Finance Committee

Croeso cynnes i chi.

A warm welcome to our witnesses this morning. I wonder if you'd introduce yourselves and your roles, and the roles of your team.

Bore da, Derek Walker, Future Generations Commissioner for Wales.

Bore da, Jacob Ellis, director for external relations and culture.

Bore da, Rhiannon Hardiman, arweinydd polisi.

Gwych, diolch yn fawr. Croeso cynnes iawn i chi. Mae'n dda eich bod chi efo ni.

So, we've got you, hopefully, for half an hour or so, and we were very pleased to receive your written evidence—very thorough, very well written, and some very interesting things in there for us to pick apart. So, in this session we'd like to understand a little bit more about where you're coming from, and maybe to put a bit of meat on the bone.

So, we'll start. This is your first Welsh Government budget since you took up your post as commissioner. Your evidence suggests the information provided alongside the draft budget is not sufficient to demonstrate that the Well-being of Future Generations (Wales) Act 2015 is considered comprehensively by Welsh Government in drafting its budgets. What's led you to that conclusion?

Thank you, and thank you for inviting us to give evidence. I wanted to say first of all that we all recognise, I think, the incredibly difficult financial situation and difficult decisions that are facing Welsh Government. This is not an easy budget to be making. And I also want to make clear that the Minister for Finance and Local Government and her officials have been proactive in engaging with me in my first 10 months in the role, in discussions around the budget. My colleagues have been talking to officials too, so there has been good engagement in those first 10 months.

It’s really important—it goes without saying, I think—that the well-being of future generations Act is applied to decision making, and particularly such an important decision as the Welsh Government's budget, because it provides the framework for us to consider decisions over the long term and not just to look at the short-term considerations. And it's a useful tool that should be applied legally across the public sector.

When we were looking at the documents, we could see that the Minister and the officials have said clearly that they have applied the well-being of future generations framework through their decision making, which I was pleased to see. Right up at the foreword you can see that the Minister makes a statement about how important the framework of the future generations Act is in her decisions around the budget. But what I was unable to see is the difference that taking account of the well-being of future generations Act made to the decisions themselves. So, the workings and the implications of the Act to the decisions that were taken, it was unclear to see from the documentation that we considered—and we looked at all the documentation available—what the implications were from considering the Act to the decisions that were eventually taken.

So, perhaps if I go into a little bit more detail, first of all, to say why this is important. It's important because if we don't consider the Act in the long term, we are storing up problems for the future. It's important for openness and transparency that we see how decisions are being taken and that assessments about impacts are considered when budget decisions are taken. But Welsh Government also has a leadership role here for the rest of the public sector in their budget decision-making processes, and being able to show how Welsh Government is doing it would be very helpful, I think, for the public bodies to do the same.

Okay. So, what do you see your role as within the budget-setting process? You've had meetings with Ministers, you've had meetings with Government. What do you see your role as, and where do you see yourself coming in to that sort of process, if you like?

Yes, well I want to take a very active role. So, as you know I'm relatively new in post. The approach that we've taken this time is not to look at individual budget lines in the evidence, you know, 'I want to see more on that preventative health budget there and more on that climate change budget there,' which I could have done, but that's difficult to do without understanding the impact of those different budget lines. And there are many others who obviously come in and argue and lobby for particular budget lines.

The approach that I've taken this time is to look at how the five ways of working have been applied to the decision making. So, this is the thing that I look at and the auditor general looks at when we're looking at public bodies: have the five ways of working been applied to the decision-making processes here, and what is the evidence of that taking place and what difference has that made?

So, as I say, we've had good conversations at a high level along these lines. I met with the Minister within my first month, I think; I met with the other commissioners and the Minister in September. We've met with officials. Officials contacted me even before I started the job to give me a briefing on how the budget process was being made, so I've had really good and proactive engagement from the Minister. I think they're committed to this agenda and the future generations Act, and are considering the long term when they're taking these decisions, but what we're not seeing is that—

So, you're not seeing those joined-up dots?

We're not seeing the evidence of how that is done. So, we can see that the Minister is saying that's happening, but can we see the evidence, can we see the workings to demonstrate that?

If I could just—?

Sorry, yes. Jacob.

These are important points and the committee will be aware that this isn't the first time that as a commissioner, or as an office, we've been making these comments. We've been scrutinising the Welsh Government's draft budget for several years now and some of these comments and narratives from the commissioner have been made repeatedly over those years. So, we're not seeing that progress happen or that response to the findings that we have as an office around the importance of meaningfully applying the five ways of working, the definition of prevention that you've heard us talk about often in this committee and the use of the budget improvement plan as an important document to articulate how the Government have considered the Act. It does feel a little bit like groundhog day, in the sense that we are repeating some of these findings back to Government, despite having made them in previous years.

Thank you for that. I fear that this is going to continue until there's a way forward and I'm thinking back to local government days, when we saw the need to put in equality impact assessments. Should there be a future generations impact assessment appended to decision making, like you would have with a financial impact assessment or an equality impact assessment? If it's that important to the Government that they've put it in the foreword and it's so important how we take things forward, should there be a lens that every decision is made thorough, formalised through an assessment?

Absolutely. I don't want to come back here next year and say the same things to you. We need to move from this cycle of asking for this information to get to the stage where the information is provided. I understand how difficult this is and the level of detail to provide on every decision around the budget might be very difficult to do, but we need to make progress in demonstrating how decisions comply with the Act.

What I'm suggesting to you today and in my written evidence is that we use the opportunity of the review of the strategic integrated impact assessment document, which the Government is already committed to, which is the key place where I would expect to see this information—and there is some information in there, by the way, but it's very short—that we use this opportunity to work with the Minister and her officials to review the document, to give clear advice on what we would expect to see in that document in future years, and to dedicate resources from my team to work with her officials to get that right, so that we're not in that situation next year.

The other specific recommendation that I'm making, and I would be keen for the committee to consider as well, is the budget improvement plan document, which is a longer term document looking at what Government will do to continually improve its budget decision making. We would like to work with them to review that too. So, for example, in that document, they do look at two of the five ways of working, which is great, but where are the other three? It doesn't make sense to me why those other three are missing. So, it's not easy, this stuff, but we need to model good practice at the Welsh Government level in order to do that for the rest of the public sector, and I think these are specific ways in which we can move on from this cycle of saying the same things and getting to a place where we can see how the impact assessment, against the well-being of future generations Act, is influencing those decisions.

That's an interesting point, and I think this committee is particularly interested in anything that will help budget documentation and help to bolster up some of those impact forms. So, if you've got anything further that you wanted to let us know about in writing, or—. Obviously, we're on a tight turnaround with regard to this report, but we'd be interested in anything that you've got that we'd be able to point out to the Minister, to be able to help you in that work.

Diolch yn fawr.

Anybody who listens to this committee regularly will know that 'show your working' is one of Mike Hedges's catchphrases, and I'm going to bring him in now around transparency. I'm sure he'll have something further to ask around that.

Diolch, Cadeirydd. Firstly, your evidence suggests that there is increased transparency in the budget narrative and the strategic impact assessment this year, but you also say that they lack analysis of the long-term impact and detailed evidence of how the involvement of public bodies and other people affected by the budget has helped with assessing its potential impact. What needs to change?

I think I perhaps covered that prematurely in that what I think needs to change is the SIIA document, the strategic integrated impact assessment document, because I think that is the place you would expect to see the workings, and that is the place that you would expect to see a more detailed understanding of the differences being made by the well-being of future generations Act. My reading of that document is it's largely a list of explanation of the decisions that have been taken, rather than an analysis or an explanation of the analysis that was undertaken to decide whether one budget was sacrificed or cut at the expense of another one that was increased or kept. So, that's where I think we need to see the detailed analysis, and, as I say, there are opportunities to look at the budget improvement plan too.

Thank you. The Welsh Government says that, through this budget, it has needed to act in the short term to protect the core services on which people rely to ensure they're sustainable into the future. With no indication of funding for future years, it's very difficult to plan for the future. Do you think the budget gives adequate consideration to the medium and long term?

This goes back to my general point, I think, that it's difficult to say, because we don't have the workings. It's not true to say that because we only have three-year budgets or one-year budget agreements with the UK Government, or the same for public bodies, you can't take a long-term approach to decision making. So, you can understand what the long-term vision is, you can understand what the long-term impacts are going to be of the budget decisions that you're taking, and you can monitor that progress. We're unable to see in the documentation that we have gone through that an assessment of the impact in the longer term has been taken.

Thank you for that. You suggest there is evidence throughout the budget of preventative spending being reduced. There's also political support for spending money now on things rather than trying to prevent them—dealing with people who've got health issues rather than engaging in preventative actions, for example. Do you think we should be embedding prevention into the budget process, so that we do spend money on prevention? Health far too often seems to mean hospitals, and the preventative work that can be done—improving lifestyles, stopping smoking, getting people to exercise more—seems to have lost its importance.

That certainly seems to be the case. It's difficult to make a full assessment, because we're unable to see what counts as preventative spend according to the definition around prevention, which we and colleagues previous to me have worked on with the Welsh Government. I know the Welsh Government are piloting an approach to look at how preventative spend is considered within the budget, but they're just at the piloting stage of that, so we know it's not a comprehensive approach that they're applying at the moment.

It is massively important, of course, isn't it, that we do get the preventative spend right, because otherwise we're not dealing with root causes and we are not doing the right thing for future generations. So, we're storing up even bigger problems for the future. The health service is the best example of explaining that, isn't it? If we're not getting ahead of some of these preventable diseases such as obesity, type 2 diabetes and so forth, then we're going to be expending increasing percentages of our health budget on these diseases in future at the expense of other healthcare needs. So, we have to get at the root causes, and we have to look at the prevention. We have to understand how cuts to budgets today may impact on the long term.

I think you've had evidence from the Institute for Fiscal Studies that said the budget hinted at preventative spend having suffered during this budget, and I would certainly agree with that. If you look at some of the budget lines that have been drawn to my attention—as Mike Hedges was saying, around smoking cessation, weight management and so forth—these are the areas where, if we're not investing in that now, they're going to cause greater demands on the health service in the future. That is, in some ways, a perfect example of where we need to see the workings—so, what assessment was made of these budget lines, what the cuts are going to do to numbers of cases and impact on the health service in future, and what is the judgment or the balance that's being made now of the benefit now to investing in our health service now compared to the potential burden on the health service, but also on the health of our future generations, more importantly. I think that those are really critical considerations. They're of course difficult considerations and they're political considerations, but that is the lens in which the well-being of future generations Act asks us to consider the budget, and what we need to see done on a comprehensive basis in future.

Thank you for that. I can think of two areas of preventative spend: one that is continued, which is Designed to Smile, which has reduced children's dental needs, but also Communities First, which has ended, which was helping in communities to try and get people to get a healthier lifestyle. I think it's so much easier to cut preventative, because you don't see it in this year, you see it in future years. Are you going to make a comment at some stage about the importance of preventative spend?

Absolutely. I think I just did, but absolutely. The preventative spend is essential for future generations, and it's essential for this agenda. We worked very closely with the Government to put together a definition of what we mean by 'prevention', and we want to see that applied and implemented into budget decisions. It's one of the five ways of working, it's absolutely at the heart of the well-being of future generations Act, and if we don't address it, as I keep saying, we'll be sewing up problems for the future. And we know we're not good in some areas in Wales, don't we? We know in terms of diabetes levels we've got some of the highest rates in the UK. So, we're not doing a good job of preventing some of these preventable diseases at the moment.

Sorry, I didn't express myself particularly well in the last question. What I meant was not in this committee here—although probably millions of people are listening to it—but going outside in public and saying we need to do more on preventative spend to reduce the demand in the health service.

Yes, absolutely. Sorry, I misunderstood; I thought it was in terms of the committee today. But absolutely, that's what I do do, and will continue to do so, because it's what I believe in, but it's also at the heart of the legislation, and I'm here to promote and advise on the delivery of the legislation. The preventative way of working is one of the five. We advise on it all the time, and we promote that it's adhered to and considered.

Thank you.

Diolch, Mike. You said that the preface to the budget talks in warm words about future generations and you talked there in your answers to Mike about 'hinted at this' and that sort of thing. You've used the maturity matrix to assess the Welsh Government's budget against the five ways of working. What does the Government actually need to do to make progress and better demonstrate? Because I think it's that demonstration. You've talked about the strategic impact assessment document; is there anything else that they need to do, or is it just going to always be warm words, and we won't see the impact on future generations until we get to future generations?

Well, I hope not. One of the things that I really wanted to flag to you today is the maturity matrix, because this is the first time we've applied it to a Welsh Government budget and we're now rolling it out to the public sector. Effectively, the maturity matrix—I always think we need to find a new name for it—is a self-assessment tool for public bodies so that they can assess where they are in terms of progress in delivering on the five ways of working in the well-being of future generations Act. It's a much more objective process that they can apply to themselves in understanding where they are and how they could do better. It looks at things like processes, people and culture and leadership. I can give you some examples in a second. We've got four levels within there, and at each level, we explain in there what we expect to see from a public body, or what they should be doing to get at level 1, which is 'simple change', right up to 'leading the way', which is the top level. That provides guidance to the types of behaviours, the types of activities, the types of things that they should be doing to go from the lowest level to the top level. So, it's a really useful document, and it says some specifics in there; I've drawn some of these out for you.

If you look at prevention, for example, because we were just talking about that, if you look at 'simple change', that might be demonstrating awareness of the root causes, but mainly addressing the symptoms in a budget decision. But if you go further along, looking at 'owning ambition', which is the third level, we would expect to see increased funding, as we were hearing, allocated to prevention, or, even further, top-slicing of budgets for prevention, so that it doesn't get lost to day-to-day and is safeguarded for the long term. So, huge credit to my colleague Jac and other colleagues who worked on it. It was really hard to produce the document, but I think it now provides us with a much more objective framework to give feedback to the Government about where we think they are, and public bodies more generally, and where we want them to get to.

It will be very interesting for the Welsh Government to do its own assessment. We’ve done the assessment based on the information provided to us. And as you can see, in, I think three of the areas—it's in the documentation—we’ve said we’re at the lowest level, and in two of the areas, we’re slightly higher. It might have been two and three—the other way around. But, yes, it’s a fairly low level on the basis of the information provided to us. The Government is saying that they are doing this, so that information may be available. Jac, I don’t know if you want to add to that.

I'm conscious of time—

I'm conscious of time and I want to bring Peter in, but it is fascinating and extremely good work on this. I think it does give an extra tool to be able to help benchmark and to help understand what's happening in Government, but also in other bodies. But I'll bring Peter in.

I can't help but reflect a tad on that, because I can absolutely see that there's a need for the Government to self-assess, and that means asking each department and each Minister to apply the maturity matrix to their own workings to see where the anomalies are. Because the trouble is, when they're setting budgets at the moment, if one department is applying a different set of principles or thinking around future generations, or they're not making decisions with that in mind, they don't know the implications for another department—say, education—of making a decision on, I don't know, economic development or something. There needs to be some overarching strategy that every department then can align to. It's a little bit like my thinking for the food Bill—that's exactly what I saw: a misalignment of policy that aspires to do the same thing, conflicting with each other.

Anyway, I'll move on to my more general questions. Given the financial pressures outlined by the Welsh Government, I wondered what you see as the key issues facing public services going forward into this next financial year.

I'm probably not going to give you any information here in any way different from what you've heard. What we know of and what we hear and what we read about is cuts to budgets, cuts to services, the potential for job losses. I know that some public bodies are looking at more commercial income streams. They're the kind of changes that are familiar to you—those are the implications that are being undertaken.

We did some work to speak to public bodies in advance of this, and wider, to get a sense of where they are with this. I guess what is, on an optimistic note, pleasing to hear in some cases is the view that they will use this to consider and transform services and think differently about how they deliver services—rather than trying to carry on doing the same things or looking at cuts, looking at new ways of delivering services in the current financial context. Powys county was one of the examples that gave that. I know that your previous council, in Monmouth, has taken that approach, and others too—the Vale of Glamorgan have talked about that as well. So, these are massively challenging times, but this is the time to really think differently and think about transformative services, rather than cuts in the more traditional way.

I accept that it's difficult to have to have a general perspective. I didn't know if there was one area that was really jumping out at you, that was really concerning you. Perhaps it is the preventative agenda from the health perspective and things like that. But I won't push you on that.

Generally, I guess we've taken the approach of not looking at particular budgets, projects and services. This time, we've looked at whether the decision-making process has applied the Act and the five ways of working. But, you know, what the budget seems to appear to be doing, and it seems to be the common narrative, is cuts to the culture and arts sector that seem to be significant, and that is one of the four dimensions of well-being. Again, and this brings me back to the workings, we would expect Government to tell us how the budget decisions they're taking impact on the four dimensions of well-being. My suspicion is that there's a significant impact on the arts and culture sector. I was just in a meeting with leaders of some of the arm's-length public bodies in that area yesterday and I know they're going through a really challenging time. So, that would be one of the areas, as I said, I think, earlier, around preventative spend. The budget certainly hints strongly at the fact that long-term preventative budgets have suffered at the expense of short-term decisions.

Yes, I accept that. Thank you for that. My only other question is—. Your evidence includes some suggested areas to follow up with the Minister for Finance and Local Government. In your view, what are the key questions that need to be asked of the Minister during the budget round? I think you've alluded to some of those for us, but if you want another opportunity—.

Yes, I'd love that opportunity, because I think the key question to ask the Minister is what difference to your budget decisions—. What is the difference being made by the well-being of future generations Act? So, if the well-being of future generations Act wasn't there, what is the difference now, because we've got the Act, that you can see in the budget as a result of this legislation?' I think that's the critical question and we've struggled to identify through the documentation and the analysis that—

We can ask her this afternoon.

Please do ask. And the other question is, I think, around the strategic integrated impact assessment. I think that is the opportunity for us not to be in the same place next year, when I'm saying the same things as my predecessor has in previous years, and we can get to the point where we've moved on and we are able to see far more of the Welsh Government's workings and their decision making so we can see how they are taking the well-being of future generations Act into account.

And you've got specific asks that you'd be able to work with the Government on on improving that documentation.

We've got specific asks and I will commit resources to working—. Because I think this is so important, we'll commit resources to working with the Welsh Government to support them to get this right. You know, this review doesn't take place very often, so let's take the opportunity of the review to get this right and to make a difference for the long term.

Okay.

Could I, Chair—?

Yes. Jacob.

Just finally, I think one thread of questioning that I think would be useful—. Peter Fox was just referring to the need for Ministers to work together to understand the impact of one element of the budget on another element of the budget in another portfolio. If we can expand that to the one Welsh public service, as well—. There is little to no evidence that we've seen that Welsh Government have been able to articulate how the budget would impact on the public bodies' ability to deliver on their well-being objectives and steps. It's really important in the five ways of working that integration isn't solely about one Minister to another, but, actually, from one public body to another. So, we now have a scenario where public bodies have now got to reassess how they're going to deliver their well-being objectives and steps in light of the draft budget, and, in some cases, that's going to dramatically have an impact. We can't see the evidence that Government have considered beyond the walls of Government into the well-being objectives and steps, which is, we would argue, a requirement under the ways of working.

That's a really key point. Thanks for reminding me.

Diolch. Diolch yn fawr iawn. We've come to time, so—

—diolch yn fawr iawn i chi am ddod y bore yma. Hynod o ddifyr, a gobeithio y gwnawn ni eich gweld chi eto, un ai yn ystod y flwyddyn neu'r adeg yma'r flwyddyn nesaf.

Felly, fe wnawn ni jest mynd i mewn i breifat am ryw ychydig o funudau ac fe ddown ni nôl efo'r gwesteion nesaf. Diolch.

Croeso nôl i'r sesiwn yma. Rydym ni yma'n edrych ar y gyllideb ddrafft, yn edrych o ongl iechyd a gofal.

It's good to have you all with us here. I'm going to start on my left. If you could all introduce yourselves and where you're from, and then we'll start the session. If we start with Sally.

Hi. I'm Sally May. I'm director of finance at Cwm Taf Morgannwg University Health Board, and I'm here representing the director-of-finance community, effectively, for the NHS.

Wonderful. Diolch.

Bore da. Good morning. I'm Darren Hughes. I'm the director of the Welsh NHS Confederation.

Nice to see you.

Bore da. Good morning. I'm Carys Lord. I'm the section 151 officer at Bridgend, and I'm here this morning on behalf of the Society of Welsh Treasurers for local government.

Fantastic. Thank you.

Hello. I'm Lance Carver. I'm the director of social services in the Vale of Glamorgan, and I am vice-president of ADSS Cymru, which is why I'm here today.

Ffantastig. Croeso cynnes.

Welcome to this session and thank you for the evidence that we've had already from your bodies. We've got quite a lot of ground to cover, and we might not come to all of you for every question—we'll come in. If you've got something relevant that you want to add to something, if you could keep that brief on top of an answer, then we'll just try and get through the session as best we can.

So, if we start looking at your overall views. We'll probably come down the line again like we've just done. The Welsh Government says its priorities include protecting core front-line public services as far as possible, and its spending plans focus on the delivery of services that matter most to people and communities. What are your views on this, and are you clear from the budget documentation how the Welsh Government has reflected its priorities in its allocations? I was listening to the health Minister in committee yesterday talking a lot about financial stability, so you might want to comment a little bit around your understanding of what you've been asked to do within this. So, if we start with Sally. Diolch.

Okay, yes. I think we've recognised that the last financial year has been extremely difficult. We have appreciated the really difficult choices that were made to support the NHS in-year—so, the change in the October allocations—and that that has been supported again moving into the next financial year. So, the emphasis within the allocation letter that we've had—it was on 21 December, I think, or just before Christmas—has been on stability and protecting the front line, and that will roll into our planning for next year that we're already engaged in. So, if I look at my expenditure profile across my services, where we've seen excess inflation and cost pressures during the year, which have now been supported by the additional allocations, those have been primarily in our front-line services. So, that's been what we call our 'care groups'—which is how we organise our services—rather than in any other area. There are some pressures around things like primary care prescribing, which, obviously, sit outside the normal inflationary uplifts. So, we are focused on how we support our front-line services to continue to deliver services in difficult circumstances. The pressures on services remain high, and you can see that in the pattern of how the delivery works. We still have significant numbers of patients who are what we would call 'medically optimised' at any one time, and lots of front-door pressures. But our focus is on maintaining those services and maintaining the delivery to our people. So, I think the budget has allowed us to see a way through to that. It means that we can aim for a balanced budget, rather than, as we went into last year, with a very significant deficit. And I think that means that we can re-institute or re-engage with our front-line teams about financial discipline and about cost-saving opportunities, because it's clearer where they start from and then what we need them to deliver over time.

Diolch. Darren.

I'd acknowledge what Sally's saying—it's been an extremely challenging time for all bits of the public sector in the current economic situation, and appreciating, in conversations we've had with officials, and with Ministers, that some extremely difficult choices have had to be made to protect local government funding and to protect NHS funding. I'd just like to acknowledge that to start with.

At the same time as we're facing these financial challenges, we're also seeing an increase in pressure and demand at the front-door, and acuity of demand as well. When people are coming into the NHS, the problems they've got are generally more serious. And just as an example to illustrate that, if you look at the calls going to Welsh ambulance, the more serious types of calls—the red calls—have increased significantly. It's an incredibly challenging time, and I think it is fair to say that the Government have focused on protecting those front-line services, and, colleagues who know much more than I do about social care—. There are huge challenges there as well.

Okay. Carys.

I think what I would say is we welcome the fact that the 3.1 per cent provisional settlement that was made this time last year was kept in regard to local government, because we appreciate the significant financial pressures that we're all under in the public sector. So, we appreciate that that's coming down to local government. I think the issue about protecting front-line services and one of the concerns, I think, for social care is that they are part of that local government family, and, whilst we welcome the 3.1 average settlement, it's not meeting the cost pressures that local authorities are finding at the moment. So, with significant in-year pressures last year and again this year, I think authorities have tried very hard to protect front-line services over the last few years, but I think now it's more difficult to do that, and, in fact, I think it's becoming impossible, because those services which, maybe, are not front-line, or are not social care or education related, have taken the brunt in previous years, and it's more and more difficult now for local authorities to be able to protect those front-line services in the way that they would want to because we don't have the funding available.

Anything to add, Lance?

I concur with Carys. I think the real challenges we have in social care are around increasing demand, which is continuing and has been sustained significantly since the pandemic. We also have a real issue in terms of spiralling costs, and you'll be aware from—. No doubt you'll have heard from care home providers, and so on, that they've got rising costs of electricity, food, et cetera. All of those are far in excess of 3 per cent, and we only have 3 per cent in terms of what we have allocated to us. So, actually, we're not protected.

So, from your side of the table, if you like, then, obviously, that side has had quite a lot of money given to it in October, it's extra money going into the NHS. What's the knock-on effect on social services? Because you're not necessarily having the same sort of funding going into that side of things. Is it creating more of a gap? Is it creating more of a problem for you?

I don't think there's a direct knock-on effect of the NHS having had money and the local authority not. I think there is a gap, you're right, and I think if local authorities and their social services departments don't get sufficient funding, then that gap will materialise, I suppose, in terms of service delivery. So, we essentially commission probably about 75 per cent of the budget. So, 75 per cent of the budget, roughly—I'm sure it would be similar in other local authorities—is actually spent on care, and if we haven't got enough money to do that, then that means that care won't be provided and, potentially, people will end up waiting in hospital.

Peter, did you want to just come in on that?

We all welcome the additional money into health, but hearing what you're saying and what I perceive myself, do you think there is an opportunity lost to address the whole picture of health, including social care, where perhaps not so much money went to health, and a portion, even if it was hypothecated—and I know local government doesn't like hypothecation—but it was hypothecated to social care to address the three big elements of the health problem? At the moment we've addressed one bit, but it sounds like we're not going to be able to address the other bit in a way that matches that.

Either you, Carys, or Lance.

I suppose we've probably both got a take on that, really, which is I think you've touched on a good point there, that any money that has come in is not hypothecated, and it goes back to the issues that I raised around the current pressures alone in social care in the current financial year are about £109 million, and the 3 per cent increase doesn't meet that, obviously. Therefore, local authorities are having very difficult decisions to make about how that money is used, and a lot of services are now facing significant cuts and, unfortunately for social care, I suspect all authorities would seek to protect them, but the level of that protection is probably not at the level that maybe it could be.

I'll bring Darren in, and then I'll bring Mike in. Yes, Mike, I can see you.

Thanks very much. We obviously speak regularly to colleagues in ADSS and in local government, and the challenges that they're facing, particularly in staff retainment at the pay rates that local authorities are able to pay at the current time, are hugely challenging. But what we're ending up with is—. Patient flow is something that we've talked about to many committees, the number of patients arriving at the front door of a hospital, and then the challenges in discharging. From a financial point of view, we're looking after people in the most expensive bit of the system, and in recent conversations that we've had, is it a case of moving money from the NHS to support social care? I think at the moment, and it's a controversial thing for me to say, we do need to be considering some of those things. If you look at the cost per day of looking after a patient in hospital when there's no need for them to be there, the cost of looking after them in social care is significantly lower. So, the cost to the taxpayer is more. But as important as that is the negative impact on those people in laying in a hospital bed deconditioning, more likely to come back into the NHS. And the unseen bit of it is the hugely important role that social care plays in keeping people well and keeping people safe, and keeping people well and keeping people safe is hugely important. Then, if that doesn't work, they come into the NHS. I think the two things are inextricably linked, and the challenges in social care have a knock-on effect on health, and the challenges in health have a knock-on effect in social care.

Mike, did you want to come in on this point?

Yes. We’ve talked about social care, and we've talked about hospitals. We've missed out what I think is the most important part—primary care. If we can get primary care right, then fewer people will be going to accident and emergency departments and fewer people will be ending up in hospital. This is a question for Sally May: are you going to protect the proportion of your budget that goes into primary care, because, year on year, across the Welsh NHS, more and more money has gone into secondary care and less and less has gone into primary care?

So, I suppose there are a couple of parts to that. So, primary care—effectively, we treat the contractor budgets as ring-fenced, and so they are protected, in that sense. If you look at the proportion of our spend, it does move over time, so that it's almost, counterintuitively, we spend more on the more acute side of it, and there are a couple of drivers for that. One is, as you say, presentations at the front door. If I'm on call for a weekend, I'll tell you by the time we get to Sunday we have extra patients on every ward and we're using every space. And for that we have to employ more nurses, usually on agency contracts, in order to keep it safe for our patients. So, that drives expenditure up in that area and, as Darren says, that's a little counterintuitive to how you would end up with a perfect system, but it is a driver.

But I think the other thing to remember is we are seeing a widening number of therapies, medicines and other things that become available in secondary care that people have a right to expect that they will have access to, but those have significant cost profiles. So, if you look at what's changed over the last year or so in terms of growth areas, secondary care drugs is a particular area of growth, and that's because there are more therapies available to treat people. People will live for longer with conditions like cancer, which have become more like long-term conditions, and we are now starting to see the development of genomics and personalised medicine responses, which are significantly expensive, but provide a real benefit to individual patients. So, that's what sometimes drives the expenditure in a different direction from the one that, if we were sitting there planning it out, we'd say, 'Yes, put more in primary care', but that's where the significant inflationary pressures are.

Okay, thank you for that. Looking at the specific outcomes that Welsh Government are expecting from the NHS organisations, maybe to Darren: what are the specific outcomes Welsh Government are expecting from all organisations to deliver for the additional investment? So, you've got the extra investment, what have they said are the outcomes? You know, because we've heard, in this committee, quite a few times as well, it's all well and good giving extra money, but what do we see on the back end? Have you got any thoughts around that?

The Government and the Minister have been quite clear in the expectations that they're setting. The additional allocations I think were ultimately to stabilise the service. As we've said, there are lots of things that we couldn't plan for, which were outside the NHS's control, inflation linked and the increase in demand. So, I think the clear message from Government is the additional allocations are dependent and need a commitment from the NHS to deliver on planned care and reduce waiting times. They have been clear that, 'This is what we expect from the allocation.'

And so, based on that funding coming through, the expectation is to see waiting times drop within the next 12 months.

Yes.

Okay. Thanks. [Interruption.] Yes.

Is there any indication of how moneys might roll forward in the same way? Because if you've got, now, new moneys so that you can address some of the issues, you can start putting interventions in place, you need to know you can sustain those. So, what's the outlook? I mean, could we expect another £450,000 next year? Is it in the base, or will it be, 'We've inflated your base, now you've got to make do'? What are the conversations around that?

So, clearly, whilst the additional funds are incredibly welcome, there is still a significant challenge. In the same way as Carys was talking about inflationary pressures within social care, we've got a large spend on continuing healthcare in associated areas, where we're seeing the same inflation levels in excess of the uplift. So, the expectation that's been clear to us as directors of finance is that we need to stabilise the financial position of the NHS, particularly across health boards, and to move that into a sustainable forward-plan look. Now, that takes quite a lot of different elements to look at. We know that services and the pattern of services has been hugely disrupted during COVID. You know, we moved things around, we put in place new responses. Now we need to think about what's the shape of the services for the future. And, certainly, within Cwm Taf Morgannwg, we're working on what our clinical services plan looks like, and that's partly about how do we best deliver the services to meet the needs of the population, but also recognising that one of the resources that's in shortest supply is skilled workforce. And we need to be able to make sure that we can cluster our services in a way that is safe for our patients and delivers effectively without us having to look either externally to agency doctors, nurses et cetera, or to have gaps.

So, it's about planning for the future as we work through, and we also have a huge focus on how do we start to deliver on the prevention agenda, thinking about long-term conditions, and thinking about the health of our population, and engaging with our communities to develop that resilience, to make a more sustainable position as we go through. Because what we know is we've got an ageing population and significant health issues across the piece that need to be supported.

So, how realistic is it to get financial stability within this financial year?

So, I think the position is different for each health board. So, in this financial year—as in, the one ending at the end of March—each of us has been issued with a control total. For Cwm Taf Morgannwg, that's break even, and that's what I'm working towards delivering, and that's what I'm forecasting at this point. There are clearly some issues that are outside of our control that do deliver additional costs. So, the industrial action over the last week has a significant cost impact, but we are looking to manage that. But there's a different position for each health board, but people are working towards delivering on that—

Is it a reasonable ask by the Minister?

So, if I look at my position—and I'll go with a really summarised bit—I came in to the year with a planned £80 million deficit; I've been given, conditionally, recurrent allocations of £72 million, and asked to improve my position by £8 million. That is what we're forecasting to do. We've had to make some really difficult choices in doing that. Some of those are non-recurrent, but we're working on a balance plan for next year. The position might differ by health boards, because some have more historical issues as well, but we are certainly aiming for a balance plan for Cwm Taf Morgannwg at this point.

Thank you. And Darren.

Just on the importance of that longer term certainty, Sally's mentioned the importance of staff development—you can't magic up staff overnight, so it's a consistent and a longer term plan for training and development, and developing the workforce. And colleagues have also asked me to raise the importance of that longer term investment in digital. If we are going to transform the way that we're delivering services in the community in primary care, which Mike has already touched on, we do need that continued investment in digital to be able to deliver services more efficiently, more effectively, and in a more timely way for patients.

Okay. Thank you very much. Looking at social care, the Welsh Government identifies social care and social services within core day-to-day local government-run services. It has reprioritised £11 million from the social care workforce grant, which it says will result in impacts for local authorities and social care partners. What are the consequences of this decision, and what impacts do you envisage for the services provided by your organisations and social care partners?

This money is used to fund social care staff and to ensure that they're sufficiently trained. And so, with less of it, there will be fewer staff, and they will be less well trained. It's almost as simple as that.

So, is it a cycle, then, of fewer staff means more pressure on the staff that are there and so on?

So, if in a local authority area it's £0.5 million less, that means you have £0.5 million less to spend on social services in your area. It's that simple, unfortunately. So, it will have a direct impact.

So, we're looking at extreme pressure, as the Government has said, and we're aware of it, and it needs to carefully consider—that's what it says—whether additional funding can and should be raised by increasing charges for a range of services, such as NHS dental care, domiciliary care. Would you support a decision to do so, given the pressures faced by the public with the increasing cost of living, and what difference is it likely to make?

I think the challenge we have across health and social care is one of rising demand and rising costs. Without sufficient additional budget to meet those demands, there are going to be cuts and changes to services. Sometimes, you can transform services, improve them, make them more efficient, and I think we've got an excellent track record of having done that. But I think, yes, we are going to end up in a position where, if we don't look to raise additional money from elsewhere, then those cuts are going to have to be implemented. I appreciate it's not where any of us would want to be, but I think that would make far more sense than allowing things to go wrong.

But it would have a knock-on effect on the most vulnerable and the poorest in society.

Some of them do and some of them don't. So, something like the domiciliary care cap, actually, if you're the most poor in our society, you don't pay. So, actually, it's arguably the more wealthy who benefit from that cap than the poorest. So, yes, I—.

It's very, very tough to answer, and everybody is in difficult situations at the moment. So, if we can move on to looking at a little bit of the financial pressures and the sustainability of the sectors, possibly to Darren, in January 2023, the Minister for Health and Social Services said she wanted the NHS

'to focus far more clearly on a smaller number of priorities.'

How has that worked in practice and how has it impacted on the health sector’s financial and operational performance in 2023-24?

I think there were lots of conversations and feedback from NHS leaders to the Minister and officials about the extent, the breadth and the hugely challenging number of priority areas. So, I think the conversations we've had with NHS leaders are that the number of priorities hasn't diminished. Essential services are needing to be provided everywhere across Wales. It's still hugely challenging from a staffing point of view. I think the number of priority areas might have reduced, but the number of things contained in each priority area hasn't. So, I think it is key. There are things that the Minister and the Government are asking for focus on, particularly people with long waits. I think in Wales there was a slightly different approach taken during the pandemic, that there was a focus on clinical need for people on waiting lists, rather than on the longest waits. And that doesn't mean there hasn't been a focus on the long waits, but those with the highest clinical need have been looked at first. I think the pressures are still coming from all directions, even if the list of priority areas has changed slightly.

Yes. So, if everything is a priority, nothing's a priority.

Well, I think everything is important, but dealing with the issues, particularly, of those with the highest clinical need is where the area of focus has been for leaders.

Right, okay. Thank you. So, in your consultation response, you say the allocation of an additional £460.2 million for local health boards in 2023-24, which the Government announced in November 2023,

'delayed collective action which could have improved the current financial position.'

Could you explain why this would have been the case?

I think that the challenge was that the extra allocation came mid year. Health boards submit their plans, their integrated medium-term plans—that's the technical name—early in the year, which were not where any of us wanted them to be, particularly in terms of the financial challenges that health boards had set out. There was a period of time then where the plans weren't formally approved, and I know there were hugely difficult conversations going on within Government to look at how the deficits that were set out in plans were going to be met. But the fact that they came perhaps later in the year than Government would have liked, than our members would have liked, did make it difficult to make the necessary changes and plan ahead in a way that perhaps we would have liked. I think I mentioned the last time we talked to the committee that that's a lot of the challenge—. And I appreciate it's a challenge of the UK Government's financial planning cycle, with a budget that then comes to Welsh Government, and then Welsh Government look at what they need to do; some hugely challenging times then come out to the service. It's that's sort of late in the day—. And it is something that I'd suggest the committee might want to look at in the future.

And you've talked a lot about managing down deficits by 10 per cent. How achievable is that, or was that? Obviously, you talked a little bit about it earlier.

Yes. I think it differs, as I say, by health board—different positions. In terms of our position, excepting, as I try and work through, what the costs of the last week have been, my forecast is now break even, which means delivering that £8 million or 10 per cent improvement target in-year. That’s not necessarily all recurrent, and so there is a challenge going into next year in terms of the underlying position that still needs to be addressed as part of our planning, which is what we’re doing now.

How do you compare to your colleagues in other health boards?

So, ours is the only break-even position. Others have got deficit control totals, but that works within the overall allocation of funds at this point. I think the challenge to all of us going into the next financial year is to deliver balance.

So, if anything, you're probably in the most favourable position of your colleagues at the moment, then, in a very difficult—

And that is difficult in some ways in itself. I think what we did was try to take some very early difficult decisions when we were planning at the start of the year. There are significant areas that we could invest more money into to deliver better services, but we had to temper that with were we delivering our cost efficiencies before we invested to make sure that we had a doable plan. So, I think the size of my deficit was around 12 per cent of the total, where you'd have expected it to be around 15 per cent of the total. So, that is the reason why we were in a slightly favourable position. So, we tempered our deficit to a greater extent, I think.

Thank you very much. The £336 million additional funding for 2023-24 allocated to the health board on a recurrent basis is conditional on making progress towards reducing the level of deficit. How will it work in practice? What are the consequences then to the local health boards that don't achieve that?

I think that's probably a question for the NHS executive and others as to how that will that work through. They've been clear it's conditionally recurrent and that 'progress towards' means getting very close to it. I think we're all working to deliver that. We have hugely appreciated the very difficult decisions that were made to reallocate funds and therefore I think, even internally, that's part of our dialogue with our services. These are the difficult decisions that have been made across Welsh Government to support the NHS, and we need to engage in doing our bit to deliver our efficiencies and to start to stabilise the financial position. It's not easy. There are many, many pressures within that, but that is the sort of dialogue that I think we're all having.

Lovely, thank you very much. And finally from me—and then I'll turn to Peter and then on to Mike—for social services, in the ADSS Cymru response to the consultation, you recognise the challenges the NHS are facing this winter, but note that local government social services had not, by the end of November, received any in-year budget support. What's your view of the Welsh Government's reprioritisation of funding for 2023-24, and what have been the consequences for related services, specifically social services?

The challenges in social care are exactly the same as they are in the NHS, so to just fund the NHS and not also fund social services doesn't seem right to me. I think what that looks like in reality is in the vast majority of social services—in fact, probably all of them—budgets are significantly overspent. I'm in an overspent position in my local authority the likes of which I have never, ever seen before, by a factor three times larger than I've ever seen before. So, it's a massive, massive problem, and I can't understand why, given that the situation is the same in social services as it is in the NHS, similar funding wasn't made available.

Thank you. Peter, we've got a quarter of an hour or so.

A quarter of an hour. Right, I'll rush through. Apologies if I ask questions that, actually, probably you've answered in some ways as we've moved through, but, for the record, I'll be going through some of them again. When we look back at last year's budget, you expressed the challenges that you were facing, and I think it was quoted, it was said, then that you were

'dealing with the most pressure it’s ever experienced.'

How would you describe the pressures for the year ahead? Can you quantify that, the scale of that financial challenge, for both health and social care and to what extent will this be met with the allocations in the draft budget? What's the deficit?

The work that we've done in relation to social care and budgets for next year, we're looking at pressures of about £260 million for social care alone. I suppose what we're seeing, and Lance can answer on this better than I probably, is an increased pressure across all of the service groups that social care support. And I think, when you ask how are we going to fund that, that's a really difficult question to answer. All local authorities will fund it differently, but I think the bottom line for all of us is we're not going to be able to fund pressures at that level going forward next year. We have reserves within the local authority but they're not going to be able to fund this level of pressure on an ongoing basis.

No, that's a really good point. I don't know if anybody else wants to add to that, but—.

I suppose the NHS will continue to experience significant pressures. Inflation is running above even the uplift that we've seen and we know we've got fragile services sitting alongside social care in particular: individual care packages, dentistry is particularly fragile. So, we've got significant pressures and health boards will come into the financial year with underlying deficits, but with an aim to try and address those as far as is practical. But there will be a need to shape services going into the future in a more sustainable way, which we're really conscious of.

So, the challenge will be there and will continue for some time as we look at the inflation rates running in the community. We know that pay inflation in those support functions outwith domiciliary care, care homes, is still running well ahead and so part of our challenge for next year is how do we manage that. Unlike local authorities, health boards don't hold reserves, which is one of the reasons why you have a slightly different funding position.

Thank you for that. I know in your submission you talked about the impact of COVID-19. Can you explain how that remains to be a financial pressure, because a lot of us are starting to think, 'Oh, hang on, this is a bit of an excuse now all of the time'? Does anybody want to reflect on that?

Shall I?

Could I just—?

You go first.

I'll come to the question, but I just wanted to reflect back on just the last point if that was okay.

I think the challenges that Lance and Carys have set out in social care, particularly the financial ones, are a concern for us and we work very closely with ADSS—Alwyn and I meet regularly, one of Lance's counterparts—. Lots of the challenges in social care are unseen, whereas we've all seen, unfortunately, the ambulances outside hospitals regularly in the media, waiting lists. And I think it's hugely challenging and I've said many times that the two services, health and social care, are so intrinsically linked, if the challenges in social care are not met then things are going to get worse for citizens, for social care and for health.

Thanks for that. Any points on the COVID?

So, I think what happened during COVID is that we stood up a range of services. So, for example, if you looked at Cardiff and Vale, the Lakeside unit was created to provide additional bed capacity at that point. That is still there and those costs are now intrinsic. We also are still running vaccination campaigns, we've got health protection, we need to respond to and recognise the gaps that were there pre COVID, and we are still seeing pressure on wards. And we still need to manage the infection-control risks in a different way, even now, around a range of diseases, including COVID 19, but also flu and other winter viruses in particular. So, it is still affecting the pressure on services and at various points it creates that response. But I think I'd say we changed the shape of services and we put in capacity during the time of COVID that is now baked in, if you like, to our cost base.

Yes, yes.

Just one really brief point on the infrastructure point, and things like the importance of air quality in hospital buildings, regular air change, those things needed capital investment to put in the kit to keep people safe, which, it became apparent as soon as COVID struck, we needed more than ever. So, the running costs as well as the capital costs of just ensuring that air quality was safe to prevent infection, prevention control, it's a relatively unseen aspect and an unseen cost.

Thanks for that. Moving on to ADSS, probably more so, you identified contributing factors to the challenges faced by the social care sector in Wales, including issues with continuing healthcare, which you say local authorities are having to fund in the majority. Why is this happening and can you quantify the impact? I think I know why it's happening, but the impact.

It's difficult to quantify, and I'm sure there'll be a different view held by health colleagues, but I suppose eligibility or otherwise for continuing healthcare versus eligibility for social services funded care has always been an area, I suppose, of some contention. There's a strong feeling, I think, across social services that, over time, that has moved so that more and more things have been required to be funded by social services, because the health boards won't fund them under continuing healthcare. I think you'll have seen—and I think we might have mentioned it earlier—some of the pressures in the continuing healthcare budget, and I understand that there's an express saving associated with that that the NHS have agreed across Wales, so there's a real risk that that impacts on the social services budget if we're simply transferring the funding stream. If we're actually looking at how we provide the care, which I hope is what we will do, we could potentially look to make sure that the care is being provided in the most economical way.

Thank you for that. The last question—. Oh, sorry.

Sally wanted to just come in on that.

Yes, sorry. So, continuing healthcare and section 117 and associated individual packages of care is an area of significant pressure for the NHS as well. It's grown significantly over recent years. The work that's going on as part of the value and sustainability board is looking at the effectiveness of packages of care and monitoring our providers, but we're really conscious of the need not to just transfer issues to social care, so that is explicitly precluded as part of the work. It's about, 'Are we getting value for money and good packages of care that support people potentially to improve and be rehabilitated?' But not always, because we've got a range of different services within that designation. But, yes, we are not aiming to transfer pressure into social care through that work.

Before we move on, we've got the Welsh Local Government Association coming in in the next session and they've said that there's a real concern that the same level of protection for social services for much longer and it puts good-quality social services at risk. Could you tell us what that means in practice? What does it actually mean to individuals or communities out there in practice?

I'm sorry, I'm not sure what the question actually is.

Basically, they're saying that there's a real concern that it will not be possible for local authorities to give the same level of protection to social services, so, budget protection, basically, to be able to pass on. So, what will the practical impact be?

It's really difficult, isn't it? If we don't have money to meet the additional care needs of more people as they come into the system, because, essentially, that's probably what we're really talking about, then the only way to make the money that we do have go around is to eek it out further, isn't it? So, actually, what you would see is a rising of thresholds across adults' and potentially children's services as well. There's nowhere else to get the money from; there's no income mechanism, it's very prescribed in terms of where we must get involved and where we shouldn't. We're under significant statutory responsibilities, so there's no wriggle room. I suppose the only thing that you can do is how you interpret an assessment and how you then choose to provide the services, so you could meet the need and instead of meeting it through, I don't know, a 28-hour care package—that's four calls a day, seven days a week—maybe we could try and see if we could do it on just two calls. It would be that, and I wouldn't say that that was unlawful, and I think we do a good job of trying to make sure that we are—it's a horrible word—rationing the carers as much as possible. We have to, there's no alternative. But if the money isn't there, those decisions become even starker, even sharper and even harder.

One last point from me, and it's this, focusing now on the health and social care workforce, I just wondered if there'd been any significant improvement in recruitment and retention, so you can start addressing this issue where we've been having to use so much agency staff. Have we seen progress in that way now?

It won't be an uniform picture across Wales, and I think that it probably needs to be subdivided in terms of the description of the problems. So, the issues relating to qualified social workers are very different to the issues, I suppose, relating to agency staff in a care home or commissioned domiciliary care. They're all quite different. A piece of work that ADSS Cymru has done is create a pledge across Wales in terms of children's agency social workers. That's fairly recent, but I suppose the early indications are that that is having some improvement in retaining people in local authority jobs, rather than them moving into agency. It's not going to be the whole answer. It doesn't stop somebody moving to Bristol and becoming an agency social worker on a much higher pay rate. So, it's a continually moving feast.

Yes. Thank you.

Just following on from that, I suppose it's agency workers in social care, but then looking across into primary care and locums, is there a way of not using as many locums, but salaried GPs? Is there anything like that that's going on in your aspect of looking at that side of things?

I think building the resilience of primary care is key, and it may not just be about locums or the recruitment of other GPs, it's about broadening the primary care workforce, using different skill bases. Pharmacists, for example, working within practices can start to meet people's needs in a different way than simply seeing the GP. I know there's a lot of work through our cluster development around that and providing that across.

But it is a challenge in terms of, a little bit like social care, the problem for medics, nursing, qualified health professionals is different to some of the other areas. We know that, particularly for medical colleagues, that's an international career. There are international shortages, and we see people moving around, and we need to work really hard to retain people within our system. We know we've also got an age profile issue that works its way through.

So, we have focused as health boards, there is some national work around variable pay and how we look at agency workers, but, internally, we've also had a focus, and we've started to see some benefits around nursing and, particularly, healthcare support workers, by proper recruitment, by planning that on a very active basis and moving away from using the more expensive agencies and trying to really focus on retention as well. We've got a workforce that has been tired as a result of the pandemic, but by starting to introduce things like flexible working patterns, even where we've got clinical services, we are hoping that we can change some of that dynamic and retain people. There have also been changes to the pension scheme—

So, managing shift patterns and trying to do a little bit more rather than just traditional 12-hour shifts and that's all you can have.

Yes, and working with the individual. When they say, 'I'd like to work flexibly,' we start to work with them to do that, rather than there being a, 'I'm sorry, that's not possible.' So, we have seen some reductions in healthcare support worker spend and in the use of high-cost nursing agencies. The medical workforce, I think, is a whole other issue that we are working through, we are analysing, we are understanding and, clearly, some of the industrial action over the last week or two also adds complication into that.

And when you talk to junior doctors who say, 'Well, we'd get paid an awful lot more if we went to Australia or New Zealand, or even to England,' that's the—. They don't have to go that far away, they can potentially—

Yes, there are opportunities for people to move around, and that'll be very enticing.

I think Sally's touched on it a bit. It's meeting the needs of the population with the staff team that you've got, and it might not be the traditional, 'I need to see a doctor for x, or a nurse for y, or a pharmacist for z.' In many parts of Wales, particularly outside the more urban areas—rural areas in particular—this is more challenging, and there does need to be a lot of that service design. And I think all of us are aware of the sort of age profile of the Welsh population compared to other bits of the UK. You know, on average, it's two years older, which doesn't sound a huge amount, but if you look at the clinical workforce, there are some worrying things coming down the tracks quite quickly there, with the age profile of medics in some of the more challenging specialities—ophthalmology, orthopaedics, ENT—where the age profile of the senior clinicians shows that over 60 to 70 per cent of the workforce are over 55. So, they're not going to be around for much longer.

And it relates back to the much earlier point, really, about the danger of making short-term cuts and decisions. We need to invest much longer term across the whole of the UK, not just in Wales on this. For the first time in medicine, in the last couple years, there are more people coming onto the register who trained outside the UK, so you're competing on a world market then, rather than training and developing. And very much related to the retention point: people very often tend to work where they're from, and even if they go away and train and develop, particularly the clinical professions, they tend to come back. So, I think that longer term investment is needed in recruiting people into the NHS workforce locally. And similarly in social care—I've talked to colleagues in Social Care Wales—people sort of train and grow within those communities, and that's really important that we're getting recruitment from all parts of Wales. Apologies for losing my voice. [Laughter.]

I'll pass on to Mike to finish our questioning this morning. Mike, you've probably got about a quarter of an hour if you need it, so—

I'll prioritise the questions, in my view, anyway. How are the allocations in the draft budget driving digitalisation, and the use of IT transforming the way in which health and social care are delivered to aid sustainability? And what savings and efficiencies are you getting through the use of digitalisation and the use of ICT?

In terms of putting a figure on this, it's an incredibly difficult thing to do, because lots of times, investment in information technology, it's making things simpler, but also making things safer. Using the electronic prescription service as a point there, it's not just an efficiency point of view, making things quicker, making things cheaper, making stock ordering simpler; it's about having that information available to all clinicians involved in a patient's care. It's very difficult to put a figure on, Mike, is the honest answer to that.

There's a tension in Government spend, and I would assume in health board and social services spend, on the ground, between doing things that are described as 'preventative spend' and doing things that you believe have to be done now. Have the Welsh Government got it right in the split between preventative spend and health spend? We know how much money could be saved if we could halve the number of people having type 2 diabetes, for example.

In terms of priorities, something that you'll hear us at the Welsh NHS Confederation say a lot is, 'Unless we do something to address demand, we're doomed to fail.' There are huge amounts of work being done by colleagues in Public Health Wales on the importance of living well. Obesity is the most prevalent example, the health complications that people get if they are obese, and diabetes leads to all sorts of other issues later in life, and it's a big part of a health board's responsibility and Public Health Wales's responsibility. But one of those things that I say regularly is that things like the quality of people's housing has an impact on their health, so disinvestment in housing could have a negative knock-on impact on people's longer term health, resulting in pressure on the NHS, and also the types of jobs that people have got. One of the things we haven't talked about today is the jobs and the salary spend in social care and in health, and the value of that to local economies, because I think the thing that's driving demand up more than anything else at the moment is the state of the economy and the cost-of-living crisis. So, it isn't just a preventative in the health budget, it's about everything that all public sector bodies do.

Can I say I agree with you entirely? If you've ever listened to my speeches, which you probably haven't, I talk about, 'Is it any surprise that people who live in cold, damp houses, who have poor nutrition, tend to have a poorer health outcome than those who don't?'

Yes. I do listen to your speeches, Mike. [Laughter.]

And you agree. [Laughter.] Okay, moving on, what's your understanding of the funding position for 2024-25 for the additional costs of paying the real living wage for care workers? And is paying the real living wage to care workers actually stopping care workers leaving to find other jobs that pay more?

I'm not aware that there is funding from the Welsh Government to pay for the real living wage next year, quite simply—3.1 per cent doesn't translate into funding the real living wage, so, it isn't there.

But does funding the real living wage stop people leaving?

Funding the real living wage and paying care staff properly makes a massive difference. We significantly increased our fee rates for domiciliary care staff, having had massive problems in my local authority. Within months, the position massively improved—they were able to recruit staff. We're not going to be able to increase those rates by very much at all next year and so it's likely that the position will deteriorate and we could end up in the position that we were in before, which was people delayed in hospital because there aren't domiciliary care workers to do that care. It's unfortunate that anybody can go and work in Aldi or wherever—sorry to choose a particular example—and get paid more. They don't run the risk of being arrested if they get their job wrong, they don't have to go through professional requirements to do their job. I'm not saying that Aldi checkout people aren't in highly skilled jobs; I'm sure that they are, but they don't carry the weight and risk that our domiciliary care staff do.

Yes, the point is it's not just about getting out of hospital, is it? It's about not going into hospital. If you have sufficient social care provision, then people are getting their adaptations, they're getting care early on rather than waiting for them to be so ill that they end up in hospital. And as somebody who was quite ill over Christmas, the amount of strength you lose in three or four days of being in a bed, I just think, is phenomenal.

Exactly, I couldn't agree with you more. I'm sorry, I was just using the hospital issue to highlight what will happen if we end up in that position again.

Finally from me, does the Welsh Government—this is to ADSS—allocate sufficient resources in the draft budget to deliver actions set out in the initial implementation plan, which runs to 2025, for the creation of a national care service?

I think it's difficult to say at this stage, because we still don't have detail of what the national care service would do and how it would operate. So, I don't think I can really comment in any detail, I'm sorry.

Okay. Can I, just finally, say on this last point, on social services, the more people who can get early interventions so that they don't end up ill, using both primary care, getting to see a GP early, which can be incredibly difficult in some practices, getting social care provision early, doesn't that reduce the demand in terms of people ending up in A&E and in hospital and having to be discharged at the end of it?

I think you're right—yes, it does. I think what you probably heard this morning in terms of evidence is that this budget position is going to end up doing the reverse of what you've just said, and that's really unfortunate.

Thank you very much.

Darren.

It was just a brief associated point, really. The Welsh Government published a consultation on their health impact assessments over the Christmas period, and it's something that we at the Welsh NHS Confederation have called for for a significant period of time relating to the wider determinants of health—the things that Mike has touched on. I know you heard from the future generations commissioner earlier today, and I think lots of the lines of questioning have been about the consistency of funding and enabling us to plan and develop, recruit and retain the workforce for the future. I think, with that eye to the horizon, however challenging things are today, there are some things that we know need sorting out and that is the fair pay, fair work for colleagues in social care. We've seen from the industrial action that's going on that there are staff in health who are not happy with their pay as well. There are big challenges ahead, I think it's fair to say.

Thank you very much. I'll bring the session to a close, but, just very quickly, the future generations commissioner was talking about how, with a view to the well-being goals being delivered across Cabinet, Ministers need to talk to each other, but then how that would be a model for public bodies to also work to, so that you're not working—. That you have an eye on the impact on—. What happens in social care has an impact in health, and I think it's probably one of the 'easier' things to actually try and align because you get each other's—. You know, you understand the link. It might be more difficult in other situations. But any comments on how that might work and how that could work in practice?

I think it's a critical way of working. Just using the example of social care and primary care, things are intrinsically linked and it seems daft to be looking at any one bit of the public sector in isolation. We've had conversations with colleagues in social care that financial challenges in social care could potentially lead to bigger financial challenges in healthcare. But, ultimately, it's public money and we've got a duty to work—as everyone is trying their best to do, and even more so in these challenging times—together to deliver the best services with a finite amount of money, irrespective of which bit of the public budget the money is coming from.

Okay. Thank you very much for that session this morning. Diolch yn fawr iawn. It was really interesting, and I know we do appreciate all the work that you do in your respective organisations and everybody that you represent here today. We know it's very, very difficult out there and we do appreciate it.

I'll bring this session to a close. You'll have a transcript of this to check for accuracy, and then you'll have the opportunity to look at that.

So, we'll stop there for a technical break just to do a changeover, but we'll see everybody in a few minutes. Diolch yn fawr.

Diolch yn fawr. Thank you.

Thank you.

Croeso nôl i bawb i'r drydedd sesiwn y bore yma o sgriwtini ar y gyllideb ddrafft. Rydyn ni yma efo arweinwyr cynghorau sir. Buaswn i'n licio mynd rownd ac ichi gyflwyno eich hunain a lle rydych chi'n cynrychioli. Os gwnawn ni gychwyn yn yr ystafell—.

Shall we start in the room with Anthony?

Hello, good morning. I'm Anthony Hunt. I'm the leader of Torfaen council and also the Welsh Local Government Association finance spokesperson.

Fantastic. Great. Who have I got? Mary Ann.

Good morning. I'm Mary Ann Brocklesby and I'm leader of Monmouthshire County Council.

Welcome. And then over to Mark.

Bore da. Good morning, everybody. Councillor Mark Pritchard, leader of Wrexham County Borough Council.

And over to—

A drosodd i Llinos.

Bore da. Llinos Medi, arweinydd cyngor Ynys Môn.

Croeso cynnes ichi i gyd.

A warm welcome to you all. We've got a lot of ground to cover because, obviously, there is a lot of important information we've had from you as evidence, but obviously we need to find out what's going on in local government on the ground as well. We've got some questions we'll ask specifically for some. If you've got something specific to add, if you could add it in in fairly short answers, that would be great as well. So, if the first person gives a substantive answer, if you concur, then be fairly quiet, but if you've got something extra to say then please say it, because it's good to be able to get through the session.

So, no more rambling from me; let's carry on with the first question. The Welsh Government said decisions relating to this budget are,

'the starkest and most painful since devolution.'

It also says it has aimed to protect front-line public services as far as possible. To what extent does this budget protect the services that you offer? I might as well start in the room and then we'll do the order that we did the introductions in, if that's okay, so we'll start with Anthony—if you give us an idea from a WLGA point of view and maybe from a Torfaen point of view as well.

Okay. Yes. Obviously, I recognise both parts of that statement. I recognise the difficult situation the Welsh Government have been put in by the financial position. We also recognise the 3.1 per cent additional funding—that's 3.1 per cent cash additional funding. It's welcome. That's £170 million more, and that will help us bridge some of the gap. However, it only amounts to around a third of the pressure facing local services, so it will inevitably mean difficult choices, job losses and service cuts across local government.

Okay. Thank you very much. Mary Ann. Can we just unmute Mary Ann? There we are. Lovely.

Thank you, Peredur. I concur with Anthony. It is a useful uplift. There's a sense in which this is a growth budget, but it's not enough to allow us to deliver our services when we are dealing with increasing demands as a fallout post COVID in social services and in education, but also inflationary pressures, particularly on waste services et cetera. Despite having more money, it is not enough for us to cover the services that are most needed and to protect the most vulnerable and needy in ways that we would want to, even though that is the focus of our budget.

Shall we go from the south-east to the north-east? Mark, in Wrexham, any thoughts?

Yes, thank you, Chair. Just quickly, we all recognise the increase of 3.1 per cent and, as we say, that's welcomed, but it wasn't welcomed by me, and the reason being for that is that it wasn't enough. I do accept that the Welsh Government has its own financial pressures, but the 3.1 per cent just adds up to £170 million; we need £800 million to be sustainable across the 22. That's what the shortfall is this year. And since austerity started, we've had over £1 billion taken away from the local authority's budget. And I'll repeat that: over £1 billion. With regard to services, it's going to be devastating. We're going to have redundancies, job losses, and the non-statutory services—. I was in a budget workshop on Monday with members, and in three years' time, if we have any non-statutory services in Wrexham, I'll be surprised. Because we have a legal duty, as we all know, to protect the statutory services. That's where we are.

And I'll say this quickly: I've been in local politics, I've been the leader of the council, I've held most portfolios within the council, and I've never known a time like it. It's tragic, and if you add up all the redundancies and job losses across Wales, for all of us, across the 22, it will be in its thousands. My plea today, really, is to you: all we want, as 22 authorities, is to be funded properly, so we can deliver quality services to our residents. Thank you, Chair.

Diolch. A drosodd atat ti, Llinos. Oes gen ti fwy i'w adio?

Dwi'n meddwl beth sy'n bwysig ydy'r frawddeg olaf yn y cwestiwn, sef 'Ydy hwn yn medru amddiffyn y gwasanaethau?' A'r ateb ydy 'Nac ydy'. Felly, er bod yna gynnydd wedi bod, mae'n bwysig nodi nad ydy'r cynnydd yn medru amddiffyn y gwasanaethau, ac rydyn ni i gyd yn edrych ar doriadau i'r gwasanaethau yna. So, i ateb y cwestiwn ar ei ben, 'Na'.

Mike, do you want to come in? Can we unmute Mike, please? Diolch.

My question is to Mark Pritchard. You said you were going to do away with all non-statutory services. Does that mean you're going to close every park? Does that mean you're going to close every community centre? Does that mean you're going to close every leisure centre, and you're only going to have one library in Wrexham?

I didn't say we were going to close every non-statutory service; what I said was I would be surprised if there were any non-statutory services being delivered in Wrexham. The non-statutory services in Wrexham add up to £28 million, and they cover education, early intervention, business advice and support, housing, assets and the economy—the list is there—bus stations, road safety, grass cutting, countryside services, parks, winter maintenance, the environment department, and the list goes on. They're non-statutory services. What I would say to you, as I said to the press, and as I've said to elected members—the 56 in Wrexham—is no stone will be left unturned. That's where we are.

And you're referring to non-statutory services; what about the statutory services? For the very first time—and I never thought I'd be sitting here today having this conversation—we're taking £5 million out of education—£5 million—because we're being forced to, because we've got nowhere else to go. Thank you, Chair.

Thank you for your answers there. If we can move on, in your consultation response, you say the measures that local authorities will have to take to address their budget gap will have to be drastic. Can you provide us with some examples of the measures being considered?

Os gwnawn ni gychwyn y ffordd arall rownd y tro yma, so os awn ni at Llinos gyntaf. Pa fath o bethau wyt ti'n mynd i orfod eu gwneud yn Ynys Môn, os fedri di roi rhyw syniad i ni, i gau'r gap, felly?

Cyllidebau ysgolion ydy'r lle cyntaf. Rydyn ni wedi medru amddiffyn ysgolion er gwaethaf yr heriau rydyn ni wedi'u hwynebu ers nifer o flynyddoedd. Mae cyllidebau ysgolion yn rhywbeth sydd yn pryderu rhywun yn fawr iawn, ac yn enwedig y bore yma, pan rydyn ni'n derbyn e-bost gan Estyn yn datgan pryder am bresenoldeb plant yn eu harddegau yn yr ysgolion, a rydyn ni'n tynnu mwy o arian allan o wasanaeth sydd angen ei fuddsoddi ynddo fo, oherwydd bod ein pobl ifanc ni yn ei ffeindio hi'n anodd i ddygymod ar ôl sgileffaith COVID a materion iechyd meddwl, ac yn y blaen. Mae hwnna yn wirioneddol bryderus. Ac o gofio mai ein pobl ifanc fydd ein cenhedlaeth nesaf ni, rydyn ni rŵan yn dirywio eu dyfodol wrth wneud penderfyniadau fel yna.

Felly, mae addysg yn un enfawr, ond rydyn ni'n edrych ar wasanaethau cymdeithasol hefyd. Rydyn ni'n edrych ar yr hyn rydyn ni'n gallu ei gyflawni, ac rydyn ni'n edrych ar wneud llai. Un ohonyn nhw yw beth rydyn ei alw'n gymorth dros nos. Cymorth Night Owls rydyn ei alw fo yma ar yr ynys. Beth mae hynny'n ei wneud ydy cefnogi yn ystod oriau allan o'r swyddfa, os oes yna rywun yn disgyn yn y nos, os oes rhywun angen cefnogaeth yn y nos. Beth mae hynny'n ei wneud yn y diwedd ydy arbed arian hefyd i'r gwasanaeth iechyd, achos mi fydd yna rywun o’n gwasanaethau ni, efallai, wedi medru cefnogi rhywun yn ystod oriau’r nos. Rydyn ni'n ailedrych ar beth sy'n bosib yn y gwasanaeth yna rŵan. Felly, mae'r angen yn dal yn mynd i fod yn bodoli, onid yw? Pwy sy'n mynd i fod yn pigo'r angen yna i fyny? Ydyn ni'n trosglwyddo’r gwariant yna wedyn i'r bwrdd iechyd? Ydy'r gwariant yna’n mynd i gostio mwy wedyn i'r bwrdd iechyd?

I ni, fel arweinyddion, mae'n rhaid i ni gydbwyso’n cyllideb ni. Dyna ydy ein cyfrifoldebau ni, ac mae'n rhaid i ni wneud iddo fo adio i fyny. Felly, mae pob dim yn cael sylw. A beth sy'n bwysig i'w nodi yw bod pob un gwasanaeth yn bwysig i'r defnyddwyr gwasanaeth. Pan rydych chi eisiau rhywbeth gan yr awdurdod, mae hwnnw’n bwysig i chi. Rydyn ni hefyd yn nodi y cynnydd rydyn ni'n ei weld mewn digartrefedd. Mae hwnnw’n flanced ar draws Cymru. Mae chwyddiant yn araf deg yn mynd i lawr, ond mae sgileffaith y chwyddiant dros y flwyddyn ddiwethaf ar deuluoedd yn ei gwneud hi’n anoddach i deuluoedd fedru cadw to dros eu pennau. Rydyn ni'n gweld mwy o deuluoedd yn dod ar ein gofyn ni, ac mae o wedi cynyddu yn y fan yma ers y Nadolig.

Diolch, Llinos. Coming over to Mark, you've highlighted quite a few things already. Is there anything in particular that you'd want to add, briefly?

I will, Chair, thank you, and I'll go through it quickly. I'm conscious of the time. Obviously, I mentioned schools—£5.3 million. I just want to say what I feel about education and schools. Education is the only way we can level up the social injustice in this country. If you have poor parenting and you live in an area of deprivation, the only opportunity you have is education and a fantastic school within that community to set the foundations for you to break that cycle of deprivation. I said earlier on we are taking—that's how difficult this is—£5 million from education.

On a similar theme to what Llinos said, there are disability facility grants, which do adaptions in people's homes, when they're waiting in the hospital to come out. Slips and falls, handrails and everything, adaptions within the property, walk-in showers—we're looking to take money out of there. I never thought I'd be saying this, but I am.

The other areas I touched on quickly are non-statutory. Yes, we'll be looking at them. We'll look at everything—social care, everything we will look at to save money, because that's what we have to do. We had a discussion yesterday on business support—£2 million is the consideration. We're going to cut that in half. Fleet management—we're doing that. Obviously, there's restructuring. When I started here, I think it was 16 we had, senior directors. We had a chief exec, directors, chief officers, 14 we had. They've all gone. All we've got is a chief exec now and the seven chief officers. The problem is, where we are, Chair, and I'm sure you all know, as I said earlier on, we've had £1 billion taken out. This has been consistent. It's been cuts, cuts, cuts, cuts. It's non-stop. There's nothing left. That's where we are. Thank you, Chair.

Diolch yn fawr. Mary Ann, obviously Monmouthshire is a more rural county as well. Do you have any reflections on some of the challenges around that?

Like all others, we've not been able to cover the full inflationary pressures facing our schools, and we know what the knock-on effect may be in terms of losing teaching assistants and teachers themselves, depending on the school, and the impact that will have on our learners, particularly at a time when return-to-school rates are still not as they were pre pandemic, and while mental health and well-being is reduced and where we need more support in the schools.

In terms of being a rural county, there are a number of knock-on effects, I think. One is that, while we're not anticipating redundancies, we are having an across-the-board job freeze, and that will have an impact on our existing staff, so reaching into rural areas on a reduced and severely stretched staff, who have their own well-being issues, which I think we'll come on to later. There's our ability to maintain waste management at the levels we want to, with increasing fuel costs, for example, when we have to cover so much more mileage than more urban authorities. We haven't, at this point, reduced our collection rates.

We're in a slightly different position than some councils in that we started making substantive cuts last year. We started transformation of services last year also, so our preventative measures are helping us in some way. The real impact is around social services and education, which will come up time and time again. The transport issues cut across the whole region. We face it with school transport—that is statutory. We cannot change that; we have to look at new models, which is what we're doing.

Thank you. If I come to you Anthony, from your own experience in Torfaen, but also as the finance lead for the WLGA, for your thoughts about your pressures locally. But also, we've heard about quite a few of the councils in England looking at section 114 notices; have you got a sense of any of our councils in Wales looking precarious?

I don't think we're in as bad a position as that in Wales, but I think being in a less bad position than local government in England is not something to spend too much time boasting about, really, as the situation across England is dire. There are lots of councils from the north to the south, from affluent areas to less affluent areas, of all political persuasions, all saying that they're very close to being not viable going concerns, and that's a very unenvious position. To ask why that is, because I think members of the public do, this isn't because of cash cuts this time around; it's because of inflation causing pressure on local services, just as it is on households, and the pay pressure that causes. Because, of course, our staff need to live as well—we'll come back to that later—but they've had year upon year of real-terms decreases, and increasing demand on services. And, to agree with what Mark Pritchard said before, this is the fourteenth year that we've been doing this. Many of the things we've already done.

In Torfaen, we've already got rid of the mayor, the chauffeur, the budget for biscuits and things that people often tease us about that councils get—we don't get any of those now. I ride my bike to meetings instead. So, lots of those things that people think are the obvious things to cut first have gone. Therefore, I know it's a cliché, but we are cutting the bone. This year in Torfaen, to give an example of the one I know best, we've done an admin and business services review—that's saving £1 million. But that's 20 members of staff put at risk of redundancy and having to look for either redeployment or leave the organisation, so that's not an easy thing to do. We've reviewed our estates and our energy again to see what more money we can take out of them. We've reviewed our senior management costs, as other colleagues have said. We've done everything we can within social care to review the structure and become more efficient, to protect the outcomes for those who need us most.

To agree with Llinos, we're straining every sinew at the moment to try and protect schools, because we know, in the post-pandemic environment, school budgets are pressed. They've made lots of non-staff savings, so my impression is that any more savings schools have to make will come from staff, and we don't want them to lose some of the teaching assistants and other support staff who've provided invaluable support for kids struggling to get by after the pandemic. So, those are the things we're trying to protect, and that's the way we're trying to do it.

Llinos, wyt ti eisiau dod i mewn ar hwnna?

Yes. In addition to what Anthony just said now about the section 114 notices, I think we have to be honest as well, that, even though we're in a better position, I think a number of authorities know that they're quite close and they only want a few things to go wrong during the year. That's why we're carefully managing our reserves as well. I know most authorities are using reserves to balance the budgets this year. We're keeping an option that—. Flooding—we're having extreme weather, now, gritting and everything. If these aren't budgeted, you turn to your reserves to budget these things that are totally out of your control—storm damage and those things. So, I just think that it's extremely important that we mention the vulnerability that we face now because we are using our safety net to balance the budget, and, with your reserves, you can only spend them once. So, we will be looking for that next year. So, I think it is important that we note that anything can go wrong, and I think, as 22 leaders, we've all faced different emergencies over the last years of being in our leader roles. And you know how quickly that money can be spent as well, and totally out of your control.

Andrew Morgan from RCT council has been quoted as saying that local authorities will only be able to do the statutory things, and we've touched on that with Mark. What does that actually mean? So, what does it mean in 'just doing the statutory things'? I'll come to you with this, Mark, because you've talked about the non-statutory and the statutory, and delivering statutory services is a wide area of how you deliver it and what does that mean. So, could you talk us through, maybe, what getting rid of the non-statutory but just doing the statutory would mean to our constituents, and what would that mean to the wider implications of that? So, Mark, if I come to you with that.

Thank you, Chair. Well, I think first of all I would say that if there's a choice between statutory and non-statutory, all of us in this room are going to go for the statutory service because we have a legal—. The law states that we have to protect them, and rightly so. And the statutory services are for the most vulnerable people in our society, and that's the way it is, and we all understand that. On the non-statutory services, Mike asked me the question and I think I gave him a very comprehensive reply, and I'll state it again: it will be a breakdown of society, because—

Because of time, there's no need to go over this now, but just maybe what the impact would be, then, on communities.

Okay. Well, listen, if you look at the non-statutory areas—and I'll give you some examples—of community centres, libraries, parks and gardens, highways maintenance, street lighting, that gives you an example. We will be looking at those areas and, unfortunately, we will have to stop some of them. I think what we've done in the past, and we've done it really well—I must compliment all the other 21 authorities—is we've tried to retain as many staff as we can. A lot of people are saying salami slicing. Well, if you take 20 per cent off your non-statutory services every year, you're going to end up with nothing. So, the impact it will have within the communities that we represent will be devastating, because of the areas that we service within the non-statutory services. And that's it, and, look, it's brutal, it's unpleasant, but that's what we've got to do. And not only that, we've put millions of pounds extra into social care, and it just keeps on rising. The demand is there for everybody to see. It's not just in Wales; it's across the country. And those increases just continue to increase, and the funding process and the amounts of money we're given each year are just not enough, and that's it. But, coming to non-statutory services, a lot of those services are what affect our residents and within our communities. And yes, we will have to look at libraries, yes, we will have to look at community centres, yes, we will have to look at resource centres. Everything that is there, we have to look at now. Thank you, Chair.

Anthony, did you want to come in?

Yes. This is a difficult one, because, as a community leader, I'm less interested in what's statutory and what's not statutory than I am in what makes an impact on people's lives. And many of those non-statutory services do make a big impact on people's lives, and we've seen, from the taking away from them in other areas, the impact that's had on statutory services further down the line. You cut money from youth services and, five, six, seven years down the line, you find out you've got more anti-social behaviour and disorder. You cut money from community centres, you find you have more community issues, anti-social behaviour within those communities.

School transport is a great one. Of course, it's a statutory service to a point, but if you remove councils' ability to have any discretion about what they offer and how they offer it, you find a system that's frayed around the edges. Libraries, of course, are another one. It's statutorily necessary for us to provide a library service, but what that means, of course, is another question. We've tried co-locating our libraries with other services to try and keep those going, but—. I'm very wary that if councils are pushed in the direction that they can only offer statutory services or the bare minimum, we won't be able to offer some of those early intervention prevention services that, in the long term, have a positive impact on our budget.

In Torfaen, we took some decisions five or six years ago that I believe are now paying dividends in our budget now and that we can see in the demand on areas like social care. I don't want to withdraw the funding from those services in order to protect the—. It's the old adage of when a building's on fire, you have to concentrate on putting the fire out, but you also want to go into schools and communities and talk about fire prevention, don't you? How can we balance those two things right when we're being squeezed in such a way as to almost push us towards short-term decisions.

Thank you.

Llinos, ti eisiau dod i mewn ar hwn? Na. Fe wnaf i ddod atat ti am yr un nesaf. Rydym ni'n dod i ddiwedd tair blynedd y spending review. Dydy'r Llywodraeth heb roi gwybodaeth bellach tu hwnt i 2024-25. I ba raddau mae gan hynny impact ar lywodraeth leol, a sut ydych chi'n mynd i allu planio tu hwnt i eleni?

Mae impact blwyddyn nesaf yn cael effaith fawr ar sut rydym ni'n gosod y gyllideb eleni, ond hefyd mae'n rhaid i ni osod y gyllideb i wneud y siŵr ein bod ni'n diogelu pawb eleni. Felly, mae'r sefyllfa yn gwbl—. A mae'r rhagolygon rydym ni wedi eu cael o 1 y cant o gynnydd y flwyddyn nesaf yn rhoi pob awdurdod mewn sefyllfa lle os nad oes adran 114 wedi bod eleni, yn bendant mi fydd yna un y flwyddyn wedyn. Yr her fwyaf i ni ydy ein bod ni fel awdurdod yn gorfod cael medium-term financial plan, felly er nad oes gennym ni'r wybodaeth yma, mae'n rhaid i ni a'n swyddogion cyllid ni roi cynllun tymor canol i fewn. Ond eto, dydy'r un llywodraeth yn rhoi unrhyw arweiniad fel yna i ni. Mae o bron iawn yn gwneud ein swyddogaeth ni yn amhosibl, ond rwy'n clodfori'r swyddogion 151 bob awdurdod yng Nghymru sydd yn mynd rhagddo ac yn rhoi o leiaf ryw fath o arweiniad.

Mae'n bwysig bod y cyhoedd a phawb yn deall nad eleni ydy'r flwyddyn waethaf. Os ydy'r rhagolygon yn gywir, mae'r flwyddyn nesaf yn mynd i fod lot, lot gwaeth. Dyna pam mae'n rhaid i ni fod yn ofalus ynglŷn â defnydd arian wrth gefn, a'r defnydd fyddwn ni'n gwneud o ran gwasanaethau a treth cyngor. Mae'r gymysgedd yna'n hanfodol bwysig o achos y flwyddyn nesaf. Dwi'n gwybod ein bod ni fel awdurdod rŵan yn meddwl mwy am beth fyddwn ni'n stopio Ebrill nesaf—er ein bod ni'n teimlo ein bod ni wedi cael cyllideb eleni sydd ddim yn ddelfrydol o bell ffordd, ond mae'n gyllideb fedrwn ni ei chynnal am y flwyddyn nesaf. Ond bydd rhaid dod â phethau i ben erbyn Ebrill y flwyddyn nesaf.

So, I take it that it's similar in other areas. Anything substantive to add to that, Anthony?

It just comes back to the point I made, and the question before, about wanting to be able to make long-term decisions and not short-term decisions. One of the advantages we've had in this budget this year is we've been working on it since February, and the longer the time period you have to make decisions and put those decisions into effect over, it means that you can do more imaginative things than when you have to do it tomorrow. So, my appeal to you would be to put as much pressure as you can both on the Welsh Government and the UK Government to give us as much forward indications as they can, because then we can look to the future and say, 'Look, even if the future's not going to be rosy, we can try and get there over a number of years', as opposed to this year-on-year situation where we are left having to basically dig out the bottom line. The more notice central governments can give us, the more creative we can be and the more we can help protect those services.

We're just talking about future planning, with the three-year spending reviews coming to an end now—just for Mary Ann, who's had a couple of technical issues, but you're back with us now, so it's good to see you back. I don't know if there's anything further you wanted to add to that, Mark, or I'll move on to Peter. Basically, the message was clear—

There are a couple of things I'd like to add, Chair, if I may.

Okay. I'll bring you in after, Mark. There we are.

Thank you. For us, the distinction between statutory and non-statutory is not helpful. It’s not helpful because many of the things that we need to do that are preventative allow us to make effective savings and become more efficient, effective and supportive to our residents in those statutory services. To give an example, the work that we’ve done on supporting families and carers when there is an alert from schools, for example, means that we have lowered the number of children that need statutory services, and that reduces the financing and the resourcing that we need. But we need to invest in those preventative services.

I’d also like to say that all the work that we do in our community hubs, our libraries, our leisure services is absolutely crucial for community and individual well-being. So, we want to protect that. We may have to reduce hours, but closing them is going to have not only an impact on the well-being of our residents, but also on the NHS further down the line. Anthony gave the example of youth services, for example. By truncating our youth services we are seeing and will see knock-on impacts not only on our young people, but on the community safety of our communities and how they feel secure. That’s why I think it’s so important that we are allowed to have multi-year funding, so that that piece of preventative work is really thought through creatively, where together we can develop innovative practice and we can think forward as to how we can be better at our statutory service provision.

Thank you.

One of the issues we have in Monmouthshire is we have no reserves on which we can call this year. Unlike every other council, we’ve done everything different since 2013. There’s a limit to how far we can do things differently without being given some wriggle room to think through, as Anthony said, multi-year budgets, and start very early in the way we want to design and reform our services.

Thank you for that. Mark, I'll bring you in now, just briefly, because I am conscious of time. We'll move on to Peter then as he's got some questions.

Thank you, Chair. I'll be brief. I agree with Anthony and Llinos and with what Mary said. Just quickly, financial resilience is the most important thing, and I’ll just say this: I worked in the private sector for some big organisations. You wouldn’t run a private sector like this. We don’t know what our settlement’s going to be, so it’s a guessing game. Let’s be frank here—we never know what we’re going to have. Our budget process in Wrexham, like all the others, is very thorough, but we never know what we’re going to have as a settlement, so we don’t know what it’s going to be. And there are the grants as well, Chair—I’ll throw that into the mix. Ninety-three million pounds—we’ve got to set our budget shortly and we don’t know what grants we’re going to receive or where the reduction is. The only word I have to try to describe it is 'madness'. You wouldn’t run your home finance on this, you wouldn’t run a company finance on this, and you shouldn’t run a government finance on this. Financial resilience is important, and we need to know a lot earlier on the settlement. Thank you, Chair.

Thanks. Peter.

Thank you, and good to see you all. Thank you for your very candid responses. I know how authentic they are, and I feel for you. I don't think, in my years as a leader, I experienced the year that probably you're facing this year, although it was tough. And I cannot imagine not having a medium-term financial plan. It's absolutely fundamental for forward planning. It's absolutely essential so that you can plan your services and you can plan where you need to start focusing in future years. Otherwise, it becomes knee-jerk and reactive and that is absolutely no good for citizens.

And I also agree with the non-statutory/statutory split. That's something—. You know, they are intrinsically linked. One happens to have a name alongside it as 'statutory', but they are fundamentally a bunch of services that have worked and work together for the well-being of citizens. Anyway, I'm not supposed to—. I'm supposed to ask some—. These are key questions, but it's difficult not to get involved with a deeper area.

I'm pleased that local government has managed to accumulate some reserves, which you are now using this year, which is prudent. I'd still argue that there's something fundamentally wrong with a system that enables some areas to accrue more than others. Anyway, that's a different debate, which we'll take forward another day.

I want to focus on council tax, because I know you're all currently producing draft figures and things, and we're seeing quite significant variances between one authority and another. What level of change in council tax is local authorities likely to implement for 2024-25 and to what extent will this mitigate pressures?

Anthony, do you want to go first?

Yes, I'm happy to go first. Obviously, council tax will be a part of all councils' financial plans. It does only cover around a quarter of the budget requirements on average in councils, as you'll know. I think you'll be seeing more news on council tax coming out from different councils over the next few weeks and we envisage an average of around 7.5 per cent on the data that we've had so far. That will raise around an extra £140 million.

I think Llinos—. Shall we go around the room just briefly, and if you could tell us what you're consulting on or what you're likely to be consulting on as well?

I think we've got the evidence.

I think it's quite difficult for us to give the council tax number. Obviously, we're going out to consult here on Ynys Môn, and we're out to consult without the fire levy; we've separated both so that individuals know what they're paying for, because a lot of people don't realise that they pay for the fire service through their council tax.

But I do think it is important that I note now as well, that, as 22 leaders, we're not quite aware what the grant effect is going to be. So, even though we're going out now on our budget, we're waiting for clarity around the grants and the impact of grant cuts. So, I had an example here last week, where I was told by my social services director that they got news just before Christmas that one grant had just come to an end, and they weren't expecting it—it was a grant supporting early years—and that has had a detrimental effect on the service here. We can't afford to plug that gap. We have to be careful, because there's homeless grant, there are all sorts of grants. So, we've got it—. It's with caution now, what the council tax will look like.

And I think the reserves issue I'm going to have to raise. When I became leader in 2017 the Welsh audit service told me that they were concerned about the amount of reserves that Ynys Môn had, in case they got into trouble, because we hadn't been careful with our finances. So, over the years, we've been able to grow our reserves slowly and gradually, and even though the opposition has challenged us several times to use our reserves to balance the books. If we had done that this year would have seen a larger council tax increase and a more dramatic effect on services. So, I do think that the reserves discussion has to be a knowledgeable discussion, and also bring in the experts from the Chartered Institute of Public Finance and Accountancy and also Audit Wales into that conversation, because financial resilience is extremely, extremely important.

If we went into something similar to COVID now, does the Government have enough money to support local government to service the communities in that emergency? If not, then each of us would have to turn to our reserves to manage any emergency. So, please, just with caution, so that we don't fool the public in any way. Diolch.

Yes, and I think that's the key. There is an imbalance of resilience across the local government family, which needs to be looked at for the sustainability of all 22 authorities, not those who are more wealthy than others. So that's a bigger point. Wales Fiscal Analysis has suggested that there's going to be more and more of an expectation for councils to fall back on council tax. Council tax is going to take a bigger part in funding, going forward, but that's a dilemma politically. To what extent do you agree with that statement? And added to that, do you think that the Welsh Government is using its own tax-raising powers efficiently enough, so that perhaps you don't need to keep moving to council tax?

I think, Mark, you had your hand up there. Do you want to come in on that one?

I did. Thank you. Peter, can I thank you for your question? Can I interrupt on the council tax? I think that some people think that it's the answer to all our problems; it isn't. Every 1 per cent we put the council tax up in Wrexham, it's £600,000. It's not a lot of money, it isn't, but it does help. But I come back to that, if we were funded appropriately, we wouldn't need to put the council tax up as high as we want to. But there is a ceiling, let's be honest. If you look at COVID, the cost of living and everything that has gone on in this country and the hardship, you can only put the council tax up so high. If you put it up too high, people won't be able to pay it, and then that causes problems with regards to homelessness, people losing their houses. So, there's a balance here.

You asked the question, 'How much in Wrexham?' Twelve and a half per cent. I've put a press release out today. For every 1 per cent we don't get to the 12.5 per cent—so, if it's 11.5 per cent or 8.5 per cent—for every 1 per cent it's £600,000-worth of cuts. That's the frankness of it. It's not hard maths; this is fairly easy. You can only subsidise services for so long with your council tax. And let me assure you, there's hardship out there, and none of us like to increase the council tax. Can I say these figures that we're seeing here today, these are not my figures? These are the 151 officers' figures, who are saying, to keep Wrexham sustainable, it needs a minimum of 12.5 per cent. Now, I'm a realist, and Peter said, and he was right, 'It's a political dilemma.' It is. I don't know how high I will eventually set the council tax through the budget process. That's in the gift of the 56 councillors, and that's the same dilemma for Anthony and Llinos and all of us as politicians. So, it's hit or miss on the council tax, as we all know as senior politicians. But we're looking for 12.5 per cent. If you were to ask me what I think we'll get, we'll probably get between 7 per cent and 8.5 per cent. Thank you.

Yes. Okay.

Yes. Great.

Thanks again for your points, and well received. Just reflecting now a little bit on business rates and how that might affect some of the areas within your authorities, the Welsh Government says it will spend £384 million in the next term on support for business rates. It's freezing the multiplier and changing the level of support offered through its retail, leisure and hospitality relief from the 75 per cent—which we know it's consequential for—down to 40 per cent. Do you have a view on the proposed measures associated with business rates? Any views on that would be useful.

Maybe if we go to Mary Ann on this, because you didn't have a contribution in the last one. So, we'll go to you first, and maybe, from a WLGA point of view, we'll come to Anthony afterwards.

Within Monmouthshire, many of our businesses have raised concerns and disappointment at not continuing with the business rates scheme and reducing it to 40 per cent. As a border county with England, we do risk businesses moving where those business rates reductions are remaining at 70 per cent, and that's a real concern not just for our businesses, but for our local economy. While it was clear it was not intended as a long-term support, in the current climate and our need to maintain businesses working—the knock-on impacts of that—it is disappointing. It is a concern.

[Inaudible.]—of 22 authorities have you—? What's the collective view on—?

I think Mary Ann encapsulates the view well; I won't repeat it. We recognise the need of those hospitality businesses especially for support. However, obviously, if that money were to come, it'd have to come from somewhere else, and I'm loath to say that, as someone who certainly wouldn't want that money to come from elsewhere in local government.

Of course, yes.

No; it's a fair comment. Moving on to inflation and pay, you estimate around £267 million for pressures in 2024-25. How will that impact on local authority services, and what does it mean to the workforce of 2024-25, and probably for future years as well?

Do you want me to come in first? I'm happy to come in first on this one. Obviously, that will cause further strain on the—. You know, we're talking 70 per cent to 80 per cent pay organisations. So, pay pressures have a big impact; £267 million is a big part of that pressure that faces us as councils as a whole. I'm very wary of the fact that our staff have had real-terms pay cuts over the last 10 years, so I want those staff to be paid more, and we have retention issues in many areas in local government and that is partially as a result of pay degradation and also people being asked to do more with smaller teams.

I'm always aware, as a councillor, that I'm always pressuring for my residents, for better-quality services, but many of those services are being delivered by staff in a team that's a fraction of the size that it used to be five, 10, 15 years ago, and I've got to be cognisant of that for my staff, for their well-being. So, I really believe that we do need fair pay settlements, going forward, for our staff, but that can't be funded from local government budgets, because otherwise we're just robbing Peter to pay Paul. That needs to come from HM Treasury, in my view, to give public sector staff the pay they deserve, and also to make sure that those services are sustainable in the long term, because I always say that local services are the sum total of the efforts of the people who work in them. If we can't attract and retain those people, if we can't pay them a decent wage—those people, increasingly, at the bottom end of our pay scales, they're getting pushed into foodbanks and real financial problems themselves—then that's not going to be a good thing for the long run of those services.

Anthony, on that, is there any update that you could give us on the 2023-24 pay deal and what we might expect from a pay award for 2024-25?

I believe the unions are still consulting on what their pay claim is going to be. We should hear in the next, I think, month or so.

Okay. Thanks. I'll move on.

Yes.

In your consultation response, you talk about non-pay inflationary cost pressures. Can you provide more detail about these? Are certain services being hit harder and how are local authorities adjusting to the higher prices? I think we might have touched on some of that right in the beginning—fuel costs, and things like that—but I don't know if there's anything further you'd like to add around those inflationary pressures.

Yes. Fuel, food, other prices—. Obviously, energy costs haven't been the same issue this year as they were previously, but those are the things that are driving up our cost pressures, as well as, of course, demand.

Yes. Do you want me to go on?

I think Mike's going to come in on the next question, if I go over to Mike Hedges. Diolch, Mike.

Diolch, Cadeirydd. In your consultation response, you say there is a very real concern that the level of protection that has been afforded to social services in the past will not be possible for much longer. If you aren't able to protect social services, what will the effect be on users, and what will the effect be on the rest of society, including health?

Shall I go to Llinos? Do you want to—? Yes, and then we'll—.

The effect will be massive, won't it? We're constantly hearing of stories of individuals unable to come home from hospitals and also tragic children's services stories as well. So, the impact will be massive and that's why, as leaders, making these decisions around the council tax and using our reserves and safeguarding social services is such a dilemma. I think Peter Fox mentioned there around the political dilemma, and then there is that moral thing that we have to do, and it's to protect the most vulnerable in society.

My main concern is that it aligns itself with the non-statutory conversation that we've all been discussing as well, because the non-statutory service that we do is to prevent these individuals from needing intense care, giving them that ability to be more independent within their communities, making sure that families are at least supported before they break down, making sure that individuals are safeguarded sooner rather than later. But we are reaching this cliff edge where, for us as leaders to legally fulfil our duties and set a balanced budget, we're going to have to discuss what sort of service our social services will be able to provide. I'm afraid to say that's the austerity agenda, and that's where it's pushed us as services. I'm extremely concerned about what we'll be delivering in the next five years without investment into public services.

Anthony, did you want to come in on this?

Yes, very quickly on two things here. I do think social services need protection. Health and social care needs to be viewed as a sector as a whole. We can't just put money into the NHS and then have unintended consequences of cuts in social services heaping more pressure on the NHS. I do, though, think there is also a challenge for some of our social care directors across Wales. Social care departments, we all light-heartedly say, have the ability to bankrupt any council, and they do. I note that in 2009-10, education and social care between them accounted for 65p of every £1 spent by local councils. By 2021 this had increased to 74p. Whilst we need to protect those social care departments, we also need to challenge them to be as efficient as they can be. We need to protect the outcomes, if you like, and not the inputs, and that's where my learning over the years has graduated as a leader. Protection for those areas, for those outcomes and for those vulnerable people shouldn't mean protection from innovation and change for the department. I think those are very difficult things.

The second thing I wanted to say is: 'more visible, less visible' is the other dilemma facing councillors across the UK at the moment. Many of the services that we provide—education and social care, for example—are less visible services to 100 per cent of our populations. Not everyone sees them everyday, whereas potholes, things like that, and waste collections are very visible services. Now, the pressure, politically, on us as councillors sometimes is to load money into those more visible services. If we did that, then the less visible services that people rely on to lead independent, dignified lives, that children rely on to get a good-quality education would be decimated. I think we need to push back, but there needs to be some public understanding that, sometimes, in order to protect those less visible services, we have to make compromises with the more visible ones. So, protection, I think, has to be a loaded word. It can't be used as a 100 per cent shield against innovation, but, at the same time, it is necessary.

I know there's interest from Mark and Mary Ann to come in on this. I'm conscious of the time, so if you could keep it to about a minute each or less, then that would be great.

Thank you, Chair. What I'm surprised by with the settlement is there wasn't anything built in, because the Welsh Government knew there was serious pressure. In all authorities across the country, social care is a major issue across the UK. Two hundred and nineteen million pounds this year, and next year I think it's £604 million—where's that money coming from? You mentioned health, and I was just trying to find my notes, and I think I'm correct here that health has had £425 million this year and £415 million next year, but no increase for social care, and, as Anthony said, they sit alongside each other. What will happen is there'll be neglect, there will be lack of services, the list will grow longer and people will be waiting in hospital longer. That will have an impact on the health board. So, for me, if you said to me, 'Where is the most pressure in your authority?' It's adult social care and children's services. Everybody knows this, but there's nothing being done to address it. We all know it—£219 million this year and £600 million next year, and there was no financial support for it. I was surprised and quite shocked. I will stop there. Thank you, Chair.

Okay, thank you. That's it. Mary Ann.

I'm going to add to what Anthony said, because I agree with it. I'll pick up on this issue of protection. Rising demands, and more complicated, more complex demands, being presented to our local authorities, social services, can't be seen just as a local authority issue; we have to have more integrated services with the national health service, particularly around the ageing population. That integration ensures that protection is throughout the whole system, and there is neither a burden on the health service or a burden on our ourselves in local authorities, but it is a shared one, and that the innovation is around that integration.

Thank you. Mike. Hang on. There we are. Yes, you're good now.

Carrying on with social services, you say the social care market remains fragile. What are the risks facing local authorities in this area going into 2024-25, and how are you going to try and resolve them?

Do you want me to comment here?

Yes, you come in, Mark, and we'll probably just keep it to you, unless somebody has something very specific to add in afterwards.

Okay. Just quickly from me, we’re not in charge of the market. That’s the frankness of it. Social care is more or less being handed over to the private sector across the 22 authorities, so we're not in charge of it, and we don't know what their asks are every year. We’re having a conversation—well, no, I can't share that with you—but we're trying to reduce our costing within our partners, and that's difficult. I suppose it's the same difficulty across the 22 authorities, but the problem is—it's the same with children's services, out-of-county services—we're not in charge of it. The market isn't big enough. There's not enough service delivery out of there to cater for it. They’re running a monopoly—we've got a cartel. That's the frankness of it. Thank you, Chair.

Anthony, did you want to come in on that?

The social care sector, especially domiciliary care, remains extremely fragile, both for the workforce and for those who rely on it for care. My question is: how long are we going to leave that in the 'too difficult' box? We need to take it out of there at some point.

Thank you. There we are. Mike, do you—?

Yes. Moving off social services to the other big expenditure level: education. You've said:

'Even the councils that have protected schools in recent years say that they cannot be given the same support in the future given the scale of funding gap.'

If schools are not protected, what will that mean for the day-to-day teaching in schools?

Llinos, you talked a bit about this earlier. Do you want to just—not go over the same ground, but possibly just add a little to what you were saying earlier?

Iawn. Fel aelodau etholedig, dŷn ni hefyd yn llywodraethwyr ar ysgolion, felly mae gennym ni ddwy het yn fan yma. Felly, mi fyddwn ni yn edrych ar y cyllidebau yma fel llywodraethwyr hefyd, ac mae’r impact ar bob ysgol yn mynd i fod yn wahanol, ond dwi’n meddwl bod pob un ohonon ni wedi cael cysylltiad yn barod er mwyn edrych ar staffio. Achos fel awdurdodau lleol, mae’r mwyafrif o gyllidebau ysgolion hefyd yn staffio, a beth mae hwnna wedyn yn ei olygu ydy beth dŷn ni’n gallu ei gynnig i’r disgyblion yma yn yr ysgol, ac mae’n rhaid imi bwysleisio, mae anghenion disgyblion wedi newid yn aruthrol yn y degawd diwethaf, felly mae’n rhaid i’r ddarpariaeth fod yn wahanol. Hefyd dŷn ni’n cyflwyno cwricwlwm newydd, a dŷn ni wedi rhoi Deddf anghenion dysgu ychwanegol newydd heb arian ychwanegol, sydd yn costio lot.

Felly, mae yna lot o bwysau ar ysgolion heb doriadau, felly mae’r implications yn mynd i fod yn anffodus—efallai mwy o ran niferoedd presenoldeb—ac yn fwy heriol. Ac mae’r peth workforce yn cyfro fan yma hefyd: sut ydyn ni’n denu athrawon y dyfodol, sut ydyn ni’n denu unrhyw weithwyr i mewn i’r maes sydd yn dod o dan gorff cyhoeddus os ydyn ni ddim yn gallu rhoi’r arian i mewn a rhoi’r sicrwydd yna bod yna ansawdd bywyd iddo fo? Ond mae torri arian yn torri ar addysg, yn torri ar ein dyfodol ni, onid ydy?

Okay. Mike, do you want to move on?

Yes. I didn't declare it as an interest, but my daughter is a teacher on Ynys Môn, in Amlwch, so I'm just bringing that to your attention.

Thanks, Mike.

Now, other services, which are key, that I want to mention are environmental health and trading standards—both carry out their really important roles from which we all benefit. What concerns do you have about key services like that and building control, which are really important for keeping us safe? What concerns do you have about those coming under additional pressure?

Who wants to go first? Mark.

Thank you. If anybody else wants to come in, Chair, but just quickly, Mike, you're quite right, but what I’m trying to get through to you this morning is that all services are under pressure, but building control will be looked at, and if we decided to take money from there, it will have an impact—public protection. I’ve been a lead member on public protection previously—they play a really important role in keeping us safe within our communities and within the cities and towns we live in, but the frankness of it is, everything is being looked at. And I don’t want to touch public protection because of what they deliver, and I certainly don’t want to touch planning control, but that’s where we are. Thank you.

I'll bring Mary Ann in first and then I'll bring Llinos in, because we haven't heard from Mary Ann for a little bit, so you go first. There we are.

This is an accumulation of 13, going on 14, years of austerity, where, in order to protect services like education and social services, other services like highways have been cut to the bone. We can’t afford to lose any more staff in highways. Equally, moving beyond potholes, we are facing a real lack of investment in our infrastructure and, at some point, that is going to come back to haunt us in quite a drastic way, I believe, in some cases. Some of the bridges in my county are actually near to falling down and we have to deal with it, but in order to deal with it, we have to take money from elsewhere.

Llinos, a oedd gen ti rywbeth i'w adio at hwnna? Na, ocê, diolch yn fawr.

Mike, did you want to move, maybe, on to—that looks at capital, doesn't it, so do you want to move on to capital?

I certainly want to move on to capital. Capital funding is the same in 2024-25 as it was in 2023-24, and, before you say it, I know it was inadequate in 2023-24 as well. Two questions: are you using slippage and rescheduling in order to carry out capital programmes, but over a longer period of time? And what about the use of capital receipts to help fund the capital programme?

So, do you want to start, Anthony, and then—?

Yes, I'm happy to start. Yes, the capital situation is bleak. We are using slippage and rescheduling of capital receipts. I wish we had more, but we’ll use what we can do. Of course, the issue with the capital programme is that it’s being attacked by both sides—both from a lack of supply of capital, but also hugely rising costs, especially in construction and projects like that. So, that means that the ability for us to do things that will help achieve shared priorities for Welsh Government and local councils are much limited.

Anything to add, or is that the same—? Llinos.

With the capital funding as well, in addition—the capital receipts have already gone, so we've done it: we've sold everything, we've got rid of them and we've used the funding to remodel and move people in and we're down to one building here in Ynys Môn. So, we've already done that. But I think the important one with capital for us is our ability to invest and to get match funding for grants as well. I'm a bit concerned that we'll reach the point, as local government, where we won't be able to bid for Welsh Government grants because we haven't got the match funding to do that capital work either. So, I think that's something that we have to be extremely careful about as well.

Mark, and then I'll bring Mary Ann in.

Yes, just quickly, Llinos covered it, but we've been selling our assets and we haven't got a lot left. We mustn't forget the twenty-first century schools as well. We need a contribution to them. We're running out of assets. What we do is we sell an asset and we put it into the education provision, match funding what we have to on the percentage for twenty-first century schools, but we're running out of them, and that will be the same, I suppose, across all authorities. Some authorities have more assets than others. We've been selling our assets for a long time, and there are not a lot left. Thank you, Chair.

Mary Ann, do you have anything to add?

Like Llinos, we're using capital receipts and we will continue using them to fund and support long-term organisational change. However, it is that issue about whether we can match grants.

Moving on, on grants, the Welsh Government and the Minister have said that in order to help local authorities, making sure that they're not hampered by unnecessary bureaucracy, there will be a consolidation of certain grants into aggregate external finance. Are you happy with that?

We heard a little bit about grants earlier—I think it was from Mark and from Llinos. Do you want to comment on the consolidation of grants?

We've been asking for many years for there to be trust in us as local government, because we're also elected and we have the ability to make the right decision on behalf of our local people. So, yes, we are happy that it is, but we've got to be extremely careful that the amount of funding is not top-sliced, and also that we're able to achieve the expectations in that grant within the funding stream. So, at the moment, I'm cautious around grants, because we are still expecting clarification around the effect of the cuts on the grant. I must say that this is a bit of a red flag for me at the moment.

Mark, did you want to add—?

Yes, just quickly, as Llinos has covered this. We'll keep a close eye with regard to the red flag; I agree with that. Can I just say, with regard to the grant, that Llinos is right? We've been asking for years now that it's put into the RSG. There is some movement. For me, personally, you need to put more in and it needs to be not camouflaged—that you're giving us a penny here and you're taking a penny off us there. So, for me, more money into the RSG, but make sure we don't lose out overall.

Steve Thomas from the WLGA, when he retired, I kept his speech. He said you can't run a country on grants. He was quite right then, and a lot hasn't changed. Thank you, Chair.

When I was sat where you are sat now, I was arguing that the grants needed to be consolidated, but the absolute amount of money that was there had to be put into the system. It couldn't be, 'We'll give you 90 per cent of it'—the whole amount had to be put in there. That's something I will continue to argue about.

Local authorities have used lots of reserves in recent years, but it reaches a stage when you can't keep on using reserves. It also reaches a stage where reserves get to a level where the auditor general says, 'You haven't got enough reserves here. If you have a major problem, how are you going to fund it?' So, are you concerned that councils are now reaching the stage where their level of reserves are getting close to where the auditor general is going to give you a black mark?

There's nodding. Anthony.

This is the dilemma, I think, that other colleagues have mentioned before. On one side, we're pressured by auditors to boost our reserve levels, but on the other side people look at the bare figures and think, 'That's quite a lot of money'. Really, if we are a £250 million organisation in a fairly small council like Torfaen, the amount of reserves we've got might look quite high, but actually it would keep services running for a week. So, there's that pressure on us from both sides again about keeping them high enough to satisfy the auditors but low enough because we don't want to keep money that we could use otherwise.

I think that probably—[Interruption.] Oh, Peter Fox and reserves. Go on then, Peter. Just one, and then we'll bring it to an end.

Councils are using reserves prudently at the moment, and if there was one benefit that came out of COVID, it enabled local authorities to accumulate a few more reserves. They've been using them now the last couple of years; we see that. But I think the one thing that is still quite concerning is the disparity, the levels that are allowed. It's not unusual at the moment to still see a handful of councils across Wales with usable reserves over £200 million; one this year, actually, has had an increase of reserves. That is a significant issue when there are people like Llinos—and your own, Anthony, and Monmouthshire—who are on the minimal scale. To me, there is still something fundamentally wrong with a system that enables that disparity, and I think that needs to be looked at for the good of the long-term family of local government.

That was more of a statement than a question, but there we are.

They can comment on it if they wish.

We don't have time. I think that will be a debate for another day.

Diolch yn fawr iawn i chi. Thank you very, very much for your time. Sorry we've gone over by about 10 minutes. It was very informative. You're doing a very tough job and we do appreciate what you do. It's all about balancing very difficult decisions and I do appreciate it—and we do. I appreciate you taking time out of your busy schedules to come and talk to us about this.

We'll now break for an extended time, longer than 10 minutes. We'll break until 13:15, when we'll have the finance Minister in for the scrutiny session there. We'll go into private now. Diolch yn fawr iawn i chi i gyd.

Croeso nôl i sesiwn y prynhawn, sesiwn gyda'r Gweinidog ar sgrwtini o'r gyllideb ddrafft ar gyfer 2024-25. Rydyn ni'n croesawu'r Gweinidog yma efo'i swyddogion.

Are you able to introduce yourself and your officials, please?

I'm Rebecca Evans, Minister for Finance and Local Government, and I'll ask officials to introduce themselves.

Hello. I'm Andrew Jeffreys, director of the Welsh Treasury.

Prynhawn da. Good afternoon. I'm Emma Watkins, deputy director for budget and Government business in the Welsh Treasury.

Diolch yn fawr. Thank you for that. As normal, this is being broadcast live and you'll have the transcript afterwards to check for accuracy. We have had an apology from Rhianon Passmore. She can't be with us this afternoon. But I'd like to welcome Huw Irranca-Davies, who's stepping in. You're most welcome, and thanks for joining us. Hopefully it will be an interesting session on the budget. This is our second session on the draft budget. Obviously, we met just before Christmas. We've heard lots of evidence. We've had some interesting sessions this morning and in previous weeks.

I'd like to start with exploring ideas regarding the Office for Budget Responsibility's role, the income tax devolution, and changes to the fiscal framework, if I may. The new annex in the budget documentation setting how the block grant adjustments are feeding through into your budget is useful and is a useful addition for additional transparency. Would you consider reviewing the information that is provided by the Office for Budget Responsibility for the Welsh Government, and is there any additional information or outputs you'd consider valuable additions or alternatives to what is currently being produced?

Thank you very much for the opportunity to talk to the committee again this afternoon. That's an important question. I think we started to explore it in our last session in terms of the role of the OBR and the information we receive. Peter Fox's question just after Christmas in the Senedd was important as well. In terms of the OBR, we are satisfied with the information that is produced. Officials, I know, have a very good working relationship with the OBR, and the OBR itself has produced a working paper. It was published in October of last year. That looked at developments in devolved income tax, and did provide quite a thorough review of the kinds of trends that we're seeing across Wales and elsewhere in the UK.

We also have really good working relationships at official level with the analysts in HMRC, and again, that's really helpful. We have, alongside that, a group that includes Welsh Government officials, officials from Scotland, the Scottish Fiscal Commission, the OBR and HMRC, and they look, again, at data and analytical developments that are happening. So, I feel like the information that we get from the OBR is suitable for our needs, and the quality of it is there, and the relationships that we have are there as well. Also, I'm pleased that there is that level of deeper thinking, if you like, about the data that is provided. So, I'm satisfied with the picture at the moment, but if there are further gaps that the committee identified, we'd be happy to look at those.

What consideration have you given to expanding the role of the OBR to look at the potential of generating Welsh macroeconomic data to enable additional Welsh-specific economic data to be developed? We obviously get some of that now, but it's generally England and Wales, and, as the OBR were telling us, they effectively look at a snapshot, or what it looks like from a proportional element, rather than looking at it as Wales as a unit, if you like, or as a country, and looking at that macroeconomic data. Have you given any consideration to that sort of thing?

I might ask Andrew to reflect a bit more on that, but I think it would be the Office for National Statistics in terms of the role of amassing that data. But in terms of the OBR, the work that they do, as we talked about when Peter Fox raised it in the Senedd, looks at the UK data, and we can disaggregate for Wales, but also layer upon that some Wales-specific data in terms of the forecasting process as well. So, I think the system works well as it is, but I'll ask Andrew, perhaps, to reflect a bit more. And also those meetings that you have with Scotland involved, and with the OBR and the ONS as well.

It's really important to keep all of this under review, I think, and to look for opportunities to improve the quality of forecasting, improve the kind of things that go into the forecast that contribute to those improvements in quality. There is a fair bit of Wales-specific data that goes into informing the forecasts, particularly on the fully devolved taxes, where the OBR has a good picture of what's happening in terms of receipts for those taxes in Wales. As you've said, the core OBR approach is to work on the basis of UK or, in some cases, England and Wales determinants, and then make adjustments in light of evidence about where Wales differs from a sort of population share, perhaps, or a kind of proportionate share. That's the approach that is currently being used and I think it's working pretty well. But as you say, we need to keep that under review.

What's the sort of time lag on that data being updated, and how regularly do you get that information through? Is it on an annual basis or is it quarterly? How does that mechanism work?

It varies, because all sorts of different components go in. So, things like the labour market and the economy, you get monthly data on things like that. Population and other elements like that are different—

Things that are a bit more static, I suppose.

Yes. So, there's a whole range of different things that go into the OBR's forecasting machines. As you say, there are limited Wales-specific data sources, but we don't feel, at the moment anyway, that there are any glaring gaps that urgently need to be filled, but we need to keep that under review, and that might change, of course.

Okay. Thank you for that. That's very useful. The OBR noted in its Welsh taxes outlook report a lack of data relating to non-compliance associated with landfill disposals tax. Can you update the committee on the reasons for this and your intentions to develop the data to support the modelling of LDT forecasts?

Yes. So, the OBR revenue forecast for LDT implicitly assumes that current levels of non-compliance remain constant throughout the forecast, but I do have regular meetings with the Welsh Revenue Authority, and we, inevitably, talk about LDT and collection, and they talk about the work that they're doing to identify the main areas of risk. The main areas of tax risk for LDT are the misdescription of waste, and that's, really, where standard material is being declared at the lower rate, and then also illegally disposed of material at unauthorised waste sites. So, those are the two key areas that the WRA has identified.

But, importantly, over the last year, the WRA has now started the charging and collecting of tax in relation to unauthorised disposals, so that's new work that the WRA has been doing, and that's been important, also in terms of disincentivising that kind of behaviour for the future as well. I think that if people inclined to undertake that kind of behaviour know that enforcement is taking place and that it's identified as a key area of risk, that can drive better behaviours, if you like.

So, changing behaviour through that. You talked about risks there, so how big a risk is it that these things aren't—? If you're monitoring the risk, how red is it, I suppose, in a red, amber, green sort of—? Are we okay with it, or—? What sorts of margins of error are we looking at?

This is a notoriously difficult area to be very precise about, I guess, for obvious reasons. We don't produce a figure for an estimate of the tax gap for LDT in Wales. As you probably know, HMRC produce tax gap figures for the various UK taxes, which estimate, using all sorts of different methods, how big the gap is between what should be collected and what is actually being collected and what are the things that are driving the difference between those two things. The HMRC estimate for UK landfill tax, or England and Northern Ireland landfill tax, is about 18 per cent, and that's relatively high compared to some other taxes. So, you might work on the basis that this kind of tax is relatively risky compared to some others. The gap for something like land transaction tax or stamp duty land tax is quite a lot smaller because of the nature of the tax base. So, as the Minister says, there are things like misdescription and illegal disposal of waste, which are quite obvious ways in which you can evade the tax, and that's why the compliance work that WRA do is so important for this tax.

Forgive my ignorance, I suppose. Who checks that? Is that local authorities, or is it the WRA that goes out to check—

On the tax? Yes. The WRA work closely with Natural Resources Wales on that.

Right, okay.

And there's a kind of agreement between WRA and NRW on how that activity is undertaken. But, yes, it's the WRA's responsibility to ensure compliance with the tax.

So, is there a risk, then, if funding is being restricted or reprioritised from WRA or from NRW or local authorities, that that enforcement action, even though you want it to happen, does have a knock-on effect on income not coming in, because you're not doing the enforcement because there are not enough people on the ground? Do you understand what I'm—? It's that resourcing element.

Yes. We do consider those risks when setting the budgets for the WRA and NRW as well. Those will be amongst the considerations that we have.

But you're comfortable that it's okay at the moment.

Yes. I think that WRA would always be keen to have more funding, not least because, as well as the important role that they've got in the collection and enforcement work, actually, we ask them to do lots of thinking and exploring about the future of tax in Wales as well. So, some of the things that we're asking them to think about, really, are a tourism tax, for example, how would you go about collecting that in the most efficient way, and what might their role be in that space in future. They are experts on collecting tax and have really proven themselves since their establishment, so we do ask them to do some work that goes beyond their core responsibilities as well.

They're maintaining the revenue from the tax that the existing—. I mean, that's the challenge for WRA is balancing those new things we want them to do with ensuring that we continue to have the right kind of compliance effort on the existing taxes. And, yes, I think that's clearly a challenge when budgets are tighter, how do you balance these kind of competing priorities. But we're confident WRA have got the resources they need to do that work.

Okay. We were in the tax conference before Christmas as well. It was quite interesting to be in a room full of people who are interested in tax. It was great to be part of that for a short time, anyway. And we were talking about all different ideas and different things around taxation.

Obviously, Scotland has fully devolved tax income powers that they're able to use. That involves opportunities and it involves some threats as well. But, in terms of changing thresholds and being able to really nuance what we do here, and be able to use our tax-raising powers to good effect—but, within that, protect the most vulnerable and the poorest in society, so having that flexibility—have you given any more thought, or is any more work being carried out—? I know you've talked about some of the work that you've looked at cross-border and that sort of thing before now. Where's your thinking on that level now and what are your current, maybe, asks of a UK Government, or current thinking, about how we develop it further?

I'll be the first to say the tax conference is always a personal highlight of my year as well, and one of the reasons why I do enjoy it is because it gives us that opportunity to share what we're doing here in Wales with others. So, we had people there from Scotland and elsewhere, and I think that that's really helpful, because so often we look to see what other countries are doing that we forget how much interest people have in what we're doing. And I think council tax reform was the star of the show at the tax conference this year, so it just shows that some of the innovations that we're doing are of real interest elsewhere.

But, in terms of Scotland and their particular approach in respect of rates of income tax, we are interested in what they're doing in Scotland, and we do need to consider what the implications might be for us here in Wales—and I'll probably ask Andrew to say a bit more—but there are certain risks, I think, that would come with that, if we were to have a similar model to Scotland.

So, the Scottish Fiscal Commission has estimated the combined impact of its proposed new advanced rate, alongside a 1p increase on the top rate, will add an additional £82 million in 2024-25, after taking into account behavioural effects. But behavioural effects are really interesting, because they expect that to have a £118 million impact on what would've been collected. That impact, I think, is quite significant, and bearing in mind as well that our border is different to Scotland's—so, we have many more people living on that border between Wales and England—you could see those behavioural effects magnified here in Wales, were we to have a similar system and take similar choices. So, I think that there's a lot to be learned, and I think that, certainly, we need to think more about it. The system that we have at the moment here in Wales is new, it's still bedding in, but I think it's proven itself to be advantageous, at least so far, for us. I don't know if you want to expand on that, Andrew.

Yes. Just on your point, Minister, about the difference between the static costing of the Scottish income tax measures and the post-behavioural effects costing—. On the 48p top rate that the Scottish Government have introduced, about 85 per cent of the yield from that is lost by behavioural effects in the first year, and that rises to 90 per cent by the end of the forecast period. So, that means that 90 per cent of the yield that would have been received had there been no behavioural effects has been lost, and that basically means—. You can't really disaggregate very easily between behavioural effects that are migration—i.e. people leaving Scotland—or whether it's people choosing to work less because they're getting less, so keeping less of the rewards of their labour. But a lot of the additional tax yield from that measure is basically accruing in other parts of the UK. That's what the modelling is telling you, that people are going to be motivated to go and live somewhere else because of that rate of tax and, because that's so easy to do within the UK, probably quite a lot of people are going to make that choice. So, I think it's a very interesting illustration of some of the constraints, I suppose, on your freedom to set tax rates within a UK devolved tax system. You can obviously choose different rates, but you won't necessarily get anything like the full benefit of those higher rates, if that's what you're choosing to implement. So, yes, I think it's a good illustration of some of the risks, I suppose, of full devolution.

I suppose we're not seeing so much of the behavioural, or people moving out of the UK, because of thresholds being held. So, that fiscal drag is dragging more and more people into the higher rate and the top rate. So, I suppose there are pros and cons to everything, aren't there? So, it's trying to work out what would be best for Wales, and whether or not—. That's where these studies and understanding how it all works and can you balance out the opportunity and the risks—. Because, at the end of the day, we're struggling financially at the moment, because the whole fiscal funding model isn't fair, from the point of Wales, and the Barnett formula is currently not working as well as it should, and then we see the impacts of HS2 and those sorts of elements come into play as well.

Before we move on from income tax, though, we were talking about the time lag between income tax outturns, receipts unknown, and the block grant adjustments being made. Would there be any benefit if the block grant adjustment were updated annually, alongside the draft budget?

I think that would further complicate an already complicated system. But, again, perhaps Andrew will have some thoughts on that. But I did want to mention the longitudinal data study, which I've mentioned to committee before, which is something that we're really interested in, in terms of impacts of different rates of income tax in different areas and so on. We should be getting an interim report, or an early report, very shortly.

Yes.

So, when we are able to share more with the committee, we'd be very keen to do that.

Excellent.

Just very quickly on that point, I think we're learning as we go along now about the kinds of behavioural effects of having different tax rates in different parts of the UK, and as that picture develops, hopefully we'll be able to draw some firmer conclusions about the implications.

Just on the point about whether we should be doing more frequent reconciliations, as the Minister said, it's already complicated and there's a risk of just moving up and down as things change. I guess the real benefit would be if HMRC could close the books a bit earlier on the final outturn, but there are various factors there, including the amount of time people have to do self-assessment returns that limit how quickly HMRC can close the books on the outturn. And I think probably we need a bit more time to work out whether more frequent reconciliations would be—. You can see a scenario where it would be better to do that if that means you're making smaller changes. The risk with the lag in the reconciliations is if it turns out to be quite big in the end, and that can be—. Big on the upside is good; obviously, big on the downside, much harder to manage. I think that's one of the things we'll want to look at—

And it's that de-risking then, isn't it, of—? Because you smooth out those adjustments.

Exactly. If we see over a period of time that, actually, if we'd have made adjustments based on how the picture looked at that time, the adjustment at the end would have been smaller, I think maybe that would be a good reason for doing interim adjustments along the way, but, yes, that's something we'll look at as we go along.

Okay. One thing I just wanted to check, and just check my understanding, really. With the Welsh rates of income tax, the behavioural aspect of people being—. Say we put the Welsh rates of income tax up by 1p, the cumulative impact on an individual would only be on that band, but at the 10p, so it wouldn't be on the whole band itself; it would just be on the cumulative bit that goes to Welsh Treasury. Is that right?

Let me just play it back and see if it's what you're asking.

Yes, try and explain it back to me, because I'm not sure if I've explained it well enough.

So, if you're talking about the standard rates, 10p of that 20p is the Welsh rate of income tax, so the revenue from that comes to the Welsh Government, and obviously the revenue from the other 10p goes to the UK Government. If we put ours up to 11p, we'd get 11p on all income in that—

In that bracket.

In that bracket.

So, effectively, it's not 1p on the whole bracket; it's only on the 10p.

You would pay 21p.

Yes, but the 1p wouldn't—. What I'm driving at is the impact would be less. You wouldn't see it as much in your pay packet. You wouldn't see the knock-on in your pay packet as much because it's only 1p of that band.

[Inaudible.]

Yes, but the cumulative effect—. It's not cumulating across. Maybe I'm not explaining myself very well. Let's move on just in case I confuse myself even more, but, yes, I'll think about it for next time and I'll come back to you with a question on that.

What's the timescale for any changes to the fiscal framework that you're trying to seek, such as reviewing and linking limits on the size of the Wales reserve and borrowing increases over time? So, what sort of timescale are we looking at from that point of view?

So, timescale wise, UK Government could do this almost instantly if it was inclined to do so, and that's one of the frustrating things, because what we're asking for, in terms of the borrowing powers and for the Wales reserve to be indexed, for example, these things aren't big deals for Treasury at all; they've already agreed them through the review of the Scottish fiscal framework for Scotland, and there is nothing different here as to why those things shouldn't be appropriate for us here in Wales. It doesn't require a wholesale look at the fiscal framework, a review that could take 18 months. This is something that the UK Government could do today if it wanted to, and it would be a great help to us and no odds at all to the UK Government. So, we continue to make that case. We’ll be making it again next week to the Chief Secretary to the Treasury, when we have our Finance: Interministerial Standing Committee meeting, in Scotland this time, and I’ve got a bilateral with the new CST as well, so it will be a chance to talk about fiscal flexibilities. But timescale wise, there’s no reason that that shouldn’t be happening quickly at all. It’s just will.

Just a brief supplementary, and I can ask the naive questions, because I’m not normally on the Finance Committee. But am I right in extrapolating from what you’re saying that, on your current calculations, even though we have the powers to adjust, within a certain extent, the tax rates, particularly the standard tax rates, there isn’t a conceivable scenario under the current tax burden that’s on standard taxpayers in Wales, and in the absence of higher rate earners, plus when faced with the pressures that we currently have in the economy generally—? I’m extrapolating from what you’re saying that there isn’t—. Plus the possible unintended consequences of shifts with people saying, 'Well, I’ll remove myself from that Welsh tax burden by skipping across the border slightly', and so on—. Anyway, with all of these scenarios, there’s no conceivable way you can see at the moment, I’m extrapolating, that Welsh Government would consider using the tax-varying powers that we have at this moment. Am I correct?

Well, we do consider it genuinely afresh every single year as part of our budget-setting process. We are mindful of the commitment that we made in the manifesto not to raise Welsh rates of income tax for as long as the economic impacts of Brexit [correction: of the COVID pandemic] were being felt, and we still feel that, of course. At that time we hadn’t imagined the cost-of-living crisis or the pandemic, and so on. Okay, I’m mixing the manifestos now, but you know where I am on that. I was just doing the maths in my head. So, that has been a manifesto commitment in any case, which we’re very mindful of. But that said, we do consider things afresh, and you’ll remember that last year the First Minister was saying that, had the UK Government made changes in respect of income tax at that point, potentially to reduce income tax, then the Welsh Government could have taken a decision to maintain the rates at the same level here in Wales. So, essentially, it would have meant increasing it by a rate, but people wouldn’t have felt any difference from the period previously. So, we do consider it afresh every year, but this year, again, we're very mindful of the fact that people are still experiencing the cost-of-living crisis and they’ve got the highest tax burden since after the second world war. You can’t just think of Welsh rates of income tax in isolation from people’s overall tax liabilities.

Chair, I wonder if I could just briefly follow up. Let me turn that question just a little bit, then. If I take you away from manifesto commitments entirely—and it may be of help to you, Chair, in where you were going as well with this question, I think, which is—is there a scenario currently, or a foreseeable one, where adjustments, using the Welsh powers, to the tax take would be of benefit to the Welsh exchequer, the Finance Minister, in settling budgets and the challenges that we're under, without undue burdens, disproportionate burdens, landing on the Welsh taxpayer? Have you worked those scenarios, and is that impossible at the moment, to foresee that that is a scenario? As opposed to adjusting down and relieving tax burdens, but actually putting more money into the—

The Scottish model.

Yes. Have you worked those scenarios? Ignore manifesto commitments for a moment. What does it look like? Does it just not feel workable?

Yes, we do have a ready reckoner available, so that you can look at the impact of raising Welsh rates of income tax or lowering Welsh rates of income tax. We do have all of that available. But to make any real difference it has to be to the basic rate, because we have relatively few people in the higher and additional rates. So, there's often a lot of challenge, 'Well, why don't you raise the highest rate?' as if we were going to raise huge amounts of money, but actually that would only be £4 million or £5 million for that very highest additional rate.

It's pennies in the grand scheme of things.

Yes. To do anything meaningful it would be the basic rate.

But it's higher now that the thresholds have been frozen for a while, so more and more people are going into that. So, it's increasing some of that.

It's £5 million. According to the ready reckoner we published in December, it's £5 million for a penny on the top rate, which is up a bit from the last time around, but it's still relatively modest on a £20 billion-odd budget. Obviously, you could increase the top rate by a lot more than that, and in theory generate more revenues, but then you get into the kinds of behavioural effects, you know, if you're earning a lot and you're paying an extra 5p on every pound you earn in Wales—

And you're more mobile.

Yes, exactly. You know, those behavioural effects then loom very large when you're thinking about the—

But the behavioural effect is built into the calculator, though, isn't it?

Yes, the ready reckoner has—. Interestingly, just going back to the—. So, the static effect of a 1p increase on the top rate in Wales is £10 million, but after behavioural effects, it's £5 million.

What does the ready reckoner say on 1p on the basic rate?

It's about £280 million [correction: £274 million].

It's £280 million.

Something like that. Behavioural effects are a lot more modest on the standard rate because the maximum impact is not very large on each taxpayer, so it doesn't have the same scale of impact.

But to pick up the Chair's question, if that were to be done, of course, knowing what we currently know, that many people who are entering poverty status are actually in work and are within that lower tax band, we'd be asking them to contribute to digging us out of a financial black hole, at the worst time for them. Sorry, it's just—.

And that takes us back to the Chair's points, then, about looking at the Scottish model. So, if you do have a larger range of bands, then you can offer relative protection to people on the lower bands. So, there are more policy choices that you could make in that kind of scenario, whilst also taking on board the financial risk to the budget.

And it becomes a bit more progressive, then, rather than just the three bands. Interesting. There we are. Well, Mike has been waiting patiently on screen and I'll go over to Mike for some questions now. Diolch.

Diolch, Cadeirydd. Also, of course, those people paying the top rate will often, or mostly, have more than one property and therefore they'd be able to choose which one of those properties they were going to spend most of the year in.

But going on to the questions I'm meant to ask: you have made comparisons of allocations in this draft budget to the 2023-24 restated final budget in published tables, and also at times indicative budgets for 2024-25, and also departmental allocations after your October financial statement. Wouldn't it be easier if we only had one set of figures to compare against?

Yes. It would definitely be easier, but there are very good reasons why we've done things in this way in this year, and that's because the figures are linked to the statement that I made in October this year, when we talked about the work that Welsh Government had done to reprioritise budgets in year to meet that £900 million pressure. But there hasn't been fiscal opportunity to formalise that, so that will come in the second supplementary budget. So, that's why we have some of those figures, and those figures, really, from October, are the most meaningful comparison that we can make. We have published a table, table 11A, which has provided this more meaningful comparison at main expenditure group level, and we've used this as the basis on which we drew comparisons within the narrative for the budget. That said, we do routinely publish the normal comparison between the next financial year and the current financial year, and those are in those year-on-year tables that are in the budget. Again, as is routinely the case, we've shown the indicative plans for next year compared to the final budget for 2023-24. So, we've tried to provide something meaningful, but then also something that sticks with the tradition of the way in which we've provided things.

Okay. Thank you very much for explaining that. You've assessed that your budget is worth £1.3 billion less in real terms. Nobody has disagreed with you—no-one in Westminster, no-one in the Senedd has disagreed with that—so I think we can assume that those figures are on and about right. The question I've got is: you've provided additional money for health, which is incredibly popular and expected, but there are lots of other areas that have been protected. We know, from discussions with David Phillips at one of our scrutiny meetings, that every journey taken by rail is subsidised by £15. We also know that enterprise zones are untouchable. We know that finding money, despite capital being short, to help leisure developments hasn't been difficult. How do you decide which areas are untouchable outside health?

Thank you for that question. It is good to see that we haven't had a great deal of challenge in terms of the work that we've done to demonstrate that £1.3 billion figure. I know we talked about that at our last Finance Committee session as well. So, that's good. Another thing that I think is good is that we haven't had a great deal of disagreement about the overall strategic approach of the budget in terms of protecting front-line services, reprioritising towards health, protecting the local government settlement and so on. So, although, throughout the budget scrutiny process, understandably, you have, 'Well, can't you just find a little bit more money for x, y, z?', we haven't actually had disagreements about the overall strategic approach, and, again, that's really positive.

In terms of areas that are protected, this comes through as part of the work that I do with other Ministers. We have a series of budget bilateral meetings as the budget process continues. Part of that is looking at the principles on which we've based our budget, so protecting front-line public services and then trying to protect people who are most badly impacted by the cost-of-living crisis, trying to protect jobs wherever possible and then working in partnership with our stakeholders and others as well. So, we try to take decisions based on that set of principles, but, inevitably, the room for manoeuvre is relatively small, in the sense that there are so many statutory commitments that we have, there are things that are legally binding that we have to deliver as well. So, what you see, actually, in terms of the changes that we've made to the budget, reflect only around 5 per cent of the overall budget. There is relatively little room to move, once you consider your big chunks of money going to public services and all the other legal responsibilities that you have. That's why the decisions that we do take, when reducing budgets, are so hard, because they are things that colleagues are very passionate about, so that has been tough. But I guess it's the language of priorities, which is why the debates we have in the Senedd and why these scrutinies are so important.

I agree with you, and I hold different views to the vast majority of people in the Senedd. I've already incurred the wrath of the farming unions. I'm sure I'm going to incur the wrath of rail supporters by saying: is £15 subsidy on average per journey per passenger a good use of resources?

I think there are particular challenges around rail in the sense that some of the costs are fixed costs and the choices that you have to reduce those costs are very, very limited, and also the impact of the pandemic, which is still being seen. So, the figures now have increased to the point at which they were—for patronage of rail—before the pandemic, but we've lost out on three years of expected growth, so that's where the pressures still remain. And, of course, we've got the £1 billion transformation programme in rail as well. Lots of people will say that our support for rail is very welcome. For many people, it's their primary mode of transport and it's important that we do have as much connectivity as we can across Wales, but I want to just give the respect where it's due to Mike, because he does genuinely engage with those really tricky decisions and discussions about, 'So, you want more money for x, what do you cut?' To be fair to Mike, he has always engaged fully with that, which is really welcome.

I think Huw would like to come in on this. I'll bring you back in after, Mike.

Yes. Mike, I don't know if this will help with your line of questioning as well, but we were in the debate yesterday on apprenticeships, and it's something that we all feel very passionately about. One of the challenges in that debate was is there sufficient information out there. If Mike wanted to put forward a proposal saying, 'Let's reallocate some money to buses, for example, and we need x amount to do it, and in that case we'll take it from, say, the train budget, and that might mean an impact on the Ebbw Vale works or whatever'—I don't know—but similarly with apprenticeships. What's your response to the argument from backbenchers that there isn't enough detail for either an individual budget proposal or, actually, a complete alternative budget proposal? What would your argument be, and has there been a case where, here in the Senedd or the Assembly before, an alternative budget has been put forward?

So, I think the Welsh Conservatives put forward an alternative budget—and Peter will remind me if I'm wrong—I think it was around 2012.

I think it was, yes. It was perhaps not a good idea.

Oh, was it? [Laughter.] It was a while ago, but—. So, no, since then, it generally doesn't happen. But I would just say in our defence, really, that the amount of detail that we publish is huge, and bearing in mind as well, when we receive our budget settlement, we basically have around three and a half weeks to formulate the entire budget and then also to produce the significant amount of documentation alongside it—bilingually, so you could argue that would take about a week to formalise as well; so, it's important that we do all of that—. So, the timescales are very small, and, within that, you've got the chief economist's report, which is really comprehensive, you've got all the budget expenditure line tables, you've got the tax forward-look plans, you've got the distributional analysis of the budget and you've got, of course, the narrative documents and all the BEL tables. So, we do produce an awful lot of information, and we're always open to producing more, but, that said, just the amount of time—I think that you have to be realistic about what's possible.

I'll bring Peter in as well.

I think you've just explained very well why it's really hard for opposition groups to put an alternative budget together. I used to challenge my opposition to do it, and they couldn't do it, because I didn't give them access to all of the budget lines and all the staff to analyse them and to understand the implications of a minor cut in one area on another, and that's why you just cannot do an alternative budget, as much as you would like to.

Yes, is there a—? To be able to answer the challenge, because you say to us all the time, 'What would you cut?', and we rehearse the argument over and over and over, and it probably doesn't get us very far, would there be a method of getting an office for Senedd budget, or whatever you want to call it, that would pull through your real-time data that you look at? Because you're able to look at, I'm assuming, up-to-date figures, so you know where every budget line is within a week or a month or—. Correct me if I'm wrong, but you know, every Minister will know exactly where their spending is and you'll know what the income is and what the spending is per line in their budget up to the time you set the budget, so you'll know if you've got an underspend, if you've got an overspend—you'll know all that, that figure. That's the sort of stuff that we don't see. Is there an argument to be made that says we should have a central resource that would be able to furnish opposition and backbenchers with that data and that expertise to be able to help to have a better dialogue around budget setting?

So, I think what you're describing is the kind of in-year financial management, rather than how we go about setting budgets.

But it builds up, doesn't it? So, if you're seeing that, you'd see how things are performing, you'd see how policies are performing, to be able to forecast, to be able to see, 'Is this going in the right direction?', the same as you'd do on a daily basis and your staff do. I know the budget is a set point in time and looking forward, but you need to build up that picture beforehand to be able to actually set a budget, going forward, and that's where I think the frustration comes for maybe backbenchers and opposition in understanding the mechanics of what the impact of, 'Well, if we cut that bit out of that bit', what it would mean, and whether or not there is an argument to say that we should have a central position, or a budget office, or part of the Senedd research team or something, that allows access to that sort of real-time data.

If I could just perhaps come in on this, there are two different things here, aren't there? There's information and what information do Senedd Members need or want to see to help them do their important work, and then there's capacity to analyse that information and provide useful insights for Senedd Members on what is that telling you, what can you do with this information to generate alternative spending plans or ask questions about how things might be different. So, on the budget for future years, we provide an enormous amount of information and I think that part of what you're getting at is that maybe you're looking for more capacity to analyse that information to help so that Members, in their budget scrutiny—. But I guess that's a matter for the Senedd and the Commission in terms of—. Because the Minister has officials who work with the data and provide insights and analysis that help Ministers make decisions.

I would say as well, though, that the position changes all the time—like, all day, every day, the position is changing. So, I have meetings, monthly meetings particularly, to look at returns that we get from colleagues across Government in terms of pressures that they're facing within their own portfolio areas and where underspends are emerging, and that helps, then, manage the overall position across the financial year. So, what you see at one moment is just a snapshot; things could change dramatically by the next day.

Huw, did you want to come in?

Yes. I think there is an alternative way forward, but it does, I suspect—. We're slightly limited at the moment. I think that this is the role of committees. Committees could look at it. Individual backbenchers on a committee, like myself on the climate change committee, could take a point of disagreement with the Minister and say, 'Actually, I think your spending on flood defence is inappropriate', and then speak to my clerks and say, 'Within what we know, within what's publicly available, where could we shave something off within the climate change budget and put a suggestion forward as whatever?' I'm not sure it needs immense resource, but it is—. It's a bit like you, Minister—whenever you make a decision, there are consequences for other budget lines, when you've agreed it collectively. Similarly, for me, as a backbencher, if I say, 'I want more in buses', I'm going to have to say to you, 'And I think the place this could come from would be here and it'll cost that amount and, okay, that may mean'—I wouldn't say this, by the way—'the Maesteg line spending will have to be cut.' Oh crikey, no, we wouldn't do that, no. Sorry.

On the same point, I know what Peredur is asking for. It's a bit like what you'll find in local government—you'll have quarterly budget monitoring reports that are open to the public and challengeable. We know they're out of date, but you've got this regular—. It's to see how you are managing to meet your management plans, your whatever they're called internally. I suppose having access to those as a committee to see how are we on track in delivering against these initiatives we've put down in a budget—. If I were sitting on your side of things in the Government, I might not want to demonstrate that, because that opens up a political barrage all the way through the year. [Laughter.] So, I can see both sides.

But is it finding something—a halfway house within that—to help with that? Sorry, Mike, have you—?

I've got two more threads to the next questions, but I'll just make a comment that, of course, part of the cost of Network Rail is the number of people that they move at the end of the day by taxi because the Heart of Wales line isn't running and people are getting a taxi from Swansea railway station to Llandrindod Wells on the Heart of Wales line.

A very simple question here: your budget documentation states that a full update on capital mapping will be provided with the final budget. Will that just show rescheduling of the capital programme?

So, the mapping relates to allocations against the infrastructure finance plan investment areas, and that sits under the Wales infrastructure investment strategy. All this will do really, in terms of impact, will be in relation to the financial transactions capital that has been allocated, because there are no significant changes to our capital plans, partly because there's no additional capital to allocate. There have been a couple of small reductions where we've reduced budgets that are not going to be spent within the period, as anticipated. So, we would aim then to ask the UK Government for a capital to revenue switch in that space. But the only new funding will be in relation to financial transactions capital. I did announce £41 million [correction: £31.8 million] of financial transactions at the draft budget, but I expect to announce some more, as we continue to work through those plans, at the final budget.

And finally from me, on the future generations commissioner, who came in to see us this morning, what difference has the Well-being of Future Generations (Wales) Act 2015 made to decisions made by the Welsh Government when formulating its budget? How is this evidenced in the budget? And the future generations commissioner has told us that there's little to no evidence that the Welsh Government has been able to articulate the impact that the budget will have on public bodies' ability to deliver their well-being objectives.

I'm grateful for that question. I did have the opportunity to watch the session this morning before I went into the local government committee, and I was pleased to see the future generations commissioner recognising the good relationship that he and his office are establishing with the Welsh Government, and particularly the way in which we aim to engage openly and constructively. Something that I think is really important is the work that his office does alongside others on our budget improvement and impact advisory group. That supports us, really, in trying to continue to improve the way in which we undertake our budget work. And they've had a particular interest, as a group, in prevention. So, we're taking seriously the work that's happening there.

But, in terms of the future generations Act and how it's influencing what we're doing, I think you can see all of the ways of working. So, prevention is always difficult when you've got a challenging settlement, but actually the fact that we have prioritised those core front-line public services is an act of prevention, if you like, in itself, because those services, many of them are preventative in terms of preventing harms from becoming even greater, and if we hadn't supported the health service and local government in that way, you would have known about it in terms of the impact in future years as well.

And, again, in terms of integration, we're really working hard to look at the integrated ways in which our choices are made. So, that kind of cumulative impact on people. We've agreed, as I saw the future generations commissioner welcoming, to review our strategic integrated impact assessment during the next year, which I think will be important. And, again, that will be about how do we embed further the future generations Act.

But I think the fact that we have prioritised those particular front-line services in itself will allow them to do the important work of delivering the Act, which should be at the heart of everything that they do. So, lots of the decisions that they take won't necessarily be funding related, they'll just be ways of working, they'll be ways in which they identify priorities, and so on. So, funding is part of it, but certainly not all of it.

Mike, are you—? Is that it?

Yes.

You listened to the session with the future generations commissioner earlier. So, that is a strong commitment from you to work with him on doing that.

Absolutely.

What were your thoughts on the matrix that he was talking about, and how could that work for Government—Government departments, Government in general and then other public bodies?

I think that's something that I'll ask my officials who particularly deal with the budget improvement side of the work and, obviously, our budget improvement plan as well, perhaps to sit down further and discuss that with the future generations commissioner and his team, because we're always interested in different ways of making decisions and different ways of evidencing the impact of those decisions as well.

Because you'll have heard him talk—. Sorry, Emma, do you want to come in on that? Sorry.

Yes, sorry, just to build on that. I can't recall if the Minister has mentioned it before, but we are looking to review our strategic integrated impact assessment this year, 2024, and our work is literally just being shaped at the moment. We would very much want to talk both through the budget improvement and impact advisory group, but also directly to the future generations commissioner about how some of the stuff he's talked about around the matrix can be reflected within that review. We do reflect the well-being of future generations Act in the integrated impact assessment, and our budget improvement plan also has the ways of working, whilst not explicitly referenced upfront, but within the actions within it. But the whole purpose of the review is to continue that dialogue, and we have a good dialogue with the commissioner, with his team, on a bilateral basis as well as through the group as well, so we're definitely open to having that conversation, as the Minister referenced there.

In that discussion this morning, we were talking about how Government departments—if one does one thing, what the impact is. And this is obviously where we're talking about this. We were then in the session with the NHS and social services, and saying that giving a welcome budget to the NHS and giving funding to the NHS, but not necessarily a similar uplift to social services, is slightly counter-productive, because if you can't get people out of hospitals into a social care setting, then you're creating more pressure in the NHS. And you'll have to keep putting money into that, rather than looking at it across the whole area, and we were talking about primary care as well. Is that something—? I know it was something that Peter was going to ask later as well, but it's something—. It's that joined-up thinking. But how do you do it—? I know you do it across Cabinet, but how do you embed that across public services, across local government, social services and the NHS and beyond that? That one, in particular, probably works quite well, because people see and understand the impact that funding one, but not the other can cause. So, it's your thoughts really on how you can develop that. The way that you set budgets and the way that you fund things, how does that help the health Minister and the Minister in charge of social services, and yourself, as local government Minister, to actually integrate that together?

I think that health or the NHS and social care, through the local government settlement, is an interesting one. So, in this financial year, local government saw a greater uplift than health saw, whereas in the next financial year, health will see a greater uplift than local government. So, I think that they don't always get the same increase every year. But local government, this year and last year, have had significantly good settlements. Of course, inflation has had something to say about that, but, otherwise, they would have been very good settlements, and those have both been baselined into the settlement. So, I don't think that you can always compare just one year, if you like, and expect the same.

You're right that across Government, when we're taking decisions, we do have that work, the cumulative impact assessment, and particularly so at times of reducing budgets. So, both in terms of the in-year exercise and setting the budgets for next year, when we were looking at cuts, part of my bilateral meetings with colleagues was asking them explicitly, 'So, you're proposing to take this action, what impact is that going to have on others who would access the same services?' Mental health, for example, that's something that spans more than one portfolio area, so we had those particular discussions as well.

I think there is a good forum where we can have these kinds of discussions, and that's the partnership council. I think that that is one particularly good place where you get leaders from across public services to discuss these kinds of big challenges that we're all facing, and doing so in a way that then has those conversations about, 'We're doing this in our part of the public sector, what will the impacts be over there?' So, those discussions do take place, and certainly with Ministers. So, the health Minister will be talking to local government directly about the pressures in social services, so that does happen.

I'll come to Peter.

You're coming to me anyway. Just to expand on that a bit, because local government colleagues were very welcoming of the 3.1 per cent, even though they recognise it was nowhere near what they needed to cover their pressures. I think it gives about £170 million of additionality towards circa £600 million-worth of pressures, and the anxiety certainly we picked up from ADSS was that the social care bill alone is around £260 million across the local government family, and the 3.1 per cent doesn't enable them to address that fundamental part of the health picture, if you like. Even the federation, I think, were in agreement that those elements, even though social care sits in local government, should be looked at as a whole, in recognising that if some of that investment had been put into social care, that would have helped to unblock the system, because a bed is three times as expensive in a hospital as it is in a social care setting. So, I got a feeling of dismay that there was good news for health, but it didn't pick up the full picture, which included social care. I think that captured—

Yes. That was the message that we were receiving.

Yes. And it was a really consistent message through most of our stakeholders today, I think. Anyway, that wasn't what I was supposed to ask you, but I think it's important that you know—you'd probably already heard it.

The other thing, I think, from the future generations commissioner—and there's good work going on in your commitments as well—is that he pointed out, 'How do we know if enough consideration has been given to the effects on other bodies to deliver their requirements against the well-being of future generations Act, because of the decisions you've made here?' So, it might satisfy enough here, but how much consideration has been given to the impacts of your decisions on other bodies to deliver their expectations in that regard? That wasn't clearly evident through the budget process at the moment, so that's probably another element worth considering when you're thinking about how you reform the engagement. I think it's fair to catch that point as well.

Yes.

On to the bit I was going to ask you. When we look at the budget narrative, it says that you've had to make some incredibly difficult decisions—and I can see that—and to refocus your spending plans on those public services that matter most to people. Could you explain what sort of engagement you undertook to come to those conclusions?

Yes. We undertake a great deal of engagement right throughout the year, actually, in terms of our budgets. So, almost as soon as we've all voted one way or the other in the Senedd and as soon as we're able to pass a budget through the Senedd, almost immediately then, the process starts for the next financial year, and that does involve a huge range of engagement. So, I have a series of different round-tables. I have a round-table with all of the statutory commissioners, for example; I have a meeting with the third sector to hear from them; and I meet with representatives of the unions to hear their perspective of workforce concerns. So, there is a whole range of different things that happen there. I also discuss the budget then, for example, at the finance sub-committee, at the partnership council for Wales, and at all of the kind of set-piece meetings that I have throughout the year as well. So, there's constant engagement with those stakeholders.

We also have our budget improvement plan, which sets out ways in which we're going to try to keep on engaging, and we try to engage with different audiences as well. So, we've tried in the past, for example, to engage with students; we've done sessions with children in schools to try and broaden the engagement there. Also, visits are really helpful too, so across the summer, I spent time visiting local authorities, and as part of the budget process, I would sit down and listen to each leader talking about pressures locally and opportunities locally, but then we'd always go out and see some services and get to speak to people delivering on the front line, to hear about the pressures there. So, lots of engagement goes on right throughout the financial year to understand pressures, understand the aspirations of people in communities, and so on. And that really helps, certainly in terms of my role, that kind of strategic approach to the budget.

But then, all the way through the year and especially so around budget time, individual Ministers will be meeting with their stakeholders. So, what they're hearing through their stakeholders, what they're hearing in their meetings, their subject, portfolio meetings, will be influencing them in terms of their priorities when setting their own budget at MEG level. So, all of that happens throughout the year.

I think, engagement wise, we are good; I haven't had any complaints that we're not engaging widely enough. Actually, we're supported by the work that this committee does, so that work that we do, having that debate in the Senedd, I think, ahead of the summer, is always really, really useful, because I know that you engage very widely as well.

Recognising all of that significant engagement, what assessment have you made of the different inflationary pressures on the range of public delivery partners? I know we've heard from childcare and social service providers that are impacted massively by the real living wage, and other organisations that contract services where charges are often directly linked to inflation. So, there's a lot of evidence to show services and organisations outside of the voluntary organisations—everybody—are feeling these things. What sort of assessment has the Government had to make—you've had to discount some of that, I suppose—to make your own decisions?

It's important that we have evidence as part of that engagement work. Through the budget process, we ask local government, health and others to provide us with significant information that sets out the impact they believe that inflation will have on the pressures and on the budget. For example, WLGA identified a number of areas impacted by inflation, but pay was the most significant of those. Overall, they estimate that pay inflation accounts for 38 per cent of their forecast pressure, non-pay inflation 17 per cent, and there's a similar situation in the NHS. Again, that's where you're seeing pay inflation being very, very significant.

Other areas outside of pay that are very significant within the NHS in terms of inflation relate to prescribing and medicines. The original NHS England forecast inflation for medicines in 2023-24 was 1.3 per cent, but the actual inflation was 11.4 per cent. Given that we spend over £1 billion on medicines in the NHS, you can see that that would have a big impact. So, that's one particular area, and, of course, we've seen earlier in the year the impact of energy prices on the NHS, as well. So, inflation is definitely having a big impact on those areas.

Would some of those observations you've made influence some of the decisions you made when you put the budget together as you took some of those points on board? Some people might think that you haven't considered them enough, but can we take reassurance that those things do feed into your decision making?

Absolutely. That's where we have those meetings, particularly with the WLGA, who set out their list of pressures, and then our local government finance officials will test those pressures with local government, make sure that there isn't any double counting, make sure that we all understand the figures in the same way. That's always really useful. We absolutely take that into account. And then the work that, through the health Minister, is done at health board level to identify those pressures is useful as well. Our finance officials then will test those figures with the health officials, and so on. So, lots of information is gathered, but it is tested quite robustly. Maybe, Andrew, did you want to say a bit more on that?

Maybe this is a very obvious point, but, as the Minister said, pay has been identified as a key area of pressure, and together, local government and the NHS represent 90 per cent of employment in the public sector, and those are the areas where we've concentrated the available funding. But that's meant some other areas where there have been similar pay pressures have not had that kind of increase in their budget, because you just can't. There's just not enough money to cover all of those pressures across the board.

I see that. A couple more questions from me, Chair. I just wondered how you'd respond to the comments from witnesses that this budget sees a shift from preventative spend into acute. How do you track progression to demonstrate your budget is becoming more focused towards primary prevention?

As I mentioned earlier, the actual change in our budget, as compared with our original plans, only represents a shift of 5 per cent of our £23 billion annual budget. So, just to make that clear, really, in terms of the suggestions of shifting focus. I just don't think we can get away from the fact that when you're seeing such extreme pressures just to keep the show on the road, inevitably there are going to be things that you can't do as much of, and those have been part of the tough choices. The fact that we have protected the NHS and local government as far as we're able to is a preventative action in itself, in the sense that the people who are best served by those services—. Education, for example, is probably one of the most preventative things that you can do, to provide children and young people with a good education, but then there's also housing, social services. All of those things provided by local government have important preventative elements to them, as well.

One of the key things I think we heard today was the lack of being able to set medium-term financial plans because of not having figures for three years, which is counter-productive to a preventative agenda. It will become clear, I'm sure, but, whilst the extra support to health has been very much welcomed, and the input of money, is that a recurring support? Does that go into their base funding, or is it a sort of one-off? Local government had a 3.1 per cent increase this time, but they had no indication of what it will be next time. I know it's difficult for you without the UK Government giving you some indication, but if these are priority areas within the whole of the budget here, is there a way that you can create three-year predictive allocations?

We'd love to be in a position where we're able to give longer term certainty. Whenever we can, we do. We're now coming into the third year of our three-year spending review, so at that point we were able to give certainty, although the value of that certainty, I think, has eroded, because when we set those budgets, we couldn't have imagined where we would be now, in many ways. So, I suppose there's that.

But also there are other sources of information. I know that Wales Fiscal Analysis provides some information that does give local authorities, in particular, some basis on which to consider their longer term plans, but, unfortunately, unless we have certainty, we just don't know. We would expect the next spending review to start at least gathering information probably from April of this year, so we'll obviously be fully engaged in that.

I would just also mention the chief economist’s report, where we do provide our projections for what the overall Welsh Government budget will be over the next five years, based on the OBR's overall spending forecasts. We think that’s the most useful thing we can do, because the risk of trying to present budgets beyond the period that we actually have budget certainty for is that it’s worse than not providing it at all. They end up being so inaccurate that people plan on that basis, and then it’s something radically different. So, it’s a tricky choice, but I think that’s our approach, anyway.

I see. Just one last little one from me. Do you share the future generations commissioner’s concern that this budget could reduce the type of innovative and bold initiatives and decisions that their office has applauded in the past?

I don’t share their concerns to the same degree, because in the sense of necessity being the mother of invention, perhaps when you do find yourselves in even more constrained times, it does lead you to innovation, and most importantly, also, to collaboration. We’ve seen some good examples in the climate change space within local government, where local government and, I think, the ambulance service have collaborated to procure electric vehicles for their fleets. They’ve managed to drive value in a way that they wouldn’t have been able to had they done that independently. It saves money, it transforms things in terms of that road to net zero. We’ve seen really good examples of things being done differently, and we would encourage more of that as well. And often, boldness is not just about funding choices, but it’s about legislation, it’s how you use the money that you do have in a different way; it’s about prioritising in that sense. So, I would like to think that we can still be innovative and bold, even in these times.

Whilst we’re still talking about the future generations commissioner and the Act, what impact has the Act had on this budget? If we didn’t have the Act, would you have set the budget differently? Has it had any impact on thinking, ‘Well, we’d better put money into that, or make that decision, because—'? Can you point to the future generations Act and say, ‘That’s the reason that we’re making that decision'?

I think the Act is becoming embedded in the way that we do things. For example, in terms of the way in which we operate in such a collaborative way, the level of engagement we do, I think that the Act compels us to do that, but actually we see the benefit from doing it as well. So, I wouldn’t say that the Act is dragging us along kicking and screaming to do things that we wouldn't want to do. Actually, we see the benefit of the Act in action through the collaborative way of doing things. It does sharpen the mind around those preventative areas. It has been really difficult, I would agree, in that space, because of the overall budget—

And that longer term thinking, I suppose.

Yes, but thinking about some of those bold things, there's the fact that we’ve provided significant funding for the basic income pilot. You can barely think of anything more preventative than that when you’re thinking about the cohort of young people involved and what their life trajectory looks like statistically, compared to other young people of their age. Actually investing in those young people and preventing some of the negative outcomes for them, I think, is one of the best preventative things that we can do. I think that's just a good example.

One of the other examples would be the way in which the education Minister has prioritised schools within his main expenditure group—so, again, looking at the youngest people and trying to put in place support there. The Recruit, Recover and Raise Standards programme was due to be tapered off in the next financial year; it won’t be now because we recognise the value of it, and I think that’s another important preventative agenda.

On childcare, even though we’ve made a reduction to the budget, that’s based on assumed take-up and our projections for that. But that said, if take-up is larger than we’d expected, then we will have to find the additional funding for it. Likewise for free school meals—again, an important preventative action. We’ll have to make sure that the funding is available for that as well. So, I think that when you get down to MEG level and project level, you can see the impact there. It’s harder to demonstrate that at an overall strategic level, I think.

And you've got that data, but we haven't—no. [Laughter.] Over to Huw.

Thanks, Chair. I want to come on to issues to do with gender budgeting. But before I do that, can I just come back to the point that Peter was raising about the interface between social care and health spending in particular? This is far from new. Back in 2018, around about then, the Welsh Government was working up different proposals and full work streams at that time to look at whether or not we could do something within this sphere. And if my recollection is right, a lot of work was done, but we decided to pause it because we were anticipating that a future Government of whatever perspective in the UK would bring forward a Green Paper. It didn’t happen, once again, and it’s a failure of successive Governments of different colours. The UK Government didn’t step up to the mark, got fearful of what the electorate would say and backed off, so we’re back to where we are, and we’ve still got this place.

As we, once again, see the stresses on social care affecting the overall health outcomes of the wider population—health and well-being—what is the current thinking from you, as a finance Minister, and within Welsh Government? Are we now waiting for some future Government at a UK level to step up to the mark and get serious about investment in social care, or are we going to do something here? Those plans that were developed five years ago now, when you first became finance Minister, in fact—are they still sitting there ready to roll?

As you say, we did a lot of work in that space, and I think you’re underplaying your own role in developing some of that as well—

I've got the scars.

I know that you were very active in terms of shaping that early work as well. We did make a lot of progress in terms of considering the distributional elements of it, and also the offer. That was, I think, the most challenging bit of it actually—

Indeed, what you would do.

Yes, rather than how you raise the finance and distribute it, actually what does the citizen get for that additional money—

So, we paused; we waited for the UK Government because we thought it was going to happen.

And it almost did in the sense that the UK Government made announcements around national insurance contributions that were then going to go into a health and care fund. So, we thought, ‘Great, the UK Government has taken a decision now and that’s the funding that we can use to take forward this for the future’.

And then they didn’t and they unravelled that and it went elsewhere.

So, now, we have to look afresh—. Well, not afresh. Now we need to build on the work that we’ve been doing in that space. Those are discussions that I’m having with the health Minister. But, in the immediate term, it’s really about looking at the cap for paying for care. So, that's our very immediate-term work, because local government has asked us to look at raising the cap. And that wouldn't be money that comes to Welsh Government, it would be additional funding for local government. So, they've asked us to focus on that very short-term thing—

And we heard a little bit about that earlier today. They were saying that that, in particular, wouldn't necessarily affect the poorest, it would affect the slightly more well-off.

Indeed. It would. It would.

Yes. So, at the moment, around a third of people pay nothing, a third pay something up to the cap, and then a third will pay the cap. So, yes, that's something that we're exploring at the moment.

Okay.

Fascinating. Okay. So, let me bring it right up to speed. Another thing that happened back in 2018, and it's interesting to this budget what's happened to that—. One of the ways to unwrap this blockage between budget silos of health and local authorities, particularly on the issues of things such as discharges from hospitals, was to pool budgets, to give up sovereignty, and we know how difficult that is. So, the regional partnership boards—there were some challenging conversations at the time. We started putting more money into those to say, 'Sort this out between the two of you, but you have to give up claims to one budget or another; we're going to pool it' and so on. You might not be able to update me on this, I'm suspecting, looking at some of the looks across. I'd be really, really interested, and I think this committee would be very interested to know, what happened. Did it stall? Did it stop? Did it go forward? I can see that Mike has got his hand up; Mike probably knows more than me because I haven't seen it.

Before you answer, shall I bring Mike in as well on that? There we are, Mike.

I was going to say that I remember when Jane Hutt brought in pooled budgets between health—well, hospitals then—and local authorities, and it worked reasonably well, except that hospitals just saw it as additional money for hospitals. And we've got pooled budgets between primary care and secondary care, and what that's done is to move an awful lot of money, proportionally, out of primary care and into secondary care. Any pooled budget you ever bring in will move money into secondary care. Hospitals can make a very good case for needing more money, and I'm concerned that, unless there's some protection, then all you'll be doing is giving social services' money to hospitals.

So, shall I ask the health Minister to provide a fuller note? I know that the integrated care fund is actually an example where health and local government working together has been successful, but the funding model there is different. But, on the pooled budgets, I'll get a note to committee.

Thank you. The reason I've raised that is—. Mike raises quite an interesting point. Even with pooled budgets, you still have tussles, but those tensions are resolved by democratically elected people plus the health authorities—this is always the criticism—sitting around a table and saying, 'Right, here are the priorities we jointly agree.' Now, it might not be working properly, but we saw some early successes, and it was beyond the ICF, because the ICF is project specific; this is actually fundamentally: how do we unblock real blockages within the care and health system? So, I think it would be of interest. Let me go on to—

And on that point, it's very similar to the social partnership—

Very much. Yes.

And those elements work together, then.

Yes, work together, cut down the silos, agree what the priorities are, spend the money jointly. It may have been parked because of lots of things. COVID has happened in between as well, and it blew a lot of good plans.

Anyway, let me go on to what I'm supposed to be focusing on—gender budgeting. I'm just wondering what progress you've made now in publishing the assessments of current gender budgeting pilots, and any timelines now to bringing forward a much more comprehensive approach to gender-equal policy development. And we know that this is important, you know this is important, because very often this is about some of the poorest people in society.

Yes, so our budget continues to be informed by the work that we did through the gender budgeting pilot. So, the next step, really, will be for us to use the learning from that to inform the review of the strategic integrated impact assessment that we mentioned and which will be taken forward during this year. So, that will be an opportunity, really, to further embed the work that we did through the gender piloting work. We're also continuing to learn and share learning with other Governments as part of the well-being budgeting Governments network [correction: the well-being economy Governments group]. That includes New Zealand, Scotland and others, and that's an opportunity, again, to share the learning that we've been undertaking. So, I think that progress is being made, but to properly embed it now, it will be through the review of the strategic integrated impact assessment.

Okay, that's great. My second question, Minister, is: if I was sitting there, if Peredur was sitting there or Peter was when you were going through some really hard decisions and we look at areas where we think, 'Well, look, the take-up of that particular area of funding has not been what we anticipated; and one of these that impacts on gender issues is the childcare offer.' So, the take-up isn't great, we're looking at difficult decisions, we go, 'Well, it hasn't been taken up yet. Knock that one on the head, cut that one back a little bit; that's easier to do.' So, I guess the question is, from a gender budgeting point of view: did you go deeper on all these things, like childcare, to actually say, 'Well, what are the reasons for issues like that? Is it because there's just lack of demand or is it because it's difficult to actually access childcare in certain areas or it's lack of awareness of it?' How deep did you go in your analysis, collectively with other Ministers?

So, the work there was led by other colleagues, but as a result of that, we do know that—you mentioned lack of awareness, that's a particular concern, so—. And people have assumptions about what's available and perhaps what is actually available might be different and actually more suitable for them. So, we have provided £250,000 for a strategic communications plan that will help to try and address some of those issues around awareness of the scheme to drive up—.

So, if that's successful, you could well need to actually restore some of the budget lines on this?

Yes. That is a risk, definitely.

Okay. It's a big risk, though.

Yes. But just to be clear that, you know, the service will be there, it's not limited by the funding.

Yes.

Yes. On that point, I suppose, it's when we're developing the budget, when we're developing and scrutinising Bills when they come through—and I've sat on Huw's committee, the Legislation, Justice and Constitution Committee, and looking at the nitty-gritty of Bills coming through there—we look at the financial aspects of every Bill that comes through and the modelling work that goes into working out the demand for a service or demand for that. How sensitive is your modelling around creating new policies? You know, I'm just thinking about possibly free school meals or childcare or something, where you've been able to reprioritise because of a lack of demand—or the perceived lack of demand—so it's not there. I'm interested in understanding why the models were different from actual and how much different they were, and is there a learning exercise that goes alongside it that then refines that model so that you get better at it every time? And I suppose, hand in hand with that, then, with Senedd reform, having better scrutiny will help you be more efficient in producing legislation that will effectively pay for itself by using scrutiny to release funds to be able to pay for other things, and, actually, to pay for Senedd reform as well.

Yes. You're highlighting a really important element of the kind of work that goes into budgeting. We've spent a lot of time, I suppose, in this session, talking about forecasting on the tax side, but, obviously, it's key on the spending side as well. Yes, there are many areas across the budget where you kind of have to make a forecast of what the level of the expenditure is most likely to be in the years in question. I mean, we do have quite a structured approach to this for those areas where—I suppose, the particularly high-risk areas. So, all of the tax forecasts come into that category and there are a number of elements on the spending side that come into that category, and the biggest and most challenging one probably is the student finance element, where, you know, it's very big and very difficult to forecast accurately. But, you know, you're highlighting a couple of areas in childcare and free school meals, where, you know, I'm not sure those are actually on our list of high-risk models.

I just used them as new things that came through—

And they're good examples—

—and being able to say, 'Well, that's the model, that's the actual, that's the difference, and why is there a difference and what analysis goes into that sort of working out?'

There is always error in forecasts, as you know, and the key question, as you say, is understanding—

Yes. Is that error 100 per cent, or is that 10 per cent, or whatever? How far off are you?

Yes, we can definitely improve on it. I think the two you're pointing to, I think, are areas where there is a degree—quite a high degree—of what you might call 'caution' in setting the budget, i.e. we were kind of assuming quite high levels of take-up for things where it's turned out the take-up has been a bit lower than those expectations. And when you can afford to do that, that's probably the right side to err, because that gives you good choices to make rather than the harder ones, which are when it turns out demand is higher than you were expecting and you have to find extra money. But, yes, I think it's important to continue to refine and improve your forecasting and learn from the errors that you see, and understand what's driving those errors and improve for the next time you have to do it.

And I suppose that leads into something that Huw will be particularly interested in, in framework Bills. Then, how do you produce a regulatory impact assessment on a framework Bill, where you don't know what it's going to necessarily look like once you've got the secondary legislation in place? So, it adds that level of risk, I suppose, or variance within how much it's going to cost.

A good example I think would be the work that we're doing at the moment on the Local Government Finance (Wales) Bill. So, part of that is about creating the structures for Ministers, then, to go on and make decisions around exemptions, discounts, premiums and so on for council tax. But those would come later rather than being on the face of the Bill. But when you lay those, then, you would provide the correct documentation alongside them in terms of costs and so on. But I think that—just as an example of what you're describing.

But from a Senedd point of view, and from this committee's point of view, commenting on an RIA when you don't have that level of detail, because it's going to come down the line, and to see if it is good value for money, makes your job harder as a Minister to explain the benefits, and it makes it harder for us to scrutinise. And that's where framework Bills do cause a little bit of an issue, and we understand why Ministers do it, but we also would rather have it as primary, because, then, at least we've got a way of understanding. So, it's yes, it's—

It's a difficult balance to strike, isn't it, in terms of putting certain things on the face of the Bill, which then are set unless changed by further primary legislation, or allowing a level of flexibility. And flexibility will be appropriate in many cases. So, I don't want to turn this into a local government finance Bill scrutiny session, but flexibility will be important then, because it does allow you to respond. So, for example, we've made changes to council tax eligibility to respond to the fact that some people are welcoming people from Ukraine into their homes. Well, they shouldn't have their council tax liability—sorry, their council tax ability to access the reduction scheme [correction: their ability to access the council tax reduction scheme] affected because they've done that. So, you do need to be able to respond as well.

And you mentioned council tax there. Obviously, we've had local government in earlier today, and the pressure of council tax increases is going to be felt and is the least progressive of the taxes; it's regressive and it affects the poorest hardest. Where are you at with council tax reform? I know it's a lot of work that's going on, so just maybe one minute on where you're at with that sort of work.

Yes, so, progress has been very good in terms of developing our thinking. We've got a stage 2 consultation out at the moment, and it looks at a whole range of things. But I think perhaps most pertinent are the scale and the pace of reform. So, on the scale side of things, it looks at whether we should just have a revaluation—I say 'just', but that in itself is a big undertaking with lots of impact—or whether we should do something more moderate, as compared to an expanded reform, which would be the more significant. So, you could see, in that version, two additional bands at the top and one at the bottom. So, there are range of things there, but then also the pace of reform. So, we could introduce reform in 2025—that's possible. Do people who respond to the consultation, does the Senedd, think that 2025 is right, or maybe 2028, and allow us to do it more gradually? Do we do reform all at once, or is it a staged reform? All of those things now are being put out there, really, for views.

Okay. Thank you very much. And obviously that's one of the ways that councils and local government can raise funding. Another element that's outside the revenue support grant is grants in particular. We were talking to local government again about the uncertainty around certain grants and then the consolidation and concern that if you consolidated, you wouldn't top slice, and then we had quite a robust conversation about that earlier today. I think Llinos Medi talked about one grant that's coming to an end in April and it's not going to be renewed, so it's those extra bits that fund services, but don't form part of the RSG. So, have you got any update on the grants and the way that they're being administered, and some of those concerns, I suppose?

Yes. So, those grants come from individual ministerial portfolios to local government. There's over £1 billion in grants, so it is quite significant. But what we asked local authorities in terms of our programme for government commitment to reduce the administrative burden was, 'What would you like to see us address?', and they did say, 'Grants.' They said there are too many grants, too many grants, often, that seek to deliver similar outcomes, and what could we do about that. What could we do about the monitoring of grants and the reporting mechanisms? They said that, sometimes, it wasn't proportionate; you could get a relatively small grant and you'd be reporting every month on it, and then a much larger grant and, actually, the reporting wasn't as onerous. So, we needed to make sense of all of that.

So, what we have done—and this might be one of the things referred to this morning—was, particularly in the education portfolio, amalgamate a large number of grants into four grant streams. What we did there was work through Jeremy with local government and the consortia to give clarity and transparency there, because that's one thing that I didn't want, was for us to be amalgamating grants and then for there to be accusations that we hadn't been upfront in terms of what was happening. So, I hope that the level of transparency has been what was expected.

Okay. Thank you. One element that we haven't talked about so much—we've talked about health, we've talked about social services—is mental health, which is another big element, especially with young people. There are concerns about that funding, and particularly grants into some commissioned services and that element. Have you got any thoughts on what the accumulative effect on mental health services is going to be through your budget-setting process?

Well, the £800 million that goes to mental health is still the largest area of spend within the NHS. It's protected and ring-fenced, but, actually, what you do see in a number of health boards is that they provide additional funding over and above the ring-fenced amount because it's such a priority for them locally. So, that funding comes from the more discretionary funding that goes to the health boards. We had wanted to increase the funding by £15 million, but we haven't been able to do that as originally planned, unfortunately, but we haven't decreased that funding. The Minister with responsibility for mental health is really keen to emphasise that we're not impacting front-line mental health services, although, of course, inflation itself would have an impact.

Right. Okay. And I think that probably brings us to time, unless anybody's got a question.

Yes, I was only going to pick up on one further one—

Okay.

—on local government, because, obviously, they came in today, and we heard, quite passionately, from several leaders. They always are passionate, but they are genuinely up against it at the moment. We're already seeing draft budgets with significant—really significant—cuts to education, adult social care, children's services. And their own terminology is that it's going to be 'drastic' going forward.

Whilst I've heard that you believe that the 3.1 per cent is a generous settlement, we've already heard, also, that the large lion's share of that will go towards paying staff; it won't go to addressing new burdens and expectations. Are you satisfied that the budget protects those core local services that we value so much—education, adult social care, or adult services and children's services?

I think, in and of itself, the 3.1 per cent can't do that. But when you look at the other sources of funding that local government have available to them—council tax, for example, and other ways in which they raise charges—that will certainly help. I'm not going to pretend there are not really tough choices ahead for local government as a result of the settlement, but what I will say is that the settlement is the best that we could do in the circumstances. So, when we look at the protection of the 3.1 per cent, I'm not going to call it 'generous', I'm just going to call it 'the best that we could do', and there's the additional funding that we've provided for health.

This is genuine scrutiny, so we've talked earlier about the fact that if there are other areas that we should be looking at—I know Mike engages with that particularly—then I think that those are important debates to be had.

Thank you. I had to raise it on their behalf.

Certainly, yes, no problem. Thank you very much for your time this afternoon. And, as I said previously, you will get the transcript to check through for accuracy.

I'd like now to go into private, so I propose, in accordance with Standing Order 17.42, that the committee resolves to exclude the public from the remainder of this meeting and the meeting on 31 January. Are all content? Yes. Thank you. We'll go into private then. Diolch yn fawr.