Economy, Trade, and Rural Affairs Committee

We'll move on, therefore, to item 2 on our agenda, which is papers to note. There are a number of papers to note this morning. I'm not going to go through every one of them, but are there any issues that Members would like to raise from the meeting papers? No.

We'll move on, therefore, to item 3 on our agenda, which is scrutiny of the free trade agreement between the UK and New Zealand. This is the first of two panels to give evidence on the free trade agreement between New Zealand and the UK. The second panel was meant to be held on 26 May, but it has been delayed now until 13 July. Members will also ask questions to Ministers on this subject in our session later today. So, can I welcome our witnesses to this session, and ask, then, first of all to introduce themselves for the record, and then we can move straight on to questions? So, can I start with Nick Fenwick?

Good morning, everyone. I'm Nick Fenwick, and I'm the head of policy at Farmers Union of Wales.

Thank you very much. And Tori Morgan.

Good morning, everyone. My name is Tori Morgan. I'm a national policy adviser at National Farmers Union Cymru.

Thank you very much indeed for those introductions. I'll just kick off this session just to ask you a very general question. Perhaps you can outline the likely impact of this agreement on your sector, as well as the timescales of when those impacts are likely to be felt. Perhaps I can start with Nick.

It's a bit like asking 'How long is a piece of string?', to be honest, Chairman. The reality is we anticipate that it will be negative. I think there's a fair certainty that it will be negative. Now, the degree to which it would be negative depends on global economics. Obviously, the anticipation would be that it would be negative for Welsh agriculture, or increasingly negative as time goes on as quotas are raised, and, ultimately, abolished. But as we've seen in recent years, the amount of imports from New Zealand has fallen significantly, and that's due to global trading patterns. Historically, we've seen times when we've had very large volumes of imports from New Zealand, and there's no certainty that that might not happen again, especially in a liberated trading scenario. It also depends on exchange rates and things like that.

Okay, thanks. And Tori.

Thanks. I think we would support everything that Nick has said there, and I think to add, I think from our perspective at NFU Cymru, we see very little in this agreement that really offers any benefit to Welsh farmers. We know that New Zealand is a market of five million people, compared to the UK's market of just over 67 million people. There's a huge disparity in terms of market size. We know that New Zealand farmers predominantly produce for the export market; so, for example, 90 per cent of the beef they produce is exported, they're 880 per cent self-sufficient in liquid milk, so, clearly, an absolute powerhouse in the global agriculture market.

I think it's worth saying that, in that respect, we do think that free trade agreements need to offer reciprocal benefits for both sides. In this agreement, it's very difficult to see where the reciprocal benefit lies for Welsh farmers. As far as we are concerned, at the moment, this deal just heaps further pressure on farm businesses that are already facing quite serious challenges as we emerge from the pandemic, dealing with rocketing input costs as a result of the conflict in Ukraine, and shortages of labour. So, I think we would support everything that Nick has said there, and would add that as well.

Thank you very much indeed for that. I'll now bring in Luke Fletcher. Luke.

Diolch, Cadeirydd. Following on from the Chair's question, I'd be interested in your views on the UK Government's impact assessment, and whether it provides sufficient information in assessing the impact of the agreement on the agri-food sector. Shall I start with Nick and then move to Tori?

Well, I think the first thing I would say is it's disappointing not to see a more detailed impact assessment of the sectors most likely to be affected by the trade deal. As Tori has said, it is a very one-sided deal, there's very little in it for the UK population. I worked out earlier on today that by 2035, according to the Government's own figures, it will increase, or it's estimated to increase UK wages by an average of about £11 per year. So, that's not much to write home about.

So, there are clearly geographic regions and particular sectors that would be particularly adversely impacted, especially under certain trading scenarios. I think we would have liked to have seen an impact assessment that looks at a broader range of trading scenarios, including fluctuations in exchange rates that favour imports et cetera, both in the short and long term, and a breakdown of those impacts at a geographical level and a sectoral level. So, a far more granular level. It's notable, I felt, that it seems to be even less granular or detailed than the impact assessment for Australia. I think there are some figures in the Australia deal impact assessment that are actually not specified in the New Zealand one.

Thank you. Tori, do you have anything to add there?

Thank you, yes. We would agree, we would have really liked to have seen the impact of the agreement go for a more granular level, both sectoral and geographically. We know in Wales that, in particular, there's an over-reliance on two key sectors, namely livestock and dairy, and we know that this agreement is going to negatively impact both of those, which potentially means that the impact on Welsh farming could be disproportionate compared to the rest of the UK. And with that in mind, we would really have liked to have seen a Wales-specific impact assessment. That's a call that we would make for all free trade agreements, but especially this one with New Zealand, due to, as I say, the over-reliance on those couple of key sectors.

I think it's worth saying that, when you dig into the detail of the UK Government's own impact assessment, they estimate a reduction in gross value for agriculture of £48 million and £97 million for the semi-processed food sector. So, clearly, some quite big impacts on agriculture and the food chain. So, when you look into that further, their impact assessment again, just to look into one sector in particular, there's a reduction in gross output of 1 per cent for beef, which basically equates to taking 29 per cent off the bottom line of UK beef production. And as I've just said there, we know in Wales we have lots of lovely cows, lots of lovely livestock farms, and that's going to have a disproportionate effect on the farmers that we're representing.

Thank you for that, Tori. If I could stick with you for a moment, Tori—Nick, if you have anything to add, by all means, please do—in your view, what support is needed for the sector from the UK and Welsh Governments to mitigate some of those possible impacts that you've outlined there?

From our perspective, clearly, farmers are facing a lot of uncertainty at the moment, whether it's input costs, dealing with emerging from the pandemic, or agreeing free trade agreements—this one with New Zealand, but of course there's one already been agreed with Australia, and others coming down the pipeline. That cumulative impact of liberalising the UK's market adds to that environment of uncertainty and market instability. So, from our perspective, we know that Welsh Government are due to take the agriculture (Wales) Bill through the Senedd later this year, and we were very pleased to hear the Minister say that she was looking again at the agriculture Bill in light of the current trading environment. So, really, we believe there is an urgent need to really look again at how future agricultural policy continues to underpin sustainably produced, climate-friendly food here in Wales, and supporting our rural communities. That's all against, as I say, the backdrop of that uncertainty. So, really, we see that Bill and the support schemes that stem from it as being the main mechanisms to support young farmers to deal with this new trading environment.

Thank you, Tori. Nick, did you have anything to add? I saw you were in agreement with a lot of what Tori said there.

Yes, notwithstanding the fact that we don't want the Bill that's currently going through the UK Parliament to be passed. We would hope that Members of Parliament would recognise the dangers that are inherent to these trade deals, and the fact that this has been brought into sharp focus by our vulnerability to fluctuations in global food supplies, and our over-reliance on food imports has been brought into sharp focus by the war in Ukraine. So, notwithstanding the fact that we don't want this to actually come to fruition, I would agree with everything that Tori says. We need that stability and we need to protect our own food industry and the economic viability of our rural communities.

Thank you, Nick.

Back to you, Chair.

Diolch yn fawr iawn, Luke. I'll now bring in Vikki Howells. Vikki.

Thank you, Chair. Good morning to you both. We as a committee have heard that diversification of potential markets is the cornerstone of New Zealand's agricultural trade policy, to ensure that they don't, of course, become more reliant on any one market. So, I'm wondering whether you both believe that this would be a good approach for Wales. And if so, what support would you suggest that we would need from both the Welsh and UK Governments to achieve this? Shall I start with Nick?

Yes, thanks. I suppose there are very different interpretations of diversification, and I think that New Zealand has diversified its markets in many ways, including the destinations to which it sends its exports. So, it would have a bigger share of its UK portfolio, in a sense, if this trade deal came to fruition.

I would bring us back to the importance of us retaining a large degree of control over the diversified markets that we have. We've seen—. There seems to be an obsession in the UK with pushing farmers towards only supplying, or it seems like only supplying middle-class, high-end markets. Now, those are very important markets that we do need to aspire to supply more to, but if Governments think that that ticks or answers all the problems that are inherent to some of the changes that are going on, they're very much misled, because if you abandon control over your general mainstream commodity market, what you do is you actually reduce the baseline for all other prices. There are, inherently, by-products of all food processes that result in stuff that needs to be sold at a generic value—you might say almost a global market level, market price—and you can't possibly sell them into these middle-class markets.

So, we need to retain control and continue to supply our mainstream markets. It's also notable that those mainstream markets are where people fall back to in a time of recession. So, lots of the middle classes at the moment, for instance, they may have been buying their organic beef and whatever it might be, but when the squeeze comes, they will fall back to buying cheaper produce, and it would be a bizarre situation—. And that produce makes up the bulk of the food that's sold in the UK, and it would be totally wrong if we ended up with the bulk of that market being given over to foreign importers, and a small handful of farmers left supplying these middle-class markets that can expand and contract depending on how the economy is performing.

So, in terms of what we should do—sorry to go on—the Government needs to take a broader view of this and realise that we need to be supplying all our food markets, not just this Waitrose-type, middle-class market.

Thanks, Nick, that's a really interesting answer. And Tori.

Thanks. Just to add to what Nick said there, I think if we are looking to diversify our markets, and we believe there is opportunity to grow exports for Welsh food and drink at all levels, whether that's high value or commodity product—as Nick outlined, both are important—then we need to really make sure that there is significant investment in trade diplomacy. And we know, from all those countries around the world, they have vast embassies and networks around the world that are out there promoting their own food and drink and knocking down doors and breaking down barriers.

And so, whilst we really do welcome the eight delegated agriculture attachés that the UK Government has recently recruited, we know, for example, that New Zealand themselves have 18. So, clearly, we're still lagging behind when we look at this just in a UK-New Zealand context. So, it's really making sure those agriculture attachés are not only recruited but ensuring that they have sufficient budgets, sufficient resource, sufficient skills and are equipped with the right teams and the right resources to make sure that they are able to make inroads into those markets. And in that respect, we would hope that the Welsh Government and the UK Government can work together, with their various food and trade divisions, to ensure that Welsh food and drink businesses are able to capitalise on any of those new export opportunities that these attachés are able to create.

I would also say as well, on the subject of New Zealand diversifying their markets, at the moment it's clear, when you look at the trade volumes, that New Zealand are particularly reliant on the Chinese market. So, for example, China consumes about 46 per cent of New Zealand's meat exports. So, clearly, there is quite a reliance on that Asia-specific and especially China area of the market. However, we know that that the Chinese market is prone to knee-jerk reactions—geopolitical tensions, currencies, currency movement, all sorts of things can cause fluctuations in those global markets. And that's why we think, because of that uncertainty, it would be prudent to see safeguards and other mechanisms within the agreement that would mean that if something did happen, and you could see a flood of imports coming our way, you were able to just close the doors, take stock, work out if we need it, how we need it et cetera. And so, really, I would make the point that, yes, it's sensible to diversify your market, but, equally, as a negotiating partner, I think the UK perhaps could have been more alive to that point, and could have ensured that the safeguards that are in the agreement offer meaningful protection to farmers in the event that markets change and we see a flood of imports coming in our direction.

Thank you, both. Thank you, Chair.

Thank you, Vikki. I'll now bring in Sarah Murphy. Sarah.

Thank you very much, Chair. Thank you, both, for being here today. New Zealand organisations we've seen in our written evidence, representing the beef, lamb and meat industry, believe that the agreement provides opportunities for the UK and New Zealand to engage on issues like policy matters, like sustainable production, animal welfare, improving beef and sheep production. And they go on to say as well that they think there are opportunities for greater international competitiveness and innovation, increased export returns and better living standards for farmers and farming communities, which all sounds extremely positive. So, do you share these views, and what areas of collaboration in particular do you think could be beneficial for the Welsh or UK Government to support? I'm going to come to Tori first.

So, I think, yes, absolutely, farmers in Wales certainly feel a strong sense of kinship with their New Zealand counterparts. As an organisation, certainly, we are in regular contact with, undoubtedly, some of the organisations that you're referencing there that are representing producers in New Zealand. And certainly, we face a lot of the same challenges when it comes to things like climate change and improving animal welfare standards; we all share very similar aims. I think what I would say, though, is, we are already in regular dialogue with the organisations and with farmers there in New Zealand. We didn't need a trade agreement that liberalised to this extent in order to allow that collaboration. All of that collaboration could have happened independently, without a trade agreement—it doesn't need an agreement that liberalises the market to this effect for those good things to happen. So, absolutely, we support opportunities to collaborate and to tackle some of those global challenges, but I just wonder if this was the right vehicle to achieve that aim.

Thank you very much. Nick.

Thank you. Tori's made the case very eloquently. This is not an issue that's related to trade deals. New Zealand already has a very generous quota in terms of its imports to the UK, and collaboration has been going on for decades between both of us, at a more technical level, but also in terms of the exchange of people between New Zealand and Wales, in particular, I think, because of the close links between the sheep industries. And we view them as friends, despite them being in competition with us. It doesn't require a trade deal to do that, it's already happening and should continue to happen.

Can I just ask, then, if it's not needed, what do you think is the motivation, the real motivation, for doing this?

For the trade deal?

Yes.

I think the UK Government has an agenda of importing more food into the UK that's cheaper, irrespective of whether the standards meet our own or not. And it's not particularly minded to protect its own food security or its own food producers.

Thank you, Nick. Tori, do you agree with Nick?

I think, yes, in summary, I would do, and I'd also say that there are clearly some political motivations here as well. Because I think, when you look at the figures, as I said earlier, there's very little in terms of net gain for agriculture. And I think, when you look at it at a whole-economy level, what's the net benefit for UK gross domestic product—something like 0.01 per cent? So, in terms of net gain for the British population, there are very, very small gains to be made from this agreement. So, I'd suggest the motives are other things rather than providing gain for British farmers or the British population.

Thank you very much. Thank you, Chair.

Thank you, Sarah. I'll now bring in Hefin David. Hefin.

Can I ask about the panel's views on the necessity for legislation on food labelling? I know the panel feel pretty clear that we need clarity on that. Have you made progress in making representations to the UK Government and the Welsh Government on that matter?

Nick.

Sorry, is that coming to me first?

Yes, by all means, Nick.

Anybody who wants to jump in.

Well, it's an issue that we've long lobbied on. It was in our Senedd manifesto last year, as you'd expect it to be. I think it's probably a standing Senedd agenda item, really. But in terms of—. Particularly with country-of-origin labelling, it is imperative, but I think there's a far bigger issue here that is the policing of labelling and the policing of such labelling in our hotel and leisure industry and those sorts of outlets as well to make sure that what it says on that labelling is actually true. And also to encourage people to put that labelling on, or indeed to make it compulsory for them to put that labelling up. We will all have been out for a meal where the origin of food is ambiguous—the origin of the piece of lamb or piece of beef that you're eating is ambiguous on the menu—and we would like to see that changed, so that, for example, the visitors who are coming here know whether they're sampling the best of Welsh produce or some substandard produce that maybe doesn't come from Wales.

Is there a feeling that this can be led by the Welsh Government. So, what progress has been made?

I'm not aware of any progress having been made recently, but it's not an issue that I've looked into in any great detail recently, so I wouldn't want that to be a misleading statement.

Okay, so it's not that important as an issue, then.

Well, it is, and all things being equal, if we hadn't voted to leave the EU and if Russia hadn't invaded Ukraine and all these other things weren't going on, I think it would be one of the things that we'd be focusing on. Unfortunately, what we would like to be focusing on is often eclipsed by other things.

Okay. Thank you.

I think if I could just add a couple of points to what Nick has said there, I think, yes, absolutely, we would echo Nick's call there for clear country-of-origin labelling and it's a call that NFU Cymru have been making for a very long time. And the point about out-of-home is a really important one. We know that pre COVID, consumer spend on eating out was always equal to that that they spent in grocery retail, so clearly there's a lot of food being bought out of home. And we know that in those food businesses, whether it's hospitality or public sector catering or fancy restaurants, there is pressure on margins and there is an incentive for some of those restaurants and outlets to use cheaper imports. And so it's likely that that's where product coming from New Zealand is going to end up, and point-of-consumption, country-of-origin labelling in those outlets isn't currently mandatory. So, we think that there is certainly room to improve that and make labelling clearer for consumers, as Nick said, so that they know what they're eating and are able to make an informed choice. I think—

So—

Sorry—

No, go on. You carry on. I thought you'd stopped.

I was just going to say, I think we also have to be really careful when we're talking about food labelling—it's not the silver bullet for dealing with food standards. Yes, absolutely, it's a tool and it's really important and it's something that we would call for. Equally, we know that when consumers come to make a choice at the shelves, they say that labelling is important, but sometimes what they say and what they do can be very different. And we know that often with consumers, the No. 1 thing that's most important for consumers is price, and is never more important than at the moment with the current cost-of-living crisis. So, we know that when consumers are faced with that decision, they will often be led by price, and as such, whilst we welcome country-of-origin labelling, clearly it's not going to deal with the problem of imported food, which maybe doesn't reach our standards, being on shelves and not meeting our consumers' expectations. So, yes, it's an important tool, but not a silver bullet.

Okay, but that aside, as a policy issue, do you agree with Nick that it's been pushed down the agenda with the other bigger issues that are at stake at the moment?

I think, yes, it remains a priority issue for us, but clearly, when faced with dealing with adjusting to life outside of the EU, a global pandemic and the fallout coming out of the horrible conflict that we're seeing in Ukraine, other things unfortunately have to take priority. But it doesn't mean that this is less important, if that makes sense; it just means that those things couldn't have been expected, and they need dealing with more urgently.

So, last question, then, if you don't mind, Chair: have you then spoken to UK—? Tori, have you spoken to UK or the Senedd Government about this matter, and have you pushed—have you made any progress?

So, again, like I think Nick outlined in his response, we've been talking about country-of-origin labelling for years. I think anyone that has been in the Senedd or indeed in UK Government will have heard NFU Cymru at some point talking about clear country-of-origin—

But nothing in the last—. No progress made in the last few months, for example.

I don't believe there's been progress made in the last few months, no, but—.

Okay. Thanks for that.

Okay. Thanks, Hefin. Thank you very much. I'll now bring in Sam Kurtz. Sam.

Diolch, Cadeirydd. Thank you, both. I just want to pick up on something that both Nick and Tori have said with regard to welfare standards, production standards. Isn't it right, though, that New Zealand's welfare and production standards are very much on par—? Looking at what we are looking at, which is the New Zealand-UK trade deal, isn't it that New Zealand standards are very much on par—okay, in different metrics, but—with what we see in the United Kingdom? Nick.

I would say they're more comparable than Australian standards to Welsh standards, generically speaking, so there is more equivalence. I wouldn't say there is equivalence, and, if you spoke to a Welsh farmer and a New Zealand farmer and you compared what they do on the ground, I don't think they would regard each other as equivalent. So, for example, animal traceability standards here are orders of magnitude more strict and therefore more costly; animal transport regulations, again, very, very much tighter here in terms of limiting the distances over which animals travel; medicine record requirements I understand to be far, far stricter here than they are in New Zealand, and the list will go on. But that doesn't mean to say that—. There are types of equivalence, but I think traceability is the one that, probably from a farmer's point of view, when they speak to a New Zealand farmer and see how they—or indeed whether they—tag their animals, that's where they start to get shocked. We have to do something within a certain period, otherwise we get fined, whereas New Zealand don't have to do it at all. And that is a significant cost. So, yes.

The reason I bring it up is I noticed in the Chamber, the Minister, when we were discussing this trade deal in a question, the rural affairs Minister changed her language somewhat around talking about New Zealand production standards, and, rather than saying that it was a lesser standard, was saying that there was a bit more comparability between obviously what—. Farming in New Zealand and farming in the United Kingdom in Wales are two very different industries, but there are more comparisons, as you mentioned, between New Zealand than Australia. Tori, anything that you want to—?

And orders of magnitude—. Sorry, Sam—

No, no.

—just to emphasise. The orders of magnitude in terms of their scales as well. So, that's an additional—that's not necessarily related to equivalent standards, but it is a huge factor in their economic ability to compete with us.

Yes. Thank you. Tori.

I think Nick's put it very well there. There is a lot more comparability between standards here and standards in New Zealand compared to countries like Australia. I think what I would say, though, is that there are different standards and sometimes those different standards make the New Zealand industry more competitive, and that's the issue that we have here in Wales, that we are not as competitive as the farmers over there in New Zealand, and, as a result, the cost of producing in New Zealand is significantly lower. So, for example, if we look at lamb, producing lamb in New Zealand is about—when you look at the Agriculture and Horticulture Development Board's figures—63 per cent lower than it is here in Wales. And that's partly because of standards, as Nick's outlined, in areas such as traceability and removal of dead stock and other issues that make them competitive. Also the fact that they have larger farms, they have less competition for land—they have 5 million people, we have 67 million. They have a lot less restrictions, whether it's around planning, other things, they don't need to house their animals for as long as we do because of climate conditions; all of these things mean that they are more cost-effective producers, which makes them more competitive and we also know that their Government has invested significantly in supporting their exports, supporting research and development to allow that industry to grow, and that's where we think that Governments here in Wales, but also in Westminster, could help support industry to take advantage of those opportunities that exist out there around the world.

Thank you. I think the time has beaten us. I could sit here and question you both on this for hours, but I'll hand back to you, Chair. Diolch.

Thanks very much indeed, Sam. Yes, unfortunately, our session has come to an end. So, thank you both for being with us this morning. It's been a very, very useful session. A copy of today's transcript will be sent to you for accuracy purposes, and if there are any issues with that then please let us know. But thank you very much indeed for being with us this morning.

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

Welcome back to this meeting of the Economy, Trade, and Rural Affairs Committee. We'll move on now to item 4 on our agenda this morning, which is ministerial scrutiny, and the Minister that we have in front of us for this session is the Minister for Rural Affairs and North Wales, and Trefnydd. This is a regular scrutiny session with the Minister and the session will include questions on the cost-of-living crisis and the UK-New Zealand free trade agreement, and the outcomes of these discussions will be reflected in the committee's ongoing inquiries on those matters. May I extend a very warm welcome to the Minister and her team? May I ask the Minister and her team to introduce themselves for the record, and then we can move straight on to questions from Members? Minister.

Diolch and bore da, pawb. So, I'm Lesley Griffiths. I'm the Minister for Rural Affairs and North Wales, and Trefnydd. I'm joined by Victoria Jones, who's deputy director of agriculture, James Owen, deputy director land management reform, and Gareth Bevington, deputy director marine and fisheries.

Thank you, Minister, for those introductions, and perhaps I can just kick off this session with a general question. I know that you intend to introduce the agriculture Bill in the autumn. Now, in addition to powers to introduce farm support schemes, what else will the agriculture Bill include, given the broad range of proposals in the White Paper?

Yes, you're quite right—I will be introducing the agriculture Bill in the autumn. The principle objective and issue is that it will establish a new system of farm support, based on the principles of sustainable land management. You'll be aware that I took temporary powers in the UK Agriculture Act 2020 in order to pay our farmers. So, it's really important that we have this Bill before the Senedd to ensure that we are able to continue to support our farmers. It also will include provisions on agricultural tenancies, forestry felling licences and legislation to ban the use of snares and glue traps. So, those will be the main issues for the agriculture Bill later this year.

So, your intentions are, of course, as a Government, to include everything in this agriculture Bill. You won't be introducing other Bills as this Senedd term goes on.

So, one of the other key things that we want to do is to reduce the regulatory burden on our farmers. So, we want to make it easier for farmers to understand what they must do to comply with the law through the implementation of national minimum standards; you'll be aware that that was in the consultation. We do recognise, of course, that these proposals are very complex. They need to be very well thought through. We need to continue to have discussions with our stakeholders around the next stage of reform. But I do hope to implement them later this term.

[Inaudible.]—sustainable farming scheme: I know you intend to publish that in the next few weeks. Can you tell us whether that scheme will be based on an outcomes-based approach, or whether it'll be inputs based?

So, you're quite right—my intention is to introduce the outline sustainable farming scheme before the end of this term, before summer recess. It will be very different to the current basic payment scheme that we're all very familiar with, and I suppose the fundamental change will be that the level of payment will be linked to actions that an active farmer undertakes to deliver outcomes. We're going through a huge range of independent analysis at the moment. We're estimating the economic cost to farm businesses of undertaking them, and what the environmental benefits will be.

The payments will be linked to outcomes, as I say, but the development of the proposed scheme has really been underpinned by a great deal of evidence and a huge amount of analysis. James Owen, who's with me, at the moment is doing a huge amount with our stakeholders, and the plan is that we will introduce, as I say, the outline scheme before the summer recess. But then we'll have the next stage of co-design with our stakeholders. I think it's really important that we get the outline scheme out before the summer, before the summer shows. It's going to be a great opportunity, having not been able to attend summer shows in person for three years, to have that conversation and continue that conversation with our stakeholders.

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

Thank you, Chair. Good morning, Minister. I've got some questions around the UK-New Zealand free trade agreement. Firstly, if you could discuss the likely impact of that trade agreement on the agri-food sector in Wales, thinking about risks and opportunities there.

So, I suppose, from an opportunity point of view, we believe there could be some small benefits, predominantly around services, I think. I think the concerns are that the impacts will be more negative. You'll remember—I think it was the last time I was in front of this committee—I was talking about the UK-Australia free trade agreement. So, we share many of the concerns that we had in relation to the Australia FTA as well, and also the cumulative impacts of these FTAs. I think there are very limited opportunities for agri-food. New Zealand are global exporters of lamb and beef and dairy. But, as I say, there could be some minor opportunities for foodstuffs such as baked goods and sauces and prepared cereals.

We know that New Zealand hasn't been making use of its already very high tariff rate quota, particularly in relation to sheep meat, so this is a massive increase to them—it's 150,000 tonnes, nearly—so I think it's very hard to justify. It's now much, much higher. It will be interesting to see what they do in year one. Obviously, there's a long run-in of 15 years, but it will be very interesting to see if they do change their focus in the first year, going forward. Because they don't use their current quota, I do think it's really hard to justify why they've been given such a massive increase.

We're a bit concerned as well about this continuing pattern. I've mentioned the Australia deal; there does seem to be a pattern here from the UK Government. We are pushing really hard and making sure our concerns are heard, but, unfortunately, that's not always the case.

I think one of the other issues that I've been really keen on, and other ministerial colleagues as well, in relation to trade agreements is to make sure—. We've got very high animal and environmental standards here, and we don't want to see free trade agreements with countries that don't uphold those high standards as well.

Thank you. And looking at the issue of diversification, we've taken some evidence that suggested that diversification of potential markets is the cornerstone of New Zealand's agricultural trade policy, so I'm wondering whether you believe that this is an approach that should be adopted in the UK, in light of the sector's reliance on the EU market, and, if so, what support would the Welsh Government look to be providing to the sector in Wales around that?

So, I do think we have that approach already. I've been very fortunate to go to places such as Dubai, and SIAL in Paris and Anuga in Germany, where we absolutely go out and sell our wonderful Welsh food and drink. The primary place that we offer that support is, obviously, we support Hybu Cig Cymru to go all over the world and promote our Welsh lamb and our Welsh beef.

It was interesting—you may have heard that the First Minister was asked a question yesterday about what benefits we could look for with Wales reaching the world cup final in Qatar, and I would say this is an area, again, where we can look to make sure we promote Welsh food and drink perhaps to a market that we haven't had before. If you look at when the Rugby World Cup was out in Japan, we've seen a real increase in Welsh lamb and Welsh beef going to Japan now, and I'm sure that was because we took the most of that opportunity. So, Hybu Cig Cymru really go out there and promote Welsh lamb and Welsh beef.

We were also very, very instrumental in getting the US ban on UK lamb overturned. I remember that one of the very first meetings I ever had, when I came into the portfolio six years ago was to try and get that ban overturned. So, I think there are major opportunities here for us now to export our lamb and beef.

Thank you, Minister. You mentioned animal welfare a minute ago, so if I could just ask you whether those non-aggression provisions included in the agreement's animal welfare chapter are an improvement on the equivalent chapter in the UK-Australia FTA, and if you feel those provisions go far enough.

I think it could be better. I certainly welcome them, and, as you say, it's definitely an improvement from the Australia agreement. Again, it's somewhere where we've pushed really hard, myself and officials, to get that included. It's a bit more of an ambitious approach, I think, for the UK-New Zealand FTA than it was with the UK-Australia one. The chapter does make firmer commitments, I would say. I think the word was 'endeavour' in the Australia one, which was a bit wishy-washy, I think. So, they are welcome. They do seem to go beyond, as I say, the UK-Australia ones. Do they go far enough? I suppose it's a bit difficult to gauge that at the moment. We just need to make sure that ongoing co-operation between the two countries keeps going. We've got the animal welfare working group. That's a provision that was included in the FTA to keep those conversations going. So, I think, let's watch how this goes, but it's certainly better than the Australia one, yes.

Thank you. And, finally, if I could just briefly ask you for some comments on the agreement's provisions on geographical indicators, and the Welsh Government's position during the negotiations.

So, again, we've constantly made clear we've got an amazing family of Welsh food products that have got geographical indicators and it's really important the they're recognised, because they will have worked very hard to get them, and all the companies and organisations that have those GIs will tell you how valuable they are. So, we've said all along they've got to be maintained in any FTA negotiations. Of course, this one doesn't grant GI protection at the implementation of the agreement, but what it does offer is the chance for such recognition to be included in the future, should New Zealand implement a GI scheme for agri-foods. And, again, it commits New Zealand to a review if such a scheme is not introduced within two years of the agreement being implemented. So, I think that's again better than we have seen before, but I think it is really important that we push really strongly to make sure our Welsh GIs are included in any scheme that New Zealand could adopt in the future.

Thank you. Thank you, Chair.

Thank you, Vikki. I'll now bring in Sarah Murphy. Sarah.

Thank you, Chair. Morning, Minister.

Morning.

I'm going to ask some questions about the impact of the cost-of-living crisis. It's obviously a huge topic that's really impacting a lot of people. So, as we're short on time today, I will focus on the heating and food poverty aspects of it. Our committee engagement has spoken to people and has found that, in particular, the large increases in the liquefied petroleum gas and heating oil delivery costs are really impacting families and farmers because it is unregulated. Even in Bridgend, which is far from being one of the more rural areas of Wales, there are 2,000 properties that this impacts, and the people who live within them are really struggling. So, what is the Welsh Government doing to support rural off-grid properties, and are there are any plans to extend any support that you are giving?

Thank you. So, yes, we know we're faced with a really difficult time at the moment with the cost-of-living crisis, and you've mentioned particularly energy and food poverty, and people who are off-grid, particularly in our rural communities. The UK Government do hold the majority of the levers, and we do welcome the support that they have brought forward, but we're asking them, obviously, to go further and to do more to support our households. You'll be aware, in relation to food poverty, the Minister for Social Justice leads on that, and I work very closely with her in relation to that.

From an energy point of view, certainly, farmers are—. We say it's the three 'Fs'—it's feed, fertiliser and fuel. From an agricultural point of view, those are the three areas that we are most concerned with. So, I think the main thing I've done to support agriculture is to keep the basic payment level the same. There's been a significant reduction in the budget in England last year—I think it was about 20 per cent this year; it's anything between 20 and 40 per cent, and you can see that the farmers are not being supported in the way they are here in Wales in England. You'll be aware that the UK Government have, as I say, made some announcements recently, but, in relation to energy, I think the thing that we need them to do the most is to have a lower price cap for lower income households to ensure that they're able to meet the costs of their energy needs not just now, but in the future. We've asked for a significant increase in the rebate paid through schemes such as the Warm Home Discount Scheme for instance.

So, in relation to agriculture, as I say, I think keeping the BPS is really important, but we are monitoring very closely, particularly officials, and Vicky's on the line, and Vicky attends several official meetings around the support for agriculture. I have regular meetings with UK Government Ministers, also with our stakeholders, with farming unions and food processors. I recently met with the banks, because it's really important the banks understand the pressures our rural communities and rural businesses are under.

Thank you. So, just to clarify, then, because, obviously, we've heard that, in some cases, the cost has tripled, and that payment has to be made upfront, and a lot of people just don't have, sometimes, the £1,000 there to be able to do that. So, just to clarify, is there anything coming in the short term to help with that?

You mean in relation to energy?

In relation to the off-grid properties and the oil that they're having to buy.

For the off-grid properties, we are looking at what further we can do to support. You'll be aware the Minister for Social Justice made an announcement last week on fuel vouchers. Also, we're looking obviously within—it's based in Wrexham—the DAF, the discretionary assistance fund. There is support that can be included there for off-grid homes particularly, for rural households, with costs of both fuel and if they need a boiler repair, for instance. They could access funding through there.

Okay, thank you. And my last question—. You mentioned that you collaborate with other Ministers on the food poverty. You attended the round-table on food poverty in May, so we just wanted to ask what changes the Welsh Government is planning to make on policy following the feedback received from external organisations at that meeting that you attended.

So, as I say, this was led by the Minister for Social Justice, and I think what that food poverty round-table event was primarily for was to underline that food poverty is about affordability and not accessibility. So, the most immediate food threat for people in Wales, I think, is the impact of the cost-of-living crisis. That's been caused by rising prices; I don't think it's about food supply, for instance. I think it was really important that I attended there, to meet with the stakeholders and the organisations who are obviously supporting people who are in food poverty. I think what we need to do, really, is maximise income for these people. It's really important. Food supply is not an issue; it's the cost of the food. And we know, don't we, people who—. If you've got food poverty, you're living in poverty. And if you're spending—. For people who are more well off, I think, of their disposable income, it's about 10 per cent they spend on food—massive choice. We all know, if we go to the supermarket, there's a hundred different types of one product that we can choose from. But for people who are in low-income households, they spend roughly twice that level of income on food. So, I think it's really important that we support people to make sure they are maximising their income, and that's what certainly the Minister for Social Justice has been doing. The round-table also focused on where that Welsh Government funding should be directed to be most cost effective. And it was very good to hear about the impactful way that the organisations feel they can help people from low-income households.

Okay. Thank you, Minister. Thank you, Chair.

Thank you, Sarah. I'll now bring in Hefin David. Hefin.

Can I ask the Minister for an update on her discussions with the UK Government and the food industry to mitigate the impact of the war in Ukraine on food supply chains and the cost of food?

Yes. I'm having regular meetings with UK Government Ministers, and I think we are due one very soon. They're led by Victoria Prentis, who's the Minister of State in DEFRA. I also meet, as I said before, regularly with people from the agricultural, farming unions, from the agricultural sector, food industry, food processors. Officials meet regularly as well—very regularly, every two weeks—with major food retailers. I've met with the supermarkets as well. It's really important that they understand—and I think they do—that if they can maintain their value ranges, for instance, that does allow people to have more choice. They need to make every effort to keep price increases to a minimum. We do know, of course, that cost pressures are impacting the entire food supply chain, and, of course, suppliers can't always absorb all the costs.

In relation to Ukraine, I think it's fair to say that it's focusing on a couple of ingredients—so, sunflower oil is obviously a major concern, and other cooking oils. Ukraine provide 85 per cent, I think it is, of global sunflower oil. We don't know how long this war's going to last in Ukraine. It's obviously had an impact on the sector this year. It will probably have an impact next year as well. So, I think it is really important that we continue to have those discussions, particularly around food oils. The UK is pretty self-sufficient in wheat production. But, of course, for some countries, they rely 100 per cent on Ukraine, and I do keep reminding the UK Government we do have global responsibilities here. So, there are countries in Africa—. For instance, I was reading something the other day about India. They really rely on Ukraine for their wheat. So, we need to make sure that we're, as I say, taking those global responsibilities very seriously and helping too. But there are many conversations going on at an official level. There are a couple of groups that Vicky attends on a fortnightly basis, and there are some on a monthly basis, to make sure that we're really plugged in, because, of course, the food supply and food system is very integrated right across the UK. We're not on our own here at all.

How is taking that with the cost-of-living crisis affecting the development of the agriculture Bill?

So, I suppose, the major thing is that we've maintained the basic payment scheme, and that we're encouraging, within the agriculture Bill, the focus on sustainable food production, because we've got to tackle the climate emergency as well. If we don't tackle the climate emergency, we really would have concerns around food production. So, I suppose, for me, the main thing in the agriculture Bill is that focus on sustainable food production. I mentioned the basic payment scheme and continuing that until the end of 2023. I think that's provided much needed stability for our farmers here in Wales. As I say, I've not reduced it in the way it's been done in England. They know that that's going to be there until the end of 2023, while we're developing the sustainable farming scheme. There'll be no cliff-edge drop in funding; I've maintained that, for the last five years, that just would not happen here in Wales. So, I suppose, that's the main thing, and the climate and nature emergencies, obviously, really threaten the sustainability of agriculture. So, that's the main focus, I would say.

You cut out there—

Sorry.

—but I think it was only me, because everybody else froze as well. Can I just ask about your support for the farming industry and how it's coping with the squeeze on margins due to increased input costs, and what support is being given there?

I've mentioned that the basic payment scheme is the area that they know they've got stability. I've had discussions with the farming unions, obviously, and with individual farmers as well. I was on one farm—I think I may have said this in the Chamber—where they'd bought their fertiliser, and the price had gone up so much in a fortnight that they didn't know whether to spread it or sell it, and that's really concerning. I mentioned that Vicky goes to regular official meetings. There's an agricultural market monitoring group that she attends, and that has a focus on the rate of inflation of input costs via that group. We're not currently considering a domestic offer of financial support in relation to fertiliser prices, because I think they are starting to stabilise now, but, clearly, it's something that we've kept an eye on. DEFRA also started a fertiliser taskforce. We had a little bit of difficulty getting representation on that group, but we managed it, and, again, Vicky attends that every couple of weeks. There's also an agricultural food supply chain group. So, we're keeping a very close eye and having discussions here in Wales with the sector to make sure that they are managing, that they are looking at how they use that fertiliser. I know there's a hub that's been brought forward that farmers can access to get advice, and we can signpost them to other organisations that will be able to help them.

And, last question—. I think you did just finish there, didn't you? Yes. I wasn't interrupting?

No.

Okay—it's hard to tell on Zoom. Just a question about the European Commission announcement that there's an emergency measure to allow 5 per cent of the available European agricultural fund for rural development funding to be supporting farmers and food businesses with those increased input costs. Will this be used to help Welsh businesses?

Well, unfortunately, because we left the European Union, we didn't have that funding. Because we've left the European Union, we're not part of the new rural development programme, which is where that 5 per cent would sit. So, unfortunately, the UK Government haven't had access to that funding.

So, it doesn't apply. Okay, that's helpful. Thank you.

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

Thank you, Chair. Morning, Minister.

Morning.

A bit of a curve ball to start with. I met with a business regarding the importation of eggs for hatcheries in the United Kingdom for shoots, and, obviously, given avian flu, there's been a decrease from France predominantly, but the UK Government were working with their counterparts in Europe to look at a derogation to allow them to come in. The chief veterinary officer in the UK Government had approved it. Is that something that Welsh Government would be looking to approve as well to support businesses here in the UK? I know that the CVO isn’t with you on there, so possibly I could direct it towards you.

It’s fine. I had a meeting with the CVO last week around that. I have got another meeting—I think it might be this afternoon or it may be tomorrow morning, depending on my diary—to discuss the next thing. I’ve had advice; I do have concerns. Just last week, we had, I think, either one or two more incidents of AI in England. I’ve never known AI to continue this long into a year—it started earlier last year, as you know. So, I do have some grave concerns. As I say, I met last week with the CVO and some of the members of her team. I gave them a list of questions, which we'll be discussing later.

There we are. Thank you. That's a helpful update. Thank you, Minister.

Moving on to fisheries, could I get an update on developing a long-term European maritime and fisheries fund replacement scheme, and could you confirm that such a scheme will be developed using powers conferred in the UK Fisheries Act 2020?

EMFF replacement funding proposals for 2022-23 are well under way—they’re being developed—and officials are continuing to engage with stakeholders to ensure co-production of the new Welsh marine fisheries scheme. That will obviously support various commitments in our programme for government. It will contribute also to the Welsh national marine plan and the Well-being of Future Generations (Wales) Act 2015 as well—the absolute principles and specific commitments—along with the commitments we’ve also made in the joint fisheries statement and the fisheries management plan. I’m sure you’re aware the UK Government allocated £6.2 million over three years to the Welsh Government for this, and obviously that will enable us to make some really positive change, I think, to the marine and fisheries sector going forward. We mustn't be disadvantaged here in Wales in relation to fisheries and so it’s really important that the scheme is appropriate and works for everyone. We will absolutely be delivering that.

Thank you. Can I ask for the remit and membership of the new ministerial advisory group for fisheries and how, if at all, this differs from the previous Wales marine fisheries advisory group?

You'll be aware that when the chair’s tenure of WMFAG finished, I decided to have a radical change, if you like, of the group. We’ve left the European Union; fisheries is having a radical change as well. So, I thought it was really important that the new group reflected our new world, if you like, in relation to fisheries. So, I decided to move to a different approach. I think it was really hard for one group just to undertake all the functions that WMFAG were responsible for delivering.

I’ve committed to hold the meeting of the new group before the end of this summer term, before recess, and that will be taking place. I haven’t decided on the make-up of the group yet. I’m waiting for some further advice. Gareth Bevington, who’s with me on the call, and I will be having a further meeting next week to discuss that. What I want to really do is see a broader range of people sitting on that group, a broader range of views. Marine and fisheries is a very wide sector and I think sometimes the membership of WMFAG is a little bit narrow, so I think it’s really important that we get a much broader reach, if you like.

My officials will chair it—that’s one thing that will be different—or myself, if I feel that’s necessary. It will advise both me and officials on a broad range of strategic fisheries issues. We’ve now got the joint fisheries statement for, instance—that’s new—so, that will be something that the new group will advise me on. We need to deliver the co-management of our Welsh fisheries, so it’s really important that that’s discussed at this group too. I’ll give you an example: I brought forward the Whelk Fishing Permit (Wales) Order 2021 earlier this year and that was developed outside of the old WMFAG model, so I envisage that that’s how we will go forward. I think if you look at the whelk Order, that was absolutely understood to be an exemplar of fisheries management and I think that’s a really good basis to form this new group on.

Thank you. You did mention it, but I didn't make a note of it; when are you hoping to hold that first meeting?

Before the end of July—next month.

End of July. But the make-up of it isn't yet decided.

No. I'm expecting some advice by the end of this week, and Gareth and I will be meeting next week. It will probably be the middle of July, actually, Sam.

Okay. How long has this been in the process of being formulated? And we're still hoping to hold a meeting within a month's time.

No, we're not 'hoping to'—

No, but we haven't got a list of who will be attending yet.

No, not yet.

Doesn't that leave it a little last minute?

No. That's how Government works, I'm afraid, Sam. It's been a priority for this term and we will be there. I'm not 'hoping' to hold a meeting; I will be holding a meeting.

Okay. Thank you, Minister and Chair.

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

Diolch, Gadeirydd. I've a number of questions around animal welfare, but in the interest of time, because we'd be here all day if we were pursuing every issue, I want to focus on dog welfare; I'm sure the Minister suspected that already. However, before I begin that set of questions, I know there are a number of Members on this committee who are interested in glue traps in particular. We've seen recently enacted the Glue Traps (Offences) Act 2022 in England, which has largely banned glue traps there. Will the same provisions be included in the agriculture (Wales) Bill? I'd be interested in whether the Welsh Government intends to ban the sale as well as use of glue traps.

It will be included in the agricultural Bill. It is my intention, as I say, to introduce legislation to ban the use of glue traps in the agricultural Bill. As you say, in England, they're introducing similar legislation, and also in Scotland as well. I think once the indicated ban—so, at the moment, obviously it is only an indication that we've had from England—has been passed in law, it may be possible to introduce restrictions on the sale of glue traps, because I think that would really further aid enforcement. So, that's what we're currently looking at.

Thank you for that, Minister. If I move on to dog welfare, if I could start by asking how the Welsh Government is promoting awareness and education around the illegal activity of dog ear cropping.

It is illegal, obviously, but unfortunately, it's not illegal to import and sell dogs with cropped ears, and I think it's really imperative that the UK Government do deal with this, because of course, once a dog's here, there is nothing we can do, really. It's illegal in this country, but clearly, it's not in others. I have to say I was looking on social media as the weekend, and it was really frightening to see people and celebrities with dogs with cropped ears, because it just sort of normalises it. So, I think it is really important that the UK Government do get to grips with this. It's a matter of international trade, which is reserved. I do think, in fairness, DEFRA absolutely recognise that and they want to do something about it.

In relation to raising awareness, I know officials recently met with both Hope Rescue, an organisation you're very familiar with, and the RSPCA. They are going to launch a campaign and once that campaign is launched, we will absolutely be supporting it; we will use our social media channels to do that. We've also got our local authority enforcement project, as you know, and we will be supporting the campaign there as well. I think, talking to vets, particularly, they are increasingly seeing dogs with cropped years. I just think it's very worrying, and as I say, when you see it on social media and so-called influencers using or putting photographs up of cropped-ear dogs, it does really worry me. But hopefully, the UK Government will bring forward legislation around that. We've got our animal welfare plan, which you're very well aware of, for the next four years now, and we're going to obviously be looking at what we can do in relation to this, but it really is a matter now for UK Government to get to grips with the international trade element of it. I think what we can do is perhaps educate a bit more, looking at it through our local authority group that we have around dogs.

Thank you, and it's encouraging to know the that Welsh Government is looking to do what it can in supporting some of our rescues across Wales who are dealing with this problem. So, that's very encouraging.

They are going to be bringing forward a campaign, which I'm sure you're aware of, and we're very happy to support that as well. I will continue to have conversations, as will officials, with DEFRA. Actually, the chief veterinary officers are all together at the moment meeting, which is why Christianne's not with us, and I know this is something that they are discussing.

Thank you. Sticking with the physical appearance of some breeds of dogs, this morning, vets from the Royal Veterinary College have said that urgent action is needed to reshape breeds such as bulldogs and other brachycephalic breeds—I hope I pronounced that right; in layman's terms it's flat-faced dogs. They've actually urged people as well not to buy or promote these breeds until their inherent health issues are resolved. Of course, Blue Cross and Hope Rescue are also urging the same. I was interested to know if the Welsh Government has taken any action on this as of yet, or if they intend on taking any action in the future.

I'm not aware of anything specifically at the moment. I will check with the chief veterinary officer, and if there is anything further, Chair, I will write to committee.

Brilliant. Thank you, Minister. To round off my questions on dogs, I don't think any set, really, is complete without me asking about greyhound welfare. We had an inquiry in the Petitions Committee on Monday that sought to seek evidence from the industry itself. In that inquiry, we were told that Caerphilly council was fully behind the intensification of greyhound racing at the Valley track. I was wondering if Welsh Government had had any conversations with Caerphilly council, and if the Welsh Government had a few on this itself.

As you know, the strength of feeling around a ban on greyhound racing is very strong. We've seen the petition, which I'm sure we will be debating in the Senedd in the not-too-distant future. I was very pleased to attend the event that you arranged with Hope Rescue, and they are just beautiful animals. And to see the racetrack in Caerphilly brag that they've got the most difficult bend in, I think, any racetrack in the UK, I think is truly horrific. I think I've mentioned previously, probably in the Chamber, that I've written to the new owner of the racetrack seeking a meeting. I haven't to date had the courtesy of a response, and I've chased it up. I will certainly be having a conversation with Caerphilly council as well. I would prefer to meet the new owner first to see what is planned for the racetrack, but this is an area where I really want to make some progress. You'll be aware that, in our animal welfare plan, we've got a broad range of policies, but specifically around greyhounds, I'm very keen to take this forward.

Thank you, Minister. Back to you, Chair.

Diolch yn fawr iawn, Luke. I'll bring back Sam Kurtz, who's got another couple of questions.

Diolch, Gadeirydd. Minister, just coming back to your answer to Hefin regarding the EAFRD—sorry, there are a lot of acronyms that I've thrown around today; it's terrible—with regard to the RDP funding that we have until 2023, is there any flexibility within this to transfer it to support farmers and food businesses, given the pressures at present?

Probably not, because we've allocated it all, because I'm really keen that every penny is spent by the end of 2023. I'd love flexibility, but I probably would be criticised for that. I don't think that there is. And, obviously, the funding that Hefin asked me about was the new RDP, so, obviously, we haven't got that. But I wouldn't think there would be flexibility, because not only have we allocated, we've probably overallocated, because you do tend to get underspend in some areas—it happens. Particularly after COVID, we saw a bit of an underspend. So, I wouldn't think there is that flexibility, no.

So, that RDP funding until 2023 is allocated, possibly overallocated because of potential underspend, so there wouldn't be flexibility within that to support farmers in the next 18 months.

I don't think so, no.

Okay. Thank you. Thank you, Chair.

Thank you, Sam. You'll be aware of Professor Mark Shucksmith's 'Rural Lives' report, which was actually published, I believe, back in 2021. There were a range of important issues in that report, including housing, employment, business, social care and well-being. Two of the challenges identified were that much of rural work is not good work, with incomes often volatile and irregular, and that there are barriers to entering self-employment and developing rural small businesses. What consideration have you and your officials given to this report, and what discussions have you had with the economy Minister on this matter?

You're quite right about rural communities; there are barriers that urban areas don't have and I think vice versa—I think, probably, there are issues for urban areas that rural communities don't have. I have a range of conversations with ministerial colleagues to ensure that rural communities aren't left behind—I suppose, primarily, I would say, with the housing Minister, because it's really important, from a housing point of view, that rural communities are considered when policies are brought forward.

I don't remember having a specific discussion with the economy Minister on the report that you refer to. I've had general discussions with him about ensuring that businesses in rural communities receive the same level of funding, for instance. So, I remember having discussions around COVID funding, the funding support we brought forward in relation to that, but that was probably with the previous economy Minister, Ken Skates. So, I haven't had any specific discussions on the report that you referred to. I don't know whether Vicky knows anything about that report and whether there's been anything.

Thank you, Minister. Thank you. Good morning, committee. Yes, so, the report is primarily focused on England and Scotland—well, it is focused on England and Scotland. But the report itself does give some pertinent and general conclusions that I think we would recognise as also applying to rural communities in Wales, such as the increased reliance on heating oil, increased numbers of off-grid properties and the issues you mentioned, Chair, as well. So, I think the issues would be familiar and recognisable in Wales, and, as the Minister says, whilst we may not have had conversations about the specific report, because it relates to England and Scotland, the issues are familiar to us and we are regularly addressing across Welsh Government on all of them.

Okay, thank you very much for that. Can I just come back on one other issue, which you were discussing with Sarah Murphy? I know that some politicians are actually asking the UK Government to extend the rural fuel duty relief scheme to Wales. Can you tell us, Minister, what discussions you've had with the UK Government on that issue and whether you've made representations to the UK Government regarding introducing that scheme here in Wales?

I haven't had any specific discussions at a ministerial level. Again, I'm going to have to look to Vicky to see if that's something that's been discussed at an official level.

Thank you. Sorry—searching for the unmute button. No discussions within my team, but perhaps we can undertake to double check and come back to the committee.

And is that something, Minister, that you'd want to make representations on?

Well, certainly, if I thought that it would be beneficial. Again, I met with one of the farming unions last week; it wasn't something that was raised with me, but, if they feel that it would be beneficial, I'd be very happy to look at it. I do have—. In fact, the next inter-ministerial group, DEFRA IMG, where we would discuss such issues, is next month, so, again, it could be something that could be put on the agenda. So, once we've been able to check and come back to you, I will let you know if we are going to discuss it at the next IMG.

Okay. Thank you very much indeed for that. Are there any other questions for the Minister at all? No. Our session has therefore come to an end, Minister. Thank you to you and your team for your time this morning; it's been a very useful session. Of course, a copy of today's transcript will be sent to you in due course for accuracy purposes. If there are any issues with that, then please let us know. But thank you very much indeed for being with us this morning.

Thank you.

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

Welcome back to this committee meeting of the Economy, Trade, and Rural Affairs Committee. We'll move on now to item 5 on our agenda, which is ministerial scrutiny. And in this session we have the Minister for Economy; it is a scrutiny session with the Minister. We'll be focusing mainly on the cost-of-living crisis, and we will likely ask questions on the UK-New Zealand free trade agreement also. The outcomes of these will be reflected in the committee's ongoing inquiries on those matters. Can I welcome the Minister and his team, and can I ask the Minister and his team to introduce themselves for the record? And then we can move straight on to questions. Minister.

Bore da, Chair; bore da to the committee. I'll now hand on to Sioned, Andrew and Steffan to briefly introduce themselves for the record.

Bore da. Sioned Evans, director of business and regions.

Bore da, good morning. Andrew Gwatkin, director of international relations and trade.

Bore da, good morning. Steffan Roberts, deputy director, tourism, development and sport.

Thank you very much indeed for those introductions, and perhaps I can just kick off this session to ask you some questions around research and innovation. You'll be aware, Minister, that I take a very keen interest in this matter. Now, it's quite clear to me that, as a Government, you haven't fully funded the £85 million recommended by the Reid review. Can you tell us why you haven't done that?

Yes. So, the context has changed since the Reid review came in. In 2018, when the Reid review was published, we were working on the basis that we would have, fully funded, all of the post-EU funding mechanisms, and that hasn't happened; that has caused real distress across the Government, but in particular in this portfolio. I think you had Lesley Griffiths in earlier, and with the rural affairs portfolio, we're the two with, in many ways, the largest challenge to meet. And as you know, through published written statements on this as well, we used to make a significant amount of that funding available in the research and innovation space. So, the honest truth is that our funding position has shifted since the Reid review, and that's clear and undeniable. With the forthcoming innovation strategy, we'll set out not just our broad approach to innovation, research and development, but we'll also want to use that as part of how we take along our colleagues in further and higher education in particular.

Because we funded those areas to a fairly significant degree for research, development and innovation, there was a challenge then about how successful they were in competitive UK funding pots, and what we absolutely have to do is we have to be more successful across Wales on generating resource from those competitive UK funding sources. So, there has been engagement with officials and myself with Innovate UK and others, with the Department for Business, Energy and Industrial Strategy as well, and also directly with George Freeman, who is the Minister leading on science and innovation in BEIS itself. But we can't simply do it on the basis, I think, of me saying, 'Wales deserves a share.' I think we certainly can and should make arguments about the way that UK funding pots are actually allocated. It shouldn't simply be on continuing to give money to the golden triangle around London and Oxbridge and some parts of Scotland that do significantly better than the average.

We've also got to be able to point out that there is real excellence in the research, development and innovation sphere here as well, in both our higher education sector but also, crucially, in the applied part of it, and how that research funding is used, from academic into practical application. We have really good examples of that, for example the semiconductor cluster, which is a globally recognised cluster for bringing together business, industry and academia as well.

You've referred to the innovation strategy. Can you give us an update on your time frame for this new strategy?

Well, without spiking one of the questions that I'm going to be asked this afternoon in the Chamber, yes, we are looking to have a draft for consultation before we go to summer recess, and then we are looking to have a genuine consultation over the summer, and then to be able to gather together the response to that consultation and to launch a strategy before the end of the calendar year. The earlier before the end of the calendar year the better, because I'd like to have a strategy launch before we get to the final budget as well, because I think that will help, and that will be an innovation strategy for the Government, not simply for my department.

Now, you've mentioned that the funding windows have changed since the Reid review, but how will you as a Government support researchers here in Wales to be more successful at getting funds out of UK research?

Well, I think the strategy will help us to be clear about what the Government wants to see happen, and there's a sense that that is important for people, both in the private sector as well as in higher and further education as well, so I think that will help. It is also then the direct conversations that we're having about the recognition of excellence that exists beyond areas that have been very successful in getting research funding in the past. Now, this isn't saying that Oxbridge and London institutions don't have high-quality research—they absolutely do—but the challenge about giving money to where it's gone typically is that you're unsighted on where excellence exists somewhere else. That is partly about us making it clear that there is excellence, so that's partly about our chief scientific officers network as well, but it is also about the direct engagement Ministers are having, and the recent research assessment excellence exercises that look at the framework do show that there is real excellence across the higher and further education sector here in Wales, HE in particular.

So, it's about making the case that excellence should be recognised where it exists. There should be funding outcomes, and, frankly, the sector itself will need to invest in engaging in a competitive process. Because we've allocated funds in a different way in the past, then, actually, that choice not to take part in all of the competitive bidding processes that have existed means that the skill and the competitiveness you need to have bids that get through those gates isn't as developed in the sector here in Wales as it will need to be. So, there is some catching up that needs to be done. It's partly about the Government. It's also partly about the university sector in particular, but not just them; it's also about the private sector as well.

And I know that Hefin David wants to come in on this point as well. Hefin.

Yes. On the Reid review, I just wonder if the Minister has responded to Professor Richard Wyn Jones, who said that he felt the Welsh Government had been systematically undermining the research base of Welsh universities with a 'massive real-terms cut'—it's the words he used—and he said that Wales gets 3.1 per cent of the spend while having 5.9 per cent of the population, a gap worth £153 million a year, and he felt Reid's purpose was the address that. Have you had any conversations with Richard Wyn Jones, because I know that his view, although quite vituperatively put, actually reflects some of the feeling in the university sector with regard to Reid?

I don't share Richard Wyn Jones's view, but I recognise the way that he's put it is provocative and he's not unaware of that. But I know there is also a concern that we should be putting more directly into research. But, again, it ignores the reality of how we used European moneys, and those European moneys did go into HE, but also some parts of FE as well. Our challenge now is, because we've got this £1 billion plus gap, and that certainly affects research and innovation funding, we've then got a find a way through it. So, it's even more important we're successful in the competitive funding parts of it.

This will be a regular feature, I think, of every scrutiny committee that you take part in, where people will say, 'Actually, you could get real value for spending money in this area.' It's almost always a fair case that is made. There are very few examples, I think, of where people say there's real evidence that spending money in this area will have a return—. It's almost always the case that you could make a real case for that, and yet, actually, we have reduced spending power across the Government, not just because of European funds. So, it's even more difficult to prioritise, but the innovation strategy, I think, will be helpful in setting out what our mission is. There is an honest and a constructive conversation to be had about the scale of research funding that goes into both higher and further education, the Welsh Government's part in that and what we can do to make sure that we are being successful in all the funding avenues that are available.

Diolch, Cadeirydd.

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

Thank you, Chair. Good morning, Minister. I'm going to start off with some introductory, overarching questions on the cost-of-living pressures, but I'm mindful that my colleagues that will follow me will have specific questions regarding the impact on businesses, different sectors and the workforce. So, I'm going to try and trickily negotiate this so as not to cross over into their lines of questioning.

If I start with the fact that the UK Government, of course, announced a range of cost-of-living support measures on 25 May, what assessment would you make of those measures? Has the Welsh Government identified any gaps in the support that it will look to address?

I think the starting point is that it was a step in the right direction. So, having been told there was no way that a levy could be introduced on the excess profits made from oil and gas mainly, but broadly in the energy sector, to then shift that position was a step in the right direction. The challenge is how that money is being used, but also some of the gaps in the way that some companies are able to move away from paying the levy. I think there's essentially an opt-out and encouragement for more oil and gas exploration. There's a challenge there about net-zero expectations and investing in a more renewable and sustainable future. So, that's a concern in itself. There's a policy concern there.

When it comes to how the money is being used, we think it's a positive thing that there'll be some help for households with spiralling energy costs. As we know, about 45 per cent of all households in Wales are likely to be in fuel poverty following the price rise in April, and that's likely to worsen come the proposed increase in October. So, the steps that have been taken aren't, in themselves, going to be enough. But in terms of some of the gaps, we've already indicated the £380 million we've already provided and, as I said in response to Hefin David's question and also to Paul Davies, that there is a reducing value to the Welsh Government budget. Inflation directly affects the value of our spending power as well, and the March statement didn't provide money to allow us to keep up with inflation as it was then, never mind as it is now and is likely to increase.

I think the other point is that we still think they can go further with the Warm Home Discount Scheme, and, as we have said repeatedly, and the First Minister said again yesterday in questions, we think that the way that the direct funding for households has been provided means that money that should be there for the stated purpose of helping people with fuel poverty and rising costs is going to be wasted. If you can have a second or a third home, you don't need money from the UK Government. If we had provided money in that way, for example, in providing support for the pandemic in a way that was that focused, I think we would have had challenge on value-for-money terms. If that money were not being paid to second and third homes—and I accept that the Chancellor of the Exchequer has said that he will generously donate that public money to charity, but that isn't the point and the purpose of the money going out—it would be better used to support households. As we know, like I said, the pinch is real and the squeeze on costs is real, but equally, and I think understandably, a range of businesses are pointing out that they've got real challenges for themselves as well. The rising costs directly affect businesses of all sizes, and if they claw that money back that we don't think is needed for second, third and, essentially, multiple home owners, you could then use that money in a different way, either to support households or potentially to support businesses that are really facing a squeeze as well.

Thank you. Obviously, the nature of the cost-of-living pressures are cross-cutting, aren't they, so what work are you doing with other Ministers to ensure that the needs of workers and businesses are considered across Welsh Government's policy development? Because the narrative has been very much about the impact on households, hasn't it, so I'm keen to press you on workers and businesses.

That's definitely been part of our conversations within the Government. We don't just talk about the direct household pressures; we do regularly talk—and it's been part of the conversation I've had today with directors—about the reality of cost pressures on businesses. It was part of the conversation I had yesterday with the construction forum about the reality that inflation and energy price issues really do affect them as well, and I'm sure it will be part of the conversation we have with a range of our fora. For example, I'm meeting the visitor economy forum next week, and I'm robustly confident that this will be part of the conversation that we have. I understand that, in evidence you've had as well, a range of business groups are saying this is a direct impact for them, too. So, it does come up as a regular feature of what we're looking at.

Our challenge always is how we use the resource we have to make the biggest difference, and the honest truth is that the biggest economic firepower here is with the UK Government, and it would be much better if there was a recognition that this is a UK-wide problem and if there was a UK-wide answer that was supported and underpinned by the UK Treasury. Otherwise, if we want to provide more support in this area, it would bluntly come from the reality that we'd have to not fund other areas as well. So, we'd have to reduce spend, and, if we did that, I fully expect that any and every subject committee would ask how and why we decided to reduce spend in other areas that have a real value to them as well. So, there is no get-out clause for the Government, but the helpful thing is that we've got an approach where we regularly talk to people from the business side, trade unions and, indeed, local authorities and others as well. I think that join-up is genuinely helpful for us, although it doesn't get around the basic challenge of costs are rising, there is a reducing amount of money, and it affects not just consumer behaviour and people's willingness to spend money in certain areas, but also, for a number of consumers, just their ability to spend in that area.

Thank you. And a final question from me on unemployment. The Bank of England has predicted that unemployment will start to rise from the end of this year until the end of 2025. How are you preparing for this scenario, and to what extent are the programmes that you have in place sufficient to address this?

You're right. One of the features of coming out of the COVID pandemic was that, part way through the pandemic, we thought at the end of it there would be significant unemployment, and, actually, that hasn't happened to date. As we see, though, some of the challenges we're left with, and the realities, however people voted in the referendum, of our trading relationship with Europe, the business environment is different. We have labour market challenges at present that are actually about not having enough available labour to undertake the vacancies that exist. So, we have record low levels of unemployment, and Wales has lower levels of unemployment than the UK as a whole, which is unusual—that's not been the story through most of devolution. Some of that is because there are fewer people available for the work. There are those people who have returned to Europe and are unlikely to come back and there's the difficulty of recruiting people from Europe, so we can't infill that in the way that we did previously in the past, but it's also the reality that, at the end of the pandemic, a number of people left the labour market, and that's a big challenge for us, and often people at the more experienced end, so people who are nearer the end of their working lives than at the start, and, actually, those skills and experience they have is really important for us. So, a number of people have made work-life balance choices. There's a bit of anecdotal evidence that we've seen more women leave the labour market than men at that end as well. So, those changes mean that the current position is one of not having enough. So, that's part of the reason why the employability and skills plan that I've introduced and published sets out how we want to help people who are furthest from the labour market to return to it. So, that's about people who may have left the labour market or reduced their hours, and giving them opportunities to return. It's also about dealing with some of the longer term skills gaps that we know that exist for those people who aren't economically active. And that's set against the fact that the Department for Work and Pensions have been more active in the recent past in those people nearest the labour market—so, people who are nearly job ready.

And if we do see unemployment rising, then we need to see the DWP maintain its activity and make sure that they don't vacate some of that space. And we need to see how that matches up against the current vacancies that exist in the labour market, because our challenge will be that there may not be lots of entry posts available, and it's part of the reason why we're continuing to invest in skills, both for the current workforce as well as those who we may persuade back into work or enter into the labour market after a long period of not being active.

Thank you, Minister. Thank you, Chair.

Thank you, Vikki. I now bring in Sarah Murphy. Sarah.

Thank you, Chair. Good morning, Minister, or—. Yes, good morning, Minister. I'm going to ask some questions about the cost-of-living pressures and business. The First Minister highlighted in March that any cost-of-living support provided to businesses will need to be done via modifying the existing programmes. So, what engagement have you had with businesses and representative organisations on this, and what proposals are you developing to support businesses through this period?

Okay, so we have provided support already, in terms of the cost-of-living crisis, and the money we provided to households, the £380 million package I referred to earlier—that has a direct impact on households' ability to spend. The households we're talking about—they need to pay their energy costs, but also the choices that we are unfortunately familiar with about households are choosing between heating and eating. And so, actually, the money that we're putting in isn't likely to get salted away into the Seychelles or by people who have multiple homes taking it as a welcome bonus that they can either spend on themselves, having a holiday, or donate to charity. That's money that is likely to get spent within local economies.

The challenge, though, comes in our ability to directly fund or deal with some of the pressures that business stakeholders have because the cost-of-living crisis affects their workers, it affects how people spend in those areas, and it affects them directly with their own costs. If you own a local shop and you have to run two fridges, then the energy pricing really directly affects you as well as your workers and your customers. And then, right up to the top end of intensive energy users, if you're running a steelworks, the energy costs for you are really significant. So, there's a whole range of those things. So, at the steel council at the start of this week, part of the conversation was definitely about intensive energy users, and there it's about getting the UK Government, and not just the Department for Business, Energy and Industrial Strategy, but the Chancellor and the Treasury as well, to move from some of the measures that are being talked about to actually taking more concrete measures, and then at the same time we're going to need to see whether there is really the ability to support businesses at the small and medium end of the scale. Now, this was the subject of conversation between officials and business stakeholders on 8 June. As I say, I expect this will come up in the next range of conversations that I have.

And there is, at the same time, wage inflation, and there is, in some sectors of the economy, a fist fight for labour because of the shortages that exist, and at the same time people are getting squeezed in terms of their cost-and-profit base as well. So, some of this is about the firepower that the UK Treasury has to be able to help those businesses, as well as trying to consider what can we do. But the First Minister is right that if we provide more money to directly support businesses, that will mean they're reducing our ability to spend in other areas. I know we started the topic of today's session by talking about investing money in innovation, research and development. If we want to put more money there we have to find it, and if we also want to support businesses to survive—we need to have viable businesses to get through the current period of time that we're in—then, again, there is no easy choice. But, at the moment, I don't have a sum of unallocated money that I am happily sitting on, waiting to allocate. So, if I do that, I'll have to stop spending in other areas.

That brings me on now, nicely, actually, to my next question, which I'm going to ask because it would be good just, I think, to get it on record and clear this up, then. So, FSB Wales has called for any unspent coronavirus business support funding to be repurposed to support businesses with the cost-of-living challenges. So, what level of funding remains unspent from coronavirus business support packages? And would you consider reallocating it in the way the FSB has proposed?

Okay, so I can't help you off the top of my head with the level of resource that has been either returned or clawed back from the £2.6 billion we used to support businesses. I think that over 300,000 grants were offered to businesses through the coronavirus pandemic, which is an extraordinary level of engagement and support to keep businesses going on top of what the UK Treasury provided through furlough.

What we are looking at doing is, any money that comes back in—and this is a standard response that may bore older Members, but it's true—money that comes back in, that is unspent, goes back into the sector. So, it goes back to the Welsh Treasury, and we then have to make a case for how that money is spent, because there are pressures across the whole Government. Now, of course, I'd want to see money being spent to support businesses, but we talked earlier about some of the choices of households between heating and eating, and there are other pressures on the Government. We've got opportunities to invest in a renewable future with a real economic return, and so we've got cost pressures there, and, if you had the Deputy Minister for Climate Change with his transport hat on, he'd also talk about the resource challenges for Transport for Wales. There are lots of challenges, and so, as an individual portfolio Minister, I'd like to see this portfolio at the front of the queue. But, as a member of the whole Government, there's got to be a whole-Government sense of priority with how that money comes back in. That isn't always a popular response, but it's an honest one.

Sioned, I don't know if you're more on top of the amount of money that might be available, or other steps in terms of conversations that you and the team have been having with businesses on potential areas of support.

Thank you, Minister. We're currently in the process of looking at the grants that went out, and, indeed, some of the criteria that we'd set down for the business support were quite clear. We're looking at that post-completion monitoring, and there will be an element of money to come back to Welsh Government on the back of that, where perhaps businesses weren't as affected as we provided support for them should they be. So, that is still work in progress, and it will continue, actually, over the next year or so as we finalise the money that's available to come back in. But we supported—£2.6 billion-worth of money went out to support over 300,000 businesses during the pandemic, and we obviously have to look at that really closely, about how much of that might come back, and indeed how that could then be used to support wider Government priorities, be it the economy or, indeed, any other portfolio area.

But to help the finance Minister, we'll certainly be pointing out how that money could be used to support the economy with some of our commitments within the programme for government and the way that we find, in the current position, we want to support jobs and businesses.

Thank you so much. Thank you, Chair.

Thank you, Sarah. Before I bring in Hefin David, on that very point, you said, obviously, at this stage you don't know how much unspent money is actually going back to the Treasury. Can you tell us when you will have those figures available, and, when you have those figures available, could you please provide them to us as a committee?

Yes, it's the exercise that Sioned's referring to on looking to see how much money won't meet the criteria that have been there. It'll take time for that to run through, but I'm happy to provide an update for the committee about how that money has been used and money that's been returned, and then there'll be whole-Government choices to make. But, as I say, we'll help the Welsh Treasury in providing options for how that money could be used to support the economy, but there will need to be a whole-Government choice around that. But, yes, I'm more than happy to give that undertaking, Chair.

Yes, that information will be very useful to us as a committee. Thank you.

I'll now bring in Hefin David. Hefin.

Just sticking with the impact of cost-of-living pressures, the hospitality, retail and tourism sectors have been hard hit by COVID, but also have the twin threat now of cost of living and don't seem to have had a break in the last three years. What additional support could the Welsh Government provide to those sectors to support them through those challenges?

Well, in retail, tourism and hospitality, it has been a real squiggly line of unevenness, hasn't it, because on the one hand food and drink retail, particularly local, continued to have significant spend go through it; other areas of more discretionary retail had a much tougher time, and there were real peaks and troughs as we came in and out of different levels of restriction when people had freedom to go and do things. And if you look at the last couple of summers, from the visitor economy point of view, and hospitality is a significant part of that as well, there was so much pressure in some parts because people made an active choice to stay at home, and at other parts of the time, actually, it was just very difficult to travel abroad that we had a real problem in servicing the demand and real challenges with staff. But, overall, you're right, they've been really hard hit, and the events sector in particular. There is a whole range of sectors. That's why we've provided funding to that sector under the broader creative banner, but it has been really, really challenging and I don't underestimate the position they find themselves in.

We do know that they're going to face challenges with the cost-of-living crisis that we are living through. I have a quarterly meeting with the visitor economy forum. I'm meeting them next week, and I know this will be part of the conversation with them. We're still looking to try to make sure that we return to the recovery and improvement plan for the visitor economy and the 'Welcome to Wales' potential and wanting to spread the season out, but that does rely on consumers having the money to spend as well as the confidence to spend it. And we are seeing from the barometers of opinion and confidence in business that there is more concern now about the cost-of-living crisis. It's a bigger concern than a return of the darkest days of the COVID pandemic, whereas actually, six months or so ago, it wasn't there as the same sort of issue. So, it's very much on people's radar and it's affecting their own confidence about their business surviving in the future.

On retail, we're shortly going to launch our retail strategy, which has been co-authored, co-produced by businesses, trade unions and the Government. So, we are looking ahead at what we positively can do within each of these sectors, but there is just no doubt that it's going to be difficult. But, as ever, the levers that we've got about looking to invest in skills and in people and what we're doing with the experience makers campaign, which has had buy-in across the Senedd as well as within the industry itself—there are things we're positively looking to do, but the unavoidable truth is it will be challenging for some of those businesses and some of those sectors.

Do you think the tourism levy needs to be adjusted or plans for its implementation to be changed as a result of those pressures?

No, and I think it's important to understand why. We are going through very early consultation and engagement with the sector on the tourism levy. It's not going to happen in the middle of August this summer. We have been really clear that this is about something for the future, and something that tourist economies in lots of parts of the developed world have as a regular feature, and it doesn't affect consumer spend and it doesn't affect the way that businesses are able to operate successfully. So, I think it would be conflating two very different issues: the tourism levy and what will happen in the future and the immediate cost-of-living crisis. If we're still living with a cost-of-living crisis in 18 months' time, we're in really significant challenge and trouble. The tourism levy is unlikely to come in until towards the end of this term, but it's the early engagement that we're undertaking now that I think is really important to understand the design of it, and I think we have the ability to do that without challenging the sector in a really, really difficult time that they and households face in the here and now.

What about other fiscal measures that might be deployed, such as businesses paying business rates or council tax, for example, in the case of self-catering businesses?

Any of those measures about business support and having reduced levels of business rate payments, well, those are things that we have done for the first half of this year. So, there is help with business rates, there's the broader context of making sure people are paying council tax or business rates as appropriate, depending on their business and what they're doing, but any choice to provide that further support would be welcome, I'm sure, for those businesses, but there's got to be a direct conversation with the finance Minister about the ability to fund those as well, and as ever we come back to the levers that we've got and the available resources. But we know this is a really challenging time. We fully expect that businesses will ask for more help, particularly if we do go ahead with the predicted levels of increase in the capping regime to take place in October, and the fact that businesses aren't insulated from them in the same way.

So, I don't think this is going to be resolved in today's session, because I think we're going to have more not just conversations, but really difficult choices to make, and they'll be more difficult if we don't see a UK Government response ahead of those challenges being real. I'd much rather see action taken now to help save jobs and businesses, rather than doing something in an emergency way if more jobs and businesses are being lost.

And finally, you've mentioned already the support with energy price inflation and small and medium-sized businesses. Did you say that you've had discussions with the steel sector about those, and have you raised those with the UK Government?

Yes. So, I offered and we hosted the UK Steel Council at its meeting on Monday in Cardiff. We asked the steel council to come to Wales because we're a really significant part of steel producing in the UK. So, it seemed appropriate to ask the steel council to meet physically in Cardiff, and it was—[Inaudible.] So, the Secretary of State, Kwasi Kwarteng, attended, and there was, I think, an open and constructive conversation. I'm not telling tales out of school in saying that. It's a regular feature from the steel sector that they want support with the price of energy, not just because they're an energy-intensive user, but also they regularly make the factual comparison that their competitors in Europe, in particular, have lower energy costs. And that would make a difference, not just about the viability of businesses now, but about future investment choices.

So, it's a point that the sector make and it's a point that we make, as indeed do other devolved administrations, on how the sector can be supported, because steel is hugely important to our future economy in advanced manufacturing, in the renewables sector, and taking advantage of the economic benefit that could and should come to Wales from that. So, having a viable steel sector, I think, is a crucial part of Wales's economy, and indeed the UK's economy as well. So, yes, we never lose the opportunity to make those points directly to the UK Government.

Can I ask one more question, Chair? Just regarding—. You mentioned the language of priorities, and, if you cut one thing, you have to—. If you want to spend on one thing, you have to cut something else. What would you say is your key priority in that portfolio as economy Minister?

Well, more and better jobs, and the challenge in doing that in the times that we're going through is really significant. And so I've tried to see the opportunities to invest, but also the support decisions, through that broad lens. So, how do we make sure that we don't see more people losing work, how do we make sure we equip people to be able to undertake the work that is available, to have the skills available to either enter the labour market, or, once they're in work, to carry on improving? So, the personal learning accounts, the money we're investing in the employability and skills plan, the apprenticeships, are very much part of that, because they're one of the levers that we do have available to us here. And the challenge about seeing that continued investment I think is hugely important for the jobs today, but also for the future as well.

It also goes into the sorts of ways in which we use traditional business support, not just from Business Wales, but when there are individual companies who want to make cases for future investment, and always saying, 'How do we get work that is likely to be here in better terms, better pay and work that has a future within it as well?' So, it may sound broad, but I think trying to see it through a relatively simple lens at the start is actually really important, because otherwise I think you can get lost in individual choices without coming back to, 'What's the overriding mission? How do we improve our economic prospects? How do we use the levers we have available, and then how do we have clarity in our mission?' And that's what the economic mission is trying to do for us—to give within the Government something coherent to hang that around, but also an important message for external stakeholders as well about what this Government sees as important, what we are going to invest in, and what we want other people to do as well.

That's a broad message that I think business stakeholder groups, from the Confederation of Business Industry to the Federation of Small Businesses, chambers, and everyone in between and around, have said that they welcome, about the clarity and stability that this Government provides. And I hope that it'll help in the conversation that we need to have with local authority partners around shared prosperity fund objectives as well, because I don't want to see four different economic plans and then a fifth one saying something entirely different to the Welsh Government as well.

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

Diolch, Cadeirydd. If I could focus on the cost-of-living pressures on the workforce. The Wales TUC and Action in Caerau and Ely have highlighted that it's not just the lowest paid workers who are being squeezed by the cost-of-living pressures. So, to that end, what support can the Welsh Government give to workers who earn just above the thresholds to qualify for existing Welsh and UK Government support?

If there was Welsh Government support available—again, it comes back to the point that's been made, and again in Hefin David's recent round of questions about priorities—one of the things about that is, if we spend more money on finding ways to directly support workers, we need to find a way that's within our competence. Say, for the sake of argument, it's to put more money into training support, well, that would need to come from somewhere else. We don't have the ability to deliver a wage subsidy.

If you recall, during the omicron wave, when we didn't get UK Government support, we looked seriously at the ability to provide something that looked like a sort of furlough scheme, a scheme where we could provide a wage subsidy, and actually that was really, really difficult. We couldn't find a way to do that in a way that would have good value for money and we could be clear about how that money was being spent. So, actually, the challenge about putting money directly into the pockets of workers is one where, realistically, that's in the hands of the UK Government, and that's where the most direct routes are and where, actually, the biggest firepower is to do something about it—so, for example, the increase in national insurance, the challenges around levels of personal taxation, including income taxes as well. The biggest levers are with the UK Government. Our ability to vary income tax rates here is always difficult because it affects the way that we're funded as well. So, these are practical challenges for us, and it's why we keep on making the case for more direct support to be provided to working people, and that will directly benefit businesses as well.

Thank you for that answer, Minister. Of course, on the topic of competence, within the devolution settlement, the Welsh Government is able to influence pay and terms and conditions in the public sector. So, coming to your point on the funding and money, if that's the issue, then am I right in thinking or assuming that Welsh Government wouldn't be able to do anything in term of public sector workers, at the very least?

We've obviously got the competence to do that, and we've had different pay settlements. When I was the health Minister, we had slightly different pay settlements to other parts of the UK in the NHS. So, that's why NHS Wales continues to be a living wage employer, because there were deliberate choices we made. The challenge always comes about our financial capacity to do so. Every Welsh Labour Minister would like to give a pay rise to public sector workers that reflected the realities of inflation, and yet we know that the Welsh Government budget has reduced in value since the start of the year. So, that's a very practical pressure.

As a Minister, I've got a small group of Welsh Government sponsored bodies that are directly affected by those public pay pressures. Other Ministers have much more challenging areas with much larger groups of workers and much larger budget consequences. So, it'll be a very difficult round of negotiations between both Welsh Government and also other public sector employers, and local authorities being the most obvious ones, on our ability to meet quite understandable concerns and demands from trade union negotiators. If I was still a shop steward in a workplace, I'd be asking for a pay rise for my fellow workers as well, but we've got to have an open and honest conversation about our ability to do that. What I wouldn't want to see is we sacrifice headcount and the number of jobs to move the pay line forward. But, sometimes, you get to the point of saying, 'What matters more?', given the position that we're in. It won't be straightforward, but I think, from the Welsh Government and public sector point of view, we will be honest and upfront with people about what we can do and what it means.

Coming back to the living wage, and considering your previous answers to the previous questions, has any progress been made in ensuring that organisations in receipt of a significant Welsh Government funding to pay the real living wage—? Has any progress ben made in convincing them to do that?

The Welsh Government continues to have a leadership role here. The Welsh Government is a real living wage employer, as indeed is the NHS, the biggest individual employer in the country, and it's part of what we're doing, for example, in the social care sector about taking that forward, so beginning the implementation of the real living wage, and that will affect well over 100,000 workers in that sector. And what it should then do is mean that, hopefully, people aren't then able to compete on the basis of squeezing wages for workers. We know that has an impact in qualitative care terms as well, and I think that will be good for workers, as well as good for people that they care for as well. Now, that in itself takes a significant financial commitment from the Government to do that, but it's one of the things we are directly doing, and we do know that a number of local authorities over the last five, 10 years have made their own steps forward in terms of making sure that they are real living wage employers as well.

So, within the public sector, we do see that, and that does have an impact in the private sector as well. And it's one of the things that I regularly look for when we look at investment choices in businesses, to look at the level of earnings, the average earnings, within a company, to look at whether they are a real living wage employer, and whether they're making steps to improve terms and conditions as part of their plan for investment and future business. So, it does affect the choices we make, as well as the areas where we have a rather more direct influence as well, which other Ministers are more directly responsible for, but I'm sure they won't mind me speaking positively on their behalf.

Thank you, Minister. And, finally, the committee heard from Citizens Cymru Wales about the Cardiff Bay community jobs compact, and how its voluntary approach can lead to better pay and more stable employment contracts. Has the Government given any consideration as to how you can give support to local initiatives such as this, where the Welsh Government does not have legislative powers?

Again, it's one of the things we do practically do. So, as Ministers, you can change things by directly changing policy. You can change the law, which is an even harder change. You can change things with money, and there's the leadership space as well, and there's the point about saying, 'This is what we value and we think is a good thing to do.' And, actually, in this area, you will find—I don't know quite how closely you follow all of the media and visiting activities of Ministers—quite a lot in that space as well. So, as a constituency Member, some of what you talked about will directly affect me; Cardiff Bay being in my constituency, just to make that clear, Chair, that I'm stepping outside my ministerial role to recognise that. But I have been, as the local Member, at a number of events where private sector employers have positively said that they are a living wage employer. And, as you'll expect, when people issue press releases, they're not always entirely clear about whether I'm there as the Minister or the local Member—it's factual—and my post within the Government.

But you'll also see the other Ministers doing the same things with their local representative hats on, but also as Ministers with a wider brief and role as well. And in the myriad of undertakings that Jane Hutt goes through, you will regularly see her talking about the value of the living wage and wanting to support, recognise and value initiatives like this. So, it's part of the picture. As I said, it's not the hard power of the Government, but something that I think is important for us to keep on doing because I think the leadership example really does matter, as well as what we're able to do with the harder levers that are available to us.

Thank you, Minister.

Thank you, Luke. Now, obviously, I appreciate that you've just said that there are real pressures on budgets, but are we seeing more and more people being paid the real living wage?

My understanding is that when you look at the progress being made, yes, and, actually, when we get the whole of the social care sector to be a real living wage employer, then you'll see that that has improved. And, actually, we've narrowed the gap to the rest of the UK. I have got a figure in front of me—74.7 per cent were real living wages paid in 2015, compared to a UK figure of 82.9 as a whole. Now in Wales, that's increased to 82.1 per cent. So, over six years, realistically, we've seen a material increase in the number of businesses paying the real living wage to their employers. There's more progress to make, but, actually, that does show that real progress has been made. And that makes a difference for every single worker and every single family who now receives an increase in their wage.

Thank you for that information, Minister. I'll now bring in Sam Kurtz. Sam.

Diolch, Cadeirydd. Good afternoon, Minister. In comparison to the Australia deal—I'm going to be looking at the UK-New Zealand free trade agreement, if that's okay—can you outline what assessment you've made with regard to the impact and opportunities presented by the UK-New Zealand trade deal?

Prynhawn da. There is a lot of similarity between the broad markets in the deal, and that shouldn't be surprising, given the Australia deal came first. And it set, if you like, a floor, if not a ceiling. There are some—. I'll bring Andrew Gwatkin in, because his team lead on the analysis, and you know that I write to the committee and provide statements on our analysis of the deal. So, I think there are benefits in the services and the mobility from the New Zealand sector of the deal. The size of the market is different to Australia, of course, and that will reflect what we think the opportunity is. Equally, we think that it's positive that both the UK and New Zealand wanted to talk about environmental responsibilities within the deal as well. I'll hand over to Andrew for, if you like, a comparison between the two now, but if he's not able to do this now, I'd be happy to write to committee afterwards, to see if there is a material difference, and, if so, in what sector.

Thank you. Andrew.

Thank you, Minister. Yes, exactly that—we've already produced our report on Australia, and we are currently producing a report on New Zealand. We've been looking at it through a well-being of future generations lens—so, in a much broader spectrum, rather than just purely in terms of economic impact. But, as the Minister's already said, we see opportunities, potentially in services, mobility, the ability for people who are working to go to New Zealand to spend some time to fulfil a contract or to provide a service. Our concerns are, as we've had with Australia, in terms of TRQs, but it is a different scale, and we have seen the inclusion of additional elements in the New Zealand proposals compared to the Australian. So, we are working on that analysis. We've been asking for additional data from UK Government as well so that we can get into some of the detail around that, and we're looking to produce our report by the end of July on New Zealand.

Okay. Thank you, Andrew. That's very helpful. So, there's a report under way with regard to the New Zealand trade deal, and there's one completed on the Australian trade deal. In questioning the Minister for rural affairs previously, she mentioned a possibility around the cumulative effects of these two new trade deals. So, in terms of these reports that you've mentioned so far, is there going to be any cumulative reporting between the two, or are they situated in silos in terms of each trade deal individually? And that can be for the Minister or Andrew.

So, we provide reports on the individual aspects of each of the deals, and we do an assessment of them, but we are looking at how we could provide a report on the cumulative impacts. So, for example, if you looked at one of the areas of challenge—the tariff rate quotas in agriculture—and then add up what the scale of that is for just Australia and New Zealand, I'm sure that will be of interest to a range of people, but then also if you look cumulatively at what are the opportunities in the services sector and in some areas as well. So, we're looking at how we can do that in a way that's meaningful, but it also depends on the information we get and the exchange of information with the UK Government. And it also then depends on the realistic size and scale of the opportunities. So, we're looking to make progress on information sharing with the UK Government, to understand how it affects opportunities as well as potential challenges for us. I wouldn't say that work is complete yet, but it's certainly in our minds to think about the cumulative impact of these deals, and it goes from not just the deals but then the implementation of it as well. Agreeing the deal itself is one thing; to then implement actually takes quite a lot of resource as well. And it is one of our concerns about the broader programme. I'm broadly in favour of having more co-operation and trading arrangements with the rest of the world, as long as our own interests are met, but you've then got to be able to implement them as well, and we need to see that done properly, otherwise we have something that looks like it should provide opportunities but they may not actually be realised.

Okay. Thank you. So, you mentioned data sharing with the UK Government there. Is there any specific data that you have requirement of that you feel is lacking at present to make more informed reporting?

Well, the HMRC data—access to that would be really helpful for us. With HMRC being reserved, understanding trade flows and the data that goes through HMRC would be really helpful, not just the volume but actually the sectors as well. And that would be helpful not just in understanding the impact of the trade deals themselves, but also our activity in supporting and promoting activity in those areas too. So, to understand the level of export and import figures being undertaken in some of these markets would really help us, I think, to identify opportunities, as well as risks. So, that in itself would be particularly helpful as an example. And there's a broader point about, as we're going into negotiating new deals, how we can have a very informed position with a negotiating mandate. But, certainly, on that, if we can make more progress on some of that, I think we can provide greater value to businesses and jobs here in Wales.

Thank you. So, you talk about the challenges, as well as the opportunities, but would Welsh Government be in a position to support any industries potentially affected by the trade deal?

Well, that depends on the scale of the impact. So, trade deals almost always, because of the scale of the negotiation that takes place, have a direct impact on devolved competencies and workers and businesses here. But the ability to conclude a trade deal is with the UK Government, and then we have obligations to follow through—international legal obligations included in trade deals as well. So, once that's there, it then also depends, given the point about implementation, on our understanding of the impact for each sector, what we're able to do to support it, both from a financial point of view, but also about what's lawful as well—so, some of the subsidy control challenges and what the regime is both within the UK and the agreement with those other countries. So, I'd like to be able to say, 'Yes, and here's how', but it will be quite bespoke, depending on each of those areas and the scale of challenge or opportunity.

Okay, thank you. That is helpful. And, in terms of any assurances you've had from UK Government with regard to how Welsh Government and devolved governments will be involved in committees or joint working groups established to support the implementation of these FTAs, have you had any assurances? And what will that structure look like, if you are aware of it?

We have repeatedly asked, and made, I think, an entirely logical case and reasonable case, that we need to be engaged because of the impact on devolved responsibilities. As yet, unless Andrew's got an update, we don't have a structure, and we don't have an understanding of the way in which the implementation committees will work and what that will mean for us, because it will directly affect us. If you were talking to a Minister from Northern Ireland or from Scotland, I think they'd say the same thing, saying 'This matters to us, and we need to understand how we're going to be engaged'. So, it is a cause of some frustration that this has not happened yet. But the opportunities, for those people who are entirely positive about each of these trade deals, for them to be realised, we've got to be engaged, and, for people who are more concerned about the risk side, we've got to be engaged. Like I say, it's frustrating, but if the committee were minded to make a recommendation on this, that's fine. I'm entirely relaxed about those things, but it really does depend on there being a shift in approach at the UK level to make this real. And I think that is not just a point about culture and attitude; I think there's a very practical point, which is why I mentioned the point that implementing the trade deals requires resource as well. You have the same people in your team doing the negotiating on a future deal as the people expected to be doing the implementation. You'll reach a point where you can't carry on doing more deals because you've got to get on and implement, or you just need to leave those potential deals on the shelf, and I think that has other consequences.

Okay, thank you. And, for the last question—I may know your answer to this already, Minister, given some of the answers you've given in this session previously, in the questions that I've asked—are you satisfied with the level of engagement from UK Government around trade deals, and not just in the implementation phase but previously in the negotiation phase, and were Welsh Government representations factored into the negotiations and final agreement?

I'll ask Andrew to share his perspective, as part of the team that's been doing practically some of this between officials. In part, it's been positive. So, there has been engagement through negotiations in areas where the UK Government recognise we have an interest. The challenge comes where we say, 'We've got an interest in an area that is reserved and has a direct impact on a devolved area', and they're still about working some of that through. We're hoping to make more progress on the sharing of information as well, which would need to be on a confidential basis, and we're entirely realistic about that as well. The Welsh Government has never leaked information that's been provided to us in confidence around any of these negotiations at all. But, at official level, where there's a recognition that we have direct engagement, the engagement has been constructive, and I'd want to be positive about that. The challenge comes in the level of detail we're given and, then, when it comes texts, sometimes the amount of time we have to respond to those as well.

But I think it's honest to say that there has been an improvement in the way in which we've been engaged. I think this still could happen, but I’d say, on the representations we’ve made, they’ve certainly been heard, but there have been different choices made. So, they couldn't have misunderstood our perspective on the impact of the Australia trade deal on agriculture and its potential and some of the animal welfare standards, where there are practices that are lawful there that certainly aren’t lawful here. They understood that very well, but they made a choice. So, it’s one thing to be heard; it’s another thing to have agreements, and, as ever in a negotiation and in making representations, you don’t get every single thing that you want. But I’m not trying to be as negative as you might otherwise have expected, but there is a level of constructive engagement around some of this stuff that I’d want to recognise and we think actually is a good basis to do more and to be genuinely constructive about the future of both the negotiations and also the implementation where we do still need to make real progress.

Excellent. Could I just ask, is that on a ministerial level or is that on a civil servant level?

So, we’ve had ministerial engagement. There’s a ministerial forum for trade, and we have had negotiations and I’ve made direct representations on a range of those points directly around that. I spoke with Greg Hands, and also now with Penny Mordaunt, as the Minister, who I have those conversations with when they come up. So, yes, we have ministerial engagement. I always think that could be better, but, really, I think it's the engagement and the sharing of information with our officials that will further improve what we can do in terms of the negotiating mandate and the conversations during negotiations. Crucially, I don't think there'd be necessarily ministerial committees that wanted to hammer out all of the details of the implementation—in answer to your previous question. That’s really about our officials being properly engaged in that. But, like I say, it’s more glass half full than half empty, but the half-empty part of it really does matter.

Okay, thank you. I appreciate the analogy. Chair, back to you.

Thank you very much indeed. Now, during this session, Minister, you've made it absolutely clear that your main priority is to achieve more jobs and better jobs. And in response to Sarah Murphy, you did say that, obviously, you don't know what the economy is going to look like in 12 months' time. So, I presume, as a Government, you must be looking at different scenarios when it comes to the economy so that you can plan ahead in terms of what support you need to provide to businesses, going forward. What work are you doing in that area as a Government?

So, I recently announced the money we're putting into the Business Wales service—that's practical support that's provided to businesses. And you'll be aware, I'm sure, in the committee of the independent assessment undertaken by Cardiff Business School that recognised the value of the Business Wales service, both in terms of business survivorship and also growth. I'm sure you'll be aware of the value that is placed on that by businesses themselves. And it's interesting that the Federation of Small Businesses have made the case repeatedly that a Business Wales service should be provided to regions within England as well, because they recognise the value of it.

When it comes to future forecasting, we do engage with a range of sectors not just to understand the here and now, but to look at the future in terms of opportunities. So, it's multifactorial and multisectoral in terms of the approach we need to take. Twice a year, we'll do some more formal testing on where we are with taking forward the mission and conditions to see if there are things we need to do. And the challenge always is that we can't set out, 'Here is a five-year plan for the economy and here is what we will achieve', and then require everyone to do it, because we're going to need to adapt to some of the changing circumstance and positions.

So, with Horizon UK, for example, we may get associate membership. That's dependent on negotiations between the UK and the European Union. If that doesn't happen, there needs to be a plan B and that will have a direct impact on research and business activity as well. So, we're still having to adapt to arrangements in one policy area, as well as the broader—. So, even if there is a recession, we'll also need to see what action the UK Government is prepared to take. And even if there isn't—and I hope there isn't, because if there is a recession it'll mean real misery for businesses, and households will be directly affected—we know that inflation is likely to keep on rising. We know that there is likely to be an increase in the energy price cap, and that, again, really does depend on choices the UK Government are prepared to make and having early enough sight on those to be able to then see how we use Welsh Government resources around them as well.

Okay. Thank you for that. Are there any other questions for the Minister? No. Our session has, therefore, come to an end. Can I take this opportunity on behalf of the committee to thank you and your team for being with us today? It's been a very useful and productive session, so thank you very much indeed. A transcript of today's proceedings will be sent to you in due course for accuracy purposes, and if there are any issues, then please let us know. Thank you very much.

Thank you very much. Have a great day.

Thank you.

We'll move on now to item 6 on our agenda, and I propose, under Standing Order 17.42, to resolve to exclude the public from the remainder of the meeting. Is everyone content? Yes, I see that everyone is content, so we'll move to our private session.