Economy, Trade, and Rural Affairs Committee

Fe symudwn ni ymlaen, felly, i eitem 3, sef papurau i'w nodi. Mae yna bedwar papur i'w nodi. Oes yna unrhyw faterion yn codi o'r papurau yma o gwbl? Na.

Felly, fe symudwn ni ymlaen i eitem 4, sef craffu ar gyllideb ddrafft Llywodraeth Cymru ar gyfer 2024-25, a'r Gweinidog Materion Gwledig a Gogledd Cymru, a'r Trefnydd sydd gyda ni'n gyntaf heddiw. Gaf i groesawu'r Gweinidog a'i swyddogion i'r sesiwn yma? Cyn inni symud yn syth i gwestiynau, gaf ofyn iddi hi a'i swyddogion gyflwyno eu hunain i'r record? Gweinidog.

Thank you. Lesley Griffiths, Minister for Rural Affairs and North Wales, and Trefnydd.

Good morning. Dean Medcraft, director of finance for the climate and rural affairs group.

Good morning. Gian Marco Currado. I'm the rural affairs director at the Welsh Government.

Diolch. Bore da, pawb.

Richard Irvine, Chief Veterinary Officer for Wales.

Thank you very much indeed for those introductions, and perhaps I can just kick off this session with a few general questions. First of all, can you tell us what key principles were followed when it came to allocating funding within your budget? And how did you decide which areas to protect and which areas to cut?

Thank you. Well, obviously, this has been one of the most challenging budgets—well, probably the most challenging—I've ever had to face as a Minister and for us as a Government. I think the UK Government have failed to provide us with the funding that we need to do what we need to do, let alone what we would like to do. So, it's been incredibly difficult.

Obviously, if you look at my budget as a whole, £238 million—and I'll explain why I did that—goes straight to the basic payment scheme. The budget for the office of the chief veterinary officer is £40 million. So, that gives me very, very little flexibility on the rest of my budget. So, to have had to find £50 million of savings out of what was left of it, which is about £150 million, was incredibly difficult. So, I've had to take some very difficult decisions, but what I chose to do was protect the core element of the budget. So, the basic payment scheme, I protected that, and I made it very clear, when I announced what the BPS would be for 2023, that I wanted to have at least the same amount of money for 2024, and I'm really glad that I've been able to do that.

I think one of the key principles for me, though, was to talk to stakeholders and listen to what was important to them, and I think that's certainly come out in what I've protected in my budget, going forward. So, BPS clearly provides an element of stability for our farmers, so that was very important to them. The Habitat Wales scheme, which I had announced not long before we started all the budget negotiations, clearly, was very important to them as well. Support for the organic sector—I've been lobbied quite a lot around the organic sector, so I've been able to protect some funding for that as well. But I cannot deliver everything that I would have liked to deliver, of course not, when I've had to make such a reduction to my budget.

Yes, and it's quite clear, of course, that your portfolio has incurred one of the biggest percentage budget reductions when looking across Government departments. Why, in your view, was the rural affairs portfolio deprioritised?

I don't think it was deprioritised. Somebody has to take the biggest cut. There aren't that many departments within the Government that had to make those savings. Every Minister had to make savings. As you know, we had to reshape our plans quite radically, really, in order to be able to protect our public services, to be able to look after the economy, to be able to help people who are facing the cost-of-living crisis. So, I don't think there's been any deprioritisation. In any table, you're going to have somebody that's at the bottom. So, of course rural affairs has been impacted, but all Ministers have been impacted. Again, I go back to what I was saying, that, for me, it was about being able to protect the things that were most valued, not just by me but by the stakeholders as well. I think I've really been able to do that with my core budget.

Obviously, this is a significant year of change for rural industries and, in light of the severe cuts that your portfolio has been given, how confident are you that you'll be able to provide sufficient support to the industry during this period of significant change?

So, you're right, it is a significant change. Leaving the European Union has forced us, if you like, to deal with particularly the agricultural budget and the fisheries budget in a different way. So, we've still been able to support the things that we would want to, but, as I say, you cannot have cuts to your budget of this magnitude and not have an impact. Of course there are impacts, and you're very aware that decisions that you're taking as a Minister will obviously have consequences—you can't get away from that. But I have been able to put significant funding into areas that are of importance. So, I hope Members have had the opportunity to see the written statement I published yesterday regarding the rural development programme. So, to have been able to use every penny of that budget is a massive achievement, and I'm grateful—thanks to officials and to all our beneficiaries, who have worked incredibly hard to deliver that. That, for me, was a big priority. So, we've been able to do that, but, as we go forward to a different way of supporting our agricultural sector with the sustainable farming scheme, it was important that we recognised the importance of the stability, BPS and the other parts of the budget that I've said.

I mean, clearly, the agricultural sector, like all sectors of the economy, has been impacted with inflation. You will have heard farmers say the 'three Fs', feed, fuel and fertiliser—the costs of those three things. And because of consequences and because of events outside of our control, you're constantly having to deal, it feels like, with a series of crises.

Now, obviously, this is a draft budget and changes can be made. Can you tell us how you're fighting for additional resources, and do you anticipate that any representations you've already made to the finance Minister have been successful?

Well, I haven't really—. What I've been doing is dealing with the reductions I've had to look at with my budget. The one area that I have constantly raised with the finance Minister in regard to my budget is if—and I'm touching wood here—we were to have an outbreak of an animal disease. I'm not going to go through all the animal diseases; there are plenty of them, unfortunately. We're seeing outbreaks of blue tongue—well, perhaps 'outbreak' is not the right word; I can see Richard looking at me—or cases of blue tongue in England, so we're very aware of that, for instance. So, you try and manage—if you have to pay compensation for any disease outbreak, you try and manage it from within your budget, but invariably you have to go to central reserves. So, that is one area that I constantly raise with the finance Minister.

Yes. I think Alun Davies would like to come in on this. Alun Davies.

Thank you, Chair. The Chair asks a really interesting question, doesn't he—how are you fighting for the budget? When I was the agriculture Minister, of course, I didn't need to fight for a budget because it was protected—

Absolutely.

—under European payments. So, the impact of Brexit, of course, has put farmers on the front line in a way that they never have been in our memory, really. So, there are debates taking place today, and we see them in the Chamber and we see them elsewhere, that simply wouldn't have happened without Brexit. Farmers would have had protected funds to support their businesses and to support investment in the wider agricultural industry, and Brexit has put them on the front line. I'm interested, therefore, in the debate taking place in Government, because it is important to protect the basic income of the farming community for many different reasons—it is socialism in action in all sorts of different ways—but also to invest in the industry for the future. So, to what extent is the Welsh Government seeking to create that balance between investing in today's income but also investing in tomorrow's business?

So, you're absolutely right. I was thinking that I've never had a budget scrutiny like this before because, as you say, in your day, when you were in this portfolio, and in the last few years for me, that funding lands from Brussels straight into your budget, it goes out, and you're not scrutinised as a Minister, because that money just goes straight out. So, we do absolutely live in a very different world now that we've left the European Union and, as I say, previously, this type of scrutiny would have very little bearing on funding that went to our farmers. So, you have to say that where we are now is a matter of a change of policy by the UK Government, and we know that, next year, in 2025, the UK Treasury could decide not to fund agriculture at all. They could decide to fund it in a completely different way. They could, for instance, give us a Barnett formula share, which wouldn't be anywhere near what we receive at the current time. As you say, we're living with the consequences of that Brexit policy. I came into this post the month before we had the referendum to leave the European Union, and I remember having a discussion—you know, I came from a very un-rural background—with farmers that they needed to educate the public about what they did. And we need to make sure that the public understand, as taxpayers, what they get for their money that goes to support farmers. The food that we eat—and we all like food—and we need to make sure that the public understand where their food comes from, but also the environmental outcomes that we get, and as we do that transition to the sustainable farming scheme, it's really important that everyone in Wales appreciates that.

I'm grateful to you for that, Minister. I've got an e-mail in front of me from a farmer in my constituency. I won't read the whole e-mail, Members will be pleased to hear, but what my constituent says is, he's asking the question how much of the public sector, if you like—payment for public sector services—has eaten into what he describes as 'farmers' money'. So, can you outline, perhaps, to answer the question from my constituent, how much of the budget you have available to you is the overhead, if you like, which goes to fund the administration of the wider budget?

So, it's not farmers' money, is it?; it's taxpayers' money, and, as a Government, we are given—

I was quoting.

Yes, yes. As a Government, we are given a budget that we invest on behalf of those taxpayers to make sure we have all the services. So, I go back to what I was saying: it's really important that people understand that, whilst they perhaps wouldn't see farming as a public service, it absolutely is, because they produce the food we eat, the beautiful landscapes that we all appreciate, the environmental outcomes that we get for that public money, is part of the money that a Government, and, in this case, the Welsh Government, invests on behalf of that taxpayer. I've heard this quite a few times, 'It's our money', 'It's farmers' money'—you know, it isn't; it's taxpayers' money, and a Government invests it in the way—. So, by protecting the basic payment scheme—. I could have, when I had to look at the reductions in my budget, taken that money from anywhere, and maybe there are people in this room who would've taken it from different places. For me, it was a priority that I protected, and there was lots of noise heading up to Christmas. You probably heard people saying, 'She's going to reduce this, she's going to do that.' For me, and working with my officials, it was really important we did that. And there are lots of reasons, policy reasons, which I won't go into, but there were lots of policy reasons why I did that, but that transition to the sustainable farming scheme was one of the main ones. And I also think it provided a level of stability for our farmers in very uncertain times.

Now, I go back to what I was saying: it's not all our fault that we've got those consequences; a lot of them are outside of even the UK's hands. So, I've had to make a cut, but I think I've protected all the core elements of my budget, particularly the agricultural sector. We'll probably come on to fisheries and other parts of my budget. But, for the agricultural sector, which is such a huge part, as I say, £238 million, £40 million for the office of the CVO, and that that left me with £150 million, of which I had to take out £50 million. But I don't think I can answer that question in the way it's set out—and I hope that has answered the question.

Okay. Diolch, Alun. And, considering the financial constraints you've talked about, do you believe that your department is actually on track to fund and deliver everything that you've anticipated over the next 12 months?

Over the next 12 months?

Yes.

Well, I go back to what I was saying, that it's bound to have an impact; it can't not have an impact when you're talking £50 million—10 per cent—out of a budget. But by protecting the BPS, by making sure that we were able to take through the Habitat Wales scheme, by finding support for organic and by making sure that there was still funding available to help farmers implement the agricultural pollution regulations, I think I've protected that.

There's still funding, obviously, in the rural investment scheme of £100 million. Sometimes, the schemes and the windows that you open aren't fully taken up. So, I think certainly there is enough funding there, because, for me, my whole focus is that transition to the sustainable farming scheme next year. So, everything we are doing is to support our farmers with that transition in that new world that Alun Davies has just said we're in, because the basic payment scheme is going. Everything I do is aimed at helping them.

I'm contradicting myself there, aren't I, because I'm saying there are bound to be impacts? However, I think the way that we have chosen to protect the budget—. As I say, some of you in the room might not agree with me, but we've done it with that aim and that purpose. And I go back to the rural development programme, because to have achieved that spend, all that will have really helped our rural communities, not just our farmers. That's the other thing I should go back to say, and Alun will know this from his days in this portfolio: the money that we give to our farmers in support of the BPS, it doesn't just stay in the farmer's pocket; it goes out into our rural communities. So, you've got to think of the big picture in the way that you support.

I'll now bring in Sam Kurtz. Sam.

Diolch, Cadeirydd. Morning, Minister—

Morning.

—and panel. Sticking to the BPS, you've maintained it, which has been welcomed by me and the farming unions, but I'm just wondering if your department has made an assessment of the impact of inflation on the true value of the BPS for this forthcoming year.

I don't underestimate the impact of inflation and what I said before about fertiliser, fuel and food. We know that the agricultural sector was significantly impacted by inflation, and, of course, BPS has not risen in that challenging time, and I've not been able to give it an increase again this year. The most important thing, I felt, was that we at least maintained it. And because, when I announced in 2022 that it would be £238 million, I said at the time that I hoped to do the same this time next year, and I've been able to do that because I do think that is the best way of providing that element of stability that, unfortunately, the sector doesn't have.

Again, you can't not have an impact, can you? If you don't have a rise—. It's like Richard's budget. He hasn't had a rise in his budget, and you know it's going to have an impact, but the money's got to come from somewhere and—

Can I just come back on that point, then? If you know it's going to have an impact, have you undertaken an impact assessment to fully understand what impact of BPS being maintained at its current level will have? The NFU's arithmetic is that every £1 spent on BPS is worth £9 to the wider community. Have you as a department undertaken an impact assessment of BPS being maintained at its current level, with inflationary costs?

We did very high-level impacts right across Government and within the department. So, officials did different impact assessments to show, and, obviously, if you're maintaining any budget at the same level year after year, then it will have an impact, but you have to work with what you've got. So, I go back to what I was saying about the core element of the budget. If you look at what they've done in England, one of the things I've been really keen to avoid is this kind of scattergun approach. So, I think that we've been really transparent about what we've done. If you look at the schemes and the windows we've opened, we haven't opened them and then closed them. I've tried not to be disruptive, which I think they've done in England. I've tried to maintain that we will be open and transparent. We will do everything we can to support for the reasons I've set out in relation to the sustainable farming scheme. Now, for the sector—and you and I had a discussion about this—the main thing was the BPS. I don't underestimate inflation, but you have to find the money from somewhere.

So, in those impact assessments, as you've called them, what was the conclusion? What was the material impact that you determined as a department of the inflationary costs to BPS?

Well, the thing that came out most in the assessments was that we needed to maintain it. That was the absolute core thing. I’m saying, ‘Oh, I’ve protected it’—don’t think it was easy. It was probably one of the hardest things to maintain that budget. You try and work out where you can take that £50 million from, and I could have taken the £50 million out of BPS, but because you could see what the impact was, we chose not to do that.

Okay. Moving on to the rural investment schemes, which you've also mentioned in your answer previously to the Member for Blaenau Gwent, the rural investment scheme has seen resource allocation reductions. You've mentioned a figure of £100 million as the current pot. I was just wondering what your rationale was around the changes to this specific funding pot in terms of the rural investment scheme and what impact that might deliver.

Again, it had to come from somewhere, and if you look at the rural investment schemes, there’s still £100 million in the rural investment schemes, which I think will certainly help a great deal. I go back to what I was saying: I could have cut TB funding, I could have cut the Habitat Wales scheme, or we could have not done it at all, because that had been announced in the summer as we came into these budget discussions, and I could have cut BPS. There are no easy options without consequences. But I think we will continue to make a significant investment with the rural investment schemes in 2024-25. Really, those schemes are, again, to help with the transition to the sustainable farming scheme, but also to help with the climate and nature emergencies, on which we absolutely need to do work to mitigate in relation to that.

So, is that £100 million going to be sufficient to help with the transition to SFS, due to launch in January of next year?

Yes.

You think £100 million is—

Absolutely I do. We've got revenue and capital in there. I think that's really important as well, because some of the schemes definitely need capital, and some of the stakeholders were telling us that that needs to be the way forward. So, if you look at what we will do: sheep scab, which is incredibly important to the industry, we'll still continue to fund that; antimicrobial resistance is very important to the agricultural sector, so we'll still continue to fund that; and tree planting, obviously, is needed, and we will continue to support that.

Is that a reason for the increase in capital, for projects such as tree planting?

Well, yes, because there are some things that you can't do within RIS if it was only revenue funding. The reason—gosh, it's probably a year ago now—that I asked for that switch from revenue to capital, because I don't have a huge amount of capital, and that was the reason I asked the Minister for finance if I could swap from revenue to capital.

Is there any fear that the industry may see that as prejudging the determination of the results of the consultation around tree planting?

No, absolutely not. If we're going to get on to tree planting, I know there's been a level of concern. For me, I think it shows confidence in the sector; I think it shows that I want farmers to be in the front when it comes to tree planting. They're the best people to help us with tree planting. I know there are lots of concerns, but no, nothing, absolutely nothing, has been pre-empted.

Okay. Moving on to the Habitat Wales scheme, I'm just wondering what the budget is for the delivery of the Habitat Wales scheme.

I can't announce that yet. At the moment, we are working with people who've applied for the scheme. What I have said is everyone who has applied for the Habitat Wales scheme will be offered a contract. It's obviously up to them whether they accept that contract or not. So, that is being worked through at the moment. I would imagine it will be the end of February before I can announce what the budget is.

So, there are no working figures pencilled in, nothing official, but is there an allocation within your arithmetic that you think, 'Right, x is being put aside for the Habitat Wales scheme'?

No. I suppose we have a figure in our heads, but I think the most important thing—. I don't think it's really about the amount of budget; it's about making sure that everybody who has applied will be offered a contract, and I can assure you that will be the case, and then I will announce that budget. But it probably will be towards the end of February.

I think the budget is important, because if it's not financially viable for farmers to undertake the contacts that will be undertaken, then farmers won't be signing up to the Habitat Wales scheme once offered those contracts, so more land will be lost to habitat management. But if there's no budget set aside just yet, or announced, for the Habitat Wales scheme, I assume it's the same for the organic farmer scheme that was announced earlier this week.

No, absolutely not. So, that's £2 million, the organic.

That's £2 million.

Again, I hope the Member's had a chance to see the scheme. But just going back to Habitat Wales, that was the point I made. We are offering everybody a contract. They will know what payments they are going to get. So, if you've applied for one, you will know. It doesn't matter what Richard gets or Gian Marco gets. You will get a contract, you will know within that contract what your budget is, or what your payments are, sorry, and we will then know, when everybody accepts or doesn't accept, what the budget is. I am saying that everybody who has applied will be offered a contract.

So, someone would be able to work out what a working budget for that would be. If they were able to calculate what those 3,000 or so contracts were worth, they'd be able to back-calculate how much that budget would be.

Just quickly, a final question before I hand back to the Chair, the comprehensive spending review 2021 plus the £2.6 million from the Bew review give an annual total of £339.6 million for farmers and land managers. Now, taking away the £238 million from that, that leaves approximately £101.6 million being used for farmers and land managers. Is that total—? Is 100 per cent of that £101.6 million being used for farming and land managers?

Sorry, I'm going to ask you to say that again.

Sorry, yes, no problem. So, the comprehensive spending review offered funding over a three-year period. The calculations of how much is left of that is £336.6 million minus the BPS, which leaves a total of £101.6 million. Is that £101.6 million being used, as was designated in the comprehensive spending review, for farmers and land managers?

Yes, because, obviously, if you look at the whole budget, if you look at rural investment schemes and if you look at all of the other schemes that we're talking about, that falls within that.

So, all of that is allocated towards the definition as put forward in the CSR—the department is confident.

Yes.

Okay, there we are; thank you, Chair.

Strange question.

Thank you, Sam. I'll now bring in Vikki Howells—Vikki.

Diolch, Gadeirydd. I've got some questions on the sustainable farming scheme for you this morning, Minister. Firstly, we see a reduction in the rural affairs budget to the anticipated sustainable farming scheme in 2025 compared with that previously envisaged when you designed the scheme. What impact do you think that will have on the level of ambition that the scheme can have now?

I don't think it'll have any impact on the level of ambition. So, the level of ambition, really, is part of the consultation now. We're out to consultation until the beginning of March; it's another plug to make sure that everybody puts their response into that. I don't think that the ambition is in any way affected. If you look at the way that we have brought the sustainable farming scheme consultation forward, it's been done on co-design, probably in a way that we've never co-designed with our stakeholders before. For me, and I've referred to this already, the importance of retaining the BPS for 2024 at £238 million was really important, because it will mean that a farmer who joins SFS in April 2025 will be no worse off than in 2024, and will receive more funding than had they remained in BPS in 2025.

What will have an effect on the sustainable farming scheme funding is the budget, and, of course, at the moment, we don't know what our budget is going to be for 2025. So, I go back to my answer to Alun: that the UK Government could decide to fund agriculture in a very different way than they have done during this comprehensive spending review. They could say, 'We're not funding you at all', and zero of zero is zero of zero. Will that happen? Unlikely, but we don't know. As I say, if they gave it to us in a Barnett consequential, that would be less. So, that's what will affect the scheme, but I don't think the budget this year will at all.

Thank you. Could you just talk us through the decision to reduce the agricultural strategy allocation by £150,000 from the indicative budget, and how do you foresee that that's going to impact the SFS policy's development?

I think that that reduction really reflects the change in the scheme's design. So, you may be aware that in the SFS there are going to be three tiers, if you like, of funding. At the moment, we're just focusing on the introduction of the universal baseline payments. We've also got optional and collaborative actions, but they will come later, so what we need to do is be prepared on 1 April 2025 for people coming into the scheme, and it will be at the universal level. So, we were using that fund, that pot of money, to help us with the three levels. We're now just concentrating on the universal baseline. And really, what we're doing within the rural investment schemes will help us get ready for the optional and collaborative actions. So, that's how we've had that saving.

Thank you. And when we visit farms as a committee, something that farmers always raise with us is the need for support for ICT systems. So, the single payment scheme administration resource BEL has been reduced by £5.5 million, and that's for Rural Payments Wales's ICT systems, which you describe in your paper to us as

'integral to maintaining efficient delivery of all rural support schemes'.

So, what impact do you think that that reduction is going to have on the delivery of both current and future support schemes?

So, I've been working very closely with officials in RPW, and they are doing all they can to ensure that that reduction has very minimal impact on the delivery of current and future schemes. What they've been doing over the past couple of years is enhancing and developing their IT and their online platform in preparation for SFS. We have given a budget allocation of £6 million capital and £3.7 million revenue. That will allow the system to be maintained, have that ongoing maintenance, and be developed to introduce the SFS, and that will have to obviously be done in parallel with reducing the BPS in that transition period from 2025 to 2029. It's not an area that keeps me awake at night. I do think RPW will be able to manage that, and it's just really important that we are ready with the SFS in April next year.

But I think there are things that we won't be able to do because we've had that reduction. So, things like—. One of the things I was really keen on was to have a full sharing data system, for instance, between RPW, Farming Connect and, obviously, livestock databases. I think that might have to be pushed back a bit, but, for me, the most important thing is getting ready to make sure our farmers are paid when we go into SFS.

Okay. Thank you. And another thing that farmers and other stakeholders have raised with us quite a few times is the need for skilled advisers to engage farmers with the new SFS, and I understand that's recommended in the biodiversity deep-dive as well. So, could you give us some more information about how that is being addressed in the draft budget allocations?

Yes, that support is really important. So, RPW, which is obviously very well known to farmers and their systems and the way that they work, is going to continue to work with our farmers who enter the scheme. They'll help them with mapping—mapping of habitat, mapping of tree cover on their farms, for instance. It's really important that we have that information, so that we're able to help farmers target advice and guidance. Obviously, we've got Farming Connect, you'll be very aware, unique to Wales. We've also got our farming liaison service, and we've got the new rural support framework, and that really will make it easier to be able to procure services—if we've got the funding for that—on a case-by-case basis.

Thank you, and that was going to bring me into my last area of questions, actually, on Farming Connect. Could you give us a bit of an update on the work to develop that, and whether there's going to be sufficient budget available now to support those behavioural shifts that we need to see?

Yes, Farming Connect has always been a priority for me. As I say, it's unique to Wales. It's something that I think is incredibly valued by the sector. Officials are currently developing the specification for the new contract, but there will absolutely be funding available for that.

Brilliant. Thank you. Thank you, Chair.

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

Diolch, Cadeirydd. Just on that point, the proposal within the consultation around creating that new Farming Connect, you mentioned, of course, that there would be funding for that, but has there been any thought there as to how much funding will be available, because it's not particularly clear in the draft budget if there have been any allocations for that new Farming Connect model?

Okay. I'll hand over to Gian Marco because he's been working on this.

Thank you. Bore da. Good morning. So, in terms of 2024-25, which is covered by the current Farming Connect framework, that budget is basically within the rural investment schemes BEL line, so the revenue comes from that. As the Minister just said, what we're doing at the moment is looking to develop, in effect, the framework for 2025 onwards, so that will then be subject to whatever budget allocation we get for 2025-26, but that will be the new Farming Connect framework that will sit alongside the SFS.

So, within that budget that you've just mentioned, what's the proportion that's allocated to Farming Connect?

For 2024-25?

Yes.

I think it's somewhere around—. I think it's somewhere around £12 million, off the top of my head, is the revenue allocation for this year, so that's under the current procured contract. So, the one that will sit alongside the SFS is being developed now.

Okay. If we could get a solid figure on that, that would be really appreciated. And just finally, I know Vikki mentioned the reduction, the £150,000 reduction, and there's another reduction as well of £50,000 in the agriculture customer engagement BEL. I'm just wondering here a bit, because there seems to be a reduction happening in those services that will support farmers with that transition over to SFS, has there been any sort of work done around how that might affect that transition? Because we know—well, we assume, at least, anyway—that there's going to be greater demand for those services and support. Is that going to have an effect on the quality of that support?

No, I don't think so. I think you find other ways to communicate. So, for instance, now, we e-mail all farmers who are in receipt of BPS. It's much easier to do that, and you have the templates, if you like, so you're able to communicate quicker and easier because of technology, isn't it, really. So, we've maintained that. So, I think they've streamlined the services, for want of a better word. We also—. If you think about our attendance at key events like the winter fair or Welsh agricultural shows, you're able to—. It doesn't cost, perhaps, as much money as it has done in previous years.

The only other thing I would add, if it's helpful, obviously, is that some of that engagement comes through Farming Connect, so that's in another BEL line. We've also got the technical advice services, which I think is 2864—that covers things like the helpline that we've got to support the implementation of the agricultural pollution regulations. So, in effect, we've got customer support, for want of a better word, covered through things like the budget that we have for RPW, the budget that we have for Farming Connect, the budget that we have for technical advice. So, it isn't just that customer engagement line that you—

The farm liaison service.

The farm liaison service.

No. Because I'm just thinking, you mentioned e-mail, and sometimes things can get lost in translation through e-mail and being able to speak to somebody directly is far better in terms of explaining how things work. So, it's just something I wanted to raise, Chair, because I think, as we come into this period now, we know and assume—assume and know, well, they're contradictory, in themselves, but people are going to want greater demand—. There's going to be greater demand for greater support and advice through that period, so I just wanted to flag that, Chair, as a potential issue there.

Okay. Thank you, Luke. And on this point, I think Alun Davies would like to come in. Alun.

Yes. I was interested by the point that Sam made, actually, about inflation, because, looking through the budget, it's clearly influenced by the wider macro-economic climate and it may be easier, I should say at the beginning, if this is dealt with by correspondence rather than here in committee this morning, but, in order to understand the real impact of the budget on the farming community, it may be useful for us to seek to understand better the Government's understanding of the economics at the moment—so, how much has inflation cost Welsh farmers, how much, for example, has Liz Truss's budget cost farmers in Wales, how much additional costs through Brexit has cost the farming community in Wales—so that we can have a far more comprehensive and holistic understanding of the costs affecting the farming community, partly as a consequence of macro-economic mismanagement, but also by policy choices taken in terms of Brexit and the rest of it, because that must have a significant impact on the community as a whole and it would be useful to see this budget in that context, I think. As I say, it's better done by correspondence.

Yes, I'm just thinking of the vast number of impact documents we had to do in this budget; it might be better, Chair, if I approach that via correspondence.

[Inaudible.]—on that would be very helpful. Thank you very much.

But I think Alun raises a really interesting point, and I go back to saying, if you think about the impact on the agricultural sector of all—you know, the Ukraine war will have had an impact on the economy of the agricultural sector in a way it didn't on other—. I'm not saying other parts of the economy weren't affected, but there was a big impact on it. That's completely outside of our control. And then you've got leaving the European Union and the significant impact that that has had and the 49 days, or however many it was, of the Truss Government. So, I think it would be interesting to see—and I'm sure we've got all the documents along the way—. But I think that's—

That's why I think correspondence is a better way to do it.

I know. And I think it's probably a very big piece of work for officials to do that, but I definitely had a lot of documents brought to my attention from Dean and the team on the impacts on the budget. So, yes, happy to do that.

Yes, if you could write to us on that, that would be great.

'I'm happy to do that'—I mean, somebody else will do it.[Laughter.]

Yes. Sorry—Dean Medcraft.

On the macro position, I think the reason why the Minister had to make those tough decisions is because of the £1.3 billion that is less for Welsh Government to spend, basically, so that's the overall position, and then, equally, with what we've got, the money isn't going so far. So, even on capital—we all know the significant increase in capital—we're not going to get the outputs that we thought we were going to get, but we have got the impact assessments on that, which we could bring.

Okay, thank you. Yes, that'll be very useful, thank you. I'll now bring back Sam Kurtz. Sam.

Thank you very much, Chair. Just a final point on the sustainable farming scheme, Minister, if I may, before moving on to ag pollution regulations. I was just wondering—. You mentioned inflation: what sort of figure, roughly, do you have in mind for delivery of the sustainable farming scheme from next year onwards? Do you have a figure in mind as to what you think is necessary? I know, in your opening comments, you said that you're not getting the funding needed for what you'd like to do: have you got a figure in mind for SFS delivery?

No, not really. For me, the £238 million is the kind of baseline, so that was why it was so important to protect that this year, to make sure that, going into 2025—and that transition was £238 million. But no, and I certainly haven't got a figure that I would want to share here.

No. Okay. So, have you had any correspondence with UK Treasury as to what figure you would like, going forward? You've mentioned that UK Government may change the funding formula for agriculture going forward, but have you made any representations to HM Treasury as to what you would like, as a department, to deliver on agricultural policy, going forward?

I wouldn't say that I've directly communicated with HM Treasury—I'm trying to think—but, certainly, as part of our inter-ministerial group meetings, finance—I was going to say 'is always'; we, unfortunately, haven't had an IMG since the new Secretary of State came in—. But, certainly, ahead of Steve Barclay coming into post, when we met at IMG, finance was always a standing item. Because I think, in fairness, DEFRA were probably in a little bit of the same position as us; they had to make the case to the Treasury. So, I think that is something that we would discuss there, and representations have been made to the Treasury on that level, if that's helpful.

Okay. You mentioned there that your working baseline is the £238 million, which you've maintained for the basic payment scheme; I would argue that it should be the £337 million, which is the continuity of the common agricultural policy funding, rather than the £238 million. That should be used as a baseline, and I think, taking that with a Bank of England inflation calculator, a working approximate is £500 million that Welsh Government should be advocating for from UK Treasury. Is that a 'there or thereabouts' figure?

I have heard the £500 million discussed and we've certainly discussed that at inter-ministerial groups, yes.

Okay, thank you. Moving on to ag pollution, and I appreciate your patience on my questions there, Minister, in terms of the service level agreement with Natural Resources Wales for enforcing the ag pollution regulations change since the introduction of the enhanced nutrient management approach, has the service level agreement changed, given the delay in implementing the full requirements of the regulations?

No, it hasn't changed. We've maintained that. I know that my officials are in regular contact with NRW on the delivery of the SLA; we will keep that under review, obviously, but, remember, it's only one of the regulations that has been delayed; the rest are still being implemented.

The only thing I would add to that, Minister, is the enhanced nutrient management approach that came in in January for that one regulation is part of that activity, so, actually, in effect, the SLA is still very valid because of that.

Yes, okay. That's helpful. In a previous scrutiny committee, we've mentioned the £20 million from the co-op agreement for support for farmers. Now, it was a bit unclear; the terminology was changed to 'up to £20 million'. Where is that £20 million or up to £20 million accessible for farmers to support with the regulations?

I don't think I changed it; it's always been 'up to £20 million'. We've already spent a significant amount of funding in relation to this. To answer that question, it's in the rural investment schemes, but, if you look back, in 2022, £18 million was offered through the nutrient management investment scheme and that included £15 million for nutrient management and £3 million for yard covers. In 2023, we offered a further £3 million, via small grants, for yard coverings again. Back in 2021, we offered £10 million. So, last year, I did announce we would make available up to £20 million additional funding, as you say, as part of the co-operation agreement, but that's in the rural investment scheme.

So, that up to £20 million is distributed across—

Yes.

Okay, thank you. In terms of assessments being taken or undertaken to determine whether the £1 million funding for 2023-24 and the £1.6 million funding for 2024-25 remain appropriate for the enforcing of the agricultural pollution regulations, are you—?

Yes, I'm happy. So, as I said, officials meet regularly with NRW to make sure the SLA is being delivered, but, obviously, it needs to be kept under regular review, and that is the case. I go back to what I was saying, it's just one of the regulations that—.

Okay. In terms, then, of moving that on, you're content with the amount of funding there, but how are you ensuring that you're getting value for money from NRW in the management and the role that NRW play as a regulator in the water regs?

I don't meet very regularly with NRW; they're not within my portfolio, as you know. I do have discussions. I had a quick chat with Clare Pillman this week, when I saw her, to make sure she had no concerns about it. But the most important thing is that my officials monitor it regularly, within criteria, and if there were any concerns, obviously, they would raise them with me.

Is that a bit of a ministerial frustration for you that NRW sits outside of your portfolio?

Not at all.

No?

Not at all.

Not for the delivery of a real core element of your portfolio in the water regulations?

No, not at all. You have to remember we're a very small Government. You know where my office is, you know where Julie James's office is. If I had any concerns at all—. And I meet them regularly. Inasmuch as I say I don't meet them regularly, you meet them regularly on the calls—you think about the Royal Welsh—and in regular things. Clare was in the Farmers Union of Wales breakfast this week, so if there were any concerns—. But, not only that, you can pick up the phone to people. We're a small country and we're able to do that. So, no, it's not a frustration at all.

Okay. That is, indeed, one of our strengths that we're quite small and nimble—

If I could just say, sorry.

Yes, of course.

There's real dialogue between the teams, the Minister's team and Julie James's team. I'm the finance for both, as well, so I meet the finance directors and I go through these issues at the sponsorship meetings.

Okay, that's really helpful, thank you. Just finally, and it's picking up on Luke's point: the cut, the 13 per cent cut around the agricultural customer engagement line, are you sure that there's effective communication going to farmers to comply with the water quality regulations—

Yes—

—given the 13 per cent cut?

Sorry. Yes, I am. We've got the helpline that Gian Marco referred to, the control of agricultural pollution helpline. That's operated by ADAS on our behalf. That's there for advice and guidance, and that is funded through I think it's the technical advice services BEL. So, we've got that. It's just one of many mechanisms. I go back to what I was saying before, the farm liaison service, that's a trusted—

So, could you argue that, actually, that 13 per cent cut won't see a decrease in customer engagement? It's efficiency savings, rather than a baseline cut to the amount of service available.

Yes, absolutely. We had those discussions to make sure that it wouldn't have an impact. We've all had to make efficiency savings, and I think that is an excellent way of describing it. I go back—we've got Farming Connect as well, so there are lots of ways they can get advice.

Thank you, Minister. Thank you, Chair.

Diolch, Sam. Minister, you mentioned earlier that you're still in discussions with the finance Minister regarding the dangers of emerging animal diseases and if the bluetongue virus spreads from the individual case recently detected in England. Are you, therefore, saying that there is flexibility in your budget?

I suppose what I'm saying is—. So, the office of the chief veterinary officer does not hold a specific budget for an animal disease outbreak. So, if you think of avian influenza, for instance, if there was an outbreak, you would have to cull the birds, that costs money, and then you would pay, rightly, compensation. So, there isn't a specific budget for that. We manage it from within the budget. However, if that budget then is spent—. So, TB compensation is another example. It has always been the route that you went to the centre, to central reserves, for additional funding. So, I think—. I can't remember who asked me the question, but I think that was what I was saying, that those were the—. There's no point me saying to the finance Minister, 'I need additional funding', when I've just had to make £50 million cuts. Don't get me wrong, if we get any extra funding from the UK Government, I will be there asking for funding if I thought it was required for the portfolio. But that is an area where there is, if you like, constant discussions, particularly as you get to the end of this financial year, obviously, in your budgets. And you don’t know; I mean, look at two years ago and the outbreaks of AI that we had. Touch wood, we have not seen those outbreaks this year, but we would have to go to the finance Minister. Richard wants to come in.

The Minister is absolutely right. If we take bird flu as an example, we’re in a very different position, as we all know, to two years ago, and long may that last. We continue to thank poultry keepers and bird keepers for all they do to keep their flocks safe, because that’s crucial. That’s where, as well as the work that the Minister has described, if we have to deal with an emergency response due to a notifiable disease outbreak, the budget that I benefit from in terms of the office of the chief veterinary officer to do the work on animal health and welfare in Wales has not been changed for the next financial year. And that’s crucial, because if we turn it round the other way, it is about a preventative set of actions—that spend is there for prevention. So, we have still got that mandate, we still have that budget.

The Minister has described the financial mechanisms should an emergency of notifiable disease outbreak occur, but we also have to focus in on the continued good work to prevent disease, and similarly, as we heard earlier, other investment that in effect is invest-to-save. For example, through the rural investment scheme, the work that has been conducted thus far to combat the global threat of antimicrobial resistance, the funding has been sustained there. And that’s crucial, because we know that that is more than an existential threat; it is a real threat. It does affect people’s lives, it affects the availability of medicines, it affects animal health and welfare in terms of the effectiveness of treatments if we have antimicrobial resistance that gets out of control.

We have to invest and we are investing in those elements. It is about prevention being better than cure and to be able to offset what might be huge spends. Let’s remember that we have lived through a pandemic in recent time. Where did that pandemic likely come from? Way back, an animal source. As these infections can hop the species barrier, we have to have the sustained prevention investment in the animal system, in our animal health and welfare, our veterinary care, the work that farmers and animal keepers do on a daily basis to look after not only their animals but these wider threats that can affect food, public health, the environment, biodiversity, climate and nature. This is core to what we do, but as I said, going back to your question, Chair, in terms of emergency response, we are always vigilant for the threats, we have contingency planning should the threats occur, and the financial mechanisms are as described.

Just to clarify, then, if there are overspends when it comes to TB compensation payments, for example, you will be able to draw down central reserves. That’s what you’re saying, Minister, isn’t it?

Yes.

The finance Minister will come to the Minister and myself and say, ‘Can you deliver within the MEG?’ We will explore all opportunities, and there are always opportunities, ups and downs during the financial year, that the Minister will have to prioritise. If we can’t manage within it, then we would go to central finance and the finance Minister.

Minister, when it comes to TB compensation, I think you’ve also said a review of compensation payments will commence once resources allow. Can you tell us when that will be?

I’m hoping this year, 2024. But it’s a significant piece of work, because obviously, we need to consult with the industry. You may remember the last time we consulted on the TB eradication plan, this was something that was in the consultation, but we didn’t feel at that time we could undertake that significant piece of work, because of resources. But we are hopeful that we will be able to do it this year. I don’t know if Richard wants to say any more.

I think you’ve described it very clearly, Minister. The intent would be to start work on a review of TB compensation, building on the feedback that was provided in 2021—or thereabouts; it was before my time, so forgive me if I’ve got the date slightly wrong. It is an extensive piece of work, it will require engagement with the sector and stakeholders, and it is also part of the five-year TB eradication delivery plan that was published last March, to have that work undertaken within the five-year period. But to initiate, yes, we hope that it can be at least started during this calendar year.

I go back to what I was saying: if we had avian influenza in the way we have done previously, then obviously resources are much stretched. I think Richard's department probably has to be more flexible than any other department within my portfolio, really, because you just don't know what's coming at you. But we certainly hope it'll be this year.

I understand you're planning to introduce mandatory legislative changes in 2024—this year, then—following the consultation on changes to livestock identification, registration and movement reporting. How were these changes considered when setting the budget?

Those changes wouldn't have any cost. There won't be any cost.

None whatsoever.

No. Again, we consulted on this back in 2021, and it's about streamlining and simplifying movement reporting, really, so I don't think it would incur any cost.

So, there would be no costs attached to this at all.

I don't think so, no.

There's a cost in relation to us as the Welsh Government civil service in doing the work, but that's not covered in the rural affairs main expenditure group, that's just staffing costs.

I think Sam Kurtz wants to come in very quickly on this.

You just mentioned avian influenza. I was just wondering about the Welsh Government's decision not to join Scotland and England in the eight-week consultation around the regulations on removing the derogation for free-range eggs. I was just wondering about the Welsh Government's decision to not join with Scotland and England on that.

I think the derogation as it is now is probably stretching it. It's 16 weeks, and I think that's quite a long time. So, if somebody thinks they're buying free-range eggs but because of a housing order those birds have been kept inside—. At the moment, it's 16 weeks. It looks like the EU are going to get rid of it completely, and England appear to be quite keen to do so as well. I don't think that's taking the consumer's view into account at all. When I asked the UK Government Ministers what work had been done with consumers around this, the answer was basically, 'Zero'.

If you look at the Welsh egg industry, the majority are free-range eggs. Before Richard's time, I remember having a discussion with Christianne about whether we could actually have 100 per cent of eggs in Wales to be free range. I don't think we advanced that, for whatever reason. But I think we should be very proud of our free-range egg industry here in Wales. For me, you pay more for free-range eggs. So, if I'm buying free-range eggs—and I'll use myself—I'm very happy to pay a premium for that. Would I be happy to pay a premium if I thought those eggs were from birds that were in-house the whole time and I had no idea? I'm not sure I would. So, I think it could have a positive impact for Wales, if it goes ahead. However, I will be very interested to see the consultation responses when they come forward. But there was very little engagement with us around it; it was something that was presented as a fait accompli: 'You will take part in this'. And I just don't think it's right at the current time for Wales.

Okay. Thank you, Chair.

I'll now bring back Luke Fletcher.

Diolch, Cadeirydd. Turning to the fisheries and aquaculture budget, it's seen quite a significant hit in the draft budget, nearly 30 per cent—28.8 per cent, to be exact. What areas are being deprioritised within that budget to accommodate that cut?

I absolutely understand why you're saying that I cut fisheries by 30 per cent, because the briefing paper I sent to you before Christmas—. I reread it this week ahead of committee and saw that I cut the fisheries budget by 30 per cent, knowing that I hadn't cut the budget by 30 per cent. I'm going to read out what I've got here, because I needed to get this in my head after discussions with Dean. It has actually reduced by 22 per cent. So, it looks a much bigger budget cut than it actually is. I think there are three budget lines in fisheries, if I remember rightly. The budget used to co-finance the EU funding under the European maritime and fisheries fund, and all projects under that fund had to submit their final claims by March this year—so, this year's budget, not next year. Whilst I thought it was going to have to be next year, it had to be, actually, this year. So, the budget for the replacement scheme, the Welsh marine and fisheries scheme, is contained within that budget line. But equally, the 22 per cent reduction doesn't explain the full position, because 80 per cent of the £1 million reduction—i.e. £800,000—will be replaced with capital funding to fund round 4 of the Welsh marine and fisheries scheme, because that's what stakeholders have told me they need; they think they need capital more than revenue, so, that's what we're going to do there. It actually means that the cut to fisheries is £200,000, which is actually 5 per cent of the overall budget. I hope that makes sense.

I think it would be helpful for those figures to be sent over to us again.

I'll write to you. I absolutely understand why you thought 30 per cent. As I say, when I reread my paper, I—. So, yes, I'd be very happy to write to you.

It would be very useful to have those figures.

If I could look at specific parts within the budget itself, trying to bear in mind what you've just outlined. Thinking about the Welsh marine and fisheries scheme, how much of the £3 million allocated to that scheme has been spent so far over the last two years and how much are we going to see allocated to the scheme in 2024-25?

We announced it at the end of 2022: £3 million was in the budget for 2023-24 and 2024-25. So, for the current financial year that we're in, it was £1.5 million, and then the same. There have been three funding rounds open. It's a demand-led scheme and, unfortunately, the take-up wasn't great in some areas, so I reallocated £0.5 million towards fisheries, science and evidence at the tail end of last year—maybe around October or November. We put £0.5 million into that from there. And then a total of £698,000 has been committed for this current financial year. Looking at next year, the next stage of it, we're currently looking at what schemes are needed. Again, I think the sector tells us they really need a broad range of schemes, so we will be looking to do that. We're developing proposals for that. But I think a large element of it will be capital, because that's what our fishers are telling us they really need.

In a previous committee meeting on fisheries, you mentioned the need to consistently review whether the scheme was delivering what its original intention set out; have you made any assessment of the impact of the scheme so far?

Apart from that £0.5 million—. I was just thinking about that. That was from looking and assessing what funding had gone out and what the applications were like.

Yes, that's right. In effect, at that stage, what we looked at was just the take-up. The other assessment we've made has been in relation to what we've heard from stakeholders, that they needed capital rather than revenue, hence the reason why we've, in effect, swapped £800,000 for the 2024-25 budget from revenue to capital. We have just commissioned, actually, an independent evaluation of the scheme. We're not expecting the report until later this year, but we will obviously use that, then, to inform any future variations of the scheme.

Finally, Chair, just in terms of the coastal capacity building fund, how much has been allocated to the fund in the draft budget?

It's £0.5 million.

Great. Diolch.

Diolch, Luke. I'll now bring in Jack Sargeant.

Diolch, Cadeirydd. I don't envy the choices Ministers have to make in this difficult budget—the draft budget and the main budget. I think Alun and yourself, Minister, set out some of the realities of why you're having to face these difficult decisions. I won't describe them. I'll be almost certain that Dean and Dean's team have sent assessments for every single area in your department, and the food and drink industry will be the same, I'm sure, so I don't have to rehearse that. But what I do want to try and delve into is how your officials and how your delivery partners will think more creatively about delivering the tasks in front of them. Because there's no doubt that reduced budgets are here; it's very real. There are difficulties there, but there is that need for innovation and creative thinking. If I can relate that to the food and drink industry, I'm very much looking forward to the launch of the beer and spirits strategy in a couple of weeks' time. We've had real success in the past with that, as you know. What will be done differently now, in the context that we're in? Are there areas that are being reprioritised or, given the very serious nature of the budget, are there some things that we will see scaled back?

You mentioned specifically food and drink, and, unfortunately, they have had a significant cut, because I had to take my cuts from somewhere, so unfortunately food and drink. Lots of things will be paused, I think, and hopefully, if we get more funding, we'll be able to pick up. As you said, we have had tremendous success with food and drink. Alun, when he was in this portfolio set what I remember thinking was a very unrealistic target to grow the industry by the end of 2020. We exceeded that a year ahead of the target. I then reset a new target, which again we are doing extremely well on. I have put a lot of funding into food and drink while I've been in the portfolio, and we've been very innovative. So, if you think about BlasCymru, for instance—TasteWales—which we hold every two years, it costs a lot of money. We've just had one in October. Already, I'm going to do an oral statement a week on Tuesday on Blas, because the output, the return on investment, is incredible—not for Government, but for our food and drink industry. We've always done things creatively. I think we've had—. I'm trying to think. Have we had three Blas or four? We've had four, haven't we—four Blas? So, we're not having one this year. They are every two years. Officials looked horrified when I said we'd do one every year. They are every two years, so we won't have one this year, but we are going to have to continue to be innovative and creative.

So, one of the ways—. We have, I think—and if you speak to our Welsh food and drink producers, I hope they would say the same—fantastic trade development visits. I've been lucky; pre COVID, I went to Gulfood in Dubai, for instance, where again the ROI is really, really significant. One of the things we're going to have to look at is perhaps doing virtual visits, because it costs a lot of money for food and drink producers to go out on these trade development visits. One thing I've asked the team to do is to perhaps look at more that you can do virtually in respect of that, and also work out what our—. Last Thursday, I went to a bakery in Ruabon on a visit. They had been at BlasCymru for the first time. They had also had support from Cywain, which is our main area where we support new businesses in the food and drink sector. So, at the Royal Welsh Show, we have four new companies every day under the umbrella of Cywain, so we need to look at maybe doing a little bit more, because the Royal Welsh Show is a fantastic showpiece for us. We are not going to be able to do the overseas visits that we have. Our exports were incredible. We were leading the UK on exports in food and drink. I hope to continue to do that, but, you are right, we're going to have to look at new ways.

Thank you for that, Minister. Another way of doing that, of course, is utilising with our partners, like the rugby union, like the Football Association of Wales—I think Wrexham Lager had real success at the world cup in Japan—and making sure those avenues are explored to the maximum opportunity. One of the other things I've been quite excited about when I've discussed this with the industry is the work that the Advanced Manufacturing Research Centre is doing to help producers maximise their efficiency when they're producing their food. Is that likely to—? Again, given the context of the budget, that work will still go on, maybe scaled down, but they will still seek to support Welsh food and drink producers.

You gave a good example there of the Rugby World Cup in Japan, where you couldn't get Wrexham Lager in Wrexham because it literally was going out every day to Japan. If you've got that big global showpiece—and there's no other word for it; it's absolutely around the world—then, again, you look at the ROI for that company and you try to support that. So, rather than going—. I'm trying to think of an example where—. There was a trade development visit to Singapore, for instance. It's quite hard, isn't it? I mean 'hard', as in from the heart. You've got to look at it very, very coldly as to what are the best outputs you're getting. I'll go back to Blas, and I don't want to say too much because I'm going to do an oral statement and I'm going to take away from that, but already the bakery I visited last week, she said the amount of work they've had from that is—. They met with 28 new customers. Now, I'm not saying everybody had a contract with them, but the ability to meet with 28 potential new customers in two days is incredible. She said if we'd have gone on a trade development visit, you wouldn't have had that. So, it's about making sure that you fund the right things for our food and drink producers, and BlasCymru, I think, is a classic example. It costs a lot of money, but hopefully we will be able to—. Certainly, I've asked officials to work on the basis that we will have another Blas next year.

Minister, if I may, it might also help the committee to say whilst there's nearly £5 million in line 2970, which supports a lot of the activity the Minister talked about, in terms of the wider food and drink sector, some of the more popular schemes are actually funded out of the rural investment scheme line. So, things like the food business accelerator scheme and the sustainable innovation scheme actually come out of there. So, there's a greater proportion of the budget that goes in support of the wider food and drink industry that perhaps isn't immediately apparent by looking at that single BEL.

Yes. And Jack mentioned AMRC, which I think is a fantastic facility in north Wales and is very well used, and it's helping food and drink companies with decarbonisation, for instance, so we'll certainly continue to do that.

Thank you, both, for that. The answer from the Minister, really, is it's value for money in the small amount of money that's left available, considering the previous budgets, of course. Perhaps, can you talk us a bit more through that, about how you'll make that assessment on value for money? You've mentioned one particular where it will cost quite a lot, but you think the value is there. What about all the support, right through the portfolio, beyond that ethos of it has to be value for money, and I'm thinking about bespoke support particularly for smaller businesses here. We know, don't we, that the seafood industry in particular is having real difficulties exporting since 2020. The support there, will that be assessed on value for money? Perhaps you can talk through what, quite, that looks like.

Yes, absolutely. We will obviously support the seafood industry, but we're having to look at how we do that, and I go back to ROI. So, we've always supported seafood export—have I got the right word? What's it called?

Seafood Expo.

'Expo'—sorry, I knew it wasn't right—Seafood Expo. I think it was in Barcelona last year, and I think it's in Shanghai this year. So, again, it's significant funding, so we will have to look at that very carefully. But, again, it's about talking to stakeholders, and the principle—. The Chair asked me about what principles you use; it's about talking to stakeholders. On small businesses, you're absolutely right—the bakery I referred to, last week, in Ruabon, a husband-and-wife team, is now employing, I think, 10 people. So, you want to make sure that, if you can, you support those sorts of companies that are increasing their number of employees, and support them not just with potential new customers but also in the way that you described in relation to working with AMRC and making sure that they decarbonise.

Minister, I think Richard Irvine would just like to come in on this.

Sorry, Richard.

No problem at all, Minister. Just very briefly, to expand on that—if I understood your question correctly, Jack, but tell me if I haven't—if we're looking across the system, let's not also forget that the high animal health and welfare standards that we develop and aspire to across Wales are also fundamental here too. So, that assurance that we can provide to consumers, whether that's at home or abroad, enables us to then provide high-quality produce to international consumers. So, from the Welsh farm to the international plate is absolutely crucial, and we can only provide that export market assurance through the hard work of farmers and veterinarians, and also, as part of, I think as you said, the system as a whole and across that value chain, investment being made by relevant parties to support those different facets, whether it is on farm, whether it is through food processing, or through the export at the end of the value chain. Crucially, amongst all of this, I think as the Minister also described, a principle that's absolutely crucial to my work and dear to my heart is partnership. So, we can only achieve the best outcomes through working together, and for Government to do the bits that only a government can do, but listening and working with stakeholders and achieving those outcomes through partnership.

I think that point that Richard makes about animal health and welfare standards is really important from our food export point of view. We're known for our very high standards, and I think one of the things, coming out of the European Union, is that it was really important that we maintained those, because you can see the trade deals that are being done by the UK Government. For me, it's really important that we keep those. We are seeing trade deals with countries that perhaps haven't got the same standards as us, so it's a massive selling point, I think, for Welsh food and drink.

I agree, and we should be proud of our high standards. I think the point I was trying to get across is that the Welsh Government paper states that the support will be conditional, based on those shared values, and those shared values of high standards are something that we should be working to. But the point on the assessment of, and the consistent engagement with, smaller businesses, based on what it is that they need in this time of financial difficulty, and what will get them the best value for money as well, the Welsh Government has the key role, as I see it.

I'll just move on to one final question, Chair, around the community food strategy, if I may. The Minister has said—I'm not sure if it was you, Minister, or perhaps the Minister for Social Justice, who said—that no additional financial resources will be made available to deliver the community food strategy. So, again, it's the same question, as I started, I think: how will you, or your department and colleagues within your department, maximise the impact of the existing resources available, and how will this be monitored and then reported? I know this is an issue of importance to many Members of the Senedd. I think it was raised by Jenny Rathbone to the First Minister in the last scrutiny session we had with him. So, how will that be delivered through the portfolio of yours now?

So, for me, the community food strategy was a manifesto commitment on which we stood, our party, and then it became a programme for government commitment, and I never really had a budget for it. It sort of evolved, if you like, and it's evolving in, I think, a very exciting way, and, again, it's in partnership with Plaid Cymru as part of the co-operation agreement. So, for me, it was never about the money; it was about making sure that all these very—. Again, there was a bit of a scattergun approach to food. Even within Government, people were saying, or certainly stakeholders were saying, and you listen to this—. You know, with Peter Fox's food Bill, which I know didn't go beyond Stage 2, but I worked closely with Peter in relation to this, and stakeholders were saying that Government food policy was too vague, if you like, and people didn't know what they were doing. And you might remember the First Minister got all Ministers together, because it was really incredible that every Minister, apart from one, had food in their portfolio. So, it's about, as I say, working with partners rather than having a delivery-focused action plan. It's about what work is being done on the ground. And, one of the first things I did, when the new Future Generations Commissioner for Wales came into post was to contact him to ask would he be interested in looking at food. So, the previous commissioner—. Obviously, like a Minister, when they come into post, they look at what their priorities are, and, for the new commissioner, he was very interested, and he's now got a focus on food in 'Cymru Can'. I've had three meetings with him—three or four meetings with him; my officials meet regularly with him and his officials, and he—. What I see the community food strategy now as being, with the commissioner, is to bring a focus and a momentum to food matters, because we know there are people who literally don't have access to food, and they should. There's plenty of food for everybody, but, unfortunately, not everybody has that access to food.

So, what we really need, I think, is a collective public service approach to food matters in communities, to maximise the impact of what we're already doing and the great work that's already been achieved. There are so many—. You've got a fantastic initiative in your constituency, and it's amazing, the work, but nobody knew about it. And then somebody else might go off and—. I'm trying to remember what it's called. Well-Fed—

Can Cook/Well-Fed.

Can Cook/Well-Fed. It is amazing, and I urge everybody, if they haven't visited, to visit. It's incredible. That is going on all over the country, and I think Huw Irranca-Davies raised this with me last week, about what could Government do to make sure initiatives come together, and that's exactly what we're doing with the community food strategy.

Just to say, Chair, I was going to make my own plug, but the Minister has taken it.

She did it for you.

It is amazing.

It is good work that they do at Can Cook/Well-Fed, and I was going to say there's a model there that could be looked at and should be looked at more nationally. I'm pleased to hear the Minister recognise that.

No, it is absolutely excellent, and we've got a public service board forum taking place, actually, in Wrexham on 22 February, and I really hope that will be a focal point to bring all those stakeholders together. I'm sure—Robbie, isn't it—Robbie—

Robbie, yes.

—will be there, because it is one of the best initiatives I've seen right across Wales.

Okay. Thank you. Diolch.

Thank you, Jack. I know that Alun and Luke would like to come in on this as well. Alun.

Thank you. I'm grateful to you. I understand the context of difficult decisions and the rest of it, but it's really worrying to hear the description of the sorts of cuts that you're looking at making in some of these areas. I'm not convinced that you can do virtual visits and sell virtually; I'm not convinced by that argument at all, I have to say. But I'm also very aware of the importance of the whole trade support work that is done overseas, and the importance of that to the industries that we're discussing here as a whole. And I'm also aware of the enormous competition out there. I'm attending an event in Brussels next week with the Scottish Government, and they're promoting Scottish produce in Brussels next week around Burns Night. There are different countries and different states doing different things every day of the week to support and to sustain their own exports. And if we lose that space, it'll be very difficult to get it back—very difficult indeed.

So, I'm interested as to how the Welsh Government is seeking to share costs, potentially, with the UK Government, with the Foreign Office, with overseas offices, because I know different embassies in different parts of the world will be looking to put on their own programme of events. And certainly, UK embassies have always been very supportive of Welsh exports at different times, and the rest of it. So, to what extent are you looking at sharing the costs of some of these programmes, rather than cutting back the programmes themselves?

You're right, virtual doesn't replace—. You can't taste a chocolate brownie, can you, if you're doing it virtually? And we will still support, but we are going to have to be much more careful in the ones that we support, and look back at what has given those companies—. Because it's not Welsh Government that gets the benefit from it, it's obviously the food and drink companies.

One thing I did—unfortunately, it was just before COVID, so you'll understand why I'm saying this—but I remember going on a food visit to Barcelona with officials, and being at the airport to fly home. There was this shop selling food made in Barcelona completely. Beercelona was their beer—fantastic—and I was thinking, 'Why haven't we got one of these in Cardiff Airport?' So, we got a small one in Cardiff Airport, but, unfortunately, it was just before COVID, and you can imagine then the impact. But that doesn't cost a huge amount of money. Obviously, it couldn't be—. There they have the big Serrano hams, et cetera, and you couldn't have perishables in Cardiff Airport, but we started very small and it worked really well. So, again, it's thinking outside the box, thinking creatively about where you can do that.

In relation to sharing costs, yes, we can do that. What I think is really important is that we're not swallowed up, if you like. I'm very passionate about seeing the Welsh flag on our food. I don't want to see the union jack swallow up our flag. It's really important that if we are going to share costs that we have equitable status. But it's certainly something that officials can look at and, as you say, I think Scotland—. I remember going to the Scotland Office for the first time and, again, they had all their produce—their Scottish wool, all the things that they make in Scotland—they had them on show. In the Wales Office, we didn't do that, so I tried to encourage it, but, unfortunately, that didn't happen with the UK Government.

But I think it is about being a bit more creative, making sure that we use the little funding that we have. I think we've always looked for value for money—don't get me wrong—and sharing it out as well. And I go back to what I was saying about Cywain in having those new companies, and when I say new, I don't mean two months old. Some of them might be five years old, but they're a one-man band and they may not have been able to get that profile. I think that's what so good about Cywain.

But it's also true to say that we've allowed the UK Government to get away with being an England Government, I think, historically. You look at VisitBritain. It's largely visit London, Stratford and Edinburgh, possibly—it's not VisitBritain at all. And in the same way, UK trade missions have largely been about supporting England, and the union flag is up there, but it’s all about England. To some extent, we need to ensure that the UK Government does more to support producers in Wales. Historically, they’ve done virtually nothing, which is one of the reasons why Welsh Government stepped into this field in the first place. But it may also be the case that we need to spend more time actually sharing those costs with UK Government, because it’s Welsh taxpayers’ money as well.

Richard, you wanted to come in very quickly on this.

Very briefly, just to expand slightly from my perspective, and also reflecting on my previous role, which was in UK Government, where I sat and chaired UK—emphasis on 'UK'—delegations negotiating trade agreements for products of an animal origin, and secured wins that enabled us to export Welsh lamb and beef in various places. So, with that in mind, from my little corner of the world, we do operate closely also with colleagues who do those export promotion activities—so, the likes of the UK exports certification partnership, working with Hybu Cig Cymru and the Agriculture and Horticulture Development Board. So, there are opportunities, as you rightly say, and mechanisms whereby different bodies can support Welsh produce and the Welsh economy as a result, and the Welsh rural economy as a consequence of that. The policy area for exports to non-EU countries is UK Government reserved, but that does not mean to say that Welsh produce cannot avail itself of those opportunities through these different organisations, and also the investment that Welsh Government provides.

I'll now bring in Luke. Luke.

Diolch, Gadeirydd. I think the Minister actually made a really important point earlier in answer to Jack Sargeant around how food permeates into all different portfolios across Welsh Government. So, I suppose, on the back of that, I'd be quite interested just to understand a bit around how decisions made in other portfolios might have affected your decisions when dealing with your own budget around food and drink. I'm thinking, for example, now around business rate relief, the size and the types of businesses that operate in the food and drink sector, and how a reduction in business rate relief might affect them. So, I'm just wondering how decisions made in other portfolios might have influenced your decision-making process when it comes to food and drink.

I don't think probably directly they have. If you look at a lot—not all, obviously—. But I mentioned that I did a visit to a small baker. I did actually visit—I'm trying to think now—the first visit I did last week had three members of staff, the second had 10, the next one probably had, again, single figures. So, the majority of small businesses do get business rate relief. But I certainly have discussions with the Minister for Social Justice around food, because obviously we've got the food local partnerships, and I was aware that budget would have an impact, and I heard Jack say that the Minister for Social Justice had said that there’s very little money in relation to that. So, I remember having a discussion with her, but I wouldn’t say the wider issues that you referred to have had an impact, no.

I'm just thinking of the cumulative impact of all the different decisions. The hospitality sector is a prime example, really, isn't it, of a sector that operates within food and drink and has highlighted something like business rate relief reduction impacting them quite significantly.

Again, one of the visits I did last Thursday in north Wales was a hotel and caravan park. That wasn’t an issue. One of the main concerns, I would say, for that sector at the moment is making sure they get the staff, because they’re really struggling to get staff. But the other things weren’t raised with me.

Okay, thank you, Luke. Our session has come to an end, Minister. Thank you very much to you and your colleagues for being with us today. Your evidence will be important for us as a committee in scrutinising the Welsh Government's draft budget going forward. As usual, 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 once again, thank you very much indeed.

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

Croeso yn ôl i gyfarfod Pwyllgor yr Economi, Masnach a Materion Gwledig. Symudwn ymlaen nawr at eitem 5 ar ein hagenda, sef craffu ar gyllideb ddrafft Llywodraeth Cymru ar gyfer 2024-25. Gweinidog yr Economi sydd gyda ni yn awr ar gyfer y sesiwn yma. A gaf i groesawu'r Gweinidog a'i swyddogion? Cyn ein bod ni yn symud yn syth i gwestiynau, a gaf i ofyn iddo fe a'i swyddogion i gyflwyno eu hunain i'r record? Gweinidog.

Diolch yn fawr, Gadeirydd.

I'm Vaughan Gething, and I am the Minister for Economy. To my left—

Good afternoon. My name is Dean Medcraft, director of the finance, economy, Treasury and constitution group.

And to my right—

Jo Salway, director of social partnership employability and fair work.

Thank you for those introductions. Perhaps I can kick off this session with a few general questions. Minister, you have said that difficult choices have had to be made as part of this budget, given the limited resources available. How did you decide which areas to protect and which areas to cut? And can you also explain how you've considered the equality implications of these decisions, and give examples of how equality considerations have influenced budget allocations?

Okay. So, the overall whole Government context is that we chose health and local government as priorities. They are the biggest areas of spend, and so that has a consequence. I don't think that you can say that the NHS is going to turn the lights off in the last week of the year. So, we have got a real challenge there. And of course, there is lots of additional need coming into the service. There was a bubble of demand post pandemic that hasn't gone away.

So, having made those choices, there are consequences. That meant that my department had to provide over £40 million-worth of reductions. We have got a revenue increase of £43.5 million for this budget compared to last year. I then made the choice that I wanted to provide as much protection as possible to our apprenticeship programme. European funds have come to an end. That has an impact. If I then had taken an even approach in, if you like, a salami slice across my department, then we would have had even more harm in some areas.

I did take on board the point that you are making about what the relative impact is of each of these areas. Now, in any of the reductions, there is a real impact that will have an equality impact. Yesterday, with Alun Davies, we were talking about the impact of my strategic choices for the department in the culture field as well. There's a real impact, and that directly flows from apprenticeships. If I then wanted to do even more—and I did go through a range of options—I think that we would actually have seen the collapse of some of the institutions that we provide funding for.

So, thinking about, not just in the Government but in the department: what is the impact on the most vulnerable, and how do we then understand the broader impact across each of the service provision areas? And we did try to think about whether there are areas that are not devolved that we're funding that we could and should actually withdraw from. There are very few of those in my department. The reason why the young person's guarantee and the apprenticeship element were relatively protected, more than other parts of the department, was because we understand the impact they have, in terms of what they do for young people, especially—they're all-age apprenticeships, but—actually helping people into work, and that support is, actually, really important.

And within the budget, I've got to think about the flexibility, that I might need to move money around in the year, because some of our programmes are demand led. Now, this year, we didn't have to use all of our ReAct+ funding. It's possible that, over the next year, we'll need to use all of that funding and potentially more. So, in terms of thinking about the impact, we've had to think about how we go through that, think about younger workers, older workers, and then the relative impacts in a whole range of areas, especially on our most vulnerable groups of citizens who need economic activity the most. So, that sort of informs a whole range of choices, but, of course, we'll publish the equality impact assessment the Government does with the budget. But, if you like, in overall terms, that's where we are, and it comes back from, as I said, in real terms, our spending power is £1.3 billion less than two years ago. That is £100 million more than Cwm Taf Morgannwg had to run all of their services, to provide every single part of healthcare that they deliver within the Cwm Taf Morgannwg area. So, it's not a small sum of money that we have lost and no longer have available to us.

Now, you've also made it clear your portfolio's budget proposals are aligned to the four priorities of the recently published economic mission. Can you tell us a bit more about how the proposals relate to the four missions, and give examples of where your priorities have influenced changes to budget allocations to particular areas?

Okay. So, let's consider 'stronger partnerships'. In 'stronger partnerships', we're looking at both working with regions and different groups of people. So, in thinking about that, we're still trying to protect some of the work that we are doing with our economic regions. If you think about the potential of a well-understood proposal—. I'm not just picking on Alun, but CiNER Glass Ltd, for example, their proposal, we need to make sure we're able to still see that potential investment come through. So, I've got to think about how much I keep within the business and regions budget to make sure that I can still deliver projects like that, that could deliver 500 well-paid jobs in a part of Wales where, without some intervention and support from the Government, the market won't deliver those jobs as well.

I'm also then thinking through relationships and how that works as well. So, there's a piece of work that isn't about the budget, but is about how we use money effectively. And that is about how we understand where that region, led by local authorities, doesn't need us and where the Government needs to be a partner, and where the Government needs to make the decision as well. And it also goes into the relative—and it is only relative—protection that we're looking at in apprenticeships and skills as well. So, we're going to continue to invest in part-time learning opportunities. That will go across myself and the education department, so that, where apprentices are appropriate, there'll still be 10,000 starts in the next year. But also we're looking at how we prioritise those in terms of growth areas for the economy, and growth, of course, is one of our priorities.

So, I'm still thinking about how, with the reduced means we have, we continue to use the budget available to us to deliver and advance the economic mission, and to make sure that, if we get a better budget settlement, as I'm optimistic we will do, then we can still do so. I could go on talking about other things that we still have to account for, whether it's the UK Government and potential partnership in freeports and investment zones, or some of the reactive challenges we'll have to deal with as well, whether it's borders, which you've got a constituency interest as well—. So, it's both proactive around the mission and it's the ability to react to events around us as well.

You mentioned the effectiveness of spend. Can you tell us how you'll be monitoring the effectiveness of this budget and what outcomes will you want to see from your department? And how will you know that this draft budget has been successful in meeting your priorities going forward?

Some of that will look at each of the different areas. Thinking about employability and skills, some of the work that we're still looking to do on helping people to return to the labour market or to enter the labour market for the first time—. So, we'll look at the success of Jobs Growth Wales and around the young person's guarantee. We'll continue to publish the outcomes we deliver for young people, the number of people that have a positive outcome. When you think about the work providing for start-up businesses, we already have a success rate of about 78 per cent of those businesses we support are still alive and functioning and running the business within two years' time. So, there's a range of metrics to use about whether the resources we're using are successful, and there'll be headline measures about the health of the Welsh economy. Now, we have an influence on that, not all of the levers, as you know, but, when we look at what we can do in the areas that we can influence, we can do that.

Another good example is our export and trade programme. We've had to reduce the sum that we spend on that. I really didn't want to do that, because I think it's a really successful programme and Welsh businesses that take part in that, they themselves are very, very positive about the support that they have from my officials and the team, whether they go into market for visits, or the help and support they get for finding new markets for them, both within Wales and within the UK, as well as outside of the UK, and I think we're going to have figures to show some of the success of that programme in this year. So, for me, it's still about how we work the asset that we've still got as hard as possible. And we'll have figures on trade and invest figures, inward investment, as well as the external trade that we do, and we'll have figures on the value of economic opportunities won by businesses that take part in our programme. So, like I said, in the next week or two, we should be able to have some more confirmed figures about where we are, but it does show that we're already seeing progress and I'll still want to see some of that progress made over the next year.

It also means that I'm thinking about what I can do before the end of the year. I'll finish on this point, as I can see that other Members want to come in. We still have a challenge about meeting our budget for this financial year and making sure that we balance. We've all got a responsibility, across the Government, if there are underspends that emerge, about how they're used. I'm interested, if I can repurpose some of the underspends that may emerge—as all of us know will happen from time to time; projects you expect to deliver may have a slowdown—I'm still interested in whether there are things we can de-risk for the year ahead, with the reduced budget that we've got, can we use things in this financial year to make sure that we have more flexibility and more ability in the next financial year, given that, because of our overall priorities in health and local government, there's a £43.5 billion reduction in this part of the Welsh Government's activity.

I know Alun Davies would like to come in on this. Alun.

I'm grateful to you, Chair, thank you. Thank you, Minister. I'm interested in how you have looked at the impact of these spending decisions. You referred, in one of your answers to the Chair, to the support that the Welsh Government is providing to a company relocating in my constituency. And the support that is required for economic growth in different parts of Wales is not uniform, clearly—

That's true.

—there are parts of the country that require greater support than other parts of the country; that's accepted. So, how are you ensuring that those parts of Wales that have greater economic need, where the market is not delivering the sort of investment that it's delivering elsewhere, are going to be in any way protected within the decisions you're taking?

I think there's a good example of the point you're making about the fact that the market will do some things in some parts of Wales that it won't without stimulus in others. So, on investment zones, those have gone to parts of Wales where there is already an established industry that has potential for growth. So, it wasn't about addressing economic inequality; that wasn't a test that the UK Government set for how the money could be spent.

So, south-east Wales, around semiconductors, Cardiff and Newport, there's a strong case there that more jobs can happen and some of those may go to constituents of myself and Vikki Howells, who will travel to some of those opportunities. There'll also be—. I know that there's a big electrical contractor in Hirwaun, with over 100 employees, and almost all of their work comes from their work with KLA. So, there is work that goes out, but I don't think you just rely on that doughnut effect delivering everything you want it to. The same thing with the investment zone in north-east Wales, and there's more that can happen there. When you think about your part of the world, Alun, we have deliberately invested in property, for example, and if you think about Rhyd-y-Blew, if you think about where we're going, we chose to invest in those to make sure that there are sites available, and, when the sites are available, the market does then want to come. What it won't do is the earlier work. I think property investment is a really good example of where we deliberately choose to do that to make sure that economic activity is generated. I think Baglan, again, is another good example, one of the early choices I made to remediate that land and make it available—the market wasn't going to do that; there was an opportunity, and it didn't happen.

So, I think we have got examples. And that's not just incidental, that's deliberate; it's a deliberate choice to want to do that. And when we talk more, as we will do in the Senedd in the next couple of weeks, about what we're looking to do with Heads of the Valleys authorities together, that's part of what we're going to do and it's why I've been positive about the Heads of the Valleys road investment, because, otherwise, the market would not deliver in that part of Wales. So, it isn't accidental or incidental; it is a deliberate approach. The question always is: is it enough, and what more can we do with the resources we have?

The Minister's pre-empted my question to him in next Tuesday's statement on the Heads of the Valleys—[Laughter.]—

I'm sure you can find a way of reframing, Alun.

—I certainly will, don't worry—in terms of property investment and other sorts of infrastructure investment, if you like, to create a business environment that is viable in and around the Heads of the Valleys. But the whole investment in that road, as you say, took place in order to stimulate economic activity. That's why it's there. My concern and my question to you this afternoon is about the protection of those investments within a declining budget, because you're absolutely right, I've got no disagreement with you in the analysis and the description of where Welsh Government has been and is going; my concern is to ensure that that momentum isn't lost on account of budget cuts and through the period of economic instability that we've experienced recently.

I understand completely your concern, and when you look at what we're talking about in the mission, again, when we talk about partnerships, we deliberately talk about the impact they have and where they're needed. So, it is absolutely not just my personal commitment, it's the mission and the task I'm setting for the department and our partners as well. Look at it this way: we would probably pay more to support and retain jobs in some parts of Wales than we'd be prepared to do in others, because there is greater need in some parts of Wales, and, actually, the market doesn't always ask us for support in a range of other areas as well. So, it'll continue to inform the approach we take.

And that will be the same in other parts of Wales as well. We're talking, the moment, about the Valleys, but it's the same question. So, when I invested, for example, in Siemens in Llanberis in north-west Wales, that's because, again, you don't see significant investment like that in every part of north-west Wales. I was prepared to make a decision to support that investment, because I understood there wasn't another ready-made opportunity for 400 plus well-paid jobs in that part of the country. Now, the political geography wasn't the point about it, it was, actually, if we don't do something there, we won't see the investment that we need.

I hope you'll see, not just in the coming weeks, but, I hope, in the rest of the term and beyond, a deliberate approach to wanting to deliver that investment to provide the genuine equity that I think our communities deserve, alongside investment in skills and all the other things that go alongside it as well.

I'll now bring in Jack Sargeant. Jack.

Diolch, Cadeirydd. I'm grateful to the Minister for being here. We had a lengthy debate yesterday, Minister, on apprenticeships in the Chamber, so some questions on that. Firstly, a point of clarification, if I may. The Welsh Government's budget narrative says

'as a result of reprioritising £5 million of funding, we are now expected to achieve 110,000 apprenticeship starts'.

Can I ask: are you expecting to achieve those 110,000 starts within this Senedd term, or is it over a longer period of time?

I'll ask Jo to come in to talk through how we're looking to measure those and, actually, the change in profile of starts, because we're talking about starts, not completion. That's the target. So, Jo, do you want to run through that?

Just to say yes, that's absolutely right, it's 110,000 starts in this term. The implications of the changes to the budget are something that we're going to have to work through, because actually managing the profile and making it deliverable for the providers and keeping the consistency of starts is a key challenge.

So, that'll be a 10 per cent increase on what we achieved in the last Senedd term, but not the 25 per cent increase we wanted to, for reasons that we went through in the Chamber yesterday, and I'm sure there might be an opportunity to go through those again today.

Just, perhaps, to Jo, again, noting the differences and the reasons why, are we confident that, given the financial context, given the situation that we're in, we will be able to meet that within this Senedd term?

Yes. The big challenge comes from the fact that the providers operate on the basis of academic years and we're funding on the financial year. So, for the next financial year, about 38 per cent of that budget has already been committed on starts in this academic year. So, any cut that we make immediately becomes magnified in the area that's there. Similarly, we carry a commitment to fund apprenticeships over multiple years; the vast majority are two years, some go up to about four years. So, actually, a lot of the money is committed. That's why the challenge around starts becomes so great, and that's why, already, we're working closely with the providers to try and manage that across the academic years to smooth that and make sure that we are still able to achieve 110,000 starts. But we are confident that we can do that.

But I should say I recognise why providers are unhappy. I'm not telling them to celebrate the fact that there's less money available in the next year with the real reduction and then there'll be a reduction in starts. This, again, is one of those choices where no-one around this table would want to make that choice, and yet we've got to balance the budget. So, it's about how we do that and how we provide enough protection of our delivery system to make sure we don't just deliver more starts in the next year, but that we're then able, if we do see more—as I'm hopeful we will do—to have a better budget position so that we can then actually continue to grow the number of starts.

Can I thank you both for that? In the debate we had yesterday, I think there was quite clearly cross-party support for apprenticeships. Most of us in this room spoke in that very debate. Do you agree with me, Minister, that it's important to protect the quality of apprenticeships, so that you learn the skills throughout your apprenticeship? I look back at my time where it was a four-year apprenticeship; you served your time, you picked up the skills that you could then take on throughout life. There is a worry with reduction in funding that perhaps we would go for more quantity of apprenticeships rather than quality of apprenticeships. The apprenticeship is a skill for life, which you can take wherever you want. I look at Airbus in my own constituency: 70 per cent in Broughton of their senior managers are former apprentices. That's the gold standard for an apprenticeship programme in Wales. But isn't that where our ambitions should be? And to do that in the context where we find ourselves in, it is crucially important for the Welsh Government to protect the quality of the apprenticeship programmes throughout Wales.

Again, that was an active choice in the budget. I could have chosen to do something that meant that we would reduce the number of higher-end qualifications in the apprenticeship programme and we could have delivered more starts. Politically, that would probably give me an easier time of it, if I could have said, ‘Actually, we’ll have an extra 5,000 starts compared to what we expected to have'. That’s less of a challenge going into the Chamber, going to the press to talk about that. But actually, I don’t think that would be the right answer for the economy, so I’ve protected the balance of quality in the programmes that we deliver.

All of these things have a consequence, because you’ve then got to make sure the providers can deliver against the real cost of delivering. You’ve got to make sure young people have—. It’s an all-age programme. You’ve got to make sure people have the opportunities to get the experience they need for the work-based learning part of it, and when they need to be in college or somewhere else to understand how those things all work together, and you’re still getting something that works for the individual who is doing the course, and, of course, the business that they want to go into.

Again, thank you. There obviously is concern from some that there may be fewer opportunities for young people when they leave school, in terms of fewer apprenticeships, but perhaps you could talk through the commitment of the Government to try and support those young people when they leave school, making sure that there are opportunities out there in other avenues, and still quality apprenticeships.

Apprenticeships are part of the young person’s guarantee. We’ve provided 27,000 opportunities that we don’t think would have been there through the young person’s guarantee as well. So, when we think about the additional side of what we’re doing—. And if you want to go back further, it was the same thing about keeping Jobs Growth Wales when the Future Jobs Fund disappeared over the border. This is us still maintaining a deliberate intervention to support young people.

If you think about Jobs Growth Wales+, not just apprenticeships, one of the things that I want to be able to do is to make sure that we understand how successful we’ve been this year. We have actually listened to participants to understand what makes a difference to them, and the providers. It’s a positive thing that we’re needing to repurpose some money to keep on the offer, and that’s because people are taking it up and they’re finding it valuable and useful. That’s the right sort of problem to have. We’ll continue to do that in the future. And again, there’s a very high level—Jo can give you the percentages in outline—of people who have a positive outcome. They go through Jobs Growth Wales+ and their outcome is they then go into work, they go into extra learning, or they go into training, and some people start their own business.

It’s a programme that works, and that’s the point about it: how do we provide that practical support in an area where we don’t have sole responsibility, but without that, we can all be confident that a number of those younger workers would not be in education, employment or training. Actually, if you spend time not in education, employment or training at a young age, it does affect your life outcomes, and not just economically. You’re less likely to have the life that all of us would want for ourselves and our respective families.

Thank you. A final question from me, Chair. I’m substituting for Dr David on the committee today, so it would be remiss of me not to bring up degree apprenticeships.

He's in jury service, as opposed to before a jury. [Laughter.]

That is quite true. [Interruption.] This time, as Alun points out. Your paper, Minister, states that no transfers are being actioned as part of the draft budget 2024-25 to support degree apprenticeships. Are you expecting to make any transfers during the 2024-25 financial year?

We still have a commitment to degree apprenticeships, and I mentioned yesterday that we're carrying on the roll-out of a number of things. And again, Dr David has talked about the rail sector and construction coming on in September as well. What I think the education Minister committed to yesterday was to provide a note to the Children, Young People and Education Committee—and I'll make sure the same note comes to this committee—to show what we're doing together for degree apprenticeships. So, rather than having one note to one committee and a different one here, I think it would make sense to make sure that the same note comes to both committees so you can see what we're looking to do on degree apprenticeships. But we'll still carry on providing degree apprenticeships next year. Again, our challenge is how many, how much can we grow, and then what more can we do in a sector where we're confident they'll have a future. And I've met lots of apprentices who have gone on to degree qualifications through work—at Airbus, at InBev, and a whole range of others as well.

I should say for the record, Chair, that my degree was part of an apprenticeship programme, which was supported by European funding and the Welsh Government. So, clearly, as we heard in the debate yesterday, the loss of European funding is devastating for people who have the same option as me of going into work, becoming an apprentice, whilst still gaining your degree. I think we need to accept the reality of that. But I'd be grateful for the note as well, from the Minister for education. I'm sure the Chair will follow up on that.

Yes, absolutely. Thank you, Jack. I'll now bring in Luke Fletcher.

Diolch, Gadeirydd. As Jack's already highlighted, we've had extensive debate around this particular topic over the past couple of weeks, but there were just two things I wanted to raise with the Minister. In the first instance, obviously, this is a draft budget. So, are there any intentions, then, during now and the period when we get to that final budget, to go back and look at the apprenticeship budget at all, and the cuts that have been made?

I think the challenge is that we've then got to identify other areas where further cuts can be made, and that almost certainly means job losses. What I said yesterday in the debate around the size and the scale of it was real. If you look at the paper and the budget lines you've got, you can see that Amgueddfa Cymru's budget next year, after it's reduced, is going to be £25 million; the national library's budget is going to be £11 million. So, it will be £36.5 million together. That doesn't meet the contract value that we would need to maintain the same contract value into the year ahead. So, with the scale of the money that is required, you could remove two of our arm's-length bodies, close them down completely—even if you ignore the reality that you need to have some costs around redundancies—. Again, thinking about Delyth Jewell's committee that I was before yesterday, a case was being made about the value of culture and concern about reductions in those areas. There would need to be even bigger reductions, and that's the challenge we face.

So, it's not about whether we want to see more money going into apprenticeships, because we do. In fact, the Conservatives had an even more ambitious target; they wanted 150,000 apprenticeships, in their manifesto. To pay for the 125,000 is a challenge that we can't meet within this term. If there were 150,000, the challenge would be even greater. As all the budget lines are in front of them, if committees think that they can identify an area not just where they want the Government to find the money, but to make suggestions around areas where, actually, you could move money around and it would be a better priority, then the Government will listen and will consider that.

This budget hasn't come about in a lackadaisical manner, where people haven't thought through and agonised over the choices. There have been any number of meetings and really difficult discussions between Ministers, between departments, and within the department. I've seen a great deal more of Dean, Jo and officials in the run-up to this budget than in any other budget, in running through that with officials. And that's because the choices are getting more and more difficult and more and more unpleasant. So, it isn't about saying, 'This area matters'. We could go on to another area in the department where you could say, 'Why can't you find more money for this, too?', because there will be a case that spend in that area would deliver real economic value, and not spending in that area could lead to a less competitive economic environment in Wales. And you'd be right to say a number of those things, but this is the budget that we have. Without more money, we really are limited. We're at the end of the point where you can say, 'Just be more innovative, you've got plenty of money.'

The question didn't dispute any of that; the question was whether or not the Government intended to look at the apprenticeship cuts again and see if there was anything they can do. So, to summarise, then, there is no intention, unless committees or other Members of the Senedd can find a solution.

No. I think you're putting words in my mouth that I haven't used. What I'm saying is that not just this committee, but anyone who wants to find extra money to go into this area, needs to identify where it comes from. That's within the Government, if we wanted to do that. That's within any other area. This is about the Government saying, 'Here is the draft budget', and asking people to comment on it, to scrutinise it and to come forward with alternatives. That's got to be the point. I think that is a grown-up way to go through this. I don't think it helps any of us to say, 'You just don't intend to do any of this', as if somehow that's it. We're well beyond that. We've got to find how we balance our budget. It's one of the prime responsibilities of the Government to present a budget that balances, gives confidence for people who need to deliver services, people making investment choices across the economy, and to be able to do it in a way where it balances. We don't have a free-for-all position where we can just avoid that. And we've got to be able to say to the Senedd, 'This is a budget that we recommend you pass so the Government can function and do what we need to for the country'.

In terms of saying if we could find solutions, then, to move things around, do you think it's fair for us as opposition parties, or even backbench Labour MSs, to ask for a bit more transparency in terms of the data and the information that the Government is using? Because, ultimately, we only get the overall MEGs rather than line-by-line information for the budget. If you were genuine in terms of wanting us to be involved—and I'm sure there are many people who would take that up—then surely there needs to be a bit more information out there for us to be able to chew the fat over, as it were.

There's a great deal more than MEGs that are provided; the individual budget expenditure lines are provided and available. There's loads of information about the budget. If you want to go through every expenditure line, you can do; that information is available. When I was a backbencher, we did go through, and, actually, one of the things we then ended up doing was—I remember this from scrutiny of the Government's budget at that time—saying, 'Can you understand what all of these mean?', but then to say, 'Look, if we're just having main expenditure groups, the really big blocks, how do we understand where that goes?' So, it's always a balance about the information that you want. Because at that time, there was a complaint that the Government had given us too much information, we can't understand it and there's not a fair fight for us to understand what we're really being presented with.

Go through all of the budget expenditure lines; I have no problem with that. That information is available. And, by all means, come back and ask more questions. The challenge then is will that lead to a better answer or does it just shift a really difficult consequence to another area of life and you just end up with a different campaign. Because, actually, that's the position we're in. You know, a whole health board's budget—. Some £1.2 billion, Cwm Taf Morgannwg had, and it's £100 million more that we have lost in spending value. That's without considering European funds. You can't do that without there being a consequence. But if you think there's a better way to do that as you go through all of the individuals lines that have already been provided, then I'm very keen to listen, to understand that. And if there's more information you want on individual lines, we can go through that too.

On the point that Jack Sargeant made about Hefin David not being here, one of the other things that Hefin raises around apprenticeships quite regularly is the issue around the apprenticeship levy. I'd be keen to know whether the Government has started any work around how we potentially look at the apprenticeship levy and the future funding model for apprenticeships going forward. I know Hefin produced a report for the Government that touches on this, so I'd just be interested to see where the Government might be on that.

The challenge is the levy isn't something that we have introduced or controlled. The levy, actually, when it was introduced, meant that we had an immediate £9 million reduction in funding. So, the levy doesn't deliver for Wales. If you have a business in England, if you're large enough, you get an individual account, but, actually, you pay tax in the form of the levy, then get a sum back to spend. It doesn't necessarily equate to the tax they've paid, but they get a sum back to spend. Here, we run a strategic programme. It's been broken up on an all-Wales level because of the collapse of EU funding and the lack of replacement to go into an all-Wales programme. We have a different position that we're trying to run and manage with the funds that we have.

From the levy point of view, I would like to see an alternative UK Government reform what the levy looks like, how it's used, more transparency in it, and not to deliver it in a way where, actually, it took money out of public services. I'll say this: it's an area where most members of the public won't have a great deal of sympathy, but I am a former lawyer, and I used to represent my clients. They were working people, don't worry, Paul; you were a bank manager, of course. I represented people, but in that trade there was no apprenticeship framework, so a large enough law firm would pay the levy without there being anything that comes back. So, actually, the legal profession will understand this as, 'We're paying taxes in the form of an apprenticeship levy, and there's no way for us to get that back.' So, we've been designing an apprenticeship framework to see if they can actually use that then to bring people into the system.

When people think about apprentices, they don't normally think about lawyers ending up being an apprentice to go through it. There are other routes through, but they often require you to borrow money, as I did before I qualified, and it takes a long time to pay it back. Not everyone ends up here, you'll be delighted to know. So, we've got to look at how apprenticeship funding more generally works and what the level of ambition is, not just in Wales but across the UK, to put more into this, because I actually think that we could and should, right across the UK, be investing more in apprenticeships, because actually that level of funding, overall, has reduced from the UK Government, and that has a consequence in our funding too. So, a different future across England helps us. I'm ambitious for us to design a future that we could have if we have the power and the money returned from EU replacement funds, and as I said yesterday, I am committed to restoring funding into the apprenticeship programme and to redesigning an effective, national strategic programme for apprenticeships here in Wales.

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

Diolch, Gadeirydd. Good afternoon, Minister and panel. In your paper that you provided to the committee, you said you've

'sought to sustain expenditure on our Young Person's Guarantee',

and increased funding for its delivery. However, you also recognise that cuts to employability and skills support will impact upon the funding of the young person's guarantee. So, I was just wondering what your assessment was, or if any assessment has been made, of the support being provided to young people to ensure that they can access training and employability programmes, and that they're aware of those programmes available to them.

This goes back into the overall budget challenge. If you can't deliver the overall budget challenge then you can't be a functioning Government. And again, if people in this or other scrutiny sessions think it's the wrong priority to prioritise health and local government, that's important for us to consider. What it does mean, though, is that within these reductions, for example, reductions in the budget for Careers Wales—not a very comfortable choice to make—that means there will still be careers advice and guidance through our schools, but it won't be of the extent and breadth we have today. So, I know that that does practically reduce the support for young people. I know that if we put more money into Careers Wales, if we had the budget to do that, I think we'd get a return from that. But you come back to: how do you balance the budget? How do you make sure you've got a programme that can exist? And there is, then, I think, an even greater imperative to deliver value from the money that is being spent. As I said earlier, the Jobs Growth Wales+ programme, I think, is one that has a good track record already. So, it isn't difficult to envisage areas where if you didn't have to make cuts you could do more.

Thank you. Obviously, in the last 12 months or so, we've seen a number of businesses and large-scale job losses in Wales. Given that backdrop and what has occurred over the last 12 months or so, your decision to make cuts to ReAct+ and Communities for Work+ were interesting. I'm just wondering whether you are content that there will be sufficient support for workers facing potential redundancies in 2024-25.

Communities for Work+ has moved to supporting areas where there are more than 20-plus reductions in head count. For ReAct+, the budget has been reduced. We have found, fortunately, in the last couple of years, that the ReAct+ budget has not been fully utilised, because it is demand led. My worry is that if we do have a really significant set of job losses then I'll need to repurpose other parts of the budget to make sure the ReAct+ offer is there. It always depends on what happens in that workplace.

If you think of an example of a recent significant job loss—or two of them. If you think about Tillery Valley Foods, we actually managed to support people, the great majority of those workers, into having alternative job opportunities. They were mostly less well-paid jobs, but still work of value. If you look at Zimmer Biomet as an alternative example, when that closed, the trade union then negotiated a package of support and we had a great deal fewer people looking to come for support through ReAct+. So, it does depend on the nature of the workforce, the nature of the local employment market, and it depends on the skills that people have and the support that they may need to try and find alternative work.

ReAct+ is very much on my mind given that it is possible that large job losses could happen in the nearer to medium term. So, it's always a concern, but what I then have to do as a Minister is, if I find a great deal more demand in one area than another, in an area where I don't think it would be acceptable to say, 'We're full, and you've missed the bus', I then have to look within my department, to start off with, or I need to ask central finance if there's any extra flexibility. But, given the position we're in, there isn't lots of flexibility within the centre, so it's almost certainly going to be repurposing other parts of the budget, and that comes with real pain and difficulty too.

Okay. Thank you.

Thank you. I'll now bring in Alun Davies. Alun.

Thank you very much. What's the future for business support in this budget?

So, Business Wales still has a budget of more than £20 million, and Business Wales has a good track record in supporting businesses, those that grow. I think Cardiff Business School has done previous assessments showing that businesses that have Business Wales support actually are more successful than average when it comes to their business growth and viability after two years. So, it does show it's a programme with impact and effect across a range of areas.

It's also worth pointing out that the Development Bank of Wales, I think, has a good track record of supporting and adding to the support available, both in terms of advice and consultancy, but also sometimes its access to capital where the market doesn't necessarily provide it. So, it tolerates a higher level of risk on some investments than other parts of the market do.

If you think about practical support, the green business loan is a good example of something where the support that a business has required hasn't been someone to tell them how to do their job, or to run their business, or to take an objective view about new opportunities, it's support, consultancy and advice on how you can both do the right thing for the planet in terms of decarbonising your business, but also, for almost all of them, do the right thing for the bottom line and reduce your costs. So, that scheme, I think, has been a success.

And I would agree with you on that. I think it has been a success, and I think the programmes you've just described have all been successful, but we are seeing reductions, of course, and my question was, 'How do you see the future?' Because it is difficult, I would suggest, to absorb the sorts of reductions that they're looking at—if you look at Business Wales, for example, within this budget—and still maintain the same level of activity, the same objectives, and provide the same level of support at a time when economic growth is flat, at best.

Yes. So, it's entirely fair that with less money, we can do fewer things. So, the service has looked again at efficiencies, about what it can do. So, there will be more support available in a digital format—some businesses want that—and to then think about how the personal in-person support is provided as well. It does mean that there will be fewer pilot programmes and outreach into different areas because we've got to think about what works and what businesses are saying they need. So, when I provided a statement to the Senedd setting out the objectives for Business Wales, they've still got the same objectives and areas we want to function in, but it's about how much they can do, how far they can go, and, again, it's an area that's affected by the loss of EU funding.

It is, it is. Let me ask you two questions, to test that a bit further. You've already said that, I think it is, the green business loan scheme is oversubscribed, so that's clearly going to have an impact, given some of the decisions you're looking at taking, and the development bank, as you quite rightly have stated, accepts a far higher level of risk than a commercial bank would. That's why it exists, of course. But will it become more conservative in this funding environment? Will it become more conservative in its approach to things? Will we see Business Wales providing—? We will see Business Wales providing less support, you've already said that, but will that mean that some of those businesses and companies that require that level of intervention will not see it, so there will be consequences in the job market, for example?

I don't think we will see Business Wales become small 'c' conservative in its approach and I don't think we'll see DBW become small 'c' conservative either, because part of the mission is, we're looking at where there's a gap in the market, as opposed to vacating that gap. So, I think they're two different things, aren't they? So, Business Wales, even with a move to being more efficient, to streamline what happens, to moving more to digital, then the reality is that there'll be a reduction in what it can do. And again, the point I made to Samuel Kurtz, if you have to make reductions in that to balance your budget, it affects what you can do, and I won't to try and hide or tell you that isn't happening. There's a level of honesty not just to this committee but that the wider public need as well. So, that still means, again, how we actually generate value from what we do, but that doesn't mean that you then go into them at the cautious end of what you're looking to do. Because there's also the crossover in the other forms of business support and advice that are available. So, banks don't always get a great rep, but, actually, banks still provide business support and advice as well, so this is about adding to the whole of it. And it also makes it more important that some of the interventions like the British Business Bank and some of the loans that they're looking to run, to invest in the market in Wales, which haven't been there before—we think there's plenty of room for those. We don't think DBW crowds the whole of the market that's left after, if you like, traditional institutions.

And on what DBW do—I'm going to join their board for their future strategy—I'm still very clear about the ask of them. If we were able to continue using EU funds, as we did in the past, to add to their funds, they could do more. They are in a position, though, where they're seeing returns on what they've done overall. It's a success overall. So, they're in a position where they need to be evergreen to think about what they're getting in, to then look at how they then reinvest that as well. And I'm still keen that they carry on looking at a sensible approach to equity investment. I think, rather than just a loan, I gave them a clear steer at the start of this term to look at equity investments as well as loan investments, and a combination of them, because if we collectively, through a vehicle that we own, are taking some of that risk, I'd like to see it take some of the return, but also to help to anchor some of those firms here as well. So, I'm thinking about when people do get successful and are they going to sell up and move on. So, I'm very interested in the generation of that middle tier, as well as then seeing some of those grow to a larger tier and how our support can help them to do that.

I'm interested in this subject. I think it's really important to understand the real-world impact of spending decisions. And it might be useful, rather than continue along this conversation this afternoon, if the Minister were to write to the committee, outlining potential changes to objectives and targets that he may set for business support, as a consequence of the spending reductions that we're seeing, rather than simply continue the conversation this afternoon.

I think the committee are looking to do some work on DBW, aren't you? And would it help, as well as considering that, to think about what Business Wales do alongside DBW in the business support environment?

Yes.

So, we don't have correspondence that isn't helpful, but to think about how that works with what the committee's already got planned as well.

Yes, absolutely.

My concern is that you're able to give a more thoughtful response in terms of considering the issues, rather than simply pursuing a conversation this afternoon, in looking at some of the consequences of this. That's probably best handled by correspondence, but, certainly—

What if we provide some correspondence, bearing in mind the inquiry that you're looking to do? I think we can do something that's coherent, then, for you as well.

Yes, absolutely. Okay. Yes. Thank you, Alun. I'll now bring in Vikki Howells. Vikki.

Diolch, Cadeirydd. It won't surprise you to know that it's the foundational economy I want to focus on this afternoon, Minister. You recently described the foundational economy as a central part of our economic mission, and said that growing it was a cross-Government priority. How do you reconcile that, then, with the 60 per cent reduction in the bespoke funding offered through the foundational economy programme budget?

So, what we've done is, we've been trying to get away from that budget line being the only area of activity. Because I think that's the problem, otherwise, it just gets siloed, I think, and all the foundational economy takes place with that one budget line, rather than what happens in broader activity. So, we're thinking about a broader approach to procurement and what that means, how we support people, businesses that are grounded here. The work we do in continuing to support the growth of the co-operative economy in Social Business Wales, that's part of it. The work we're looking to do, for example, around housing, around transport, all of those areas I think we need to see more growth in localised spend and how that supports the foundational economy. Again, it really is like going back to not all roads lead to Blaenau Gwent, but in the recent—

Of course they do. Eventually they do.

In the recent visit to Elite Clothing Solutions, we were looking at the work they're doing with the uniforms contract with Transport for Wales. It's a really good example, and it's a consortia—you've got sewing done in Treorchy as well, you've got design work done in Newtown, and you've got Brodwaith up on Ynys Môn taking part in it. So, it's a consortia of different businesses grounded within their local communities. So, we have got examples, and that isn't from the foundational economy line. It's still about how we can not just say it's embedded but continue to demonstrate how we're supporting the foundational economy through a range of different areas of Government activity, including those public services like TfW and our health service as well.

Thank you, and, obviously, embedding the foundational economy like that across Government is a fantastic approach. How do we then track and monitor progress? That can be a difficult thing. Maybe you could tell us some more about your work with other Ministers to do that.

We've had a number of programmes looking at areas of work within other departments, and, to be fair, Lesley Griffiths and the food and drink team were helpful in this, in volunteering to have a review of the work they're doing to look at how they support the foundational economy within their area of activity, and to see if there are more opportunities to do that. So, we do have more work that we are doing with different parts of the Government to look at how they're using their own resources to add up to a larger whole for this. And what I'd like to be able to do is to continue to come back to present to the Senedd, 'Here's what we're doing and here's how the foundational economy is being supported', and to be able to set out, 'This is what we think we're doing to grow and protect it'. But, like I say, you'll see that across a range of areas.

Now, in all of this, if I think about my previous time as a health Minister, when people would ask me, 'What is preventative spend?', and I'd say, 'Well, actually, there's preventative spend in pretty much every budget line—there's an element of it that is preventative'. And in lots of budget lines, you'll see things where you can say, 'That's supporting the foundational economy', but what I want to be able to do is not provide a statement that's largely saying, 'Isn't this wonderful—I'll give you three examples of it', but thinking about what the whole means and how we can continue to demonstrate we're spending more of that.

Procurement is often the easiest lens to look through, because you can be clear that if you have got more localised spend, then you're generating a local return you can guarantee is going to support the foundational economy. So, if you think about—. Whether it's NHS or education capital build programmes, the fact that, actually, I think our approach with this term and the previous one with twenty-first century schools has delivered real economic return—. We're not always very good at telling the story, I think, unless you're a local Member and visit one of those projects, meet the apprentices, to see the local growth in jobs, to meet the local firms that have done the work. I still don't think we tell a great story on that, and certainly in the health service.

But the previous Minister—[Inaudible.]—regularly thought that the NHS was a bad guy in all of this, without necessarily understanding that, with the Grange Hospital development, there was a huge amount of local spend within the economy that came from that, but because it wasn't described and talked about in a way that I think really told the story effectively, there was a starting assumption that none of it had happened. And yet, actually, the majority of that spend, thinking about the electrical works, you'll find local firms had done all of that, and the same thing with Prince Charles Hospital as well with significant work that is being done. So, I'm keen that we tell a story that is honest but is more coherent in what we really are doing to support the foundational economy through lots of different arms of the Government.

Thank you. That's interesting. I think it shows how, as a committee, we might have to look more broadly to follow things on the foundational economy.

Yes, and I think Dean Medcraft would just like to come in on this point.

I was just going to say the Minister is spot on, especially on procurement as well. I know the finance Minister and what she's taken forward on procurement reform and driving that social value is really important in this foundational economy bit. And I think there's really good work that's happening in Wales.

Thank you. And your paper to us, Minister, says that £20 million of capital funding will be allocated to support small businesses in the retail, leisure and hospitality sectors, but they're going to receive less business rate relief than they did in the previous year. What's your initial thinking, then, on how this fund will operate, and when would you expect to be able to provides businesses with some further details on that?

Well, it's a matter of weeks not months before I provide the detail on the funding, because we want people to have an opportunity to see how we want to run the fund, and we're actually working through with a range of business stakeholders the design of the fund. So it isn't big brains in the civil service, of which there are many, that are thinking this up themselves. There is a deliberate engagement with groups representing small businesses, including, of course, the FSB, on how to design a fund that can have the maximum impact. And we saw this during COVID, where some of the capital funding that we provided then allowed businesses to do capital work because they hadn’t had the time to do it, and hadn’t thought about doing it, in terms of running their business, but actually that then improved the business that they then had to run. So, we’re still thinking, with some cash that we do have, how we can help this sector to think about planning and then delivering it. And of course that will be another area where you can expect that that money won’t just be for that business, but most of that work will be done by local firms.

Thank you. I'll close with a question from the Welsh Retail Consortium, then, talking about tracking spend. They say that, for the retail action plan to have purpose, it requires budgetary support. What would your answer be to that?

We've got a futureproofing fund of £20 million, which should be available for retail and to support measures to contribute to the action of the plan. What we’ll need to do is we’ll need to see how that money is to be used, to see that it really is delivering against actions in the plan.

Retail is a hugely important sector. There’s a reason why my department, as well as the social partnership department, spent real time and energy and effort on having that conversation. It’s a really good example of social partnership making a difference. We’ve got a joint plan led by the main trade union, Usdaw, on the one side, and the Welsh Retail Consortium on the other. We’ve agreed on objectives for a healthy retail future. I know you’re a member of Usdaw, so it’s an area where we know that some sectors, I think, are characterised, in the way they’re presented in the press, as if they’re something to do if you can’t do something else, and yet, actually, there is a good career to have in retail, as well as the opportunities for seasonal work and others.

Actually, retail is hugely important to place, as well. Thinking about the foundational economy, lots of the reasons why people feel a loss of sense of place is they don’t have a healthy retail offer in their town or village, as well as things like investment in high streets—whether it’s optometrists or pharmacists and the opportunity to generate footfall. So, retail is definitely part of the sort of future we want for a sustainable community, and it provides work that should be good work, and there’s absolutely no reason why it need be low-paid work. In fact, part of our challenge is keeping people in other sectors of the economy when there’s actual a decent offer from the retail sector for people that can be flexible as well.

Thank you, Minister. Thank you, Chair.

Thank you, Vikki. I'll now bring back Alun Davies. Alun.

I'm interested in your approach to trade. Brexit, of course, has erected more barriers to trade—

It has.

—than at any other time in our lifetimes. We've seen decades of trade liberalisation promoted by reducing barriers to trade, and now we're seeing barriers erected. That's going to have an impact, of course, on Welsh exporters, but also people who import from abroad in order to manufacture here, and the rest of it. So, I'm interested, therefore, with the reductions taking place within the overall budget, in what sort of approach you intend to take to help support businesses that are trying to overcome these new barriers to trade.

Your broad analysis is entirely right, and unavoidable. There are more barriers to trade now compared to when we were part of a member state in the European Union. That’s undeniable. Our challenge is how we nevertheless support people to trade and continue to be successful. Now, we know that lots of small and medium-sized businesses have stopped exporting because they think it’s too difficult. And the reality is that there are more barriers, so it is plainly not as easy as it was before. We do, though, still have opportunities around export businesses. So, there’s the promotion from the Welsh Government on this, both in terms of our public messaging and, really, the directing game between the trade and export team and businesses, wanting to keep businesses that are exporters still in the export market, how we help them to find new markets and how to get through some of the barriers that exist, as well.

So, some of this then is also about how we run our own export support programme, and how we try to make sure it is as coherent as possible with the new offer that is being created by the UK Government. Part of that has been trying to make sure that we’re not overlapping or competing. If you remember Liz Truss, she used to be something to do with international trade, and she was looking at creating a new model—

I hope you're not following her example.

No, actually, it was a problem and she was looking to create something to support Welsh exporters, but the title she came up with for it was exactly the same title that we use, and we said, 'Well, actually you'll confuse businesses', and actually it was, 'There's no problem where you want to provide more support for Welsh businesses who want to export, but let's make it coherent.' And what we have always done in the Welsh Government—and I'm very pleased about this—is, if businesses come to us, and, actually, there's trade and support they can get from the Department of Trade and Industry, as it used to be, now the Department for Business and Trade, then we will direct people to where that support is. So, we try to take a 'come through this door and we'll tell you where the right place is for you to go'—. What we couldn't be clear about was whether it was the same approach. So, it's a practical working relationship, and it's still all the things like the visits we do, the export exemplars—it's introducing people to markets, it's the 16 or 17 trade visits we'll do. And, sometimes, a Minister going on a trade visit matters, so I went to Germany recently. I've been to America, and the biggest individual country for both foreign direct investment and, indeed, export is the USA. The second biggest is Germany, and after that it's France and Ireland. So, it should be no surprise that they are our priority countries. You shouldn't be surprised to see Ministers being there to support that activity, because I think that's part of the job.

Yes. I noticed you were wearing a friendship badge between Wales and Germany at yesterday's—.

I met the ambassador yesterday.

Yes, yes. So, let's use Germany as an example to understand the approach the Government is taking, because it is a good example to use, and I think there's a year of Wales in Germany.

That's right. The year of Wales in Germany has just finished.

So, it would be useful, therefore, Minister, if we were able to understand the actions that the Welsh Government are taking to help and support and to sustain the economic relationship, in its wider sense, between the two countries.

So, the year of Wales in Germany has finished. I went there, to Baden Württemberg. As part of that visit, I went to Munich, I went through Cologne. It was not just an interesting experience on German trains, but, actually, we met members from the Government, members from the Parliament, and, actually, there is a real interest in Germany in what happens in Britain.

Of course there is.

And, actually, there's a real interest in what happens in Wales as part of that, as well, but actually being there physically makes people more interested as well. We've got people who are interested in what we're doing on the circular economy not just as a learning point, but, actually, opportunities to invest. We've got people who are involved in glass recycling schemes in Germany who are interested in the design of what we're doing because they have a footprint within the UK market as well. So, they're interested in some policy and outcomes. In all of this, the other thing I think is worth putting forward, from a German point of view, is RWE is a German company and already significant investors and want to invest more in the future. So, actually, having that conversation in Germany, as well as here, there are understandable benefits for people who want to come here, and we're expecting a reciprocal trade mission around life sciences and potential partnerships. So, we have willing partners who want to work with us. But, if you're not part of delivery and you want to say, 'Actually, we have a great offer for you', don't be surprised if the rest of the world doesn't recognise that.

So, it is how and where we're proactive, and it's one of the things that Eluned did, as the international affairs Minister, actually—she looked at where we had diaspora, she looked at where we had diaspora within Wales and outside Wales, and she looked at where our biggest markets were and biggest opportunities for growth, and the themed years programme came from that as well. So, this year, it's the year of Wales in India, and, again, big opportunities there: the economy, public services. So, there'll be a focus in that year on not just arranging visits, but then seeing what return we've got.

The memorandum of understanding that I signed with the government of Baden Württemberg is an example of not just a formalised institutional relationship, but, actually, of how we then see the ability to co-operate and want to make trade easier, despite the barriers. And the good thing is that there's still lots of goodwill from German states and the federal governments, and we need to take advantage of that to work with the current barriers we have, whilst I hope that there can be an improvement in those practical barriers to trade in the future.

And I think all of us who have travelled to Germany, and met German politicians in recent years, have experienced that anxiety to maintain relationships and to build those relationships. And I'm grateful to you for that explanation, Minister; it's very useful. So, how is that going to be affected by this budget?

We will still run an international trade programme. It's been reduced. So, as an example, last year, we had 19 trade and exhibition missions; it's likely to be 16 or 17. So, there'll be three places we don't go and don't directly support businesses to go, and each of those—

But how will you take that decision?

Well, I'll look at the size and scale of the market and have advice from the team about where the market is, what the biggest opportunities are and how we will do that. So, it's not easy, because, in each of our trade missions, we end up knowing that we've helped to support businesses, and they come back with business they would not otherwise have got. I'll give you an example when I was in two big trade shows, one about semiconductors and one about life sciences, Medica—really, really big; the biggest exhibition in continental Europe. We have a big stand there, it's very impressive, you'd be delighted and very proud to see it; it looks better than that of a number of other places. But, actually, most of the people on that stand are small businesses. And again, there's a business that started in the pandemic, from your constituency—I've got to stop talking about Blaenau Gwent—

No, carry on. Everybody's very happy.

But what that meant was that we were able to display something that's coherent about life sciences from Wales. We were able to do that in a way where two or three of those businesses might have been able to go there themselves, but, actually, the great majority of those businesses would not have been there in market, and yet they've all seen a benefit from that.

Semiconductors is a bit different because the companies we've got here are larger, but it's important for us to be there to remind the international market, which knows that Wales is a real player in this and has a future, that we're still interested, as a Government, in seeing the sector grow. So, there is both the signal as well as the practical support, whereas at Medica, small and medium-sized businesses with opportunities to grow are there and they would not be there were it not for the Welsh Government. And having three fewer opportunities in the year is a problem; it's not a cause for celebration. But again, it means that, for the 16 or 17 that we do choose, we've got to be clear about the size and scale of the market, the opportunity and what that means.

Content. Thank you very much.

Thank you very much indeed. Are there any other questions for the Minister at all? No. The session has therefore come to an end. Can I thank you, Minister, and your officials for being with us today? Your evidence will be very important to us as a committee in scrutinising the Welsh Government's draft budget going forward. As usual, 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. So, once again, thank you for being with us.

Dim problem. Diolch, Cadeirydd.

Symudwn ni ymlaen nawr, felly, i eitem 6. Dwi'n cynnig o dan Reol Sefydlog 17.42 i benderfynu gwahardd y cyhoedd o weddill y cyfarfod. A yw'r Aelodau i gyd yn fodlon? Ydyn, mae'r Aelodau i gyd yn fodlon, felly mae'r cynnig wedi'i dderbyn, ac felly symudwn ni i'n sesiwn breifat ni.