Y Pwyllgor Cyllid - Y Bumed Senedd
Finance Committee - Fifth Senedd15/11/2017
Aelodau'r Pwyllgor a oedd yn bresennol
Committee Members in Attendance
|David Rees AM|
|Jane Hutt AM||Yn dirprwyo ar ran Eluned Morgan|
|Substitute for Eluned Morgan|
|Mike Hedges AM|
|Neil Hamilton AM|
|Nick Ramsay AM|
|Simon Thomas AM||Cadeirydd y Pwyllgor|
|Steffan Lewis AM|
Y rhai eraill a oedd yn bresennol
Others in Attendance
|Anne Meikle||Cadeirydd y Gynghrair Datblygu Cynaliadwy (WWF Cymru)|
|Chair of the Sustainable Development Alliance (WWF Cymru)|
|Annie Smith||Y Gynghrair Datblygu Cynaliadwy (RSPB Cymru)|
|Sustainable Development Alliance (RSPB Cymru)|
|Hayley Richards||Y Gynghrair Datblygu Cynaliadwy (Oxfam Cymru)|
|Sustainable Development Alliance (Oxfam Cymru)|
|Huw Vaughan Thomas||Archwilydd Cyffredinol Cymru, Swyddfa Archwilio Cymru|
|Auditor General for Wales, Wales Audit Office|
|Isobel Everett||Cadeirydd, Swyddfa Archwilio Cymru|
|Chair, Wales Audit Office|
|Kevin Thomas||Cyfarwyddwr Gwasanaethau Corfforaethol Swyddfa Archwilio Cymru, Swyddfa Archwilio Cymru|
|Director of Corporate Services, Wales Audit Office|
|Steve O'Donoghue||Cyfarwyddwr Cyllid, Swyddfa Archwilio Cymru|
|Director of Finance, Wales Audit Office|
Swyddogion y Senedd a oedd yn bresennol
Senedd Officials in Attendance
|Ben Harris||Cynghorydd Cyfreithiol|
|Catherine Hunt||Ail Glerc|
|Georgina Owen||Dirprwy Glerc|
|Leanne Hatcher||Ail Glerc|
Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle y 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.
Dechreuodd y cyfarfod am 09:03.
The meeting began at 09:03.
Bore da, felly, a chroeso i gyfarfod o'r Pwyllgor Cyllid. Os caf i, yn y lle cyntaf, groesawu Jane Hutt fel eilydd, ar hyn o bryd, i Eluned Morgan. Rŷm ni'n ddiolchgar i Eluned am ei gwaith hi ar y pwyllgor, ac yn croesawu Jane fel dirprwy am heddiw, ond efallai, gan ddibynnu ar benderfyniad y Cynulliad, fel aelod llawn o'r pwyllgor maes o law. Croeso mawr i Jane.
Atgoffaf bawb fod offer cyfieithu. Mae'n gyfarfod dwyieithog ac mae yna offer cyfieithu—sianel 1 ar gyfer y cyfieithu a sianel 0 ar gyfer jest sain gwreiddiol. Ac atgoffaf Aelodau jest i dawelu eu ffonau ac ati.
Good morning, and welcome to this meeting of the Finance Committee. If I may, initially, welcome Jane Hutt, who is here as a substitute currently for Eluned Morgan. We're very grateful to Eluned for her work on the committee, and we welcome Jane who is here as a substitute today, but who perhaps, depending on the decision of the Assembly, will be joining us as a full member soon. So, a warm welcome to Jane.
May I remind everyone that there is translation equipment? This is a bilingual meeting and there's translation on channel 1 and amplification on channel 0. And I remind Members to please put their phones and everything else on silent.
Yn gyntaf oll, a gaf i ofyn i Aelodau hefyd nodi'r ddau bapur sydd gennym, sef llythyr gan Ombwdsmon Gwasanaethau Cyhoeddus Cymru a chofnodion y cyfarfod diwethaf? Iawn? Ocê.
First of all, could I ask Members to note the two papers, which is a letter that we have from the Public Services Ombudsman for Wales and the minutes of the previous meeting? Okay.
A gaf i droi at y Cynghrair Datblygu Cynaliadwy ar gyfer y dystiolaeth, gan eich croesawu chi yma? Cyn i ni ddechrau ar y dystiolaeth, wrth gwrs, a gaf i jest nodi, ar ran y pwyllgor, ein cydymdeimladau i deulu a chyfeillion Carl Sargeant? Rŷm ni'n mynd i drafod un o'r deddfwriaethau yr aeth ef drwyddo â hi, fel Gweinidog, wrth gwrs, sef Deddf Llesiant Cenedlaethau'r Dyfodol (Cymru) 2015, ac mae'n siŵr bod pob un o'r pwyllgor am ymuno gyda mi yn dymuno'n cydymdeimladau i'r teulu ac i'r rhai a oedd yn cydweithio gyda Carl Sargeant, gan gynnwys chithau, rwy'n gwybod, fel tystion. Rwy'n ddiolchgar i chi am aildrefnu'r sesiwn yma fel yr oeddem ni, wrth gwrs, yn gorfod ei wneud yn sgil y digwyddiadau trist yr wythnos diwethaf. Diolch yn fawr iawn i chi.
Os caf i ddechrau, felly, os ŷch chi'n hapus i fwrw ymlaen, gyda'r dystiolaeth, gan ofyn i chi—. Dyma'r ddeddf, wrth gwrs, sef Deddf Llesiant Cenedlaethau'r Dyfodol (Cymru) 2015, a oedd i fod i newid y ffordd yr oedd y Llywodraeth yn gwneud ei gwaith a'i gweithdrefnau ac ati. Y tro diwethaf, y llynedd, wrth edrych ar y gyllideb, roedd yn deg i ddweud ei bod yn rhy fuan, o bosib, i weld unrhyw beth. Erbyn hyn, rydych chi wedi cael cyfle—blwyddyn gron o gyllideb, ac ati. Yn eich tyb chi, a oes yna ôl o'r ddeddf ar y gyllideb bresennol?
Therefore, I'll turn to the Sustainable Development Alliance for their evidence, welcoming you here. Now, before we begin on the evidence, of course, may I just note, on behalf of the committee, our condolences to the friends and family of Carl Sargeant? We will be talking about one of the pieces of legislation that he passed through the Assembly, which is the Well-being of Future Generations (Wales) Act 2015, and I'm sure that each member of the committee would like to join me in expressing our condolences to the family and to Carl Sargeant's colleagues, including you, I know, as our witnesses. We're very grateful to you for rearranging this session, as we had to, as a result of the sad events of last week. So, thank you very much.
If I may begin, therefore, if you're happy for us to move on, with the evidence, and I'll begin by asking you—. This act, the Well-being of Future Generations (Wales) Act 2015, was the one that was meant to change the way that the Government carried out its work and its procedures. Last time—last year—when we looked at the budget, it was fair to say that it was perhaps too soon for us to see anything visible, but by now, there has been a whole year of budgeting. So, in your view, do we see the mark of the Act on the current budget?
Well, I think that there is some impact. There's certainly some clear attempts in the narrative to link some of the activities and the spend more clearly back to the Act, but I think what we should remember is that, actually, the 'Prosperity for All' strategy contains the objectives that the Act requires to deliver against the goals. What they've said clearly about the budget is that, over time, it will be realigned to align to 'Prosperity for All', so not directly to the goals in the Act. So, it's a slightly convoluted way around. I guess we would expect by now some of the clarity on what's been reframed or reshaped to meet the new requirements, whether they've reviewed and updated some of the decision-making tools, which, again, those of you who were here last year, we did talk a bit about: all the business case models and how they were being applied and had they been updated to take account of the new duties, had they applied the sustainable development principle properly, and has that been explained in the budget narrative.
I guess, from our perspective, we have looked across. So, as WWF now, we commissioned a piece of work to look across all the Government departments and how they were developing their strategies and what had been the outcome of that over the first 15 months, and we've subsequently looked at the budget as to how it was linking into those. I think it's one of those things where it's a bit slow and it's a bit inconsistent in its implementation. The same is true through the budget, I think. There are some examples, for example the franchise around Wales and border, where clearly what they'd been asked to tender for has looked at maximising well-being across everything. And then there are other millions and millions of pounds of public expenditure in things like city deals or broadband, where there is no mention of it at all, and there doesn't seem to have been any review or reshaping of the objectives to say, 'Are they appropriate to meet the Act?' So, a bit patchy, I think, is the way to say it, and looking at whether there is good practice happening and why is there less good practice not happening, I think, is an important thing to scrutinise, really, and for the Government to look at themselves, I think.
Just to ask you on that, if I may, you mentioned 'Prosperity for All'. Is that a document or a strategy that clarified how the Government would be using the Act, or has its effect been to cloud how the Government is using the Act, and particularly in relation to the budget, obviously?
Well, I think it's difficult. From my perspective, and I think from the perspective of the alliance, what we're concerned about, I think, is that 'Prosperity for All' doesn't do the key thing, which is maximising the delivery of all the goals because it has gaps in it. So, even in its own assessment, it refers, for example, to the state of the natural environment: that we don't have one single resilient ecosystem in Wales, that biodiversity is still in decline. They put that down as a major problem, but there are no objectives to do anything about that. There's no objective to restore that biodiversity. I think, therefore, to us, how are you making sure you're maximising the delivery of all the goals? Because that's the resilient Wales goal, and it's not apparent what is going to go into that and how that's going to be met. There are some good things in there, because there are some of the bits in—what is it called? I've forgotten what it's called now—the prosperous part, which are about tackling some of the drivers of biodiversity loss in the way businesses and things operate, but then there's no direct, 'How are we going to do some restoration?' and things. So, I think, from our perspective, there are some gaps in there. It’s quite worrying if the budget, over time, is being realigned to those objectives and those objectives don’t quite line up to the goals.
Steffan Lewis, on this point.
I was hoping just to get your thoughts on whether you think that the gaps and inconsistencies that are quite evident—and you’ve outlined some of them in your opening remarks—are a reflection of the fact that the Act is just basically not up to scratch, not fit for purpose, and it was well-meaning and well-intended, but actually, when Government goes about its business of bringing forward budgets and policy initiatives, the Act is pretty much a box-ticking exercise in the background.
I think that it’s a long process to make sure it’s not. I think the biggest weakness of the Act, which we argued long and hard about when it was going through—and in fact had many an interesting discussion with Carl Sargeant on the subject—was that it has no teeth. It doesn’t have any sanction for when things are not done, which means it’s quite hard to push through the culture change that is required of all public bodies. Hence, the only stick, in a sense, and support, is from the future generations commissioner, who you will be talking to later.
We will be having evidence from her, yes.
So, I think that’s a genuine weakness of the Act, and therefore it takes a lot of scrutiny and a lot of pushing and a lot of drive from within Government, and it needs its own leaders, whether that’s in Cabinet or in the civil service, to actually make that culture change happen, because the Act itself doesn’t have any kind of sanctions around that either.
Could I just come in on that point?
I mean, in terms of a framework for policy coherence, the Act is way ahead of the game in terms of other devolved nations, for example, who are struggling with policy coherence. If the Act is implemented effectively, then it gives us a massive opportunity to bring different aspects of policy together to deliver on multiple goals. So, I think, from that perspective, it’s way ahead of the game, and it is the responsibility of all of us, of Cabinet Secretaries, of Ministers, of individuals, of committee members, to use every opportunity that we have to drive this Act through so that bad habits become changed and that a different way of thinking is embedded within the way that we work. So, we’ve got this amazing framework, and it’s up to all of us to make sure that we can implement it effectively.
We’ll look at some of the aspects in questions this morning of how that’s done, now, so I’ll turn, if I may, to Jane Hutt.
Yes, it’s interesting to hear you say that there’s been some positive impact, because obviously it’s a real task, a challenge to the Welsh Government, to ensure that you are, we are, they are—it’s very hard taking my ministerial hat off—
It may take a little time.
I’m taking it off now. But I think it is important to understand how this can be addressed in terms of decision making and planning more generally, and it would be helpful to have some feedback from you as to how you think we could take that forward.
So, I refer to this from WWF’s point of view. As I say, we’ve done a report on where we think the good practice and the bits that aren’t going so well are. We’re currently in discussions with some of the civil servants, and we will be having some workshops with them in January to discuss some of the findings and some of the recommendations about how to take that forward.
But I think one of our concerns is that, when we looked across the piece, that policy coherence isn’t there yet, and that’s quite a big thing to do, but you can see in quite a lot of the strategies where that’s attempting to start to happen, I guess. But what it does look like is that there is not a clear programme from within Government—and I mean this more at the civil service, departmental level—to ensure that everyone knows what they’re doing, has a programme of review and change of things like, ‘What are the potential barriers to implementing this Act?’ So, for example, we talked before about some of the business case decision-making tools. I don’t know if they’re a barrier or not, but it’s quite clear that they have not been reviewed for their consistency, so what we were saying was, ‘Well, is there no programme?’ Is there no programme to systematically go through what’s happening in those departments and work out where the biggest areas of impact are, what we should change most and what are the processes or the tools? There might be inconsistent policies across different areas. Where are the barriers to actually making this change happen? I think that's the bit that we are trying to focus on now, saying, 'If you want to make this change happen, you have to have a programme and it has to be driven from the top.' I know the Permanent Secretary's now appointed a deputy director to lead that work, which is good.
Well, obviously, you're very influential in terms of highlighting what you suggest could be failures, not just in terms of planning and implementation of the Act but decision making, so that's very important for us in terms of moving this forward. But, clearly, this is also about budget setting so it would be helpful as well to know how the Welsh Government has engaged with you—third sector and sustainable development organisations—in preparing for this budget and what you think the involvement of organisations should be as budget preparation commences and then is seen through scrutiny.
I'll start this and then I'm going to give it to Hayley. As part of the Wales Council for Voluntary Action, we have biannual meetings with Ministers, as you know. So, we've had two with the Cabinet Secretary, Mark Drakeford. Part of the work plan there is looking at participatory budgeting and preventative budgeting and how the sector can be involved. I know there's definitely been one meeting—there may have been another that I did not go to—and there have been some problems identified. So, we've had two cabinet meetings and I'm not sure how far that's got in terms of participation et cetera—
It's about how—. How has that influenced, do you feel—? Has that fed into the budget preparation?
I don't know, and I can't see it. We've certainly not, as WWF, fed into any part of this process. It's one of the things that we were concerned about—where is the co-production? Also, I know you wanted to talk about the transparency of this, so it's—. There's a lot we don't know, I think is the best way to put it.
Yes. I think, in terms of Oxfam, we provide the secretariat for the Welsh Refugee Coalition so, independently of any request from Government, we wrote to I think it was the equalities committee, asking what would they do to ensure that the budget across all departments had spend in there to deliver on the recommendations of the 'I used to be someone' inquiry. So, we've done that independently. We haven't as yet had a response from that committee, and we don't know whether the budget lines—. You can't tell from the budget whether the different departmental spends include an element of spend to make sure that those recommendations are delivered.
I think from a transparency point of view, we are a team here of fairly well-educated people, experts in some areas of policy, and trying to navigate your way through the budget is very, very difficult. The engagement that we've had has mainly been through this committee, to be fair, responding to the draft budget consultation and sitting here today. I think that, for a layperson, I would say they've got minimal ability to understand or influence this budget at all. There is a detail in the budget that says there will be engagement sessions, not only on participatory budgeting but on the budget as a whole, which would be great, but I'm not privy to whether those have taken place or not or where they took place or how we could encourage people living in communities to come forward and attend those sessions. So, I think there's a lot more to be done in terms of reducing the jargon, bringing the budget down so that it can be better understood by a person on the street so that, when it comes to participatory budgeting, they have the skills and knowledge to equip them to make informed decisions. At the moment, I don't think we're quite there yet.
Sounds like a budget tour, Jane—
Right, yes. I'll go back to—. I'll take that hat off. [Laughter.]
Diolch, Cadeirydd. I want to go on to the preventative spend in a minute, but I want to just follow on from Steffan Lewis's question regarding the well-being Act. You highlighted that it's very good because it's overarching and brings in the policy issues together. You mentioned culture change. I just want to ask a simple question: do you think this budget starts the process of that culture change because that's going to be crucial to this?
Does it start the process of culture change? This goes back to—. It would be very hard to tell from just reading what's in the budget whether that's the case. It's clear that there is some thinking that is trying to drive that change. For example—we talked about this last year and this may be something that will happen over time but, again, I don't know the timescale—all the budget headings are still in the traditional main expenditure groups. They're not aligned to, say, 'Prosperity for All' and its four headings or to the goals. So, going back to, 'How is there coherence?', well, you're asking four budgets—in effect, each ministerial department, in that sense—to contribute to all the goals, but the budgets are still in silos and it's very hard to know if there's anything in the health budget that is contributing to education or environment or vice versa. The way it's constructed doesn't help you know whether this is being brought together to more strategic delivery, I guess. Maybe that's a plan that's in place but it's not obvious, from this, how that's happening.
There's nothing obvious that you see it doing that, but there's nothing obvious either that it's not doing that. So, at the moment it's just wait and see if it works or not.
It's in its traditional format, so it hasn't yet got there. What I meant about the narrative earlier is that there are some attempts in some of the narrative to try and explain where the change is coming or whatever. But the construction of the thing is still in its traditional format.
From a policy coherence perspective, it would be very difficult to determine, from the way the budget is set out, how much spend there is on anti-poverty measures, for example, how much spend there is on climate change and carbon reduction, how much spend there is on Wales being a globally responsible nation. You can't determine from the way the budget is laid out what the total spend is or, presumably, what the impact will be of that spend under cross-cutting themes like that.
Well, it's something we'll keep an eye on in that case. Going to the situation—. In your written evidence, you actually provided four overarching areas that you thought should be prioritised in the budget. The Welsh Government seems to have come to an agreement with the commissioner on three areas, which are participatory budgeting, decarbonisation and procurement. Do you think your four areas and those three areas match one another? Is there something you think the Welsh Government is missing? How are they matching, how are they working together, in your view?
Well, I think the decarbonisation one obviously matches up, although, again, as Hayley says, it's not entirely clear what's being spent on what exactly and what's the outcome.
So, in one sense, there is a problem with the narrative explaining certain things but you're not seeing the evidence within the budget where that narrative is being met.
So, for example, it quite clearly says that some of the prioritisation of the budget has been done with a view to the decarbonisation potential, but that's it. That is the sentence. So, there is nothing else that tells you how much savings you are expecting that to make for what level of spend or from which departments. So, although it's there in some ways, what we haven't got—just on that decarbonisation point, as I'm on it—. We talked last year and I know you made a recommendation to the Minister about doing a carbon impact assessment of the budget overall. Because, of course, I'm sure individual Ministers or Cabinet Secretaries are looking at how they can make savings in their department, and I'm sure there are bits of this spend that will—. Spend on improving public transport, in some ways, should be reducing carbon emissions. But you don't know, going back to policy coherence, whether there are other things in here that are increasing emissions. So, you can't see overall how this is helping to get towards the initial target of 40 per cent reduction by 2020 and beyond that. It does say it will align in future to the carbon budgets from the Environment (Wales) Act 2016, but at the moment—
Which is a separate policy in production.
Which is, yes—but that has not yet come. That's in another year's time. So, there is a process going forward on the decarbonisation. Procurement—that's definitely yours.
We see procurement as one of the key areas of work that can have a significant impact across a whole range of well-being goals, particularly on the global responsibility goal. So, there should be a planned switch for all Government contracts to sustainable products. At the moment, what we've got is kind of a good policy ambition but there's no monitoring framework to determine, for example, how many public sector bodies are buying fair trade products, how many are buying Marine Stewardship Council fish, how many are buying Forest Stewardship Council timber. There is no monitoring framework to determine or measure how successful that has been. So, it's a good policy ambition but there's no scrutiny to see whether it's being delivered or not.
Similarly, with the code of conduct for ethical employment, that's guidance only, but we don't know what impact that's having, how many public bodies are using that guidance, and to what effect. There's also more scope for the community benefits toolkit, which has been used really effectively to create training and employment for people in local communities that are suffering from deprivation. So, there's opportunity to embed the Well-being of Future
Generations (Wales) Act 2015 within that toolkit to help it deliver more goals potentially. That's something that the Wales Audit Office has also flagged up.
So, this budget has the potential to do that, but you haven't yet seen how that potential will be realised and measured.
Okay, that's fair enough.
Procurement is really important, because going back to the other things that were on our list about transitioning to a low carbon, resource efficient economy—well, you have a tool there in the sense of how you spend public money to reward and support companies in Wales or elsewhere who are doing exactly that: becoming more resource efficient, becoming more sustainable in their production methods. And it's a very important tool to reward those who try to make that transition, because, obviously, usually it's quite expensive et cetera, and the need to support the skills and knowledge of those businesses to be able to compete for those sorts of contracts, because I know, from when we moved into our office and had it refitted, there was only one supplier in south Wales who was certified to fit out an office with FSC and sustainably produced products. There was only one. So, if you want a Welsh supplier, you're going to have to work harder to help them become appropriately skilled.
You mentioned that everything is still in silos, and I understand that, and that the budget is presented in a silo in a sense, and there's the critical issue of cultural change. When would your view be that you would expect, perhaps, a change in that presentation? Because it does take time for cultural change. When would you expect to see something far more realistic to deliver on the well-being, and therefore you can see how it fits in, and the silos start disappearing?
Yes, well, I don't think any of us would say that we are experts in how you do budgeting. Perhaps you should turn to the lady on your side, who might know better than me. I genuinely don't know what is a realistic expectation, but I think it's a realistic question to be asking the Cabinet Secretary about how long he thinks it's going to take him to do that and what are the plans to do that, because at the moment we don't know. It talks about realignment but there isn't a time frame for that realignment. I don't know what's realistic and I'm sure there are questions you could probe as to what his plans are.
I'm quite sure we'll have the opportunity.
We will have that opportunity.
One final question. You talked about the preventative agenda. Are you seeing this budget delivering on the preventative agenda? Because we often hear about the preventative agenda within the health scenarios—how we prevent people going into hospital, how we prevent people from needing the secondary care—but as you rightly point out in your evidence, the preventative agenda is wider than that—it's also how we ensure the well-being of people is delivered. So, does this budget respond to the preventative agenda, understanding that the Cabinet Secretary is still yet to perhaps define what preventative is?
I was in a meeting yesterday where I discovered it's even more horrific than you think, because I was with other people from the Wales Council for Voluntary Action and they were talking about the fact that several pieces of legislation passed by this Assembly have contradictory definitions of 'preventative' in them in that context, which probably is one of the barriers to actually making it happen. So, that's an ongoing debate that the third sector is definitely part of, which is good.
There is actually a sort of—I was trying to remember where it is—but there is a good example actually in the line about the health stuff, about being very clear what their aim is, and what they're hoping the impact will be on future generations. And it's actually a good example of a piece of very simple, very clear narrative about what is the intention in terms of delivering against that part of the sustainable development principle; the whole idea of prevention is in there. That's not so clear in most of the other bits of the narrative. It comes in places, so there are some certainly in the environment stuff about flood prevention and also trying to adapt to climate change and prevent future damage. So, there are clearly areas within each portfolio, I suspect, where they have thought that through to some extent. But predominantly, you do still see that in certainly health and social care, whether that's in—. And the whole of 'Prosperity for All' sort of tells you that, because it's talking about the life chances of somebody born now and their whole life. So, I'm sure from their perspective the explanation in there is about looking at the whole thing and preventing future harm.
I think one of my concerns about this—this goes back to the sustainable development principle—is that the sustainable development principle is about balancing the interests of future generations, and that 'Prosperity for All' for me is very much about people who are born now. I think some of the concern we have is around the reduction of the principle to just talking about it as if it's ways of working, so people think about, 'Oh, we're planning for the long term'. The lifetime of one person is long term—that's very long term—so you can't deny that that's a good thing, but that's at the expense of thinking, 'And I need to balance that with the interests of generations not yet born', and I do wonder if some of what we see as the lack of priorities—so, some of the environmental issues—is related to that. But a lot of what you're trying to do about the management of natural resources takes quite a long time to come to fruition, and might be for the benefit of somebody's grandchildren, at the very best, rather than currently. And therefore, with some of the things I was talking about around the business mechanisms—whether that's even the Treasury's discounting rate—you're discounting future benefits. Is that actually what you want to do as a policy decision if you're trying to give a bit more, or do you want to change the amount of discount from the level it is now to a little less to balance that up? So, it's a bit of a—
Are you having discussions with the Welsh Government as to what you see as the definition of 'preventative'?
As I say, there is a process through the WCVA where the third sector is doing that, and we have inputted a little bit from our area of expertise, but that's definitely for other people in the sector who are more engaged in that.
Okay. Nick Ramsay.
Thanks, Chair. I'm resisting the urge to ask Jane Hutt opposite me the question, so I will resolutely ask Anne. [Laughter.] It builds on exactly from what you were just saying, actually. How do you factor in future generations into current budgets? Each year when we've taken evidence from Jane and other Ministers, we talk about the budget factoring in not just current time but also next year, 10 years' time, 100 years down the line. But are we asking too much of Government? I mean, that's an incredibly difficult thing to do, and is it measurable? It's certainly not measurable by us, is it, because we don't know what's going to happen in the twenty-second century. So, is it possible to take into account these things as the future generations Act wants us to do?
Yes, I think it is. I absolutely agree with you that it's very difficult, and that's going back to the role of the commissioner and the role of civil service and others in terms of supporting that process. That is not an easy set of challenges to balance, and you need good data. There is data in the future trends report. There is very good data in the state of natural resources report, and the trends of what is happening over time, and what's likely to happen with increased population or whatever. And the whole point of that future trends report was a very important part of the future generations Act because it's saying that you actually need to help decision makers in all public bodies come up with better ways of understanding what might be the implications of what's happening. And I think that's again back to why did we talk about things like carbon impact assessment, but also impacts on, say, natural resources, because they are long-term impacts, and they're long-term—. You can model what is going to happen to these longer term. It doesn't mean you can fix the problem now, but you can actually look at what is the likely impact of this.
My concern, for example, is that the strategic impact assessment of this simply doesn't do that. It does it no more this year than it did it last year. It doesn't attempt to do it, as far as I can see. There is some general discussion about how the various bits of spend might benefit different goals, but there's not what I would call a sort of evidence base of what actually is the likely impact of this, overall or in individual bits. And it brings me back to that sustainable development principle, because one of the key things in there is that it said that integration is one of the key ways of working for that, and people are misinterpreting integration, I think, quite a lot. They take that to mean policy coherence. Integration is very specific in there. It is: what is the impact of your objective or your activity on each of the goals? So, you should be doing some kind of assessment of 'What is it I'm doing here? What am I spending here? What is the impact on each of those goals?' That's what the principle asks for, but I think most of the time—. And you can see it: there are certain bits in this budget where you can see that they've taken that approach, such as some of the bits of anti-poverty, actually, where they've tried to integrate and look across the piece about how their spend might benefit all sorts of goals. But there are also bits where, really, it's been used instead of collaboration between public services, which is a good thing, and it's another principle, but it's not integration.
Could I just add—? Going back to the 'resilient Wales' goal, it makes clear that we need a biodiverse natural environment with healthy functioning ecosystems to support our wider resilience—so, economic and social and ecological resilience—and that's supported by additional duties in the environment Act. 'Prosperity for All', as Anne said, doesn't have a clear objective related to that. It does recognise in various places the importance of our natural resources to the economy, and the importance of nature and access to green spaces to health, for example, and some of that, certainly in the health section, as Anne said, is reflected in the budget narrative. But what's not clear is how that is recognised in terms of investment into the environment, in order that we benefit now, and in future generations, from having access to that. So, we're seeing the environment main expenditure group decline year on year, notwithstanding the transferred money from the waste budget. But that's at a time when the scale of investment needed is increasing, and there's a lot of emphasis—. We're seeing, as third sector bodies, that the grant money available to us is decreasing, and also the pressure on us to demonstrate how our work is integrating across various goals and contributing to different areas in order to draw down any of that money. But if the integration isn't happening via other departments, then the money's just not coming in to investing in the environment.
Do you think that when the budget overall is squeezed, as has happened over the last few years, then the environment is one of the first things to be squeezed within that, and also longer-term objectives? It's like in a household, isn't it? If you haven't got any money, then you don't think about what you're going to do next year, you think about how you're going to get your heating on tomorrow, or where your food's going to come from. So, it's all well and good—you've got your natural cycle of the economy, your boom and your bust, which I know we've tried to get rid of over the years, but it's still there. And, so, when the economy is booming, great, we can think about all of these things, but as soon as you start going into the 'bust' part of the cycle, then it goes out of the window. So, I'm just wondering, when we start to turn a corner economically, I think probably all of this will come back on the agenda and be much easier to do, but at this point in time—how do you make sure that, over time, you've got a consistent approach to future generations and the environment?
I guess my answer to that would be that that is very short term and it's not going to get us to a place where Wales is prosperous. I think what I would commend about 'Prosperity for All', and some of the other things, is that at least they recognise, going back to those goals, that the future is in a low-carbon, resource-efficient economy and that there needs to be a lot of support in Wales to those businesses to develop in that way, because I think that if you rely on those cycles and what's happened before, the longer you go on, the less not just Wales's natural resources—. But the problem here is that you've got to see this as a global problem. Most of the resources that are used in Wales are not from Wales—they're from somewhere else and there is increasing competition for those globally from other businesses, from growing populations and from whatever; they're going to become much more expensive. So, if we don't do something that cares for the sustainability, if you like, of our supply chains across the world, going back to procurement and supporting businesses to be much more resource-efficient, then we're not going to come out of 'bust'. So, for me, that isn't the way to see where is a prosperous future for Wales. If you don't decouple, for example, that economic growth, as we've been managing to do over the last few years, from growing carbon emissions, we're not actually going to end up in a place where we are all prosperous.
And from things like natural resources, which are going to get more and more expensive in terms of the investment needed to fix it.
The Stone Age didn't end because we ran out of stones. Can I just, very finally—? On the natural capital stress test, which is mentioned, I think, in your evidence—and you might have mentioned this earlier—how would that change the allocations, do you think?
I think that this is actually, in some ways, the other way round. The stress test can work both ways. One of the pieces of work that we've been trying to do, talking with the natural capital committee in England, is about what is the impact on the economy of exactly what we were talking about—the depletion in natural resources. What are the risks to the economy of this, and vice versa? What is that loop and what are the risks to our natural resources from the proposals that we have? So, for example, I can remember a presentation some years ago from somebody in the Department for Environment, Food and Rural Affairs, I think, which was just overlaying where are the flood-risk areas with rising sea level, against where are the major house-building plans, against where is the best farmland in England. And they are all in the same place. So, you have an immense problem coming towards you, and there's the stress. So, if you look at that in terms of a very small model of one area that you can look at about where have you got a stress on your natural capital, you've got very competing demands, and you've got threats from flooding, so how are you going to manage that and keep those natural resources in use longer term? So, there are models that are developing and they are looking at developing them, certainly, in England, and it's one of those things that we were discussing that would be good to investigate how that might work for Wales.
In relatively simplistic terms, the health budget goes up by about 1.5 per cent every year. Michael Trickey came to talk to us some time ago and said we were going to hit 56 per cent within this term. He wasn't prepared to do the sums, but if you do the sums, it goes up to 100 per cent sometime around 2050 and 2060. I assume that you accept that that is not sustainable. When you take out the transfer of the budget for the environment and rural affairs and reduce it by 1.5 per cent, which is about average for all portfolios—. What I'm really asking you is: do you think we've got the budget right? Do you think there's an understanding of how the environment actually has an effect on people's health? Because we seem to have a very simplistic view of health: we give money to the health Minister, the health Minister gives it to the health boards, the health boards give it to hospitals. But is there another way, using the environment, of actually helping to improve the environment people live in, and thus reduce their health problems?
There's some good evidence about the benefits to people's health of having access to nature, but also the benefits of forming a deeper connection with nature, which can come about through, for example, volunteering in nature or engaging in monitoring or that sort of thing, which actually makes a contribution to nature itself and to putting back some of those depleted natural resources.
As we've mentioned, 'Prosperity for All', and indeed the budget narrative, do recognise the value of people's environments in supporting preventative health approaches and that sort of thing. But unless any of that budget goes into actually supporting the nature that we rely on to get those benefits, then that will continue to deplete, so I think that's a bit of connection that needs to be made in order to secure that benefit for the long term.
It's back to those integrated budgets again. It's quite hard to know—. Certainly, in 'Prosperity for All', it's quite clear that some of that connection's recognised, and there have been mentions in other places about social prescribing, helping people—you know, help them improve their mental health in particular by connections to nature or exercise or whatever. But, as Annie says, where is the money for providing that access actually sitting? At the moment, it sits within the environment budget, which is very small in comparison to the health budget, so is there something that could ramp that up if it were connected in a better way? It would be a very good example of where might some of your prevention come into play. I mean, there's certainly a discussion in there—. Public Health Wales, I think, are very forward thinking in the way they look at that, and they do a lot of talk about what do you need to tackle, whether that's air quality or whether that's access to natural resources to clean water and to enough of it. All of those things, which we kind of take for granted now, with changes and adaptation to climate change and growing resource use become more difficult. And I know they're—. I think they're pretty good exemplars of looking further ahead and doing that. How well that's represented in what is the actual spend, and is it moving, is any of it going towards supporting those changes, I do not know. That's back to the—. If you want to integrate this, ask the question: how much of the health budget is going to help the environment, then?
Members will be glad to hear I'm not going to spend any time talking about the well-being of future generations Act—my views on that particular piece of legislation, I think, are well known—but just to say, Chair, that of course the reason that Act hasn't got any sanctions in it and any deliverable measures or impact assessments is because it's not about the outcomes. The Act, in my opinion, is just about sounding like we're doing the right thing, and if we were serious about tackling sustainability issues then there would be sanctions and there would be measurable impact assessments.
So, I just want to move on to another piece of legislation—you've touched on it earlier—the Environment (Wales) Act 2016. I wonder if you could elaborate further on comments you made earlier on in your evidence about whether or not we can see the footprint of that Act in this budget.
Yes. So, I think it sort of overlaps to what we were saying. There are two main sections to that. There is, in effect, an entire climate change Act embedded within the environment Act, which is—. You can definitely see some thought, as I was saying, because there's some discussion about preparing to put plans for decarbonisation alongside those carbon budgets when they come out, and how that will change how resources are allocated, I do not know, because there's none of that information there, but you would expect that to be the case. I think Annie's touched on the other part of it, which is really about how do you get healthy ecosystems—that's the objective of the other part, and the funding to deliver on that and restoring those ecosystems to health. That includes—. The majority of that duty, I would guess, apart from on Welsh Government, falls on Natural Resources Wales, which is obviously part of the budget settlement and is reducing for them.
Yes. So, Natural Resources Wales has a budget that's seeing decreases year after year and they've picked up a sort of new, overarching purpose but also specific responsibilities to make stuff happen in order to implement that new approach to maintain and enhance the resilience of ecosystems. And in addition to that duty on Natural Resources Wales, all public bodies, including the Government and local authorities, for example, are subject to a biodiversity and resilience of ecosystems duty, which is a more robust duty than was in legislation before; it has requirements to report against it and so on. But it's unclear how the budget supports delivery of that and one of the issues that isn't clear to me is about that grant transfer: the focus has been on waste, but that grant was the source of funding for biodiversity and local environmental quality as well for local government. Biodiversity and other elements have always lost out comparably in terms of waste because waste is the area where there are statutory targets for delivery for local authorities and sanctions if delivery doesn't happen, and, you know, we know that there's significant success in delivering against those. So, there's a question remaining about what budget is available to local government then for spend towards delivering the enforced biodiversity duty that they have and how will monitoring of outcomes take place to make sure that money is still being spent on that if there's no longer any ring-fencing, which isn't clear to me from looking at the documents.
Just to pick up on your previous point about the future generations Act—and it's not necessarily an alliance point of view, but I do think there is a danger that the Act is being used as the panacea for a whole multitude of things. We all believe in the Act and we really want it to work, but we don't want it to be the excuse for inaction either. So, from Oxfam's perspective, working with colleagues in Scotland, for example, they have a community empowerment Act, they have a procurement Act, they now have a socioeconomic duty. In Wales, we have none of those things because the Act is being used as the panacea for all of those things. So, from a socioeconomic perspective, for example, the public sector equality duty has more teeth than the future generations Act. So, if somebody wants to hold the Government to account from a socioeconomic perspective, in Wales, they cannot do that at the moment because the future generations Act has no teeth and it is being used as the excuse for not implementing a socioeconomic duty in Wales. So, you know, as much as we all believe in the Act, it has to live up to our expectations, otherwise there's all this other stuff that it's meant to be delivering on that could be delivered through other means, but they're not being delivered because the Act is being held up as the reason why not.
I agree with everything you said, except for believing in the Act. [Laughter.]
But we're not here to scrutinise the Act.
But we're not here to—. I know; I keep telling myself that.
Only what they're spending as a result of the Act.
There was some debate around biodiversity targets when the environment Bill was going through, partly because of the issue we're talking about whereby the—you know, biodiversity and ecosystems continue to not receive the priority they need for future generations. And that—. Again, this Act was used as a kind of reason why that wasn't necessary at this time, but I think that was, again—in addition to Hayley's thoughts there, that's another area where the legislation could have been more robust.
We've talked quite a lot about strategic integrated impact assessments, and it's easy to see from each year's budget shifts in monetary allocations between departments and within departments and, of course, the impact assessment is supposed to tell us what the impact of this is on the broader Government objectives that go across the whole field of Government spending, and you've not been entirely complimentary about the way in which this process has developed. Looking at the budget in narrative terms to explain to ordinary people what the impact of changes in spending year to year means for them in terms of these broad, different objectives that you've all been mentioning, to what extent do you think that the current system is working? And what can we do about it, given that a lot of these goals are pretty diffuse and, in many ways, difficult to capture in financial terms? Are we setting ourselves an impossible objective?
What, delivery of the well-being goals?
They're not impossible. They are really ambitious and really difficult and, unless you break that down into, 'Okay, although that's a long-term target for 2050, what do I have to do in the next five years?'—and this goes back to my point about prioritisation—'What are the big things that I could be doing here that will help us hit those goals?'—. I think, in here, there are some missed opportunities to make that obvious. I mean, there are some new financial mechanisms, there is a new mutual investment model, there are Welsh taxes, there's a reserve fund, there are some criteria in here for the taxes. I don't think that explains fully how that is best going to deliver against the goals, for example. I don't think the criteria are clear. The reserves fund I think is really interesting because, after all, it's future savings and investment into the infrastructure. So, what you would want to know is that the criteria for spending that or giving loans out of that are very clearly tied to those long-term—because that is about long-term investment. The mutual investment model is really interesting but any loans or anything out of that are based on the five-case business model, which is the same thing that's been there for, I don't know, 10, 15 years. It's not aligned to the delivery of what are complex and difficult goals and very, very challenging.
We're still waiting—. The Government will publish milestones towards those goals: how far do you think we should get in the next, I don't know, 10 years, five years; it's not specified in the Act. They haven't been developed yet. So, quite how ambitious, going back to Annie's point about what should those targets be—. We have some 2020 targets, and it doesn't look like we're going to—we're definitely not going to hit them on biodiversity. We may well hit them on climate emissions, but most of the milestones are not set yet.
All budgets are about opportunity costs in one sense. If you spend money on one thing you can't spend it on something else. And Governments are very keen to tell us what good outcomes will come from how they are spending the money. They're not so keen to tell us what they could have done with the money in other ways. So, I wonder what your view is on the extent to which the budget narrative provides a clear picture of the positive and negative impacts of spending in as much as the budget of one department in one respect is reduced or is not increased to achieve X but another department's budget is increased to achieve Y. To what extent do you think the budget is honest in presenting choices, if I can put it that way, so that people know that they've lost out because somebody else has gained?
I think, Hayley, you wanted to come in.
Yes. That should really be part of the appraisal process, which it isn't. The appraisal is published alongside the budget, which gives you the positive outcomes of the decisions made, but at no point in that appraisal can you see how they came to that decision and what decisions, if any, they discounted because the outcomes weren't so good. So, we can't make an informed choice as to whether they've made the right decision because we can't see what other priorities they discounted. Similarly, with the carbon assessment, if they're saying that options were chosen based on decarbonisation potential, then how do we know what amount of carbon was saved through this choice compared to another choice that was discounted as a result? So, the appraisal process is an opportunity to take people with them on the budget journey, but the way it's presented is alongside the budget, and it's not a full appraisal like the sustainability appraisal on waste treatment options, for example, that took place for the 'Towards Zero Waste' strategy. There was a range of options presented, and the sustainability appraisal assessed each of those against various criteria. So, you could make an informed choice as to why one option was selected as opposed to another. But we can't see that in this budget. The decisions have been made, and we haven't been privy to what was discounted.
I think maybe one of the implications of the Act, perhaps, is about what are the accompanying papers or supplementary papers that go with the budget and what they tell you. Because that may not traditionally be part of the budget, but actually, because of the way the Act is asking for engagement and those integration principles, then maybe that's one of the things that they could look at doing.
Okay. We'll have to draw this session to a close as we have another witness coming in as well. So, just to thank you for your evidence. Diolch yn fawr. There will be a transcript to check for veracity as well.
So, diolch yn fawr iawn i chi.
So, thank you very much.
Thank you very much.
Can I suggest to members of the committee, because we have the auditor general and he's ready to give his evidence, that we go straight to his evidence session and wrap up the discussion at the end of everything? Okay. Steffan should be back, so, we will be quorate. We'll be okay. So, if you need teas and coffees, you'll have to pop out and come back, to make sure that we're still quorate.
Bore da, felly. Rydw i'n credu eich bod chi i gyd yn barod, a'r offer cyfieithu a phopeth wedi eu darparu—a dŵr. Felly, a gaf i eich croesawu chi i'r cyfarfod yn edrych ar yr amcangyfrifon ar gyfer y flwyddyn ariannol nesaf? Jyst ar gyfer y Cofnod, os caf i jyst gofyn ichi, yn eich tro, i ddweud pwy ydych chi a pha rôl sydd gennych chi, gan ddechrau gyda Mr Thomas.
Good morning. I think that you're all ready, and the interpretation equipment has been provided— and water. So, could I welcome you to the meeting to look at the estimates for the next financial year? Just for the Record, could I just ask you, in turn, to state your names and roles? We'll start with Mr Thomas. Thank you.
I'm Kevin Thomas. I'm director of corporate services and also a member of the Wales Audit Office board.
Isobel Garner, chair of the board.
Huw Vaughan Thomas, Archwilydd Cyffredinol Cymru.
Huw Vaughan Thomas, Auditor General for Wales.
Steve O'Donoghue, director of finance and human resources.
Diolch yn fawr iawn ichi. Cyn inni droi at yr amcangyfrifon ar gyfer y flwyddyn ariannol nesaf, jyst i ddechrau gyda'r flwyddyn ariannol hon achos rydym ni'n deall, fel pwyllgor, eich bod chi'n chwilio am amrywiad yn yr amcangyfrifon y tu fewn i'r gyllideb atodol nesaf. A fedrwch chi jyst esbonio y cyd-destun ar gyfer hynny a phaham yr ydych yn gofyn am hynny?
Thank you. Before we turn to the estimates for the next financial year, just to start with the current financial year because we understand, as a committee, that you're looking for a variation in the estimate within the next supplementary budget. Could you just explain the context for that and why you are asking for that?
I'm sorry, but I will need to go back a few years. Basically the supplementary budget deals with the vestiges of the old Audit Commission. Under the old Audit Commission, the Government was able to ask the commission to carry out certain tasks. In terms of Wales, that really dealt with local government.
Under the Local Government (Wales) Measure 2011, there was a set of requirements placed on local authorities. I'm glad to say it's eased over the years, because I do think that the local government Measure represented a disproportionate audit burden on local government. But, in order to defray the cost that would otherwise have fallen on local government, central Government gave a grant, and that has continued over the years. It started off at almost £2 million, and it's eventually come down this year to £460,000. But, as the Welsh Government is now rethinking what it wants of terms of the audit regime of local authorities, we were finding that there was really a disagreement as to what it was that I wanted to use the money for, in terms of audit, and what the Welsh Government wanted out of this. And we managed it over a period; we've reduced, if you like, the grant to a core. But, this year, we've jointly agreed with the Welsh Government division concerned that it really made sense to just stop this arrangement.
So, what we are having is, the Welsh Government is not giving us the grant this year, but, equally, we're not looking for £460,000, which would have been the grant. We have distilled it down to the exact amount that we would need this year, and we've revisited it again when it comes to the estimates for next year to a core of £280,000, which represents, if you like, the staffing that I have in order to devise the audit regime for local government. And that means doing some research and development work, and so on. So, that is what happened. And, of course, it's in a sense sensible, where the Welsh Government and ourselves got the funds from the consolidated fund, it goes in a different route down. Now, we're saying, 'Let's do it on one bite, and let's get rid of this historical vestige.'
Does that, in your view, mean that you are—if I can put it this way—more independent of Welsh Government, in the way of the allocation of this money now? Because, clearly, previously, if it's a Welsh Government fund, then they're going to come with strings attached, and, as an independent organisation, you don't necessarily want to be part of that, I would imagine.
Yes. And my law and ethics team kept raising with me: didn't this run counter to other bits of legislation that talked about the audit independence? So, we've reached, I think, the sensible arrangement. That still leaves the Welsh Government able to come to us and commission a particular piece of work. For example, two years ago, Leighton commissioned some work on the local government pension scheme. But that was a specific piece of work, funded for that purpose, and I'm perfectly comfortable with that kind of arrangement.
Okay. That explains what will be happening in the supplementary budget. If we turn to the estimates for this year now, in particular, these estimates ask for an additional resource—this is a separate item of, I think, £130,000. And you've demonstrated in your report around how those strategic priorities are being set out. Could you say how you worked up those priorities, and why you've decided to—the reasoning behind the allocation of the funds behind that?
The strategic priorities were developed over a number of months—started last December, actually—where the auditor general and the Wales Audit Office consulted with a broad range of stakeholders about our draft strategy for the following three years. And then workshops were held with staff during the early part of 2017, with over 60 members of staff attending them. There was general support for those proposals, but we did refine them in light of feedback. And they were used to confirm and refine the strategic priorities that you see.
Then, you will also notice from the estimate that we have allocated what we're looking for against those strategic priorities for the first time, which we hope the committee finds useful. Overall, we're asking for no more than last year plus the supplementary, and the cyclical national fraud initiative, because we are determined to keep the overall cost of audit in Wales controlled and contained. I can expand more, if you'd like me to go on, about how we set the estimate, but I'll be driven by you.
Well, just on that, it is encouraging and it is useful, I think, for the committee to see you set out expenditure under the headlines of actual strategic—. I mean, we've just had a scrutiny session on the Welsh Government where, perhaps, we were more critical that we couldn't see the spending according to their goals and achievements, so that's useful for us. But I suppose also, in addition, what sort of pay-offs have you had to do in order to achieve this, and is this a particular focus for the office in what you need to achieve for the next year?
There have definitely been pay-offs and Huw's gonig to expand on that.
Yes. One of the benefits that we had from the 2013 legislation—and you know that I have certain issues with little bits of it—a real benefit is the challenge that the board gives me in terms of bringing the estimates forward, and I think that you almost have the comfort that they've been thoroughly scrutinised. We have tried to do two things and the board's really been clear on this. First of all, overall, we're not going to exceed this current year's estimate, and that means, of course, that the inevitable drift that I have in costs has to be contained within it. Secondly, the fees that we charge individual organisations will continue to go down. So, with those real constraints on me, I've had to do some real prioritising and convince the board in terms of where we are seeing money actually being needed, and that, in a sense, is what you've got here and why. The only variation is the £130,000, which is the second year of the national fraud initiative and that's reflecting the Public Account Committee's desire to see more bodies participate in that. One year, it's £50,000 and the next year it's £130,000.
Yes, we had this in the previous—. It's cyclical, yes.
There's a particular outstanding sum—in the sense that it stands out—of I think about £0.25 million for data analytics. What's the thinking behind that? Why is that a specific initiative, if you like?
Okay. I'd just like to give a very short introduction on that. Last year—and thank you, Finance Committee—we were able to invest in transformation and the first project was around technology and data analytics. Under Huw's direct leadership, we had an amazing team come back with a lot of really interesting ideas, but that's the one that's in front of you, and you've got the full business case on data analytics. There are a number of benefits and my team can go through those, but I want to tell you that the board has scrutinised that business case and really believes we cannot afford to not invest now in data analytics.
Periodically, I meet with the auditor generals from the rest of the UK and Ireland. The National Audit Office is ahead of us; Scotland is ahead of us in terms of investment in data analytics. What do we get from data analytics? I think I'd start with what the audited bodies will get. By data analytics, the aim is to pull the data from the audited bodies in year, which means that we're able to do the auditing faster. Secondly, we're able to engage in what the NAO has, I think, very successfully done, which is to visualise exactly what's happened. If you look at, for example, central Government accounts with Westminster, you'll see nice graphics indicating how, under the various headings, the money has been spent. That is part of what data analytics can produce. Now, I'm not going to say it can be produced overnight; we actually are starting from a very low base. But our firms that we contract with are also engaged in this journey.
One of the things that we're already finding with the graduate trainees coming to us is that they're asking, 'Are you engaging in data analytics?' because it's seen as being the real area. That said, I think the work that we did in terms of preparing for this has really attracted attention. It was one of these what we call Rayner exercises, where you give responsibility to a very junior set of staff and you allow them to basically get on with it, reporting directly to me. That staff has been to offices to present it in the Netherlands, Estonia and in Spain and it's really attracted attention from a range of European audit institution. So, whilst we're behind the journey, and we do need to do the investment, what we have is a set of enthusiasts that, I hope, will enable us to catch up.
Did you have anything to add?
Just to add to what Huw has said, we've carried out data analytics exercises in the past with things like the National Fraud Initiative. What technology now allows us to do—there's been an exponential increase in the power of what the analytics tools can do. So, we will now be able to analyse huge volumes of data very quickly and, as Huw has pointed out, to present the outcomes of that to help the understanding and interpretation of that data, leading to better quality audit outcomes, greater insight, greater depth in terms of the work that we can deliver. And it's really important that we work alongside the other UK audit bodies—bodies outside of the UK, but also the big accountancy firms, all of whom are investing very heavily in data analytics.
Would it be reasonable to say that your investment in this would be part of helping you to keep the fees regime at that reasonable and, indeed, decreasing level as you go forward?
Indeed. I think it'd be fair to say that if we can deliver the kind of vision that we'll have for data analytics, particularly capturing it in year, it achieves two things: first of all, that it becomes cheaper for us to do the audit. We don't have to send staff, going out and, in a sense, manually going through. It also makes it easier because the analysis will throw up variations. For example, it will spot if somebody is making ledger entries on Sunday mornings on a regular basis, and we're starting to be able to look at that. So, that will enable us to do the audit quicker, therefore cheaper, and the other bit that I think is important is that it will help us and help the audited bodies keep in-year control of what is happening.
I would just say that we're not at this point prepared to link financial payback from this early stage of investment. But, yes, we wouldn't be putting it before you, and yes, we thought it was going to deliver those benefits, and just a slight caution: it's not going to have a major impact next year.
But hopefully you'll be able to show to the committee in future years how this has been used and utilised.
We'll keep an eye out for that, obviously, here. Thank you. Can I turn to Jane Hutt, please?
I think this is really praiseworthy and welcoming, the fact you've had a graduate trainee scheme, but you're now proposing funding on the development of an apprenticeship scheme. So, what do you expect to gain from this new scheme?
Okay, well, can I just kick off with the fact that when we say 'we', we're very fortunate that the WAO is hosting this scheme? It's actually on behalf of the the financial skills development group, which is across all of Wales's public sector finance professionals, and, because of the success of the graduate scheme, which has won an award, there is certainly an appetite within the Wales Audit Office and the financial skills development group to extend that to apprenticeships to attract people who may not have a natural career path into finance. We've been asked to host it, and we're delighted to do that and we think we can bring a lot to bear. I don't know if you want more details, Jane, but colleagues could probably provide that.
We're asking for money very much to help the whole scheme. So, just as with the graduate trainees, I see an impact in terms of the public sector as a whole.
I have a slight concern that the Welsh Government is not supporting the same level of apprenticeships as is happening in England. So, for example, if you could go to Deloitte and you're on an apprenticeship, you'd be able to move into a degree level at the end of it. So, that's funded in terms of the English system.
With us, we've decided to head for a scheme that allows people to go to AAT—that's the accounting technicians—first, and hopefully, if they're really sold on that one, they'll then do the crossover to acquire more advanced—. We haven't yet fully sorted out whether it's going to be on the ICAEW or another route in terms of the professional qualification. But the aim is to capture people who come in from school straight and help them, in the same way as graduate trainees, to develop a career and hopefully retain them by working with the other public sector bodies in Wales, to retain them within the Welsh public sector.
That's very good to hear in terms of targeting young people leaving school. I would hope you'd also look at some of the initiatives like Jobs Closer to Home, where we can perhaps target these apprenticeship opportunities into areas where we know that there are fewer job opportunities and to raise the skills levels of young people in those communities. So, hopefully, you'll take that on board.
I want to move on to another aspect of your estimate, because you are including £120,000 for preparatory work for early closure of local government accounts. Can you explain to us the impact of the early closure approach, what work you have to undertake to ensure that the arrangements are in place, risks in terms of not undertaking this work and the impact on the public bodies that are going to be affected?
Early closure, very simply, is that the Treasury is requiring local government to close its accounts faster. That does cause a problem for us. It causes a peak of auditing in the period between March and July. Albeit that local government has a few years yet to achieve this, we already are working with some local authorities so we've been able to see what actually is required in order to help this work take place. And we've also been holding webinars in order to spread that learning across other local authorities. But essentially, we need to do two things: first of all, we need to be able to fund the peak of work that we're going to have, and we'll be looking to see whether we can get people in from the firms, things that we'll do flexibly in-house. But also, we need to help the local authorities themselves develop systems that allow us to do that early auditing. Part of the money that we're seeking is, yes, to skill us up, and secondly to actually help a cohort of local authorities a year over the next three years in terms of the processes they need to do.
We do have problems with some local authorities. There's one body, for example, where I'm in version 14 from them of their 2015-16 accounts. So, I can't afford that, if I'm also under an obligation, which you touched on before with me, to actually close the audits by a particular point. So, the money will be spent in-house and, more importantly, in the training and support for local authorities.
And that's going to rise, obviously, over the next three years in terms of your increase of estimate from £120,000 upwards, is it?
No, I'm going to try and keep it at a—. Well, I can't guarantee that my successor won't be sitting here saying, 'Well, actually, I need a bit more', but we've tried to flatline this one for the next three years.
Can I add to what Huw said there? In terms of a fixed-term piece of funding that will come to an end, the difficulty we have is that when we take auditors off of fee-earning work, we no longer have the funding to pay their salaries and oncosts, et cetera. So, for this project and the data analytics, it is providing that funding to enable us to support the work without expecting them to earn fees for that at the same time, if that helps.
Is that okay, Jane? Have you finished?
Yes, that's fine.
Nick Ramsay, you wanted to come in.
Just on the local authority issue, we know full well that 22 local authorities in Wales all tend to move at different speeds. So, how realistic is your ambition? You said you were going to help a number each year, but how realistic is it to get them all at the right point in time when you need them to be?
We've got some that are pilots that we've been working with. We've worked with Torfaen, we've worked with Wrexham in terms of seeing how the internal systems can be adjusted to allow them to deliver us their accounts earlier—that's the first task—and then for us to do the auditing within the laid out period. So, from those, I think we can say, 'Yes, it is possible, but it does require changes within the local authority to help us have the accounts correctly.' So, over the period that the Treasury has set out, we will be able to achieve that, but it is going to be working with a few more each year.
We're not looking at the local authorities' accounts, of course, in that sense; we're looking at your estimates. Would you expect local authorities also to be making an investment to make this work?
Yes, I would.
Okay. Neil Hamilton.
Just to look at the performance and improvement targets, in your report this year, you've demonstrated some progress in organisational performance, having met 24 out of 35 targets, compared with 21 out of 35 last year. Do you think that the targets that you've set yourself are sufficiently aspirational, so that this is a demonstration of real improvement rather than cosmetic?
That's a very good question. The board does challenge them, but I'll let Kev explain the process around that.
We look at our suite of 35 key performance indicators each year when we prepare our annual plan. And, as you know, they cover seven key themes, which, together, give a sort of holistic view of our overall performance as an organisation. When we're setting targets for each of those indicators, we look at a range of factors: we look at our performance in the previous year, we also look at industry benchmarks, and, for example, with our people survey, you'll see a number of social KPIs within our PI suite. We've looked at indicators from the civil service survey, which provides benchmarks for a number of those indicators. So, we are always aspiring to be a leading organisation, to be an excellent employer for our staff. And, so, we've looked really closely at those civil service scores when setting those targets.
You talk about the fact that we have had an improvement in our performance from one year to the next, with 24 out of 35 KPIs having been met. Others are close to having been met, but I think it does demonstrate that we're not setting ourselves targets that are too easy. We're always looking to set ourselves stretch targets, to stretch our performance as an organisation and to continue to improve.
As you mentioned the seven themes, the social category is the one which seems to require greater improvement, but I wonder how quantifiable some of these objectives are. In this social target, 70 per cent of staff felt that they were treated fairly with respect. I'm amazed that 30 per cent of your staff therefore don't feel they've been treated fairly and with respect. So, what does that mean?
I think this is something, obviously, we take very seriously. That survey was run over a year ago, and, since then, we've carried out an awful lot of work to look to ensure that staff do feel that they're treated fairly. Some of the work we've done includes an exercise to develop values and behaviours for the whole organisation. That wasn't an exercise that was top down; it was very much a bottom-up approach, working with staff right across the organisation, to the point where we've now developed and agreed a set of values and behaviours that permeate through all aspects of our work at the Wales Audit Office, and we've seen tangible improvements in the atmosphere, the feel of working at the place over the past 12 months.
Alongside that—that's not all that we've done—we've looked at things like the fair treatment indicator. We've carried out an awful lot of work on equality and diversity, and, just a month ago, we published our latest equality progress report, which showed that we'd made significant improvements in a number of areas, not least in terms of the support we give to our lesbian, gay, bisexual and transgender staff, with now a positive pay gap in that area, and a number of initiatives, such as our spectrum staff network, and also the filming of an Iris in the Community project film that we are using on our website as part of our recruitment materials to demonstrate that we are a diverse and inclusive organisation.
One of the other areas that we've looked at since then is what sort of difference that has made. We've just run the first of our staff surveys, using the civil service staff survey that I mentioned—all 60 questions. We released the results to staff just a few days ago. We still need to do some analysis on that, but we've already seen over a 10 per cent increase in that particular 'fair treatment' indicator, which I think suggests that the work we're doing is helping to make a difference. Indeed, although we still have some further benchmarking and analysis to do, the results of that survey do indicate that, in the majority of areas, we're operating at what the civil service describes as their high-performing organisations in terms of staff engagement.
Another figure that comes out of this is that 71 per cent of your staff felt that they have a good balance between work and private life. I'm sure that all Members of this committee think they have a terrible work-life balance because there's hardly a day that will go by when we're not either thinking or doing something related to our work. So, I'm wondering, in these surveys—and people are asked for their subjective opinions—what are they actually factoring into this to make this a meaningful figure so that you can then draw conclusions from it as to the efficiency with which your organisation supplies the needs of your staff as well as of your clients, as it were?
We asked them the straight question about whether or not they feel they have an effective work-life balance, and, again, looking at the latest results from our staff survey, there's been around just over a 10 per cent increase in terms of that indicator as well. I think what we have done over the past year or so is improve our approach to recruitment—so we've been more successful in both permanent and short-term recruitment, which has helped to ease pressure on staff. We've also looked and monitored very closely the working hours of staff. That's been done by line managers, by director committees and also by our health and safety committee, and we've seen a marked reduction in the number of excess hours above contracted hours that staff have been working, both in overall terms and in terms of the quantum above the core 35 hours that staff are working.
Alongside that, though, to dig deeper, there is a section within the civil service survey for narrative comments. That has still to be analysed by us, but there may well be rich information included within that that will help us to further tackle this issue.
Thank you; that's very illuminating.
Looking at your exchange of good practice, I see you've hosted 20 shared learning seminars and webinars in the year, attended by 1,126 people. Huw, you mentioned, in relation to local government, the use of seminars a moment ago. How do you actually measure the impact of such activities as good practice exchange and, on one hand, ensure that it delivers the impact that you want and also the value for money, which is one of the key objectives that you set for everybody else in public service?
Steve, as well as being director of finance, is also the director responsible for GPX.
I'll say a few words, yes—
I notice the poisoned chalice being handed across the table. [Laughter.]
Well, I think Steve should have his time.
We touched on early closure earlier and it's an example of one of the sessions that the good practice team have run. So, they've run three sessions on early closure now, both in south Wales and north Wales, attracting all the local government bodies in this particular instance. What that does is bring people together who don't ordinarily talk to each other. You might be surprised that quite a lot of public services work in isolation from others. So, I've got a quote here from one of the attendees, which said: 'There are lots of good ideas in public services and lots of willing people. They often don't get together and GPX provides that space to do so, and provides it safely.'
But we do analyse a lot around what impact we are having, because it's around a £0.5 million sum that we invest in this every year, as you'll see in our estimate, so we take impact seriously. Not only do we ask for feedback after every event to shape our future programme and to learn lessons after each event, but we also undertook a piece of research last year to bring some indepedence to an assessment of that impact.
Eighty-three per cent of chief executives say that our good practice has benefited their public services, which is an important impact measure there. And the research that we had said that GPX is actually seen as leading international practice for audit bodies in sharing good practice, and that the value emerges over time. So, we don't necessarily see an instant impact from the activity, but over time, public services are improving. They say it's the bringing together of ideas and creating that safe space for organisations to talk to each other where the impact is best measured.
Can I also say that we we don't charge for GPX? This is because I don't have powers to do that. However, what we're finding is that the staff who are engaged on that work are being asked to do work for other organisations, so I regard that as commissioned work, where we'll be seeking to recover their costs through charges.
Also, as Steve's indicated, I do have interest in this from audit offices elsewhere, who are seeking to find out how best to go around it. They attend seminars and we do give advice to other audit offices.
Okay, thank you.
It's a bit of a loss leader, then, you're saying, in supermarket terms.
On the other hand, when we did charge, before PAC suggested that, actually, it should be met separately, what we found was a great reluctance by a number of organisations to pay a fee for this, whereas we do get a very good take-up, and when it's not just a freebie. We want to make sure that we're seeing the impact extend.
I appreciate that. Thank you very much. David Rees.
A couple of governance issues at the moment. You've talked about your staff surveys and the work you're doing with staff, and the good practice going on, and that's fine. That's fantastic. But I notice that you've actually reconstituted the remuneration committee to remuneration and human resources, with the remit now of HR policies, effectively, for that. Just for clarification: can you confirm for me where that remit lay before the change? I'm assuming that there was already a remit for HR policies.
Absolutely. The people strategy is the whole employee proposition about how we attract people, how we keep them and how we grow them when they're with us. We felt that the remuneration and HR committee needed to drive the development of that people strategy and the actions that needed to be put in place to make that a reality.
Now, I can confirm that HR policies had a good deal of scrutiny through Huw's executive teams, but even now, although HR policies are within remuneration and HR, it is the strategic ones that are absolutely critical. We've recently looked at the delegation scheme again to make sure that we don't use board members' time going through the fine detail. It is the key framework policies that will go to remuneration and HR, under the guidance of Steve. Do you want to add anything to that?
So, where would they go before?
The management committee.
The 2013 Act—well, prior to that, I employed the staff. The 2013 Act made it quite explicit that the board employed and set out some directions to the board as to what they should do. So, I think properly, over the last four years, the board has actually gone through all policies to ensure, as Isobel's saying, they meet the kind of people strategy that the board wants.
And any detailed amendments will either be considered by the board, or, if they're not significant, they are delegated to Huw and his executive team.
Because the board now takes a strategic overview of HR policies.
The remuneration and HR committee does. But then they are a sub-committee of the board so, inevitably—
So, technically the—[Inaudible.]—board.
Yes, and they make recommendations to the board.
Okay. And also in your report it highlights that the HR policies and practices are needed to support the cultural change. What is that cultural change?
Our values are about being genuine, respectful, our behaviours adaptable, and trustworthy. You can't go around saying we really value people being trustworthy and adaptable and then expect them to clock in and do this and the rest of it. So, it's just making sure that we live what we say we believe in. So, that doesn't mean to say people can go off and do whatever they want to do. They are performance managed appropriately. But it's actually making sure that we are fostering through good, innovative HR policies and the behaviours and culture we want.
Okay, all right. I'll live with that one for the moment. [Interruption.]
Yes, let's explore it.
I think it's about moving from kind of a control and compliance environment, where a policy says, 'You will do this and you won't do that', to one that's more principles based and, as Isobel says, links back to our values around being genuine and respectful and trustworthy. So, it's getting that balance right and it's providing a more enabling and an empowering workplace rather than a controlling workplace.
So, one that is more professional, in a sense. One that respects the individual and the individual's integrity to actually deliver.
Absolutely, and we're linking that, then, to the improvement in the culture internally, which we'll see filtered through in the key performance indicators that we've set around how staff feel respected and valued and trusted to do their job.
Okay. You also undertook some assurance mapping, and I understand that you had, in September, a final draft considered. When will we see that actual final report published?
It's a working document for the board. That's our first reaction but—.
Assurance maps are what we would expect our audited bodies to have as well. They should underpin the governance statement. In the accounts, the governance statement sets out a number of things—'How do you know that is the case?', 'What level of assurance do you have?', 'What's your first level and second and third level of assurance?' Basically, this was a mapping for the board to reassure itself on theirs, and, of course, there are some, because of slightly separate responsibilities, that I need to be satisfied with as auditor general. So, bringing that map together—the results you should see in the governance statement in next year's accounts.
But will we see any aspect of that assurance map at all?
Well, I'm happy to write with—
It's very much at a working-tool stage. I'm not ruling out you seeing it at all, but it's already proving really useful because the board's assured that we haven't got any significant gaps in our assurance that we didn't know about, and where we know there's a gap, work is now ongoing. But it's also helping us make sure that—it's a tool for internal audit to make sure they add value and just don't go over old ground. It's helping the board focus on what really matters rather than duplicate levels of assurance, and, of course, we've got external audit as well. But, Kev, you're the sort of owner of the tool at the moment. Do you want to add anything?
I suppose just really to emphasise the fact that it has been a very useful exercise to date. I think it's something that we'll want to use as part of our ongoing business planning processes, alongside risk management and other internal controls. So, the idea wasn't necessarily that it would be published in any form, it would be something that we would use as a tool to help us manage and run the business effectively. But I think, quite rightly, Huw points out that the summary of that, because, of course, it's mentioned and referred to in our governance statement, will feed through into the following year's governance statement. I think one of the other benefits of the exercise is that it will help to inform the internal audit work programme as part of their risk assessment as to the sorts of areas that are going to provide greatest added value as they carry out their work for us.
I'm sure that we'll have the definitions in next year's report, but, clearly, if we want to ensure that it's delivering, it would be good to see the results of the assurance mapping available somehow, so that we can ensure that what you're saying is being met by maps, basically. I don't see any harm in publishing it.
Shall we leave that with you as a suggestion that you might want to consider.
We'll leave that with you, but, as a consequence, you talk about a risk analysis—you also produce and you identify, for the risk assessment, strategic risks again, and you've identified a couple this time around—two in particular are effectively workforce capacity being a major impact and linked into that, of course, is the funding for the workforce capacity. I suppose, how you undertake that, other than the supplementary budget request—. How you look into that avenue—is there anything else you're doing to address those issues?
Are you after mitigating actions or how we went about workforce planning?
There's a whole host of mitigating actions that we're carrying out as part of a broader workforce planning project. We've done an awful lot of work to model the various factors that will affect our workforce over the coming years. We've talked about the impact of faster closure of accounts, but there are a number of other factors, including work in response to the well-being of future generations Act and the response to fiscal devolution in Wales and changes to the grant regime. All of these will cause various differences to our workload, both in terms of timing and in terms of the skill mix that's necessary. So, we spent quite a bit of time developing a system that will help us to model the impacts of these various factors so that we can accurately project what resources we're going to need now, in the medium term and in the longer term. I suppose the solution to that is not a single solution. There's a whole range of activity that we are looking at. We're looking at the more flexible use of our own workforce, working more widely across the organisation, so that we can help to manage the peaks of workload and also make best use of the skills that we have at our disposal. We also have—
Which I assume feeds into your HR policies as a consequence of that.
Yes. All of these things are interlinked. We also have our contracting strategy whereby we release some of our work to some of the big accountancy firms who carry out work on the auditor general's behalf. That has a number of advantages. It helps us again to manage peaks in workload. It also allows us to draw on particular specialist resource at a particular point in time for specific projects where we might not necessarily need that resource on a permanent basis as part of our permanent establishment.
We've been developing our trainee scheme so that we have a constant flow of people into the organisation with a variety of skills. We've talked about the data analytics work. That, again, forms a key part of our workforce planning strategy. So, there's a range of activity that is going along as part of this broader workforce planning agenda, which will help us to meet these challenges now and in the future.
As I mentioned earlier, we are seeing some of the benefits of that in terms of improved work-life balance for our staff and reductions in sickness absence due to stress, for example. That's not to say that we can be complacent. There are a number of further changes on the horizon, not least faster closure, and we will need to build on the work that we've already done to ensure that we have got the right people in the right place at the right time.
Can I just ask one final question? You talked about your commissioning of other organisations to do some of the work. Just out of curiosity, and I apologise if I missed it, do you have a commissioning policy or procurement policy to actually address that?
Okay—which I'm assuming looks for the best possible value for money and return on investment, as much as possible, to ensure you use your money wisely.
Lessons in sucking eggs are also available. [Laughter.] One of the committee concerns last year was the sickness absence rate. It is encouraging that it has reduced. Can I just ask—is that in line with the trend that you want to see overall within the organisation, the reduction this year?
Absolutely, Chair. We're now at target—at the KPI target. I think when we talked to the committee last year, we recognised that there's probably a level below which we can't go. We all suffer colds and flu bouts from time to time. So, our short-term absence is probably at the minimum and there's probably little more we can do to reduce that. In terms of longer-term absences, we've now finished the first year of our health screening programme with staff. That's been incredibly well received and it has been leading to some changes in people's personal practices in their life to better manage health risks. So, we hope, over the longer term, we're better managing that longer-term absence figure as well.
Okay. Thank you for that. Steffan Lewis.
Diolch, Gadeirydd. I wonder if you could explain how exit packages are agreed with staff and what is the driver there for voluntary severance within the organisation.
For voluntary severance, quite simply, we need the Cabinet Office's agreement to conduct voluntary early severance exercises and we have to adhere to their guidance. It's just due to the constitutional role of audit offices that we go direct and seek that permission. So, basically, the voluntary exits that we've conducted have all been within the rules, as set by the Cabinet Office. It does have a slight problem because—Steve will explain—I'm not sure about the correctness of the advice that the Cabinet Office gave last time.
It comes down to the judicial review that was launched around the civil service compensation scheme. The union won that judicial review and it has meant that the UK Government have had to revert to an older scheme that existed from 2010 onwards in terms of civil service compensation payments, rather than the new scheme that was introduced in 2016, which we followed for the payments that we made. So, what's happened across public services that made payments under that scheme is that they now have to revisit whether those payments were legal and still stand, or whether in fact they now have to pay higher sums to the staff that left. This is a UK-wide issue that each individual body that has paid exits is currently grappling with. That is a risk on our risk register at the moment, while we work through if there are financial implications for us.
If I may add, in terms of governance, it comes back to that workforce planning, and, as Kevin outlined, needing the right skills in the right places at the right time. Huw and his team will develop a programme, if necessary, of voluntary severances, and depending on what level of the organisation they are, they go through different scrutiny checks. So, anybody in the management committee or above is scrutinised not only by our remuneration and HR committee, but by the board itself. We have to take assurances that it is value for money and it does meet the Cabinet Office rules. So, I can assure you we don't just say, 'Whatever you want.'
Thank you. The assistant auditor general and head of performance audit has agreed an exit strategy of up to £200,000. I wondered how you thought the loss of skill and experience will impact on the organisation. Are you considering restructuring in any way to accommodate that?
It's not so much restructuring, but rather that we've taken advantage of that opportunity to develop more joint working between what used to be the two halves of performance and financial audit. That's something that we're going to need to do more of, particularly in coping—I hate to keep pressing this one—but in coping with the peak that we have as a result of the early closure. So, it is being used as a means of changing the direction of travel as opposed to restructuring, and that's why we were able to do a payback for that post at 14 months.
So, can you just elaborate further on what that change in direction looks like? If it's not a full-scale—
I used to have two assistant auditor generals: one looking after financial audit and one looking after performance audit. As a result of the departure of the head of performance audit, I now just have one, who's the head of practice, and we are looking at bringing the two practices closer together and—going back to something I said earlier—in a sense removing the last vestiges of what used to be the NAO and what used to be the Audit Commission. But more importantly, it is getting a sense that there are not two silos. We're all engaged in work for the audit office, and that links with the work that we've done on audited bodies. There is a single engagement director per audited body who's able to deal with the audited body across both the old performance and financial divides. So, it's an opportunity to slim down senior management and to hopefully see the organisation really working as one as opposed to two halves.
Thank you for that. And finally from the, the outturn information shows that income was lower than anticipated in 2016-17. Could you explain the causes of this and the impact on resourcing?
The complexities of our fee regime mean that we can never precisely estimate what we're going to have, and I think it's useful that we're able to call this an estimate rather than a fixed budget. Some of our grant work reduced last year and some of our normal fee work moves between one year and the next. So, it's that sort of explanation: that sometimes we might have estimated we're going to do particular work in March, then it's done in April instead, and that can have a big effect on the figures.
Okay, diolch yn fawr.
Okay. Jane Hutt.
I just wanted to ask two questions about equality issues, and pay as well. It's good to see an increase in the number of women employed, but you also acknowledge that you've got a gender pay gap of 17.5 per cent. So, how are you going to address that in terms of career development, skills and opportunities? And my second question is—and I'm sorry if this is well known—do you pay the accredited real living wage in terms of addressing low pay?
Shall I answer the last one quickly? The board took a decision a while ago to ensure that we paid that living wage.
And for our contractors.
And for contractors, like the cleaners who come in, as well.
Excellent. And on the issue of women's equality?
Clearly, the 17.5 per cent gap is a concern to us. We identified that through an equal pay audit that we carried out earlier this year. We've been carrying out a lot of work to identify the reasons behind that, and following the issue of the equal pay audit, we had a workshop with staff facilitated independently by Chwarae TegFootnoteLink to help us explore some of the issues that were potentially acting as barriers to women to progressing within our organisation. It was extremely illuminating, and as a result of that we've identified a number of things that we think can help us to make progress in this area.
Some of the initiatives include coaching and mentoring schemes and the use of secondments to help change, even for a short term, the mix and balance within particular staff groups. We've also established a women's network within the organisation, which has been very active to date and has hosted a number of sessions to help women develop confidence within the organisation, because that was something that was identified as a particular issue and concern at our staff workshop. The network has held, as I say, a number of events. One of them was on inspiring tomorrow's leaders, where we had a number of high-profile speakers, including from PwC and a major recruitment agency, talking about their journey in work and some of the barriers that they'd come across and how they'd overcome them. So, it was a very rich source of information from there as well.
I've talked a lot about the plans that we have in place. One of the key initiatives that we have coming up is that we're due to issue a new strategic equality plan, a joint plan between the Wales Audit Office and the auditor general, in April next year, and at the end of this month we'll be seeking the board's approval to go out to consultation on the 10 new objectives that will sit within the equality plan. One of them very much focuses on addressing the structural pay gaps that we have within our organisation. That will set out as a high-level objective over the next three to four years what we need to do, and underneath that we will have a much more detailed plan drawing on some of the examples that I've used to help us tackle this area.
A comprehensive response; it's good to hear that, thank you. Mike Hedges.
Can I talk about the annual plan? There's some things you know you're going to do every year, such as audit local authorities. We also have things that happen—Kancoat, Powys Fadog—that pop up unexpectedly. So, how do you manage to leave room to be able to deal with these very serious issues that occur that are unpredictable?
The second question is: you've got a plan for 2017-18; does that feed into a draft plan for 2018-19 and 2019-20 for the things that are the known knowns? You're going be auditing local authorities, you're going to be auditing health bodies, et cetera. So we know we're going to do that, but there are also things happening that are massively unexpected. I think Powys Fadog and Kancoat are two, but there have been others as well—the fish pond up in Merioneth, for example. I mean, these things just happen, don't they, and then you have to respond.
First of all, the annual plan sits in a three-year rolling view that we have, and I think it's the three-year that keeps having to be changed. We were planning until recently for a reduction in the number of local authorities, therefore reducing the amount of audit work that we had to do, and therefore reducing staff volumes. That's no longer on the table. In fact, if anything, it looks like there might be an increase in the number of bodies that we'll be auditing. So, that three-year plan is very much a moving feast, but within it there's the annual plan, as you say. Yes, there are changes. I think the thing that really changes in the course of the year is the studies that are required to be carried out, No. 1, because there might be a change in priorities. And I will shuffle the pack on that. Some studies will be delayed, others will be brought forward, depending on what is required.
We also have issues in terms of local authorities—well, not just local authorities, other bodies—where we suddenly find that there's a need to do more work on a set of accounts—you'll be familiar with the issues that arose with Natural Resources Wales, for example—which requires me to divert more resources to that than I'd originally planned. But for that kind of a shift we already have enough flexibility in-year, Mike. So, I'm reasonably comfortable.
The other bit, of course, that—. To keep me on my toes, the board keeps monitoring on where we are against the various targets that are set out in terms of the studies and so on. So, the board is able to be satisfied if I do need to shift resources to address certain problems.
Can I talk too about fees? You would say it's for the first time since 2014-15 that the fees have gone up. I think some of the people who are paying these fees would say their income hasn't gone up during that time. What sort of response have you had to the increase in fees from your stakeholders?
I think it's important to separate the fees we charge from the fee rates we set. So, the actual fee is a combination of the fee rate times the hours worked. What we were very clear about in our consultation was that, whilst some of the rates will go up by about 0.8 per cent, which you'll see in the draft fee scheme is around £1 for some of our roles—£1 an hour—our intention is to refine our audit approaches so that higher rate times lower hours will result in a lower fee. I'm aware, for example, of a local authority nearby whose fees are going down by about £11,000 at the moment in response to changes in our audit approach of that authority. So, the responses we got from stakeholders were very clearly, 'Bring down your fees and, as long as the fee rate increase isn't going to increase our fee, then we're supportive of the pressures that are causing that'.
Okay. And the last question from me—