National Assembly for Wales

Bore da. Croeso. Good morning and welcome to the meeting of the Public Accounts and Public Administration Committee. We've not received any apologies for absence. Do Members have any declarations of registrable interests that are not already on the record that they wish to declare? No. Thank you very much, Members. 

Simultaneous translation, as always, is available from Welsh into English using the downloaded Zoom app only. Interpretation will not work when accessing the meeting through an internet browser. Attendees who want to hear the English interpreter when Welsh is spoken should ensure that 'English' is selected from the ‘Interpretation’ menu option at the bottom of the Zoom application window. Attendees who do not require interpretation should ensure that ‘Off’ is selected from the ‘Interpretation’ menu.

Members, we have a number of papers to note. We have the Welsh Government's response to the committee's report on care home commissioning. The Deputy Minister for Social Services responded to our report, published in September 2022, accepting 10 of our 13 recommendations made in the report. As I'm sure you're aware, we'll be debating the report in Plenary this afternoon. Without wishing to pre-empt that debate, does anybody have any comments they wish to make regarding the response received? Mike. 

On recommendation 8 that they rejected on high-cost grounds, could we ask them if they could identify what the costs are? They say, 'We reject this because of the high cost'. I don't believe that there's any cost at all, because the data is there anyway and you just need to make it available. But, if they say it's high cost, can we ask them to identify what the costs are? They must know the costs because they couldn't say they were high if they didn't know them. 

That one line. We have a preference that it should perhaps be considered a cost-efficiency done properly, not a cost. 

But, if we can ask them how they calculate that high cost. 

Yes. We had a few calls and we spent an hour yesterday afternoon going through it and preparing something, but we'll add that to the comments on that section. 

Thank you.

Members, any other comments on the response received? My only other comment, which I picked up on, was in reference to our recommendation 2, in particular, and 3, which are about involving people with lived experience, and that was accepted. But then, the process it described for involving people was the antithesis of what the Social Services and Well-being (Wales) Act 2014 says should be happening, so I'll be mentioning that. So, are you content, therefore, to note the response and have further discussion about how we may wish to progress this, once the debate this afternoon has taken place? Thank you. 

The Auditor General for Wales wrote to the Permanent Secretary on 1 September setting out his findings and recommendations arising from his examination of the setting of well-being objectives. A copy of this letter has been included in your papers today for your ease of reference. Members noted the auditor general's letter at our previous meeting on 21 September and agreed to have a further discussion on these issues once we'd seen the Permanent Secretary's response. Adrian, would you like to comment, as auditor general, on that response? 

Thank you, Chair. Just briefly, just to remind Members of what I said when we tabled our letter a few weeks ago, the duty on me at this point in the cycle is a very specific one: to assess the application of the sustainable development principle in the setting of the well-being objectives by the Government. And, in doing so soon after a general election, I appreciate that that process necessarily interacts with a political one of the election and the establishment of any new government. Nonetheless, the Act is very clear on the duty that it places on me, and you'll have seen from my letter that we did not feel there was sufficient supporting evidence to show how that principle and, by implication, the five ways of working, had been applied in the setting of the well-being objectives. 

The Government's response, understandably, draws attention to something that we said in our letter also, which is how the objectives have been placed very much at the heart of the programme for government, and I think I'd give the Government credit for that. But, as I say, the duty on me is a much more specific and precise one. To be honest, from this point on, I'm not sure there's anything to be gained by further debate on this particular issue. It's more important now that we turn our attention to our assessment of all the other bodies covered by the Act, and the steps that the Government will be taking to take forward its well-being objectives. But, I hope that the lessons that we flagged from our assessment this time round will be learned by the Welsh Government for the next time this happens, after the next election.  

Thank you. Members, do you have any comments, or do you want to propose any steps you'd like to take further to this? I see a couple of heads nodding in silence otherwise, so are Members content then to note the letter? Thank you very much indeed. 

Before I move on to the next item, are witnesses available and present? They are. Thank you very much indeed. 

Well, we're nicely ahead on time, but, if witnesses are available, we'll move on to our next item, which is the scrutiny of Welsh Government accounts 2020-21. And we have a number of witnesses from the Welsh Government, who I welcome: Dr Andrew Goodall and his officials. I'd be grateful if each of you, starting with Dr Goodall, could state your names and roles for the record. 

Thank you. Mr Kennedy?

I'm Peter Kennedy, HR director at the Welsh Government.

Mr Evans.

Bore da. I'm Gawain Evans, director of finance.

Thank you. Mr Moss.

Bore da. I'm Tim Moss, chief operating officer.

And Mr Hamer, please.

Good morning, all. I'm Duncan Hamer, director of operations.

Thank you very much indeed, all, and, again, thanks for attending committee today. Before we begin, can I just confirm that everybody understands how to indicate if they wish to speak? As you are no doubt aware, simultaneous translation is available, from Welsh into English, using the downloaded Zoom application only. Interpretation does not work when accessing the meeting through an internet browser. Attendees who want to hear the English interpreter when Welsh is spoken should ensure that 'English' is selected from the 'Interpretation' menu option at the bottom of the Zoom application window. Attendees who do not require interpretation should ensure that 'Off' is selected from the interpretation menu.

Well, as you would expect, witnesses, we have a number of questions, and I'd be grateful if both Members and yourselves could be succinct and focused on the questions. We're very much focused as a Public Accounts and Public Administration Committee on who, what, why, when, where and how responses to the specific questions, to enable us to cover the range of issues we wish to cover through what is a wide topic. If I can commence with the questions, before colleague Members take those further forward, initially, and if I could put my question to Dr Goodall: although in your evidence to this committee on 6 October you suggested the Welsh Government had reported changes to the former Permanent Secretary's working arrangements in its previous accounts, committee has checked that and found that that is not the case, where the earlier accounts reported a reduction in salary only. We'd be grateful if you could, therefore, clarify your comments.

Diolch, Cadeirydd. Obviously, a very long session on a significant issue last time, and I recall responding in a level of detail on many areas. On the specific reference to the annual accounts, I was simply trying to make reference to the fact that the reduction in salary and the draw-down of pension had actually featured as part of the 2018-19 accounts, and, in fact, the subsequent year as well. Just to confirm, on the 2020-21 accounts, obviously, we've had to try and make sure that a further level of detail has been available to make sure that we are clarifying. But my intention was simply to just make reference to the fact that the accounts had had that reduction in salary and the draw-down of the pension arrangements. So, I apologise if that wasn't quite as clear as you would have wished, but that was my intention.

I think I took it that your reference to working arrangements being in the previous accounts meant that you considered that was a valid point to be made. So, why weren't they included in the previous accounts?

Well, I was speaking in great detail, I know, on a range of different areas there. At the time, the salary reduction was in there. Obviously, the change of pension arrangements would be a matter for the former Permanent Secretary to speak about. My impression, as I said last time I was reviewing things retrospectively, was that the intention was to make sure that the committee was sighted on those salary reductions. We obviously have, over the last couple of years, needed to ensure that the disclosure notices in the accounts have had a finer level of detail. As I said, we tried to put that right for 2020-21, and, also, that will be part of the submissions for 2021-22. But I think the intention was to make sure that that was disclosed appropriately within the remuneration reports. Certainly, looking at remuneration reports I've been part of for many years, they are meant to be disclosing appropriate levels of information for public use as well, and, hopefully, we can get that balance right in future as well.

Okay. Thank you. How did the Welsh Government balance its wish to avoid a protracted handover period—I think that was a quote that you referred to in your previous evidence session with us—with the implications of filling the posts of chief executive of the NHS in Wales and, in turn, the role of chief executive at the Aneurin Bevan University Health Board, particularly during a pandemic? And for the sake of people who may be listening in, if you could confirm that you were the chief executive of the NHS in Wales previously.

Yes, I can confirm that; heading it up for eight years, I was the director general for health and social services and the NHS Wales chief executive, located in Welsh Government. And, yes, I reflected last time that I was aware of the intentions, not least from the First Minister, to wish to ensure that we were able to move to the new appointee, which happened to be myself, as I was describing in the last committee session. As you'll appreciate, irrespective of being ultimately appointed to the role, one of my concerns would have been to ensure that there were clear successor arrangements in place and that I wasn't able to simply just take up the post just on my appointment; I needed to ensure that there were credible and competent arrangements put in place. I was particularly concerned, I have to say, because of the winter that was ahead of us, the last winter, and I thought it was going to be really important that there was certainty in place to manage what I anticipated to be a difficult period of time, particularly still with COVID experiences, and continuing to focus on the recovery side of things.

There was an opportunity, in checking out with colleagues in Wales, to second Judith Paget from Aneurin Bevan health board into that post—a very experienced chief executive, with excellent knowledge of the Welsh system. Judith has been appointed on an interim basis, and that is pending a substantive appointment and recruitment process that will be starting, actually, in the new calendar year. So, always very clear that these were interim arrangements, but they were designed to give stability for that arrangement. And, obviously, before proceeding with those arrangements, we needed to have confirmation from Aneurin Bevan health board that they were in a position to put in their own chief executive arrangements as well, again on an interim basis, and we had that confirmation from the organisation, including from the chair, that an existing member of the executive team was able to take up that role and there would be confidence from the board in that appointment as well. But I just felt that there was a need to move on very quickly—managing these transitions are important, and I think Judith has done a good job in applying that system leadership to the role and bringing her experience to bear on that. And, obviously, I was still overseeing those arrangements, and I hope one advantage for Judith has been that, in her reporting line to me, now in my Permanent Secretary role, I've been able to give her the benefit of my own knowledge and experience in that oversight of the NHS role as well.

And in terms of the Permanent Secretary position, were previous appointments conducted in the same way, or were those subject to competitive application?

Well, Permanent Secretary appointments have always been subject to competitive arrangements; I came through a competitive arrangement myself. If I focus on the NHS Wales chief executive role, which Judith took up, in the past, of course, they have always been subject to a substantive and open competition process, but you ask the question, as I came into post myself as the NHS Wales chief executive back in June 2014, there were, at that point, interim arrangements that were put in place, pending my own appointment and my ability to take up the role. So, the principle of that is understood. We do need to secure that confidence in the way the system works, and we were able to ensure that we had civil service commission approval for Judith's interim placement as well. So, we did actually ensure that the oversight arrangements—I hear the UK civil service have been discharged for this role as well. But, to confirm: we will be going out for a substantive role at some point in the new calendar year.

Okay. Well, your previous evidence appeared to suggest that you remain in secondment with the Aneurin Bevan University Health Board. Is that the case, and if it is, why? And have you retained your terms and conditions as an employee of the health board?

Yes. I've been on secondment to the Welsh Government from the NHS since 2014. I'm paid on the NHS chief executive pay framework that was put in place back in 2009. That happened when the larger local health boards were put in place, and it's been declared on the remuneration report ever since 2014 as well, about my NHS secondment arrangements as well. Clearly, I was on—I am on different arrangements from the traditional civil service route and, during the recruitment process for the Permanent Secretary post, I did check on the arrangements and whether my existing pay arrangements, and certainly my secondment arrangements, would be problematic, potentially, about this. It's unusual for Perm Sec appointments to come, perhaps, from outside the traditional civil service. I think, in Wales, we would probably have a more flexible approach in overall terms, based on that 'one Welsh public service' principle. And, of course, I've been located in Welsh Government myself over many years. Despite being different from traditional civil servants, I just wanted to make sure that it would be acceptable for me to progress with that process, irrespective of the final outcome, and, obviously, I needed to prove myself through a competitive process.

When I was identified as the successful candidate, there were discussions that took place that were between myself, Cabinet Office and Welsh Government about my employment arrangements and there were, really, three that were available for that. Firstly, of course, there was the choice to not recruit or appoint me to the role. Secondly, there was the choice to transfer me across to the civil service and to become a substantive civil servant. And thirdly, there was an opportunity to recognise my NHS secondment arrangements and, in effect, to continue those secondment arrangements, and it was the latter action that was approved and agreed by Cabinet Office. So, yes, I am an NHS secondee; I continue on that basis. There are other secondments within our organisation, as you would expect, and in the health group in particular, there are more secondments because we draw on that expertise. But, yes, they are the agreed arrangements for me to take up the post.

Thank you. Just before I bring Mike Hedges in, given the circumstances that you've just described, how do your terms and conditions compare with those advertised for the role of Permanent Secretary? 

I'm subject to the terms and conditions of the NHS. My employment rights are maintained throughout that period of time, so if there are any changes to my employment under the very senior managers category, whether they are general terms and conditions changes, pay awards or pension contributions, they simply apply in the normal way as part of the annual process for the NHS. Those mechanisms are reported into Welsh Government and then there is an exchange on the funding side between Aneurin Bevan University Health Board, as my employing organisation, and Welsh Government.

The salary was advertised in its traditional civil service template at a lower salary than my existing pay, so it was advertised as £165,000 to £180,000. Typically, Permanent Secretaries come through the internal route, so whilst they may take up a fixed period of office, and it would be five years for the Welsh Government role, they will be also falling back on their substantive arrangements because of their previous civil service arrangements as well. So, arguably, the secondment arrangements can help to give some certainty around those arrangements when stepping into this. So, as I say, it's a more unusual kind of mechanism in the sense that most Permanent Secretary arrangements will simply come through that traditional civil service route, and I remain on an NHS pay arrangement in line with NHS secondment arrangements.

Just to confirm, no substantive changes were made to my salary or my existing secondment arrangements. I remain subject to the same terms and conditions from my employer, who acts as my parent organisation. And I think, critically, as I was reflecting on in the last meeting, in respect of our opportunity to be clearer on the terms and conditions arrangements, we've ensured that arrangements, including the secondment, are absolutely clear in that devolved context so that they are included in the terms and conditions framework that has been agreed now between Cabinet Office and also with Welsh Government itself.

Mike Hedges.

Just to clarify this—and if I've got this wrong, please correct me—your substantive post is chief executive of Aneurin Bevan University Health Board. You had a secondment to be chief executive of health in Wales, and now you're on a second secondment to being the top civil servant in Wales. And Judith Paget, who is now coming in, was acting chief executive of Aneurin Bevan University Health Board because you held a substantive post.

No, that wouldn't be correct. So, when I moved across from the Aneurin Bevan health board mechanism—as I said, I'm on the NHS chief executive pay framework—I removed myself from the substantive appointment for Aneurin Bevan University Health Board. So, Judith Paget had taken that on substantively and had been appointed to that role through an external recruitment process. But, obviously, we have the Welsh NHS pay framework in place for chief executives, and I remain on that. So, technically, if I moved on from Welsh Government after five years, I would technically move back to the organisation. In real terms, I would probably end up moving away, but they remain my substantive employer. And it protects, also, my 31 years in the NHS in Wales, in terms of continuous service as well. But you are right, it looks as though there are a series of acting-up arrangements and interim arrangements, but I actually removed myself from the specific chief executive role of Aneurin Bevan.

Sorry, you've confused me even more now, so I hope that you can unconfuse me. My experiences of secondments are that you're seconded from the post you currently have into a new post, but the old post is your substantive post. You now no longer have a substantive post with Aneurin Bevan University Health Board, but you can still be seconded from that organisation.

Yes, I have a substantive status in that organisation based on the chief executive payroll, so I am an employee as part of those secondment arrangements. But given that, at the time I was appointed to be the NHS Wales chief executive, I was appointed initially for a five-year term and then, that was extended subsequently by another two years and potentially up to another two years again, it would have been inappropriate to have left the organisation with unclear and interim leadership arrangements. So, you could argue that that exposes me to risk, but I retain substantive employment arrangements within the organisation; I've just allowed that post to be free to be appointed to.

Sorry, just to clarify, if only for me: you no longer have a substantive post at Aneurin Bevan University Health Board.

I am substantively employed by them. I don't have a claim on a specific post within the organisation, because I've moved myself from the Aneurin Bevan health board, so it means that my NHS terms and conditions are protected in that arrangement.

Okay, thank you.

Thank you. You told committee that recent legal advice received by the Welsh Government confirmed that the former Permanent Secretary has, and I quote,

'entitlement, in employment law terms, on the three areas, even if we change the labels.'

Does the legal advice you received suggest that the Permanent Secretary was entitled to payment under contractual terms and conditions, or that the Welsh Government's actions created an obligation to make a payment?

As I said in the last meeting, whilst I confirmed that we had not taken specific legal advice at the time and that it had been based on professional views and informed experience, I had been able to actually check the legal position, both before the issuing of the technical memorandum and after. And again, to confirm, it indicates that there were entitlements on those three areas. Of course, just for clarity, we had accepted the change that needed to happen in respect of the reference to the special severance payment, so we have made an alteration in our annual accounts on that basis. But there were three payments, if you recall. One was in respect of outstanding annual leave balance. One, although now framed as a special severance payment, was in respect of the payment in lieu of the three months remaining on a contract. And then also extra-contractual payment. That in itself, by making that reference, shows that there were broader issues than just the specific contract. We had to account for a number of areas, including Shan's employment status, not least as a civil servant of 40 years' standing; obviously, the basis of the contractual arrangements; the employment law premise, which is where we have sought specific advice, albeit it it has been retrospective, and it does indicate that there would still be issues to be considered in respect of all of those three areas, even if we've accepted the technical change of the advice as well.

What I should say is, as I reported last time, if we look at, perhaps, alternative routes that could have led to the same mechanisms, if we had drawn down, in retrospect, on the civil service compensation scheme, it's very likely on the calculations—and of course we would work with the Cabinet Office on this—that Shan could have been entitled to more money. I was emphasising last time about our wish, really, to have ensured that there was a value-for-money component of the calculations that were being made. So, irrespective of the legal advice, we still actually feel that there could have been a higher entitlement, and that would probably have been higher, even if we hadn't necessarily accounted for, perhaps, outstanding leave at the same time as well. So, there would have been an entitlement for up to nine months of recognition in respect of the civil service compensation scheme.

It would be good if you could clarify, because you've just described payments under contractual terms and obligations and also referred to an extra-contractual payment. We'd understood that previously, the former were described as extra-contractual payments. So, what specifically was the extra-contractual payment that wasn't covered by contractual terms and conditions?

Well, extra-contractual payments occur where there are liabilities or obligations through employment law that mean that we may need to recognise, whether in financial terms or not, a potential claim from an individual. And we felt that that was clear to us in Shan's case, that, based on those status issues that I described earlier, there was the potential reality that that could happen as well. So, we always try to balance fairness to the individual alongside the value-for-money aspects as well. But, as I said, this has to draw an employment law lens on employees' rights, if I can put it in that way, alongside the policies and the frameworks that are actually in place at this time. But we tried to be really clear, again recognising the change of labels, that there were three individual components that were making up that payment originally. The special severance payment—the technical change probably changes the status a little bit, but, as I said, we're going to have to take a little bit of a look at that one, because we've taken the Cabinet Office advice on that technical change, but we still feel that it probably doesn't quite align with some of the definitions that are in 'Managing Welsh Public Money', so we may just need to find a way of clarifying that. But, certainly, we've made sure that we have dealt with it. But, yes, absolutely, there is an employment law context to dealing with these individual sorts of circumstances as much as there are the specific words in any policy or contracts as well.  

Natasha Asghar.

Good morning, gentlemen. Dr Goodall, thank you so much for all the information that you're providing for the committee at the moment. I'm sorry for hopscotching; I know our Chair has asked you a series of questions, but I just wanted to go back to what Mike Hedges asked you a little bit earlier in relation to your secondment and moving from job to job. Pardon me for my insolence for asking you this question if this perhaps sounds very basic to the committee and to you, but, with regard to when you came across and there was a secondment—and you elaborated on the job process that you went through to get to where you are today—can you please explain to me, just in relation to the salary element, how did that fit in? Were you paid two salaries, from, obviously, the Aneurin Bevan health board as well as the Welsh Government? Was it separated? How does it work with the civil service in that regard, please?

It's just a single payment arrangement, to reassure you. Simply, my employment and salary arrangements at Aneurin Bevan are paid normally as part of the NHS payroll and then the organisation just bills for those arrangements. And, of course, there are on-costs around employer contributions in the usual way that would apply to any other member of staff. So, for complete clarity, yes, I'm just drawing down the single salary arrangements, and it just means that, in effect, I remain paid right now exactly the same as I would have been paid if I was still, for example, the director general for health and social services, the NHS Wales chief executive, and in terms of those chief executive pay arrangements as well. But it's only a single salary arrangement. 

Okay. Thanks. 

Mike Hedges.

Just two very brief questions, and the answers will either be 'yes' or 'no' to both of them: did you take external legal advice, as opposed to internal legal advice, and did the Cabinet Office approve?

So, in terms of the legal advice, I said in my evidence last time that, at the time the mechanisms were being put in place, we had taken professional internal advice on that, rather than legal advice. We subsequently did take legal advice in responding to Shan's arrangements, and I've particularly been able to do that in the light of the technical memorandum. No need to ask for external advice on this perspective; we have internal employment expertise and of course we have a significant team of lawyers in here, headed up by our director of legal services, who is the head of professional as well. I was able to take advantage of both the internal employment advice—although, of course, this is privileged information that we have around individual circumstances—and I was also able to take the director of legal services's advice, who is of course a qualified solicitor.

In respect of the Cabinet Office arrangements, as I was indicating last time in the arrangements, the Cabinet Office approval hadn't happened as one would have expected at the time. We have checked with those areas retrospectively. It is very clear in the terms and conditions framework that is now set out in writing about the balance of the actions that are taken forward by Cabinet Office alongside the actions that are taken forward by Welsh Government as the employer. And, Chair, it may well help, perhaps—as a follow-through to today's session, I'm very happy to provide a copy of those terms and conditions, just for transparency, because it may just help to understand this balance between Welsh Government and the remaining oversight of the Cabinet Office, because the Welsh Government civil service is part of the UK civil service, and I feel that that's one of the areas that we've needed to highlight during the course of this evidence. 

Which is one of the points I've been raising. But is it usual—because in my experience it isn't—when somebody is at the top of an organisation, for people lower down the organisational structure than them to give advice relating to them? I've always seen it either going out to get external advice, either legal or otherwise, because, otherwise, you've got somebody giving advice about their direct line manager or someone higher up the hierarchy.

Well, we have directors who are able to give their advice on behalf of the organisation, including for the Permanent Secretary arrangements. That would have been the expectation in these arrangements. But I can only speak from my own background and experience in the NHS side. All of the NHS Wales chief executive posts that have been both appointed to and departed from in NHS Wales would have had the lead involvement of respective directors of workforce in the arrangements, providing advice, giving advice along the way, irrespective of their status within our director team. Whilst, of course, there are oversight mechanisms for that, that would have felt, to me, an appropriate arrangement and an appropriate use of director experience and responsibility as well. So, of course there are always times when you can draw in other experience as necessary. From a Welsh Government perspective, as I said, looking at it retrospectively, I've at least had the benefit of being able to draw on that internal legal advice from a significant team of lawyers, including employment specialism as well.

Thank you.

That's answered my question. Thank you, Chair.

Okay. I'll move on. I have a couple more questions before I pass on to colleagues. The recent legal advice you refer to: what difference, if any, would that have made for the governance and approval of each element of the payment, had you received the advice at the time?

Cadeirydd, I can't change, of course, what happened at the time of the former Perm Sec's exit from the organisation, but what I can say is that we have absolutely learnt lessons, and shared some of those through these evidence sessions, to improve the governance and make sure that there is clarity of the processes that need to be in place for the future. As I said last time, these are rare appointments: I'm the fifth Permanent Secretary for Welsh Government since devolution. Nevertheless, we do need to make sure that the decision making is clear and the processes are in place and I do believe that the terms and conditions framework provides us with that guide and opportunity to give those future reassurances to the committee on the arrangements as well.

On the basis of that legal advice, if it were to be held then, would you anticipate that things would have been done differently?

Well, the legal advice still indicates that there would be entitlements, from an employment law perspective, looking at the former Permanent Secretary's arrangements within the organisation. And even with the governance oversight and even as we've tried to put things right retrospectively and clarify areas, it hasn't really changed the underlying nature of areas. The one thing that I would say would probably be different in doing it in retrospect is that we probably would have gone more formally down the route of the civil service compensation scheme. But, as I said earlier, that may well have—well, that would likely have—led to a higher amount of money being paid on departure and we would have had to have done a number of calculations there that would have been up to nine months and we would have still had to have assessed any outstanding leave on the back of it, and that was probably going to be a minimum of £103,000 as a departure package if we'd gone down that route as well. So, that would clearly be part of the learning from this experience and linking in with the Cabinet Office advice as well.

So, would each element of the payment have been made, if that legal advice had been received at that time—yes or no?

The legal advice still stands about those three arrangements being appropriate for the way in which we had technically interpreted things at the time, at this stage. But, in retrospect, I think we could have gone down the civil service compensation scheme.

Right. So, I think that we can conclude it would have been done differently, but all you can refer to is, 'We would've gone down the civil service scheme.' Okay. Can you clarify what you meant when you told the committee, you think, quote,

'there has to be some ability to ensure that there is still a level of interpretation'

of policies and frameworks? How do you balance this with your accountability responsibilities for the system of control and compliance with legislative and other requirements, which presumably limit the ability to interpret policies and frameworks?

Yes, I hope that what I wasn't doing there at all was undermining the need for control and governance in our arrangements. I've really tried in my 11 months in post to put a focus on governance through the organisation in a range of different areas, but we are a large organisation of 5,500 people. I think that human resource policies provide a framework and parameters for decisions but they don’t necessarily account for all of our members of staff for every individual circumstance, and I think that part of the day-to-day professional human resource role is being able to interpret human resource policy, but taking also into account those broader aspects, including employment law and rights that apply, irrespective of what a policy says.

Just thinking of an example that might help out of this context, we have put a lot of focus in the organisation—in fact, we’ve been launching various things over recent weeks—around our organisational response to menopause, for example. A lot of organisations, of course, are recognising this and reissuing policies. So, we’re going down a route of being really clear from a policy perspective on supporting women going through the menopause, providing flexibility. One could argue that our previous policies have always permitted a flexible approach to allow for those types of circumstances along the way, but that would have been people applying those general parameters to the specific circumstances of an individual. But what we’ve decided to do now is to call that out more clearly in policy terms within the organisation, so there are much clearer parameters. So, I just think my point last time was that, even when you think you've pinned down all of the detail, there is always a need for assessing it in a different way and that’s why accessing, for example, employment law principles, becomes important on these areas, particularly in the HR area.

I hope that, given the rare appointment of a Permanent Secretary, at least we can come through with different terms and conditions that make these arrangements very explicit, but I advised last time in my evidence that I was trying to ensure that the broader lessons learnt on these policies can be applied more generally to all of our staff and, of course, to the senior civil service as well.

Well, the law applying to human resources and equality is quite specific in some areas, as you know. In some areas, yes, it requires interpretation according to the individual person or demographic we’re talking about. So, it’s a question of what we’re interpreting, and I think the issue here is quite specific. But, given the response you've just given—and I think we understand what you’re saying and the reason that might apply—how does that provide assurance for this committee that processes are transparent and the term 'interpretation' isn’t used too widely? 

Of course, I would absolutely want to state that we want to ensure that there is consistent application, even if we allow for that interpretation because of some of the individual circumstances that will exist, so governance is fundamental about the way in which we ensure this.

In terms of ensuring the processes are transparent, hopefully, the translation of our policies and the terms and conditions framework will really help that, because we'll know what we’re guided by, to be explicit on the respective roles. We’ve drawn in different oversight arrangements through the remuneration committee. So, as an example, I've made sure that the remuneration committee is fully aware of my own circumstances, that there is an annual mechanism for that to be reviewed, and we’ve been able to make sure that that is highlighted also within the terms and conditions report. Of course, the remuneration report itself, which is a formal part of the annual accounts, provides that oversight mechanism as well, and then we’re trying to use the governance and committee arrangements in our organisation to ensure that these areas are worked through as well. So, there's a very specific role for the remuneration committee around our senior civil service, for example, but also, as we submit the annual accounts each year, we do so at a level of detail, and it does mean that the audit and risk committee and the members who we have in place within the organisation are able to challenge us more objectively on these issues, as they are highlighted there as well. And of course, finally, we are subject to your own scrutiny arrangements, and, as part of our annual cycle, we have to come here and clarify our response and show how we adapt and move on each year, and are very happy to continue to be part of those arrangements as well.

Okay. Rhianon Passmore, could you take up the questions, please?

Thank you, Chair. I'm going to move on to the reporting outturn against the approved budget. So, the Welsh Government said it would continue to seek to improve the clarity and accessibility in the summary of resource outturn. What has been done differently in this reporting year, and how are you using basic, accessible, plain language to explain the variances within the two documents? 

If I could maybe just make a general comment, and then I’ll call Gawain in to perhaps talk through how we've approached some of the technicalities there. But, Chair, I just wondered, as we go into the general annual accounts, if I could just give you some reassurance, further to my evidence session two weeks ago, that we were this week able to submit the last part of our consolidated accounts. With the support of Audit Wales, we’ve been able to submit these in phases through from the summer months, and it does mean this week that we’ve now submitted all of our annual accounts, and that means that we are ahead of the statutory deadline. So, I just thought you would want to know, given your concerns about the submission deadlines, that we've actually been able to do that earlier than our original expectations, and I'm very glad for the flexibility to be, as I said, doing that in phases. I just thought I would register that with you today, if that was okay.

Returning to the Member's question, I have also come into the annual accounts process and annual reports from a slightly different experience in the NHS, where there is probably a broader ability to give a sense of what the organisation is up to, maybe with fewer constraints through some of the technical criteria and expectations, because, clearly, trying to have a report that can point towards the public as well as address all of the technical detail can be very difficult. But we have actually tried to improve on our explanations in the accounts. We are aware that there are complications around some of the different budgets as well, and we are trying to use plainer language to explain the variances and make sure that there is an understanding around the glossary of budget terminology. But there are some very significant technical parts of the annual accounts as well, where it's a template to be completed, rather than an ability to describe the experience that the organisation has been through. Gawain, you may just want to talk about how we've tried to approach the adoption of more of a plain-language approach.

Thank you, if I may. Sorry, I am just looking at the accounts here. In terms of what we've done differently for 2021, particularly when it comes to the statement of resource outturn, there are a few things that we did differently. We've included an explanation of what the summary of resource outturn is, and an explanation of how it relates to the outturn reports. Those are the very last explanations in the accounts in relation to the SORO. We've included for each of the ambits a breakdown of the overall variance in each type of budget, and provided an explanation for the main variances within that. We've also tried to structure the explanations so there's some commonality there, so we've run through the explanations, started with revenue, then explaining the capital and then explaining the annual managed expenditure elements.

What I would say is, as the Permanent Secretary has said, we are always trying to use plain language where possible to explain the variances. Previously, we had introduced a glossary of budget terminology, which hopefully helps. However, we've been on a journey with the accounts. I've been with the Welsh Government for, now, 10 years, and we've tried to improve as we go along every year. We are continually seeking feedback, either from PAPAC members or, indeed, any of our stakeholders. So, we're keen to take on board any recommendations and, potentially, improvements that we can do in the accounts process.

Thank you. It's obviously a technical document, and I do understand the difficulties involved in what you have to do. I suppose the question, really, at the heart of this is reading across different reportage. Is there any way of simplifying that in terms of the outturn reports and the summary of resource outturn from your perspective? It's very difficult to ask you what other institutions do in this regard, but are you convinced that we are at the end of this journey yet?

I don't think we're at the end of the journey. If you take some of the general language that we've used within the annual accounts, obviously, as I said last time, living exceptionally through EU exit and the COVID pandemic response in 2021, we try to draw in examples that demonstrate the impact of how money is spent in different ways, so that we can lift up the experience for somebody who is reading it for the first time.

There are complications because of the way in which the political oversight of the organisation works. So, obviously, we are trying to reconcile our annual accounts with a supplementary budget process that is more Minister led, with an outturn report process that is more Minister led, and whilst we have tried to ensure that there is a focus on the operation of the organisation, when we are trying to focus on outcomes, they are discharged through the political oversight mechanisms. So, the programme for government obviously works in a different context for us than, perhaps, other public services in Wales. We're always trying to find that balance between ensuring that the areas that are for ministerial scrutiny remain in that area and at least we can focus on the management of the organisation. But I do think that the need to reconcile why sometimes it feels as though there is different information in different settings, that's really important to do, but, as an example, there is, at least, an annual report available on the programme for government that allows that to be understood as part of the overall approach to Welsh Government.

Okay, thank you. I'm going to move on. You've mentioned the variances and you've talked to some of the context around that. The Welsh Government has previously stated that the variances are explained in the outturn report, and that was sent to the Finance Committee. So, the question is: is the outturn report directly comparable? You may think that you've touched upon this with the summary of resource outturn, but, restating what I've said, can a reader easily find and access the relevant information?

I'll comment very quickly just to say we are required to report on both of those control regimes. That in itself, whilst it causes some difficulty, is a requirement placed on us. Gawain, you may want to explore that in a bit more detail.

Thank you, yes. The two reports are comparable and you can reconcile  the two. As the Permanent Secretary said, it is slightly complicated—the fact that the Welsh Government, unlike perhaps UK departments, are required to report against those two budgets. So, the outturn report is based on the HM Treasury control totals—something we call 'total managed expenditure'. The statement of resource outturn represents the ambit that is voted on by the Senedd. The difference in the two—we do try and explain that in the published budget documentation.

I think the most straightforward way of explaining the difference between the two is on non-domestic rates. So, non-domestic rates, which are funding for local government, would be included in the outturn report under the total managed expenditure, but they're excluded from the ambit. There is a technical reason for that, if you don't mind me explaining. The local authority expenditure is part of overall public expenditure, so we have to report it through the outturn report. When it comes to actually approving the spend, that's down to the Local Government Finance Act 1992, which means a direct charge to the consolidated fund, and therefore it doesn't actually technically need to be included within the budget motion. That is one element, but it is the key element of the difference between the two.

In terms of trying to make it a little bit easier to understand, we have the outturn report and perhaps in future we need a bit more in the outturn report that actually explains the differences between the two budgets. As I say, they are completely reconcilable, but maybe we need to add to the outturn report to just provide a little bit more detail around that.

I think that sounds sensible as a way forward. The summary of resource outturn shows a net, as you know, underspend of £526 million. The accounts for 2020-21 don't explain the implication of the underspend—a topic of great interest to us—on the Welsh budget, as recommended by the Public Accounts Committee. So, the question, really, is: why is that the case since the outturn report was issued to the Finance Committee on the same day that the Auditor General for Wales laid the accounts?

I think there's, firstly, a timing issue that affects those. Again, as we were trying to describe, there are different processes, including where that ministerial oversight happens. Again, Gawain, you probably need to help technically. As an example, the Wales reserve is a budgetary mechanism, it's not part of the accounts; it's used for the overall management of our money in a different way. But, again, I revert to Gawain, if that's okay, Chair.

Thank you. In terms of impact on the budget, I think the main impact of any underspends would be the Wales reserve. The Wales reserve is obviously a mechanism that we can use to carry forward limited sums. The Wales reserve, I think, is part of the budget mechanism more than the accounts. I think, on that basis, it would probably be more appropriate to include it in the outturn report. Obviously, we can look to do that. As in responding to the previous question, we can certainly look at the outturn report to provide more information around this and the previous topic. But, with it being budget, as I say, it's probably better for it to be in the outturn report. Also, with the outturn report, as has already been said, the accounts are quite prescriptive in some respects in terms of what we do, but the outturn report is very much a document we can craft ourselves and try and make things clearer through that.

Okay. Thank you. My last question, really, is pertaining to what the Minister has referenced previously to this committee: what seems to have been precedent or normal practice in terms of carrying forward. So, as we are aware, the Treasury rejected, this time, the Welsh Government's request to carry forward funds in excess of the Wales reserves limit in 2021, in March, and as a result we've lost £155.5 million at a point when we really need it. The Minister for Finance and Local Government has said that there has been much engagement at all levels with the Treasury on this, so my question, I suppose, is: have we an explanation as to why the normal practice hasn't occurred in terms of the carry forward, and has there been any indication if this is the new normal?

I'll start by saying that we have a really good track record from a Government perspective of operating within the departmental limits that are set and, of course, they're overseen by HM Treasury. But we have tried to approach our relationship with Treasury to allow for that flexibility and to ensure that we have funding that is available that can be used across years—appropriately so, in that way.

We were disappointed that, on this occasion, Treasury didn't allow for the switch to be undertaken. We had actually put in place an action that we felt was appropriate to support that end-of-year position and, I think, as I recall the finance Minister saying, there had been a lot of conversations at the ministerial level, irrespective of the more technical conversations that we'd been having with officials. But the final decision was made in retrospect, so we didn't have any ability to alter or change that at the time.

I think, in understanding the context though, it's just a reminder that 2021 was such an exceptional year, because it was dealing with the whole impact of the COVID response and the significant additional moneys that were coming into the system. And I think, in this example, probably we were more affected by the fact that there was a more general level of underspend that was occurring across departments for reasons of the unusual environment, that they hadn't been able to spend money even when they had been given it to support the pandemic response.

My compare and contrast on that, in answer, would be that, irrespective of what we had recovered from us, technically, at the year end, it represented about 1 per cent of our budget, whereas other departments were reporting on average about 6 per cent, so I think we were probably affected by that broader outlook as well. But, clearly, in moving forward, we want to make sure that we always have as much technical flexibility as possible, but there are always going to be limits on the way in which the Treasury funds come to us as well. So, again, if I've said anything that Gawain wants to clarify, I'm happy he does that, but hopefully that gives you a pretty general response to the issue. 

It's a general response, but I'm still confused in regard to what seems to be an ability previously for a flexible approach around this carry forward. Obviously, you've got your departmental limits. So, is it practice to be able to carry forward, as seems to be the case, or not? And are we in a new era, then, if there is no flexibility? And I still don't really have an explanation. You said it was retrospective, the decision, but I still don't understand, if there's been precedent previously, why this has now occurred this year, because we all operate in terms of what is normal practice.

I'll hand over to Gawain to perhaps try and explain further. But, irrespective of any flexibility, there is always a ceiling; there is always a limit that is placed upon that. But, Gawain, thank you.

Yes, we are allowed to carry forward normally. We do have the Wales reserve. It's only £350 million in total, but that is normal practice.

But this is £155 million.

Yes, I appreciate that. Also, in the past, if we've received funding very late in the year, we have approached Treasury to say, 'Are we able to have additional flexibility with that?'

I think, in terms of the retrospective position—and perhaps I can come back to why we think Treasury took this decision—the finance Minister actually wrote to the Chief Secretary on 18 February—I've just checked the dates—18 February 2021, to ask for this flexibility. We actually received the final confirmation that it wouldn't be happening on 19 April 2022. There was a very long, protracted discussion between not only the Ministers, but between officials. So, we found out very late that this wouldn't be happening.113

In terms of why, we don't have a firm answer on that, but as the Permanent Secretary was saying, I think it was in respect of the overall level of the underspend across the UK, particularly across UK departments, which was £25 billion. I think in my mind, if we'd been allowed flexibility last year, the question would have been, 'Well, what about flexibility elsewhere?' Also, I think what came into the Treasury thinking was around the impact of potential consequentials. The health department in England actually returned over £18 billion-worth of funding. If the Treasury had looked at that from a Barnett consequential point of view, that would mean £1 billion for Wales, which obviously wouldn't have been acceptable. So, I think those two factors—in terms of a particular year with a huge level of underspend across UK Government departments, and perhaps the thinking about how Treasury would otherwise have looked to perhaps adjust the Barnett consequentials—all came into the thinking. 

So, what lessons can be learned, bearing in mind that we seem to be not knowing what our limits are?

We know what our limits are; it was just that, in this particular year, the Treasury decided they weren't going to allow us this flexibility. On lessons learnt, I think if possible—. I mentioned that the letter went in February. If possible, I think we need to flag any changes, anything that we need, perhaps a little bit earlier in the financial year. The supplementary estimates for the UK Government are done about January time. Perhaps, if we have one of these exceptional years again, we can flag our needs, maybe, in January rather than February. That may make a difference—

And that there isn't a reliance on any flexibility.

Well, as I say, we do have the flexibility, we do have the Wales reserve. We always had the ability to carry forward, but as I say, it was just an exceptional year so the Treasury made this decision. 

Okay. Thank you, Chair. I could stay longer, but I won't. 

The key point, as I understand it, is that that was in addition to the £350 million—it was in excess, in other words. But, just to clarify, when did the Welsh Government first know that this funding would be lost if they didn't use it?

The final decision came through—. Sorry, I've got some papers here just in case this came up. The final decision, the final response from the Chief Secretary to the Treasury confirming that no additional flexibility would be provided was 19 April 2022, so this year. As I said, that shows the extent to which the Welsh Government and the finance Minister pressed Treasury to actually get this resolved. 

And when was it first indicated or intimated to the Welsh Government that it could be lost, which generated the Minister's response? 

I'm just checking through some notes here. I've got a whole series of notes, because there are about 20 different dates when we corresponded. Would it be possible to provide a note to the committee?

Please do, yes. 

That would be helpful, thank you. 

The main thing I'm trying to be absolutely clear on is whether the Welsh Government knew while it still had the capacity to spend that money, or it didn't discover this till after the end of the funding period. 

Chair, could I just follow up, please? Just for clarity, in terms of being able to be certain about what you can and can't do. We're clear on the set lines of the budget, but if there is a precedent of flexibility then you will use that precedent of flexibility in your planning situation. So, what I'm asking, I suppose, is: from this occurrence, this year, in not being able to continue with the previous behaviour or approach—. What I'm asking is: is this a new era in terms of that flexibility? Will we be able to rely—? I'm not saying we do rely, but will we be able to use the functionality of being able to carry forward? Is that security there in future?

I think we will expect to be able to continue to have flexibility. Clearly, there will be some areas where we'll be reliant on a technical interpretation of an issue, and, ultimately, HM Treasury will give a call on those areas. I think, as an overall approach, more led by Ministers in this respect, we'll be looking to maximise some of the flexibilities that are available to the Welsh Government on a range of different areas. But, of course, it's probably more for the Minister to take that up with counterparts. But, yes, we would expect to still have that, and there's certainly no indication from HM Treasury that they will be removing those normal experiences you were describing.

Mike Hedges. 

Can I just carry on with this for the moment? The first two bits are statements; tell me if I'm right or wrong. The Treasury treats Wales as another department, no different to defence or health in England. That's what you appear to have said regarding what happened there, as opposed to a devolved Government. The second one is that £158 million was either not drawn down or paid back to the Treasury. That equates roughly to two thirds of a penny on income tax. And the third one, which is a question, which isn't just a 'yes' or 'no': why didn't you give it to local government and increase the percentage of payment for twenty-first century schools, for example, to 100 per cent, so the money would have gone out and been spent? You could have done that on 30 March. 

Perhaps if I pick up the latter point and, Gawain, if you can pick up on the departmental status issue. We had, technically, utilised the funding in a manner that we felt was appropriate with that flexibility. Given the time that elapsed on it, there was just not an opportunity to go back, given that they were decisions that were taken within the financial year in question. None of that removed the fact that we were engaged with other bodies about maximising their own flexibility in what clearly was an exceptional year dealing with the pandemic, and there were lots of other examples of funding streams that were able to be given appropriately on that level. But, we were ultimately going to be limited by the fact that the financial year had passed, and we had expected that the decision that had been taken to utilise this money would be recognised an be accepted. But, Gawain, on the departmental status issue.  

On the departmental status issue, I think the question was, 'Does Treasury effectively treat us like a UK central Government department?', and I think the answer, if it's a 'yes' or 'no', would be 'yes'. They still consider us as a department for financial purposes. 

Sorry; I did ask another question in the middle—I was trying to get it over quickly. The £158 million was either not drawn down or paid back to the Treasury, which equates to about two thirds of 1p on income tax. 

Is that a statement or is it a question? I wouldn't be able to calculate that right now. 

Please can you give us a written answer, then? I make these statements on what I think is true, and I then ask you to clarify and tell me why I'm wrong. I think that makes life easier, but if you could give us a written statement through the Chair, I'm quite happy.

The last question from me is: how has the Welsh Government responded to comments made by the Public Accounts Committee, amongst others, that the accounts need to explain what outcomes these expenditures achieved or delivered—outcome related, as opposed to expenditure related? And can I just say that I find it much easier, instead of all these clever accounts that are produced, that somewhere you produce an income and expenditure account that people can go through and actually understand? 

As I said earlier, there is a technical template in place to underpin these accounts. There are ways that these things have to be reported from a Government perspective, and we have to follow that. We have tried to lift up some of the overarching commentary to demonstrate some of the things that have gone on but do reflect the operation of the organisation. I hope that some of the overarching descriptions within the annual accounts do show that, because as I've indicated today and in the last evidence session, we need to recall that this was a year where we were handling both EU exit and the pandemic response at the same time, which were generational changes that we were experiencing as an organisation, irrespective of the impact, of course, across Wales. 

We are trying to improve the way in which we describe the operation of the organisation. The outcomes side is trickier in looking at the Welsh Government because, of course, there is the political and ministerial oversight mechanism. And that's why we do draw on other reports and other mechanisms; for example, as I was saying earlier, the annual report that sets out the response to the programme for government. We try to use both the annual accounts and then our performance reporting approach that we've introduced over these recent years, to at least explain and show some of the progress that we're making on the operation of the organisation.

But I think there's still probably a need to blend some of the broader documents that are available that perhaps have that balance between running an organisation and then the Welsh Government political oversight of areas, which come through the other reports that are in place, whether that is the 'Future Trends' report or the 'Wellbeing of Wales' report. Because, obviously, there is something that is available beyond just the operation of the organisation about the progress the Welsh Government is taking as well. We'll try to continue to lift up the descriptions in the reports, but there are some restrictions, as I said, just because of the technical templates that we have to be guided by, which maybe limit our ability to say that in as straightforward a manner as Members are asking for.

Are you precluded from producing an income and expenditure account—not necessarily as part of the accounts for the auditor general, but for the benefit of the people of Wales and people like myself who find it easier to understand income and expenditure than we do all the technical bits?

We're not precluded from trying to visualise things and describe them in as simple a manner as possible to help the general lay reader, but we have to cover off the technical areas in our budgets. As we were saying earlier, there are differences in some of the annual managed expenditure from the general I&E, as you're describing. But, Gawain, do you think there is a path through that in terms of description, without us distorting the accounts?

I think, in terms of explanations, as we've discussed before, the flexibilities would come more with the outturn report. On the financial statements in the accounts, effectively, we have to produce those financial statements. So, parts 2 and 3 of the accounts, which go from remuneration through to the statement of resource outturn, through to the key financial statement, they're all, effectively, a format that we have to comply with. I think, if there was an option to perhaps provide more of an explanation, as we've already suggested before, that would be in the outturn report, where we can more easily explain, basically, what the budget was and what the outturn was against those particular areas. So, it's certainly something we could have a look at.

And you could put income in as well, because income is becoming more and more important as we have more tax-raising powers in Wales.

Yes, we can certainly look at the income and where that could fit in to the outturn report as well.

Thank you. That's me finished, Mark.

Thank you very much indeed. Natasha Asghar.

Thank you so much, Chair. The Welsh Government, obviously, during the thick of COVID, gave discretion to a lot of local authorities for eligibility under the COVID-19 non-domestic rates grant scheme. My question is: what do you know about the extent of commonality or variation across local authorities in how they have actually applied that discretion? There is a follow-up question as to how comfortable you are with these differences in approach, particularly given that you updated guidance about self-catering accommodation as well.

Just leading into responding on the detail of the non-domestic rates—and, Chair, if it's okay, I'll bring in Duncan, as the responsible director, to respond on that—perhaps I could just, in overall terms, recognise the exceptional way in which we needed to bring in business support, that this was a team working very closely with sectors, bringing mechanisms in, in matters of days, with a series of control mechanisms in place. And of course, we adapted over time as we were learning from these mechanisms. But there was a need to give certainty and confidence very, very quickly, so the level of urgency that was needed as part of the general pandemic response was really significant here. We're really minded that we focused an awful lot, despite the urgency, on design, really to try to design out some of the potential fraud and error rates that may occur, and really try to take an overall approach. And we were always also able to take advantage, as you've indicated in your question, of the relationships with organisations and their own statutory responsibilities as well.

But I just wanted to say, in handing over to Duncan, that I'm really pleased with the way in which the team approached this in these extraordinary times. And in fact, they have had some validation of that, because you may not be aware that they actually received a UK civil service award for the way in which that organisational design impacted on outcomes for businesses, and it is seen as a best-practice template for the rest of the UK. But just on the specifics around the non-domestic rates and that variation, Duncan, I just wondered if you wanted to come in, and maybe you could help to clarify the role of the local authorities in that respect as well.

Certainly. Thank you, Andrew. Just to respond and add to the question, I think it's important to note, first and foremost, that local authorities are very much trusted partners—we utilise the accounting officer within the authority, the section 151 officers. Briefly, on non-domestic rates, it is a relatively simple tool to operate. So, if you were closed or significantly impacted during the COVID different regulations, you paid NDR—non-domestic rates—and were registered, you were technically eligible. And the non-domestic rates were designed to work in tandem with the other support vehicles. So, it was scaled at a rate where you'd provide the minimum necessary for that typical business to operate through that period of closure, and then topped up with the economic resilience fund, where there was much more due diligence undertaken et cetera on those areas of activity.

Turning to the question asked, of course, all 22 authorities operated within shared and jointly agreed scheme rules. That's what they were required to do. But, as you mentioned in the question, they were given discretion as well. Of course, there are different types of businesses across all parts of Wales, and we very much applied the 151s' accountability within that discretion area. We are confident those decisions were made broadly consistently, and, indeed, we engaged throughout with the 151s and also had a trusted group of 151s, which was designed to use those difficult cases and push out core messages. I think I heard in the question you mention self-catering as an example. That was updated and, as Andrew alluded to, on the pace of delivery, I think we were 10 days from the Prime Minister's announcement of lockdown to actual money going out the door. So, the balance of trying to make sure a business could survive, pay its bills, and, of course, what was the end of the month at that time, balanced against risk and value for money, was key throughout. But we picked up very early in the scheme that there was a particular issue around self-catering, where we wanted to support self-catering businesses, not necessarily second home owners who happened to be registered on rates. So, that's where that additional guidance and eligibility was built in, I think, from memory, in April 2020, to really build that through and take it through that action.

Can I ask a supplementary at that point? Straight after that amended guidance in April 2020, or in the following weeks, I was contacted by scores and scores and scores of legitimate self-catering businesses. These were owned by Welsh people in north Wales. The only exception was somebody serving in the armed forces in England, who kept a home to go back to in north Wales. I contacted all the counties in my region. Five of them confirmed that they understood what the Welsh Government had said, that they would be applying discretion, which they did in assessing the cases, and they'd put in assistance for that, and all of them therefore paid out to legitimate businesses where evidence was provided, even when they didn't meet the three criteria. One county, because the written guidance was explicit, stating you had to meet the three criteria, insisted they had no discretion, despite the Minister's statement in the Chamber the week the revised guidance was published stating they did have the discretion and could pay out, where the three criteria weren't met, if they were satisfied they were legitimate businesses. Subsequently, I couldn't get a straight answer out of anybody to help the businesses affected in that one county. So, could you reconfirm the degree to which that discretion applied—were the five counties right? And, if so, what, if any, redress legitimate businesses in the remaining counties, who were denied that support, may have?

Duncan, do you want to continue to respond to that? Thank you.

Certainly. Just to reiterate, Chair, an absolutely fair challenge, and I know we've been in regular correspondence with Audit Wales colleagues to try and ensure that wasn't happening. But, to reiterate, guidance was issued consistently to 22 local authorities that they were required to operate within. But, within that, and accepting totally your point of, 'This is not a black-and-white position', discretion was applied to those 151 officers, who are the accounting officers in that sense—and discretion is exactly that—and they had discretion to apply those rules sensibly. Because ultimately, Chair, we of course wanted to support every eligible business that was eligible for that support—closed and/or restricted severely by those regulations. So, again, I'm very happy to pick up any cases we pick up retrospectively where there is an issue. But, you know, my belief is we applied that as consistently as possible across the piece, while respecting this was a scheme operating at pace, and we certainly learned lessons and improved that process as we went through what were two years of delivery in the end.

So, should I refer cases via committee to you?

So, we're happy to pick up cases. We're always looking to learn, even after the event. You know, we are in that post-completion period, but, yes, certainly, if you have specific examples, we're happy to pick them up.

Thank you.

Thank you. Duncan, you mentioned earlier that you're using section 151 officers' certification for assurance over the COVID-19 support for businesses administered by local authorities. Yet, according to what we've heard and what we've uncovered here in the Public Accounts and Public Administration Committee, Audit Wales has said that, in July 2022, you'd received responses from 19 out of the 22 local authorities that did not cover all expenditure in 2020-21, and that you had

'outstanding work...to do...to comply'

with your control framework. So, can you provide the committee with an update as to where we're at with that, please?

Andrew, are you happy for me to take that?

It's worth saying that we needed to put in additional levels of assurance beyond the roles, but I think, importantly, Duncan, you’ve been highlighting the statutory responsibility of the 151 officers. But, yes, please respond. That would be great. Thank you.

Thank you. Yes, so, as of now, we've had 20 of those schedule 6s. It's worth me pointing out to Members that the schedule 6 is not a standard requirement of our normal local authority grant activity; we did that for above and beyond. And I'd add, in addition to the schedule 6s—and we do intend to get the 22 by the way, and it's frustrating, but we will pursue those—we also did a fraud and audit survey with all local authorities. So, all 22 have provided either both the schedule 6 and the survey or the survey as a result. So, we have had a much fuller picture of the total local authority delivery. As Andrew mentioned, it's really important to note that 151s have statutory obligations, and we require them to work within that, and they are a partner organisation that we deliver in partnership with.

While I've got the mike, it's just worth mentioning, in addition to those schedule 6s and the surveys, we worked as a team to deliver additional assurances. So, for example, we've put in place, from the start, a data sharing agreement. So, local authorities could share their NDR database, we could share our ERF database, and check and balance across. So, in the early schemes, where you could only get, as a microbusiness, either ERF or non-domestic rates, that ensured that you only got one of those applications. Again, I mentioned earlier that the schemes were designed to work in tandem. That was deliberate. NDR is a quick-to-deliver, property-based solution that gives you that first injection of finance, and it's followed up with that more detailed assessment through the economic resilience fund.

Okay. What expectations have you now set in place for local authorities on post-completion checks? And what line of sight do you have, going forward, as to what they're doing and, potentially, some results that you may be seeing in the responses that you've received so far? 

Duncan, carry on, it's fine.

Thank you. So, ultimately, we require all local authorities to work within their existing audit frameworks, and I mentioned earlier that, in addition, we issued the audit and fraud error survey in 2021, and we intend to do that again in 2021-22. To put this in context, these were huge schemes of delivery—so, 300,000 total grants delivered over eight phases, over two years of activity, worth over £2.5 billion. So, this was very much fast evolving, and we tried to rapidly improve.

Just to give you a feel of that error rate, across those local authority survey databases, we identified, depending on the scheme, an error rate of between 0.08 per cent of those total numbers, or 4 per cent. And that's the total error rate. It includes fraud, but it also includes, 'You weren’t eligible because of your employment numbers or your turnover' or whatever it may be. So, broadly speaking, just to echo your question, really, this is an ongoing piece of work. We want to work in partnership with those authorities. We'll continue to work through and, where we identify funding that wasn't eligible, we will still encourage authorities to go after that funding. But, again, this is an ongoing piece of work. So, hopefully, that covers your question.

Thanks so much, Duncan. Audit Wales has actually reported that some local authorities have submitted fraud returns to the Welsh Government that have not actually included any cases of fraud and error, and it says that it seems unlikely in practice, albeit such cases may not have been identified to date. You've just said 4 per cent, so which one is it?

So, it's the range—

No fraud or 4 per cent?

Sorry, excuse me.

That's fine.

It ranged between 0.08 per cent and 4 per cent, and it's not just fraud; those figures are for all error rates. So, fraud is an aspect of that, but you could also get an ineligible application for whatever other reasons on the registration—for example, you applied and you weren't actually in the sector that closed, and those types of errors. So, it's the total error rate, not just the fraud rate.

So, Duncan, just to clarify, the error rate—that application that, perhaps, wasn't eligible, for example—that figure that you're giving is including those people, for those errors—

Yes, so, fraud—

—who filled out a form wrongly and were still paid out.

Excuse me, I keep cutting across you—apologies.

That's okay.

Yes, it covers the range of activities in that local authority action, and a part of that and a sub-part of that will include fraud. I think you asked and you noted, in the survey, for some authorities it's currently stated they're not showing fraud rates. I do have some pretty strong assurance that these schemes are designed to mitigate fraud before it happens, so it's worth noting that, through the registration process for NDR, local authorities rejected, across the board, 14 per cent of applications. We're designed to get rid as soon as we can. I think it's fair to say, in the scale of these schemes, even where they haven't had a fraud recorded right now, we may well find some, but, as you've alluded to in the numbers, these are low levels of fraud. In comparison, compared to the UK schemes, I think they're running at a recorded rate of around 8 per cent. So, we know we've got the checks and balances, we know we will see issues, and we will pursue as they come up. But, again, controls and balances are in place.

Duncan, can you give me as a cash value as to how much this 4 per cent accumulates to?

It's a big number out of £2.7 billion [correction: £2.6 billion]. It depends on where it is, and I wouldn't want to quote the figure now. To explain that, there are different areas and rates. So, on the non-domestic rates, it's at the lower end, and that's the bulk of the budget. We're seeing higher error rates for example on the business development scheme, where, in effect, there were tougher eligibility criteria. That was the ERF3, as they called it. So, it depends on the scheme. I could go through each scheme and I'd have to apply it to each level of scheme to give you a total figure. I wasn't trying to dodge the question, but that's a genuine answer—they do vary.

That's fine. I have just one final question to ask before I pass it on to the Chair again. Now, Audit Wales says that one local authority purchased additional national fraud initiative products, which, with its other controls, identified fraud and error amounting to £570,000 on 31 March 2022. So, did you in fact encourage other local authorities to follow suit? If so, why? And if not, why not?

Duncan.

Yes. So, in answer to the question directly, yes, we did raise this as an option. National fraud initiative was an area I was broadly aware of as we entered this pandemic, and it became increasingly part of our delivery. We made it available, and aware, to all the authorities. I mentioned the different forums we had, both with the leading group of six and also the 22. I think it's fair to say that different authorities had different needs for it. So, if you had a really well-cleansed non-domestic rates database, the national fraud initiative was not as useful, and also in its application. Of course, we're funding for the majority of authorities buildings and physical properties that you can see and feel. Where it has real value is where, for example, you're able to apply a national insurance number or a personal check, which wasn't always possible for a big group of companies. So, yes, it was made available. Not all of them used it, as you've identified. Some used it extremely effectively. I think, moving forward into our more mainstream programmes, it's clear that NFI has a role in what we do day to day, going forward, as well.

Rhianon Passmore, and then I'll bring you in, Mike.

Thank you, and then I'll go onto my questions. This was just really for clarification, which you seemed to have delivered. Is it possible to disaggregate the ineligible error rates from the fraud rates, because it's very difficult to contrast otherwise? Obviously, it's a very different picture across different local authority areas, and it's very easy then to go for a ballpark figure for the whole of Wales. It's a simple question.

Sorry, could you repeat that question? I didn't quite catch—

In regard to the 0.08 per cent to 4 per cent rate that we've been talking about, is it possible to disaggregate the ineligible application—the error—from the fraud? No.

The simplest area—. So, in the delivery we at Welsh Government do, that is absolutely feasible and possible. We can do it in the NDR, but we'd have to go back and break it out. So, at the moment, I don't hold that total data. But as we compile 2021-22 data, we will be able to break out fraud and different classifications. I'd suggest eligibility and fraud is a splitable number, yes.

Okay, thank you.

Can I just bring Mike in?

Very briefly, this was in the middle of a pandemic. It was a time when local authorities were under huge pressure, when businesses were under huge pressure. Do you agree with me that local authorities did a phenomenally good job in getting this money out to people where, otherwise, the businesses would have folded and there would have been serious problems to the British and Welsh economies?

Yes, this was a phenomenal achievement, I think, all round, from the design side to the delivery side, actually working really closely with sectors as well. It's been interesting to have the feedback from our business stakeholders about the way in which this was discharged as well in the Welsh context, and of course that had to continue over time. But, I think it was an enormous effort. I think it was also really important to try to be respectful to the starting principles for this because, in very blunt terms, this was trying to ensure the survival of businesses. We were trying to ensure that there weren't duplicate mechanisms in place. We had to have a focus on value for money. But, I think the particular challenge for Welsh Government and the system was that we had to change our risk appetite in these extraordinary times. And I think, as Duncan has outlined—[Inaudible.]—was progressing through the system in a matter of 10 days at scale. I think it's an enormous achievement for all involved, including local government. 

Before we move on, would Members like a five-minute break, or would you like to plough on? A break. Okay. If we can come back at just after 10:50, please.

Croeso. Welcome back to the Public Accounts and Public Administration Committee. We're still in evidence session with Welsh Government officials, and I hand over to Rhianon Passmore to carry on with the questions.

Thank you very much, Chair. I would like to start my questioning off with a statement, if I may, and that is to say that local government has actually carried out a phenomenal job in terms of its delivery of Welsh Government grants and UK grants.

So, on to the questioning, then: Audit Wales says that the checks on eligibility criteria that were carried out before grants were paid were not systemic or always documented. Why was this the case, or why do you feel that that could be the case?

If I could just start generally, and again, Duncan—[Inaudible.]—the level of detail that he was overseeing at the time. We don't accept the general point, just in the context that I was describing. Of course, systems needed to develop over time, and there was a wide variety of grant mechanisms that were put in place, from small to large, and inevitably, there will have been some issues along the way, including, I have to say, for some of the smaller schemes. But, we were responding in days, further to lockdown, in an exceptional manner. I think we tried, as I said earlier, to ensure that the design was able to avoid some of the potential fraud and error that could have occurred. There was actually a very high rejection rate, so we were avoiding some of these things in advance through the process that was established. Our head of counter fraud in Welsh Government has actually confirmed and given his own opinion that the actual role of the delivery schemes was impressive in respect of that level of control that happened. 

In the Welsh context, maybe this was more unique for us—see what you think, Duncan—these were generally organisations that were known through the system because of that localised contact, certainly the liaison with local government as well. So, I think that that combination did allow us to avoid that high rejection rate, and beyond those initial days, we were able to make sure that there were proper systems and phases in place and that we were able to still carry on with some of the checks and balances within the process. Duncan, you may wish to just underpin that with some of your technical knowledge. Thanks.

Yes, certainly, Andrew. Just picking up the controls that were in place, I think Audit Wales, for example, may have been referring to the fact that in the very early phases of the economic resilience fund, we didn't keep some of the backing data for eligibility for the microbusinesses, which is the smallest element of the funding we did. That was purely a systems capacity issue, so we just weren't able to build a system quick enough to collate. As Andrew mentioned, you can see the checks taking place due to the 25 per cent rejection rate on that scheme, so it's there in evidence, but what we learnt quickly through the internal audit was that we needed to collate that information in the background and did so for the later rounds.

It's probably worth mentioning as well, in addition to the actual systems and the digital applications, this was underpinned by quite a thorough assessment appraisal. It was all overseen by an oversight group, an operations group leading into an oversight group. We conducted hot and cold reviews, so hot reviews in the moment on the assessment and appraisal, cold reviews a week after, just to make sure that we were continually learning those lessons and picking up the issues. Then, we increasingly developed that intensity of offer, so we built in artificial intelligence and other checks into the digital systems to try and pick up those erroneous applications as they came in.

As Andrew mentioned earlier in the evidence, our entire principle wherever possible was to cut those issues off at the knees and basically not issue money, because obviously once the money is gone it's much harder to reclaim and claw back. So, overall, the entire process certainly built and evolved, but I would challenge the point that it wasn't done from the start.

Okay, thank you. Audit Wales's report from July this year said that you were at various stages with the post-completion monitoring for Welsh Government's administered schemes with activity under way up to phase three and further activity planned. Can you explain why this wasn't completed 12 months after payment?

Duncan.

Yes. Put really simply, I hadn't anticipated that we'd still be delivering COVID support two years after it started. In reality, we had to use some of the post-completion team in delivery. So, obviously, 12 months after the ERF 1 and 2, we were still in restrictions and delivering results out there. The other important point, of course, is that, if we had conducted a 12-month review on all those companies, many of them were actually still closed 12 months after the event. So, in effect, we just had to respond to events. I thought it would be all done and dusted by July 2020. Actually, in reality, as we mentioned, it was two years' delivery over eight phases, and 300,000 grants. So, I think it's just basically where we're at.

In terms of updates, we're into about round seven now of PCM, so we're up to about September 2021. So, we are catching that timeline up, but it is literally that we lost months of delivery because we were having to focus on carrying on keeping businesses in survival. Hopefully, that gives you some assurance on that point.

Thank you for that. I don't think anyone underestimates the crisis situation that everyone was facing at the time. How much ineligible or double funding have you identified and how much have you clawed back?

Duncan, I know that there's such a lot of detail that we have, but we may want to reflect on whether some of the examples we are able to focus on can be provided to the committee, but do you just want to give some highlights, maybe, of some of those areas? I know that you know all of these figures inside out.

Yes. Thanks, Andrew. In terms of active recovery, we've actually recovered to date around £2 million of spend. Again, that is behind the curve we expected. I think I mentioned in my previous answer briefly that we are into round 7, which is the July-August activity from 2021. So, you know, again, we're catching up that curve and we're going to carry on delivering that through.

We've had good levels of response to both the survey and the direct post-completion monitoring, and our focus, really, is, obviously, on the higher risk areas. So, there is a due diligence in line and level with the investment principle applying, so we will be pursuing those. And also, it's worth noting that there is obviously a timing issue. So, we have been quite careful about our pursuing of ineligible spend when businesses were still impacted by COVID regulations and, obviously, that is now ramping up with the hope that we won't have to go back into further restrictions. So, we're progressing along the line, we are getting it back on track; we are up to August-September 2021, and we will carry that through until it's complete.

And have you identified any very large-scale frauds that you're concentrating on, without detail?

So—. Oh, sorry, Andrew; are you okay for me to carry on with that?

Yes, that's fine.

So, interestingly, I think, the large-scale frauds—we did identify some in the application phase. You would see economic resilience fund with similar—20 applications from a single applicant and somebody had obviously sat in a room looking at the walls. So, there was a company called 'plug sockets', 'light sockets', 'kitchen table'—all traceable back, and so we did cut those out at base. The checks and balances really, again, were designed to cut that fraud out in the early days.

I would say that the bigger clawback schemes are likely to be more around those broader error rates. So, you mentioned earlier about the fraud versus eligibility: companies that claimed they had a 60 per cent turnover drop, which they didn't get anywhere near to or, indeed, haven't secured employment. I think there will be some larger clawbacks coming in around that. But, again, where clawbacks exist, we will work with those businesses to ensure that we don't inadvertently cause a major issue and work through them to agree a payment plan, et cetera, et cetera. 

We continue to monitor and, again, to your point, where we pick up any fraud, we will absolutely pursue those fraud cases. But as I sit here today, we're not sitting on a major fraud case, but it will evolve, I have no doubt, over the next period.

Okay. And I would presume, hopefully, successfully, to prosecution, if that were to be evidenced. 

In its memorandum, Audit Wales refers to a further pilot being undertaken for post-completion monitoring before the roll-out for phase 3. Will you expand on those arrangements, and also how have they changed, and why have they changed?

Well, certainly the pilot helped to refine, I know, the final post-completion monitoring. Duncan, again, you know the detail on this. Thanks. 

I think you referred in the question, phase 3 was actually a business development fund, and you will recall at this time that we thought we'd be supporting businesses out of the crisis, so it did have a particular different need. But specifically about that pilot, we ran a pilot on 26 businesses within that, and it was really to identify lessons learned and what could be improved with post completion. That pilot has helped refine the process. We've tailored our post-completion documentation and very much targeted activity and built it into our main stream.

For example, on that ERF 3 specifically, 342 businesses are in the post completion, and 50 of those have already been released from conditions as part of that work, and we continue to develop that through. I think the principles, lessons learned and continuous improvement are absolutely core, and we haven't stopped, we're still 'live-ing' it. So, as we learn new things, as we look at these cases in detail, we will continue to evolve and develop.

Thank you. You've obviously referred in your documents, and today, that this is going to be ongoing for some time, and also in terms of post-completion phase 3 work. Are there revised timescales for completing post-completion monitoring, because, obviously, this has gone on for a lot longer than anyone had ever expected or anticipated for 2021, anyway? Is there a revised timetable around that?

Duncan.

So, specifically for the 2020-21 accounts, just to cover those, our monitoring, the survey work and the initial checks will be complete by the end of this financial year—so, 2022-23, March 2023 that is, isn't it? That said, of course, any work requiring clawback will continue on, and I anticipate that, more broadly we have a good 18 months' workload to get through the survey work of all eight rounds. Again, as we develop, improve and get more core focus on it, I think we may be able to shrink that timeline, but just the scale of the activity is beyond what we were expecting and certainly is taking a little longer, but we now know the end is in sight.

Before you continue, I'll just bring Natasha Asghar in with a supplementary.

Yes, thank you so much, Chair. Just a quick question, gentlemen—in fact, just a bit of an elaboration on what I asked you previously, if that's okay, from yourselves, Duncan and Dr Goodall. I hope you don't mind me asking this. You mentioned previously in your answer that, in relation to fraud, the figure was somewhere between £0.7 million to £37.2 million. There's a concern that I have. I appreciate all the evidence you provided us with, but is there any way that we can have the workings out as to where you came up with these numbers and figures from, please? Because it's just causing me a bit of concern that we get lots of numbers thrown at us, but we don't actually see the workings out as to where we came to those figures from.

Yes, I'm sure we can give a summary of those arrangements. I know we're trying to give you some of the individual examples, because there was a complexity around these schemes. But we'll send a follow-up note through, Chair, that just tries to outline those as much as possible. And, of course, we'll also try and make sure that that is as clear as possible in the ongoing financial years, because this will be a matter of reporting for some time.

Thank you so much. And, Dr Goodall, can I make a humble request to you and your team as well, please, because if you look at the business and enterprise as well as industrial strategies from the UK Government—yes, I'm using an example of the UK Government in this when I speak about it—their workings are a lot more in detail, compared to what we've seen and what we've had? So, is it possible for you and your team to have a look at their examples and how they've actually provided their breakdowns and perhaps try and replicate that to a certain extent, just for clarity's sake for us as well, so that we can see where and how those fraudulent issues have occurred, what we can do, and perhaps so that we can then even work together in finding ways forward to help avoid this, if it were ever to happen in the future?

Yes, I'm happy to take a look at the best way of reporting it back and if there are other alternatives available, we'll want to do that. Also, maybe I can just say at this point that it's interesting, being part of the national fraud initiative, that we've had no references, I think, Duncan, from either the ERF or the NDR mechanisms, so there's another level of controls assurance about whether we would have expected those. But, yes, we'll take a look at the format and see what we can do on the basis of the detail that we obviously have within the organisation.

Thank you so much, Dr Goodall; that would be really, really, appreciated.

Thank you. Rhianon Passmore.

Thank you very much, Chair. You've referenced the ongoing nature of this post-completion monitoring. What resources, in the current dire financial climate that we're in and that we face moving forward, have been allocated to this or have you identified for this? And what do you see as the main risks of delaying completion?

Duncan, it's probably worth you just giving a view on behalf of the team on this issue, because it's been so sustained. So, over to you.

Yes, okay. So, in addition to our business-as-usual, post-completion monitoring team, which is part of our grant activity, we've got a dedicated team of 10, which is a grade-6-led team with a senior manager and eight appraisal managers. I think I mentioned earlier, in my opinion, I think we've got another 18 months to two years of post-completion on this work. It is a challenging area and, again, we need to really focus on the higher areas of risk where we possibly can and our objective is to release people from terms as quickly as we can.

The biggest risk, of course, is that businesses do go in and out of business, so there is a risk, of course, that we'll identify a case where we can't claw back because they no longer exist. But I guess that's why, again, we're trying to prioritise those higher risk areas and develop that through.

And perhaps, Chair, if I can say, given the profile of this, and obviously the significance and the value and the support as well that Duncan described there to make sure that the team is available and resilient, I will obviously take that forward internally in the organisation. We have to still make sure that all of these processes are followed through on and, as Duncan said, we wouldn't have anticipated still going at certain points, but we'll make sure that we have a mechanism to support the next 18 months to two years as necessary.

And finally, in regard to the fixed-term appointments to the team around business and post-completion monitoring, I believe they're due to finish in the summer, so what happens then?

Well, it's important that—. Duncan has made really clear the need for continuation. We can see the level of funding that is used on this scheme, and I will work with Duncan and the team to make sure that we can retain those and make sure we can carry on with those processes. But speaking in a very honest way, there isn't an alternative; we have to follow it through, and hopefully what we've done is demonstrate the impact of that team, working with the broader network and all of the other controls as well. So, the fixed-term appointments inevitably will come to an end, but we'll need to make sure that we have mechanisms in place to continue those arrangements as well.

Okay. Thank you, Chair.

Thank you. Over to Rhys ab Owen.

Thank you very much, Chair. I just want to deal swiftly with estimates of error and fraud. An easy one to start: do you expect to report on the estimate of fraud and error in your next governance statement?

I think we're broadly content, just given the extraordinary level of detail that we're having to work through. But I appreciate Duncan's position on this. We're probably not expecting much change because of the approach that we've taken, the methodology and the controls. But, Duncan, what do you think?

Yes, so the intention is to publish it in next year's accounts as well. I do anticipate, as Andrew said, that we're not expecting a big change in what we've reported to you today on the 2021 position. If anything, I'd expect there to be an improving picture, because the checks and balances have improved. But, yes, I think transparency in reporting on the level of funding is expected and that's what we intend to do.

And do you expect to make any changes to the way you estimate following the memorandum from the auditor general?

We're not really expecting to make any changes. Obviously, we've reflected on it, and hopefully today we're able to describe the range of detailed approaches that were taken. I think the team will still look to learn around the methodologies and look for feedback along the way, but I think we feel that the controls and assurances are working at this stage. I think, as Duncan has described, we've had to adapt so much along the way anyway that, clearly, if we feel that there's a need to change, we would do so.

Gawain, on the technicalities of this, do you have a particular view in respect of the annual accounts?

Thank you. I haven't really got that much to add. What I would say in terms of where we are, as has already been mentioned, the estimate for 2021-22 was very much based on the information we had when we signed the 2021 accounts back in August. I think, this year, that's one of the issues, obviously: trying to finalise a set of accounts and sign it off while, in parallel, also preparing the next one. What I would like to add, though, is we did discuss this with the audit and risk committee, and agreed that we would keep the situation under review, and if any information came perhaps late in the day, we would then discuss with the audit and risk committee whether we perhaps needed to do a final update to the accounts. Audit colleagues are at our audit and risk committee, so they're obviously aware that if something does come in quite late, we might need to make that last-minute change to the governance statement. Thank you.

How are you keeping the estimates up to date whilst receiving further information from local government?

Duncan, do you want to talk about the flow through of the data and the information? Thanks.

Yes, sure. So, obviously there are two elements to the delivery: the stuff that Welsh Government delivers, which we keep up to date live, so in effect we are monitoring what's returned, what's done, and as I mentioned earlier, we will rerun the survey for local authority delivery for—sorry, I forget which year—the 2021-22 accounts. So, we'll conduct those checks and balances through.

Just in response to the memorandum as well, of course, we've worked with Audit Wales through the summer, so in effect some of those changes have already been implemented through, and again, I think just to reiterate, we are committed to continuous improvement in what we do and deliver, so anything we can improve, we will do. So, I think that this is a running programme of activity that we'll need to record and report and update accordingly.

Thank you. Thank you, Chair.

Thank you. Natasha Asghar, could you pick up on staffing arrangements, please?

Thank you so much. I'd just like to ask two or three for clarification. In what circumstances are the Welsh Government entering into off-payroll arrangements for staff? Why are some for periods of more than a year? And how do you ensure the individuals are meeting their tax obligations whilst doing so?

Thank you. I'll probably look to Peter to just describe some of the steps that are taking place on this. I think my overarching statement, though, would be to confirm that the majority of off-payroll as described are actually secondments into the organisation and agency workers. So, the terminology may not be quite capturing that at this stage, because of course in respect of our engagement with other Welsh public bodies, for example, we do have secondment arrangements that support us in respect of the expertise that we need to oversee the operation of the organisation. But, Peter, perhaps if you can outline some of the steps that we take, because there are lots of controls in place around this area.

Yes, of course. Thanks, Andrew. So, we use HMRC's online employment status indicator toolkit for every worker at the point of engagement, and we've got a lot of guidance in place to support employees in undertaking this assessment. Once the toolkit has been completed the work is captured by HMRC's off-payroll working rules and then they should be put on to the Welsh Government's payroll. Although of course, as Andrew's just commented, if the individual's on secondment or loan or employed by an agency, their payroll arrangements are via their parent organisation.

Where an individual is self-employed for tax purposes, it's the engaging Welsh Government department's responsibility to seek assurance that the worker is meeting their income tax and national insurance obligations. We seek the department's assurance that this is sought at the start of the contract, at the six-month stage, or at some other point, depending on the circumstances. Of the numbers that we are required to report on, we had 118 off-payroll workers, but only three of those weren't seconded or operating via an agency, or through some other payroll mechanism. Is that sufficient information for the committee?

It is. I'm just going to ask a little sub-question to that now. The Welsh Government reported an off-payroll arrangement for six of its board members and/or senior officials with significant financial responsibility from 2020 to 2021. So, how many of these were actually staff?

Yes, just to confirm those arrangements, of the six that were reported, only one of those was a member of the board and a senior official, and that happens to be myself because I am an NHS secondee, as I was outlining earlier to the committee. So, I'm the board member who is part of those arrangements. The other five individuals all hold senior roles within the groups, but they weren't board members or senior officials that relate to the purposes of the remuneration report. So, they are part of our secondment arrangements within the organisation. 

Okay. You describe the increase in the gender pay gap from 5.53 per cent on 31 March 2020 to 7.37 per cent on 31 March 2021 as 'disappointing'. What specific actions are you taking now to address this matter?

Yes, I am still disappointed that we're not making further progress, although this is an area that is really about trying to track over the longer term, because even when you are putting in place individual in-year actions, it can take some time to work its way through the system. I would share with the committee that if we track the progress that we've made since we first started reporting this measure, which was back in 2011, actually, we have seen a reduction from 12.5 per cent to 7.4 per cent, which was the position at the end of March 2021. So, that's a 40 per cent reduction in the gender pay gap that has occurred.

Also, if I look back over the recent period of time around our appointments, we can see on our senior civil service appointments, on our deputy directors, there is a much higher level of female recruitment happening within the organisation. I'm pleased to say, if the committee hasn't noticed this, that 50 per cent of our directors general, for the first time that I recall, are actually female as well. So, I hope that we are able to show that in a range of areas, but there are some specific actions that we're putting in place, particularly around our diversity and inclusion strategy. Peter, I just wondered if you wanted to talk through those examples from those schemes. Thanks.

Of course, Andrew, and I think I will just remind committee of your comments about our refreshed approach to supporting women through the menopause. I'd argue that's part of the action that we're taking, although that's something that's not come out from the action plan per se. We've got a lot of support for women to develop and further their careers, and a range of opportunities for women at all levels of the organisation: the standard suite of learning and development courses—I won't go into all the details of that, but there's quite a considerable amount—coaching and mentoring opportunities to support women, and also encouraging members of the senior civil service to be reverse mentored by a woman so that they can understand the barriers that women face at different stages of their career. And our workforce equality, diversity and inclusion strategy recognises that we need to do more to ensure we've got a gender-balanced SCS between now and 2026, with a target that more than 50 per cent of appointments to the SCS will be women. Andrew gave a bit of a feel for the progress we've made recently on that. We've done a lot of work to support our women's network, Women Together, and just a final one, Andrew—there's quite a bit more—we undertook Chwarae Teg's fair play benchmark and incorporated feedback into our workforce equality, diversity and inclusion strategy, and we'll continue to carry out further benchmarking of gender, in particular, during the life of the strategy. There is more, but I'm conscious of time.

Rhianon Passmore's got a quick question.

If I just may, obviously there's a large drop since 2014, but these things are very fluid. I'm just very interested, briefly, that as we are securing more senior roles for more women within the commission and wider, why is there a drop? Is there any explanation for that? 

Well, the drop is because of the positive progress that we've been making. So, it just means that we're able to deal with a couple of things. I think visibility on some of those senior roles, on the one hand, is part of it, but we've also been trying to deal with the technical areas in between boundaries and grade changes. So, we've been trying to target that over a number of years; it will be part of ongoing discussions that happen, not least with our union colleagues as well. This is the second lowest year that we've reported on the gender pay gap, so that's a positive reflection of, I think, the progress we're making, but we need to keep going at that. And what I'll be interested to see is how we compare and contrast more broadly with other UK civil service departments, but actually other sectors as well, just to make sure we have a continuing focus on this. My worry is that, even if we put a whole series of actions in a single year, it may not work its way through for another three, four, five, six years. This is one of those areas where you have to monitor it more into the longer term.

Gentlemen, I know we're conscious of time—I know there are other questions that I want to ask, and my colleague Mike Hedges wants to ask you as well—but just to sum up my final statement or question to you: I've been listening to all of your statements today, I know that we've had previous conversations about the accounts, but there's one question that I have for you, which I hope you can answer for me. As elected politicians, for us to do anything out of our bounds and our rules and regulations is a very difficult task. For me to get seconded to another job right now would be next to impossible—in fact, I'd probably get ripped to pieces by my own colleagues sitting here, let alone anyone else. But it seems that it's very much the case that it's okay and it's a justified thing to be doing in your line of work. People who are watching in today are probably thinking to themselves, 'Well, you know what? It seems to be a different rule for one set of people and a different rule for civil servants.' Whilst I understand the importance of civil servants—I hold you all in the utmost regard—even with the payouts that we've been discussing, this £38,000 that we've been going over and over again in the meetings that we've had, it is a cause of concern. There seems to be one system in place for civil servants and one system in place for everybody else. So, I want to ask you now to please tell me that is not the case, and, if it is the case, why it is the case.

Well, secondment arrangements are a pretty standard procedure that is in place—it works across sectors; it isn't just something that's available for the civil service. The NHS itself will have secondees in for different reasons as well. I think, actually, in terms of pursuing the way in which we work as Welsh public services together, irrespective of UK civil service arrangements, we are likely to see, across public services, more exchanges and secondment arrangements to be there, because we're taking advantage of different experiences. And I hope it's a positive that I have come through a process that means that, as somebody with an NHS background, I'm able to lead and discharge my role in the civil service in Wales. We also have arrangements where, across other civil service departments, there are secondments from those arrangements, because those other departments act as their employers as well. So, I would hate for this to be seen to be an unusual mechanism—it's pretty much an available and standard mechanism. And we may find more happening of that in Wales, if we want to see that experience circulate more generally. And a lot of our comments today are trying to look at aspects in respect of what employment contracts, employment rights and employment law means as well. So, irrespective of these arrangements, we do have mechanisms that are standard for any members of our staff. And as I was trying to say in the evidence session last time, in some respects, some of the conversations we've been having are to try and make sure that these things are consistent right across the organisation as well. So, I don't feel these things are peculiar; all of these arrangements that we have been describing in the last two evidence sessions are things that other organisations experience as well.

Of course. Dr Goodall, I appreciate the secondment side of things; I don't question the experience that you bring or that other civil servants bring by doing secondments. It's just in relation to certain—and I think you know exactly what I'm alluding to—. When it talks about payments that are being made to certain individuals for the jobs that they have done, for untaken holiday, for example, it's not a facility that's available to everybody else, whether it be me, or whether it be a common person outside on the street who's doing a job in an office somewhere. These are certain things that we are seeing happening here in a Government organisation, and it's our responsibility to, obviously, scrutinise that. But this is what I'm saying: why does it feel that there's one rule for civil servants and one rule for everybody else, including Members, including members of the public?

I understand the scrutiny, but, as I said, these are available and standard procedures within the civil service, within large public service organisations, as I've experienced over the years as well, and with other employers as well. So, I absolutely understand the scrutiny and the focus on it, and, hopefully, what we've tried to do over the course of these two evidence sessions is to give a response on behalf of the organisation.

That's fine. Thank you.

Mike, do you want to just ask one question?

I do. The Welsh Government's got a commitment to 30 per cent of staff working from home at any one time. Are you meeting that, and, if you are, what reduction in office space are you going to have, and how are you going to go about it?

Well, I'll look to Peter and Tim, perhaps, to speak on this, but we have a commitment on our hybrid working arrangements to work on up to 50 per cent of our staff coming into our office environments. We still remain short of that. That's not a target, to get 50 per cent of our staff in; we're really pleased with the way in which remote working has helped the organisation to work through its different issues. But, Pete, you may want to give a feel for things. And Tim, obviously you've come in recently to see what we're up to in Welsh Government in your chief operating officer role. Pete.

Yes. So, in terms of—if I heard the question correctly—the target of up to 30 per cent or 50 per cent of colleagues working remotely, we're actually exceeding that at the moment, and have done since all the way through the pandemic period. What we are doing is a lot of work to look at what the business need across our offices across Wales is at the moment for physical accommodation. We're doing a lot of work with other parts of the public sector to share our accommodation, to sublet our accommodation, and also, where we don't have a presence necessarily, to actually provide that facility from a touchdown point of view. And Tim, I don't know if you wanted to add anything around your leadership around the Welsh Government 2025.

Well, maybe I'll just add in. In the first few weeks that I've been in post, certainly the use of our estate has been one of the key things that I've had briefing on, and also been impressed by the work that's already in train around looking at the most effective and efficient use of the public sector estate. And I know there are mechanisms in place, through Ystadau Cymru, and also the Welsh Local Government Association, in terms of the wider public sector and saying, 'How can we really optimise the use of the estate going forward?' Because all of the public sector organisations, the previous ones I've been in as well, are all facing into this issue of actually, with the increase in remote working and moving to much more hybrid and smart working arrangements, the need to look differently at the way that we use our estates and to have much more collaborative arrangements going forward.

Okay. Thank you. Well, that brings us, I think, to the end of our formal questions. There were some other matters we'd hoped to question you on, but time has worked against us. So, we'll pick those up, hopefully, in correspondence with yourselves, if that's okay, or subsequently in our committee reports. So, a transcript of today's meeting will be published in draft form and sent to you for you to check for accuracy before its publication in final form. So, it just falls to me to thank all the witnesses for being with us this morning, for participating, for answering our questions, and may I wish you a remainder of a very productive day?

Right, Members. Well, under Standing Order 17.42, I propose to exclude the public from the meeting for the following business: the items for the remainder of the meeting itself, and item 3 of our meeting on 26 October. Are Members content? Thank you.