it—particularly microbusinesses—they're actually quite safe bets. If you're putting money into a microbusiness that has been there for 10, 12, 20 years, they're family businesses, they have assets, but they want to have somebody else help them develop it. And yet, the instant reaction of many banks would have been, 'Anything under £0.25 million—we're not interested. That's now a personal account; it's not a corporate account.' So, as a result of that, what tends to happen is that they can't get access to funding, and that's what the Development Bank of Wales has started to do, to focus very much on, shall we say, getting more funding into that sector and making it quick and easy. So, you put your application in, you're asking for £20,000 to do up your shop front, or, if you're a restaurant, to get a new cooker—very simple, get it done, signed off. The issue, at the moment, and I'm sure you'll see this, is that even though they make up the majority of businesses, they do not get the majority of funding. It's like you've got the triangle here with the bigger businesses at the top and the smaller businesses at the bottom, and then the funding triangle is like this—it's an inverted one. So, the many don't get access to the funding they need. So, that's the challenge. But you can do that quickly, and in many cases the default will be very low on that, as research shows.

Okay, but that goes back to the problem that Mr Lloyd Griffiths referred to, which is that large companies have become dependent on getting a bung to stay in area X or to come to area Y, because if Wales doesn't give it to them, then they're off to some other place where they are offering these incentives.

It's like the point I made; it all depends what you want to base your competitive advantage on. There was a case a few years ago in Ireland—this was pre 2008, obviously—where Ireland was looking towards, as we know, moving towards being a far more innovative and technology-based economy. They actually turned down an investment of 400 jobs in Cork, and the reason they turned it down is they said, 'Well, it doesn't fit in with what we want as an economy'. So, that is always a challenge, particularly in, shall we say, nominally lower-employment or higher-employment economies: do you make those choices as a Government? Do you make those choices—I'm sure we'll discuss it later—on what sectors you want to support? So, if you're saying that we want to be this smart, clever country, that we want to be innovative, competitive, productive, entrepreneurial, you then make the choices about which businesses you choose to come here. Because many of those businesses will choose to come here for very different reasons. They don't want, shall we say, subsidy. They want to see where are the best workers, where are the skills coming from, how do we work with our universities to make the most of the opportunities that we have, and, more importantly, access to markets. So, it's how you create that package, which is quite different to saying, 'Here's £2 million. Come and create some jobs in Wales.'


Well, I'm happy to continue, because this is a really interesting area. I mean, obviously, the focus on the foundational economy enables us to be a little bit more robust in terms of having to compete with other regions, because these are areas—we're not going to be building homes for people to live in in Wales in some other parts of the country. So, either they do it here or they don't, and, therefore, the challenges are slightly different. These are clearly businesses that have to be delivered locally, but I suppose the challenge of the foundational economy is to ensure that more of the people delivering these goods and services are local businesses, rather than multinationals that export all the profits elsewhere.

And to an extent, that's the irony of financial support. So, if you think that the public sector in Wales—. You never get the most accurate figures, so I'll use the ones that I have, which is it spends about £5 billion a year on procuring goods and services, and about 50 per cent of that—. Again, you cannot get more accurate figures, but say half of that goes to Welsh businesses—and when you say Welsh businesses, it could be somebody who's just come in because they've got a contract from Welsh Government to do this. But if you think about that, the quantum of that as compared to the grant—. So, if you could start moving that indicator up to 55, to 60 per cent, to 65, and you look at the way that procurement has, shall we say—. Take the United States of America, probably the last place that you'd think that procurement would be focused towards smaller business—but it is. It's very much focused—. They have a whole range of programmes that make absolutely clear that a certain high proportion of Government contracts have to go to small to medium-sized enterprises, local businesses, particularly, you can imagine, in areas like agriculture. So, there are lessons to be learned there. But if you think about how much grants—sorry, non-repayable loans—if you think about the funding or the financing that the Welsh Government gives out every year compared to the difference if you adjusted that procurement, as you rightly say, by five to 10 per cent, it makes it look like small fry compared to what you could do. And, actually, spending locally, you're probably going to get far better value for money than these large contracts where it's usually one supplier that you've signed up with and you've contracted to work with that supplier for the next three years. I can guarantee you that supplier will never keep their prices low and they won't employ local people. 

So, how do we—? Is the economic action plan and the commitment to prosperity for all fit for purpose to actually deliver prosperity for the whole of the community of Wales? 

I'll let my two colleagues jump in here, otherwise I'll be talking all afternoon.

Apologies for being late, Chair. Thanks for that, Dylan. I think the model that Dylan talked about in terms of the inversion of the investment is really crucial to understanding whether or not the economic action plan can be successful or not. So, if you think about the impact of that inversion, who is not able to access funding and support and therefore able to take advantage of opportunities in the economy, it's women, BAME people, disabled people, those for whom existing structures haven't served well, and so the economic action plan goes some way to recognising that, but, certainly, we would say that it needs to go further in terms of putting much clearer objectives in respect of those kinds of specific groups and how much support they should be able to access. That's just one example.


We as an organisation have welcomed the economic action plan in terms of where it goes. I think what's really helpful—and I brought a copy along with me—is, in terms of accessing direct financial support from Welsh Government, and your point earlier was, 'Does Welsh Government just hand money out?', I think what has really been welcomed is the actual process by which businesses have to now go, or the journey they have to take in order to access financial support, and the contract that they have to make in order to get it. And I think it's—. I'm sure you will have seen it, but the details are very helpful, I think, for you to look at and understand as well. It's not something for nothing; one has to actually be able to go some way along a journey in order to access funds.

I think the other thing to add is that the provision of funding in and of itself is only one part of the picture. How people access informal or formal business networks, how they access support through mentoring or advisers and who is accessing those ways of support before you can get to the point of drawing down or considering drawing down funding, and, again, those groups that we might naturally talk about, particularly women, BAME people, disabled, are less likely to have those established networks, are less likely to have formal mentoring or business support in place. So, I think, again, it's being much clearer and more specific in how we deliver on the ambition in the economic action plan.

We can't be silent, though, on what it is that x, y, z small business run by women is wanting to do, because there's got to be a strategy that we want to invest in certain sections of the economy and not others. So, whilst we may want to stimulate underrepresented groups, surely, Wales can't possibly risk losing sight of the core strategic objectives around digital, rapidly changing technologies, renewable energy and all those sorts of core areas that the Government—

I completely agree, but I would say that the Government has, through its work on the gender equality review, already committed to a vision and a set of principles around everything they do also contributing to reducing inequality. So, this change in thinking around equality of outcome and is that achievable, and that includes economic policy—so it talks about a gender-equal Wales meaning an equal sharing of power and resources. And so—. I think actually the ground for that is very well laid by the economic action plan in terms of the focus on foundation sectors, largely dominated by women, often. But it's ensuring that, in addition to that, the support—we don't just make the assumption that, by choosing a particular sector that the benefit will flow, if you see what I mean. We have to be a bit more proactive, so the first report of the gender equality review talked about an implementation gap—yes, the right kind of vision, political commitment, recognition at a senior level within the civil service, but somehow not quite flowing through to implementation on the ground. So, what are the things that we're measuring? What are the targets that we're putting in place to show that we will achieve the ambitions that it sets out?

I think, particularly, if you think about the retail sector, which, for the very first time, has been seen as a key sector—you know, it's one of the biggest employers in the Welsh economy. And I think this is probably, let me think, the fourth economic strategy in the last 20 years—there was a time when we didn't have one for about five years—that the Welsh Government has come up with, and this is the first time that retail has been seriously appreciated, albeit as part of the foundational economy, and yet we know that retail is the basis for—particularly local retail—communities up and down Wales, and yet there's been very little—


What's the reason for that, Dylan? Why has it taken so long? Because I remember before—

It was the European regulations for funding, basically, that retail—. Because it was all to do with competition, so the idea was that, if you gave a grant to shop A here, shop B next door didn't get one, then shop A would put shop B out of business; it was as simple as that. The fact that one was a grocers or a veg shop and the other one was an ironmongers didn't make any difference; that was the simple rule. Now, of course, what we need to see more and more, particularly the way that retail is changing, is that we need to see a far more vibrant local retail community up and down every town, village and city in Wales. We've seen the challenges in that, particularly with the advent of online shopping. So, this emphasis particularly on retail—and, as Cerys says, I think it's an unintended consequence of the focus on the foundational economy and these sectors that they are dominated by women and particularly by microbusinesses many of them. So, these are the women entrepreneurs who have taken that opportunity against all the odds in many cases and with additional pressures to start businesses—that, you know, the support is there for them to do that—.

The question is, and I'm sure you'll look at it, what support you offer, because you cannot offer hundreds of millions of pounds of support to these particular businesses, but maybe that's the real question at the heart of this inquiry: whether the support that businesses get needs to be financial. It can be, as Cerys suggested, more than that and particularly getting peer-to-peer networks, as we say, or just getting people to talk to each other, to come together and to actually share their experiences and share their problems and see that they're not the only person—. We have this theory in entrepreneurship research called 'the loneliness of the entrepreneur', where every owner-manager thinks they're the only person to have somebody paying them late or having an awkward customer. Actually, what you find when you bring people together is that they share those experiences and, more importantly, they share solutions to that, and it doesn't have to be funded by Government. It is a matter of encouraging and developing that, and I've seen it in countries all over the world and it works exceptionally well.

Just before I bring you in, I can see that Vikki Howells is dying to ask a question.

Yes. I've got two questions off the back of some of the points that have been raised, firstly around this idea that support doesn't have to be purely financial. And I'm wondering what your views are about where we should go with this, because, obviously, we're scoping out our inquiry. We took some evidence on the economy committee, actually, just last week that was looking at the role of regional skills partnerships, and I wonder whether you think that we should be looking perhaps at whether they would have a role to play, particularly in delivering that side of support and not just Business Wales, or do you think we should be sticking to Business Wales for that kind of support?

There's a clear role around skills and training that is core to the RSPs' remit. I think I gave evidence to the committee around that. But I wouldn't see it as necessarily stripping away functions from Business Wales. I suppose the type of support I'm thinking of is some of the things that already exist around mentoring, around making those peer-to-peer connections, as Dylan has talked about. We are about to produce our research around BAME women in Wales, and that shows that a higher proportion than average of those women go into self-employment to avoid the kinds of typical barriers that they face in the workplace. So, yes, let's support them if it's a positive active step and target resources and expertise at them but also understand people's motivation for different types of entrepreneurship. So, that's probably not entirely answered your question, but I wouldn't say it's either/or—RSPs or Business Wales—it's both.

Sorry, can I—? I think it's going to be really important for you to probably interview some Business Wales advisers and to actually find out exactly what types of questions and the types of things that they're dealing with day in, day out. Because I think that what Business Wales advisers do and do very well is signpost businesses to a range of different outlets in response to the questions they have, whether it's skills questions, whether it's finance-based questions, whether it's marketing-based questions, whether it's networking—they do actually act very much in an arm-round-the-shoulder, 'This is what you need to do—this is what you need to do in order to get from where you are to where you want to be', and I think that's really going to be important for you. 

So, I don't think that regional skills partnerships would replace Business Wales. I think it's Business Wales that's being the first port of call in order then to identify the needs of that particular business. 


I think the real challenge, as you rightly say, is from these intangibles that you have. It's not cash, or somebody offering you some—. Let me give you an example. So, a decade ago—. There's a small city in the Rocky Mountains called Boulder, in Colorado. [Interruption.] Yes. It's about the size of Newport, and it's—you know, everybody wears Stetsons and they're at x thousand feet in the Rockies, but what they did was they realised the economy was failing, so there was a gentleman by the name of Brad Feld, who was a successful tech entrepreneur, and he decided, 'Right, how are we going to change this around?' And what he did, he—. There's a great book on it, called Startup Communities, about his journey, and he said, 'Well, in the end, we need to bring the entrepreneurs together—actually bring them round and say, "What do we want as a group?"' That was quite an innovation in business support, because it tends to be governments telling entrepreneurs what they should have. It tends to be academics telling entrepreneurs what they should have. Very rarely do we have entrepreneurs coming together to do that, and it's literally transformed—. So, you have the people who do, the entrepreneurs, and the people who support, which are universities, government and other agencies, and moving towards that sort of system will work exceptionally well. And now—. In the old days nobody could get into Boulder; now you've got investors from Silicon Valley flying over because it's one of the most vibrant start-up ecosystems in the whole world. And that basically came about because the entrepreneurs decided to come together, work together and actually tell government and tell the universities and tell everybody else, 'This is what we need to succeed'. 

Yes, it did. It did. And it's—. As I said, it's quite fascinating. I remember taking it to an academic conference, an entrepreneurship one, and actually showing the book, and not one single professor there had actually read it, which probably says a lot about us rather than them. But it is a fascinating story, and I think that's what you're finding now, that you have these start-up ecosystems developing around the world, but they're developing because they are rooted in the communities they come from. And, when you think about Wales, there's this one competitive advantage that we have as a nation in that everything we do is rooted in our local community, and yet I feel that local businesses now don't feel that they're being listened to, to an extent, and Government's are coming up with what's necessary and required. As you say, it might be cash, but it might be slightly more than that. 

We've actually had a look at that—or Welsh Government's had a look at that—in terms of the Be The Spark initiative for entrepreneurs. I would suggest that you would maybe look further into that, and think that has been a successful operation so far. It's ongoing, and I think that the embracement or the embracing of entrepreneurs is absolutely critical for the future of Wales, and also for the course of direction where Business Wales is going as well.

Thank you. My other question flips out of that, really; it's purely a financial question. So, we're looking at the role that Welsh Government plays in financial support for business. I've recently become aware of philanthropic organisations, or they're set-up to look that way, that assist people who haven't been able to access finance through conventional routes—my understanding is that that would include the Development Bank of Wales—and they're often marginalised people, marginalised groups, particularly women, and, for very small loans, maybe, say, £1,000 or £2,000, they're charging around about 40 per cent APR. What are your views on that? Is there necessarily a gap in the market for that sort of thing? Or is this somewhere where you feel Welsh Government should be stepping in to assist people such as that?

Well, I remember having a session with Welsh Government officials about this when we were doing the review. The Minister was with me, and you can imagine how forthright she was about it. But we made this point, and it was interesting how officials didn't get it. So, when we said we wanted a micro loan fund that would be as you say—. Actually, we were suggesting up to £1,000, so, if somebody wanted to start a business, or they wanted to buy a sewing machine, for example—or they wanted to buy a camera, whatever, but it would be that—and they just couldn't afford it—. And it was interesting, that lack of understanding, empathy and reality on the other side of the table, to say, 'Why would somebody want £1,000?' Well, if you're a civil servant earning £60,000, that's not much; if you're a single mother, living up in the Valleys, it's a lot of money. And it's how you deal with that issue. And, as far as I'm concerned, that is market failure, and there's no way that that individual should be going to somebody and getting charged 40 per cent on that.

If you look at it, a Development Bank of Wales, I can see—. As I said, I spent three years of my life getting to the point where it was launched, but I think that, even if you took the bank in itself and you took an element of it that says, 'Like every other business, we have to do our bit for society.' And maybe if you had a fund there that was able to offer that—repayable, of course, over, say, five years—. But £1,000 repayable over five years, that is something that they could do maybe without interest or for a nominal charge. But that's something I think, in terms of the corporate social responsibility of both Government and its 100 per cent-owned subsidiary, the Development Bank of Wales, that's something I really seriously think would make one heck of a difference in those communities where, as you say, people only want £1,000 to start up their business. That's what, probably, a lawyer would charge in a day for looking at a scheme for one of the larger investments. 


I totally agree. I think we have to think about the kind of investment models that you've described as exploitation in the same way as we would think about payday loans, and all the scrutiny that they've had. But I suppose I'd go back to what is the motivation of those individuals in seeking that kind of finance in that way, and my suggestion would be it's about building trust, recommendations in small networks of communities, and probably those people wouldn't see themselves as entrepreneurs who engage with Business Wales in the way that it is currently presented or described. So I think we have to talk about valuing those kinds of entrepreneurial activities and being seen to be supportive of them, because only then can you build up the kind of trust that would stop somebody going for a 40 per cent APR loan when actually there are more responsible lenders there. 

But if you've got an idea that you think is viable if you buy this camera or sewing machine, why would you need a grant system, because the—

No, I didn't say 'grant'; I said it should be repaid. The simple reason is nobody will give them the money, that's why they're going to people who are asking for 40 per cent or we'll break your legs if you don't pay. That's unfortunately the situation. It is literally, on that sort of money, 'Computer says "no"'. I've had this experience recently, going to a bank with a business that I'm working with and asking for a loan. Because it was a new business—and I was personally guaranteeing every penny of that—they turned us down. I'm not saying me as me, but if I can get turned down with a perfect credit history and substantial resources behind me for a loan, imagine somebody, like you say, who is living in a council house, who is a single mother, having to work other jobs and would like to take that step to do something themselves, banks aren't even going to look at them, never mind actually getting them to write the application. 

It saddens me to hear of those issues that you identify. I think one of the things that Business Wales does quite well, or does very well, is actually give them the range of options and the types of sources of finance available. And I think, if I could have one wish, it would be to get the message out even further of the ability of Business Wales to make a difference and to say, 'Right, okay, in order for you to access this loan from this organisation, or to access finance, you need to do this, this, this and this,' then that business will go and do that, but they can actually point them in the right direction. They can steer them and help and support them to achieve what they're trying to do. 

But I think the point that you're making is that that funding isn't available now, yes? 

That's the point, isn't it?

So, regardless, it's just not there now. 

But there is the microbusiness loan, which—

They wouldn't even get through the front door for that. Absolutely. 

It'd be interesting to see. Maybe we can discuss that outside. 

This is obviously an area that would be fruitful for us to explore. I just wanted to know, in light of the Government's declaration of a climate emergency two weeks ago, how that might need to shift the focus of the economic action plan, because if we're serious, lots of things have got to change. Out-of-town shopping centres, complete delete as far I'm concerned, for all sorts of reasons, mainly because they're dominated by foreign companies and they export the money somewhere else, apart from the meagre wages.


I suppose one of the questions that you might like to ask of the Government, then, is how they're going to adapt and amend the economic action plan in the light of that policy change. You wouldn't want it, obviously, to adversely affect the economy, and it will be interesting to see the decisions that are going to be taken and the ramifications that might ensue of the decisions that have been made.   

You've already got the call to action around decarbonisation. I suppose it goes back to the point I was making initially about how we are going to ensure that those words are followed through. And I suppose also, the point that I'd like to make is that, in addition to the economic action plan, there's the relevance of, obviously, the Well-being of Future Generations (Wales) Act 2015, the Fair Work Commission report that came out recently, the report that we are going to make around gender equality—all of those things need to interact. And I think it's just putting a bit more meat on the bones of, 'Okay, what does that good growth look like? What would fall in or out of the definition of fair work in terms of the type of organisations you'd get through the threshold for economic contract?' I think we're in the early days of testing some of those out.  

I can see your point, clearly, because if this is going to be something that the Welsh Government and, indeed, the National Assembly for Wales itself are to adopt wholeheartedly then Government would have to, potentially, look at this seriously in terms of the conditions in which it will provide funding to businesses. The challenge, of course, is that the biggest producer of carbon dioxide in Wales is Tata— 

—and, you know, I don't think there's going to be one politician who's going to turn around and say, 'We need to not provide support to Tata', and I can see, potentially, after what's happened with the failed merger recently that that situation may arise again.

But in general terms, I can see for business support, certainly in the same way that you have—and there are environmental standards—but in the same way that a company will demand a certain amount of quality standards from suppliers, there's no reason why the Welsh Government couldn't take the lead on this and come up with its own environmental standards, or adapt others, to say, 'This is what we require from you as a business if we are to provide public support for you, because we've adopted this particular stance.' Now, that may be a political stance—I would argue it's also an economic stance—but that may be something that the Government may wish to look at, and it may want to look at that in different ways, and the same with women, with employing—

Exactly. I think with all of these examples, to take Tata, it's about moving the dial, so how much can they and others clean up, and what expectations should Welsh Government put very clearly around them being required to do some of that? So, it's not in or out this sector, not that, so that we're just picking on decarbonisation, but I think it's about moving the dial. It's the same with the gender pay gap, the same with participation from different kinds of groups. It's not saying that overnight, through having a new economic action plan, we can change these, but moving it over time. 

Steel is wonderfully renewable material. Shove all the washing machines and old cars into the Celsa furnace, and out comes something else altogether.

I just wanted to look at something else, which is how we join up our strategy—the Welsh Government's strategy—with the strategic needs agenda. Somebody else has already mentioned the regional skills partnerships. I've been doing some work on food. We've got 23,000 people employed in the food industry in Wales, but apparently we need 6,000 extra by 2025, and we're not talking low-paid people flipping burgers, we're talking about people with high-level design skills, technical skills, marketing skills. The challenge is how we change the image of the industry and get young people wanting to go into it. How does Government ensure that the needs that have been identified—zero-carbon housing would be another obvious one—actually are delivered by the training organisations that we have at our disposal?


If I put a different hat on as a small business owner, absolutely that is all incredibly important: skilled staffing shortages are a real thing in the retail/hospitality sector—absolutely. Access to support for upskilling, for improving our infrastructure, our tech and our marketing: also true. I think there is a role for RSPs and frankly local authorities to do some of that support at local level, again connecting organisations, doing the peer-to-peer support. We run three businesses in Cardiff. No-one's ever come to ask us our view about what we need to be able to sustain and grow, and we employ over 100 people in the local area. So, I think something's not quite working right in my view and I imagine—that's just one example, we're not alone in that. I have tried to access both skilled support through the apprenticeship programme and finance through what was Finance Wales, and those are quite difficult to navigate for small organisations. I suppose you might default to, 'I just need to get on with the day job.'

It's very difficult for local authorities to engage with all that when their economic development departments have been hollowed out. If local authorities want to deliver something akin to the Preston plan, it's hard to see how we develop the skills.

There's a disconnect between the ambition in the economic action plan and what's going on locally. So, you've still got this kind of view that cranes in the sky is prosperity, and cranes in the sky do nothing for small high streets. So, I think it's translating again the economic action plan into—

You say that you employ around 100 people within the Cardiff area, yet from your previous attempts at applying for any of the funding streams available, a company of your size would find that incredibly difficult.

Yes, without personal guarantees and the like. Maybe I should have a chat with Dylan about whether or not—[Inaudible.]

Because 100 people is not as small as some employers, is it? If you're finding that difficult, it makes you wonder what the current schemes are catering for. 

But again, coming back to the point about skills, I think one of the challenges—and my institution is possibly different to some other institutions, in that the University of South Wales sees its predominant role as being about contributing to the local economy by providing the type of skilled graduates that the businesses need, but that is always the challenge, and it's something that we always have to be aware of as a university. Sometimes it takes us two years to change a course, and by the time those two years have gone, particularly in the fast-moving sectors of the economy, we're out of date. So, I think that is a particular challenge for not only higher but also further education in being able to essentially mirror what the needs are of businesses. So, this is what we provide and this is what businesses need. That's a massive challenge to get that right. But, again, there hasn't been, shall we say, much policy focus to try and say, 'Well, are we doing it well?'

Most of the focus in education, you could argue quite rightly, has been at primary and secondary level, but if we're saying that it's going to be our colleges and universities that are providing the workforce for the future, then how do we develop a system to do that? But more importantly, remember, all we do as institutions is provide the workforce of the future. So, once somebody graduates, they're going to get a job. The vast majority of our workforce are already in jobs, and that I think is the biggest single economic challenge facing every economy. Because in three to four years' time, the job they have now will be completely different to what's going to be then.

Yet, there is no funding stream, there's no support, it's mainly—there's very little out there now in terms of providing the skills. Apprentices, yes, but with apprentices you're dealing with, again, new entrants into the workforce. There's very little support or training for this. And again, looking at this whole idea, when you look at financial support, because, I suppose, of the way that the National Assembly for Wales and the Welsh Government has been for the last 20 years, the type of powers that we've had have tended to be, shall we say, normal economic development powers. Shall we say, a boosted—you've mentioned local authority. It tends to provide business support and a bit of finance. But now, of course, with increased fiscal powers for the Welsh Government, the real question is how you can use fiscal powers positively to actually support businesses in different ways. So, let me give you an example. The example would be Singapore. So, we have research and development tax credits here in the UK, and if you spend, say, roughly £1 on research on development, you get £2 back. It's to encourage greater innovation, because for that investment, it doesn't matter what Government gives you, the return in the economy will be far higher. What they did in Singapore was very interesting, in that they did that, but they also did it for skills. So, what they did was, if you invest £1 in skills, we'll give you £2 back. Why? Because that £1 actually turns into £4, £8, £10 back into the economy. And yet, that tended to be something that I've tried with the UK Government for 10 years to try and get this through, but—.

I think we just have to be a little bit cleverer sometimes about using the tax powers that we have. So, rather than using tax powers where we're going to say, 'We're going to charge businesses more', is there a way, potentially when you look at this, to say, 'When we say financial support, that could mean certain situations in the taxation regime where you could positively influence the behaviour of businesses'? It could be environmental, it could be gender, it could be training, it could be research and development. Make them more innovative. How do you boost those businesses that are ready to invest in it through fiscal incentives? At the moment, that's something that hasn't been considered. It may be beyond the scope of this, but it is something serious. And the same with business rates. I know now, slowly but surely, in terms of business rates, that there are now starting to be certain conditions on different types—but, again, you can change behaviour—which is another form of taxation anyway, business taxation. How do you change behaviour?


Actually, I didn't say create new taxes; it's more about utilising existing taxes and what are the powers or the potential for variation in this? I'm not going to go down the 'Let's reduce corporation tax' path, which, if there's an exit out of the European Union, you're no longer bound by the Azores treatment and then you can drop it wherever you like in any part of the UK. But, at the moment, I think, let's look at what powers we have and how those powers can positively influence the development of business. So, it's not just about using grants; it may be saying to a business, 'Well, we can incentivise you in other different ways.'

Just to pick up on one of the things that you said—which I agree with—there's been so much focus on job creation and measuring the number of jobs we protect or make, that doesn't address the point that Dylan's just explained around people's experience in work, and wanting people to progress and increase their earnings and become more productive in work. So, that's exactly what programmes like Agile Nation, which we run, does; there's a focus on women's career development. Since 2015, we've added £1.6 million, I think, to women's wages as a direct response to that investment, but those kinds of programmes are funded by structural funds and may or may not exist after Brexit. So, there's concern there.

But, I suppose the point I'm wanting to make is that we shouldn't measure success just by number of jobs. Not least because of things we know around in-work poverty, but also because most people are already in work, and we have to think about improving their experience and the impact of the work that they do on our economy.

And inevitably your challenge, as we say, is that everybody's saying, 'Automation is going to cost tens or hundreds of thousands of jobs in the Welsh economy.' That could well be the case, but that means that that workforce will have to be retrained and refocused on other—. And if companies aren't realising this, then they need to be educated to do so. If companies need support to do that, what sort of support do they need, and can higher and further education change the way that we as a sector operate? So that we're not just focused, shall we say, on the 21-year-old leaving with a degree; we're focused far more widely in the community on providing the higher level skills that industry requires. So, those are other challenges that are maybe outside the scope of this, but again it's what can Government do to not necessarily pay for this, but to influence and stimulate that sort of behaviour.


But it is all about having the big conversation, isn't it? Because, it isn't just a single department responsible; it's a multidepartment approach, a multigovernment approach, working in partnership with stakeholders, higher education, and further education as well, in order to look and identify what the needs of the economy are going to be, going forward. It's not just a knee-jerk reaction to 'We need 5,000 more people in catering.' I've got, in the IOD, a range of members, in a variety of sectors, that can't get certain types of skilled jobs. But it's all about having the conversation, because there has to be a forum in which these issues can be raised, and getting together and saying, 'Listen. What does Wales need going forward? Where are the areas that we're light? Where are the areas that we're oversubscribed? And how can we react and respond to the needs of the economy for the future?'

There's possibly an absence of a critique of where businesses are based. It's sort of, 'Well, let's bring in some foreign company, they can do it more efficiently because bigger is better.' Surely, in the context of the very rapid change that we're talking about in terms of all this automation, isn't it about getting everybody in the room to say, 'What are the things that we're now going to be able to do because machines will be doing some of what we currently do, more efficiently?'

It's a blended approach, isn't it? It's looking at the bigger companies. I mean, Wales has 100 anchor companies and regionally important companies. The vast majority of the other 248,000 are predominantly micros or small businesses. So, yes, of course we'd like some really big businesses to come into Wales, and the more the better, because that has a cascade effect in terms of communities and in terms of the environments in which they're based. But it's a blended approach, I would suggest, as to how we take that forward. But have the conversation and get people in a room and just decide where the future's going to be. And it's not only for jobs; it's also the quality of jobs, the style of jobs, and the way in which people contribute—not just in numbers, as you said.

Yes. I agree that it's a cross-government responsibility. I was going to say there's a big opportunity around the way Wales has structured its higher education funding support. So, we've seen the big increase in part-time students as a result of the Diamond recommendations. Now, that is different to other parts of the UK. That means people in work can be studying in university whilst also working, perhaps responding to some of these needs. But at the moment, most of that uptake has been the Open University, and so we need to see the other institutions with their specialisms and expertise and grounding in local economies also responding to that ability to grow the skills of the existing workforce at a higher level.

It was interesting, your earlier point about automation and how it's often seen very negatively, but actually—

Don't worry, Nick; they'll never replace politicians with robots.

I don't know—I think that might be well on its way. I've lost my train of thought now, but there we are.

That was the intention. [Laughter.]

I'm mindful that—. Some people in the public might not share your view. I'm mindful that time is moving on. We haven't heard from Mohammad Asghar yet. So, did you have some questions, Oscar?

Thank you very much, Chair, I'm listening, and thank you very much, witnesses, Robert and Dylan and Cerys. I heard very carefully the two differences there of opinion regarding financing. The bank, you go and approach, if people get refused for business planning, the Development Bank of Wales is ready to give those types of small businesses financing available to them, when the bank has refused those businesses' projects. But what actually happens is that the people go with a professional business planner and normally they'd get through their loans and funding, the non-refundable borrowing. But is there any way that you're open to those entrepreneurs—those who get refusals from banks—to help them? Because, you said there are people to help, to make sure—

Well, there are three limits. There are three reasons as to why businesses are turned down for funding by high-street banks. The first one is collateral, because banks will normally want collateral or a personal guarantee. And if it is collateral, it's normally 60 to 70 per cent loan to value. So, if you want to borrow £100,000, you still have to find £30,000 to £40,000 yourself. The second one is affordability, and affordability's the issue, really, because most banks will give you a loan for five years only, a maximum of five years, and as a result you may be in a situation where you say, 'Well, actually, I'm prepared to take a 10-year loan. It's going to cost me more in the long term, but it's going to cost me less per month, and the reason I want that to happen is because I want to invest more money into the business, rather than paying back the bank', and in some cases they get holidays. And the third one is sector. And from our experience, when we interviewed the banks, when we did the access to finance review, you'll find some of the banks, if a sector starts making losses in one part of the UK, they'll blacklist that sector completely. Tourism was one in particular, and I was trying to make the case to one of the banks to say, 'Well, when you have a Welsh economy that, basically, 5 to 10 per cent of its economy is dependent one way or the other on tourism, and yet you have another part where it's 1 per cent, say, the west midlands, which obviously has a very different economic structure, then how can you blacklist tourism businesses in Wales? We'd be in a very different situation.'

So, those issues can all be dealt with. I mean, collateral is something that—. That's where Government should come in and take the risk or share the risk. In terms of affordability, it's starting to happen now with the development bank because one of the recommendations we made was that you extend the loan. So, I know you may have heard this term 'patient capital' now, that the UK Government's talking about potentially giving loans, 10, 15, 20 years. But we saw this happening in Ireland. They set up a similar sort of structure in Ireland—the Strategic Banking Corporation of Ireland, they called it. They couldn't call it 'Bank of Ireland' because somebody had already taken that. It was essentially a development bank, but they had actually looked at business, and if business wanted a loan lasting 10 years, then basically they would give that and they would give certain holidays. I'm glad to say that I know of a few instances where the development bank has been doing that to encourage those businesses to apply, but that should become the norm rather than the exception, and, again, look at it from the point of view of the customer. If a customer says, 'Can you afford to give me a seven-year loan?', well, as a public bank, 'Yes, we can.' So, why imitate what the banks are doing and do it over five years?

So, those are the three reasons why, and all of them are surmountable because if you make a strategic decision to support tourism, then you make that strategic decision as a public bank or a public fund. It's the same with retail. That's where the economic plan comes from. So, all of those: collateral, Government can share the risk, as it does on certain schemes; affordability, extend the length of the loan; and in terms of sectors, make a strategic decision.


I understand every bit of what you're saying here, Dylan, but the fact is that 90 per cent are small businesses. And don't forget predominantly it's the Development Bank of Wales, not businesses development of Wales. They just put 'Development Bank of Wales'. So, our industry in Wales predominantly—predominantly—are small businesses and agricultural businesses. Agriculture is the one that—'agri-economy' I can call it. Is there any funding available to them to make sure the future—? Now, you earlier said the future is very, very different. You earlier mentioned Singapore and American examples, but Terry Matthews, he started 30 years ago, Chair, on $3,000, and every dollar is £6 million-worth now. That is worth—. So, basically, there's no shortage of entrepreneurs. Don't forget we all eat, drink, we are clothed and we need housing. Agriculture—even water—comes under that. Funding should be available to these entrepreneurs who want to do things in that sector, with LGBT, disabled people, ladies—women, I mean—they should be encouraged with small businesses, whether they stitch a few clothes at home—. They should be encouraged quickly rather than going through all these big, long sheets or filling forms. 

But as far as I'm aware, I think all those sectors fall under Business Wales and the development bank. 

Yes, they would fall under Business Wales. I think what is important to say is that there is a very good relationship between Business Wales and the development bank, which I've already alluded to, but there's also a good relationship, a triangular relationship, with the banks as well. Officials from Business Wales, the development bank and the banks meet continuously on an ongoing basis in order to identify where the gaps in the funding areas are, and I know that the relationships are good. So, I think that what I found when I did my lending-ready review is that people will go forward to access finance with the banks. I interviewed about five or six different banks, and oftentimes they wouldn't have any money in it from themselves, they hadn't looked at any of the finances; they just had a great idea. They didn't have a marketing plan, they didn't have a business plan, they didn't have a pipeline of orders. And the bank was saying, 'Look, you need to get your ducks in a row. Go to Business Wales', and then Business Wales would help them become lending-ready to speak to the banks, and then the banks were working in tandem with Business Wales and the development bank on a variety of occasions in order to create an opportunity where those small businesses are able to access the loans. And the development bank are lending millions and millions to businesses right across Wales. So, it is happening, and what I'm keen to do is to see the access and the availability widen so that more can take advantage. But there is a good relationship.


Thank you very much. The fact is they are small businesses when they take over some small entrepreneurship business. So, for example, after a year so, the business is not doing as well as it's supposed to be. How long are you going to support them up to that level? You said earlier that you support them in how to get the grant, but I want to know how further you help them carry on because, initially, you started this business, this certain bright future, so make sure they achieve the goal rather than, once they're not doing well, you pull the rug.

I think, from Business Wales's perspective, one can access information and help online, also via the telephone service Business Wales offers and also from an individual relationship management perspective as well. So, there is a responsibility to look after those businesses, to help and support them as and when they need it.

One thing you've got to remember is that the vast majority of businesses do not want money. They don't want to borrow money. It's only a very small proportion that will want to borrow money, and if they don't get it from the banks—. In Wales, we're in this fortunate position that we have a publicly funded bank that can, under certain circumstances, provide that funding. What we've also got to remember is that the Scots have been looking enviously at what we have in Wales, and they're about to create their own Scottish investment bank, which will be far bigger than the Development Bank of Wales. That is something that—. Clearly, again, it would be worth looking at other structures. So, one of the anomalies to an extent is that we have a British Business Bank that is funded by the UK taxpayer, and, as far as I'm aware, outside the enterprise guarantee scheme, which is available to banks in all regions, nothing specific has been funded here in Wales. So, we've seen other parts of the UK get venture capital and other sorts of funding.

Again, it may be something you want to look at—that this is billions of pounds-worth of UK taxpayers' money: what proportion has come to Wales and in what type of funding? It's very easy to say, 'It's the enterprise guarantee scheme', because the banks have been using this, but when you're looking at informal angel funding and venture capital in particular, where we have a real problem because we have one provider of venture capital in Wales, which is the development bank, and you really need to have what we call that beauty parade of different funders as you have in other innovation hotspots across the world. So, that, I think, is a particular challenge in terms of what Wales is actually getting, not just through Welsh Government support but accessing those funds outside Wales.

It was set up, I think, in 2010/2011.

I'm not talking about joint venture here; I'm talking about small businesses and transparency now. That is the area I would like to explore. Is it any clearer as to what or how much funding is available to businesses and through which routes? You know—DBW.

Yes. I think it was part of the agreement when the Development Bank of Wales was set up that it would be increasingly more transparent than its predecessor has been, so I'm assuming that would be the case—that if you wanted to find out where the money was being allocated and in what sectors, all that is available. I think the report from the Auditor General for Wales points out where the funding is. I think there are some major issues in terms of gathering that data within the Welsh Government. Some of their customer relations management systems seem to be out of kilter and, again, I think that's very important, because, if you're going to come up with any sort of policy, you need really great research and information on which to base that policy. You can't make strategic decisions without it. And I think that's what surprised me more than anything else in reading the paper this committee had sent me—the fact that I'm sure millions of pounds have been spent on putting these systems into place, and the information that's required by policy makers and politicians and, more importantly, Ministers, isn't available to them as a result. That's the impression this paper gives. Whether that's the case, you really need to examine that. It's easy to blame politicians and Ministers for making the wrong decisions, but if they don't have the right information to make the right decisions, then they can't make it.


Thank you very much. Moving on—the adequacy of the guidance available to businesses seeking the support.

Sorry, I didn't hear that question very well. 

What are your views on the adequacy of the guidance available to businesses seeking support?

The feedback that I hear from our members, and also the information I receive in my role as chair of the strategic board, is that it's improving all the time in terms of the quality and the individuals who are able to offer the advice. The Brexit portal, for example, has had over 42,000 page views and nearly 900 businesses have completed a full Brexit self-diagnostic in recent times. These are practical statistics that indicate that it's been well received. I think it's at the very heart of what businesses need in terms of preparedness for Brexit, but also, in general terms, it helps and supports them in areas that they need help and support in, and the quality of the advisers is improving and has improved all the time. So—of course, I would say that, wouldn't I?—this is the feedback that I get from our members of the Institute of Directors as well. 

Chair, if you don't mind—. Cerys, do you want to answer first, and I just want to come back to the previous point, because there was a point I wanted to make.

Only to add that, with transparency, you need good communication. So, I think the Brexit example's a really good one. Most people will have seen that campaign. I think it's been quite visible, and maybe that's had an impact on the kind of result that Rob's talking about. We've also done some work in the past with Business Wales around gender-lensing their website, their materials. Obviously, you need to do that for a range of lenses. Ours was from a gender perspective, to ensure that the terminology that advisers are using, the kind of examples of businesses, are open to being able to support a more diverse group of businesses as they develop. So, all of those things on their own are quite small, but I think they add up to an improvement overall. 

I was just going to say, and it relates to some extent to what you've noted, that when Finance Wales was originally set up in 2000, it was based on a paper that I and some colleagues at the then University of Glamorgan put together for the Federation of Small Businesses, to make a case for the development bank. It actually was the case for a development bank in Wales at the time. It was based on the development bank of Canada model, which is enormously successful. It's still going. It's been going for 40-odd years, and what was interesting about that model—and that's the model that was put into place in 2000—. I was on the board of Finance Wales in 2000 and that model was what we called money with management. So, the whole idea was that not only are you given cash—it's the point you were making about how do you help businesses—you are also given that support to go alongside it. The reason that model was adopted was because it is what has made the development bank of Canada very successful. So, what they have—. When I was doing the access to finance review, and the development bank review, I had a number of Skype calls with officials at the development bank, and they sent me some of their internal evaluation documents. So, what they do, they offer money, they offer consultancy and they offer money with consultancy. So, how do you make your business better? So, what they found was, say, if you've got money, your business would grow by 5 per cent or 6 per cent, if you've got consultancy, 10 per cent. If you had both, your business was going like this. It was growing tremendously.

So, to an extent, that is the real challenge that we face in Wales. One of the recommendations that we had, which wasn't taken up at the time, was how could Finance Wales, or Business Wales, come together, potentially, as one entity. Maybe it was a big step too far, and the three words 'Welsh Development Agency' suddenly came back to haunt everybody. But if you think about that element, in that it's not about the cash that you have but how you manage that cash, and if you can get those elements, regardless of the system we have now—. It's how you get that to work better for Welsh business, so that there is this seamless way in which the business support you have and the financial support you have work together, because the evidence shows that if you put those together and, when you write a financial plan, you have that support to help the business at the same time, then that business will grow. At the moment, Robert could probably point to a number of instances where that has happened but, again, that would be the exception rather than the norm. If somebody applies for development bank funding, it's not necessarily the case that they'll take up some of the services from Business Wales. If somebody applies for Business Wales funding, it's not necessarily the case that they'll take up funding from the development bank. So, as in all systems, it's how you get those systems to work more closely together. That, I think, is a particular challenge. Again, when you look at finance, it's not just about the cash. As we've emphasised, all three of us, it's what else you can add on top of that.


I would just add to that, Oscar, that it's probably working better than it's ever worked before, and it's improving all the time in terms of the relationship. As I said before, a senior investment manager from the development bank sits on the board of Business Wales, and there is a like-minded relationship and agreement between Business Wales and the board of the development bank as well. So, there's a really close working relationship. There's a close working relationship between Business Wales's business advisers and also the development bank advisers as well, so that there is this communication, which I think is crucial to how it develops going forward.

Thank you. Does the funding go to the right businesses? Are there any limitations?

Well, you only know that the funding has gone to the right business when that business is successful, I suppose. So, it's really difficult to do that. Let me think on that. Does anybody else want to answer? It's such a difficult question to answer.

I think the question is are we measuring that so that we can answer the question. And I don't know if we are, or, if we are, if that's in a clear way. So, if, with the different approach that the economic action plan outlines, we don't have a different way of evidencing, measuring and reporting on the success or not of that, then we'll revert to the status quo and we'll get back to what Dylan was saying right at the beginning: the smallest number of businesses accessing the largest amount of money. So, I think—

I do have some statistics, if you'd like to hear them. Since the inception in 2001, through to March 2019, Finance Wales and the development bank have invested £710 million in Welsh businesses, leveraging an additional £1.1 billion from the private sector, had an impact of some £1.8 billion into the Welsh economy and created or safeguarded 58,000 jobs. So, it goes some way—.

The thing is, the next question to further this is that the future is social media also. Entrepreneurship innovations are coming very quick and fast. We don't want to miss opportunities, because we've got the best brains in the United Kingdom in Wales, so those areas haven't got priorities for the businesses—it's about coming up with ideas—. Dylan just mentioned entrepreneurs. Say it's somebody coming with IT development and somebody comes with—they're making—a small bolt for different reasons. So, basically, is there any priority for the different types of businesses about who should have quickly attention rather than putting them behind and reinventing the engine and then the plane is built in America? So, we need to know whether people—. We need leadership and experienced people in the banking sector, the financial sector, to check and make sure people don't come out of the net.

I would say 'yes'. Business Wales operates an accelerated growth offer targeted specifically at businesses that demonstrate the potential to grow rapidly in terms of turnover, exports and high-quality job creation, and I think it might be useful for you down the line to have a witness or somebody to speak with about that area. Accelerated growth, I think, is hugely important going forward.

It is interesting that Robert mentions that, in that, again, this comes to targets. So, that particular programme has hit its targets. As a result, for the next two years, there will be no funding available to support pre-start and start-up businesses that have high-growth potential in Wales because they've hit their targets. So, again, if we have a target-driven mentality to say, 'As long as we hit the targets, it doesn't matter what else we add, we tick the box, we've done it, that's great'—. We need to think a bit more imaginatively around that, in that, if the programme is successful, why do we stop doing it because it hits the target? I'd rather have another 300 businesses coming through as a result of that programme. And that's going to leave a massive gap in terms of business support in Wales. Any business that needs that support that 300 have had to get to the point and want to grow—it's not going to be available for the next two years. So, that, to me, is very worrying. Again, if we're driven very much by artificial targets, be they job creation targets or be they the number of businesses we have to support, to me, I think, if we are still—and I've been a great advocate over the last 10 years that the Welsh economy is doing better than we think it is—but if we're going to get off the bottom of the prosperity league table, we can't just stop and say, 'We've had 300 businesses—well done, that's it', we've got to have 600, 900, 3,000 businesses to do that. We just can't stop and say, just because we've run the programme—we've got to have a bit more imagination than what we do have.


Well, it's not that. The problem is, it's like 'computer says "no"' from the point of view of Government. If they say, 'We've set up a programme: here's £30 million—we've allocated £30 million, we've picked 300, and that programme has done its job', well, it's done its job for those 300. In the same way, to an extent, where you talk about the number of businesses—. People forget that the impact that the development bank has is enormous on those businesses that it works with because it provides that funding that those businesses, in normal circumstances, wouldn't have access to in the way they wanted to, and it has an enormous impact, as Robert says, on those businesses. But it's only a small number of businesses relative to the entire economy. So, the more money that we can get into the development bank to work with a greater number of, particularly, microbusinesses, which we saw was the real weakness, then all strength to the development bank.

The same with these programmes—if that programme is successful, if it works, which we hope it does, the first thing we have to do—if something works, you don't stop it, you actually put more money into it. It's going to create jobs, create wealth, it's going to bring new products and services out there and put Wales on the map. Why do we just say, 'Oh, we tick the box, it's done'? So, again, when you're looking at this in real detail, looking at it in such a way to say, 'Well, if we think we've achieved a job, we haven't'—if we'd achieved the job, we'd be in the top five of the most prosperous regions in the UK; we're not, we're bottom, and we've got a long way to go to get that. So, the job is never finished, and I think what worries me sometimes is when the funding is done, everybody ticks a box, 'Let's go to the next programme', and we can't allow ourselves to do that or be in that position.

Hang on, Oscar. Vikki, did you have a supplementary question or did you want to—?

Yes. It's particularly on this, really, because I was going to ask about outcomes and, clearly, as a panel, you've all already given your view that we shouldn't just be looking at job creation, it needs to be more than the number of jobs created. And, Robert, you used a range of different indicators that you rattled off there about, you know—

Sorry to rattle them off.

No, no. My question was going to be: do you think that those indicators are sufficient, or in order to try and capture the quality of jobs, do we need to be looking at something else? I know that Ken Skates is looking at the index of sustainable economic welfare. Now, I don't profess to be an expert on that, but is there mileage for that index, or something similar, to be considered when we're looking at the impact of Welsh Government finance on businesses?

I think the short answer is 'yes'. I think it's very easy to give a number of jobs and jobs secured. As hugely important as that is, I would certainly agree with you that other areas should be looked at in the types of jobs, the quality of jobs, the impact on the environment, the impact on communities and other areas that Cerys alluded to earlier. So, the short answer is 'yes', and perhaps that's an area that you may wish to investigate further as you proceed with this.

Let me give you another quick example, and this is something you need, I think, to investigate in terms of the data being gathered. I was told that data is—. I remember us asking for this information when we did the access to finance review because, obviously, the best database available was supposed to be the one run by Welsh Government, which had all these 30,000, 40,000 businesses. There's hardly any real information on there, and I'd want to measure that. Again, I'll put an academic hat on, but also, in terms of being a politician or a policy maker, I'd want to know which businesses are being supported, and where, how, and what impact it is having. So, to an extent, as far as I'm aware, no data on turnover of these businesses is gathered at all, or it's very spurious. And, remember, this is one of the challenges you have—because of accountancy rules, you can't just go to Companies House and ask because you've got exemption for any business with, I think, less than £10 million turnover. So, you're going to get a very small number. And imagine if you made that a condition of any support—that you have to provide us with a copy of your annual accounts, and somebody actually puts those in. Simple: what's the turnover? What's the profit? What's the number of employees? That's all we need to know, never mind anything else. And if we knew that, we'd have this amazing database by which, you know, the brainiacs you have in the economy department here, the policy makers, can actually look at it and say, 'Wow, look at the patterns we have here.'

The Development Bank of Wales now are starting to do research around the data they've had, but that's taken a recommendation from our report to say, 'Create a research and evaluation unit to do this, because you haven't done it since 2000.' For 15 years, nothing had been done and they're finally doing it. The same should happen here in Welsh Government, in that we should have information, so we know, for example, that—. We may find out that businesses in the Valleys are doing better than before. I can't tell you that, and the data you get from the national statistics office is not very good in terms of they just tell you the number of businesses and the numbers employed, that's about it. But if you knew—. You know, we could actually come up with a coherent economic strategy that's based on real facts, rather than people thinking, 'Well, this is maybe what we should be doing.' And businesses don't have to—. Businesses will turn around and say, 'Oh, God, we've got to fill in another form', but they have to do their accounts every year. It's a statutory obligation—well, for the majority of businesses, anyway—so it's a statutory obligation to do it. I have to do it, Cerys does it—we have to do that. All that financial information is there. If there was a way of actually securing that, so that we knew what each business was doing—if they were getting support. It's a small price to pay for getting the business support you need, and I can see no reason—because that would give you the sort of information you need to make some really good decisions. And the problem is, as I say, like all computers—bad information in, bad information out.


I think the other thing to add to that is thinking about who is benefiting. So, if you just take turnover, number of jobs and profit, you don't necessarily have a way to measure the kind of aspirations and needs in the economic action plan—

—around better jobs, fairer wages, so—

But you have the sector, and you can look, and you can add more to it.

You know, this is just—. We don't even have a base from which we can actually make decisions, and if you don't have that information—and I absolutely agree—that means you've already gathered the financial information, you can then start doing quite detailed surveys about some of the other things that actually make a difference to these businesses.

Thank you, Chair. Dylan, you mentioned a few times the Valleys—that's my patch, actually—and there's no shortage of loan sharks there. [Inaudible.]—financing for poor people; it's pretty bad there. The fact is that this banking sector is very important as a backbone for businesses. After Brexit, have you got the capacity to look after—? Or will we need another bank, another name, to make sure that our economy doesn't go in reverse rather than go forward? You just mentioned a few things and it's not very rosy at the moment.

I think you've done very well; it's taken you this long to mention the 'B' word. [Laughter.] Clearly, I think the strongest way to do this—Vikki mentioned it in terms of what can be provided—and like I said before, I repeat my call for either Welsh Government or other parts of the Welsh Government to look at this as a real social responsibility to the communities that it's supposed to be serving. You have the credit union movement, which I believe needs to be strengthened, needs to be given the incentive to do more work on the ground, and it's very patchy in Wales at the moment. And there'd be no reason why I think that, again, there couldn't be—. I'm not saying for Welsh Government to pay for credit unions, but, certainly, it can give the foundation, particularly with the funding that it has, so that those credit unions can actually play a more active role within their communities. There is no reason why anybody should have to go to a loan shark in a modern economy, a modern society. There's no reason. You can come up with legislation to get rid of them, but you never will. All you need is to give them a viable alternative, so that they can go to those and get the sort of funding they need.

I just want to pick up on corporate social responsibility, which we mentioned earlier. As well as turnover and profit, and numbers employed, do you think we also need the information about the ratio of the highest to the lowest paid employee?


Well, I can pick up on gender pay in that context. We would certainly be supporting a reduction of the threshold of the size of businesses that would have to report on gender pay, absolutely. But, again, as with any measure—I said earlier that it's about moving the dial—this is not about going into organisations and business saying, 'You're dreadful', as opposed to, 'How can we help you improve and grow in the right way?' That, for me, is what's at the heart of this economic approach. So, it's about moving everybody a step on and not setting an unachievable benchmark for lots of organisations in Wales.

I'd go along with that, and I think it's not for Government to say, 'You've got to pay this.' I think businesses would be expected to do the right thing and not be inappropriate in their pay scales.

No, I wasn't suggesting that Government should be telling people what they should pay their employees, but it was more about corporate social responsibility at the top—the people who are already paid well.

I think what you find, particularly for the majority of businesses in Wales, of which 95 per cent employ fewer than 10 people, is that in many cases the owner-managers, the founders of those businesses, are earning less than some of their employees, because of the fact that they're trying to get the business going. I think that's one of the things that the Federation of Small Businesses have highlighted. There's this impression, because, I suppose, the word 'entrepreneur' is associated with billionaires, but many people running their own businesses are on less than the minimum wage.

Okay, but would that be a mechanism for, if you like, transforming the image of business? I'm sure you're absolutely right, I don't disagree with that at all, it's just that the image of business comes up with Philip Green.

Not in Wales, one would hope.

But there are, and, again, this is one of the things that if we're talking—we're talking about the quantitative impact here, but the qualitative impact—. I've been working with Welsh entrepreneurs for 23, 24 years. Some of the fastest growing companies in Wales—. The one thing I found, working with about 600 of them over the last 20 years, is that if you ask every single one of them what the most important part of their business is, what's made them successful, every single one will say, 'It's the people around me.' That, to me, is what differentiates a lot of those businesses—'It's not about me.' Nobody ever gets an award and says, 'It's all about me.' The first thing they say is, 'I wouldn't be here without the people behind me who have made this a successful business.' And if you ask them, they say it's that team approach that, to some extent, differentiates Wales from other parts of the UK, that the solo entrepreneur thing, the hero entrepreneur—we tend to see that a lot in the south-east of England and London; it's far more of a team-based approach here in Wales, I find. And, yes, somebody has to lead the company, and it's somebody's idea, but it's creating that team that's made them successful. You know this from the businesses you've been in.

That goes back to your earlier point about providing balance sheets and that that's a good basis to start from, but there are other issues in Wales where our businesses benefit, maybe differently, from things like people than they would across the border.

I know how difficult it was when we were trying to get information from banks when we were doing the access to finance review—it was almost impossible. The banks would not give us any information at all. So, it was very difficult to find out what exactly was happening on the ground, but, again, I thought, 'Oh, we'll go to Welsh Government, they will have this massive database.' It was there, but it was very patchy, and I think, like I said, if you're going to make those decisions, that's going to be the base of what you have because that's available anywhere, but, by all means, have a discussion of what else you need to measure, because, in terms of business support, they will gather that information over time. That would be a tremendous instrument for economic development in Wales. I know it sounds boring, but that sort of information now, particularly with the way that we analyse and look at big data, is something that would be a major tool for Welsh Government in making decisions in the future on this sort of inquiry.

I don't want to start a crusade for the perception of business, but there are thousands upon thousands of businesspeople up and down Wales working really hard, getting on with it in very difficult circumstances. If there is a negative perception of businesspeople, I can introduce the people who hold that perception to thousands of others who are really making a massive difference to themselves, their colleagues with whom they work and also the communities in which they're based.


It's about considering this. Yes.

Oscar? No? Great. Okay. On the dot, a quarter past three. Can I thank our witnesses, Dylan Jones-Evans, Robert Lloyd Griffiths and Cerys Furlong for being with us today? It has been a really helpful session and achieved our aims of getting information from you to help us frame our questions for our inquiry to other witnesses, so thanks for all your help this afternoon.

I'm sure I speak for all three of us: just let us know if you need any further information. 

Definitely. And we'll provide a transcript, so if anything else occurs to you once you look back through your answers, then that'll be really helpful. Great. Thank you.

5. Cynnig o dan Reol Sefydlog 17.42 i benderfynu gwahardd y cyhoedd o'r cyfarfod
5. Motion under Standing Order 17.42 to resolve to exclude the public from the meeting


bod y pwyllgor yn penderfynu gwahardd y cyhoedd o'r cyfarfod ar gyfer eitemau 6, 7 ac 8 yn unol â Rheol Sefydlog 17.42(vi).


that the committee resolves to exclude the public from the meeting for items 6, 7 and 8 in accordance with Standing Order 17.42(vi).

Cynigiwyd y cynnig.

Motion moved.

I move Standing Order 17.42 to meet for items 6, 7 and 8 in private session so we can consider our evidence and some other issues. 

Derbyniwyd y cynnig.

Daeth rhan gyhoeddus y cyfarfod i ben am 15:16.

Motion agreed.

The public part of the meeting ended at 15:16.