National Assembly for Wales

Bore da. Good morning. Can I first of all ask if there are any apologies? I know we've got one from Andrew R.T. Davies. I know we've got no substitutions. Are there any declarations of interest? No.

That takes us on to the main item of the morning: the Welsh Government's draft budget—scrutiny of the Minister for Environment, Energy and Rural Affairs. Minister, Lesley Griffiths, can I welcome you? 

Thank you. 

Would you like to ask your officials to introduce themselves? 

Yes. We'll start with Tim.

Tim Render, director of environment and rural affairs.

Good morning. Dean Medcraft, director of finance.

Good morning. Gian Marco Currado, director of environment and marine.

I'm Christianne Glossop, Chief Veterinary Officer for Wales.

Thank you. Croeso. Welcome. Can I move straight to questions? 

Of course.

Thank you. We know that we've had a climate emergency declared by the Government. We've had the Future Generation Commissioner for Wales's 10-point plan and we've had a 0.7 per cent, in real terms, gross in the revenue budget for the area that you are in charge of. Can you put that into some sort of context?

Yes, okay. You're quite right, I have had a 0.7 per cent increase in my revenue budget. However, I've had probably over a 50 per cent increase in my capital budget. I have to say, that's the biggest increase I think in any budget that I've every had in my years in Government, and that's where you would want the funding to be, really. If you look across my portfolio, it's the capital area of the budget that you would want it to be in. As you say, this draft budget is the first one since we declared a climate emergency, and, obviously, the Assembly did too, following the Welsh Government. I think it builds on the commitment of both the First Minister and the finance Minister, who said we must maximise the use of all our budgetary levers to support a greener Wales.

We've got to raise our level of ambition, and one of the reasons we did declare a climate emergency was to galvanise other parts of the public sector, of the Government, but individuals and communities as well, to face the climate emergency. For colleagues who saw the news last night, I think it's very scary. I think the input of the future generations commissioner is very welcome. It's really important that people do challenge us on it. Obviously, her 10-point plan—I think it was about £1 billion of investment. You've got to be pragmatic, haven't you? We just don't have those levels of funding. We've had a decade of austerity. As I say, I've had an increase in both revenue and capital, but the capital one, in particular, is very significant.

Isn't there a danger, though, of just dealing with the problems? I mean, you use the capital to build higher walls to stop flooding rather than trying to mitigate the problem.

We have to mitigate the problem. Obviously, we've got our climate change adaptation plan. I don't think it—. We want to see different ways of combating and flood prevention. So, not that long ago—I was going to say it was last summer, but it was one of the worst days I've ever been out in; it was blowing a gale and lashing down—I opened the new flood prevention scheme in Porthcawl. And that was completely different. You didn't have the levels of concrete that we've seen in previous ones, or as you say, the building of high walls. So, that's what we need to see, really—we need to see innovation around our flood prevention schemes, for example.

You've said in your paper that the most powerful initiatives are not necessarily those that would receive the highest financial investment, but those that provide the opportunities for people to take action on tackling climate change. Would you like to expand on that?

It's absolutely right: not everything costs a huge amount of money. And I go back to what I was saying about galvanising individuals. So, if you think about our environmental growth plan, for instance, which is in the stages of development at the moment, one of the things that we really want to look for—and this was in the First Minister's manifesto—is bringing initiatives to your doorstep. It's for local people to see what they can do in their area. That won't cost huge amounts of money.

It's about making sure, if you think about the targets that we've brought forward—. So we've got the UK Committee on Climate Change, which is our independent advisory body, and they've helped us with our targets. So, again, we've listened to all the voices around climate change; I brought Extinction Rebellion in to hear about what they have to say. You know, we don't have all the answers. It's really important. So, it's not just about expensive initiatives, or making sure—. I think it's about making sure that we spend the money where we need to. Obviously, policies will change. So, something that we're doing now—if UKCCC say, 'Well, you've allocated the funding in the wrong place', we can look a that.

I'll just make a comment: you can deny climate change; what you can't deny is the effects of climate change.

Absolutely.

Jenny Rathbone.

On decarbonisation, it looks as if none of the nearly £96 million capital funding identified in the draft budget narrative is being allocated to areas within your portfolio. It's already ring-fenced for decarbonisation. Is that a correct interpretation? And given the significance of carbon emissions generated by agricultural and food activity, I just wondered why that would be.

So, the extra £96 million for decarbonisation measures is within a wider green investment packet of more than £140 million. So, as I say, my capital budget has increased by over 50 per cent. So, I have received a significant amount of funding in relation to biodiversity and in relation to air quality, for instance. So, that obviously feeds into the decarbonisation element too. 

I've also set aside some revenue funding in relation to my decarbonisation budget to increase activity on renewable energy and on energy planning. That started as the Energy Atlas—and Llyr will remember that—last year. That has now moved into energy planning to make sure that people know the best place to look for renewable energy. 

And, obviously, next year, we've got a massive opportunity with COP26—the United Nations climate change conference—being hosted mainly in Glasgow, so I've also set funding in relation to COP26 as well. But it isn't just about my portfolio; it's right across Government. What we're trying to do is make sure that decarbonisation is mainstreamed across Government. As soon as I came into this portfolio three years ago, we set up the decarbonisation ministerial task and finish group, which I chair, and I lead on. And every Minister has responsibility for this part of policy across Government, and it's business as normal, if you like—decarbonisation now. So, every Minister—and I know you've got Ken Skates coming in after, Chair—will be spending funding in relation to decarbonisation.

Okay, so how much of this £96 million do you think will be dedicated to decarbonising agriculture and food miles?

I can't give you a specific amount now, but you're quite right in relation to agriculture in particular. If you think about the business farm grant that we've had, we've made sure that that funding has gone towards helping farmers look at equipment, for instance, which will help them reduce their carbon emissions. You'll be aware of our new agricultural scheme that we're bringing forward—some of that funding might be required there. Agricultural pollution is another area where we're going to have to look at capital funding, not to support non-compliance—I make that very clear—and I am due to make an announcement very soon about agricultural pollution regulations. So, I've always said that we would help fund, but not for individual farms to bring up their farm to compliance.

Okay, but you can see the anxiety that all of this money could easily be gobbled up by developing more new renewable energy, which, obviously, I am not opposed to—it's just that one third of carbon emissions come from agricultural farming-related activities or food-related activities.

I don't think it's quite a third.

It's significant, anyway.

Obviously, it is part of our emissions profile. But, as I say, we've been working with agriculture for a while now to get them to be able to reduce their carbon emissions, and the farm business grant was certainly one of them. So, that 50 per cent increase I've had—I'm sure we'll be talking about this later—about 66 per cent of that increase has gone into biodiversity, which, of course, then feeds into decarbonisation.

Okay. You're about to introduce legislation to commit us all to a 95 per cent reduction in emissions by 2050. What assessment has been made of the potential cost of achieving that target and is the budget you've been allocated for next year going to be sufficient to keep us on track for that?

Again, the UK Committee on Climate Change advised us that we should revise our 80 per cent target to 95 per cent by 2050, and we absolutely agree with that. Also, we're going to have to legislate for our interim targets as well—I can't just legislate for 95 per cent in 2050 and then just leave it to everybody else to do.

When the UKCCC reached that conclusion, they did do an appraisal of the costs and the benefits of emissions reduction with the support of a dedicated expert advisory group. So, they estimated that the cost of moving to a net-zero target for the UK—that would mean a 95 per cent target for Wales—was between 1 per cent to 2 per cent of gross domestic product. 

As I said before in an earlier answer, if the UKCCC tell us that we've allocated the funding in the wrong place, they will come back and tell us. If I can just do a quick plug, Chair, the UKCCC have just put a call for evidence out. I think they're visiting Wales twice next week to talk to people, so please put in your responses in relation to that call for evidence—I think it closes on 5 February.

So, at the moment, I think we're listening to their advice and we're putting the funding where we think is correct, but, of course, we will continue—. I think I'm meeting them, or, certainly, officials are meeting them—I'm looking around—next week, or certainly the week after. I meet them regularly, and we will listen to their advice, but, at the current time, I'm happy with the way we've allocated funding.

Okay, thank you for that. You may be aware that we've initiated an inquiry into fuel poverty, and that's already revealing certain challenges for us all. I just wondered whether, given that we really haven't met our targets for eradicating fuel poverty, you could explain why there's a £4 million reduction in capital allocations compared to last year, and only a modest increase in resource funding for fuel poverty programmes. Could you just put that in context?

Yes, the context is that the programme was set back in 2017, so it's the way that it's committed over the four-year period. So, £104 million was committed over a four-year period. The £4 million reduction was set in 2017—I'm right, aren't I, Dean?

It's a profiling of the £104 million over several years. 

Yes. I think, now, we've helped 25,000 homes, having put that £104 million in back in 2017. So, we've improved the energy efficiency of about 25,000 homes. As at the end of March 2019, investment of more than £327 million has been delivered through both Nest and Arbed schemes. So, that's improved the energy efficiency of more than 55,000 homes.

This is an area where, I think, we can make significant contributions, not just in relation to fuel poverty, but to decarbonisation as well. Committee will have heard me say many times that we know this is an area where we can make a big difference, and this is what I was saying before about—. I think my budget increase—I'd much prefer it be in the capital part of my budget rather than in the revenue part, because this is where we can make significant differences.

Okay. Given that Arbed only appears to have spent £1.5 million of its £9 million allocated for this year, how are we going to accelerate their performance?

On Arbed?

Yes.

So, we've just had a new manager—I think it is the Arbed scheme that has had a new manager—because we clearly need to be making more advances in relation to this. So, this is currently being monitored very carefully, because we did have some concerns about the scale, if you like. I've had assurances this will be increased in the next financial year and, as I say, the funding is available.

And—. Sorry. There has been a ramping-up of spend towards the end of this year, and we are confident that we're going to hit those targets next year with the change in the team—[Inaudible.]

Okay. All right. Well, we'll obviously come back to that. I think that would be good to—.

Could you just set out the purpose of the new environmental growth plan? When do you think you're going to publish it, and what is your aim in developing this?

So, this was a manifesto commitment of the First Minister to develop an environmental growth plan. So, we started discussions, probably about spring time last year, when I asked Sue Essex—who colleagues will be aware of—to look at this for us, and she's convened an environmental growth external reference group. So, the idea is that we have an overarching narrative for action across Welsh Government for a greener Wales. We want to set a strategic approach and the most important thing is that we're focused on outcomes. So, we're currently developing it. I expect to publish it, I would say, in autumn, so probably later this year—maybe October/November of this year. Lot of discussions going on—I've met with Sue several times. The group have come together. I think they're due to come together again before the end of this month. Again, it's about mainstreaming it. I think it's really important that environmental growth is mainstreamed across Government. The priority themes for the greener package are, obviously, biodiversity and decarbonisation, and that funding will contribute to environmental growth next year right across Government.

The £5 million allocated specifically to projects that can be seen from the doorstep is very welcome, obviously. This may be an opportunity to get people growing their own, enjoying the environment and, obviously, we know that that means that they will care for the environment much more. Could you just say what the rest of the £137 million allocated for this is going to be spent on, because £5 million doesn't look quite enough, given that we have lots and lots of communities?

Well, the £5 million is—you know, that's for next year. I'd like that to be different. I think if you're going to include communities, I think it's going to be—. You might find, of that £5 million, some will be very small amounts of money, because I really want to see it pan-Wales. So, I think, as we develop the environmental growth fund it will be quite exciting. I don't think we've done anything really like that before. So, it doesn't sound a huge amount of money, but I think, if you spread it out in an innovative way, that will make a big difference to local communities.

The £137 million is across Government, so I'm sure, when Ken's in front of you in the next session, you'll hear what he's doing in his department. So, one of the big things is the electric waste collection vehicles for local authorities. So, there's significant funding going from Julie James's department. Town-centre regeneration, looking at green projects—I've just been reading an—

Electric buses.

Electric buses, yes. I've just been reading an article on green bridging, and I notice Ken Skates made an announcement this week about, I think it was, a bridge over the Dyfi. So, again, it's about making sure that that funding is used right across Government as part of environmental growth work. There are lots of projects managed from within my department. Obviously, the national forest is, again, another of the First Minister's manifesto commitments. So, there will be funding to kick-start the national forest.

So, this—the national forest is coming out of this £137 million, is it?

Yes, it is, isn't it?

Yes. The £137 million is basically an indication of the capital across Government that we will spend on environmental growth more generally, and the £5 million is specifically, as the Minister said, for the environmental growth plan and the work at a more local, community level.

Joyce Watson's got a question on this.

Very brief. I notice it says that we're going to halt and reverse the decline in nature, and that's great, but it's not enough, because we just stay where we are. So, what I'm after is understanding how we're going to actually improve it, because that's what we really need to do. We need to halt it in the first case and improve it thereafter, otherwise, as I say, we're standing still.

So, we're working up a variety of ways that we're going to do that—things like the LIFE project, which, you'll be aware, is EU funded, I would like to see that continue even after we leave the European Union because I've seen some fantastic reversal of biodiversity in relation to that project. But, you're right, we need to halt the decline and then ensure that we improve it. So, a lot of the peat restoration, for instance, that we've already got under way, we need to ensure that that carries on as well, because, again, we've seen significant reversal in the areas that we've concentrated on.

Certainly, Minister, one of the areas that we would be looking at within the environmental growth plan is around growing the environment. That's part of the discussions that we will have through the Sue Essex group, but it won't be just focused on halting and reversing; there will be an element that will be about growth.

Back to Jenny, then.

Just finally, you've told us that there's going to be—. The local places for nature fund is going to be about small-scale projects. You've got an external reference group that is advising you, but what are the likely criteria going to be in terms of determining which of, obviously, lots of applications that will be made?

So, the early discussions I've had with Sue Essex are that we need to be different and we need to be very innovative here, and I've used a word that I think we don't use in Government enough, and that's 'risk'. I think we need to—. Because we need to do different things, we need to look at the impacts a bit less risk-averse, and if we—. Officials won't like this, but if we—. You can't be certain about everything, can you? You have to take a risk, and it's very difficult when you're using public money, and I absolutely get that, and you have to make sure that that public money is protected and used in the best way, but I equally think that sometimes we need to take a bit of a risk.

So, I've asked Sue to look at different ways of—. So, the criteria might be a little bit different to what we usually give out in grants from Welsh Government. So, we're working those details up. If we want to acquire, restore and enhance nature, we have to start doing different things. We know that. I want it to be community-led activity. So, it's about looking at what we've got already and perhaps building on that. So, organisations such as Keep Wales Tidy, I'm sure they'll be able to advise us and help us on the scheme going forward. So, it's being worked up at the moment. As I say, we started the discussions probably in spring last year. And I'm really excited about it. I think we can be different and really make sure it's across Wales that people—. If they want to grow their own vegetables, as you say, maybe look at a village having an allotment or—. It is going to be that kind of small scheme, but I think we have to be a more—well, a bit less risk-averse; that's probably the best way of saying it.

I think that perhaps Government will be more risk-taking on small projects and more risk-averse on some of the big projects. 

Yes. I think there's the potential for that, certainly.

Llyr.

Thank you. Well, speaking of risks, there is still the possibility of a 'no deal' Brexit come the end of this financial year, and I'm just wondering whether you've had any discussions with the new UK Government, not solely in an agricultural context, but across your portfolio responsibilities, really, about whether additional funding might be available if we do face that kind of scenario.

So, I had inter-ministerial group with DEFRA on Monday. You won't be surprised to hear that finance was on the agenda. You're right about a 'no deal' Brexit, it hasn't gone away. I mean, it might have been parked up for a little bit, and, certainly, as a Government—and I'm speaking now across Government—we did, as you know, a huge amount of work around 'no deal' Brexit. We've archived that, if you like, because we might need it later on. So, the risk of a 'no deal' by the end of this year, I think, with the timetable that the UK Government have set for getting a deal—. So, on Monday, when we were at the DEFRA group, we had a discussion about trade agreements, and the timescale is hugely challenging. I was told by the DEFRA Secretary of State, 'Well, nobody thought the Prime Minister would get the agreement he got in the short space of time, so don't worry about it'. I do worry about it. So, I think it is really important that we still have that sitting there.

In relation to discussions on 'no deal', we didn't really go into detail on Monday about it. However, we've made it very clear all along that, if there was a 'no deal', we would expect additional funding. And I have to say that the UK Government, which is obviously the previous UK Government, accepted that, and we were having discussions particularly around the sheep sector—you'll be aware of—about the additional funding we would need if there'd been a 'no deal' Brexit.

What I would like to see is some certainty about the finance for agriculture now. So, I know I've got funding for the basic payment scheme for 2020; I don't know about any other year. And when I raised that with Theresa Villiers on Monday, she just said, 'Well, it's a manifesto commitment'. So, you have to take that at face value, that you will get that funding. We know that a 'no deal' Brexit would really require substantial additional funding, and we would expect the UK Government—. They've said all along we would not lose a penny, and we expect them to pay for that. It's things like the discussion of—. Sorry.

There's a difference between not losing a penny of what we currently receive and needing additional funds to mitigate those additional impacts.

Yes. And we made that very clear to the previous Government. I didn't specifically talk about a 'no deal' Brexit on Monday, because I was focusing on that funding, but the First Minister, I'm sure, will have reiterated it to the Prime Minister.

Okay. There's no specific line in your budget for Brexit per se, and I'm just interested in knowing how decisions on allocating funding to Brexit preparation is managed within the department. How do you—? If you needed to find extra money, you would have to take it from somewhere else within your budget, and I'm just interested in what impact that might have on other work.

Yes. So, I suppose the short answer is: it's just a core part of business now. Brexit is just kind of there. I think it's Tim who calls it 'Brexit is the new normal'—I think it was you who came up with that. It's just a core part of business, both financially and resource-wise; it's just what we have to do.

Obviously, I did very well out of the EU transition funding—the extra £50 million. That's nearly two years ago now. That was brought in by the former First Minister. Certainly—what financial year? 2019-20—yes, this current financial year I've had significant funding. But you're right, if something suddenly happened, I would have to look within my current budget if we did need to do—you know, if there was something specific. But I just think we've adapted. We've been doing this now for three and a half years, and I just think we've adapted now to Brexit being part of our normal business.

So, as part of normal business, we would deal with any small variances. If there was a material change, we would go, then, to the finance Minister and look at central reserves to help us out, basically.

Because central reserves aren't that substantial at the moment—

No, because we've used it.

—either, are they, really? Because the finance Minister told us in Finance Committee yesterday that, realistically, if there was a substantial draw, then she would have to go to UK Government. [Interruption.] Yes. But it's where we are, I suppose, isn't it?

As I say, it's just normal life now.

So, focusing specifically on agriculture, then, if I may, the Bew review came up with a formula that gave us an additional €6 million or so. I'm just wondering whether you've made any decisions as to where that money potentially will go or what it'll be used for.

No. Haven't had it yet.

But surely you have ideas about what you could do with it.

Well, yes, but I haven't had it. Ideas, well, yes, we're—

I mean, basically, the question is: is it going into the basic payment scheme or is it going to be used for other things?

We really haven't decided on that yet. So, I think we'll get part of the funding next—. The budget we're talking about, 2020-21—

Yes, 2020-21, which is why I'm asking the question.

—and the rest will be 2021-22.

Yes. So, you know you're getting part of it but you don't know what you're going to use it for yet.

At the moment, no.

Okay. When will you make that decision, then?

Well, that's sort of ongoing decisions in relation to all of agricultural funding, but whether I'll put it into the BPS or not has not been decided.

Okay. Okay. Because we are scrutinising that particular budget now, aren't we, really, and it would be good to know what—

Just for clarity, the money hasn't actually been allocated to this department; it's been provisionally allocated to the Welsh Government, then the Cabinet will make a decision on whether it would come to the Minister or not. Obviously, we've put strong representation—

I would expect it. 

I would as well. [Laughter.] We'll back you on that one. 

There is a process to go through. 

Yes, okay. Yes, it would be quite a thing if it didn't find its way to your department, I'm sure, but we won't go there until we have to.

Yes, I'll quote you. 

Right. The budget allocation for research and evaluation hasn't changed, and I'm interested in that because, clearly, in your discussions and statements around the 'Sustainable Farming and our Land' work stream, you've made it perfectly clear that there will be need for modelling and piloting and developing stuff around that; but I can't see where the budget for that is coming from. So, I'm just wondering what plans you have to do that sort of research, if you like, and evaluation, which isn't accounted for in your budget. 

No, it will come from existing budgets. We're in the process of procuring and developing the comprehensive economic analysis of the new scheme. That will look at both the costs and the benefits, obviously. It'll be part of the regulatory impact assessment, which will be published alongside our Wales agricultural Bill, when we come to do that. But, as I say, it will just come out of existing budgets. 

So, whereabouts in the existing budgets? Because if it's not under research and evaluation, which is where I thought it might sit, maybe you could point to us where it does sit.

There is a new line—I'm trying to find—that we put in; yes, I think it's the agriculture strategy line, which has gone up from—. We've put £400,000 in around the implementation of 'Sustainable Farming and our Land', including the research base for that. I think it's also important to differentiate between modelling and piloting. The modelling is the academic, technical assessment, the economic analysis and so on; piloting is on-the-ground projects. 

Yes, but there's a resource allocation—[Inaudible.]

Yes, but those can be done by variation within the existing rural development pots. 

So, RDP is paying for the development of the policy. 

So, they will come out of some of the RDP that is currently not committed. So, we'll be testing new ways of using that RDP funding to do the piloting elements. The modelling is that separate sort of research and evaluation. 

So, that budget line you mentioned, tell me again which one that is?

It's 2829.

And the value of that, what total is that—£400,000, did you say?

It's gone up to £400,000. 

It's gone up to £400,000. 

And that will enable us both to do some of the stakeholder engagement, co-design work, and also commission that detailed modelling analysis, which we're procuring, essentially, from universities. Because you need that very specialist, agriculture economics evidence to that. But that is separate from the piloting, which will be taken forward from the various rural development—. And it's not just next year; this will be over a number of years, including from next year, which of course is outwith—the following financial year, the 2021-22 financial year, of course, is beyond the rural development programme. 

Of course it is; yes, you're right. And is there any allocation in this existing year's budget then, just for interest? Because the work is happening.

We haven't fully committed the rural development programme yet; that is one of the key tasks to do this year. And some of the things—. The new ways of committing those remaining funds will look at some of the piloting and testing of new options. We're already, through some of those projects under the existing rural development programme, piloting new ways of, particularly, groups of farmers coming together to deliver some of the things in the Brecon Beacons. There are already projects that are testing new ways of doing things, which are modelling new ways of doing things already. 

That's a continuous process, in a sense. You're always looking at being innovative.

Which is a continuous improvement process anyway, but we have quite a large chunk of the rural development programme still to commit and we are looking at piloting new ways of doing things as part of that, and then, as we move into the 2021-22 rural development budget, which of course is beyond the current EU rural development programme, we can look at more ways of piloting things, building on the co-design process that we'll be doing this year, which will give us much more specific things to test.

Okay, thank you. On the 15 per cent modulation, which was discussed quite a bit a few years ago when the initial decision was made to max out on that transfer—. Of course, we're still awaiting confirmation of that money for next year. Although, my understanding is that there's a presumption that it's going to come. But, again, I suppose, it's one of those—until you see the colour of the money, then you're not getting too excited. But promises were made, back in the day when that 15 per cent was originally shifted, that that money would come back to farmers; that it was taken out of direct payments, if you like, and then they'd be able to apply for it in other ways. I think we're looking at just over £40 million for this year. So, I'm just wondering what ideas you have for that money. Is it just going to disappear into the pot, or do you have any particular projects that you might wish to pursue with that money?

I do. And when I was at the DEFRA meeting on Monday, which I referred to earlier, I did raise the fact that we haven't had it—just to put it on the record yet again. The presumption is that, of course, we will get it.

So, my particular idea is around agricultural pollution. So, if we are bringing in regulations, which I'm due to make an announcement on in the very near future—. Unfortunately, we know we have a lot of non-compliance, as I referred to before. You'll be aware that we've been doing dairy visits. Natural Resources Wales officers have been brought in to do some dairy visits, and I'm afraid a lot of the visits have shown that—I think it's over 50 per cent of dairy farms aren't compliant at the moment. I've made it very clear we wouldn't provide funding for that, but we will provide funding where farmers do need assistance in relation to ensuring they have the right structure on their farm in relation to slurry et cetera. So, they are very early discussions. I have talked about it with one of the unions. That's one area where I think we could look at using that £40 million.

So, just to clarify in my own mind, you're looking at potentially some sort of capital investment programme where farmers could actually apply for loans or grants to support farm infrastructure.

Yes, grants. So, that's very early thinking, but that is one area I thought that we could look at.

Sorry, how does that differ to—? You said you wouldn't help those individual farms because they've been—

Non-compliant. But there are a lot of farms that just need—

Yes, it's a change of practice and not infrastructure requirements.

Yes, a change of practice. When I say non-compliance, some are very simple. Some was separation—you'd know about this more than me. Do you know what I mean? So, it could just be very simple things. However, if somebody—

I think we need to be clear about that. When you say '55 per cent are non-compliant' it creates out there this belief that everything is seeping into rivers and streams.

No, no; not at all. Some are fine.

Well, we need to be careful with that kind of language.

I'm going on a visit with one of the dairy inspectors to see for myself. Some are very, very small adjustments that could make them compliant. So, we need to make sure that that happens. But some farmers who are compliant will still need help with their infrastructure. And I've said all along—because there's been a lot of concern around agricultural pollution on both sides, we've seen far too much, and I think the agricultural sector absolutely accepts that—that we need to do something.

And what challenges will those who are compliant now face when you introduce your proposed new regulations? 

Well, that's something that I'm waiting for advice to come up on, because obviously—

Because it's not just those who are transgressing now; there may be others that will be captured if new regulations are brought in.

Yes, absolutely.

Finally from me, then, have you quantified, or can you quantify, potentially how much that will cost? Would this £40 million be enough?

Probably not. I haven't got all the advice yet, so that's something that we need to take into account, obviously.

So, will that inform your considerations in terms of where you pitch the level of requirements in terms of regulations? Or is that going to be absolute and then, if we can't pay for it, somebody else is going to have to pay for it?

It's something we're going to have to look at right across the board. As I say, I've not received advice from officials. I'm looking at Tim. I think I'm due to receive that advice, certainly in the next few days. 

Next week.

Yes, next week, Tim's saying.

Okay, thank you.

We'll move on. Jenny.

Given the tsunami that's about to occur, or could occur, in relation to the negotiations on our future trading relationship with the EU, I can see the increase in the technical advice and policy implementation. The increase in the budget there is very welcome, because there's huge uncertainty in our agricultural sector as to exactly what market they're going to be operating in. I just wondered if it's sufficient given (a) the levels of uncertainty and (b) the rising environmental agenda that we, obviously, need to get compliance on across the whole sector.

Can you just tell me where you're looking? Sorry.

Well, 2864 has been renamed technical advice and policy implementation and it's gone up from £175,000 to £358,000—along with agriculture strategy. Both those are relevant to this discussion about helping people deal with the unknown.

Well, there is a huge amount of uncertainty, and I don't think we can mitigate everything, but certainly, at the current time, we think that's sufficient. It should be enough.

There are a range of other ways of getting that information. A lot of this is about information and, as you say, at the moment there's a huge amount of uncertainty. We can't give people that advice yet because we don't know what the outcomes will be. A huge amount of that will be communication. Some of that is through our vehicles, through Farming Connect, those sorts of routes, and it becomes part of their day job, if you like. Some of it will be through people like Hybu Cig Cymru. Some of it will come from the farming unions, from food industry trade associations. So, a lot of this is going to be about maximising that communication.

One of the things that we have been doing, which I'm proud of, is that we brought together all of those industry stakeholder groups for a regular—bringing together all our comms experts to make sure that we all understand what messages need to go out and that they've got the information to use their routes. They have far more effective ways of getting that message to farmers than through ours. We need to make sure they've got the best information through things like the Paratoi Cymru website, but we're not necessarily going to be the best vehicle for getting that information out. We've got to make sure the information is available and use our routes, but in collaboration with all our industry and non-governmental organisation partners.

The Minister said earlier that decarbonisation is everybody's agenda—that's in Government—but have these stakeholders all grasped that as well?

Absolutely. The group that Tim's referring to is our Brexit round-table stakeholder group. We met again yesterday. What I like about that group is you've got nobody working in silos. So, as I was leaving, one of the environmental NGOs said, 'Oh, I'm just going to go and speak to the NFU about decarbonisation.' That was the exact word she used. So, it is really—. I think we brought that group together—I think it was the month after the referendum result. Aside of Brexit, it's been a really good group; stopping people working in those silos and bringing everybody together.

Thank you. I just wanted to ask you about the regulation of the environment: environmental governance. We are leaving the EU, therefore, we can no longer rely on the governance that we've enjoyed by being part of that. You'll be aware that we took quite a lot of evidence about the importance of establishing some really robust environmental protection rules. There doesn't seem to be anything in the budget that we can see for establishing a domestic environmental governance body. So, could you identify what the costs are likely to be? How do you think this is going to be done? Is it going to be a pan-UK body or one specific to Wales?

Okay. Within the Brexit round table, I've got an environmental governance stakeholder task group, and this was an item on the agenda yesterday. I'm awaiting a report from that group around that, because, obviously, we have the environment Act, so our environmental gaps are going to be very different to England, for instance. 

The task group will be giving me the draft report, I think—or officials—at the end of this week, and then we'll have the substantive report at the end of the month. That will have a thorough options appraisal, and included in that will be financial implications. I'll be very happy, Chair, to report back to committee when that work has been done, because it is nearing completion.

When I was at the Department for Environment, Food and Rural Affairs group on Monday—. They're looking at an office for environmental protection in their environment Bill, which is due to be introduced next week, I think. It was announced on Monday that climate change was going to be looked at as part of that as well. So, we would expect some consequential funding to come from the UK Government in relation to that, so that would, obviously, help us with the funding for what we're going to bring forward.

I think it's really important also to reassure people. We've got environmental principles now, they're not going to suddenly stop on 1 January, once we've left—I think that's really important to say. We've got the environment Act and we've got the future generations Act. We were quite prescient, really, with those two pieces of legislation. There will be funding implications, but I would expect funding from the UK Government as well—additional funding, sorry.

Okay, thanks.

Thank you. Neil Hamilton.

Moving to biodiversity, and marine and fisheries, in reply to Joyce earlier on, you mentioned the LIFE programme and said that you would like to continue this beyond Brexit. Given that this is the last year of this particular programme, there shouldn't be much difficulty guaranteeing that this will happen because it's just for the rest of this year. So, can you confirm that that is the case—you will continue to fund existing projects from 31 January?

Yes, absolutely, because, as you say, the funding has been agreed before the end of 2020. 

What assessment have you made of any potential additional costs that there might be as a result of Brexit in respect of this programme? Does the draft budget reflect this?

In relation to LIFE?

Yes.

In the event of there being no deal with the EU in place at the end of the transition period, as you alluded to, the funding will be there for projects approved before the end of this year, 2020, so they'll continue to receive funding. There's no extra cost to the Welsh Government as a result of that.

If a deal is reached at the end of this year, it's my aim, subject to considering both the costs and the benefits, that we will continue to access the EU LIFE programme, or, if that's not possible, I would hope there would be an equivalent arrangement. That's part of the negotiation with the UK Government in relation to our future relationship with the EU, so I'm having those discussions.

Good, thank you very much, that's very helpful. The Natura 2000 network management has an additional £15 million allocated. Can you tell us how that will be split between marine and terrestrial sites, or is that not fully decided yet?

That's not been fully decided yet. I know officials are talking to NRW—looking around—at the moment about that, but we haven't decided on a set split at the moment. We'll need to make an announcement, probably quite soon, won't we, about how that funding can be accessed? As I say, it started with discussions with NRW—are we discussing it with anybody else?

We're certainly considering how we might be able to make that money available not just to NRW, as one of our delivery partners, but to others who would be able to make improvements or can help manage Natura sites. As the Minister said, although we've not yet decided exactly how it will split between terrestrial and marine biodiversity, we're certainly considering and are very hopeful that we'll be able to support both.

Is £15 million an appropriate figure for things that you would like to do in the relatively short term? I know you can always find scope for spending money, so perhaps it's a nonsense question, in a way. But looking at it in terms of priorities, which you've obviously thought about—things you'd like to spend on in this area—is £15 million an adequate sum?

I think it is. I think it will help us build on the schemes that we've had. I mentioned EU LIFE and we've obviously had the sustainable management scheme. So, I think it will help us. I think it's really important, with everything going, that you don't throw the baby out with the bath water. So, I think it's really important that we build on the current schemes. But I think it's safe to say, in future years, I'd be looking for additional funding.

Joyce Watson's got a short supplementary on this.

Just an observation, really. You've only got 55 per cent of the species featured in the 'State of Natural Resource Report' in favourable condition. I mean, that's pretty serious, isn't it? So, we need to act fairly urgently. It sort of goes back to my question before: we need in the first instance to halt, but we certainly need to improve. I mean, 55 per cent is just awful, to say the least.

So, in terms of the marine environment particularly, that will involve some form of protection for certain sites—and to say we've been slow is an understatement. So, within that £15 million that's allocated, are you looking towards some protection for the marine environment, where none currently exists but in my opinion is long overdue?

We are, and that will be part of that £15 million funding. I think, you're quite right: we haven't made the progress this year that I would have liked to have seen. But it is about prioritisation and I'm afraid that Brexit has taken a significant amount of work in this area. Plus, also, I was really keen to get the Wales national marine plan; it was something that I really wanted to see when I came into post. It took three years, it took a lot, lot longer than I thought it would, but that's where we've, sort of, concentrated this year.

But I would expect now, because of the work that we did last year and this £15 million funding, that next year, we will be able to make some significant progress. And I'm sure you'll hold me to account on that in relation to marine protected areas, because I think only a small proportion of the budget this year, now, 2019-20, has been spent in this area.

Thank you. Back to Neil Hamilton.

In relation to the environment and rural affairs monitoring and modelling programme, in the paper that you've submitted to the committee, you highlight the annual investment in evidence-based policy making. Can you, perhaps, sketch out a bit more for us to what extent you are investing in evidence gathering specifically for this programme?

Yes. We remain very committed to that. We're going to continue to invest into it, I think it's essential that we do. I allocate £1.2 million annually to this programme. I think, as we develop new policies and regulations, it's really important that you've got the evidence on which to do it. So, we're absolutely committed to continuing to fund this because we do need that rigorous programme of monitoring. 

Can I say—? I think that this is one of our jewels in the crown.

I do.

When I talk to my colleagues in other UK administrations, they haven't got anything like this. This gives us really detailed spatial information, so we can look at what things mean in different places in Wales in different types of farms. The level of detail we have for soil mapping, for instance, through this programme is unprecedented anywhere else in the UK, and as we're doing our future farming policy design, this is really powerful, really important. And it might sound quite a lot of money on a research and monitoring programme, but what it gives us in terms of being able to show the impact of policy and design new policy is really, really best in class in the UK.

So, DEFRA doesn't do this.

It does some things like this, but not to the same level of detail that we have.

Because, clearly, the policy background to agriculture is likely to be very different, say, in five years' time from what it is now, given that we'll have new freedoms as a result of Brexit and obviously there will be changes in the pattern of trade internationally, presumably. So, that has implications for land use and so on in Wales and the entire United Kingdom, so it's a vitally important area for making, as we say, informed policy changes.

Moving to marine and fisheries, can you explain why your marine and fisheries budget line has been reduced by £1 million, compared with the latest supplementary budget? That's quite a large proportionate decrease, isn't it, in a £5.5 million—

No, it hasn't been reduced. I assume that you're referring to the EU transition funding that we had that has now been spent.

Well, in budget expenditure line 2870, you've allocated £4.5 million for 2020-21, and that's a £1 million reduction compared with the supplementary budget.

No, we've had an increase in the recurrent baseline figure. I think what you're seeing is the additional allocation we had from the Brexit transition fund in 2019-20, so this year's budget. That's coming to an end now. So, I think that's the reduction you see, because I've actually had an increase in marine and fisheries, because we had additional allocations of £1.55 million and that's been retained within the fisheries budget. So, the baseline funding for marine and fisheries, not including the EU transition funding, has increased from £2.192 million to £3.742 million in this budget.

That's a misunderstanding on our part.

So, basically, in this financial year, we had £1.7 million of EU transitional funding, which is non-recurrent. That comes out to go into next year, so it's not in next year's budget, but the Minister has prioritised the budget and put an extra £750,000 in it, so it's actually gone up from last year's baseline, and it's recurrently improved the baseline. There is a good news story.

Well, that's a misunderstanding on my part, which I'm glad to have clarified.

Of the marine and fisheries draft budget, £450,000, that's 9 per cent, is allocated as a non-cash budget, which was rather perplexing. Why has this not been outlined within budget expenditure lines on the Welsh Government's website? Because on the website, it indicates that £4.9 million is allocated to developing and managing Welsh marine, fisheries and aquaculture, including enforcement, but the BEL lines that accompany your paper say it's £4.5 million, so there's a £450,000 variance there.

The way the budget is shown on the Welsh Government website is a decision taken by finance officials, so I'm going to hand over to Dean now—[Laughter.]—to explain the presentation of our budgets.

Not this finance official—[Laughter.]—but the finance Minister's finance officials—how she presents the overall budget position. What we've tried to do for the department is give more transparency, and that £450,000 is actually non-cash. It's actually depreciation for the vessels, basically, so it's just the split of the money. The total comes to the same, it's just the split and we've given more information than is on the face of the overall budget.

Right, very good—thank you very much.

We've previously—[Inaudible.]—requested clarity and breakdowns of the marine and fisheries budget. Can you clarify how this will be spent in 2020-21? For example, how much is going to be allocated to restoring the marine environment—this goes back to the question that Joyce asked earlier on—and how much to developing marine and renewable energy?

That detailed budget planning at a divisional level is currently under way, but I do want to assure committee that marine conservation and biodiversity is a priority. I would expect to continue, as I answered to Joyce before, to manage our marine protected area designations via our MPA network management action plan.

I mentioned before about the priority we've put into the Wales national marine plan, and that was launched back in November. That identifies the growth of marine renewable energy as a priority, for instance. So, we're going to take work forward during 2021 to develop planning tools so that we can help de-risk the decision-making process for marine renewable energy. I think we've got huge opportunities in Wales. I was out at the marine energy conference in Dublin in September, and developers are now coming to us wanting very much to work here in Wales. But they need confidence that the opportunities will be there, so that's an area where we'll also be putting in a lot of time preparing that. You will have heard in previous answers to yourself and to Joyce about the £15 million—that some of that funding will go into marine, not just terrestrial.

Also, I don't know which budget line it came from, but, last year, we put additional funding into the Prince Madog with Bangor University. I thought that was so important for our marine and fisheries policy also.

Last year's budget included funding for identifying, designing and managing new marine protected areas, but there were no new marine conservation zones designated in Wales last year. So, has this money been spent?

No. As I said in my answer to Joyce, we didn't do the level of work that I think we all would have wanted in relation to this because of reprioritisation of staffing resources. But I would hope, in the next year—. So, that funding wasn't spent in the way that we would have wanted to. 

But it was spent in another way. It hasn't been ring-fenced for this. 

No, it wasn't ring-fenced, was it? But we will be doing that work in the budget that we're scrutinising at the moment. 

So, can you tell me what funding has been allocated to designating and managing marine protected areas this year?

I knew you'd ask me that question. It's part of the £15 million—

It's part of the £15 million?

No, of the marine and fisheries budget, so the overall budget.

The current budget. 

So, it'll be funded from the marine and fisheries line, which is—the total is £4.5 million. 

Very good. Lastly then, does the draft budget include any additional allocation for developing the future fisheries policy, which the Welsh Government has committed to? And if it hasn't, how will this be funded?

As you know, I went out to consultation on 'Brexit and our Seas' last year. I'm due to make some statements around that. Currently, officials are looking at the responses we had, so I will be making a detailed statement on the outcome of the consultation. That will then obviously provide details on how we'll take forward our future fisheries policy. I suppose the main part of resources that will be needed isn't financial; it's more staff resources. So, obviously, we'll do that within our existing budget, but, in time, it could be that additional funding would be required. But, for this financial year, I think it would mainly be staff. 

This is one of the great opportunities from Brexit for the UK generally, to recover control of our fishing grounds. In terms of the policy background to fishing management and so on, we have the opportunity here for making some significant changes. Obviously, there's going to be a cost implication for departments in this respect, and it's important, therefore, that proper preparation and provision is made. 

Very rarely, I agree with you. [Laughter.]

It could become habit-forming. 

I don't think so. [Laughter.]

Last month, I was at fisheries council—. I think you're right, and I've always said, one of the major opportunities, I think, post Brexit, is in relation to fisheries. So, of course there will be financial implications down the line, but I think at the moment it's mainly staffing. And we have boosted the marine and fisheries department: we've had a new deputy director; we've had an additional director—no, that was in decarbonisation, sorry. But there's been a big move on that, because I think it was a department that needed extra resources from a staffing point of view.

Obviously, one of the priorities for the £4.5 million revenue budget that the division has would be on developing the future fisheries policy, following the consultation. 

And does this prioritisation then have implications for other parts of your budget? Are you moving funds from one area to another? Is anybody going to lose out as a result of that?

No, because we've increased—. I know you didn't think we had, but we have actually increased our budget, so that funding is there. 

Okay, thank you very much. 

Thank you. Llyr Gruffydd. 

Yes, thank you. We've covered a lot of ground: carbon reduction, environment, biodiversity, marine, flooding, national forest. But of course your main delivery body for most of this is Natural Resources Wales. Now, you tell us in your paper that you're maintaining funding for NRW, so it's a flat settlement, which in effect of course is a 1.8 per cent real-terms cut. In your paper, you tell us that settlement will allow NRW to 'boost', is the word you use, its efforts to tackle climate change. How do you expect NRW to boost its efforts when it's receiving a shrinking settlement?

So, it is a flatline budget that they've had; but, as you said, they're one of our key deliverers. Certainly, in relation to capital, they are probably our main delivery partner. So, the discussions that I've had and officials have had in relation to their budget, we believe that they can do that. Actually, they're really doing some very innovative work around climate change. Presumably, they'll share it with you. It's quite a few months since the First Minister and I went to meet with them to see what they were doing right across the organisation. 

I think we mustn't forget it's not their only funding that they get from us. They assure me that the organisational design that they've had—you'll be very aware that they've gone through a massive organisational design—has been done to make sure that they meet our priorities. We're going through the draft remit letter at the moment for next year in relation to what we expect from them. Straight after this committee, I'm meeting the chair and chief executive of NRW. 

Having said that, the whole public sector has been under financial pressure and I think, because of that, NRW have ensured that their organisational design and the way that they've done things differently enables them to do that.

There's only so much organisational redesign that you can have when you have less and less money to employ people and boots on the ground to do the work against, as well, a backdrop of increasing responsibilities and duties.

We've rehearsed, on a number of occasions, the Well-being of Future Generations (Wales) Act 2015 and the Environment (Wales) Act 2016 and all the new duties and responsibilities that have been handed over to NRW. We've heard more recently about the environmental growth plan, and you've spoken about the national forest again. These are things that they're expected to do with fewer people. So, are you really comfortable that that is sustainable? Because I've been on this committee now, on and off, for 10 years, and right back at the start of NRW they were telling us that—it's an unsustainable trajectory, isn't it?

I think they've reversed that, if you like. I think, through the change—. And I think you're right, it's come to the end now, more or less, of their organisational redesign. I think they are much more comfortable with where they are. I'm concerned that, in relation to flooding, for instance, I know they're struggling to fill all their vacancies. They've got the funding to do it, but these aren't people that obviously you—.

Surely, you have to acknowledge that what we have after a redesign are people being employed to do more? They have additional responsibilities added to their titles and their business cards become longer and longer and longer. So, it means that there are more things to do with fewer people to do them. Surely, that doesn't sit comfortably with you, as a Minister? Where you see that so much needs to be done, and where you're telling us that it's a political priority of this Government that these particular areas—that NRW are leading on, for most of them—are expected to be delivered.

But I do think they are delivering, because their ways of working are different, and you also have to remember, as I say, it's not just about the revenue, we give them additional capital funding for things. They will help us, of course, with the national forest, but it's not just down to NRW to deliver the national forest; we will be looking at other ways of doing that. Flooding is obviously a big part of it as well—flooding prevention. And, again, it will be capital funding. They're looking at other ways of accessing revenue, and we're working with them to do that. And, as I say, we're currently drafting the remit letter to make sure that our priorities are reflected in their ways of working. But I do think, along with the organisational redesign and working in different ways, they are delivering what we ask them to do.

Okay, but still the cake is getting smaller, so you're just cutting it up in a different way.

Well, they've had a flatline budget, and if you look right across the public sector—. I'm not making excuses, but we have had 10 years of austerity. We've all had to—

All departments have had an increase this year.

When you look at the budget, every department has had an increase. We haven't looked at just reversing things, we've looked at new ways of working ourselves, as a Government, and I think that's the case right across the public sector.

It just seems odd that, when your department gets that uplift, your key delivery body, through NRW, isn't enjoying the same kind of uplift.

But they will, I think, get significant funding through the capital programme, where I've had a massive increase.

I think it's important that this is probably the best budget we've had for a number of years, Minister. However, the majority of our funding has gone into capital; only a small percentage has gone into revenue. So, there's only so much we could push over.

Equally, the Minister has monthly meetings with the chief executive and chair to go through their financial position. There's been a reprioritisation within there. The organisation itself has changed significantly since the merger, and they're confident, when they talk to us, that they can deliver many of these new things, which are the norm for them now as well. So, that's where I think we are, and I think their financial position is a lot better than it was a few years ago as well.

Yes.

You're taking me really to where I want to get to next, because NRW, when they've been before us as a committee, previously they told us that they were working with the Welsh Government on a more participatory process for setting its budget. So, I'm just wondering if you could explain a little bit about how your officials have been engaging in that new culture of participation, and how you've identified some of the priorities that you'll have to focus on, because I think expecting them to do everything for everyone isn't feasible.

Officials have worked very closely with NRW throughout the process, and it's not just finance officials, it's policy officials too. I know there have been a number of meetings where they've focused on priorities. There have been a number of finance meetings, there's been a workshop. I think there's been a challenge to NRW's financial plans. I think everybody's benefited from having that kind of close participation.

And they've been challenging back, I hope, have they?

They've been challenging back as well.

Yes, I'm sure, otherwise they wouldn't be doing their job.

It works both ways. 

There's actually a meeting this afternoon to go through capital priorities.

Indeed.

There we go. So, as I say, I'm meeting the chair and chief executive. I think every official at this table will be with me. I'm not sure about Christianne, but Tim, Gian Marco and Dean will be with me. We have a very detailed agenda every month, and officials meet I think probably every week with NRW, I would say. But there is that level of challenge to make sure that—. They've got priorities and we've got priorities, of course.

Sure, I understand that. Very briefly, if I may, Chair, finally from me on this, NRW have also said that not just additional funding would be nice but a multi-annual settlement would be good. I know what you're going to tell me: you haven't got the luxury of that from UK Government. But, surely, to maximise the use of any investment then giving them that sort of longer-term assurance so that they can see things in terms of three years—maybe five years, ideally—would help get a better bang for your buck, basically? So, what assurances are you giving NRW in that respect? Surely, given the focus that you have on the work that NRW does in terms of your priorities as a Government, offering that sort of assurance, regardless of whether you know exactly what you're going to get—it would be incomprehensible if you didn't fund NRW properly, surely?

So, we do try to give them indicative budgets. Obviously, I can't promise any funding beyond the term of this Government.

No, but you can give that sort of confidence, surely?

But we can give indicative budgets, certainly. But you're quite right: we don't have the luxury.

So, you have given them that, have you?

So, we do give them indicative budgets, don't we, and forecasting? And that's part of the discussions that financial officials have with them.

Okay, thank you.

Joyce Watson.

On flooding and coastal erosion, Minister, it would be useful we could have some examples of the changes that have been made to the way you prioritise flooding and coastal erosion schemes, and the factors that you are now having to take into account that maybe you didn't have to before.

We prioritise flood risk to homes and businesses; that's always been a priority for us. That's not changed. But we do now put additional emphasis on local evidence of risk and wider well-being benefits. From this financial year, we've also incorporated surface water flooding alongside risks from rivers and seas. So, the way we prioritise is primarily based on NRW's communities-at-risk register. That's an index of risk from rivers, the sea and surface water, and that's also alongside local evidence of recorded flood events. So, we have multiple sources of modelled flood risk, as I'm sure you can imagine, so we're able to compare different places, because we've got that evidence. So, our prioritisation also takes account of the number of properties, benefiting cost per property and the wider benefits of a proposed scheme. So, when we get potential schemes brought forward from local authorities, for instance, that's an area that we consider, and we also encourage natural flood alleviation schemes. As I said, we want to see less concrete and more greener solutions to flood prevention.   

And I'm sure, if some bad planning hadn't happened, we'd have seen that anyway. But that's another matter.

So, could you explain how funding of the coastal risk management programme works and why you think it's the best model for local authorities?

It was devised as a mechanism to draw additional capital funding into flood risk management via prudential borrowing by local authorities. I think it really recognises the need that we have to invest in coastal adaptation in light of increased risks from climate change. So, coastal schemes receive 100 per cent funding to develop outline business cases for schemes and that early scheme development, and then the design and construction of eligible schemes are then funded by local authorities through that prudential borrowing from the Welsh Government, and we provide 75 per cent of the repayment costs.

I think the reason it works so well is that there's a high degree of flexibility for local authorities, and they can then choose how to raise their 25 per cent. So, they look at whether they do it through partnership funding. Again, it brings in those wider benefits for those coastal communities. It's significant funding—it's about £150 million of funding. At the moment, I've got about 24 eligible schemes, I think, across 10 local authorities.

So, there's 25 per cent that's got to be found from the local authority. Of course, some local authorities have fair stretches of coastline that might be at risk. How would they manage if they had a—? Have you come across any instances where there is a large stretch of coastline that that authority, because they've also had shrinking budgets too, as a consequence of ours, simply can't do anything about? Have you come across local authorities really struggling, because 25 per cent of a lot is a lot?

I can't think of anything off the top of my head. I'm sort of thinking—I remember when Aberystwyth had some significant challenges, I know we assisted them with some additional funding, but I can't think of anything off the top of my head. If we do come across anything, I can send you a note.

All of the feedback from local authorities has been positive, going back to the point you made earlier.

Yes, they really like this.

That's good. What is the spend profile for the coastal risk management programme? You mentioned that there's £150 million, but how is it really going to be used? Are you content that, first of all, it'll all be committed and spent, in terms of the programmes that you have seen?

It's a multi-year capital works programme, as you're aware, and there are some very complex schemes, so, the scheme isn't naturally back-loaded, if you like. The construction phase is the largest proportion of scheme costs. The schemes that we're approving now have to begin their construction phase by the end of March 2022. I'm happy with the way it's going. It always gets taken up, as you can imagine, by local authorities. As Gian Marco said, the feedback is really positive from them, because we feel that this is the best way of making sure that that money gets out.

Finally from me, first of all, I want to thank you for finally putting in and realising that surface water flooding is a problem. I've been talking about it for 12 years, so I'm really pleased to see that it's there now. But, of course, because the climate is changing, there are areas now that are flooding that have never flooded before. So, it isn't just about the coast, and I think it's only right that we talk about flooding in all its aspects.

How flexible is your budget to help people who suddenly find that a whole street has been flooded—maybe a town? We haven't seen what they've seen in England, for example, but how flexible is the budget should we have that situation, in terms of helping people?

I think you're right, we haven't seen the level of flooding that was seen in England, and I think that's because we have put significant funding into our flood prevention over the past decade, if not longer. I think if we did have that sort of level of flooding that you've just referred to, we'd have to look at the current budgets and prioritise from within that budget.

Do you think there'd be enough flexibility?

I think there's enough flexibility.

I mean, it's a worst-case scenario, and I hope—we all do—that it'll never happen.

Yes, I think the flexibility is there—it would just be about us having to prioritise the funding.

Okay, thank you.

On to me and forestry: you've got an extra £4.5 million capital allocation, is that going to give us our 2,000 hectares a year, which is the target?

No. I think we'll need additional funding. So, as you know, we've got the national forest, which is going to be—[Inaudible.]—but that on its own won't be enough, as well. So, what we're looking at—. We're currently scoping out the national forest, but we do need to look at other ways of funding woodland and trees. The private sector, I think, will play a big part; I don't think we can just do it from Government alone. You've heard me say many times that we're not planting enough trees and we need to ensure that we plant more, and we will.

Not as often as I say it. That really leads on to two questions. The first one is: you talked earlier about that community money—why can't some of that or all of it be used to plant trees in communities?

Some of it could—or all of it could. I mean, that's what I'm saying. As we're working up the environmental growth plan, I'm very keen to see little bits of money go in. So, again, you will have heard me talk about tiny forests. So, I think a tiny forest in a community is a great way of being part of that environmental growth plan.

There used to be little woods in lots of urban and semi-urban areas that are now housing estates, but the woods have never been replaced. That is a sad fact, and I think many of us would like to see that happening, and I'm sure that the Minister would as well.

Yes, I would.

So, really, when you have these developments, why can't people—? It's outside your portfolio, but perhaps you can discuss with the planning Minister why they cannot say, 'If you're taking down 40 trees, you have to replace these 40 trees within the development'.

Yes. I'm very happy to have that discussion.

And the final question is—. Forestry is a commercial undertaking. Why are we so unsuccessful in getting commercial forestry in Wales compared—and I won't just say Scotland—but compared to Scandinavia, which is phenomenally good at it? Shouldn't we be doing more, not to say, 'It's a public cost', but, 'It's a business opportunity'?

Do you want to say something on that?

I was just going to say that part of the vision that we are developing for the national forest is how we can maximise that project to deliver multiple benefits, and part of that will be looking to work with the commercial forestry sector to see what they need and what we can do, balancing a lot of the other priorities—biodiversity, timber for house building, flood prevention, et cetera. But, part of the broader vision for the national forest includes the commercial.

Jenny Rathbone.

How much are you looking at orchards as a way of ensuring that there is additional food available, but also using national forests as green divisions that are permanent between—? Expanding Cardiff endlessly into Caerphilly has got to be stopped, and surely the best way of showing developers that that's not going to happen is by putting part of the national forest between places that are under pressure from those developers. 

Some of the elements—. I mean, the Minister talked about the community side of it. I think that's something we're looking at under the environmental growth plan, but that's something that we're going to consider under the national forest as well. I think one of the key themes that we're developing at the moment is connectivity, and I think that connectivity—how you do that might address some of the issues that you've raised.

Thank you. Turning the white wedges green. Joyce Watson—

I think fruit trees are a really interesting development as well. Somebody suggested to me that as part of the environmental growth plan, we should plant apple trees, so, if somebody was homeless, they could be available—fruit would be freely available. I think that's a great idea. So, again, as part of the environmental growth plan, we can certainly look at that as being an initiative. 

Thank you. Joyce Watson.

I'm going to ask around animal welfare—dog breeding, licensing. There's an awful lot of activity in this policy area at the moment. So, do you feel that you have allocated enough funding towards it?

Currently, yes, but you're right, there is a huge amount of activity, particularly around puppy farms, as you very well know; you take a huge interest in this. Just yesterday, Christianne and I met with the cabinet member for Powys with responsibility for this and it was one of the things we were discussing. Clearly, local authorities are responsible for enforcement and giving out licences; they can charge a licence fee as well, so that's obviously additional funding.

But you'll be aware, Joyce, that, as part of the work that we're looking at, following that programme in relation to puppy farming that the BBC showed, Christianne and her team met with all local authorities, apart from one, in November—November time—and this was obviously a discussion around extra responsibilities, their enforcement requirements, and whether extra funding would be needed. And I guess, at the end of the day, we would have to look if that was so.

I think one thing that we need to look at—and how many times have we said that local authorities need to collaborate more? There are some local authorities, I think it's Torfaen, that's got one licensed puppy farm, whereas other local authorities, many of which you represent, have got significantly more. So, I think it's about local authorities also working together to make sure that if one local authority's got the expertise, they can go into another local authority and assist them. So, I think the short answer is 'yes' at the moment, but I think in the longer term, I think certainly Christianne's view—and I'll let her say this—is that, probably, additional funding will be needed further down the line.

Yes, which, obviously, would be a great thing, because you're right: it's resource-intensive for local authorities. And yet, if we're going to do the job properly, we need to do it properly. And the meetings with the local authorities, or the one meeting we've had so far, really demonstrated that they're determined to get this right, but you're right: the distribution of these establishments is not even across Wales. And pooling resources so that we can have some consistency on things like charging, licensing fees and inspection regimes would be really welcome. And so, to enable local authorities to collaborate on this would be a really great thing. It's something that we're actively discussing with them.

Yes, and we've got legislation that's going to come through. For example, the animal exhibit licensing scheme, which would give more responsibilities to local authorities and Lucy's law, which is coming through.

I hear what you say about sharing resources, and you won't be surprised by what I'm going to say, but I'm going to say it anyway. You've got a situation where, quite frankly, it doesn't matter how many inspectors you have—and I know that you're amending it in your Bill—we're at a point where, in Carmarthenshire, there are three premises with over 100 dogs. I mean, come on. So, in terms of sharing resources, they haven't got enough resources, so, it's about the responsibility here, too, of local authorities. And I'll come to that because this is about budgets. But there has to be—and while I'm talking about budgets—a different mindset when we're talking about helping people who are trying to diversify within their holdings, not looking at—. Because I've had a paper from Carmarthenshire council that starts by saying that people are trying to diversify, so they've gone into puppy farming. You know—really? With all the other schemes that we're funding? So, maybe, through your budget process, Minister, you could help, with some wider thinking, maybe, from individuals who do need support to keep their holdings going, but not just in terms of delivering animal cruelty, which is really what's happening, mostly, in these puppy farms.

Again, as part of that work, the animal health and welfare framework group offered to do a review for me, and they've brought forward the report. Officials, I think—Christianne, you had the report last week?

Yes.

So, I'll be getting some advice on that, but I think we're going to have to reopen the dog breeding regulations and have a look at that. So, clearly, it's a big piece of work that Christianne's leading on. It's urgent; we need to get moving on this because we saw, in that programme, the horrific practices that there are in some parts of Wales. So, I'm not—. I haven't seen the report yet, but I think it's safe to say that we are going to have to reopen the dog breeding regulations.

And quickly. Thank you.

Okay. We've—

Perfect timing.

We've got 14 seconds left. [Laughter.] Can I thank the Minister and her officials for coming along and answering our questions? Thank you very much and we'll meet you again for general scrutiny shortly, I'm sure.

I'm sure you will. Thank you.

Thank you. Shall we take a short break until 11 o'clock?

Can I welcome the Minister, Ken Skates, and the Deputy Minister, Lee Waters, to this committee? Would you like to introduce your officials?

I think my officials can introduce themselves.

I expected you to say that. [Laughter.]

Hello, I'm Simon Jones, director of economic infrastructure.

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

Okay. Croeso. Do you mind if we go straight to questions?

Absolutely.

If I can kick off then: we've got the climate change emergency, we've got a commitment for Cabinet colleagues to work together on decarbonisation, we've got a commitment to a 95 per cent reduction in emissions by 2050, we've got the future generations 10-point plan—how do all those fit together in the budget I'm looking at?

Well, I could go through each and every one of them and say how they've influenced the budget decisions, but I think, first and foremost, we should recognise that this is the first draft budget to be published since the declaration of a climate emergency, and within this portfolio, it contains some significant additional finance for key schemes that will contribute towards decarbonisation, including the extra £20 million for the north Wales metro and the £29 million for ultra-low-emission vehicles within the public transport fleet. I think it's with saying that we've had very, very productive talks on the decarbonisation ministerial group that have contributed to considerations in this draft budget.

The Future Generations Commissioner for Wales's 10-point plan has also been valuable in informing decisions, and if you look at some of the key statistics now associated with our spend, you'll find that we've shifted our allocations quite significantly in recent times, and we now, as a consequence, for example, spend more on active travel than we do on new local roads.

Could I just take it on one step from there? We seem to have—something we were discussing in private before—this view that everybody has to travel long distances to work, and that's one of the problems. I actively travel to my office in Swansea, which is a mile away. I don't actively travel here, which is 44 miles away. I don't think you'd expect me to either cycle or walk that. So, really, how are we, in terms of the economic policy, going to create jobs closer to people rather than having Deeside and Cardiff, and if you want to work, you have to find your way there?

This is why the economic action plan has an emphasis now on regional economic development. Ken has been driving forward that agenda and there's a lot to show for it. On top of that, and falling out of it, is the foundational economy approach, which is about strengthening local and regional economies as well, precisely for that reason. If we can improve the quality and the amount of work that is local, the whole emphasis on agglomeration and moving people from where they live to economic centres becomes less important. So, that is absolutely part of our thinking too—reducing the demand in the first place for travel is as much a contribution to decarbonisation as it is in lessening the impact of the travel we do make.

Thank you very much. Jenny Rathbone.

What are the key opportunities for decarbonisation investment in relation to the transport portfolio, given that the UKCCC said this was an absolute must if we're going to meet our target?

Well, there are some huge opportunities in terms of transport. The rail franchise gives us an opportunity to spend £5 billion in a way that will contribute towards decarbonisation. The emerging new transport strategy will also be an opportunity for us to reshape the way that we prioritise investment and to introduce a new sustainable transport hierarchy. I could talk in some detail about that, but I think perhaps a supplementary note would be beneficial for committee.

There are other opportunities concerning the roll-out of more ultra-low emission vehicles, and the adoption of those particularly within the public sector. So, there are major opportunities, and our concern is with ensuring that businesses take full advantage of the move towards decarbonisation, and that we're at the forefront of deploying interventions in the public sector.

Okay. Well, the strategic integrated impact assessment points out that we're going to be spending over £60 million in capital on decarbonising the transport sector. So, could you clarify how this is going to be allocated?

Yes. Of that money, £29 million will be spent in terms of ultra-low emission vehicles, on bus and taxi fleets, and there'll be £25 million allocated to resilient travel, £1 million of ultra-low emission refuse vehicles for—

Twenty-five million on resilient travel?

Resilient travel. One million on, basically, bin lorries for local authorities. There are about 180 of them at the moment. If we were to get rid of all of those and introduce ultra-low emission vehicles to the fleet, then that would save something in the order of 4,000 tonnes of carbon dioxide each year. There's also £7.9 million that's being allocated to air quality interventions in Cardiff and Caerphilly.

Okay. I'll come on to air quality later. Who will be paying for vehicle exclusion zones around schools, as advocated by Sustrans, if that was something the Government was to—? Because it's quite difficult to know whether that would come from the education budget or whether it would come from the transport budget.

I think we'd need to assess that with education colleagues, if that came into being.

Okay. Could you tell us how you think the future Wales transport strategy will reflect the ambitious transport decarbonisation target set out in 'Prosperity for All: A Low Carbon Wales', given that the well-being of future generations commissioner's comments are that we're not meeting our current targets? So, are we really ratcheting up our budget allocations in order to achieve the ones we are setting for the future?

At the very heart of the Wales transport strategy will be that new hierarchy that I mentioned a little earlier. I do have a diagram demonstrating that. I can provide a more detailed briefing note, but, essentially, what it will mean is that we have to exhaust all options before we reach the point of investing in solutions for motor vehicles that are polluting. So, first and foremost, at the very top of our priority list are interventions that regard walking and cycling. If every solution has been exhausted in that area in that regard, then we move on to public transport. Then, if we find that public transport isn't the solution for a particular challenge, we move on to ultra-low emission vehicles, and only then, if we've exhausted all options there, do we move into the area of looking at investing in schemes for other motor vehicles. It's a major, major new piece of work that's being undertaken in the strategy. We're doing it with the future generations commissioner and it will be published this year.

Okay. Well, we look forward.

Could I just add to that, because I think your question goes to the heart of the issue? I think the big challenge that we've been discussing is the issue of modal shift, and we've committed that the Wales transport strategy, as it's developed, has modal shift at its heart. And that is a profound challenge for us all in how we operationalise that concept, because the decarbonisation plans that we have going up to 2021—the 100 actions that were published under the low-carbon plan—take us to a point, and this budget talks through and has real commitments and manifestations of that. We are spending significantly more this year than we have done on low-carbon or carbon-free transport.

But to really hit the targets—and we await fresh advice from the climate change commission on whether our targets are sufficiently robust and how to get beyond them—then we really need to tackle the issue of how to get people out of cars into less polluting forms of transport: modal shift. We've got some idea of how we do that but we don't have all the ideas of how we do that, and that's a challenge for us all. That's a societal challenge, that's a challenge for us as individuals in the choices we make about how to get from A to B. And the role of Government is to make it easier for people to do the right thing, and make it harder for people to do the wrong thing. That is a known tough challenge and we are working through how that manifests itself.

Okay. I'm sure you'll be looking at vehicle exclusion zones around schools, then, because at the very least, we need to make people walk the last part of the journey to the school. But I just want to come on to the proposal for the development of electric bus fleets, and also for taxis and private-hire vehicles. How much of this can be achieved through robust regulation, which is if you want to provide this service, you've got to provide a clean vehicle to do it in, and how much is going to have to be pump primed from Government money?

I think you make a really important point there that it's not just about the money for the actual vehicles, it's about associated regulations and licence regimes and so forth. For example, with regard to taxi licences, could we see a policy emerge that only grants a licence to an operator of an ultra-low emission vehicle? That would certainly encourage a more rapid take-up of ultra-low emission vehicles for taxis and private-hire vehicle operators. But, equally, there's a concern over whether they are affordable, and so that's why we've introduced a £29 million fund, which is not going to be a one-off, it's going to have to be maintained. This is a considerable challenge that we need to overcome, and an expensive one as well.

So, you're absolutely right—it's not just about the money that's made available, it's also about the regulations that can be put in place. Simon.

So, a key part of that is the bus Bill that the Minister has been working on that is going to introduce measures like enhanced partnerships and franchising, and those kinds of methods, where the authority begins to contractualise the relationship with bus operators. And as part of that contractual relationship, some of these things can be brought in. 

Until we address the business model of the bus industry, we can set the regulations we like. We've seen in the last two weeks the problems of school transport—

I was about to raise that. 

—where for 20 years the bus industry have known that new regulations would come in for accessible buses, and yet in the last fortnight we've seen bus services withdrawn, because (a) the buses aren't available—they just haven't been made—and, secondly, some of the smaller bus companies can't afford to upgrade their vehicles. So, it's all very well regulating, but unless the fundamental business model—and that's what we're starting to tackle in the bus Bill—is confronted, then we're not going to be able to respond to those regulations in a way that means anything.

So, given the failure of the bus industry to address the regulations that they've had years and years to put in around seat belts, how are we going to ensure that the bus industry is grasping the nettle on this one? 

Through the reforms and the legislation, through the introduction of stronger partnerships, with conditions that ensure that passengers have a higher quality experience, and that we do meet with various priorities, not just decarbonisation, but safety on the roads as well.

Okay, that's great. Could you tell us how you currently assess the carbon impact of transport projects, and the methodology you're using, because we still have people who suspect that we're going to be spending more on roads than we are on sustainable travel? How are you going to be able to demonstrate that that is not the case?

Well, this is extremely complicated, the assessment of the carbon impact of our investments. A lot of work is being done on this front, with regard to the transport strategy, and the transport strategy will contain detailed assessments of carbon impacts and the specific investments that we're making. So, too, the carbon delivery plan for 2021. Simon, do you have anything to add?

I was just going to underline those two points, really. The place that that's going to be done in totality is the strategic impact assessment around the Wales transport strategy, and then the follow-on carbon budget in 2021. So, those are the two places where this work will be done holistically.

To your other point, then, about the expenditure on roads, it's worth reflecting on the amount of money that's been spent on roads in this budget in comparison to active travel and to public transport. And I think new roads are only about 10 per cent of the entire economy and transport MEG, so I guess it's got to be seen in proportion.

It's about 9.9 per cent new road schemes, and maintenance, correct me if I'm wrong, is around about 9.7 per cent.

Okay, thank you for that. 

For accuracy, then, you made an emphasis on local roads when you said that first of all—you are differentiating.

Yes. 

So, it's not all roads that are being developed. So, I think we need to be transparent around that, don't we?

Absolutely, yes. So, that doesn't, for example, including the Caernarfon-Bontnewydd bypass. 

Quite, for example. So, we just need to be clear that there are other roads being built. 

Does it include the Llandeilo bypass?

No, that's not included in the budget yet. Work hasn't commenced on it; that's still in the planning stage.

Okay. Jenny.

Okay. I wondered if you could respond to the future generations commissioner's suggestion that the Welsh Government should establish a carbon impact account, in order to be able to assess and monitor the carbon impact of all projects?

I'd agree with the future generations commissioner, and that will be undertaken as part of the work on the Wales transport strategy. 

Thank you. Fine. 

Llyr Gruffydd.

Thank you. I want to move on to decarbonisation in the economy, and, of course, industry has now become the biggest emitter. And, I suppose, it's one of the sectors where Welsh Government has least powers in terms of getting to grips with some of these issues. But, nevertheless, maybe you could tell us a bit about what specific actions you are taking as a Government, because, of course, there is a target of, I think, a 43 reduction by 2030, against the 1990 baseline?

Yes, and, of course, manufacturing accounts for proportionately more people in employment in Wales than the average across the UK. So, as a consequence, you would expect it to be an even greater challenge in Wales. So, we have the economic action plan that has decarbonisation at its heart. It was designed to dovetail as neatly as possible with the UK industrial strategy. And we're encouraging Welsh businesses, not just to take advantage of our support, but also support available from UK Government, particularly the industrial energy transformation fund. We're actively encouraging businesses to bid for that money.

How successful has Wales been in accessing that money, really? Are we getting our share of it?

Because it's a new fund, it's difficult to assess at the moment. 

Yes, it's too early to say. Okay.

Yes. But within the EAP, you'll be aware that we have the economic contract—if you like, the gateway: you have to sign up to the contract if you're going to be in a position to draw down money. Although you don't need to sign up to the contract just to get money, you can do it voluntarily, and a number of businesses, I'm pleased to say, have done so. And within the economic contract, there are only four points to it, one of which is decarbonisation. Once you've signed up to that particular contract, then you can apply for economy futures fund money through one of the five calls to action—decarbonisation is one of those.

As a result of the economic contract, a good degree of dialogue now takes place, on a very regular basis, between Business Wales officials and Welsh Government officials, particularly within the business and regions team, which will lead to best practice being disseminated across the whole of the business community. And we do have some really good examples now of how, through dialogue and the economic contract process, and the calls to action, we've seen quite a bit of creativity and innovation and businesses stretched to do more in the area of decarbonisation.

Now, there are five calls to action and decarbonisation is one of them, and projects relating to decarbonisation have amounted to more than 20 per cent, one-fifth, of the awards made to date. I think the figure is just over 30 per cent. So, considering the sum of money that has been drawn down for—

Is that the £13 million?

That's right, yes. So, it's possible to apply for and secure economy futures fund money for those five principal areas. You have to declare what principal area you are drawing down the money for, but there can be applications where more than one call to action is being supported.

I see, okay.

So, that's exclusively the principal—that £13 million—reason for drawing down—

So, there'll be others that include that as well.

Absolutely, yes. And there are some really good examples where, as I say, through dialogue with companies, through drawing down money from the economy futures fund, we've been able to encourage businesses to go further. Just this week, for example, KK Fine Foods announced that they'd secured over £0.5 million from the economy futures fund. As a result of dialogue that had taken place between us and KK, KK have said that they are looking to move towards utilising fully biodegradable packaging. I'm not sure that that necessarily would have taken place in the past had it not been for the dialogue and the economic contract. So, it is providing us with an opportunity to stretch businesses further.

I'm just picking up on something I raised with you under the urgent questions yesterday, really, in terms of the futureproofing businesses. Businesses can evolve and improve the way they do things, but effectively they're still doing the same thing. To what extent is the Government supporting businesses to actually look fundamentally at—. If they're in a sector where societal direction of travel is going in a very different way, are you supporting them to really refocus and change direction?

So, this is work that the thematic sector team are heavily involved in. The calls to action are designed to futureproof the economy and to turbo-charge the industries of the future. The economic contract is principally about making sure that we have inclusive, fair growth. And so the thematic sectors team, horizon-scan—they look at trends and they look at emerging opportunities—and that then informs our decision-making process with regard to the economy futures fund. Sioned.

If I could just come in on that. Business Wales, of course, supports all small and medium-sized enterprises and businesses across Wales and they have a particular focus on looking at helping businesses on the ground to translate our policies into action on the ground in order to develop them. We're also working really closely with industry and there's an industry decarbonisation group. We engage very closely with them to develop terms of reference in order to take forward the industry narrative for the next iteration of the low-carbon plan. So, that is something that is really encouraging, and we're seeing really positive collaboration with industry and with wider businesses on this front. There's a real recognition—

Joyce Watson's got a short question.

—around this climate change emergency.

Sorry to interrupt; I thought you'd finished.

No, no, that's fine. I have finished now.