Pwyllgor yr Economi, Masnach a Materion Gwledig

Economy, Trade, and Rural Affairs Committee

11/11/2021

Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

Hefin David MS
Luke Fletcher MS
Paul Davies MS Cadeirydd y Pwyllgor
Committee Chair
Samuel Kurtz MS
Sarah Murphy MS
Vikki Howells MS

Y rhai eraill a oedd yn bresennol

Others in Attendance

Andrew Gwatkin Llywodraeth Cymru
Welsh Government
Christopher O'Brien Y Gymdeithas Frenhinol er Atal Creulondeb i Anifeiliaid
Royal Society for the Prevention of Cruelty to Animals
Dylan Morgan Undeb Cenedlaethol Amaethwyr Cymru
National Farmers Union Cymru
Gareth Parry Undeb Amaethwyr Cymru
Farmers Union of Wales
George Dunn Cymdeithas y Ffermwyr Tenant
Tenant Farmers Association
Gwyn Howells Hybu Cig Cymru
Meat Promotion Wales
Madison Rogers Grwp Lles Anifeiliad Anwes Cymru
Companion Animal Welfare Group Wales
Paula Boyden Dogs Trust
Dogs Trust
Peter Ryland Llywodraeth Cymru
Welsh Government
Sioned Evans Llywodraeth Cymru
Welsh Government
Tim Render Llywodraeth Cymru
Welsh Government
Vaughan Gething MS Gweinidog yr Economi
Minister for Economy

Swyddogion y Senedd a oedd yn bresennol

Senedd Officials in Attendance

Aled Evans Cynghorydd Cyfreithiol
Legal Adviser
Lara Date Ail Glerc
Second Clerk
Robert Donovan Clerc
Clerk
Robert Lloyd-Williams Dirprwy Glerc
Deputy Clerk

Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.

The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.

Cyfarfu’r pwyllgor yn y Senedd a thrwy gynhadledd fideo.

Dechreuodd y cyfarfod am 09:34.

The committee met in the Senedd and by video-conference.

The meeting began at 09:34.

1. Cyflwyniad, ymddiheuriadau, dirprwyon a datgan buddiannau
1. Introductions,apologies,substitutions and declarations of interest

Bore da a chroeso i gyfarfod hwn o Bwyllgor Economi, Masnach a Materion Gwledig y Senedd. Dydyn ni ddim wedi derbyn unrhyw ymddiheuriadau y bore yma, ond oes yna unrhyw fuddiannau y hoffai Aelodai eu datgan o gwbl? Sam Kurtz.

Good morning everyone and welcome to this meeting of the Economy, Trade, and Rural Affairs Committee at the Senedd. We have not received any apologies this morning, but do Members have any interests to declare? Sam Kurtz.

Diolch, Cadeirydd. Just to declare an interest with regard to post-Brexit border controls, which will be discussed, I have a port trading with the Republic of Ireland within my constituency. 

Yes, and that also relates to myself as well in my own constituency, so thank you very much for that. Any other matters? No. 

09:35
2. Papurau i'w nodi
2. Paper(s) to note

Dyna fe, symudwn ni ymlaen i eitem 2, papurau i'w nodi. Rŷm ni wedi derbyn llythyr gan Ben Cottam, pennaeth Ffederasiwn Busnesau Bach Cymru, yn dilyn cyfarfod y pwyllgor ar 30 Medi. Rŷm ni wedi derbyn llythyr gan y Gweinidog Newid Hinsawdd ynglŷn â'r Rheoliadau Amodau Ffytoiechydol (Diwygio) (Rhif 2) 2021.

Rŷm ni hefyd wedi derbyn llythyr gan Gadeirydd y Pwyllgor Cydraddoldeb a Chyfiawnder Cymdeithasol ynglŷn â memorandwm cydsyniad deddfwriaethol Llywodraeth Cymru ar y Bil Ardrethu (Coronafeirws) ac Anghymhwyso Cyfarwyddwyr (Cwmnïau a Diddymwyd). Rŷm ni wedi hefyd derbyn ymateb gan y Gweinidog Cyllid a Llywodraeth Leol ynglŷn â memorandwm cydsyniad deddfwriaethol Llywodraeth Cymru—y memorandwm ar gyfer y Bil Ardrethu (Coronafeirws) ac Anghymhwyso Cyfarwyddwyr (Cwmnïau a Ddiddymwyd).

Rŷm ni hefyd wedi derbyn llythyr gan Weinidog yr Economi ynglŷn â'r cytundeb masnach rydd rhwng y Deyrnas Unedig, Gwlad yr Iâ, Liechtenstein a Norwy. Ac rŷm ni hefyd wedi derbyn llythyr gan Gadeirydd y Pwyllgor Cydraddoldeb a Chyfiawnder Cymdeithasol ynglŷn â'i ymchwiliad gerllaw gofal plant a chyflogaeth rhieni. Fe welwch chi o'r llythyr yma fod yna gynnig i Sarah Murphy i weithredu fel rapporteur yn yr ymchwiliad yma. Dwi'n hapus iawn gyda'r cynnig yma, ac, os nad oes unrhyw wrthwynebiad arall, fe atebaf yn ôl yn cadarnhau hyn. Ydy pawb yn hapus gyda hyn? Ydy. Dyna ni.

Oes yna unrhyw faterion eraill hoffai Aelodau eu codi o'r papurau yma o gwbl? Nac oes.   

There we are, we'll move on to item 2, the papers to note. We've had a letter from Ben Cottam, head of the Federation of Small Businesses Wales, following the committee meeting on 30 September. We've had a letter from the Minister for Climate Change regarding the Phytosanitary Conditions (Amendment) (No. 2) Regulations 2021.

We've had a letter from the Chair of the Equality and Social Justice Committee in terms of the Welsh Government's legislative consent memorandum on the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill. We've also had a response from the Minister for Finance and Local Government in terms of the LCM on the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill.

We've had a letter from the Minister for Economy regarding the free trade agreement between the UK, Iceland, Liechtenstein and Norway. And we've also had a letter from the Chair of the Equality and Social Justice Committee regarding the committee's forthcoming inquiry into childcare and parental employment. You'll see from this letter that there is a proposal for Sarah Murphy to act as a rapporteur in that inquiry. I'm very content with that proposal and, if there are no objections, I'll respond confirming that. Is everyone content with that? Yes. Okay.

Are there any other issues that Members would like to raise from these papers at all? No.

3. Craffu Cyffredinol ar Waith y Gweinidogion - Gweinidog yr Economi
3. General Ministerial Scrutiny - Minister for Economy

Felly, symudwn ni nawr i eitem 3 ar ein hagenda, sef sesiwn craffu gyffredinol gweinidogol, a dwi'n falch o groesawu Gweinidog yr Economi i'r sesiwn yma. Croeso cynnes i chi, Gweinidog, bore yma. Cyn dechrau'r sesiwn yma, gan ei bod yn Ddiwrnod y Cadoediad, byddaf yn bwriadu dod â'r sesiwn i ben ychydig funudau cyn 11:00 fel y gall pobl gynnal dau funud o dawelwch ar ur unfed ar ddeg awr o'r unfed ar ddeg diwrnod yn ystod yr egwyl. 

Felly, Gweinidog, croeso cynnes i chi. A gaf i nawr ofyn i chi a'ch swyddogion i gyflwyno eich hunain i'r record, ac wedyn gallwn ni symud yn syth i gwestiynau gan Aelodau? Gweinidog. 

Therefore, we'll move on to item 3 on the agenda, namely general ministerial scrutiny, and I'm pleased to welcome the Minister for Economy to this session. I welcome you, Minister. Before starting this session, given that it is Armistice Day, I plan to bring the session to a close a few minutes before 11:00 so that people can observe two minutes' silence on the eleventh hour of the eleventh day during a break in proceedings. 

So, Minister, a warm welcome to you. Could I just ask you and your officials to introduce yourselves for the record, and we'll move on immediately to questions from Members? Minister. 

My name is Vaughan Gething. I'm the Minister for Economy; I have been since the change in Government in May this year. And I'll go round my officials to introduce themselves. Andrew. 

Bore da. Good morning. My name's Andrew Gwatkin. I'm director of international relations and trade. 

Morning. Tim Render. In this context at this committee hearing, I am the senior reporting officer for the Welsh Government's work on borders. 

I'm Peter Ryland, chief executive of the Welsh European Funding Office. I'm the director in charge of discussions with UK Government in respect of replacement for those structural funds. 

And I hope we'll be joined later by Sioned Evans, who's the director of business and regions. In particular, her team deal with Business Wales and a range of other areas of direct support to businesses, as well as, of course, our regional footprint as well. So, that's the team and I'm looking forward to a wide-ranging session of scrutiny. If we don't get through everything, then I'll be happy to write if there are follow-up questions from the committee, Chair.  

Yes, thank you very much indeed for that, Minister, and perhaps I can just kick off this session, then, just with a general question, and just ask you what are your priorities, as far as your portfolio is concerned, over the next five years. 

Well, I set out some of those priorities in the statement I gave to the Chamber on 19 October, about taking forward the economic resilience and recovery mission. This is really about how we try to both recover from the pandemic and actually create the fairer, greener, more prosperous Wales that we want to. There are big challenges there that I set out about our generational challenge, of making sure that young people, in particular, don't need to get out to get on, how we encourage more people to stay in Wales and be successful in Wales, including people who've gone away to be successful somewhere else, to come back and be successful here, because we have a big and a really significant challenge. If we can't do something about not just our generation and our population shift, but also the tax base in Wales, and needing more people to work and to be in good work and well-paid work, then actually there's a really big challenge for the economy, and our ability to no longer be one of the poorest parts of the UK will be significantly undercut if we can't do something about that.

That's something we often talk about in public service terms, about the success story of having an older population—actually, we need to have more people in the middle of working age, and successful in working age as well.

09:40

Thank you very much for that. If I could now bring Hefin David in to ask a set of questions. Hefin.

Can I ask the Minister what is his response to what the BBC is reporting as the comments of Ian Edwards, the boss of Celtic Manor, today, who said that small businesses could collapse if business rates are reintroduced in April?

Well, I've had a number of conversations with the visitor economy group, and that includes lots of people in hospitality and tourism and others. They were all clear—there was a pretty unified ask—that they would like further support on business rates. We've already, of course, got a more generous offer on business rates in Wales than in England. We know that pandemic recovery in business terms has certainly not been complete yet, but it's a matter of discussions between myself and the finance Minister about the sort of support we will be able to provide businesses in the future. So, we haven't published our budget yet, and I don't think the finance Minister would take it kindly if I tried to either bounce her or to preannounce part of the budget, but we do understand that there's a consistent ask from businesses of all sizes for further support.

So, can I take from that that we would expect to see something done in that area?

Well, what I can't do is I can't say, 'This is what we will do,' but we're still looking at the conditions we're going to face when we get to April, because part of the challenge is that we need to get through this next period of time—it's a key trading period, in the run-up to Christmas and beyond—and then understand how much businesses have recovered, or not, by the time we get to the next year. So, we're going to need to make choices in the next couple of months with our budget, and of course I look forward to scrutiny on that in particular. But I do understand there's a consistent ask from businesses for more support in the next financial year.

And one of the things you've also said is you'd like to double the number of employee-owned businesses in the time ahead. How many more businesses would that mean? It's not just about helping businesses survive; it's actually causing more businesses to be created. How are you going to do that?

Well, actually, I'm looking forward to a conversation with the Wales Co-operative Centre, because we do provide specialist support to co-operative and social enterprise businesses, and the support we already provide through Business Wales alongside that. Because you sometimes have this challenge, when someone who owns a business is coming to the end and they want to retire, often what happens then. Sometimes, it'll be sold on to another business, and actually worker buy-outs are part of what can help that business to carry on growing with people who already know and understand it. I've got a meeting arranged, following the debate in the Chamber, with Huw Irranca-Davies and the Wales Co-operative Centre and my officials, to look at what we've done in the last term. I think it got up to about 60-odd worker-owned businesses of varying sizes. And it isn't just about a pledge to double that; it's actually about the broader sense of this being a normal way for businesses to run, as opposed to individual examples. So, it's part of the co-operative economy, it's part of the social enterprise economy, and I think there are good prospects for that to be really successful, and those businesses, in one of our key challenges, are always rooted in their communities, so you're less likely to see money leak out of those companies and go elsewhere.

So, just to be clear, you said there were 60 employee-owned business.

I can't remember the exact figure. I gave the figure in the debate. I think it's 60-odd businesses that we define as worker-owned businesses in Wales at present, but if I've got that wrong I'll come back to the committee. But the number—

Yes. So, that's the challenge, to double that, but it's also about shifting the economy, to keep more wealth within Wales in what are generally successful businesses.

Okay. More broadly, can you give us some more information about the business development and recovery fund that you've got planned, and what that will entail and how it will work?

Well, when we're looking at how we support businesses to develop and recover, we're working with local authorities. So, I'll be making some announcements about that alongside local government, because, as you know, one of the key factors in supporting businesses through the pandemic has been our work alongside local authorities, and their work with small and medium-sized businesses. And it's then going to be about looking at how we do invest in skills, because skills is a key challenge in every single area. Every single sector of business I talk to—small, medium or large—there's always a key skills challenge. That's both about developing the workforce they have, as well as new entrants, and that is—. I'm pretty sure we'll talk about skills in the context of European funding, but we've got to get alongside our business to understand what our plan is going to look like and how we help them to invest in their own future. So, you can expect to see more about how we support them and more about the key calls from the Government, about help on decarbonisation, to be climate aware and more resilient, and equally about how they invest in their workforce, because fair work is going to be part of the way forward, and the changing nature of work, where more people will expect to work remotely for a more significant part of their time. We're not going to go back to the pre-pandemic ways of working in every single industry, particularly office-based staff, many of them have found a new work-life balance, which I think is part of the attraction that Wales has to offer.

09:45

So, that'll be the criterion for applying to the fund.

We're going to have criterion for the support we have, it goes alongside our economic contract, and I'll set that out for you in more detail when I come to make a written or an oral statement depending on business in the Chamber.

Can I just check the timescale of that? Is that dependent on the budget?

No, I'm expecting to have a recovery fund, with some announcements being made before we get to the end of the budget round, as well as what we're going to do in the next year as well. There's a challenge about supporting businesses in this part of the recovery as well as what we're going to be able to do on a more sustained basis from the next financial year onwards.

Yes. Yes, not too far away; you won't have to wait too long.

Okay, that's fine, thank you. And my last question: what are your views on the UK Government's announcement that it will set up a £130 million fund for business support to be delivered through the British Business Bank, and how does that fit with what the Development Bank of Wales does?

Well, it should be good news. It's a little disappointing that there wasn't a conversation and consultation with us or even direct conversations between the British Business Bank and the Development Bank of Wales. But, to be fair, I think that the British Business Bank were a little surprised with the announcement from the Chancellor anyway, because there have been specific regional funds in other parts of the UK. Because the big challenge about equity investment is that it's largely skewed towards the south-east corner of the UK, so it isn't just an issue for Wales, but it is certainly an issue for us as well. You'll have heard that I've recently called for specific equity investment from the British Business Bank. I'm looking forward to meeting the chief exec of the British Business Bank with the chief exec of the Development Bank of Wales to make sure that we have a process that is genuinely about how we complement what we do, rather than compete or get in the way of what each other does. Because equity investment is a key challenge for us and the development bank has been much more active in this space too.

So, I'd be more than happy to update Members again once that meeting's taken place and there's a fuller understanding of how that fund is going to be used and how it's going to benefit Welsh businesses alongside the activity of the Development Bank of Wales as well.

So, these issues, these approaches by the UK Government are working separately to the Welsh Government rather than in parallel and as a united step.

Yes. We weren't informed of the announcement and I don't think that the British Business Bank had much notice of the announcement either. The challenge now is, like I say, it's broadly good news that there is recognition of a specific fund to invest in Welsh businesses, because otherwise, Welsh businesses weren't getting as much as they should've done from general activity. But I think we would get a lot more out of it if there was conversation beforehand to make sure that we maximise that. We're looking to make the best of what we have and have a genuine, open and constructive conversation with the British Business Bank, the Development Bank of Wales and myself. And I'm very pleased that they've agreed to the meeting.

Thank you, Hefin. If I could now ask Sarah Murphy to come in and ask a few questions—Sarah.

I'm going to ask some questions about hospitality, tourism and the retail sector. Going back to the beginning of this year, in March 2021, the Welsh Government published a new recovery strategy for the tourism, hospitality and events sector, 'Let's Shape the Future'. The next step, then, was to create a taskforce and an action plan and implement this strategy, however, we don't have a timescale for developing the action plan, so could you please give us an update on the timescale and the process that's going to be involved in doing this?

Okay. So, you're right, we published 'Let's Shape the Future' in March of this year, and actually, we've had a few more bumps in the road since then, but we have been working with partners to—. The plan was produced by Visit Wales and the Welsh Government and we worked alongside the Tourism Alliance. The priorities for the visitor economy for the longer term future, the recovery plan is about a bridge to get back towards that strategy. So, our ambition is still to grow tourism for the good of Wales—that's economic growth that delivers for Wales and does so in a way that is environmentally, socially and culturally sensitive. 

So, we did begin delivery conversations across all of the themes within that recovery plan in March, and that's been affected, obviously, by what's gone through then, but the regional fora have had a conversation about that and there'll be a formal overview that I expect will be drafted for me for the end of December and that will then look at how we're then, again, looking to bridge recovery. Because our aim is to ensure that, over the next months, we help the market to recover to pre-COVID levels, to make sure that, over the next 12 months, we can do that, and then we want to see international visitors back to pre-COVID levels over the next two years. 

The challenge with that is that some parts of the tourism sector have seen real growth; others have struggled. One of the key struggles has been staff, which is why we've got alongside them a promotional campaign to help recruit into the industry. There are a variety of careers in tourism and hospitality, it's not simply seasonal work. And as I mentioned earlier in response to Hefin David, skills have been a real challenge for this sector as well. So, we're looking at how we can understand with the tourism and hospitality skills partnership what we need within the sector and how we can persuade them not just to join but then to invest in them as well. So, a range of our other skills interventions will be directly relevant to this sector too.

09:50

Thank you, Minister. That actually answers my question, because I was going to move on to the skills aspect as well, so thank you. Then, I wanted to have a look more specifically at the retail sector. Again, in the fifth Senedd, the Economy, Infrastructure and Skills Committee recommended the Welsh Government should develop a strategy for the retail sector, and this was accepted in full. So, again, would you be able to give us an update on the process and the timescales and where Welsh Government is with that at the moment?

Actually, once we'd had a conversation on a strategy for tourism and hospitality, the retail sector made clear they'd want to have a similar conversation on a similar scale, and actually it's been really positive to have both businesses and employers alongside trade unions and the Government and the sector bodies looking at this. So, I've met with that group, with businesses and the trade unions, I'm expecting to have a draft come to me again by the end of this year, and then with a view to publishing a retail strategy in the spring.

So, I think we're in a good place with social partners working together and recognising there is both the challenge of how staff get to have proper career paths, and again skills is a key part of that as well, they've got recruitment challenges as well in the retail sector too, but it's also about the variety of the offer in the retail sector, from large supermarkets, large clothes stores, to the high streets that you and other Members will be familiar with in your local towns and what a healthy retail centre looks like within a local context.

So, there's quite a lot to get through, but I'm positive that we've got people in the right place to have that conversation, and then there's our behaviour as well, about encouraging people to take advantage of the local offers that are available. We're coming up to Small Business Saturday, a regular reminder of the small businesses that people supported during the pandemic, and we need to keep on supporting them if we want to have a healthy and a vibrant town centre, and retail is a key part of that. So, it won't be too much longer before I have something, and then we'll be looking to publish a strategy in spring next year to take us forward.

Thank you. You mentioned the trade unions and I just wanted to highlight that USDAW, the trade union, did a survey recently of 4,000 of its members asking them about how they've been feeling about working in retail, and almost three quarters said they feel anxious about going into work, nearly half said that they don't feel very safe when they're at work either. Some of the recommendations that they've put forward for a retail sector strategy would be things like disability leave, or better enforcement of the right to reasonable adjustments for workers with mental health problems, and I was just wondering are these some of the things that you and your team are also hearing an taking on board and would be looking to kind of explore more with the retail sector strategy?

Those are definitely asks that USDAW have made in the conversations and the correspondence, and you'd expect them to, wouldn't you, because they're interested in their members having a good experience at work as well as good terms and conditions. Actually, many, many employers recognise that they do need to look after and invest in their workers as well, in particular because there are real challenges in parts of the retail sector in both acquiring and keeping good staff, and so there's more openness in the conversation, which I think is a really good thing.

The challenge, though, will be not just how businesses behave and how they treat their workers as part of what fair work definitely is, but it's also how we behave. I'm certainly not suggesting anyone who's involved in today's meeting behaves this way, but we do know that aggression and difficulties are real issues in both the retail sector and certainly in hospitality as well. The challenge is, as we're looking to recover and secure all the gains that we've made in the journey out of COVID, that we do also know and we understand and we shop safely but we're also kind to the staff that we're interacting with as well. I'm genuinely concerned about the reports that have come back from both employers as well as trade unions that there is direct aggression, including physical aggression sometimes, to staff. And I think all of us across the Chamber, in the Senedd, would want to support that message. When staff ask you to put on a face covering, they're doing their job, it's the law, and there should be no aggression directed at that member of staff, because it is one of the things that puts at risk the safety of all of us, and I just don't think that's part of what someone has to put up with when they go to work. So, that's going to be a key message we're going to be highlighting over the next week and more, because we do know that the current season is one where, sadly, attacks and aggression on shop staff do increase. 

09:55

Thank you, Sarah. Before I bring Vikki Howells in, I understand, Minister, that you mentioned earlier on that Sioned Evans would be joining us. I'm afraid she's having some difficulties in joining us, so I understand that Duncan Hamer will be joining instead. 

Yes, I've seen Duncan enter the call, so when we come to that, I'm sure Duncan will be able to assist if there are technical questions beyond my technical and detailed knowledge. 

Great. Thank you very much indeed. So, if I can now ask Vikki Howells to ask a few questions. Vikki. 

Thank you, Chair. Good morning, Minister. I've got some questions on the economic contract. Now, when it was first brought in, the then Minister for economy, Ken Skates, explained to us as a predecessor committee that the primary role of that contract was to drive behaviour change. So, what would you say has been the evidence to date that the contract has actually driven behaviour change, both on the part of the Welsh Government, in terms of how they allocate funding, but also among businesses who've signed up to the contract?

Yes, you're right, and interestingly, we have the economic contracts, and then, there are calls to action, and the two things are separate, but there is a relationship. So, the contract is about who we spend money with and the sort of values that we're looking to agree on. And, in the next phase of the contract, we're looking to have an enhanced level of expectation, so this is both in the space of what we expect in terms of economic strength and adaptability as one of the four pillars in the renewed contract—fair work, the promotion of well-being, low carbon and climate resilience.

And what we've found is that by having conversations with people who want an economic contract, because, in many ways, you've got to be prepared to sign up to the principles of an economic contract to gain future support, that does mean we're having different conversations with businesses of a variety of sizes. So, for example, we are having more conversations now with businesses of a variety of sizes about promoting well-being of their workforce, and it's been really fascinating, actually, in reporting back from officials about the nature of those conversations from really big manufacturing organisations, to smaller and medium-sized organisations, about how we look at work and well-being. And they're conversations that weren't taking place to the same depth or extent beforehand.

So, I do think we're seeing behaviour change, but also, it's part of the consistency of the lead and direction of the Government. So, on climate change and resilience, we're seeing more people thinking again about their impact. It comes partly from the Government, but also, partly from the public and the consumer as well, where more people are more interested in how the goods they acquire, and how the businesses that they interact with, are actually looking at their environmental footprint. And when I saw Flowtech before the update on the economic mission, in your neighbour, Buffy Williams's constituency, they again were looking very closely at what they were doing, the goods they were providing, how they looked at more recycling and reuse, and, actually, they had customers who were definitely interested in that. And, again, they were very clear about wanting to invest in their workforce too. So, they're going to be one of the first, if not the first, company to sign up to the new phase of the economic contract to again try to sharpen up our expectations. 

And to what extent has the pandemic accelerated the take-up of the economic contract, because businesses had to sign up to that in order to gain Welsh Government support, didn't they?

I think that's been really helpful. It's been helpful in the sense of the practical point there that we want you to sign up to this before you get public money, to understand what the principles are because this is part of it. But, also, it's the point that I made earlier, that it's not just about forcing people to do that, but it's meant that we've had conversations that we wouldn't otherwise have had. And it's also meant we've had to talk to and work with more businesses because of the range of businesses that we've had to support. And that's why I think that we're in a much better place. And you don't have to take my word for it. Both the Federation of Small Businesses and the Confederation of British Industry Wales, and others, have commented that there is a better relationship between the Welsh Government and businesses, and a better understanding of the challenges that each other has because of the way we've had to work in the pandemic to save businesses that would otherwise have gone under. 

And there's a recognition that we do, simply as a matter of fact, have a more generous offer than is available over the border. The challenge is how we adapt what we're able to do to support people to carry on being resilient through this next period of time, as well as what we hope will be a sustained recovery in the future.

10:00

Thank you. And in terms of the businesses that have signed up, I know the FSB has suggested that, in their experience, there have been very different interpretations among businesses as to the purpose of the contract, and that the terminology itself might be confusing, in that, unlike most contracts businesses will be familiar with, the economic contract doesn't have any binding legal status. So, what are your thoughts on that, and also how businesses have been and can continue to be held to account, to make sure they're actually fulfilling the terms of the contract?

So, the contract is, if you like, a gateway to funding. So, you need to be prepared to sign up to the contract and the values we want to see before you get through the gate on funding. And then with the calls to action that are part of the funding application process, that's where you look at what you're doing in those particular areas. Because we're trying to guide people as to what our priorities are. And actually, business organisations we've talked with have been clear that, as long as there's consistency in what we're doing and why, they're happy with that. They understand what they need to do to gain support from the Government, in cash terms, in resource terms, but also in terms of the conversations we have about how they can help to improve those more broad points, which they recognise, even more so than before, are really important for their businesses—about how they look after the well-being of their staff, how they retain staff in a hyper-competitive market for people in many, many different parts of the economy.

And interestingly, this is something that isn't just being noted within Wales. I've had conversations with UK-wide organisations, and they're very interested in the contract and what it means, and the level of planning. And it's one of the things we can do in Wales—we can give a level of certainty for the future. Because there's stability in the Government and what we've said, and what we've then done, it's a real strength for us to build on. So, there may be different terminology and ways of working to how people who were used to working five years ago, but, actually, I think business has already caught up. And as to the point you made earlier, the pandemic has really accelerated the ability and the willingness and the engagement of business in what the contract asks and how that leads to funding support when people do want to engage, and with the Welsh Government as well. Of course, not every business wants financial support from the Government to succeed.

Thank you, Vikki. If I can ask Luke Fletcher now to come in to ask a few questions. Luke.

Diolch, Gadeirydd, a bore da, Weinidog. I have a couple of questions around regional investment and international trade. Around regional investment to begin with, firstly, we know with the UK levelling-up fund that Wales is likely to receive just 5 per cent of the overall fund—so that's 10 projects in Wales out of 105 projects. And when we look at the community renewal fund, Wales will share £47 million amongst 165 projects. Now, of course, this is the first round of allocations in those funds, but I was wondering if the Minister could give his view on this.

I think there are a couple of things that are worth restating. The first is that there have been unambiguous pledges on Wales not losing out on funds. And the pledge from the Government was that—. The view was that the former European funds were overly bureaucratic, but a very clear pledge—and if you want to go and look it up, it's on page 44 of the Conservative manifesto from 2019—that the replacement would not only be better targeted at UK-specific needs but, at a minimum, match the size of those funds in each nation, and that's each nation of the UK. And in the current round, they haven't done that; £375 million a year, and we would have expected that within this year in the programme. And even if all the money that's been announced was going to be spent in one year—and it isn't, because it isn't possible to—we'd still be short by several hundred million pounds.

And actually, when you look at what's been announced in the budget, I'm afraid there's no prospect of meeting that manifesto pledge. So, the budget is an announcement of breaking that very specific pledge, because the shared prosperity fund is due to be £400 million on a UK-wide basis in the next financial year. As I say, Wales's individual share, on an annual basis, would have been £375 million. So, we're never going to achieve that within a UK fund of £400 million. But it only gets to £1.5 billion in 2024-25, and, even there, I don't see how we would get to that share. So, there's a plain broken promise when it comes to the level of funding. But I think more than that, though, is the way that the funds are being allocated. So, we haven't had meaningful engagement on the design of the funds. We still don't really understand how the current announcements have been agreed. We don't understand how those authorities that have put in bids have not been successful. So, Flintshire is the only local authority in Wales that hasn't had a community renewal fund project agreed, and they don't understand, and neither do we, why that's been rejected.

But if you look at what the Senedd has said and what scrutiny committees have said, including those chaired by people from parties not in the Government, they've been very clear over a period of time that we learn lessons on how European funds were spent. So, in the round that started in 2000-01—in the evaluation of that—we had about 3,000 projects and the Senedd committees at the time were very clear that there should be a more strategic approach. We also had an independent review on that as well. And the current Chair of this committee will remember his time on a previous Finance Committee that made recommendations about having a more strategic approach to how European funds are allocated. So, we went from about 3,000 projects to about 300, taking a more strategic approach. When you look at what's happening now, it is going back to when we had lots and lots of smaller projects and there was consistent and, I think, well-founded criticism that actually we could achieve more with the money if we used it in a different way.

And you can't evaluate the purpose of this fund either because we don't know how the funds have been allocated—there is not evaluation framework built into it, so we don't actually know if this is going to achieve a stated purpose. My concern is we'll have less say over less money, but the money that is spent will be less effective in addressing the challenges we have here in Wales. And, of course, we could talk about sectors like research and innovation as well, but the current approach is not one that I think is helpful.

And from the Welsh Government's point of view, we want to have the money that Wales was promised, and I think it would be extraordinary if people in the Welsh Parliament thought that that shouldn't happen. But more than just having the money that was promised, we want to have a proper say in it, as we have done for more than 20 years, so that people on this committee and in the Chamber get to scrutinise how that money is used, as has happened in the past. And a previous Finance Committee, chaired by a Conservative Member, said that's what should happen as well. And more than that, we want to have a proper way of spending and understanding the money so that we understand the point and the purpose so that we don't spend the money poorly, regardless of the sum of money in question.

10:05

Diolch am yr ymateb hwnnw.

Thank you for that response.

The Minister touched on the element of less money. I just want to stick with this for a minute. I was wondering if the Minister could quantify what he refers to as 'vast reduction in funding'—which was in his recent letter to the committee—as a result of the UK Government's arrangements for replacing EU funds. And I'd also be interested if he could set out how schemes such as Business Wales and the Development Bank of Wales will be affected by this reduction in funds.

Okay, so, as I've set out, and, as is I think widely accepted, our share, if we were still within the European Union, in Wales would be £375 million a year. The current announcement on the community renewal fund is £47 million for Wales within this year. And it's not going to be possible to spend that all within this year. Even if you spend all of the levelling-up fund and the community renewal fund projects together, and if they were all spent within this year, we would still be short by more than £200 million within this year. That's the revenue budget of a medium-sized local authority within Wales that we're short within the one year. And when you look at the forecasts that are referred to of a future shared prosperity fund being £400 million in the next financial year on a UK-wide basis, there are zero prospects of Wales receiving £375 million out of that. And so, that means we're going to be hundreds of millions of pounds short every single year, when you look at the forecast from the spending review.

And that has very real consequences. Over a third of Business Wales funding comes from former European sources. On apprenticeships, about a third of that funding comes from these sources. And to put it another way, we went to the election with a pledge not just to match the 100,000 apprenticeships we achieved in the last term, but to increase that to 125,000. I think every party that stood for election—every serious party—had a pledge to increase the number of apprentices. If these funding cuts are seen through, then actually we will find that that money—which isn't replaced and isn't there in the way that the pilots have been designed—equates to a loss that we would suffer of over 5,000 fewer apprentices every year, or, to put it another way, around about 26,000 fewer apprentices in a full Senedd term. So, unless we have alternative sources of money, that isn’t just the 100,000 we had previously, but your baseline goes down to under 75,000 apprentices each year. And I just don’t think that any party within the Senedd would say that that’s what they thought they we’re doing and what they were campaigning for either in our election or indeed in how the replacement European Union funds would be used. So, there are very, very real consequences.

On the money that the development bank spends in each area, I think the equity investment fund business that the development banks funds is 48 per cent from European Union funds. So, this is a really significant chunk of what they have. And if you just want to think about Swansea and Neath Port Talbot, then there were 43 development bank investments within the last term within that area, totalling to £24.8 million, and there were over 18,000 apprenticeships and traineeships, just within those two local authorities. So, these are really significant numbers that have been supported by former European funds, and we don’t have the funds or, indeed, the ability to direct them in a way for regional and national programmes like the development bank, like Business Wales, and like apprenticeships—they are very much at risk.

10:10

Diolch. Finally, on regional investment, the Minister touched on the lack of engagement from UK Government. Could I take from that that the Minister hasn't heard anything from the UK Government regarding how the shared prosperity fund will operate when it is introduced in 2022-23?

Well, we have the story of Robert Jenrick, the now former Secretary of State, who didn't respond to a single letter that I sent. He never thought it worth corresponding with the Welsh Government on this issue. The correspondence we did have from junior Ministers didn't give us any insight into how the funds were going to be designed. I genuinely don't think there was a plan for those funds. The one thing they were clear about was that Welsh Government Ministers would have no decision-making role, which, I think, is extraordinary given what we've just run through about not just the way Ministers have learnt, but actually, from the parliamentary side, the Senedd has had, I think, a really important view in helping not just to scrutinise but to improve the way we spend these funds.

I wrote to Michael Gove before the end of September. It's now about six weeks after that letter. I've not had a response yet. There has been a brief conversation with the First Minister in a different meeting, but it's frustrating and disappointing that there hasn't been proper direct engagement at a ministerial level to try to learn and understand the things that we can offer, that we can have a conversation about the future design of these, what should be, significant funds, and that's deeply frustrating. So, when I come to be scrutinised by this place, in this committee, I won't be able to tell you about decisions that I am making because I'm not currently a decision maker at all in this area, and I think that that is a real problem for making sure that these funds work for Wales.

So, yes, I'm really disappointed about that, but there's an opportunity to get that right. And it would help if there were direct conversations with our officials. Peter Ryland is the director with responsibility. It's not been a satisfactory set of conversations, and we're still not sighted on what is happening in the development of these funds and how they're going to be deployed.

Before you go on to international trade, I know Sam Kurtz wants to come in on this very point. Sam.

Thank you. Thank you, Minister. Just quickly, is the Welsh Government still receiving EU funds for any specific projects?

Yes, as is usual, there is still the roll-over from the previous funding period. That's from the funds we previously had, as it were, from the 2014-20 programme. But the new funds that should have been in place from this year—and we have shown how we'd be able to spend them in the first year—aren't available to us.

So, you wouldn't describe it as a tapering-off period, as it were, where EU funding decreases while UK Government funding increases to match the equivalent funding?

No, I think that's a fundamental misunderstanding of how this works. We'd have had the £375 million available through the whole of this period, and how we profile that would be a matter for us. What we’ve actually got within the shared prosperity fund is a significant cut of hundreds of millions of pounds every year, and that is simply not made up by the way in which we’re spending the end of the former European funding programme. There is an undeniable significant budget cut for Wales. Even if you’re happy that the Welsh Parliament has no role in scrutinising and directing how that money is spent, it’s undeniable that hundreds of millions of pounds have been taken away from Wales. We definitely have less say over less money.

10:15

Diolch, Cadeirydd. On international trade now, Minister, I'd be interested in your views on the agreements in principle for free trade agreements with Australia and New Zealand and their impact on Wales.

Okay. So, I've tried to be clear and upfront about this, so I'll happily just restate this as briefly as I can. There are opportunities in new international free trade agreements; I wouldn't say that there are zero opportunities. So, in areas like some of our manufacturing areas, in professional services, and in medicines, there are some opportunities. The challenge, though, is that the net benefit of the free trade agreements, on the UK Government's own analysis, is relatively small, and my big concern is the risk in particular to agriculture and, with Australia, some welfare standards that I think are important.

So, the tariff-free quotas that agriculture can now import into the UK with the agreements in principle are significantly increased, and that's a real concern for Welsh agriculture. It also potentially adds lots of food miles to the way in which food is used and imported into the country. But, more than that, the agreements with Australia and New Zealand set a bar for future negotiations as well. Given the significant increase in tariff-free quotas that have been given to agricultural products from those two countries, why on earth would other countries agree to less? And that's a really big problem for us.

The safeguards that have apparently been built into those agreements are a challenge in wider trade negotiations as well, because, actually, if people are looking for equivalents, those safeguards may not be effective. So, I'm genuinely concerned about what they mean, and I'm sure you've all heard the brief and the concern from the National Farmers Union, and, indeed, the Farmers Union of Wales, who are not necessarily natural allies with the Welsh Government. I know Guto Bebb now works for the FUW; he's not a natural Welsh Labour supporter. So, it isn't about the politics; it's simply about people's genuine concern for the future of the agricultural industry here in Wales and what it means. I think it has a broader impact on the future of communities and the language as well. You'll have heard the First Minister talk about this previously.

Thank you, Minister. So, could I take from that that the Welsh Government has conducted an assessment on the cumulative impact of the market-access provisions for agriculture in the New Zealand and Australia agreements in principle?

I'll bring Andrew Gwatkin in on this, but our ability to properly scrutinise these is somewhat hampered, but it's really about what can happen in the future. And so it's what can happen in the future if you do see a significant increase not just in the tariffs, but when and how people choose to actually take advantage of those tariffs—one of the big advantages, in respect of New Zealand, of our membership with the European Union, and what it means for the lamb produce. But, Andrew, do you want to go through how we've run the assessments and some of the challenges we have on the certainty we can provide on those?

Yes, certainly. Thank you, Minister. Based on the information that we have in the agreement in principle, we are beginning the analysis on that in terms of the impacts. However, we await the detail of the final trade agreements with New Zealand, Australia. That will allow us to go into a lot more detail of that analysis. But I would say also that the information that we have, the data that we have, particularly from Her Majesty's Revenue and Customs, doesn't give us a lot of granularity, and so it's really quite difficult to undertake that analysis specifically for Wales, which is something that we want to do. So, we've taken that up with the Department for International Trade, looking for further detail in some of that data. But we're absolutely very keen to analyse as much as we can, and are looking forward to the additional detail that we will have on the free trade agreement as it progresses from agreement in principle through to a final free trade agreement.

Thank you. And, on the information that you do have right now, do you have a timeline as to when that impact assessment would be roughly completed?

Go on, Andrew. It depends on the information we get and whether the agreements in principle become finalised agreements and the detail around them.

Thank you. Moving on to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership—a bit of a mouthful—I was wondering if the Welsh Government has made any representations to the UK Government with regards to its negotiations to be involved in the CPTPP.

10:20

Yes. If I can just refer to it in short as the pacific partnership. I'll bring Andrew in again, because I think the point about safeguards is directly relevant here. But, if you think about it, as a starting position, about 60 per cent of our trade in goods takes place with Europe and the European single market; about 6 per cent of our trade takes place with the pacific partnership. So, they're of entirely different scale, but there are valuable opportunities to trade in the pacific partnership. The challenge, though, is about trade being a reserved matter, but trade having real consequences in devolved matters as well, and how we, then, will want to support Welsh businesses to either deal with extra competition, or, indeed, new opportunities as well. And that's where this point of safeguards come in, and about the nature of the engagement between my officials and the UK Government.

Sorry, Andrew, do you want take Members through the point about safeguards, and our concerns about the apparent safeguards in the Australia and New Zealand agreements in principle, but actually the terms on which the pacific partnership is constituted?

Yes. It's exactly that, Minister. Within the agreements in principle for Australia and New Zealand, there are safeguards built into that agreement in principle, specifically relating to red meat. So, in years 11 to 15, there are safeguards that would come into play. Our understanding with the CPTPP is that that does not allow for safeguards. So, our concern would be, as the UK accedes to CPTPP, does that mean that those safeguards are no longer in place? We've had significant discussions with the Department for International Trade to try and understand that. We are assured that it shouldn't be an issue, but we still see that as a risk, because it's not clear whether CPTPP would override those safeguards. Clearly, having safeguards in place is something that would be of assistance, but, that said, the tariff-rate quotas would already go from the current levels to significant rises anyway. So, as the Minister says, you have to look at the trade-offs between the amount that we currently export to European countries and the amount that we would export, or are exporting and would export in the future, to those countries within CPTPP.

Thank you. And a final question on international trade. I was wondering if the Minister and his team could outline the representations made by Welsh Government to the UK Government regarding the future trade negotiations with Canada, Mexico, India and the Gulf Cooperation Council.

We are working with a range of stakeholders in Wales to try to understand how they see the possible opportunities and risks in that wider group of countries and free trade agreements, a number of which will take their cues from where we see the UK Government has negotiated and agreed agreements in principle with Australia and New Zealand in particular. Now, we don't submit a response to the public consultations, but there are conversations between officials. I wrote to the UK Government in the middle of July to set out our initial views on the potential threats and opportunities of a wider free trade agreement with India. It remains the case, though, that our prime concern in this is to understand how we get as level a playing field as possible, and that we don't put at risk Welsh jobs and industries, and, crucially, how we don't open up devolved responsibilities in a different way. You'll recall some of the previous concerns about the NHS being on the table in trade negotiations as well. We need to understand that devolved responsibilities are not going to be offered up as part of trade negotiations, but, in any event, we've got to understand the business environment that businesses across the economy are going to be faced with. And I'm afraid, at this point in time, it has been a consistent theme thus far that, to get some gains in other areas, agriculture has broadly been offered up as a makeweight to get the deal over the line, and that is certainly the feel from people who work in the agriculture sector, as well, of course, as our two main farming unions.

Okay. Thank you, Luke. If can now ask Sam Kurtz to ask a few questions. Sam.

Diolch, Cadeirydd. Hello, again, Minister. I'm going to chat and ask some questions around BCPs—border control points—if I may. So, forgive me if I focus on those in Pembrokeshire, given my constituency's location, but I understand Holyhead is involved as well, so I'd appreciate responses relating to both border control points. Could you update the committee on any progress made regarding the development of these BCPs in Wales since the briefing paper provided to Members on 4 October?

10:25

There hasn't been a giant step forward in terms of the information we already provided to Members at the start of October, which probably shouldn't be a surprise, as we're only a further five weeks away. We're focusing, actually, on delivering a permanent border control post in Holyhead, to want to prioritise the interim arrangements and the physical checks that will be required from July next year. And, of course, the way those are being introduced is in phases, and that's consistent across the UK from July next year. This is because—. You'll be aware of the background, that initially the border control posts were going to be constructed by UK Government, then handed over to the Welsh Government, because there'll be checks that HMRC and others need to do as well that are plainly reserved functions. We then had responsibility passed to us relatively late in the day, so we started a bit behind other parts of the UK, where the UK Government had been active already, but there's a challenge in delivering these on time right across the UK. So, the interim arrangements are still what we're looking to focus on, and, because of the significance of the volume coming through Holyhead, we really do need to focus on how we have permanent structures there.

The picture's a bit more complicated in south-west Wales, with the two ports in Pembrokeshire, because we both need to understand where and how we'd site a border control post, where and how we'd have satisfactory interim arrangements, but also about the potential change in the volumes of goods. Unfortunately, we've seen trade reduce by about a third, and that's a really big problem, because that compromises the jobs that exist in the area. If that were to be a permanent reduction in trade, it would affect what we do in terms of the construction of a border control post. If it's a temporary reduction, we might need to build a bigger post than the current trade provides for, and that's a material consideration in the site and what we do.

And I'm afraid that, just because there is less trade going through the south-west ports than Holyhead, it doesn't really alter the cost of the border control post, because it's the number of checks you need to undertake. So, the infrastructure has still got to be pretty equivalent. The size and the scale of it is one thing; we've still got to undertake the same number of checks, and so the sum of costs you need to have to do that doesn't significantly reduce because of the amount of trade and the volume through it. So, that's our biggest challenge.

I think the other thing is that we still have some difficulty in our conversations with the UK Government about funding for these as well. 

I was going to come on to the funding element of this, but, just before that, could you outline what additional Welsh Government and other public service staffing resource will be required to operate the BCPs in Wales when they're fully operational? In short, whose logo would be on their uniform? Is it a Welsh Government logo, is it a UK Government logo, is it Department for Environment, Food and Rural Affairs, is it—? Who would it be?

I don't think it's quite as simple as that. So, the Animal and Plant Health Agency, who we're working with, together with the port health authorities, they're the people we need to work with to understand who needs to be there to undertake checks, what sort of checks they'll be, how frequent they'll be, the number of staff we'll need to be able to undertake that in a satisfactory manner, both in the interim as well as permanent relationships. It's also about managing the potential risks to biosecurity and food safety. So, I'll ask Tim to come in, because we do have some working assumptions on this, but they are assumptions we're having to work through in detail, and it's part of the challenge that we do need to be able to understand to have both the interim and permanent arrangements in place. So, Tim, do you want to come in and talk about what this means in terms of resourcing and then what that means to get fully operational? 

Thank you, Minister. It might be helpful for committee if I take a step back and just remind everyone that we talk about a border control post as if it is a single function. It's actually doing probably seven different things: it's checking products of animal origin—meat, cheese, sandwiches; it's checking low-risk plants, which are basically plant-based food products, carrots, potatoes; it's checking high-risk plants, which are basically plants with soil attached, trees, plants that go into bedding, et cetera; it's looking at some high-risk foods that aren't of animal origin—so that would include some of the more high-risk plant products and so on; it's looking at livestock, sheep, cattle, goats, pigs; it's looking at small animals, cats, dogs, chickens; and it's looking at horses. Each of those is actually a different type of function and requires different facilities, so we're basically building seven types of facility within a single border control post.

The staffing will be mainly by the Animal and Plant Health Agency, which is a GB-wide body that delivers a wide range of animal and plant health services and by the port health authority run by the local council, and that those port health authorities, as well as doing physical checks at the border, will have to do documentary checks on all goods that come through. So, the physical checks are done on a very small proportion; so for instance, products of animal origin. You're looking physical checks of probably 1 per cent of consignments, but 100 per cent documentary checks. So, we're working with Ynys Môn and Pembrokeshire around what that means; it is a fairly substantial number of staff they will need to employ to do that, and then, you will need inspectors from the Animal and Plant Health Agency looking particularly at plants and animals, live animals, and then obviously, there will be a facilities management function within the site as well.

I can't give you, I'm afraid, absolute numbers. They are fairly significant and we are working to look at how we do that, but they will create a fairly significant number of job opportunities around these ports, and we're looking particularly in Anglesey—where you've also got a large customs facility—around how we co-ordinate all of those things.

10:30

Thank you. Can I just come back on a quick point there? Forgive my ignorance on this, but the list that you mentioned there with regard to what's being checked, would to me—in layman's terms—be devolved issues. So, why then is it the APHA that would be carrying out those checks along with the local authority? Where is the definition there between reserved and devolved matters?

Shall I answer, Minister?

Exactly right; they are devolved functions. There is an agreement between the three nations in GB that a single technical agency delivers these veterinary services on behalf of all the administrations. We have a memorandum of understanding with them and pay them to deliver the services. That gives you the economies of scale, so for instance, they're an agency that also deal with animal disease, and the fact that you've got a GB-wide facility means that when we have an animal disease outbreak, they call on people from across the rest of GB and vice versa. But they are delivering devolved functions, but they are delivering them on our behalf through a memorandum of understanding and that we are paying them to do. But it provides that economy of scale and skill across the whole of GB.

Okay, thank you. So, the Welsh Government have agreed to this, that GB-wide, as part of Scotland, England and Wales, will be one central agency for the economies of scale that you mention. Thank you.

Just coming back, then, Minister, to the funding point on this: have you had any further discussions between the UK Government on the funding of BCPs following the autumn budget and spending review of 27 October?

We've got—I'd describe it as some comfort on the capital cost, the build costs, of the posts and what's been helpful is that we've used the same consultants who have looked at some of the border control posts in England to give us an idea of the cost of that and there's a challenge there, because as you will know, construction costs are broadly rising in a range of areas, so there are some challenges about costs, but we've got some comfort on funding for those.

What's more difficult—and certainly we haven't got comfort on—are the costs for the running costs. So, you were just running through earlier about the running costs of the APHA as an agency working on sharing skills, resilience, and economies of scale to undertake these functions, and the significant numbers of jobs that that would require. We don't have comfort that those costs are going to be covered, and our clear view is that, in the UK statement of funding policy, those costs come as a direct result of UK Government EU exit policy. The choice that was made on a form of exit from the European Union means we have to do these things, and we think those costs will be material, and those costs should not be passed on to the Welsh Government budget. That’s where the UK statement of funding policy works, or at least it should work. So, there are still conversations ongoing that the Finance Minister is obviously taking an interest in, so we look for the UK Government to meet its obligations in respect of those additional costs that could otherwise shift onto our balance sheet, with all the consequences that would come with a material amount of funding. I can't yet give you the exact figures on that because it does depend on the model, but when we do get a better idea on running costs I'll happily update the committee.

10:35

Thank you, Minister. When you say you've had some comfort, I've got the letter that Rebecca Evans, your colleague, the Minister for Finance and Local Government, received from the Treasury Minister, Simon Clarke MP. It goes above some comfort in delivering what UK Government's funding commitments are to the construction and capital costs—or the capital costs, I should say—on this. But it is quite clear with regard to the non-future-funding of the cost of these sites for future years. So, it comes back to: if Welsh Government is happy for GB agencies to operate it, and then is in this position where they're not willing to be involved in the running costs of this, there's this conflict between the reserved and the devolved matters again on these points, isn't there, on these BCPs? It seems there's little clarity on who takes forward the mantle of this, of delivery in terms of these BCPs in Holyhead and south-west Wales.

So, the checks on animal and plant imports are a devolved function. The consequence of the choice made on how to leave the European Union, and the form of leaving, is a UK choice that means there are extra costs in a devolved sphere, and whether we choose to create our own agency or what I think is the right approach, the current one, is that we have a GB-wide agency who are acting as our agents in undertaking these functions, I don’t think muddies the water in what is a devolved and a reserved function; it's simply about shifting costs as a direct consequence of UK Government choices, and it's within the statement on funding policy at a UK level. If the UK Government makes a choice that has a direct consequence in increasing the costs of devolved functions, then they should cover the cost, and at the moment, they're saying they won't. But we're clear that we want to carry on pursuing that matter, and it would be pretty unusual, I think, if the Welsh Parliament said it was happy for those costs to be shifted onto Welsh Government budgets without any kind of funding support for them. So, it's really about making sure that the costs are properly covered, and it would take away what I think is a needless area of argument and allow us to try and focus on doing the right thing, which is making sure the arrangements work and we don't compromise biosecurity and food safety here in the UK.

So, you would disagree, then, with Simon Clarke MP in saying, and I quote:

'Ultimately, however, this is a devolved matter and the Welsh Government is more than adequately funded to manage the costs of its devolved responsibilities. This will continue to be ensured by your significant Spending Review 2021 settlement, which is being announced today',

which was in the letter dated 27 October. You disagree with that.

The spending review was never about covering off the costs of this particular area, and the consequentials that come from the UK Government's spending review are set out in entirely different areas. There is zero money that can be identified as a direct consequential coming over to help with the running of these, and actually, Barnett shares are the wrong way to fund this, because as I said earlier, you've got to think about the cost of running each border control post, wherever it is, and that's what needs to be funded. Because otherwise you get into the ridiculous position of trying to do this on the cheap in some parts of the UK, and that simply compromises what we're trying to achieve here. So, it is a matter where I think we need to continue conversations rather than simply saying we're going to throw our hands up in the air and say, 'It's not fair, we're not doing it', or we simply say, 'Well, look—we're going to cut other areas of expenditure in the Welsh budget that are devolved', because there's a direct consequence from a UK Government choice that increases the costs in a devolved area. And it's really clear and specific to be able to identify that increase in cost when we get the finalised figures. And again, I think it would be extraordinary if the Welsh Parliament decided that it was the view that, actually, the UK Government can make the choices that increase costs in devolved areas, but have zero responsibility for covering off those costs, and you can’t simply say, 'You get enough money—just find it', because that means we have to have different choices, that I’m sure we will have, and conversations about how the budget is shared and used. So, it’s direct cost shifting at present, but I don’t think that has to be the final position. And it’s not just our view, of course, but others in the UK share that perspective too.

10:40

Finally then, you mentioned the interim arrangements. Could you describe further what you envisage those to be? It might be a technical question, so I'm grateful for whoever would be able to answer that.

Tim, do you want to set out what those interim arrangements might look like, and then how long they'll be needed? Because there's a challenge over how long the temporary arrangements might be needed before the permanent border control infrastructure is in place.

Yes, thank you, Minister. As I say, we are still developing the plans for these, and the idea is that we will use these in the interim from the beginning of July, when the need for physical checks comes into force, until our BCPs are operational. For Holyhead, I think we would hope that would be certainly by quarter 1 of 2023, if not earlier. At south-west Wales, as the Minister set out, I think there’s a little bit more to go. So, that’s the period, certainly for Holyhead—six to nine months. Maybe a little bit longer in south-west Wales.

We are not doing this from scratch. There are models, particularly that have been used in Northern Ireland. You will recall they had to introduce these sorts of checks from the beginning of January of this year. So, they brought them in at very short notice, and on a fairly simple facilities basis, and we’re learning from them. I think, as I said earlier, also remember that, for many of the products, we’re looking at perhaps a physical-check rate of 1 per cent, so it’s not necessarily huge volumes.

We recognise we won’t be able to do everything at the BCP, and we will continue, as now, to do checks on live animals and high-risk plants at destination. And that will be similarly an issue in England, where I don’t think full live animal facilities will be available either. So, we will be looking to do primarily products of animal origin and low-risk plants at the ports with fairly limited structures—portakabins, temporary shelters, those sorts of things. Again, as I say, there are models that have been applied in Northern Ireland that we are looking to learn from, and that would be doing probably a more limited range of checks than you would do in the full BCP, but certainly a number of checks and, as I say, things like the high-risk materials would continue the level of checks that they are currently doing at destination. But, the practical stuff of, 'Where do you put these things? What space have you got available in the ports?' and those sorts of issues are the things we are working through at the moment to get that final design and to put them in place to be functional from 1 July.

Okay. Thank you. I had some further questions with regard to the location of the BCPs, physically, but I'm conscious of the time, so I'll hand back to you, Chair.

Thank you very much, indeed. Yes, I’m afraid time is marching on, so if I can ask everyone to be as succinct as possible now for the next 10 to 15 minutes. So, if I can bring Vikki Howells in at this stage. Vikki.

Thank you, Chair. Minister, I've got some questions on the heavy goods vehicle driver shortage, which obviously is a UK-wide issue, but it's an important issue for us here in Wales. So, what engagement has the Welsh Government had with the UK Government and the haulage and logistics sector regarding the shortage and how to combat it?

10:45

Officials in our transport division are in contact with both the Road Haulage Association and officials in the UK Government, and the challenge is what we can do to address the short and the medium-term problems. Before Brexit and before the pandemic, we knew that there was a shortage from the optimum level, but it's been exacerbated during the last period of time, and you've seen that in challenges about getting goods to and from places. But also, it follows on neatly from the previous conversation we've had; a number of people are choosing not to want to work in the UK who would otherwise have done, because there are extra delays already in getting to and from the UK. It's part of the reason why we have challenges with the land bridge between Ireland and the UK into continental Europe, with more journeys now going around the UK direct to France.

We're looking at what we can do, because the licensing isn't devolved, but what we are trying to do is look at how we can try to assist people to gain the training, to be able to go through and then achieve the licences to be able to address what is a shortage area in the economy. And there have been, understandably, price rises and competition between employers for HGV drivers, including an appeal for people to come back. But changes in immigration might help. You've seen there's been a short-term change in increasing driver hours, which is not something I am sanguine about, because there's a good reason why there's a limit on the hours drivers can drive. It's about the safety of those drivers and other people on and near the roads.

Thank you. In the Wales transport strategy, there's a freight and logistics plan referred to in that. Do you think that that will have any impact on trying to get some assistance in this crisis area?

This is an area that's led by the Deputy Minister for Climate Change. We are looking at what we can do in terms of how we help people with the skills element. So, personal learning accounts might help, ReAct funding can help as well in terms of assisting people with a wage subsidy for recruitment of people, but in particular how we help people to get the skills to do this. And not being able to have the right number of drivers, or an acceptable number of drivers to get goods around, has obvious consequences on the real economy as well as things like food and other goods supply as well.

I understand there's a significant number of people in Wales already holding a HGV licence who, for various reasons, have stepped out of the industry. What could the Welsh Government be doing to try and encourage those people back into the industry, which would obviously be the quickest route, rather than training up new drivers?

There is work on wanting to encourage people to come back. In fact, I was talking to Welsh Government officials who have got HGV licences who've already had a notice saying, 'Have you thought about coming back into the industry?' So, it's about how the package of training to reskill and to reactivate your licence is there. But part of the reason is that some people have moved on and got different jobs. Actually, there's a number of people—it's appropriate today—who are veterans who will have got a licence during their time working in and around the forces. And a lot of those people have moved on into different aspects of life, so they may not want to come back.

Also, part of the challenge is that the age profile of the industry was such that some people just retired, and other people didn't like the conditions, more broadly. Because, actually, we don't have lots of the infrastructure to make this an attractive job for some people. You know, the overnight showering and cleaning facilities aren't necessarily great for drivers in every part of the country, so some people—and even with the money that is now on offer—are simply not prepared to come back. The loss of some of the European pool of drivers has really exacerbated the issues we've got, and you understand why; it's not just a headline, 'You're not welcome', but it's also about do people really want to get stuck around a port trying to get out of the UK with the extra checks. Because, as you heard from our official in the previous round of questions, there are checks on paperwork. So, that is a very obvious non-tariff barrier, and it does mean people can expect to have to build in more time away from home when doing the job.

You mentioned facilities for drivers there, and I know that that's been identified by the Chartered Institute of Logistics and Transport as one of the factors that's contributed to the current shortage. So, could you outline for us—and this is my final question—what actions the Welsh Government is taking to improve the standard of lorry parking facilities, to increase their number, and also whether there are any plans to put in place a national inventory of lorry parking facilities too?

10:50

I think I really would be stepping over what my colleague and your friend Lee Waters is responsible for, but it is something that we're aware of and it's about us working with the industry and trying to have a conversation with the UK Government. Because, actually, this is a key challenge for all of us. When you think of the key importance of Holyhead as a port—the second largest roll-on, roll-off port within the UK—and you think about the facilities to look after driver welfare, not just there, but on the routes that exist across the UK, it would be something that would be helped if we had some UK-wide agreement on how to invest in those facilities. But I think, if I go beyond that, then I'll be stepping into an area where my colleague Lee Waters really does need to take a lead.

Thank you, Vikki. If I can ask Sarah Murphy to come in now. Sarah.

Thank you, Chair. We're going to have some questions about skills now, which, obviously, you've touched on quite a few times this morning, Minister. Just to kick start, really, with the young person's guarantee, could you tell us a bit more about how it's co-ordinated to ensure that the guarantee is operating successfully and fairly? 

The guarantee is the umbrella that sits over all of the things we do to try to make sure that young people have employment, education or training opportunities, including self-employment. Actually, the good news is that we've got many of the building blocks in place already. There are high numbers of people still in education in the 16 to 24 age group; there are a high number of people in training as well. What we're looking to do, though, is to try to make sure that we provide more tailored support for people, in trying to make sure we understand how we help people to achieve their own goals. That's why Careers Wales and Working Wales are so important. Working Wales will manage and report on the guarantee to me, and I'll be considering what is the most appropriate way to report to this committee and to the Senedd on the progress being made in the guarantee. But key additions to that are about how we're looking at work that we do and the work that is done in reserved functions. So, the Department for Work and Pensions and their programmes Kickstart and Restart—we need to the take account of those as well. There will be young people working through that too. And then how we're able to set out what we're doing to help get people ready for work, and that's why we've reformed Jobs Growth Wales into the new Jobs Growth Wales+ programme as well.

Brilliant. Thank you very much. This was discussed in the previous term, but the use of the shared and degree apprenticeships—it seemed like they were a really good way of combining working and studying. I was just wondering: have you had any conversations with the Higher Education Funding Council for Wales about the pilot schemes that they ran, and whether they plan on expanding those to other universities?

We're really interested in expanding these out. It comes back to our challenge on how we use our budgets and the new realities of the developing funding framework. Because, as I said before, with apprenticeships, about a third of the funding comes from former European funds. So, we then have a choice. We've got a pledge to want to enhance and expand the number of apprenticeships—and the degree and shared apprenticeships have really good outcomes, but they're more expensive to run than level 2 and level 3 qualifications and apprenticeships as well. So, that's one of the challenges that we have to understand in what we're going to be able to do with the funds that are available. Yes, my officials have had conversations about the outcomes. We think the outcomes are good, but our challenge will be what can we do within the funding envelope we have, and with the level of certainty we have as well, which is why the design of the levelling-up funds are really important for us, as well as the amount of the levelling-up funds as well.

Before you continue, Sarah, I know that Hefin just wants to, very, very quickly, come in on this particular issue. Hefin.

Yes, very quickly. Regarding the degree apprenticeships, I would welcome them continuing, but one of the issues was gender balance. They were very male dominated in the last round. Do you recognise that, and will you be able to address that as an issue?

We do recognise the differential take-up when it comes to young men and young women going into them, but also these are all-age apprenticeships as well. So, yes, it's a factor that we recognise. And it's part of what we're trying to do to encourage people to look at different careers, and not simply see them through traditional gender stereotypes of who goes into them. That's why there's lots of work about women in STEM, but it's a range of other areas—women in engineering as well, women in construction. These aren't careers that require—. These aren't necessarily jobs that are dirty, these aren't necessarily jobs that require lots of physical force and power for that individual. So, we're trying to dispel some of people's expectations by going in there, and you can expect that work to carry on with partners. But a lot of that takes place earlier on in education. Because, as you know, many of your life choices are made before you leave school, and your expectations about what you can do. And trying to unlearn that later on is possible, but it's more of a challenge. So, yes, I recognise the central point you make, Hefin.

10:55

Thank you. Just a couple of questions, then, quickly, on the Jobs Growth Wales+ scheme that you mentioned. Can you set out for us what makes this scheme distinctive from the legacy schemes that it's replacing and how it improves on them? 

The legacy Jobs Growth Wales programme was, essentially, a wage subsidy for younger people, and it had good outcomes in getting people opportunities. The support that employers had to take on young people, I think, was widely recognised and praised. What we're doing is trying to learn from what we did successfully with traineeships, which are aimed at younger people, and in particular people who haven't then necessarily come out of their normal education with high-level qualifications. So, we're trying to get them onto a path where they can get a qualification and get some experience into the world of work.

What Jobs Growth Wales+ will do is—it's got three strands. It's going to be aimed at people between the ages of 16 and 18, and it will be about how we engage those people to understand what they actually want to achieve and do. So, that intensive support around that. It's then about trying to see how that gets to be advanced. That could be about providing them with a pathway to gaining some qualifications or an apprenticeship, it could be about progression into employment at that point. But then, we also do have an employment strand. That is then about trying to help people to get into employment, and, again, there's a wage subsidy available for employers. So, it depends at what point that person is on their journey, but there's support in each of those strands to try to help them to get through and to be generally work-ready with confidence and a qualification if they need one, and then, crucially, to be able to enter an apprenticeship or the world of work. Duncan can give you more detail on some of the self-employment and employment areas, but I don't know, Chair, if you want to deal with that in follow-up, because I do appreciate that we are short on time. 

Yes, we are very short on time. I'm afraid time has beaten us, in fact. Of course, in order for Members and, indeed, our witnesses to observe a two-minute silence, I'm afraid we will have to leave it there. So, I just want to take this opportunity on behalf of the committee, Minister, to thank you and your officials for being with us this morning. It's been very useful as far as we are concerned. We will be sending you a transcript of today's proceedings just for accuracy, and if there are any issues, then please let us know, but thank you very much indeed for being with us this morning.

Now we'll take a short break, and we will resume at 11:10. Thank you.

Gohiriwyd y cyfarfod rhwng 10:57 a 11:13.

The meeting adjourned between 10:57 and 11:13.

11:10
4. Blaenoriaethau Pwyllgor yr Economi, Masnach a Materion Gwledig - Sefydliadau ffermio
4. Priorities for the Economy, Trade and Rural Affairs Committee - Farming organisations

Croeso yn ôl i gyfarfod Pwyllgor yr Economi, Masnach a Materion Gwledig. Fe symudwn ni nawr ymlaen i eitem 4 ar ein hagenda, sef sesiwn banel i drafod blaenoriaethau ar gyfer y sector bwyd-amaeth. Mae hyn yn dilyn ymlaen o ymgynghoriad y pwyllgor â rhanddeiliaid yn ystod yr haf, a chyn i Lywodraeth Cymru gyflwyno Bil amaethyddiaeth (Cymru) yn ngwanwyn y flwyddyn nesaf. Felly, a gaf i groesawu’r tystion i’r sesiwn yma? Ac os caf i ofyn iddyn nhw gyflwyno eu hunain i'r record, a gallwn wedyn symud yn syth i gwestiynau gan Aelodau, ac efallai y gallaf i ddechrau wrth ofyn i Mr Dunn i gyflwyno ei hunan.

Welcome back to the meeting of the Economy, Trade, and Rural Affairs Committee. We move on to item 4 on the agenda, namely a panel session to discuss the priorities for the agri-food sector. This follows on from the committee's consultation with stakeholders over the summer, and is in advance of the Welsh Government bringing forward an agriculture (Wales) Bill in spring next year. So, could I welcome the witnesses to the session? And, if I may, I'll ask them to introduce themselves for the record, and then we'll move on straight to questions from Members, and maybe I'll start by asking Mr Dunn to introduce himself.

Thank you, Chair. My name is George Dunn. I'm the chief executive of the Tenant Farmers Association of England and Wales.

Good morning, everyone. Bore da, pawb. I'm Dylan Morgan. I'm deputy director and head of policy for NFU Cymru.

11:15

Diolch, Cadeirydd. I'm Gareth Parry, and I'm the senior policy and communications officer for the Farmers Union of Wales. 

Bore da, pwyllgor. Gwyn Howells, prif weithredwr, Hybu Cig Cymru.

Good morning, committee. Gwyn Howells, chief executive, Meat Promotion Wales. 

Chief executive, Meat Promotion Wales.

Diolch yn fawr iawn i chi am y cyflwyniadau yna. Felly, fe symudwn ni nawr i gwestiynau, ac mae'r cwestiynau cyntaf gan Sam Kurtz. Sam.

Thank you very much for those introductions. We'll move now to questions now, and the first questions are from Sam Kurtz. 

Diolch, Cadeirydd. I'll just start by declaring an interest as a director of Wales YFC. Could I get your views, please, witnesses, on the proposed sustainable farming scheme? Gareth, could we start with yourself?

Thank you very much, Sam. Yes, as a union we believe that the sustainable farming scheme, moving forward, should focus on the three pillars of sustainability. So, not only should it focus on the environment, it should also focus on food production, but also on the culture and the rural communities, if you like. In particular, I'd like to emphasise the joint FUW and NFU Cymru document that we published back in 2018, actually, which we feel is just as relevant now, which sets out five priorities, namely stability, family farms, supporting rural communities and Welsh jobs, sustainable agriculture, and also rewarding agricultural outcomes. 

We do feel that, based on the proposals that are set out currently, the sustainable farming scheme will be focused entirely on public money for public good payments. That is only one leg of the stool, if you want to put it, in some aspects, and we need food production and also the rural communities and our culture to be the other two legs of that stool for everything to work together. If a scheme is focused entirely on environmental payments, then it won't necessarily deliver for the other two pillars of that sustainability, as I mentioned, and in a way we need all three to work in tune together in future for them all to work.

Diolch yn fawr. Dylan, allaf i ofyn i chi yr un cwestiwn, plîs?

Thanks a lot. Dylan, can I ask you the same question, please?

Yes, of course. From our point of view, obviously, we see an opportunity in Wales now to design and implement a policy made in Wales for the people of Wales and for Welsh farming. Really, from day one post Brexit we've set our policy based around a couple of clear principles: (1) we need to make sure that we underpin and secure the supply of high-quality affordable food for all in society going forward; we need to make sure farmers are fairly rewarded for the environmental goods they produce; we want to make sure that we target the active farmer; we want to provide support for farmers to be able to invest in the future to meet the challenges of the marketplace; and we want a proportionate regulatory regime and fair funding for Wales.

As Gareth has talked about—[Interruption.]—collectively we've got a policy based around three cornerstones of stability, the environment and productivity. And stability is really—. What we suggest we need is some measures to underpin food production, and a set of universal measures that all farmers can adhere to. The environment—we talk about having measures to support farmers who want to go above and beyond those elements that we've got within the universal stability payment, and productivity measures to support farmers to meet the aspirations that we have for net zero, as just one example.

We think that Welsh Government's proposals currently through 'Sustainable Farming and our Land' cover the environment, as Gareth has mentioned, because it talks very much about public goods being environmental goods. There are elements of the productivity element in there, but, sadly, we're lacking that stability element, that universal element. We believe, really, that it's only from a position of stability that farmers will be able to invest in the environment and productivity going forward. I think, given what we've seen in the last couple of years as well, with regards to COVID-19 and the importance of supply chains, given the situation we've got with trade deals and the change of circumstances that we've got now, that this is really a time for Welsh Government to possibly pause and rethink the direction of travel with regard to the sustainable farming scheme to make sure that we have those three elements of stability, environment and productivity. 

Diolch yn fawr, Dylan. George, can I come to you and ask the same question, please?

Yes, thank you very much. Without wanting to repeat what's already been said, I think it's right that we should be bringing all of these elements together into one place, so we have farming, the environment, culture all brought together into the same scheme. But we are in a moment where we need to realise we're moving away from a scheme where people have been supported by a direct payment to provide these things already, so it's not like they haven't been providing these things—these things have been provided—and the basic payment scheme has been the difference between profit and loss for many farm businesses who have been taking that. So, we need to make sure that we design this scheme very well, and I think it would do well for the Welsh Government just to look over the border into England to see how not to develop a scheme for the post-EU era, because it's vitally important that we get this right. 

And particularly for my sector, for the tenanted sector of agriculture, we don't want our members to be disenfranchised from taking part in this scheme, and many of our members will have short-term agreements, many of them will have restrictive terms on those agreements that prevent them from doing things beyond straight agriculture, and we want to make sure that, therefore, tenant farmers have access to this, and also other types of land occupation. So, common land, for example, is something that needs to be carefully thought through as this scheme is developed, because we will be looking for people to act collegiately from the word 'go' in terms of getting any money from this scheme. 

So, we are in favour of a move in this direction. It must be planned carefully. It must be done to ensure that those who aren't owner occupiers—tenanted farmers, common landholders—are not disenfranchised from taking part. 

11:20

Excellent, thank you. 

A Gwyn, allaf i ofyn yr un cwestiwn i chi, plîs? 

Could I ask the same question to you, Gwyn, please? 

Mi wnaf i ateb hwnna yn Gymraeg, os wyt ti eisiau. Rwy'n credu bod e'n bwysig iawn—. Mae hwn yn gymhleth iawn, yr ardal polisi yma, yn eithriadol o gymhleth, ac mae gofyn ein bod ni'n cael y polisi yn y diwedd yn hollol gywir ar gyfer nid yn unig y blynyddoedd nesaf, ond y cenedlaethau i ddod a'r degawdau i ddod. Felly, dwi ddim eisiau ailadrodd beth mae pawb wedi'i ddweud, achos dwi'n credu bod e'n bwysig aruthrol cael y cydbwysedd yn iawn rhwng y public goods—ac fe ddof nôl at hynny yn y munud—yr elfen economaidd, sef activity economaidd yng nghefn gwlad, a hefyd, wrth gwrs, yr elfen gymdeithasol. Mae hynny'n bwysig tu hwnt hefyd, ac mae cael y tri pheth yna'n iawn yn eithriadol iawn o bwysig. Dyw e ddim yn mynd i fod yn hawdd ond mae eisiau lot o gydweithio. 

Beth bydden ni hefyd yn dweud yw efallai fod eisiau inni ailedrych ar ddiffiniad nwyddau cyhoeddus neu public goods, achos mae e yn agored i interpretation gwahanol, achos mae pethau yn newid. Ac rŷm ni wedi gweld yn ddiweddar iawn elfen politicaidd y byd yn newid, a'r gallu i gynhyrchu bwyd yn newid, a'r gallu i fewnforio bwyd yn mynd i newid dros y blynyddoedd, a beth sydd orau i'r boblogaeth. Ac mae'n rhaid i ni gael y cydbwysedd yna'n iawn hefyd. 

Beth dŷn ni'n ei ddweud hefyd—a dwi'n siŵr ei fod e yn yr arfaeth—yw ein bod ni'n cael hefyd y polisi yma yn cydlynu ac yn asio mewn i beth bynnag fydd gweledigaeth Cymru ar gyfer y sector bwyd a diod yn fwy cyffredinol. Wrth gwrs, mae fy niddordeb i, mae'n bwysig i ddweud, yn nhermau cig oen a chig eidion a chig moch o Gymru, ond beth mae'r polisi yma yn ei olygu i'r diwydiant yn ehangach? Ac mae'r diwydiant yn ehangach yn bwysig iawn, wrth gwrs, i economi Cymru wledig a'r gynhaliaeth mae hynny yn ei rhoi i gymaint o—[Anghlywadwy.]—bobl. 

I'll answer in Welsh, if I may. I think it's very important—. This is a very complex issue, this policy area. It's exceptionally complex, and we need to get the policy entirely correct not just for the next year, but for the generations and decades to come. So, I don't want to repeat what others have said, because I think it is very important to strike the right balance between the public goods—and I'll return to that in a moment—the economic element, namely the economic activity in rural areas, and, of course, the social element. That's exceptionally important too, so getting those three things right is exceptionally important. It's not going to be easy, but we need the rural economy to work. 

I would also say that we need to look again at the definition of public goods, because it is very open to different interpretations, because things do change. And we have seen very recently the political element worldwide changing, and the ability to produce food changing, and the ability to import food is also going to change over the coming years, and what is best for the population at large. And we need to strike the right balance.  

What I would also say—and I'm sure that it is in the pipeline—is that we also get this policy aligning with whatever the vision of Wales will be for the food and drink sector more generally. My interest, of course, it's important to say, is with regard to beef, pork and lamb from Wales, but what does this policy mean for the wider industry? And the wider industry is, of course, very important to the economy of rural Wales, and the sustenance that that provides to so many people. 

Diolch yn fawr, Gwyn. Therefore, witnesses, is it a fair assumption if I say that the lack of food production in the drafts seen so far on the sustainable farming scheme is a cause for concern? Yes, go ahead. 

My view would be, when we had the 'Brexit and our land' consultation, there was much more of a feel of an integrated approach being taken, whereas we've moved to 'Sustainable Farming and our Land', and the food production element, the productivity element, seems to have got lost in that thinking, and that's a great sadness. And we need to bring that back in again, because it is absolutely central, as both FUW and NFU have said, to ensuring that we have a vibrant, sustainable farming industry that is providing both good, high-quality food, produced to high standards of environment and animal welfare, as well as providing those public benefits that we all need to see.

11:25

Fantastic, and would the other panellists agree with George on that point? Dylan.

Exactly. It's about extending the definition of public goods, as I think everyone on this call has already spoken about, and bringing in that definition of food security, rural vitality. Really, if you look at the definition of agriculture in the 1947 Act, it is the cultivation of land, it is the production of food, and that's what we need to be looking to do. So, it's extending those boundaries. I think, as I say, the definition of sustainable land management used by Welsh Government is too narrow. There are other definitions out there. There is one by the World Bank, for example, that talks about food security and rural vitality, and it's extending that to make sure we've got all of the goods and benefits that Welsh farming produces for society in Wales.

Excellent.

Gareth, fe welais i fod dy law di lan.

Gareth, I saw your hand was up.

Diolch, Sam. I totally agree with what Mr Dunn and Dylan Morgan have said there. We have seen in the past, with the common agricultural policy, where CAP reforms have focused entirely on food production, it hasn't necessarily worked for other aspects within the environment, and that is why things have changed over the past decades, to try and bring, for example, the RDP programme in, to try and encourage farmers to engage with schemes such as Glastir, to find that balance between food production and improving the environment, notwithstanding the fact that in the proposals set out in the 'Sustainable Farming and our Land' consultation, it is hoped, at least, that the actions to produce the public goods would indirectly support food production and result in improved farm efficiency and things like that, for example, and all we ask for, really, is that, as Dylan has referred to, that that definition of sustainable land management is extended so that goals in the well-being of future generations Act and so on are actually written on paper and are actual objectives rather than simply hopeful outcomes.

Diolch. Diolch yn fawr. Could I ask you all again, then, for your comments on the Welsh Government's plans for transition to the sustainable farming scheme—this is obviously expected to be introduced in 2025—and how the CAP-style payments should be phased out? Dylan.

Well, first of all, we are very clear that we shouldn't move to any new schemes until we can be sure that the replacement schemes can deliver at least the same as, or hopefully better than, what the current schemes deliver, so it's vitally important that we have impact assessments and modelling et cetera, and there is quite a bit of that going on with Welsh Government at the moment, and as we've talked about, to cover what we deliver for the environment—economically, socially and culturally—because if we get it wrong, as Gwyn has already talked about, it doesn't just impact on farming, but it impacts on the £7.5 billion food and farming industry. So, our idea for transition is very much about an evolution of the current policy and the schemes to the new schemes. I think we're fortunate in Wales that we've developed an excellent system through Rural Payments Wales Online—an excellent example of co-design, actually, where Government and industry have worked in partnership for their application process for the single application form. That currently collects a huge amount of data, which actually I don't think Government or anyone else actually properly values at the moment. So, I think what we can do is evolve that scheme into the new scheme, really, so we don't end up with a sort of cliff-edge period. 

I'm pleased that Welsh Government have recognised the need for time for change, and obviously committed to the BPS for next year and the year after, and hopefully 2024 as well, to give us that time to be able to evolve those current systems, because as George Dunn has highlighted, we don't have to look very far to see where people try and do things and things can go very, very wrong. So, really, that's evolving where we're at, using what we've got, using what we've done well, to come into the new policy going forward.

Thank you. George, could I ask you the same question?

We're delighted that the changes are not envisaged to be taking place until at least after 2024. Obviously, we mustn't waste the time that we now have to put in place the plans that are needed to put those new schemes in place. It's also really important that we just don't focus on reducing one payment and replacing it with another. We need to see this as a systems approach, so we need to look at this policy in respect of: what are we doing about the issues in supply chains? What are we doing about the issues in terms of the trading agreements that we've got, both within the domestic market and internationally? What about the climate change policy, how does that play through in terms of the things that we're bringing forward in the new scheme? Agricultural tenancy reform I'm sure we'll come onto later, and health and welfare. So, this shouldn't be seen as a siloed approach to simply doing away with BPS, which can be the focus of this type of discussion; this is about creating a new sustainable platform for agriculture and the rural environment for the long term, and therefore, it must take a systematic approach to it.

11:30

Yes, I would agree with both speakers before me. I'd just like to add, really, that, first of all, we shouldn't transition into a new scheme until we are certain that it will work, and we need to use the next two to three years now effectively in order to carry out economic and environmental impact assessments. 

One thing I would add, as well, on top of that, is that this is going to be, I would say, the largest change in agricultural policy in Wales since the UK joined the EU decades ago. So, we have one chance, if you like, to get this right given that the Welsh agriculture Bill now is going to shape agriculture in Wales for at least the next two to three decades or maybe even longer.

Lyfli, diolch. A Gwyn, y diwethaf i chi, plis.

Lovely, thanks. Gwyn, I'll turn to you last.

Thank you. I think it needs to be acknowledged that the Welsh Government hitherto has taken a very pragmatic and diligent approach to the change from the current support systems to what might be in the future. And I think that that diligence and pragmatic approach is crucially important in terms of the adaptation that the industry and supply chains need to do to understand how they might plan their businesses going forward and what options there are. Let's not forget that, certainly in our sector, sheep and beef, it is a long-term business, it's not a matter of something you can switch direction on in weeks or months; you measure change in years. And I think that the policy thus far, certainly in terms of introduction, has reflected the need for that approach. And let us, perhaps, also not forget that the complexity of getting the right support mechanism for the future is acknowledged by the Welsh Government, and I think that that's to be welcomed as we move forward.

The other thing I would add is certainly that this needs to be—Dylan used the word 'co-designed', but I think there needs to be a collegiate approach to designing and introducing any such scheme going forward. I think that will be noted and hopefully will take place over the months and years to come.

Thank you very much. Thank you, Sam. If I can now ask Sarah Murphy to come in with a set of questions—Sarah.

Thank you, Chair, and thank you, everyone, this morning. We've touched on an awful lot here and I just wanted to drill down a little bit more into what some of you have said about the UK framework for farm support. So, the Minister recently told us that a provisional framework has been agreed by the UK inter-ministerial group to enable effective co-ordination of future agricultural support schemes, and the UK framework will be finalised following scrutiny by each of the legislatures. So, I'd just like to ask each of you, please, what your views are on how the sustainable farming scheme could fit within the UK's internal markets, and any advantages and disadvantages that you see within the UK framework proposals. So, if I could come to you first, Gareth.

Yes, thank you very much. In terms of UK frameworks, we've long maintained that there needs to be some form of common framework, but in such a way that avoids a huge amount of divergence but also in such a way that respects devolution across the UK nations.

Of course, as has been referred to already, when it comes to agricultural policy, England are following a similar pattern, if you like, to what Welsh Government is proposing in terms of moving towards public goods payments, whereas, I believe that Scotland is a bit further behind in terms of maybe maintaining an element of baseline payments alongside environmental goods, if you like. So, there's already a slight divergence there and what we need to consider here really is that, notwithstanding the fact that Welsh producers are in competition with EU producers and also producers across the world, we're also, in some degree, in competition with producers internally in the UK as well. What we need to consider is 80 per cent [Correction: about 80 per cent] of farm incomes in Wales are derived from the current direct payments, and we've long maintained that there needs to be some form of baseline payment in a future scheme in order to underpin our food production in Wales, and also to enable us to be on a level playing field with the other UK nations, but also across the sea as well.

11:35

Thank you very much. Gwyn, can I come to you next, please?

I absolutely concur with lots of what Gareth said there in terms of UK frameworks. The parallel being, I guess we'll come on to it later on, the free trade agreements with other countries around the globe. We've mentioned the words 'common' and 'level playing field', and I think what we must do is obviously find a mechanism by which Governments in the UK achieve some sort of commonality, while respecting devolution in these particular areas. But, we don't either want to see internal market distortion, because there will be different support mechanisms in four countries as we see it now, and obviously that then has a bearing not only on competition within the internal market but also when we then go to either import products from elsewhere but certainly also there is an aspect in terms of how then do we use the same rules or same standards to export our products to overseas markets. I think there's a bit of an alignment to undertake there on those two issues. It probably is something that is work in progress, but I would hope that note is taken of it now to avoid problems in the years to come, because these things fester and they become bigger problems as the years go by.

Thank you. George, I could see you nodding along with a lot of that then. Can I bring you in next, please?

Yes, thanks, Sarah. I think I would also just want to say, without again wanting to repeat what's been said, obviously we've got to recognise that in a devolution situation within the UK we've got to accept that there will be differences between the way each bit of the United Kingdom wishes to operate—it's like a cultural policy. Previously, as members of the European Union, we've had a common position on a lot of this stuff, so these issues haven't arisen to date. But, obviously, one farm against another will have different competitive advantages in terms of where they are, what their topography is, what fixed equipment they've got, how supportive their landlord is, if it's a landlord-tenant situation or not. So, these differences already exist between farm businesses, so we need to just recognise and be grown up about the fact that different bits of the UK will want to emphasise different aspects of policy.

I would suggest that Welsh Government is probably slightly more supportive of the sorts of things that we in NFU and FUW want to be promoting than we might see in England at the moment. But I also think it's important that we have a good system for arbitrage within the four bits of the United Kingdom to deal with issues, and I think it's going to be vitally important particularly on those issues where you are looking at restrictive practices rather than issues where you are incentivising things within your own country.

So, restraints to trade, for example, across borders within the UK is something I think we need to be very cautious about, but I don't think we should necessarily try and get a complete common approach right across the four bits of the United Kingdom—recognise diversity, but have a good system for arbitrage so that each of the four bits of the United Kingdom are equal parties in that internal market agreement.

Thanks. I think, as everyone else has said, we are broadly supportive of the principle of the UK frameworks, but we're clear that they mustn't impact on devolution. So, we want these frameworks agreed by mutual consent, rather than any imposition. As has already been mentioned, it's hugely important that we have these because we don't want to destabilise the internal market given the amount of trade there is across the UK, but also we have to remember as well that we've got nearly 600 farmers who straddle the border, so we've got to be careful that we don't have vastly different rules for those as well. And if they are vitally important for many issues like pesticides, organics, fertiliser and feed regulations, we can't afford to have separate rules.

I think—. You mentioned where things could be improved, possibly. In terms of market monitoring groups that have been set up actually to monitor the market, I think those are important because they might be useful for us in terms of future policy around risk management activities and intervention and private storage aid. I think one area of concern that we've got is they're set up as Government groups with very little possibility for expert stakeholders, such as the people on this call, to be able to input.

I think the other one is around dispute resolution as well. What happens if there's a disagreement? It appears at the moment that you just pass it up the pipeline until you get to the inter-ministerial committee. So, I think something needs to be sorted out so that there is a clear dispute resolution process rather than just passing it up the line until you get to the top. Thank you.

11:40

Thank you so much, and that's the end of my questions. So, thank you, Chair.

Thank you, Sarah. If I can now bring in Hefin David. Hefin.

Can I direct my questions to George Dunn, please? I'd particularly like to ask whether the agriculture Bill White Paper proposals are appropriate specifically to tenant farming.

Thanks, Hefin, for that question. So, as I said in my remarks about the sustainable farming scheme, it is vitally important that whatever new arrangements are put in place are applicable whether you are a non-occupier, a tenant farmer or occupying under another land occupation system. And, certainly, we would want to see provisions that allow tenant farmers who may have short-term agreements, may have restrictive agreements, to be able to join on all the land that they can, rather than having to join the scheme on all the land that they farm, because there may be some of the land that they farm that they will not be able to have the eligibility criteria to join the scheme.

But, more widely, the forthcoming Bill does give the Welsh Government the opportunity to properly look at the system of agricultural tenancies as it operates within Wales, and I have to say that there has been a tendency over recent years, despite the fact that agricultural tenancies are a devolved matter, for the Welsh Government to slavishly follow what's been going on in England in terms of agricultural tenancies. So, we've had a recent consultation, which was very much the same as the consultation in England. We've had the Government response to the consultation, which was very much the same as the Government response in England. We've had debates about provisions within the Agriculture Bill in the UK, which we're having again with the Welsh Government in the Welsh context.

So, now is the time, from our perspective, given that, as we've said here, Gareth and Dylan have said, we are pursuing a massive agenda of change here, for the Welsh Government to properly think about the extent to which the agricultural tenancy system, which underpins much of agriculture in Wales, is fit for purpose for Wales, going forward with the Welsh solution. It's no longer good enough to simply cut and paste from English law, English regulation, English policy into the Welsh context. We need to have a proper review of whether farm tenancies in Wales are fit for purpose. And one example of this is in relation to farm business tenancies.

Farm business tenancies are the shortest agreements that we've got—on average, three and a bit years. Ninety per cent of farm business tenancies are let for five years or less. And they have the most restrictive terms available to them, which prevent tenants from maybe complying with statutory requirements, on things like pollution control for example, and also, the least able to diversify or get involved in agri-environment-type schemes. So, we think that there is a need to ensure that tenants occupying FBTs have longer terms and are able to find ways to deal with the restrictive terms that they've got in those agreements to comply with statute and to be involved in these new arrangements.

Obviously, a lot of the issues around length of term are related to the way in which landlords are taxed. I realise that's a reserved matter. But Welsh Government, I believe, could be doing much more to advocate for the sorts of tax changes we need to see at a UK level in order to incentivise longer term tenancies that fit with the 'Sustainable Farming and our Land' objectives.

So, I could talk for hours on this, but that's a brief overview of where we think Welsh Government should be going.

Yes, there's quite a lot to explore there. And there was something you said earlier that I was interested in about the relationship between tenant farmers and common land. Can you just expand on that, and how they interact with common land?

11:45

Okay. Again, we could talk for weeks on this, but I'll try to be very brief. So, there are people who have land as an occupier of that land and have the land at their disposal fully, so they have the ability to use the land as a tenant, where they've got a lease from a landlord. But sometimes they will also have rights of common grazing on additional land, or sometimes they may simply, with others, have a right of common over all the land that they farm, and that right merely gives them a right to graze. It doesn't even give them a right to tree plant or to hedge plant or to interfere with the soil in any way. And obviously, as we move towards 'Sustainable Farming and our Land', a sustainable farming scheme arrangement, people will be expected to do more on the land. You've got to look deep into the tenancy agreements to see whether individuals have the right to do what the schemes are asking them to do. And, certainly, on common land, you will find situations where people will only have the right to graze and, therefore, may not have the management control necessary to take part in the scheme that the Welsh Government want to promote.

Yes, thank you. And before I bring Vikki Howells in, I know Gareth Parry would like to just say a few words on this issue. Gareth.

Diolch yn fawr, Cadeirydd. Apologies, Hefin, I know that question was directed to Mr Dunn, but I just wanted to bring in another point from our perspective. We are aware currently that there are some complexities with regard to lengths of farm business tenancy agreements, for example, farmers wishing to engage with Glastir scheme agreements and the contract lengths of the Glastir contracts not working in tune, if you like, with the farm business tenancy agreements. So, there is an issue here. If we do go along with the public goods payments-type scheme, and the contracts may be for maybe 10-plus years—we're not sure yet—there may be an issue there that tenant farmers may not be able to access such a scheme because the tenancy agreements may only be for five years, whereas maybe the minimum contract period, for example, under the new scheme, may be 10 years. So, that might create a huge barrier for a huge number of tenant farmers, really. Thank you.

Okay. Thank you very much for that. If I can now ask Vikki Howells to come in. Vikki.

Thanks, Chair. Good morning. My first question is about horticulture, which only plays a small role in the Welsh farming industry currently, but the Minister recently told us that the potential to expand it is massive, and, certainly, if we are serious about tackling food miles and climate change, I would say that that should be a big part of it. So, is the Minister right in saying that the potential for horticulture is massive, and, if so, what kind of support would you be looking for the Welsh Government to provide in order to enhance that sector? And I think that question is probably best addressed to Gareth and Dylan.

Thank you, Vikki. I'll kick off, and then I'm sure Dylan will have more to say. I would say, in terms of horticulture, we mustn't forget that the majority of agricultural land in Wales is classified as less-favoured areas or severely disadvantaged areas, which is best suited for cattle and sheep grazing in the uplands, for example, particularly in mid and north Wales. Of course, there are areas of Wales, particularly south Wales, that may be more suited to horticulture production. And focusing more on new initiatives, particularly with the changing climate, Welsh Government have done a lot of work on the mapping of Wales and predicting how the land area in Wales, or the agricultural land, may change over the next 80 to 200 years [Correction: 100 years]. And they have found that there are particular areas that are relevant for horticulture now that may actually become better for grazing in the future, but then also, vice versa, some other areas that are being grazed now may become better suited for horticulture production.

The only thing I would add on that, really, is that, if there are incentives under the new scheme for farmers to switch from traditional cattle and sheep farming, for example, to maybe horticultural production, the correct support will be required so that they have the expertise and the support to do so, but also a financial incentive, given that I would assume that wherever horticulture is adopted in Wales, the yields and the difficulty of growing crops—fruit and veg, if you like—in Wales and the yields would be far from what you could expect in the ideal growing situations in places like England and on the continent. So, there would need to be an understanding there of, potentially, a much higher cost of production for maybe less yield.

11:50

And in terms of that—obviously, the soil is very different here in the upland areas and your comments around yield—what about hydroponics? Is that a viable way for us to be looking at increasing horticulture?

Yes, definitely, and it refers back to my point on new initiatives. There is a lot of work being done now in certain academic establishments, if you like, on the new ways of growing crops, and vertical farming is another example of that. It's finding the right locations, I feel, for that to be adopted and notwithstanding, as I mentioned at the start, how much of Wales is best suited for cattle and sheep grazing. Therefore, I think there is opportunity for some parts of Wales, but obviously it'll be a completely new way of farming for a lot of farmers.

And just finally on that, in terms of hydroponics and vertical farming, people who I've met, who have been going down that route, haven't necessarily been farmers themselves, so what's your view on that? Is this somewhere where farmers could and should diversify or would you see it as, in some way, being a challenge to traditional farming enterprises?

Yes, definitely, there's a lot more involved, particularly with new initiatives in terms of research and so on. The majority of sheep and beef farmers in Wales will have learnt from previous generations, if you like, and they'll continue on with what they know. There may be another option there for people who come from, you know, the research in terms of these new initiatives, who may want to adopt such farming practices, rather than necessarily the farmers that we know now. As I mentioned, I think, particularly for the near future at least, it would be more of a niche type of production in certain parts of Wales.

Yes, thanks Vikki. Yes, with regard to horticulture, we're proud to be able to represent a number of horticulture growers operating on a range of scales really. And what we've tried to do over the last few years is really promote that through our magazines and other communication avenues. And also, we've obviously got Puffin Produce in the constituency of the Cadeirydd really, which is a fantastic example of a company that works with a number of farmers and growers and supplies all of the major retailers. So, certainly there are opportunities for further growth on all scales.

But, as has already been mentioned, there are challenges with us as well with regard to the climate, the topography and the soil structures in Wales, which will always make it difficult for us to compete with some other parts of the UK and Europe. And there are quite a lot of significant costs associated with horticulture as well, and risks in terms of pests and diseases, particularly when you are in a damper, wetter climate that we are in the west of the country. And access to labour—you've probably seen a lot on the news really in terms of the horticulture sector—that's obviously a huge issue at the moment.

But I think there are opportunities as well, particularly maybe under glass, tying up with an industrially produced heat and carbon dioxide, for example. That could be a win-win really with regard to the climate and also in terms of horticulture production in Wales. I'm certainly aware of one major horticulture producer who's looking at that in Wales, but they are quite frustrated at the moment by the planning system and the ability to move forwards.

So, in terms of where Government can help, I think it's around planning and helping that type of enterprise to move forward. I think they can look at investment support. I think there might be opportunities for public procurement. But I think the message to anyone really in terms of considering horticulture is, first and foremost, to make sure, if you are looking into that, that you've got a market, because I think it needs to be market led rather than anything else.

That's really helpful. Thank you very much. Just some questions to finish from me on RDP spending: is there ongoing concern that the RDP will be underspent by the end of the programme? I think this is probably for Gareth and Dylan as well.

11:55
Gareth Parry 11:55:02