|Adam Price AM|
|David J. Rowlands AM|
|Hefin David AM|
|Joyce Watson AM|
|Lee Waters AM|
|Mark Isherwood AM|
|Russell George AM||Cadeirydd y Pwyllgor|
|Vikki Howells AM|
|Andrew Slade||Cyfarwyddwr Cyffredinol, Economi, Sgiliau a Chyfoeth Naturiol, Llywodraeth Cymru|
|Director General, Economy, Skills and Natural Resources, Welsh Government|
|Claire Hartrey||Rheolwraig Tîm, Trwyddedu (Caerdydd), Pen-y-bont ar Ogwr, Caerdydd ar Bro Morgannwg, Cynrychiolydd Cyfarwyddwyr Diogelu'r Cyhoedd (Cymru)|
|Team Manager, Licensing (Cardiff), Bridgend, Cardiff and the Vale of Glamorgan (Representing Directors of Public Protection Wales)|
|Huw Morgan||Arweinydd Tîm Uned Cludiant Integredig, Cyngor Bwrdeistref Sirol Caerffili (Yn cynrychioli Cymdeithasol Llywodraeth Leol Cymru)|
|Team Leader Integrated Transport Unit, Caerphilly County Borough Council (representing the Welsh Local Government Association)|
|Jo Foxall||Rheolwr Gyfarwyddwr, Traveline Cymru|
|Managing Director, Traveline Cymru|
|Justin Davies||Cadeirydd, CPT Cymru|
|Chair, CPT Cymru|
|Ken Skates AM||Ysgrifennydd y Cabinet dros yr Economi a Thrafnidiaeth|
|Cabinet Secretary for Economy and Transport|
|Marcella Maxwell||Dirprwy Gyfarwyddwr, Datblygu Sefydliadol a’r Rhaglen Newid, Llywodraeth Cymru|
|Deputy Director for Organisational Development & Change Programme, Welsh Government|
|Margaret Everson||Cyfarwyddwr, Bus Users Cymru|
|Director, Bus Users Cymru|
|Mike Payne||Swyddog Gwleidyddol Rhanbarthol, Rhanbarth GMB Cymru a De Orllewin Lloegr|
|Regional Political Officer, GMB Wales & South West Region|
|Paul O’Hara||Taxi Drivers of Cardiff|
|Taxi Drivers of Cardiff|
|Simon Jones||Cyfarwyddwr, Seilwaith Economaidd, Llywodraeth Cymru|
|Director, Economic Infrastructure, Welsh Government|
|Catherine Hunt||Ail Glerc|
|Jennifer Cottle||Cynghorydd Cyfreithiol|
|Robert Lloyd-Williams||Dirprwy Glerc|
|1. Cyflwyniad, ymddiheuriadau, dirprwyon a datgan buddiannau||1. Introductions, apologies, substitutions and declarations of interest|
|2. Cyllideb Ddrafft Llywodraeth Cymru ar gyfer 2018-19 a'r Cynllun Gweithredu Economaidd—Ysgrifennydd y Cabinet dros yr Economi a Thrafnidiaeth||2. Welsh Government Draft Budget 2018-19 and the Economic Action Plan—Cabinet Secretary for Economy and Transport|
|3. Datganoli pwerau cofrestru bysiau—Pwerau Newydd: Posibiliadau Newydd||3. Devolution of bus registration powers—New Powers: New Possibilities|
|4. Datganoli trwyddedu cerbydau tacsi a hurio preifat (PHV)—Pwerau newydd: Posibiliadau Newydd||4. Devolution of taxi and private hire vehicle (PHV) licensing—New Powers: New Possibilities|
|5. Papurau i'w nodi||5. Papers to note|
Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.
The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.
Dechreuodd y cyfarfod am 09:32.
The meeting began at 09:32.
Bore da—good morning. I'd like to welcome you to the Economy, Infrastructure and Skills Committee. I move to item 1. Are there any apologies this morning? None have been brought to my attention. Are there any declarations of interest? No, there are none.
So, in that case, I move to item 2. This morning we have scrutiny on the draft budget and the economic action plan and we have the Cabinet Secretary before us. I'd be grateful, Cabinet Secretary, if you could just introduce your colleagues around the top table.
Thank you, Chair. I'll allow them to introduce themselves, but can I start by thanking you and the committee for your understanding prior to Christmas in accepting written evidence and agreeing to this committee appearance today? Marcella, if you'd like to—.
I'm Marcella Maxwell and I've been leading on the development of the economic action plan in economy, science and natural resources.
I'm Simon Jones, director of economic infrastructure.
Andrew Slade, newly appointed director general for economy, skills and natural resources.
Lovely, thank you. Can I ask the first question, Cabinet Secretary? What's more important? What's the priority in your economic plan? Is it inclusive growth or is it addressing inequality?
I think that's something of a false choice, because there's ample evidence now that demonstrates that inclusive growth is a driver of sustainable growth and that, in driving down inequality in terms of income, you can generate a more productive economy and, in turn, generate more growth. It's an obligation that we have under the future generations legislation. I think, if we look at some of the international work that's been undertaken by the Organisation for Economic Co-operation and Development, the World Economic Forum, the International Monetary Fund, it all points to a new way of working and a way that benefits the economy, provided you focus very heavily on inclusive growth. There are some really good examples around the world, and I would point, perhaps, principally at Canada at a prime example of where the focus on inclusive growth has been very successful in driving up productivity within the economy. So, we're not alone in taking this new approach. In some respects, we're even going further than other nations, but we are by no means alone. But I do think that, perhaps, the choice of growth or inclusive growth—growth in the aggregate or growth that also seeks to reduce inequalities—is a false choice.
Have you got some examples? You pointed to Canada, but have you got any examples here in Wales?
Yes. We could point to demographic interventions, we could point to geographic interventions, and I think we could also point to some enabling interventions that demonstrate this. So, if we take each of those in turn. Demographic: well, between 2010 and 2015, there were parts of England where we saw long-term unemployment among young people rise by thousands of per cent. I live in a border area. In Chester, I believe the figure between 2010 and 2015 increased by 300 per cent. It didn't in Wales because we developed Jobs Growth Wales, giving employment opportunities to something in the region of 18,000 young people, with an 85 per cent success rate. In doing so, we've ensured that we have avoided the long term—. Again, under the obligations upon us through future generations legislation to act in a preventative and long-term way, we've managed to avoid thousands of young people entering into debilitating periods of long-term unemployment. In doing so, we've narrowed the opportunities gap between young people and people already in the workplace.
If we take geographical intervention, I think perhaps Merthyr and Mold act as—if you like, we pick one in the south and one in the north—good examples. If we take Merthyr, there is a new buzz and there is a new momentum in Merthyr. That comes as a consequence, I think, of strong partnership working with a very, very willing and ambitious local authority; partnership with the private sector and companies like General Dynamics investing in innovation and investing in skills training; targeted regeneration of the town centre; and the provision of more public sector jobs—moving public sector jobs out of areas that are already performing very well, for example Cardiff, into places that require specific intervention. That's the sort of model. If you look at Mold, it's very similar as well: strong private sector partnership; third sector as well, I think; targeted regeneration with the town centre. That creates a buzz, and that creates momentum.
In Merthyr we've seen, I think, considerable cultural activities undertaken in recent years as well that contribute to a new degree of confidence. Likewise, in Mold, you could argue that the increased number of good-quality restaurants and cultural activities again have been increased through strong work by the town council. New energy at the theatre, Theatr Clwyd, again has contributed to a buzz and momentum and a feeling that the areas are delivering inclusive growth, and that people are being brought into that new way of working together. I could provide other examples, and then—
No, that's fine. I'm sure other Members will have questions as we progress. Can I just say as well to Members—we've got nine subject areas to cover this morning, and we need to be quite succinct in our questions? Can I ask, also: do you mind if we interrupt you of we are not quite hitting the—?
Just to get a better understanding of the way in which the new economic contract between the Welsh Government and businesses that it supports will operate in practice—so, what level of proof will business be required to present in order to demonstrate commitment to the four requirements of the economic contract, and will this commitment be monitored in any way over the lifetime of the support that the business receives? Following on from that, when do you expect to have a clear definition of what is meant by 'fair work', and will this be in place before an economy futures fund is launched?
Okay. Chair, the purpose of the economic contract is to deliver inclusive growth and to reduce inequalities. Then, once you're through the door, the purpose of the calls to action is to address the challenges—the structural challenges as well—that hold back our economy and that need to be addressed in order to improve productivity. In terms of the implementation of the fair work criteria, it's my hope, it's my aim, that the fair work board will provide the definition in time for us to roll out the economy futures fund.
Right. Why have you decided not to apply the requirements of the economic contract to the support provided by the Development Bank of Wales, or through Business Wales at this stage?
I think this has been raised in the Chamber on a number of occasions, and I think I've given a pretty clear steer on this that we do view, longer term, the development bank and Business Wales as potentially conforming—the support that they give conforming to the economic contract. And also, we're looking at applying it across Government as well, particularly with regard to procurement: £6 billion of procurement spend, if we apply the economic contract—I do think that there are huge benefits, particularly in terms of being able to reduce inequality, and drive up employment standards as well. But it's my view that this should be carried out in a phased, manageable way, and starting with the funds that we directly manage I think is the most sensible way of going about this.
We've also—. This has come about as a consequence of a huge degree of engagement with the business community, with business leaders, business representatives. And whilst there is a desire to see simplification of the funding arrangements that Government operate, there's also a desire, I think it's fair to say, to see that change managed in an orderly way so that we have a transition that recognises that there needs to be a new way of supporting businesses but that doesn't send businesses that are currently receiving funds into an area that is completely unknown to them.
I think Marcella can probably give some detail on the engagement that's taken place that has led us to the decision to implement this in a phased way. But I do think that that is the safest way right now, particularly as we exit the EU and we need to address uncertainties and concerns across the business community.
Can I—? Perhaps we can move on, because I know we're tight for time. I've got Mark and Adam waiting for supplementaries. Mark.
Okay, a very quick question, given your referral to Mold. Critical to success, alongside the innovative work of the town council has been their direct engagement with Mold Business Forum, the presence of a town-centre manager, who's done the detailed modelling to establish opportunities—to what extent do you recognise that, and also the need, given the problem in Mold regarding, perhaps, landlords in London leading to rows of shops sitting empty, the need for Welsh Government to provide guidance on CPOs in such circumstances—compulsory purchase orders?
Yes. In general, I'd agree with all of those points that have been made by Mark Isherwood. In contrast to some other areas, I think the town-centre manager has worked tirelessly and very successfully in Mold. I think the town council, in particular, has had a strong vision over several years, with a particular focus on well-being and quality of life. Mold was one of the first towns in Britain, I believe, to join the Cittaslow movement, and I think—
Okay, and that has helped to define the identity of Mold, and in doing so, it's helped to draw in those investors and businesses, I think, that want to offer a higher quality of service and goods.
I saw the news yesterday about Welsh Government taking an equity stake in TVR. I was just wondering, could you just say—? Did you undertake an independent evaluation of the market capitalisation of the company in that case? Will you be announcing—? I mean, this was in the company's accounts from before Christmas, but it was the BBC that put in a request for confirmation. Will you be making regular announcements on the Welsh Government taking equity positions in companies? Would you expect a director—? Have you asked for a director position on the board? And why did you do this directly, rather than through the Development Bank of Wales?
We did it ourselves rather than through the development bank because of the timing. This decision relates back to early 2016, far before the development bank was formed. In terms of the demands that we will place on any equity acquisition—it will change from one business to another, but I thought it made sense to proceed with the purchase at 3 per cent of TVR. I know that many Members have called for Welsh Government to take equity stakes in various projects, including the tidal lagoon. In this particular instance, it made sense. I'll ask Andrew to come in with some of the detail on the due diligence and analysis that were carried out, but this is a product, this is a brand that I believe will help to define Wales's industries of the future. So, I think we've got a vested interest in making sure that TVR is a great success. When it ceased production in Blackpool back in, I think it was 2006, it left a huge number of enthusiasts and TVR owners bitterly disappointed. There is a great appetite for the car to be resurrected. We are looking forward to the TVR Chimaera hitting the roads in 2019, and we are working with the company in making sure that the facility in Ebbw Vale is modern, fit for purpose and can also carry out the sort of research and development that's needed to make sure that the company stays at the forefront of the automotive sector. Andrew.
Just on the point of detail, we were independently advised as part of the due diligence process on the acquisition of the equity stake and the price to pay. I can't remember which—I think it was one of the big four that advised us on that, but I can confirm that for you. But it was certainly a part of the process.
Can I pick that up? I think we have challenges with putting directors on boards of companies. So, you know, we own 100 per cent of Cardiff Airport. We don't have a director on the board of the company there; we have an observer arrangement there. Our job is to provide a remit to the company and to scrutinise whether it delivers against that remit. The Public Accounts Committee, I think, have looked at issues around conflicts in the past with directors on boards of companies, so it's a difficult area.
So, how do you resolve that, then? Do you have—? The UK Government has Crown representatives, doesn't it?
Yes. So, we provide observers to the boards of companies to be able to monitor what's happening with these companies.
I'm not sure of the specific details of that company. I'm just talking about the principle of putting directors on company boards.
Yes, but I mean you're giving the company a loan, you're giving them a lease—.
We'll check on the current status of the official who deals with this. I believe—I wouldn't want to name him in case it's not him. I believe he is the observer on the board at the moment—the lead official who's dealt with this.
Okay. David, had you finished your question? Sorry, I wasn't sure whether I interrupted you.
Well, I think I could probably bring the addendum to 3 into this one.
Okay, that's fine. I'll come back to you then for that, David.
Can I just ask, Cabinet Secretary, as well: in your calls to action you've got five areas, and for a business to have direct financial support they're required to meet one of those five, but one of the five is exports and trade, so when I looked at that, I just thought, 'Well, all businesses are involved with trade', so isn't that just a low bar? Perhaps you could just explain your thinking behind that.
In increasing export and trade activity—. Again, when we undertook an analysis of the Welsh economy, we found that one of the factors that needs to be addressed in improving our productivity is an increase in the number of businesses that export and increasing the amount that businesses export as well. So, this is about driving up the degree of trade and export within the Welsh economy.
But we want to see them increase the degree of trade and export in order to qualify for the calls to action funding.
Yes, I just wanted to understand how that might work in practice because, presumably, businesses we can support are already ticking one of these boxes. So, we could award funding to a business for ticking one of these boxes, which they would have been doing anyway. In practice, what levers do we have to stretch them to tick the other boxes they may not want to tick?
This will come during the process of implementation and engagement. We are working with companies, with responsible employers, to determine what it is that we can do through the calls to action to stretch businesses further than they're being stretched at the moment. At the moment, the criteria for drawing down Government support largely rest on cost per job and ratio. We wish to see a move away from that, and towards support dependent on the degree to which a business is futureproofing itself. In order to futureproof itself, it has to look at export opportunities, it has to look at automation. So, we're going to be working with—during implementation—the business community, and identifying precisely how the criteria can work in practice. But the other important element of the calls to action is the challenge element too: for the first time we'll be working proactively with businesses to come forward with bids for funding based on recognised challenges faced within any given business community sector or area or region. That, in turn, will address the discrete problems that certain sectors face, that certain areas of the economy currently face.
I understand the principle, and it's a sound one; I'm just trying to test, in practice, how this might work. So, say, for example, we're going to support businesses that export, and under one of the other targets we have on decarbonisation, for example, would we be able to say to them, 'We expect you to have a travel plan, for example, to reduce the number of employees who come to work by car', under the decarbonisation heading? It that how it's going to work?
This is being worked through with businesses. What we want is to address the challenges that the economy faces and the challenges that businesses face, but what we don't want to do is to make the system and the method of supporting businesses overly bureaucratic or complicated. So, at the moment, we're balancing the need to deliver support in a different way that drives up productivity with a desire to simplify and to inject a greater degree of transparency into the way that we go about supporting businesses. This is something that we're working through during the implementation process, alongside businesses and social partners. Marcella can give an indication of what's been—.
Yes. Before the businesses can access or be eligible to bid for calls to action, they have to satisfy the four minimum requirements of the economic contract, which are growth potential, fair work, promotion of health, skills and learning in the workplace, and reducing the carbon footprint. So, they have to satisfy all four. The next stage of the implementation is working with businesses to work through the detail of how that's going to work.
So, if you like, we're not going to be prescriptive in saying to a business, 'You must do this in order to draw down funding', but what we will expect from a business is a demonstrable commitment to reducing their carbon footprint, to decarbonise, to—
Yes, and we've already got monitoring and evaluation processes in place. Clearly, they need to be adapted for the economic action plan, but we already have that in place and we will be monitoring throughout the course of the support we offer.
Can I move on to perhaps a new section now? Your economy futures fund is a consolidation of other funds of the past, or that exist now, effectively. What are those funds that will be consolidated into that fund?
Okay. There are a very significant number of funds that we currently operate. I believe it exceeds 40 still. We're looking, at the moment, at consolidating a significant number of those funds. We're working through them at the moment. At the point of the economy futures fund being initiated in the next financial year, we won't have all of the funds that we intend to bring into it forming a whole part of the economy futures fund. That comes as a consequence, again, of businesses telling us that there are certain funds that need to be transitioned into the economy futures fund. In the coming weeks we will be in a position to be able to identify which specific funds are going to form the new economy futures fund.
Well, again, it's dependent on which ones go into the economy futures fund. Again, we can publish the sum total of that fund.
So, in the coming weeks, we'll know which funds are consolidated into it and what the total figure will be for the next financial year.
Yes, because we wish to start that economy futures fund early in the next financial year. In order to start that we need to know exactly what existing funds are going to be in it, and then the quantum of the income that's going to be in it as well.
A very specific question, actually. My understanding is that the Development Bank of Wales can only really match fund a second investor. So, in other words, you can only invest in a particular business 50 per cent, and then you have to have another investor or investors to come in with the other half of that investment. Can you tell me, could the economy futures fund be the other 50 per cent of that, or the other investor in that?
I think that's something we're going to look at as part of the implementation.
They're designed to be complementary. The activities of the development bank are designed to complement the economy futures fund—indeeed, all of the funds that Welsh Government currently operate.
Because there's a technical inability for the development bank to put anything more than the 50 per cent in, isn't there? It would be a great advantage if this economy futures fund could supply the other 50 per cent, or some percentage of that.
Yes, and it's part of the feasibility that we're looking at when we're looking at the consolidation of the funds.
I would imagine, along with state aid considerations as well.
So, I wonder if you could tell us about the regional and sectoral allocations for the fund.
Okay. So, the regional piece, I think, makes sense, because whether it be city deals or growth deals or regional working at a local authority level, I think there's a need to better co-ordinate what's happening on a regional basis, and I view the chief regional officer's role as being the glue that brings together different interests and different activities to be the voice of the regions in Government, and the voice of the Government in the regions as well. But, the position of chief regional officer and the new regional approach will be an evolving one, so it's more of a journey than an end point.
To begin with, chief regional officers are tasked with drawing together partners and putting together an enabling business plan for the region. In the future, their roles could evolve and with an evolution of roles could come the allocation of funds. At the moment, the funding that will be drawn down for regional activity will be from us, central in the department, but the regional officers will be able to inform exactly what investments and interventions are required at a regional level.
Because at the moment, they have no funds; they're not even working full-time in their roles, as I understand it.
There will be management targets, not just for the chief regional officers, but there'll be management targets across the department. The role, though, initially is to bring together the different stakeholders in order to make sure that our investments are complementary and that we're not duplicating or competing with one another across Welsh Government and local government, that we're all working to the same objectives, and that our investments are, indeed, complementing what local authorities are doing through growth deals, city regions and city deals, but also at a local authority level on a regional basis where they're going to be mandated to deliver economic development.
In practice, how will that work in terms of the existing structures that are there? So, for example, take the city deals. There's only a governance board for the city deals. Will this chief regional officer be the Welsh Government's principal agent in dealing with those boards?
Yes, this is something that we've discussed initially with regard to the Cardiff capital region, and my view is that the chief regional officer can become that single point of contact for the city region or the growth region area, again, simplifying the process of communicating with Government and ensuring that we get a clear and consistent approach, not just from my department but, potentially, from the entire Government as well.
Well, they will remain accountable to Andrew and to me, ultimately. This won't be about recreating the Welsh Development Agency on a regional footprint or about creating fiefdoms; this is about making sure that we are all working together across the regions in a collective and co-ordinated way.
If I can use your term 'lumpy', you referred to lumpy growth, which was a consequence of the nine previous priority sectors. Why will this flatten out some of those lumps—the action plan?
Okay, it's not just as a consequence of how we've delivered economic development through the traditional nine sector approach. Lumpiness has actually come about as a consequence, in part, of chasing targets that have led to perverse incentives, whereby if we chase after targets, we chase after the low-lying fruit, and that often means in the case of Wales, we go where we know we can create jobs more easily where we can hit the targets. And that's why, largely, we've seen more urban areas benefit considerably in recent years, whereas some more rural areas, more deprived areas, and those areas that have been more isolated, have struggled to grow at the same pace.
So, as you delve deeper into that isolated undergrowth, what do you expect to find and do?
Well, it will be different for each of the regions. This is one of the reasons why we've taken a different view of economic development and applied both a regional, place-based approach and also a new focus on the foundational economy. What we expect to find is that, with regard to the foundational economy, 40 per cent of people in Wales, who are in work, are employed in the foundational economy. But what too many people in those sectors find is that they are underemployed and underpaid. Due to the fact that women are over-represented in those sectors, we've also seen a widening of the pay gap because with women being over-represented in the foundational sectors, and with people employed in the foundational sectors often underemployed and underpaid, we've seen, if you like, the men in the other sectors get paid more and rise up the ranks faster, whereas women, who are represented more in the foundational sectors, have fallen behind.
What we wish to do with our new approach to the foundational economy is identify the challenges that the various sectors and businesses face, but also to improve pay, to improve working conditions and to improve opportunities. So, it will be different for each of those sectors.
Okay. Well, with tourism, for example. With tourism, the tourism strategy for up to 2020 is focused consistently on driving up the quality of the offer. In consistently driving up the quality of the offer, we've had to drive up the offer to customers and, in doing so, the businesses had to drive up the skills and the quality of the offer themselves. That's led to improvements in terms of pay and conditions within the tourism sector. I could point, as an example, to somewhere like Bethesda or Blaenau Ffestiniog as a prime example of how the tourism sector has helped to improve pay within those communities as a consequence of having to drive up the quality of the offer in order to get people in.
Okay. Are you going to give us more detail on—? Because, on your four pieces on the foundational economy—tourism, food, retail and care—you'll be giving us more detail on specific actions within that, but when?
So, I think it's very important to say that each of those four will have enabling plans, and they will be, I imagine, quite different for each of them. There are different challenges that are faced by each of those.
That work is under way at the moment. I've not set a target for the date of the enabling plans, because I think it's important that we get the work and we get the analysis that is carried out right.
But it won't be like the economic action plan, where it goes on and on and on.
No, no, not at all. I think, actually, in some regards, with some of those sectors, much of the work has already been done. Again, highlighting tourism, the tourism strategy, 'Partnership for Growth', actually identifies what the objectives are and what the targets are; what the challenges are and what the opportunities are. In other areas, such as care, we've got £1.5 million as a consequence of the budget agreement. An element of that funding is going to be spent working with the Wales Co-operative Centre on social care—
I can't divulge at this moment how much of that £1.5 million will be spent specifically on care, but that work is already under way. So, each of the enabling plans will be different, but each one is aimed at driving up the quality of work, driving up the skills of employees and driving up the sustainability of businesses engaged within those sectors.
So, for example, with retail, a big challenge for retail is automation. It may well be that the challenges that the retail sector faces will mean that we need to acknowledge that there could be a reduced number of people working in, if you like, the traditional retail sector, and that we will have to develop the skills of those people who could face redundancy to transition into another element or area of the retail sector. Likewise, the retail sector is heavily dependent on the quality of place, and, therefore, the work in the enabling plan will take account of the need to ensure that the regeneration of town centres is carried out in a way that contributes to a thriving and sustainable retail offer.
Okay, and in the Government's economic action plan, you've got tourism, food, retail and care—you say,
'We will align our approach to wider cross-government initiatives including the Valleys Taskforce Programme.'
In the Valleys taskforce, they've got those four areas in the foundational sector, but they've also mentioned energy, construction and health. Without any extra money behind the Valleys taskforce, how are you going to deliver that?
Yes. I think it's worth just recognising as well that the focus on the foundational sectors will not just stand in isolation within this department. We're working across Government with other departments in ensuring that any interventions that we make align with and complement what is carried out—
So, if the Valleys taskforce required money for the foundational sectors of energy, construction and health, you'd be able to say, 'Well, here's some extra money for that as well'.
Well, that would—. What we would need to do is to ensure that any funding or any resource that is attributed to sectoral work that doesn't form part of the four identified sectors is done in a way that conforms to the calls to action and that we focus, so that if businesses in the sectors that you've outlined currently don't conform with the economic contract, they get the right support from Business Wales, the right support from the development bank and from other areas of Government, in order to enable them to get through the door, to get the calls-to-action money. Now, that funding could come from different departments, but with the Valleys taskforce—we're delivering the objectives of the Valleys taskforce on a cross-Government basis as well.
So, in addition to the four that you've identified as Cabinet Secretary in your economic action plan, are you happy that the Valleys taskforce has identified a further three areas?
Yes. I'm content with that, because if we look at the thematic sectors, for example, and the enablers, energy is a key feature of enabling businesses to operate in a sustainable way. So, it ties back in.
Thank you. I just want to be clear about what the terms you're using mean. Because you seem to be interchangeably using 'foundational sectors' and 'foundational economy', and they're different things, aren't they? You correctly identify the amount of people working in foundational sectors, but the foundational economy is meant to be of a different philosophical approach. And from what I understand from your reference to the money to be spent on social care, that's on the margins, really. That's not really trying to get to grips with the philosophy of the foundational economy.
Well, the foundational economy, if we're to look for a definition of it, is built on those activities and those services that apply to everyday living, to everyday life, and it's blind, if you like, to the wealth of the consumer that requires them. So, it applies, essentially, to everybody. The sectors within the foundational economy, or the activities within the foundational economy, are multiple, but I think it's important that we recognise the limitations of Welsh Government in terms of the financial resource that we can provide to businesses, because resource is finite. And so, it's absolutely essential that we focus on the priority areas. Now, 'Prosperity for All' has highlighted care, along with mental health, for example, as priority areas. Therefore, we've had to choose—and I think we have selected rightly—those activities within the foundational economy where we can get cross-Government buy-in and cross-Government investment in solving the challenges and in making sure that the economy is futureproofed.
Forgive me, but are you saying that the Government wants to do more activity in the foundational sectors, or are you saying that you want to try and embrace the philosophy of the foundational economy to work differently in those sectors?
To some degree, both. First of all, we do want more activity within those areas of the foundational economy that require urgent change, given societal shifts, given the ageing population, given the pledges that we've made concerning childcare, and given the requirements for improved and more sustainable methods of delivering adult social care. But we also wish to see a change, if you like, in the behaviour and culture that operates within the foundational economy—a behavioural change that will lead to enhanced employment opportunities and greater recognition of the value of people and skills that are deployed in the foundational economy.
I think one of the big problems that we've had in the foundational economy over many years is that too many people view employment within the foundational economy as poor quality and not desirable. That needs to change, and it's only going to change if we drive up the availability of better quality jobs, if we drive up employment rights and conditions, and if we drive up pay and employment opportunities. So, if you like, the interventions and activities meet both of the objectives that you've outlined.
That sounds like the sort of things you'd be planning to do anyway and the Government's done for many years. I'm not clear on what we're going to be doing differently—
We are struggling for time, so just briefly address that, before I bring in Adam Price.
I don't think we've done it on a consistent basis across Government with the particular focus of the economy department as well. We've often, I think, viewed some of the activities within the foundational economy as being more relevant to other departments than to our own, and we've not always embraced the economic opportunities of the foundational economy, which sounds ridiculous, but I don't feel that there is sufficient evidence to lead me to believe that the foundational economy, in the past, has been given the respect and the recognition that it deserves, or given the resource that is required to make sure that people employed in the foundational economy are properly skilled.
The foundational economy, in the sense that Lee Waters was referring to, as an economic paradigm, is an idea that actually is made in Wales. Wales has been leading the world on this through the work of Karel Williams and his team, and Kevin Morgan, and the research programme of the Federation of Small Businesses. In developing your ideas in the economic action plan, and particularly the reference to the pilot that you've just referred to, the £1.5 million, have you spoken to the progenitors of the idea, if you like? And if you haven't yet, would you welcome that opportunity?
Yes, definitely. We're ready to listen to and to work with anybody in this regard. I think there are experts—. You're right; we're the home, I guess, of the foundational economy. I think there are experts that we would wish to engage with in the future. If they've not had an opportunity to speak with us or to influence our work to date, then I'd welcome their involvement in the future.
We can do that as part of the development of the enabling plans as well. We're very much seeking views of experts and expertise of others.
If the committee has any recommendations, I'd be more than happy to consider them. I'd also welcome further opportunities to discuss the foundational economy, given the proportion of people that are employed in it in Wales. And if I could offer the committee any suggestions for looking at economies around the globe where I feel that inclusive growth, for example, has been particularly successful in recent years, perhaps I could offer that and issue a paper.
That would be welcome. Can I just ask—? On your inclusive plans, can you give an indication of when they may be published?
I don't want to give a time frame because we want to get this right. But we're hitting the ground running, and I would say we'd be doing something towards the summer, when we will be at least getting—the scoping and the initial thoughts should be ready, which will help to inform the next steps of what we do with it.
So, can we expect to see something, a plan, brought to us sometime later this year, for each of the sectors?
Yes, but they won't come all at the same time, given that some of the work has already advanced.
Yes, but you'd expect them all to be in place by the end of this year.
Yes, my aim would be to see them in place by the second half of this year.
I want to further explore the regional approach to economic development. You talk about chief regional officers and their appointments, and the first flag that goes up for me is who are they going to be and where are they going to be drawn from. Because I think if we're talking about equal opportunity within a workforce or businesses, we also have to give air to equal opportunity of ideas and who's leading those, and also, if we're trying to drive change, to make sure that we don't draw on those who've always occupied this space and ignore those who haven't. So, that is my key question, because that, as far as I'm concerned, will drive everything else—if we have a top-down approach. And I suppose that's the second question. But this isn't new—a regional approach. The Welsh Development Agency, in the past, tried it, so I want to understand what might be different. I might as well be blunt, I suppose, when I'm talking about chief regional officers. What I don't want to see are lots of men all lined up in their suits, like we've had in the past, potentially increasing the disparity between the chances of women and men when we have this huge gap that's there and has been three for a long, long time.
Can you address Joyce's point as succinctly as you can? We've got quite a lot to get through.
Sure, yes. So, there are three chief regional officers and they've been appointed from within the civil service—in the south-east David Rosser, in south-west and mid Wales Rhodri Griffiths, and in north Wales Gwenllian Roberts. So, we've got one out of three women at the moment. I would hope that, in the future—but it's a civil service matter—we'll be able to see more women appointed to senior positions.
That's one point. What's going to be different in this regional plan to what happened before?
Well, we've not operated on the basis of regional delivery. We've operated through nine priority sectors and through other interventions and other departments concerning employability and regeneration. What the chief regional officers will do in the new regional approach is bring all of that work together, and bring it together with partners within local government and within the business community, social partners as well, and—crucially, I think—with education and training providers across the respective regions.
A regional approach is really important for me, because I cover such a big region, and I think it's fantastic that we're thinking differently, but the outcomes must be different also. Because if we look at the disparity in the opportunities for earning and learning, I'm only assuming that your whole policy, again, would be to close those down. So, what can you say to me that you think will do just that—will deliver that change within this policy to afford equality within the system?
Well, in terms of the way that chief regional officers and Government will be operating, we'll be operating with due regard to the five ways of working within the future generations legislation, making sure that we integrate service delivery across all levels of Government, that we are seeking to prevent longer-term problems from affecting communities. We're going to be working on an all-Government basis as well, as I've already outlined, with those chief regional officers potentially becoming key figures that represent the regions in Government, the Government in the regions, serving various interests across portfolios. And in doing so, the chief regional officers, then, will pay due regard to the work of Ministers concerning equalities. And I think, with a particular focus on inclusive growth, the chief regional officers will be well positioned to ensure that a greater degree of opportunity is afforded to people who have been marginalised, who haven't been given opportunities to gain employment that recognises their full suite of skills and that irons out the lumpiness, therefore, in the economy. But I don't think we can see the work of the chief regional officers in isolation. I think the chief regional officers' work will act in a complementary way to the new focus on foundational sectors and to the work, for example, of the pilot Better Jobs Closer to Home, which could be replicated across Wales. I think in the first instance, though, it's essential that we get those regional business plans that bring together the key players across each of the regions, and that primarily means bringing together the work of local government and Welsh Government.
This session is due to finish at 10:30, but with your permission, we'll go over slightly, if that's not an issue.
Okay, we'll be done by then. I've got Adam, Vikki, Mark and Lee all waiting to lead sections, so I'll have to say no more supplementaries. Any questions you've got, then we'll have to write to the Cabinet Secretary after the meeting. Adam Price.
One of the biggest criticisms of the economic action plan is the lack of quantifiable targets. You refer to the problems of being overly obsessed with targets, but if you don't have any, it's difficult to measure success. If you don't measure it, you can't manage it, as Peter Drucker said. So, how are we going to measure success with this economic action plan?
Well, success will come as a consequence of improving wealth and well-being, and reducing the inequalities in both. In terms of monitoring and being able to measure success, I have faith in some of those international organisations that we're opening up dialogue with to provide not just the challenge that I think is required, but also the international benchmarking and monitoring and evaluation, so, for example, with the OECD and World Economic Forum, who I think are already conducting work in the area of inclusive growth that could be valuable in terms of the roll-out of our policy. And I think you're right: an obsession with targets can lead to damaging consequences and to widening inequality, and to preventing some of the more isolated, disadvantaged areas from realising their potential. I think we've also been quite clear in 'Prosperity for All' that we'll be applying the national well-being indicators across not just this action plan, but also the complementary action plans that are being developed by my colleagues in other departments.
In terms of evaluation and engagement, again, I think it's absolutely essential that we bring in international bodies to challenge us, to monitor us, and to ensure that, as we implement the economic action plan, we do so with due regard to what it is that businesses themselves believe must happen in order for them to become futureproofed, and in order for them to become more productive. This is an area of work that Marcella has led on during the process of consulting with and engaging with businesses.
Time is very limited, so—. I understand that. The well-being indicators—I don't know how many there are, but there are probably over 100 or whatever, across Government—in order to focus on the success of the economic action plan, in order for citizens to be able to assess and measure this, why don't you do something like buy into the index of sustainable economic welfare, which brings together that basket of well-being type indicators that relate specifically to the kind of high-level goals that you have in the economic action plan?
The well-being indicators, they don't amount to hundreds. They're limited in number, and I think they're limited to such an extent that we will be able to monitor the success of the economic action plan. But my concern is in, as I said at the outset, raising the wealth in the aggregate of the country, but also reducing inequality and raising the level of well-being whilst also reducing inequality in that regard as well. That's something precious few countries, precious few economies, have been able to do in recent years. And—
Yes, but, Cabinet Secretary, what an index does is it brings together a basket of indicators. You know this. And it gives you then a single figure, which allows you, in a relatively direct way, to measure progress at the time. Why don't you do that?
Well, because we've already got—. We've established, through 'Prosperity for All', that there's a need to apply a consistent basket of measurements as outlined by the well-being indicators. That's something that I do have confidence in. With regard to the outcomes that we wish to see, the well-being indicators will be able to provide us with a clear analysis of whether we've been successful in implementing the plan and rolling out the various actions within it. Marcella.
I think the Cabinet Secretary mentioned the international work as well, and that's going to be very important in, if you like, exposing us to international best practice and constructive challenge. So, we see that as a new way as well of examining our progress and benchmarking us against others globally, not just within the UK and within Wales.
Okay. Time is very—. So, explicitly specifically, then, the OECD will be doing an annual report that will benchmark where the Welsh economy is internationally.
We're in dialogue with them at the moment about specifically how it is that they're going to be able to benchmark. So, I can't say it's going to be an annual report. It may well—
And the World Economic Forum. We're still looking into which organisation.
I'll truncate very, very quickly. Just on the—. There's a reference in the economic action plan to a further period of engagement. I think we've had, you know, engagement-itis with this 18 months that took us to this point. How long's that going to be, that further period of engagement, and is there—? What's the outcome going to be? Are you going to do a revised version of the plan then?
No, the plan is the plan, but, in terms of the engagement for implementation, that's taking place right now, up until the end of the financial year, when we expect to be able to commence the economy futures fund and roll out the economic contract. But subsequent engagement will continue. We're not going to stop talking to businesses, either, once that engagement process ends. The establishment of the ministerial advisory board or, if you like, the superboard—that will enable us to engage with business interests across all sectors, across all parts of Wales, and it's my intention to have that board up and running up and to be able to provide advice on a consistent basis as we move forward. So, the engagement will continue, but the engagement specifically with implementation is taking place at the moment, and that will come to an end when the economy futures fund and when the economic contract commences in the new financial year.
Right. Very, very briefly, all these different 48 advisory boards—they've got the sword of Damocles still hanging above them at the moment because you won't tell us which ones are going to survive and which ones are going to be culled. So, can you tell us now or will you write to us? When will we know?
Already, some boards are aware that they'll be ceasing. Discussions are ongoing with the remaining boards in terms of how their work will be phased out or indeed how their work will continue but in a different way, in the form of task and finish work. I'm happy to provide a detailed update at the point where all current boards have been informed of their future and at the point where we're able to provide details of the individuals who'll be sitting on the ministerial advisory board.
You referred to the enabling plans that you're working on. Are those the same as the calls to action or are they going to be—
No. So, calls to action, that's the new prism through which we will fund businesses looking for support from Government. The enabling plans for the foundational economy, activities within the foundational economy, are specific to the challenges that we face and referencing Government commitments in terms of care and—
So, will there be a plan for every call to action or is it just a statement of aims?
No, the calls to action are those areas of activity that need to be addressed if we are to improve the productivity of the economy, and that's based on the analysis of the Welsh economy and, indeed, on other analysis of the wider UK economy. So, they are the statement of aims. The plans will not be prescriptive. They will be based on what each individual business requires in order to grow in an inclusive, sustainable way. But the calls to action are also designed to enable businesses to come forward collectively to be able to draw down funding through the challenge initiative, which will in turn be the vehicle for drawing down funding from the UK Government in the industrial strategy. I don't think we should believe that we are automatically entitled to 5 per cent of funding from the UK Government through the challenge fund, through the industrial strategy. We need to develop a means of ensuring that we get as much funding as possible for activities that will futureproof the economy, which will lead to a higher degree of productivity, and those areas within our calls to action do just that.
Thank you. Cabinet Secretary, if we allow you time to get your meeting, if we go on till 10:40, is that okay with you?
Thank you, Chair. The No. 1 policy question that my constituents ask me is: what's happening with the new rail franchise? Now, just in here I see that Chris Grayling, on 10 January, in an opposition day debate said he had the answer to what was going on with the new franchise and said it was 'untrue' that any powers over the franchise remain in Westminster and that:
'The re-letting of the...franchise is being handled entirely by the Welsh Government.'
How would you respond to that, Cabinet Secretary?
I wish it was the case. It's not, but the Secretary of State has many spinning plates, a huge portfolio with an immense amount of work demanding his time and attention. I think it's fair to say that positive discussions have taken place with the Secretary of State and with his officials with a view to bringing to satisfactory completion the talks concerning the transfer of the asset and resolving the funding settlement issue. It's my intention, and it's the Secretary of State's intention, to draw those discussions to a conclusion next month, and I'll be able to provide the committee with full details of the outcome of those discussions, but those discussions, as I say, are concerning both the transfer of the asset and the funding shortfall, which I think has been well covered in the media. But insofar as transfer having already taken place is concerned, that's not, strictly speaking, correct.
You can understand my concern when we know that any delay in the transfer of powers could push procurement activity into 2018-19. To think that Chris Grayling appears not to have a grasp of this, while at the same time we are being told that Welsh Government is going for a third agency agreement to try and resolve these issues—it's certainly an area of concern. If we add into that as well the fact that there's still the dispute over the £1 billion revenue funding—. Could you give us any further update on that?
Yes. As I say, I think it is fair for me to report that discussions are progressing positively and will reach a conclusion—we're determined on both sides to see these discussions reach a conclusion in February. At that point I'll be able to update Members on the outcome of those discussions. But, if we just go back to 2014, the agreement that was in place for funding through the block grant was not to be affected. That's not the position that is now taken by UK Government. That's why further discussions have now taken place on historic growth, and why we've engaged not just with the Department for Transport but also with the Treasury. Discussions will come to a conclusion in February. They have not yet. Those transfers that we talked of in the Chamber have not yet taken place.
Another concern of my constituents is, if this funding issue is not resolved, who's going to carry the cost of that. Will there be a knock-on impact on fares or on services provided under the new franchise?
Okay. So, we're still working through each of the tenders at the moment. There are a whole number of levers that we will have at our disposal, and a whole number of factors that will contribute to the eventual outcome of the deliberations concerning any shortfall. Simon, are you able to—
I don't think we've got time. Can I ask you to write to us on that point? We'll make sure we prompt you on that, if that's okay.
Thank you. To switch to community transport providers, which, in Wales, provide hundreds of thousands of passenger journeys for vulnerable and isolated people each year—in Powys, last year, 95,000, Rhondda Cynon Taf, 74,000, Denbighshire, 20,000, and so on—in so doing not only improving well-being but reducing cost pressures on county halls and health boards. You're no doubt aware that, in 2015, the European Commission told the UK Government to address how its directives on passenger transport operator licensing were interpreted into UK law, particularly in terms of local government contracts and derogations, and that, alongside that, a threat from a small group of commercial operators to force a settlement through threats of legal challenge. Last July, the Department for Transport UK issued a letter to all section 19 and section 22 permit issuers, and community transport providers in Wales have told me that this now threatens the continuation of their operations, where most of them are small, against some of the giants in England, but many are dependent on their commercial contracts for their viability, and that many of these are potentially planning to go out of operation if this, unfortunately, went through.
So, what assessment of this, if at all, have you made of this? What actions do you propose to work with the sector to ensure that essential services continue? What dialogue have you had with the UK Government, if any, regarding this? And, finally, what, if any, flexibility do you consider exists under the devolution settlement for you to issue your own guidance or legislation regarding the permitting regime in Wales?
Okay—many aspects to that question, which I'll try to rush through. First of all, the dialogue that's taking place is taking place on a very regular basis, but UK Government, I believe, will be commencing a consultation on this imminently. It's fair to say that the proposals could have a very, very damaging impact on community transport providers across Wales. You're right, it's hugely popular. It's more than hundreds of thousands of passenger journeys that are undertaken every year—it's now 6 million. In contrast to commercial services, we're seeing an increase in the number of passengers using community transport. It's a sector that employs more than 600 people. I think 1,800 volunteers are engaged in community transport activity. So, it is crucially important nationally, but it's also incredibly important, particularly in rural areas and for people seeking services, specifically within health, where, without community transport, people would be struggling to get to appointments, and where health services would struggle to be able to operate in an effective and efficient manner. So, it's absolutely essential that, if this is taken forward, adequate resources are made available to community transport providers in Wales.
Now, the indications so far—. I think there's been some confusion at a UK level over the resource that may or may not have been allocated to community transport, but the amount of funding that has been talked of to date, which is being made available, potentially, for England and Wales—and it's still not clear whether it will be made available to Wales—is only £200,000, which, I'm afraid, is a drop in the ocean across the whole of England and Wales if it does apply to both.
This is something that must be addressed by the UK Government, given that it's a reserved matter and it should be addressed with adequate resource for Wales as well. As it emanates largely from vehicle standards, it's a resolved matter. It's something that I would wish to see devolved if at all possible, but we already support bus services with the bus services support grant to the tune of £25 million a year. Changes of this type that emanate from the UK Government should be resourced and should be delivered in such a way as to not disadvantage communities in Wales, or the community transport providers. So, I'd expect adequate financial resource to be made available.
We may have to come back to that in written form, Mark, if you have further questions, if that's all right.
Well, the key question you may want to pose is what work you're actually doing with the sector itself in this and the wider context. Not now, but you may want to—
We'll put that in written form and ask you to expand on that. The last four minutes, Lee Waters.
I'd just like to briefly ask about the announcement you made over Christmas, when the Assembly wasn't sitting, that you're going to give £136 million to Associated British Ports so that they'll lift their objection to the new M4. Of course, that'll delay the whole project. Are you able to update the committee on what the overall figure of this project is likely to be?
Simon will be able to give the specific detail of the cost. It's over £1 billion, and £139 million is being made available for the ports work. I understand that Members are concerned by that degree of investment, but that investment will ensure that Wales becomes a more attractive place for investors.
Forgive me, Cabinet Secretary, I just want to know: is there an up-to-date working figure? Because it was £1.1 billion, there's an extra £136 million announced, there's a delay—what's the latest working figure?
The figure that has been lodged with the inquiry is between £1.3 billion and £1.4 billion.
Right. So, it's gone up to potentially £1.4 billion. That's including the delay—is that right?
Those are prices benchmarked to 2015 prices.
No. We don't generally include VAT in our budget prices.
The VAT situation is quite complex with that road, because VAT applies to some parts of the scheme but not to other parts of the scheme. So, there are conversations taking place with HMRC at the moment to understand exactly what the VAT implications of the scheme are.
There will be an element of VAT, but the scale of that we've not been able to nail down yet.
But it's reasonable to assume that the £1.4 billion will be higher once whatever VAT you decide you have to pay is taken into account.
Well, there will be an element of VAT, yes.
There will be an element of VAT, yes.
Okay. Now, in terms of the cost-benefit that the Cabinet Secretary just started telling us about, you quote two figures. One is on the wider benefits, which is just over a £2 return for a £1 investment, but the actual figure of the road itself is significantly lower—from memory, it's something like a £1.60 return for a £1 investment. Now, using the Treasury benchmark, that's regarded as low value for money. Do you have a figure? At what point is the tipping point where this road no longer becomes a sensible use of public money?
That's for the wider benefits. There is another figure, isn't there, of the actual—? So, there are two different ways of doing this. Not using the wider benefits, just using the actual benefit of the road, that's significantly below £2; I think it's around—
It's £1.7, okay, which is low according to the Treasury book. So, my question is: is there a—? That is what it is and we can take a view on that, but my question is: as these costs go up and it's delayed—I mean, I'm told it's going to be at least £1.4 billion, not the £1.1 million that the public inquiry was originally told—does it reach a tipping point where it is no longer good value for money?
There's not a figure that we have that we've set because this is a decision that, ultimately, will be taken as a consequence of the outcome of the public local inquiry and then will be determined by Ministers. But, in terms of getting the best possible benefit-cost ratio, the cost of the scheme would have to increase massively to bring the current £1.7:£1, down to £1:£1, which would essentially be a flat rate.
But you accept, of the projects in your portfolio, if another project came forward with a £1.7 return on a £1 investment and the Treasury says that's low value for money—
So, that's typically not a low number for transport schemes—£1.7. That's just the transport benefits, but we need to look at the wider benefits—the number of other people employed on this. Actually, when we get into that £2.2, £2.3 figure, that's classified by the Treasury as high.
And I think it is right to take into account wider benefits as well, in terms of the opportunities being afforded people in the construction phase. We're looking at something in the region of 1,800 people employed during construction. Twenty per cent will be trainees or apprentices. This has massive—
Compare that with, for example, energy efficiency measures, and were you to retrofit our housing stock, you're talking a £9, £10 return for a £1 investment there.
But that's different. In terms of transport, and I can provide—I'm happy to provide a comparison table, if you like, of major transport programmes, including rail and active travel, so that Members can see for themselves—
Some active travel returns are a £9 return for a £1 investment, for example.
Thank you, Cabinet Secretary, for agreeing just to stay over a short while. We'd better let you get off for your meeting, and we'll take a short break, if Members can be back just before 10:50. Thank you.
Gohiriwyd y cyfarfod rhwng 10:41 a 10:55.
The meeting adjourned between 10:41 and 10:55.
Okay, I move to item 3. This item is in regard to devolution of the bus registration powers. In this morning's session, we have a panel before us. We just want to draw on your experience and views on a number of areas. We're very grateful for your time with us this morning. Can I just ask, for the record, if you could just state who you are and what your role is? If I can start from my left.
Huw Morgan, I manage the integrated transport unit in Caerphilly council and I'm also attending on behalf of the Welsh Local Government Association today.
I'm Margaret Everson. I head up Bus Users Cymru, which is a Welsh Government-funded bus passenger representation body.
Justin Davies, chairman of the Confederation of Passenger Transport's bus side for Wales, and managing director of First Cymru buses, based in Swansea.
Jo Foxall, managing director for PTI Cymru, and we deliver the Traveline Cymru service in Wales.
Lovely. We're very, very grateful for your time with us this morning. If I can come to Vikki Howells with the first question, and that'll lead us on to some general discussion after that.
Thank you, Chair. The Wales Act 2017 gives us some new powers over buses, so I wanted to ask you all what you think the key priorities for the Welsh Government and the Welsh Assembly should be in using those powers.
You don't all have to answer every question—whoever feels most able to address the point.
Bus Users Cymru thinks that Welsh Government should provide a framework that encourages a stable and effective network of services for passengers, to enable them to get to and from work and access healthcare facilities, shopping and leisure. We think they should use the powers to tackle congestion and to provide some bus priority measures.
Do any of the other panel members—? Don't feel you all have to respond to every point, but if anybody else wants to make a point—.
On behalf of the industry, I would echo much of what Margaret just said. The key issues for us are congestion and the speed and ease at which we can move vehicles across different parts of the network, because that affects the efficiency of the operation. We run to a timetable, and each element of those timetables has costs, and the more efficiently we can move vehicles, then the lesser those costs become. Because time equals employment cost equals number of vehicles equals the resources and assets you need to run the service. So, every aspect that can be used to improve that efficiency of operation benefits the customer.
Can I ask you, do you think that tackling congestion is key to reversing the decline both in bus patronage and also the registration of services as well?
Time after time again, if you survey the customers and ask them, 'What are the key elements that are important for you?', it's reliability, punctuality and speed of the service. They always come in at 1, 2 and 3, in a variation of that order. Because what customers want to do is do their journey quickly, they want to feel that they're making the journey and it's taking place at the speed they expect it to do, they want the bus to turn up on the time it's supposed to turn up, and then they want that bus to make that journey on that regular basis.
Almost all of those elements are based around the road you're travelling along. Clearly, some of it is to do with the ticketing systems and how quickly we can get people on the bus. Almost all operators are now moving towards ticketing systems that don't involve cash, because cash is quite a slow process in getting people on and off the bus. We're playing our part in trying to speed that process up, but then you come down to what is the physical highway you're running along and what are the elements of that journey and how quickly can you do that on a consistent basis.
You said that those were the three key answers. Is that the case across all demographics? Because I'd have thought that, for an older demographic, the most important thing was being able to get on the bus in the first place—so, access. For the disabled or mothers with pushchairs, access to getting on the transport would be the No. 1 priority. I just want to know a little bit more about who you're asking and how those three have come out at the top.
I think the point to remember, of course, in the bus industry is that every single bus now has to be 100 per cent accessible. So, every bus is low floor, every single bus has wheelchair facilities within the vehicle. So, access issues in that sense of having a stepped entrance have now been totally eliminated. So, every bus has to be accessible under the appropriate legislation in both England and Wales—and Scotland. So, that problem is resolved. So, when you go and survey customers, actually, those issues that did exist some time ago have now gone away. Now, you do get comments from customers regarding sometimes the number of wheelchair spaces on a vehicle and aspects like that, which are often to do with the frequency of service, but, fundamentally, when you survey customers, it's regularity, reliability and the speed of the journey.
Yes. Just a very straightforward question actually—whether panel members have had any discussions with the Welsh Government on how the new powers should be used.
We very much feel that they should be used quite simply to improve information and improve services for the people of Wales. There are some very easy wins from our perspective within the new powers. We've got a particular vested interest in the processing of registrations in Wales. Our single highest area of complaint is not around incorrect information but information that is incorrect because we've not received registrations from either operators or local authorities, and we feel that PTA Cymru is best placed to ensure that we get all that information. We're already processing that information anyway, but to make sure that we get it, to then be able to disseminate that quality information to the public of Wales.
Okay. And, in your discussions with him, do you feel that that's forthcoming?
We very much do. We've spent quite a lot of time talking to the traffic commissioner about the process. We've also visited the Driver and Vehicle Standards Agency up in Leeds to understand how they do what they do and if it's something we could take on easily, which we very much feel it is.
I'd like to ask about the new powers in the Wales Act around franchising in particular. I'd like your views around franchising and what we might be able to creatively do under the powers that we now have. Because, as I understand it, Cornwall have the power to do this, London have this power. Correct me if I'm wrong, but my understanding of the way the system works is that, at the moment, a commercial bus company can pick and choose the routes it wants to run—the commercially profitable ones, because it's a commercial sector—and the unprofitable ones they will run if there's a Government subsidy, but, until now, because of the privatisation legislation, the Government hasn't been able to say, 'Well, take a basket of routes, a network of routes, if you like, and give us a price for running all of them—the profitable and unprofitable all in one go.' And the franchising powers, it's my understanding, allow us to do that, which will allow us to make more routes viable. Is that a correct interpretation of the system, and what do you think this possibility opens up and how should we use this?
I think the issues around franchising and the benefits or disbenefits have been well debated and are not clear. You've referenced Cornwall; I'm not aware that, in that sense, there is any franchising in Cornwall. I know part of our business works there and is in a very close commercial partnership with Cornwall Council. That, in no way, is a franchised operation. It's a partnership that exists, which is a very successful partnership actually in terms of investment in the industry and the number of routes and type of routes operated.
Franchising, of course, if you take the small and medium-sized enterprises, which form many of the operators in Wales, particularly in parts of west Wales and parts of north Wales, would mean that, potentially, some family businesses would lose the entirety of their livelihood because, if they didn't win a franchise, their business would disappear and they wouldn't be trading in that marketplace, whereas today the marketplace works with a mixture of commercial and tendered operations, as you pointed out, which means that you actually have a number of different operators playing within the field, with competition for individual tenders as they occur and, of course, the open marketplace for people who want to develop their own routes and do that. So, in Pembrokeshire, for example, there's a mixture of commercial and tendered services operated by a number of different operators. So, if you maybe moved to a franchised operation in Pembrokeshire, for example, you would end up possibly with just one operator, and everybody else would therefore be out of the marketplace. Potentially, for some small medium-sized enterprises, that would be the end of their business. They would lose out substantially, as indeed would other operators if they didn't win the operation there. So, that would be one potential effect of franchise.
Of course, if you look at the London market—which is a completely different market, I think we could recognise, from other parts of the United Kingdom—of course the bus market there is in decline and has been for some years now. If you look at the plans recently announced, and the projections from Transport for London that have recently come out, they're actually looking, over the next few years, that bus services are going to decline and their number of customers is going to decline, and that's in a growing city in what's one of the most—I think we would understand to be—prosperous parts of the United Kingdom.
So, I don't think the picture's clear of what that benefit would be across a marketplace that is very mixed.
So, quite clearly, commercial operators don't particularly want to change. I get that. I understand that. You're defending your commercial interest. And, clearly, you're right: in a rural area and an urban area, franchising would need to work differently. So, you got that on the record; I understand your point. Let's try and talk about the potential benefits from a franchising approach now, because it may allow a cross-subsidising of routes, which hitherto has not been possible because of the privatisation legislation, and, as public subsidy is becoming harder to find, because of austerity, we could potentially have a situation where we salvage some routes for people. Yes, it might disadvantage some operators in some areas, but let's put that to one side and look at the positive benefits. I wonder if, from a user perspective, or from a broader perspective, there may be some advantages to that. How would it work, and what would we need to do?
I understand what you're saying, but I think the reality is that there's a cost to providing a bus network. When you look at some of the services that have been developed commercially on some of the routes now, they're at far better frequencies in some areas than they were before deregulation—
—because the operators have been able to grow. Yes, where they're profitable. And they've grown a market. But, if you move to a franchised system, if you wanted to keep all those routes at the frequencies they were and also do the things like interchange at stations and the integration that we all talk about, you're talking about adding extra resources into the network but not necessarily generating enough revenue to sustain a network of that size. So, the likelihood is you'd probably end up having to spend more money to maintain the network than you would under the current system. That doesn't make the current system right or wrong, but, if you genuinely want to address the network and expand the network so it is more inclusive in some areas—because we all know, in some areas, there have been some quite significant cutbacks—I think we've got to accept that that's going to come with a cost. Going back to London, the cost to the public purse for running the London network is much, much higher per passenger, per resident, than it is most other areas—well, all other areas of the UK. I think we've got to take that into account when we're talking about franchising. If you want to expand the network and make it a much more inclusive network, there's going to be a cost that comes with that, and you can't ignore that.
As well, we talked earlier about the decline in bus services, but society has changed a lot over the last five years, 10 years. People aren't necessarily going out to shop as they were previously. So, because bus transport is a derived demand, then there's been a natural decline, as we saw in the 1950s and 1960s, when the cinema became less popular and people were watching tvs and staying at home. It's led by what society wants to do. So, there's a reason that patronage is declining as well—because of the way society has gone. And I think, coming back to what we talked about initially, with congestion, it's difficult to rival the car for convenience. I think we all accept that.
So, what we need to be doing is working with the bus operators, working as local authorities, as a Welsh Government, in trying to improve the network and make the network attractive to people to want to use it. One of the things we need to do for that is, as Justin mentioned earlier, look at where the hotspots and congestions are, and give the bus an advantage for people to travel into the centres where jobs are or where the shopping and facilities are to actually make them want to use the bus. At the moment, if a bus is just stuck in traffic—. And, obviously, I'm talking about the more urban areas, rather than the rural areas—there are different issues in different areas. But, if we want genuinely to improve the network and generate growth on it, there's another way. Again, some of us were members of the bus alliance group that the previous Minister set up—one of the strong themes that came out of that was, 'Let's develop partnerships', and a good example of that is what's been done in the west midlands with the Bus Alliance, and it's basically a set of 50 key deliverables that operate with local authorities and that the regional government have signed up to as deliverables over a timescale.
Is it acceptable that we've used a huge amount of energy over a number of years around quality bus partnerships and quality bus contracts and they haven't really made much of a difference?
But am I hearing from your evidence that you don't think that franchising is an attractive option, either?
Personally, I think the partnership route is a better approach, but the problem that we've had with partnership—. And, again, this wasn't helped by the demise of the transport consortia, because there was some work being done to develop things like this, and, all of a sudden, it stopped.
But I think the problem with partnership at the moment is we're obviously talking a lot about different things, but what we haven't really got is a defined plan to take things forward. With that defined plan, you need surety of funding, you need to make sure that, if you are going to change things, whether it's investing in infrastructure or improving the standards of cleanliness at stops and lots of other things that would be much better than what we've got at the moment, we need to commit revenue funding to that—much more than is there at the moment—and we need to improve the standards from the outset. We need to be looking at real-time on a regional basis or in a wider area. There are lots of things that we could be doing, but we don't seem to be bringing it all together and coming up with a plan that we can take forward.
I agree that if that doesn't work and that isn't the way that's going to achieve what we want to see then probably franchising is the last resort for making it happen. But I think—
Can I just bring in—? There are a couple of other Members who just want to come in on this theme, as well—Hefin and Adam. Hefin, do you want to ask your question now?
Yes. Just a simple question: one of the Welsh Government's consultation proposals—I'll ask it to Huw—was to remove the restrictions on local authorities setting up bus companies. Is it likely, if those restrictions were removed, that any local authority would do that?
I think unlikely, generally, unless there was a serious failure in the provision of services in an area, because it's not an easy thing to make happen. It requires a lot of investment and a lot of time put in to make sure that everything's in place to run services effectively. For most of us, we've got operators who're able to do that at the moment. I accept, in some areas, then, that it is more difficult, particularly for the smaller operators. A lot of smaller operators don't participate in local bus networks anymore; they've moved just to coaching and schools and they've moved away from local bus. I think if we're in that situation then, yes, I think it's something that local authorities should be looking at.
I remember the days of Inter Valley Link. What were the—? Deregulation was the reason for the failure of Inter Valley Link—that was a local authority-owned service.
I think, after deregulation, there was an awful lot of on-the-road competition, and that brought about the demise of many companies, whether they were local authority or private operators, because, generally, networks can't sustain that level of on-the-road competition. There isn't enough revenue being generated to support—
Generally, yes. In some parts of the country, if the passenger base is there and the right things are in place, competition can co-exist and co-exist quite well. And there's differentiation of the product, so, if you want to pay more to have a more direct service the passenger's prepared to pay a premium, and if you want to stick with the service that goes all around the houses then there's perhaps a different product there for people.
Would a local authority ever be able to compete on a commercial basis?
I think it would be very difficult to compete on a commercial basis. I think the role for a local authority would be in networks that are probably failing and difficult for a commercial operator to cover.
Yes, it's down to cost, yes.
But that is happening, of course, so in the context of franchising then you could have municipally owned companies that, actually, would be sustainable, presumably.
If the costs are right they would be, but it would depend on the cost of sustaining the network we wanted to see.
The on-road competition you just referred to and the demise of municipal companies and other operators—I remember when there were two bus companies in my home village of Tycroes. Has that been beneficial to passengers, then—the post-deregulation competition era?
I think the immediate post-deregulation competition was not beneficial to passengers generally. It caused a lot of uncertainty, because the services were changing frequently. I worked in one of the shire counties just after deregulation, and at that point there was a traffic commissioner's office in Cardiff. We were literally visiting every day, because it was before the internet, to see what services had been lodged that day for the next six weeks' change—
This is what I'm struggling with—it's something you can help me out with. In the regulated era, there were privately owned companies successfully operating and there was regulation. So, moving to reregulate, effectively, why would that mean, necessarily, the demise of small and private operators?
It depends what type of franchise, I guess, was let, because a franchise is a network. Some of the smaller operators were able provide one or two local services traditionally and continue to do so—
So, that's what I'm getting at. You could imagine a model, couldn't you, where you encourage consortia, for example that you had, actually, even flexible arrangements whereby companies could come in to a franchise that was held by a lead operator? You could parcel franchises in ways that ensured that you didn't actually lead to a wholesale erosion of the family owned companies. Would it be possible to design franchising in a way that met some of the concerns that you referred to?
Clearly, again, there are many ways you could design something, and maybe you could have a range of subcontracting arrangements. I think some of the recent news from this week would suggest that subcontracting has its difficulties, doesn't it? If we looked at the consultation document on buses from last year, the Competitions and Markets Authority, in its response to the franchising questions, if I recall rightly, actually made some comments about ensuring the competition that would exist into a franchise structure. So, I think they were suggesting how that could or couldn't work, and were looking at that from that angle. I think it's probably quite important to take on board their views and suggestions around that, so that if you're going to structure something, then it needs to take account of their views as the Competitions and Markets Authority, clearly.
So, yes, you could structure things in various ways, and I think it all comes back, ultimately, to, at the end of the day: is that going to grow the market and the business and reverse the declines that we've seen? You made reference to previously, pre 1985, and then you had, effectively, a regulated market. I think if you actually look at the rates of decline that was taking place in bus usage at that time and the years before then, then it was a higher rate than it's been since. There's clearly been a decline, we are all aware of that. But, actually, that was a sharper and steeper decline than where we are now. Now, we've moved on, the economy is very different structurally, we're a very different country, and, clearly, we're at a different place, but I'm just not necessarily convinced that pre 1985 is a good picture to look at and say, 'That was great, that was a good era, and we could just go back to that again.' I'm not sure on that one.
Just on that point, if we did the same survey, would trains also have been in decline at that time? I'm just thinking about capturing a mood change, and I think there is a mood change now towards the environmental impacts of all sorts of things. Plastic is high up there at the moment, air pollution is pretty close behind, at the moment, and I just want to explore further what Adam has been saying, because, if we regulate, we can do all sorts of things. So, we could decide that we want our cities' air not polluted anymore. So, we might decide that the buses in the cities would all be electric, and that would put considerable peer pressure on people to drive cars that were high pollutants around the city, and that could be enforced, or it could be peer pressure.
So, there are many variables in terms of regulation that we're really not discussing at the moment. I just leave it with you whether you've considered them or whether you've been asked to consider them. Because it's fairly obvious; if you just look at the profit motive then there's going to be a creaming off, and it would be the government, whether that's local or national government, that would be plugging the gap. That's what we've got at the moment. So, has anybody, in your consideration, thought about advancing an argument for cleaner transport? Have you had any of those discussions whatsoever in terms of the environmental impacts?
Is that in the context of the Welsh Government?
Moving forward, because we're trying to really, ultimately—. Yes, in Welsh Government, but moving forward to where we might be in this changing world of transport.
Certainly, on behalf of CPT, we've had no particular discussions with the Government on that aspect, but, yes, I think as an industry we recognise that there's a change in fuels taking place, and of course within England, for some years now, grants have been available to move to lower emission vehicles, hybrids, and there's work on electric vehicles, of course, taking place now. So, it's developing technology, which I think is very welcome, and the industry is now starting to invest in that type of equipment. Inevitably, when it first comes out it tends to have a very high cost, and then as production units get larger and larger and the unit cost comes down, that's when it starts to develop, and more and more users go to that type of product. So, I think we're in the infancy of some of this, and the technology is still developing. So, for example, hybrid vehicles, when they first came out, became popular. Since then, battery technology has moved on, which means that, actually, the vehicles bought a few years ago are quite high cost in terms of maintenance compared to some more modern equipment that's coming out now.
So, it's continual development. I think, as an industry, you would obviously want to move to the cleanest and most efficient type of fuel, whatever that's going to look like in the future—gas, battery, and moving away from diesel technology. But in terms of discussions, no, we haven't had any particular discussions on that side.
I think in the context of what you're talking about, that could be one of the opportunities where we actually try and make the bus far more attractive, and penalise car-based traffic in a low-emission area. Because if you set the standard, we can get the bus industry to that standard, but for cars it's going to be much more difficult to enter a zone that you've classed as—. That could be one of the advantages for the bus, and also a unique selling point for people using the bus rather than taking their cars into congested centres.
Well, I've got Mark waiting, and you, and I wanted just to give the panel members as well an opportunity to impart to us anything else they wanted that perhaps has not been raised through questions. So, if I come to Mark first, if you have a think about anything else you might want to impart to us as well. Mark.
Jumping forward a little bit, but with lots of cross-cutting issues, to the Welsh Government's 2017 spring consultation on proposals to improve local bus services in Wales, including the proposal to require local authorities to set out local transport plans, ensuring communities are provided with bus services and how these connect with long-distance networks and rail services, including Traws Cymru. You referred earlier to the demise of transport consortia in north Wales. The work of Taith went into the North Wales Economic Ambition Board. So, to what extent should we be seeking to address this on a regional rather than simply a local authority level?
I think it's vital that we address these sorts of transport issues on a regional basis, because I think, with 22 individual authorities, we're never going to have the joined-up connecting networks and the joined-up standards that we need to achieve what we aspire to. So, I think it's vital that we look at it on a regional basis. Whether the old regions were the right geographical split and whether we should be looking at different ways of looking at how things could be managed—. I think, on a regional basis, it's essential to deliver some of these improvements.
I would 100 per cent agree with that. The old regional consortia were good to work with. They did a lot of hard work and, actually, I think achieved quite a lot, and from the industry point of view we've really missed them since their demise. I would agree with Huw in saying that, mainly now, if something was replaced then it wouldn't be in exactly the same grouping, or not in exactly the same structure. For example, Swansea bay city region—would that be appropriate? Maybe, maybe not. But I do think that—transport crosses boundaries, doesn't it? It crosses political boundaries, it crosses geographical boundaries, and that's the planning area that we need to be looking at. What are people's journeys to work? What's the travel-to-work area? What are the leisure areas? And examining it and looking at it on that basis we think is beneficial.
And we would absolutely agree with that. As Justin rightly says, people don't tend to travel within their authority area for all of their journeys. We used to work very closely with the consortia and with the travel plan co-ordinators who were employed by them, and I think one of the keys is to work with major employers in areas, and the travel plan co-ordinators were doing that—assisting them with developing travel plans, developing those carrot-and-stick approaches to both encourage people to use public transport and to discourage the use of their own cars. So, I think reintroducing that kind of regional working is key, really.
Next Wednesday, I think, will be a year since the bus summit. There have been a series of workshops since that most local authorities have been attending. Some in north Wales have expressed concern to me that they're still waiting to hear what's going to result from that, but what's your understanding of the current position regarding the work that's supposed to be coming forward from that, and how that might impact on what we're discussing today?
I don't think there is a clear—
I would entirely agree with the comment you've just made: everyone's waiting to hear an outcome.
We've seen the result of the consultation last year, but it isn't really clear how that's going to be taken forward and how that's going to—. Obviously, there's another summit, I believe, planned for May. We've not seen the compilation of the outputs from the workshops yet, and that has a bearing on the policy discussion last year as well. So, yes, I think we're waiting for direction, really, as to what the next steps are.
I think we'd all welcome having another summit, but we haven't seen the outputs of the last one yet.
I think with the next summit, we would—
And finally, could the BSSG—the bus services support grant—be used differently to deliver the services that you're talking about more effectively, particularly in the context of—as has arisen in Wrexham again over Christmas with another operator closing—particularly impacting short-term on tendered services but longer term on commercial services in areas that regard these services as essential because of their isolation?
I think, operationally, BSSG is an important element of the mix of funding that goes to support bus services. I know it's administered differently in the four different areas of Wales, but certainly in south-east Wales, what we've tried to do is encourage an improvement in standards for the passenger without really rocking the boat too much in terms of disturbing the cost base that operators need to stay in a stable network, and we've been very conscious of that over the years. We've developed standards and we've gradually raised the bar. Obviously, now, that's been adopted on a voluntary basis by the Welsh Government and there are core standards that have been reissued and are being re-issued for April that we need to follow. But in south-east Wales, for example, we've also got some enhanced standards that sit alongside the core standards that encourage—because we pay operators at a different level of per kilometre support, depending on which level they reach by the standard they submit to us. So, for example, we've got some smaller operators who are now part of the network rider scheme, and some bigger operators as well, who wouldn't participate in it until recently. So, there's a network ticket for the south-east Wales area that's available on bus daily and, for most operators, weekly. A lot of operators didn't previously participate, but now do, because they get credit for that in the score.
We've seen operators invest in telematics, so they know where their vehicles are and they can be far better at disseminating information to passengers. A lot of that is small steps for each operator, but it's quite a big change, as well, overall, when others have participated as well. So, some of it's been quite positive, but if we moved away from a mechanism where an operator who is providing a service gets this level of support for providing that service—helping towards the cost of providing it—and we looked at making it competitive, for example, because that's been talked about, so we can perhaps develop services or have a more inclusive network and there's a fund there to do that, that'll take away some of the support from existing services, which for more marginal routes is going to destabilise them. So, we may improve it in one area, but it may have an adverse effect in another area, and we've got to be very careful about the mechanics of how we fund the provision of bus services, because a bus costs the same to run, generally, wherever it is. Yes, there are local wage variations and, perhaps, running in a city, you're going to spend more on fuel than you are in a rural area, but generally the cost per hour of providing a bus is a cost per hour—
Okay. We're just a little bit out of time. I want to give each of you a chance just to leave us with something before you go, but Lee wanted to come in as well, then I'll come to Jo and work my way that way with any final comments. I've got a couple of short questions from me as well. Lee.
My question is primarily to Jo Foxall and to Margaret Everson, and perhaps we can become a bit more cheerful about the future of the bus industry. I want to ask you about the role of technology and artificial intelligence and the rest of it, because it seems that the Bwcabus initiative that Traveline was involved in in west Wales could develop in a much more exciting way now with the development of technology like Uber. If that kind of platform was applied to public transport, as surely it will be in the coming years, particularly through the development of automatic cars, what work has the industry done, looking forward, at the potential that automation, digital and the new technologies have for the way the bus industry works now to be more responsive to passenger need?
I think that the industry has invested quite heavily in technology and is listening to the customers and listening to what they're asking for. But the reality doesn't change, as Justin has rightly said. Customers just want to know that their bus is going to be on time, and if it's going to be late, where it is. All those sorts of things are now possible with technology. We're considering how we might be able to convey real-time information, congestion information, to empower passengers, to enable them to make choices about the journeys that they make. It all comes down to funding, Lee, ultimately.
Yes, but let's try to move away from that for a second. Let's just remove the shackles of where we are now and let's think forward five, 10 years to self-driving buses, potentially, which may be much smaller buses that could respond to demand on an app, just like you use Uber now—you can just imagine that sort of technology applying to the bus industry. What kind of future thinking is going on about how that might work and how we can exploit it?
I wouldn't be able to answer that question on behalf of the industry, I don't think.
I could say, certainly in Reading, certain strides are being made. I think they have a bus network system called Vamooz, and I believe you book your bus and get on it. I believe it's like an auction: the more people on the bus, the cheaper the fare is. So, they're certainly making huge strides forward. They have new buses. The design buses differently in order to—. They call them 'spritzer' and 'claret' and all sorts of different names to attract the student market and attract the young people, because I think we all would like to get more young people on buses. Because if you can catch them young, you can keep them, can't you?