Economy, Trade, and Rural Affairs Committee

Fe symudwn ni ymlaen, felly, at eitem 3 ar ein hagenda. Heddiw, rydyn ni'n ystyried hynt prosiectau'r pedair bargen ddinesig a thwf. Dyma'r tro cyntaf i Bwyllgor yr Economi, Masnach a Materion Gwledig gael yr wybodaeth ddiweddaraf. Cafodd y pwyllgor a oedd yn ein rhagflaenu ni, sef y Pwyllgor Economi, Seilwaith a Sgiliau, yr wybodaeth ddiweddaraf am y prosiectau ym mis Mawrth 2021. A gaf i felly estyn croeso cynnes i'r tystion? A chyn gofyn iddyn nhw i gyflwyno eu hunain, mae'n werth nodi bod nifer o gyrff ynghlwm wrth fargen dwf canolbarth Cymru ac, o ganlyniad, mae gennym ni banel o dystion anarferol o fawr ar gyfer y sesiwn hon, ac felly a gaf i ofyn i bawb roi atebion cryno ac osgoi unrhyw ailadrodd diangen? Felly, cyn ein bod ni yn symud yn syth i gwestiynau, gaf i ofyn iddyn nhw i gyflwyno eu hunain i'r record? Efallai y gallaf ddechrau gyda Nicola Williams.

Good morning. Bore da. My name is Nicola Williams, and I'm the joint strategic lead for the mid Wales growth deal and the Mid Wales Corporate Joint Committee.

James Gibson-Watt.

Bore da, Cadeirydd. Thank you very much. I'm Councillor James Gibson-Watt, I'm the leader of Powys County Council.

Clive Davies.

Bore da. Cynghorydd Clive Davies, aelod cabinet dros Geredigion. Dwi yma yn lle y Cynghorydd Bryan Davies, sef y leader.

Carwyn Jones-Evans.

Bore da. Carwyn Jones-Evans, rheolwr corfforaethol Cyngor Sir Ceredigion a hefyd y cyd-arweinydd strategol ar y gwaith Growing Mid Wales gyda Nicola.

And Kellie Beirne.

Good morning, everybody. I'm Kellie Beirne. I'm director of Cardiff capital region and chief executive of the South East Wales Corporate Joint Committee.

Well, thank you very much indeed for those introductions. Perhaps I can just kick off this session with a bit of a general question, really. Can you outline the main areas of progress that your particular deals have made since you or your colleagues last gave evidence to our predecessor committee, which was back in 2021? Who would like to kick off with that? Clive.

Since 2021, we have set about developing the strategic portfolio business case, and that was following the Government guidance and best practice, and then commencing that and then the programme and project development. That led to the approval and agreement of the final deal in January 2022, which confirmed the scope of the portfolio, including two indicative programmes and nine stand-alone projects. And then, throughout the summer and autumn of 2022, projects were submitted with their strategic outline cases, which have been assessed and approved, giving about six projects to proceed to development of their outline business cases, of which two are required to be resubmitted, and there is one future project looking to progress from feasibility to an SOC in autumn 2023. There is also progress being made on the two programmes, the digital and the sites and premises, as well. So, quite a lot has been done in a short space of time. We've gone from heads of terms to getting into delivery within a calendar year, almost. Thank you.

Yes, okay. Anyone else? James.

Well, just to say, it's very welcome that we've had the first tranche of money from Welsh Government, which was quite long awaited, but welcome nevertheless. That's pretty crucial, really. It was quite a crucial milestone for us to see the first—. It gives reassurance, doesn't it, all around, both to ourselves, but also to the sponsors and the project leads, that this is really happening. That, for us, was a big boost.

Okay. Anyone else on this? Kellie.

Yes, if I can go, please, Chair. We're in a different place, as you know. We've been operating for six years. This will be our seventh year now of full operation as the Cardiff capital region city deal. We've actually committed about 87 per cent of our fund to date, as you'd probably expect at that stage in our process. We're on track with all of our targets in relation to both job creation and leverage. We hope to leverage over about £2 billion-worth of additional funding. There's lots of match funding coming in via our work with Welsh Government, via the work that we do with organisations like UK Research and Innovation. We've secured those two Strength in Places funds: nearly £40 million on Media Cymru—that's to help our creative industries in the region—and £45 million for the compound semiconductor sector and CSconnected, which is our cluster group.

So, we're making really good progress on clusters generally. Along with Welsh Government, we've invested nearly £20 million in the cyber innovation hub. That's a hub that catalyses growth in cyber innovation, not just for economic benefit, but for societal benefit, and that's something that truly embraces the whole of our region, given the asset base, given where our companies are, many of which are in the northern Valleys, alongside some of our key educational institutions. We've also invested in Media Cymru, as I've just mentioned. Last November saw the launch of our £50 million innovation investment capital, which is run and managed by Financial Conduct Authority-accredited fund managers. We've just announced the first investment from that fund.

I suppose the big piece of news was that, about 18 months ago, we acquired the former coal-fired power station at Aberthaw in the Vale of Glamorgan—really significant. That represents about a £40 million investment, and significant because we're trying to take that asset and repurpose it as a green energy hub, which will hopefully fulfil some of the region's energy requirements, particularly around renewable energy generation as we look ahead. So, that's a particularly ambitious project. We've acquired the site. We're in the process of letting a demolition contract. But clearly, many more opportunities to come, particularly around the research and development space, which for us is critical. If we're going to grow the Cardiff capital region economy in the right ways, then we have to invest in high-productivity mechanisms, so a research and innovation system is really, really important.

And on top of some of the activity that we've seen in the northern Valleys, for example, our first investment under our strategic premises fund was in a company just outside of Ebbw Vale, and Zipworld, of course, that's a really important asset, but this summer as well, our regional cabinet agreed a £50 million investment in the northern Valleys seed fund, which we hope to match against other investment sources, which will look to leverage some of the benefits of the Heads of the Valleys road, the dualling of the A465. Regional cabinet also agreed a £45 million investment in upgrading to full fibre connectivity, which, again—. We're looking for investments that can really benefit the whole of the region.

Yes, and are there any specific areas where progress has been slower than anticipated, and, if so, what were the reasons for this?

I think, in the Cardiff capital region, we've all been hit with the same set of issues. The headwinds are global at the moment, aren't they? The economy is the geo-economy. The issues that we face in sectors like compound semiconductors are geopolitical, so we are now competing with the world, which is very, very different stakes. So, yes, there will always be crosswinds, there will always be an upside and downside, but, I think, understanding the nature of some of those global trends is really important.

We've seen, with the war in Ukraine in particular, the rising cost of energy, instability of global supply chains, and, I think, around some of our infrastructure projects, perhaps transport in particular, the rising costs of goods and materials is having an impact. We're trying to manage that as best as we can, but, yes, that's something that I would highlight as being a factor that we really have to keep an eye on in relation to our key risks and challenges.

And from the mid Wales growth deal perspective, are there any areas where progress has been slower than anticipated?

Well, I suppose, similarly to the previous speaker, the headwinds that are affecting everybody, they're bound to affect your investor confidence, and the confidence of the people developing these projects. And inflation is a really big issue, because this is a deal that is—. All the deals are over a period of years, and for every year that goes by, the costs rise, and so, I should say that that is certainly hampering progress with some of the projects, for sure. But we're still making progress; it's still moving forward. And I think we're confident that this is going to work despite all the pressures. So, yes. But I think all of these growth deals are bound to be affected by these similar problems.

Yes. I'll come to Carwyn, and then I'll come to Clive. Carwyn.

[Inaudible.] I think the advantage we've got, in terms of where we are, is that the projects are still in their planning phases, and we're very much in that position of, 'Okay, so your ideal utopian vision of the project is no longer deliverable'—they need to work harder in terms of looking at investment, levering investment from other sources. And I think it's not a bad conversation to have, rethinking, relooking at all these aspects: is building a building the right option? Can you build it in a different way? Can you reuse? Again, thinking about net zero and climate change targets as well. So, it's not a bad conversation to be having, but it is also a bad conversation in terms of ensuring that we actually give accurate figures to Government in terms of what spend we'll be able to achieve in the coming year. And it is a challenge because, with prices, the outline business case is pre-procurement and the full business case is post-procurement, and things change in that landscape as well. So, just to articulate that, but we're mitigating it just because of where we are. But as Councillor James Gibson-Watt said, we're still confident; we're just having to relook at the optimism bias in the figures we've got currently. But we're still confident.

Yes. Clive.

Just to add very briefly, one thing that's good—. As has been said, it's early days yet, but the portfolio of the project is a good mix to mitigate some of that risk, I think.

Thanks very much for that. And, now, Hefin David, you want to just come in on this.

Yes, just on mid Wales, just to follow up on the question you asked, Chair, if that's okay.

Yes, sure.

With regard to the UK Government's re-profiling of its financial contribution to the deal, have you had information about that, and will you expect to receive confirmation?

Carwyn.

So, I'm happy to answer this one. So, no, we haven't officially. So, the process is, I believe, that all Welsh and city deals are being re-profiled by the UK Government currently. We submitted a re-profile a couple of months ago via Welsh Government, being the accountable body between the UK and Welsh Government, but we still haven't had confirmation, no. But from civil servants, we have had assurance that it is being considered and no issues. So, we're taking it as no news is good news, but we're proceeding regardless.

Okay. Thank you very much. I'll now bring in Vikki Howells. Vikki.

Thank you, Chair, and good morning to all the witnesses. I've got some questions on the Cardiff capital region city deal, so I'll direct those to Kellie. And thank you, Kellie, for the update that you've already given us. I'll start by asking about the wider investment fund, and maybe if you could outline for us the latest position regarding the projects that have been approved there, and maybe the amount of money invested, and the extent to which those projects are actually spread across the region.

Thank you very much for the question. So, yes, 87 per cent of the fund is now committed, of our wider investment fund, which has been really good progress. We've tried to drive that really hard in the last few years. So, our level of spend was up to about £50 million last year, which is significant for us. That represents quite a big ramp. So, you've got all the leverage coming in against that.

So, significant projects that have been approved and we're delivering and deploying on: the innovation investment fund; some of the cluster projects; in our strategic premises fund, for example, Pulse Plastics, just outside of Brynmawr—really significant to sit alongside some of the assets that we're starting to build up in the northern Valleys. And again, some of our equity investments include Apex, which is an additive manufacturing facility that we've supported in the northern Valleys as well.

So, our regional cabinet were really keen that, in terms of how we distribute our fund—. So, with our £500 million, what we've tried to do is invest in a range of projects that benefit all areas. So, you'll see that every single area has a metric for a sustainability project. Every single area will get access to the full fibre connectivity, to our Venture skills programme to try and retain graduates, to try and get people reskilled and upskilled in terms of future industries. Every single area has access to things like our housing viability gap fund. Then what we do with the rest of the fund is try and deploy that in terms of investments, and I think the really good news is, yes, regional cabinet approved that northern Valleys initiative—£50 million—they've just recently approved the full-fibre connectivity project, but a lot of our investment—. The significant thing is we've made investments. Yes, we've had to put some subsidy into places, because not everywhere is commercially viable—we're trying to work on that—but because we have equity investments, because we have debt investments, those things are starting to repay. So, the big benefit, and I'm probably holding myself here as a bit of a hostage to fortune, because something will probably happen after I've said this, but I think the real benefit for us is those things are starting to come back into a secondary fund that we can use to leverage against and we can redeploy to have further impact in the region. So, I think for us, the financial sustainability of what we're doing, especially in this climate, where the outlook on public finance is very serious and there are some grave challenges—building in that sense of self-sufficiency, self-reliance will be really important, especially when we go to other funding sources and try to leverage against them.

So, geographical spread is really important for us, and I think the good news is we recently did a deep dive into the competitiveness of the northern Valleys, and we've seen some significant improvements. Blaenau Gwent no longer sits at the very bottom of the UK competitiveness index now, which is important. But in the 2023 index, the Cardiff capital region was the biggest climber on the index that measures the UK city regions. I'm not saying that's all down to us, of course it's not—it's always about a partnership—but I think for us, the trajectory looks good. I think the bit that we've got to nail is that there's more opportunity than there is money. So, how do we start leveraging against our collateral to raise more investment, to keep this going for the future?

Thanks very much, Kellie. And would you say that the degree of progress in approving and investing in projects to date would be as expected at this point, seven years since the fund was agreed?

Yes. So, it's a really good point. So, our deal—. I think that the re-profiling question is important for us as well. So, our deal was re-profiled from 20 down to 15 years. As I said, we're in year 7, and we've committed about 87 per cent of our fund. So, I think the big opportunity for us is getting that money back into the recycled fund, so we can have a second churn of our wider investment fund, if you like, and keep that approach going.

Thank you. And so, with those years in mind that you just outlined, what’s the current target date for fully committing the wider investment fund? And do you feel confident that you'll be able to secure the pipeline of projects needed to achieve that?

Yes. We have a significant pipeline at the moment. I think, best-case scenario, we've got about £70 million left in the fund. We're going through an exercise at the moment where we're doing a portfolio review of all of our projects. So, I think we could probably deploy all of that within the next couple of years. So, our fund will now be fully committed within a 10-year window. I think the big question is: what happens after that? Because we would like to use our recycle fund to go to UK Government, to go to private markets. We would like new instruments, through the CJC, like tax increment financing, value capture. So, we've got really innovative financial levers and mechanisms to keep having an impact beyond the life of just this first city deal.

That's really interesting. Thanks very much. Thanks, Chair.

Thank you, Vikki. I'll now bring in Luke Fletcher. Luke.

Diolch, Cadeirydd. If I could just stick with you, Kellie, just around particularly Aberthaw power station. I was wondering if you could give us a bit of a timeline around the renewable energy hub—how long you think it'll take to get it off the ground and what impact you see that project having.

I love Aberthaw. I mean, every time I go there, it's overwhelming to see it. Those of you who know this site will know it's 450 acres, 70 acres of which is a nature reserve, so it is a really important asset locally as well, and there's a strong community dimension that I think is worth talking about here. So, as I say, we're in the process at the moment. We've spent around £8 million acquiring the site. We have put aside about another £32 million to go through the process now, which will take us through, as I say, razing the site to the ground, which will take a period of time, but whilst we do that, we equally have opportunities. So, for example, there's a large pulverised ash mound on the site, which has a real opportunity in terms of the circular economy, which is something that we're looking at. There's the potential that, as we demolish the site, we could be doing solar projects, battery storage. Green hydrogen is something that we want to be looking at for the future. But we're going through that phase at the moment, I think, of trying to set out the plan; the first business plan will come into regional cabinet very shortly.

I think one of the positive moves that we've made is that we've set up a special purpose vehicle, so a company limited by shares, which is owned by all the 10 local authorities in the region. So, that board that we've established of non-executive directors will now assemble, and they will drive forward the business plan now for the next few years. I think one of the things that I'm really keen to do quite quickly is establish some kind of research and development presence on that site. I think, because of its scale and because of its potential to demonstrate new things and its proximity to the Celtic seas, this is a unique research and development opportunity for UK Government and Welsh Government, in line with their innovation strategy and objectives. So, with Aberthaw, there will be a lot that happens. I just don't want to create the impression that we're going to have to wait years and years for it to be demolished before we can start. Some of these things will start to go on simultaneously, and the hope then is that—. Clearly, I mentioned the crisis in relation to energy supply and energy security, and I think making sure that we have a focus on generating domestic energy capability is going to be really important in the Cardiff capital region and Wales as a whole.

So, a lot of ambitions, but I didn't hear any specific timelines as to when you might see a lot of these projects get off the ground and ultimately come to their end. It was interesting, actually, you mentioned the ash pile, because I've read a fair bit around it, about some of the opportunities of extracting minerals from that pile. So, there's no specific timelines as of yet?

We're going through the process at the moment, so the business plan will come in. The company that we've set up is a company limited by shares, so we're going through a process of assessing some of the submissions that we've had at the moment. I would say in the next couple of years there will be definitely something on the pulverised ash mound. We're going through a process at the moment of commercially assessing some of the other potential that we have on the site, so that we can have a plan. It's attracted quite a lot of international interest as well, it's captured imaginations. So, once we have an agreed company business plan that the regional cabinet endorses, we can make that available and we can be more specific then about how we will twin-track certain things and the time frames that you can expect to see in terms of some of those projects going forward.

Okay, thanks for that. In terms of costs associated with Aberthaw, then, in terms of the costs of purchasing the site, which you've already touched on, the costs of redeveloping the site, can we just get some clarity on what the overall costs are, as it currently stands, and where you might see those costs going as well?

So, as I said, we've put aside about £40-odd million in terms of the acquisition, razing the site to the ground, preparing the land. There are some significant issues on that site, as you can imagine—it's sea defences, it's coastal, so we've got to think about all of that infrastructure as well. But as I've said, in our wider investment fund, we've only got about £70 million, £65 million left. The idea then is that this site is taken forward to produce green energy, to have a focus on renewable energy—absolutely we have to have domestic energy capability in the region. But we want to use that to leverage other funds in—commercial funds, UK research and innovation funds, which is something I think we're building up a track record in. We will be going to private markets, there's sovereign wealth capability here, such is the size and scale of this opportunity. So, I think what we're trying to do in the Cardiff capital region is seize something. It's about putting our investment in as a catalyst and then leveraging against the collateral that we're building up. So, there'll be a mixed-investment approach, and this will be set out in the business plan that's coming forward from the company limited by shares. But again, £40 million is a drop in the ocean—that won't even scratch the surface in terms of what's needed here. This is about a long-term investment plan and really understanding our capability in terms of going to the market and accessing—. We'll need hundreds of millions of pounds to make this a success and a reality that will benefit the region and local people in the Vale of Glamorgan as well.

So, in terms of the money spent on the project, then, what arrangements are in place to scrutinise and ensure that what's being spent is proving value for money? What are the scrutiny arrangements around the spend?

So, the Cardiff capital region scrutiny committee has looked at Aberthaw already in terms of the initial phase, the significant due diligence that went into purchasing this site. Obviously, the arrangements to purchase the site were done under private tender, given the land holding and given the company involved. So, that has been scrutinised. Now, because we're in the phase of committing further funds for demolition and potentially redevelopment, that business plan, then, will be subject to the same scrutiny mechanisms. But to give you additional assurance on this point, Aberthaw has been set up as a company limited by shares. So, CCR Energy Limited is the owner of this, so all the scrutiny that comes with being a company, information that goes into the public domain, the board of Aberthaw, the non-executive directors—all of that obviously goes through all of the appropriate external scrutiny processes, as well as the internal ones too.

Great. Thank you very much. Diolch, Cadeirydd.

Can I just ask you, why was it decided to purchase this particular site, given some of the challenges you've just mentioned to get the site up and running for some of your projects?

Well, there are huge opportunities in relation to the size and scale of the site. I think, in terms of the rationale, which regional cabinet was strongly behind, this is really ambitious, it gives us a set-piece project. This is something that is a 20-year, 30-year endeavour. We recognise that we have considerable deficits in terms of renewable energy generation in the region. We know that we have issues with fuel poverty, for example, affordable warmth. So, this is an asset that we can leverage for the future. And I think, given what we paid for the site, the value-for-money argument is about the value it represents for the future; it's being bold and ambitious. And I think the rationale behind it was, we're not here to asset-strip the site, or to break it apart and sell off its component parts; the public sector can be a long-term, responsible investor—we can be a good custodian of the site. As I mentioned, it's coastal, it's got communities close by, it's got a nature reserve, so huge opportunities for the circular economy. We're thinking about biodiversity in very different ways. So, yes, we're not here to do very small, minimal-impact projects that keep us safe; I think the idea is the public sector is here to take risk—for reward, but with a strong sense of responsibility. We're here to shape and create and stimulate new markets. We're not just here to meekly enable safe projects—we've got to be in the space of making big, transformative things happen, and I think that's definitely the kind of ambition that you'll see behind the acquisition of Aberthaw power station.

Okay. Thanks for that. I'll now bring in Hefin David.

Diolch, Gadeirydd. Can I just come back to the mid Wales question that we had at the very beginning? I'd just like to ask about the funding breakdown in the final deal agreement, which refers to a contribution of between £75 million and £132 million from 'other public sector'. Can I ask the panel what contributions will Ceredigion and Powys councils each be making as part of this?

I'm happy to answer this initially in terms of the more detailed question. There's a range of things, really. The figures we've got in the final deal agreement are actually based on information that's coming through on the project. So, these aren't targets—these are projections. When we are developing the strategic outline cases with our external partners and sponsors, effectively the funding breakdown comes from figures that they're putting and committing to as part of their strategic outline cases. There's a mix in terms of other lottery funding, some Welsh Government, because a lot of the schemes we've got in the growth deal are adding value or complementary in terms of what's already happening. So, the growth deal has effectively been that catalyst or leverage, a word that Kellie refers to quite often. We see our mid Wales growth deal in the same way—it's ultimately a blunt instrument; it's £110 million of capital funding. It's very difficult capital funding to deliver, particularly in somewhere like mid Wales, so we've had to build organisational capability, capacity, ways of working and leverage, and make that £110 million sweat as far as it can. So, in respect of that figure that the Member of the Senedd referred to, effectively, that's where it comes from.

In respect of Powys and Ceredigion contributions, both local authorities have got capital reserves in respect of economic development, but their main direct contribution currently is in revenue terms, because apart from initial one-off support from the Welsh Government in revenue terms to help establish our portfolio management office, there is no revenue funding; we can top-slice an element of the capital funding to effectively run the portfolio management office, but being two local authorities in mid Wales, the local authorities carry that cost of running the growth deal and running the system, as it were, and that's to the order of about £200,000 to £250,000 per annum of revenue. But again, having all of the years of developing this, that obviously adds up to a significant contribution from two small local authorities in the context.

Thank you very much. And with regard to the private sector investment, the final deal agreement says it's between £92 million and £157 million. Can you help us understand how you will secure the investment?

I'll happily answer that one again. Again, that's what our project sponsors are confident of in terms of leverage. There's a few projects in there that are looking to partner with the private sector directly. In respect of a couple of projects, they are looking to, effectively, work with a major sponsor or private company in respect of the project that they're developing. In respect of the digital and sites and premises programmes, they are projections that we are estimating based on market intelligence and discussions with private developers and private partners in the region. We know circa what the gap is in terms of public sector funding, and that word Kellie used, 'market failure'. There's a lot of it in mid Wales when it comes to sites and premises provision and also digital provision, but, again, we've based those projections on quite a few years of work. Particularly in terms of sites and premises, our main issue is land availability and whether or not we can build things, and also ensure that we don't have a strategy of build it and hope people will come.

There's been a lot of engagement. We've got Savills working with us, particularly in respect of sites and premises now, so being the leading commercial property experts. We are quite confident that we're now starting to identify two strategic sites for development under that programme. The figures look commercially viable, and, again, looking to attract private sector partners to help build those out. And the secondary element then is obviously the nature of mid Wales. We don't want to try and use the growth deal just on a handful of small sites, either. We want to try and spread it because the nature of the businesses and the economy in mid Wales. So, again, we're possibly looking at some sort of local market intervention fund. But again, there are a lot of conversations with the Welsh Government to ensure that we're adding value and not duplicating—that we're complementing the offer and actually filling a gap in mid Wales.

Diolch, Gadeirydd.

Thank you, Hefin. I'll now bring in Buffy Williams.

Thank you, Chair, and thank you for joining us this morning. I have some questions on risks to delivery. Could you please set out the main risks and challenges affecting the delivery of your deals and how you are mitigating these risks?

The risks are around the general economic situation—the relatively anaemic economic growth generally across the whole of the United Kingdom. And inflation is a really big risk, obviously not just for the growth deals, but for the economy generally. Those things are causing problems for the private sector investors in particular. Obviously, they’re inflating the costs of the projects daily, so that is a massive risk, there’s no doubt about that, and the quicker that inflation can come down, the better it will be for us all, but particularly for the growth deals.

But we’re working flexibly. We’re in constant contact with the project sponsors and we have a really good economic advisory group now. They’re very challenging, but they’re very wise, too, and they’re helping us out in that respect. Again, that helps us in understanding how these pressures are impacting on potential investors. There are, no doubt, lots of other risks, but I would say the general economic situation and inflation is really the biggest problem, because it’s deflating the value of the deal daily. We have to be frank about that, and we’ll have to adjust our aims and objectives accordingly. I suppose that applies as much to every growth deal. You just have to adapt as time goes on and do what we can—do the best we can with what’s available to us.

Does anybody else want to come in on that?

Yes, if I could come in as well. I'd say 'ditto' to all of that. At the macro level, inflation and interest rates do affect supply chains and do affect the skills market. The skills market is really difficult. Recruitment at the moment, I just—. In all of my career I’ve never known a time like it, getting the right skills in at the right time at the right level. I think during the pandemic and the immediate aftermath we just lost so many people from the workforce. It really, really is a struggle.

One of the messages that we’ve had back from a recent study is we’ve got lots of knowledge growth in the northern Valleys, but we don’t always have the capacity to absorb some of that. So, it's thinking of that differently, about a skills strategy for the future—upskilling, reskilling, thinking about the generational gap. There’s probably an untapped workforce, and I think we need to think very, very differently about that. We're trying to do that with our venture methods, we’re trying to think about reskilling, and I think there’s just a set of skills now that is expected of every single sector or cluster. They all need people who understand data and digital in particular—that is hugely in demand.

The macro level stuff massively impacts us as well in terms of geopolitics. If you think about the compound semiconductor sector, which for us goes from Cardiff and Newport to Bridgend, with Philtronics in the Rhondda valley, there are huge issues when you’ve got, in North America, a CHIPS Act committing multiple billions of pounds. We’ve got £1.2 billion pledged in the UK, which is something, but we have to recognise the competition is not the rest of Wales, or the rest of the UK—it’s international.

We’ve made some moves in the last few days. You’ve seen on the creative industries we’ve just announced a deal with the Welsh Government, a £20 million deal on Seren Studios. Keeping that creative industry here in Wales is really important to freelancers, sole traders—that whole media industry. So, we can intervene, we can do things positively, but I think the biggest risk to us going forward is we’ve got to get more investment into Wales, we’ve got to increase productive capacity. Innovation investment has to come in. I think looking ahead to some of those big opportunities around innovation zones and innovation accelerators, and making sure that we secure some of these big investment tools, is going to be key to our future prospects.

James Gibson-Watt, you'd like to come in on this.

There's something I should have mentioned. There's a renewed focus on skills, as Kellie mentioned. That's a really important issue. There's a renewed focus now in mid Wales on enhancing the skills base, and ruthlessly, if you like, reconnecting the skills delivery to the needs of business. Because there's been a bit of a disconnect, let's be frank, and it has never really worked terribly well. We've talked about it a lot over many, many years, but now the need is so acute. I have to say that I think we're making really good progress on that, and also reconnecting the work of the local authorities with the learning providers more broadly. Local authorities have tended to focus on their schools in the past; actually, that's changed now. We're all very much looking at reconnecting the work that we do with local FE providers, work-based learning providers and so on, and, indeed, community learning, and broadening out that collaboration. That's absolutely key, because if we don't get that right, this won't work. We fully understand that and we're absolutely determined to make it work. Thank you.

Back to you, Buffy.

Thank you. I know we've touched on mid Wales, but I have another question on this. The Government assurance review in February 2023 identified that more needed to be done to formalise the mid Wales growth deal's action in respect of private sector investment. How are you responding to this?

As mentioned, the economic advisory group has now been set up and they're actively involved in the progress of the growth deal, which is great to see. It's a cross-section of different sizes and types of businesses that we have across mid Wales. They're experienced individuals and they provide constructive challenges on how the growth deal has been progressing, a lot of challenges in respect of the business case planning process and the hurdles we've had to jump in respect of the funding. They've been helping us and advising us on that. There have been good discussions and good scrutiny going on around that in terms of the details of the projects and the programme. In a way, we've created this space as well with the private sector and between the two authorities—this new space that we've created where we can actually have all these conversations. And there's additionality and adding value to it. It's really making an impact—not just on the finances, but there's a wider implication here, I think.

There's been developed now a private sector investment strategy in response to that observation. The assurance reviews actually have been positive; they're showing that, actually, we are addressing these issues and we're getting it right. So, I'm confident that—. It's a good question, because it's always a big problem. It's just a fact of life and has been for decades that, to get significant economic progress in rural Wales generally, but particularly in mid Wales, there has to be a significant level of public intervention. We've known that for a long time and it's as true today as it was back in the 1960s and 1970s, and nothing has changed in that respect. So, this is always a great challenge for us, there's no doubt about it—attracting private sector investment has always been a challenge and always will be, and it requires a lot of hard work. But I think we now have the strategies in place to make a difference.

Very quickly, just a final comment. Obviously, that private sector investment strategy really is there to set the parameters and expectations, ensuring that the project sponsors do sweat the amount of funding that they've got on the table as hard as they can. We're there to support them and work with them, but ultimately it's their responsibility. Because this is not a grant fund. We haven't set this up as a grant fund from the start. There's a lot of work that the projects have got to do to effectively demonstrate and justify the case. They've set their projections as part of their strategic outline case and now they've got to deliver them as part of an outline business case. But again, we've got some projects that do vary and are starting to probably look at reducing some of the outputs and figures, as James was referring to earlier, because of the investment climate. But some are looking to deliver more jobs, and that's the nature of the portfolio; we take a look again and see, 'Are these delivering what they were intending on delivering?'

The other point is around private sector investment and a lot of the space that Councillor Clive was referring to, in that, in conversations with a lot of businesses in mid Wales, there are a lot of issues, actually, that wouldn't be addressed by growth deals—things like skills, a lot of revenue support, business support, how we better integrate services, how we ensure that we've got a productive planning environment, all of these aspects. And the space that we have off the back of developing the mid Wales growth deal—a lot of the conversations that have stemmed from that actually have been very productive. Because from day one, we realised that we needed to build capacity and capability in various organisations in mid Wales. If we're going to do a transformational change, delivering £110 million of capital is not going to transform the mid Wales economy—it's what you do around it.

It's for another discussion in another committee, but in respect of the shared prosperity fund and other funding, we have aligned those to what we're doing in terms of the Growing Mid Wales strategy. That's sort of in lockstep with the Welsh Government's regional economic framework—their plans and strategies—and also the UK Government's ambitions. Because ultimately it's the mid Wales level and the local authority level where it all connects on the ground. So, we've made sure that we align things at source, effectively, so, when it comes to private sector investment and needs, trying to join the dots, because everyone has got a different part of the jigsaw and we need to try and bring it together.

Okay. Thank you, Buffy. I'll now bring in Sam Kurtz. Sam.

Diolch, Cadeirydd. Good morning, panel. Starting with Powys and Ceredigion, as you're in the room, what's the current position regarding corporate joint committees with yourselves?

Thank you. I'll answer that question. So, the corporate joint committee in mid Wales has been established and it's operational. It's meeting four times a year. It's been established in accordance with the legislation. We've got delivery plans in place for the regional transport plan and the strategic development plan. In relation to the economic well-being sub-committee, we're still planning the scope and function of that committee. We're currently running our existing arrangements for the mid Wales growth deal alongside the corporate joint committee. We're working with the Organisation for Economic Co-operation and Development and the Welsh Government to scope out that work and our thinking as to what the possibilities of this sub-committee will look like, going forward.

We're proposing initially that the CJC economic well-being will adopt the strategy-only approach to the economic well-being, but this is still work in progress, and there's more thinking to be done around this sub-committee. There's been no definite decision to lift and shift the growth deal into the economic well-being at this point in time, which I know, potentially, other regions have done.

We are in the process of producing our corporate plan for the corporate joint committee. That will be out to consultation in the autumn for implementation in the new year, and that, hopefully, will give further details around the economic well being sub-committee.

Okay, thank you. Before I come to you, Kellie, I just want to come back on that, and maybe it's more of a political question than that. What's the rationale behind not lifting the deal into the CJC?

The thing is—. I think, when the CJCs were set up, what was good about the way that they were set up was that, actually, Welsh Government left it to the CJCs to make of them what they will, in a sense, and decide for themselves. So, for the Cardiff capital region, you've got 10 local authorities, is it? It makes huge sense for them to create a really powerful vehicle to deliver a lot of this stuff, particularly economic development, skills development and so on. For us, it's two authorities. We're already working really closely together on these issues anyway. So, there's no point in reinventing the wheel, if you like, if we're already doing this stuff, and there's no point in putting stuff into the CJC that doesn't need to be put in.

Now, there will be, in time, as things develop, undoubtedly, things that we will want the CJC to take responsibility for. But, given the really close and constructive working relationship we've developed over the last 18 months or so, in particular since the last round of elections, where—. I think it was fair to say that relationships between the two cabinets previously weren't as good as they are now; there's no doubt about that. I think we'll use the CJC in as pragmatic a way as we can, without creating an extra level of bureaucracy to things that we don't need to.

So, on that point of an extra layer of bureaucracy, if there isn't a lifting of the deal into the CJC, isn't there a risk of duplication there, given that the CJC exists, the growth deal exists? If there was a mirroring and if those sat simultaneously together would there be less duplication, given that you're not moving one into the other, or is it that those relationships exist anyway so that duplication is just—it's the same point of contact of one local authority speaking to another, regardless of CJC or growth deal?

I don't know how often Carwyn and Nicola talk to each over, but I guess it's more or less daily. So, the work that's going on jointly with the growth deal is—. They're so enmeshed now. Okay, put it with the CJC, but it's not going to make any difference to the way it's functioning, because the working relationship is so close anyway. But there will be plenty of other—. I think the sub-committees will be really important once they're fully up and running. They're fully populated now, the members are there, scrutiny arrangements are in place, so that will develop quite quickly now, and, undoubtedly, there will be an increasing role for the mid Wales CJC as time passes. But, as far as the growth deal is concerned, we don't see the need at this time to move it in, but that doesn't mean that that won't happen in the future.

Okay.

And Carwyn, you'd like to come in on this.

It's a very quick one. I think that 'at this time' is an important statement, because I think, as Nicola was referring to, there are ongoing conversations with Welsh Government, UK Government, OECD, in respect of future funding landscape. Growth deal is just a funding vehicle for a capital programme, effectively. We don't see the risk of duplication currently, because the economic well-being committee effectively maintains and owns the strategy. We've got a cross-sector Growing Mid Wales partnership that's currently looking at refreshing that strategy document, again working with our stakeholders and partners in the region, and the CJC can adopt that as a strategy. The delivery of the growth deal, then, is about accountability and reporting to Government and ensuring that we invest the funds wisely. That needs its own space to deliver, but, again, we've got various other sub-committees underneath, with a dotted line, as it were, in respect of the shared prosperity fund and other activity, like the regional skills partnership, because we do need that space where everything elevates up to, so it does make sense currently that the CJC economic well-being committee has a strategy function, because that's where it all brings together.

But, yes. And just to—. I probably speak to Nicola more often than I speak to my wife. [Laughter.] Not to put that on record, but, yes, we do. [Laughter.]

I could see, when James raised that question, both of you nodded along there—

We do, because it is important, because, particularly going back to the private sector investment point and partners externally in Welsh Government and how things join up, we do need to join up, and what Nicola and I have got responsibility of—. I line manage the growth deal portfolio management office, Nicola line manages the skills team. That doesn't make a difference; we all come together on every Monday morning, and all the teams integrate. So, again, we can make it work, because we're two local authorities.

Yes, okay. Helpful. Kellie, to move to yourself and Cardiff and the CJCs there, what's your take on the current setup of CJCs and the deal, the city deal itself?

Yes, so thanks very much for the question. The CJCs are really important to us, because our current way of working is ever more constrained. We're bolted onto a council as an accountable body at the moment. We don't have our own balance sheet, we can’t act direct, we can't hold or acquire assets, so having the autonomy of the CJC is really, really important; more freedom and flexibility, I think, to be interventionist, I think, as colleagues in mid Wales are saying.

So, with us, our context is very different. So, at the moment, we've got the Cardiff capital region city deal joint committee. Under that, we've got about 12, 14 other committees, skills partnerships, a brilliant economic growth partnership, a business council, a programme board. Every time we make an investment, we have to set up a governance structure to make sure that it's looked after properly, and that's starting to feel a problem. I go from committee to committee. That seems to be what I seem to do a lot of at the moment. So, we're taking the opportunity and setting up another joint committee to lift and shift, so we've got one integrated model of public investment. It enables us to rationalise some of what we have and to also really up the ante in terms of the contributions of the private sector—so, working across that triple helix of businesses, universities and the public sector. We've got so many people as part of our distributed governance network at the moment we have to keep on board, because we couldn't afford them if they were on our payroll. They give their contributions pro bono, because they've bought in to what we're trying to do.

So, where we're at at the moment, we're in a period of transition, we're using the economic well-being bucket, if you like, to put the city deal in. That will discharge the economic well-being function. We've got proposals in place in relation to the new corporate duties and how we fulfil some of those, particularly the strategic development plan and the regional transport plan. But we have to put those in the context of our regional economic and industrial plan. Otherwise, we'll start to work in silos. So, for us, there's this point of having one system of regional economic governance. As colleagues in mid Wales are saying, for us, it's 10 local authorities, I think, so having that sense of cohesion, strong governance, is really critical.

And I think, in terms of UK Government's support for us to bring across the city deal, I'm hoping that it will open up bigger opportunities around investment zones, innovation accelerators, making sure that we bring more funding to the region for things like net zero. We'd like to see many more financial levers and incentives, value-capture mechanisms. We've got organisations like the Office for National Statistics, the Intellectual Property Office in our region. So, tax incentives and levers that are tailored to really leveraging the contribution of those Government non-departmental entities have got to be part of the ambition set for the CJC.

So, I can take from your answer there, Kellie, and the written evidence as well from the Cardiff capital region, and the evidence from Powys and Ceredigion as well, that you're actually in two different locations, given the demographics and the locations of your growth deals as well. So, it's a little bit of horses for courses. You see the CJC as being a real enabler, but, at the moment, that CJC isn't necessary specifically for the delivery of your mid Wales growth deal, if that's a very simplistic look at it.

Just to move on to the accountability element of CJCs. We'll start with Powys and Ceredigion as well. When, through these committees, a representative from your cabinet goes forward, who or what is the cabinet representing? Are they representing a council decision? Are they representing a cabinet decision or are they there with delegated powers to put forward their own views and thoughts on something?

That's a good question.

And I'll let both of you look to each other to see who will answer first. [Laughter.]

Yes, I think it's the views of the cabinet, with advice from the adviser and the officers. So, yes, that's what's put forward, but it does fit into the whole overall strategy of both local authorities I think, when we've discussed it at CJC level, really. There are sub-committees as well that put forward things to the board, and Bryan, not me, sits on that board, then, where the decisions are made with yourself, James, so, I don't know whether you've got anything to add to that.

Yes, so, we're a committee of two. I mean it's rather good really, but—.

Yes, that's the point. Is there a meeting, a full council meeting where the sort of decision is made and ratified through a vote and then the leader goes forward to discuss it, or does the leader take delegated powers to go, 'I think this is the best way forward'?

It’s interesting that—it’s a really interesting question, because one of the things that surprised me having, for the first time in my life, become a council leader a year ago last May, was how much executive power rests with a council leader. And indeed, cabinet members have significant executive powers as well to take decisions on their own without even reference to the leader if they wish to do so.

So, that’s the structure we have—it’s a cabinet system. And this is new for us. So, it’s a really good question and something we’re going to have to work through as to how we—. It’s the reporting back mechanism to our respective authorities, because that is really important. You make a really good point. And I'll be honest with you, I don’t think we’ve really given that as much thought as perhaps we need to because we haven’t had to yet, because we haven’t been in a position to make significant decisions at CJC level. But when we get to that point, you’re right. And when the sub-committees are set up—. I mean, I guess Kellie is much better able to answer how they work it for them. But, again, they’re in a different situation because of the scale that they’re operating on, but, I suppose the principles will be the same. And I’d be interested to hear what she has to say about that if she wishes to.

So, at the moment, it's basically, because you've not had to do it, it's still, some of it, a process to be found out.

It's a work in progress, yes. And so the economic sub-committee, when it's up and running and has had its meetings, what will be the reporting-back mechanisms to the respective authorities, I guess we'll have to find our way with that. But, no, it's a really good point, and point taken, actually.

Kellie, I know you're not a politician in the sense of a council leader, but what's the mechanism within the Cardiff bay city deal region in terms of decision making around the CJC and the executive power a leader has? What's the mechanism there?

Yes, so, the leaders are empowered by their councils and their cabinets to come to the current corporate—

So, both council and cabinet are empowering them. So, there is: the council agree, then the cabinet and then—. Or is it a cabinet executive decision?

Yes, but we don't take decisions back through all of those 10 councils. It's very much like if you were a company director, I guess: you're in that context; when you're in that board room, your allegiances are to that company. So, in terms of our constitution, our joint working agreement and standing orders, the leaders are empowered.

The legal duty of CJCs actually sits with the 10 local authority leaders. The bit about the feedback loop, though, and how you engage—and I guess some of the new sub-committees are designed to do that—I suppose we've been quite fortunate really, and, again, it's just a fluke of context—our context is different to mid Wales—that we already have up and running a regional transport authority and they've got delegated powers, so, transport cabinet members sit on that group. We'll have the same now for the strategic development plans, because we've got companies: we've got CS The Foundry Ltd, we've got CCR Energy Ltd. We've got elected members that sit as part of that, in compliance with company law. We've got our scrutiny committees. But I think what we've tried to balance is that, though we get really good advice, feedback and input from local authorities and from politicians, part of the point that I made about having a distributed governance network is we've been able to bring the private sector, the third sector, universities in. They act as part of our investment panel. So, our regional cabinet, our CJC board knows that when they get a proposal, when they get advice on a business case or a new policy mechanism, it's been through the mill. It has been through more than just—

Okay. On that point, then, the element that I'm trying to get at, and I understand that you're not the politician in this, is the level of accountability in the decision-making process. You described it as being a company director. Well, company directors are responsible to the board but politicians are responsible to their electorate, and what I'm trying to determine here is the mechanism for someone who disagrees—a voter who disagrees with something, a decision. What mechanism is in place for them to show their disagreement, other than naturally at the ballot box? That's what I'm trying to get at in terms of a CJC.

Okay. So, I didn't say it was the same, I said it's almost akin to that model of company directorship. But the same mechanisms would apply in terms of how cabinet make decisions at the moment, or cabinets locally. You've got call-in rights, you've got the call back to scrutiny, if you've got particular concerns, there are a number of different levers and mechanisms. And around the CJC legislation and the role of the monitoring officer, all of that would work as it does work now in a local authority, except that you're right to highlight the complication that, in my case, there are 10 local authorities; it's huge to manage. But, as I understand it, the mechanism is that these things are set up to be on par with the running of the operation, the operating model, if you like, of a local authority.

Okay. Thank you, Kellie. That was really helpful. I'm conscious of time, so I'm handing back.

Just to say, it's always open to a scrutiny committee in either local authority, the relevant scrutiny committee, to put this on their agenda and require a report from officers on what it is that the CJC is doing, how is the growth deal going, or whatever it might be. So, I think the mechanisms are there to make sure that there is that accountability, we've just got to make sure that they work properly. Scrutiny is always a challenge, but you make a good point and it's something I'm sure we'll give much more thought to.

Thank you, Chair.

Thank you very much. I'm afraid time has beaten us, so our session has come to an end. But thank you very much for being with us this morning. Your evidence has been very useful to us as a committee. A copy of today's transcript will be sent to you in due course, so if there are any issues with that, then please let us know, but thank you for being with us today.

We'll now take a short break to prepare for the next panel.