National Assembly for Wales

Good morning. Bore da. Welcome to today's Finance Committee. In accordance with Standing Order 17.22, I call for nominations for a temporary Chair until the election of a permanent Chair. 

I nominate Llyr Gruffydd to be the temporary Chair of this committee until such time as the Assembly as a whole appoints a permanent Chair.

Thank you. Are there any other nominations? No. I therefore declare that Llyr has been appointed the temporary Chair.

Congratulations.

Suzy Davies, Assembly Commissioner.

Perhaps I could just begin by saying you've probably noticed there are quite a few differences in the way that the budget has been presented this year. On this specific line, I think the two main things, perhaps, to mention, of course, are that we, as a Commission, have committed that we will no longer be using the remuneration board underspend as part of our budget. If any part of that isn't used, it goes back to the Welsh block grant in a way that we haven't had before, and you'll see that, to compensate for that, effectively, there's a line for a project fund, which I expect you'll probably want to talk about a bit more. But the main thing to draw to your attention, I think, is the fact that we've introduced an element—. We've reduced the amount we've put into the budget because of a potential churn in the staff that we take on as Assembly Members. It's an issue that's been raised by this committee more than once in the past. So, we've heard what you've said and we've taken that on board. The figure of £500,000 is an estimate based on previous figures, but also it's in line with what we've seen with the Scottish assembly.

I thought you probably would.

There is a risk, which we've also raised with the Finance Committee before. The majority of the budget is estimated in the same way as it always is, but because we don't quite know what Assembly Members will do once the changes come in in April 2019—will they spend all the money that's allocated to them? There is, potentially, a risk, but we're hoping it's not a serious one. Because, of course, the budget, as we put it together, has been done taking all risks into account, effectively. I don't know if you want to talk in any more detail about that.

Yes. I just want to say, can I welcome this decision? I think it's the right one. Of course, if it turns out to be financially wrong, you're in exactly the same position as the ombudsman and the auditor general—you can come back with a supplementary budget if it's wrong. So, I very much welcome it. The auditor general has not, but the ombudsman has, in the past, come back with a supplementary budget because of unforeseen circumstances. I believe—though you may not—that it's better for control of finances to rest with this committee and the Assembly as a whole, and for money that's needed to be provided this way rather than the other way around.

Thank you. That is what we've tried to do.

Well, I suppose the first thing to say is that if they're unforeseen, they're not foreseeable in that sense. [Laughter.] But, yes, it's an interesting question. I think the remuneration board has raised the level of office costs available to Members now, or from April, anyway, to accommodate things like the caseworker system, so there's more freedom within the office costs budget we've got now, plus, viring office costs into staff costs as well. So, Assembly Members have got freedom to spend their office costs, I think, in a way that adapts better to us as individuals, because none of us spend our money in exactly the same way.

With the money that still comes from the Commission's central pot, if I can put it like that, the post and printing costs, for example, there's no intention to restrict Members from using this money. As I say, we all work with our constituents in different ways. I think it's just where it appears in the budget that is causing a few problems, because, as an operational budget, it's a line over which the Commission has no direct control, and nor should it in that sense, but it does make getting that final budget line accurate—. So, I think what I'm saying is that there's no problem with the spending of this money, it's where it appears in the accounts that can prove a little problematic when we're trying to bring the Commission budget in on a sixpence. 

It is an anomaly.

There's another point I think that's possibly worth raising as well. Because any remuneration underspend, which could include some of those office costs, now goes back to Welsh Government and doesn't find its way into the overall Commission envelope, if I can call it that, then there's a question about how we as individual Members spend and which bits we spend from, which pots we spend from. It's a good exercise for us as AMs, I think, in transparency.

Diolch yn fawr. David.

Diolch, Cadeirydd. I appreciate you're working on, as you said, a sixpence, but you're no different to many other public bodies working in those scenarios. I'm very much appreciative of your attempts to keep the increases down to the levels we suggested last year, but, clearly, there is a difference, because you have this project, which I'll come on to in a minute, as well, which increases it a little bit. If you put the project together with your Commission budget, it goes up from a 1.6 per cent increase to a 4.5 per cent increase. But I suppose I want to ask: have you got the evidence to demonstrate how you've prioritised your spend—because, clearly, there are some important areas of work, I'll come on to the project in a minute—or operational costs in your priorities, whatever it is that you use to inform your decision making on those areas of priorities?

I'll just speak at a high level to start with, and perhaps I can bring officials in to talk about the detail on that. The first thing, of course, is that we have to comply with our statutory duties, so those are strategic priorities. We have our strategic goals, which, of course, are supporting Members, using resources wisely, and something we really need to take very seriously at the moment, which is engaging with the Welsh public to understand what the Welsh Assembly is for. Then we have plans that are in accordance with the strategic goals, which will come into that £1 million pot that we'll talk about in a while, if you like, as well as our ongoing plans for maintaining the estate and maintaining ICT, which I think you're familiar with. So, those are the headlines of how we prioritise, but there is quite a lot of detailed work underlying that, and of course perhaps Manon's best placed to talk about that.

I'd be happy to explain a bit more about that. We're doing nothing differently to what we've done in previous years. We're just being very transparent about stating it and presenting it to you so that we can comply with the comments, suggestions and recommendations that were made last year about transparency and scrutiny. We do need to have a fund for investments. This ranges from investments that come under the ICT rolling programme and the estates and facilities management programme—replacing boilers and windows and so forth. We have a degree of latitude over which year we do them in. We can bring them forward or delay them, as fits around other requirements, but these are things that need to be done on a rolling three-year or 10-year basis. Then there are other Assembly priorities, such as developing a new website, and things that were in that pot last year, like the Youth Parliament, that are now business as usual, so the costs are incorporated within the service lines that you have in the budget.

I was asking that question, because, obviously, in your project element you've got some of those things you've mentioned down, and in your other table you've got your maintenance lists. So, you've got your list of maintenance, you've got your list of projects, boilers being part of the projects, and there are window replacement projects—not in the maintenance. So, clearly, I can understand to an extent the separation. Do you, therefore, have a list of projects you would expect to be doing over the next three or four years so we could actually see, 'Well, perhaps this now fits into what you anticipate for the next three or four years'?

Yes, we have those rolling programmes of ICT investments and estate and facilities management investments, which are the big issues. Then there are other projects that, obviously, the Commission has sight of as we prepare the budgets and the forward budgets. It's certainly the case that we undertake capacity and service planning on a regular basis, and always have, and we bring those results to the Commission on a regular basis. We have systems of internal challenge. I think we've set out in the budget document the new governance arrangements that we have internally. We have our executive board and our leadership team that make sure that projects are assessed across the organisation, and so we're evaluating competing priorities across that scope and looking at what needs to come forward in that particular year. Then that, of course, is scrutinised by our independent advisers, by the audit and risk committee, as well as the Commission coming forward.

Can I give you an example? In your annex 3, which is your priority projects, you've got, 

'To engage with all the people of Wales and champion the Assembly'

as a project, and I would have thought that that would be part of your normal business, per se. 

What we've done has been to group the priorities under the three headline goals. The projects are the items that are not in bold, but we've grouped them for clarity. Maybe it hasn't made it more clear in this sense, but we've grouped them under the headings, so that it helps us to focus on how we're distributing the investment proposals going forward.  

But, to me, public information and engagement as a heading in a project, I would have thought that's part of your normal business—public engagement and information. 

It is. It's the next level down, I guess, which we can go into; we can write to you with more detail again, if you like. These are proposals that are coming out of the Leighton Andrews digital engagement report last year. The intention to engage with people around the Youth Parliament and around the twentieth anniversary of the Parliament next year, these would be specific projects that do not come under the heading of business as usual, but I can write to the committee with more detail if that would be helpful.

But also linked into that, perhaps we could look at how you then split the £1.5 million you've allocated to these projects to capital and revenue; which ones are going to be from the capital element and which ones are going to be from the revenue element. That will be interesting because I couldn't work out from annex 2 which ones are which. I can guess, but I couldn't work out.  

Well, yes, because last year there were some ICT projects that were examined by the auditor, and the conclusion was that they turned out to be—. They didn't want us to count them as capital projects, which is why you'll see that there is an underspend on the capital budget last year. I don't know, Nia, if you want to talk a bit more about that. 

As Manon mentioned earlier, within the Commission budget, which is potentially different to the Government budget, we've only got one control total whereas  other organisations have a line with the annually managed expenditure budget, for example, and capital budget, where they have to come in within those budget lines. We have one control total, so we do have flexibility with regard to classifying things as capital and revenue. We can provide you with more information where we think these projects will land, but as Manon mentioned, with the Record of Proceedings project and the Table Office, we anticipated that these would be capital projects, but after protracted discussions with the Wales Audit Office, these ended up being classified as revenue. So, there is potential for things to move anyway between capital and revenue as business cases come to us. 

I appreciate that and, obviously, you will respond to the Wales Audit Office consequently. But if you're putting in the figures here of £500,000 from the capital budget and £1 million from the Commission project board, and you end up with a list of projects, it would be nice to know which projects you think will be using the capital budget and which ones will be using the Commission budget, basically, so I can work out where I would expect to see capital in that case and what would be capital. That would be helpful. And do you think that—? You know, some of these projects, are these all one-year, two-year projects? What is the anticipation with the legislative workbench? Is that a one-year, a two-year project? What is the—? 

We've provided more information within the budget document itself. Within one section of the document there's a whole section of narrative around each of these projects in more detail, and that explains the legislative workbench, for example. For the next two years, we're anticipating £100,000 within 2019-20 and £100,000 in 2020-21. So, there's more information within the narrative of the budget document itself, but we can provide— 

But, it is a two-year project; it isn't an expectation—

It's a two year—. On that particular one, as I say, we've gone into a bit more detail in the narrative, but we have to invest in the system we have already because we're not yet ready, working with the Welsh Government, to determine our exact requirements for a new system, because that's going to be quite an investment. It is a core piece of software that underpins our legislation and streamlines all of it; it removes the possibility of human error, which is obviously very important when we're dealing with amendments and legislation. The new system itself is going to be quite an investment, as I say, but we are speccing that very carefully, in other words, in planning for that now, sharing the cost with the Welsh Government. So, this is actually to keep going the system that we have and to keep it up to date until we're ready to move ahead with that major new project. 

So, until you and the Welsh Government come to an agreement as to what the specification will be, you're going to be maintaining the existing system as best you can.

Exactly.

So, it might go beyond two years, depending on when that agreement and specification align.

Indeed. And it will be a lengthy process to procure as well.

Okay.

Diolch, Cadeirydd. I'd like to ask about the way in which you've presented the budget. In the budget documentation, you describe the increase in the Commission budget of 1.66 per cent as excluding non-cash. But the increase in the total net budget is slightly larger, 1.67 per cent, because that includes non-cash and pension finance costs. Now, I realise that, in this particular example, the sum of money involved is trivial, but I'm interested in the methodology of your approach here, to ensure comparability and consistency of presentation of the figures, to make them more comprehensible to the average reader. Do you think that comparisons should be made including or excluding non-cash, and under the managed expenditure costs? And, in future years, will you take a consistent approach to this, because the committee has had concerns about transparency in the past. And, for example, by excluding the Commission's project fund from quoted increases in the narrative of the budget, do you think you're meeting our recommendations in that respect?

Well, yes, I do, because certainly the recommendations that we had from this committee in the past were to present the budget in the way that we've done it this year. So, it's a transitional year, which kind of does make it a little bit difficult to compare next year, and if there are any changes from last year, and possibly next year, if you're expecting other changes from us. The main thing for us was to make sure that we came in at that 1.66, 1.67, which was the equivalent of the growth in the Welsh block, and I'm pleased to say we've done that. It took a fair bit of work to achieve it, but we've done it. But if there are any further recommendations, I suppose we have to take those on board.

Well, it might be in future years, or in another instance, that the difference between the total figure that might be produced using one approach compared with another might be more significant. Obviously, the difference between 1.66 per cent and 1.67 per cent is not really worth bothering about, but—

Well, we were pleased. [Laughter.]

Yes, I realise that. But if it were a larger figure, then it would be more significant. So, a consistency of approach to ensure easier comparability when you look at the documentation would be of help.

Okay. I think Nia may want to add something here.

The figure that we focused on was the 1.67, on the total budget. From the figures that we've received from Welsh Government, that will be the increase that they expect to have at the Welsh block for 2019-20. That may change, but that was the figure that we were given, so on the whole budget. And that includes non-cash, it includes the determination budget, it includes depreciation, it includes a number of things. We felt that was the most transparent way to present this transitional budget. It's very difficult to compare last year's budget to this year's budget because of the number of changes that we've put through: the churn figures, the commitment not to access any underspend on the determination budget. There were quite a number of changes. Going forward, there is merit in looking at excluding non-cash items, such as the capital charges of depreciation, and excluding the AME budget, because the AME budget, for example, is out of our control—it's based on information we have from the Government Actuary's Department. And there is also potentially merit in excluding the determination budget from the Commission's—the figure that we're asked to keep our increase within. So, we're open to the recommendations of the committee, and we will look at that in how we determine the budget for 2020-21. But there is merit in looking at non-cash items, because they tend to be out of our control.

It might be worth including a sentence or two of explanation as to why you took that decision about how the accounts are presented.

So, in the current year, it was the whole budget, to make it clear and transparent, and the number of changes. But, going forward, there's merit in looking at just the Commission budget, excluding non-cash.

Thank you very much. The other question I've got is about communication between the Commissioners and the party groups last year. We expressed some concern that party groups and Members of the Assembly weren't sufficiently engaged in the options for spending, particularly in relation to underspends that released cash that could then be spent on other things—I realise the situation has changed now, since we published our report on that. But can you tell me what steps you've taken in the last year to engage with different party groups, to discuss your future plans for the year ahead?

Well, I can speak for my own group, but I'm presuming that it's pretty much the same in all the other groups as well. The Commission, after we've had a meeting, will produce a very short synopsis of what we talked about, making sure that anything that's confidential isn't included in that. But, certainly, in my group, I tend to go a bit beyond that—obviously not talking about anything confidential—but to explain as far as I can, including some of the controversial things that we've encountered over the course of this year. As you might expect, my group will bite back if it's got particular views, which I then take to the Commission. But I'm sure that's the same in the other party groups as well. We are always open to ideas for how to communicate more, but there's an awful lot on the website already, we get notes from Manon every quarter, updating everyone on what's going on in the Commission—summaries of that. And, of course, we get the draft budgets as well. That's very much, 'This is what's coming next. If there's something in there that you don't like, you should tell us as soon as possible.'

I think Suzy has mentioned the main channel of communication, which is that, obviously, we discuss everything with the Commission and then there is a note that records the outcome of that and hopefully would prompt any further discussion. I've made offers to come and talk to any party group that wishes to have any factual clarification, and obviously that offer stands—and any other ways in which AMs would find it useful to receive information from us we'll obviously comply with.

Okay, thank you very much.

I think, as Members, we need to be mindful that we shouldn't always just depend on the Commissioner to feed back. I think if, maybe, at times, we are reminded of these other channels of information that are available to us individually to pursue, I think that would be very useful as well.

But, as Commissioners, we do have responsibilities as well; there's a reason for having us.

Absolutely, no, I understand and appreciate that fully. Mike.

I'd like to talk about the danger or the possibility of in-year supplementary budgets. It's something we put you in danger of, so if any blame is to be attached, it's to us, not you; I think that's got to be said. Can you explain the likely timescales for the changes to the civil service pension scheme and how that will impact on the budget in cash terms and accountancy terms, because quite often the two are different?

Would one of you like to take that?

We've mentioned some of the implications of the changes within the budget document itself, and we've explained that, currently, the Government Actuary's Department is undertaking a valuation of the civil service pension scheme. So, those are the contributions that the Commission will make for Commission staff, not the Members' pension. The result of this valuation will determine the employer's—so, the Commission's—contributions that we have to pay from April 2019. So, this is ongoing at the moment, and the outcome of the valuation will be based on the assumptions that HM Treasury make. 

Early indications, as I've stated within the budget document, are that the average contribution of the Commission could increase from 21 per cent to 28 per cent. And in monetary terms, in cash terms, that would be in excess of £1 million onto our budget next year. So, that amount hasn't been included as yet because the valuation is still taking place. Cabinet Office has written to us and highlighted this issue. So, it's in excess of £1 million to us but a far greater figure, obviously, to the rest of the public sector. The information that the Cabinet Office included in the letter was that Treasury could provide additional funds to UK Government departments and, in turn, that could mean more for the Welsh block, which in turn could increase the Welsh block and then, potentially, that could mean an increase of the Commission budget. So, we're not there yet. Early indications are that we won't know until, and I quote, 'later in the year'. So, I can't give you a definitive timescale for that, but the assumption is that it could be in excess of £1 million.

So, the options open to us are either to continue, as we do, to use resources wisely and find efficiencies within our own budget or, if that's not possible, to come to you for a supplementary budget in the event that the Welsh block would have increased, and that gives us scope then to look for an increased budget in line with any increases in the Welsh block.

And, of course, that's something beyond your control. I can't hold you personally responsible, or the Commissioner or the chief executive, for the decision made by the actuaries. The other question is: changing accounting rules around operating leases. Again, the same question: how will that impact in terms of cash and in terms of accounting procedure? Will it involve more money actually being spent or more money appearing on the balance sheet?

This is a forthcoming change to international accounting and international financial reporting standards. There's a new accounting standard, leases 16, coming in for accounting periods 2019-20. Again, I don't know exactly how that will impact on us. The financial reporting advisory board is meeting in November. We should have more information then, and then they will provide an update to the financial reporting manual, which is published in December of this year, which will give more information about how that accounting standard is adapted for the public sector. So, until then, I can't give a definitive answer, but, potentially, what we know it will involve is that any operating leases that we have—so, Tŷ Hywel, for example—will now be shown on the balance sheet or the statement of financial position and depreciated rather than, as we have at the moment, it's an operating lease and we pay cash for that each year and it's not shown on the statement of financial position. So, there will be quite a change to the presentation of the budget, but no impact in cash.

Yes, because, as far as we're concerned, if the cash doesn't matter—. The accounting procedures are interesting, and they change them fairly regularly, if only to keep people like yourself very busy, but it's not going to cost us—

Not in cash terms.

—any money, but things will look different when they're reported, which will obviously, possibly, get people asking you and the Commission lots of questions.

So, potentially, on that issue, we would be returning with a supplementary budget for presentation purposes only—as opposed to the pension, where it would be a cash impact.

Can I just urge you that you explain, when you produce it, that it's for presentational purposes only and that there's no additional cash being asked for before you make the front page of the Western Mail? 

I think we do. We have done in the past, haven't we?

No, I just—. I was trying to be helpful. [Laughter.]

Thank you, Mike. We always appreciate it when we help. Thank you. Nick.

Thanks, Chair. Looking at the possibilities of in-year supplementary budgets, has the capacity review that started last autumn given you a stronger view of whether current Assembly staffing is at the right level compared to UK and bilingual parliaments and that resources are distributed efficiently and effectively?

Yes, it has. I mean, there's been a lot of detailed work gone into this, so I'm going to ask, Manon, if you'll talk us through this one, because I think it's worth you hearing some of the detail about the work that's happened in the last year or so.

It has been a very productive exercise, and we've engaged with all staff to understand the distribution of the resource. The committee has been sent a copy of the phase 1 report, which had included a lot of the benchmarking work in it. We have subsequently worked with a steering group, drawn from a lot of different departments, to draw up an action plan, which was finished before the summer and which outlines a programme of change moving forward. And the four goals are to enable us to work in a more agile way, so that staff can deploy their skills on a number of projects, as suits the business priorities. 

We have made economies in lots of little ways. We have looked at ways of streamlining our procedures. We have looked at ways of using IT better, realising other benefits of IT investment— invest-to-save, renegotiated contracts, that sort of thing. And then we have brought those savings together to consider how we can then meet the evolving needs of the Assembly going forward.

So, to answer your question, I think that we are comfortable that, although there is significant work pressure on everyone, we are at the moment staying within that establishment post count of 491 that we gave you an undertaking last year that we would stay within. And we are managing dynamically to make sure that we can meet the new demands from within that staff cohort.

What sort of response have you had back from them? You said that you'd been consulting with the staff about the structure—.

Yes, well, we had—. We lay it out, actually, in the capacity review. We had, I think, something like 370 individual responses—so, that's a fair proportion of our entire staff core—with over 650 individual suggestions of things that could be done better. We've had a series of workshops where we've worked together on turning this into an action plan. We've also, before the summer, had sessions with the staff on the values that underpin our work, which has, again, been a very rewarding process and has helped us in terms of setting priorities and making sure that we're looking after staff welfare in all of this as well.

And are you planning to take the opportunity with emerging vacancies to look at restructuring the management structure?

We are. You will be aware, for example, we've lost a director out of the three directors that we have. One of them left shortly after Easter, in fact. We have imposed the discipline on ourselves that, whenever somebody leaves, rather than automatically backfill, we pause and reflect and we consider whether an alternative arrangement might allow us to free that resource to work in another way. In this case, we have had interim arrangements in place since the director left. We're working with a lot of the service heads in a new way and they've had a chance for a bit of personal development and a bit of additional responsibility as well. We are in fact now going ahead and recruiting a third director, because that experiment has shown us that we do need to have a third director to provide robust leadership and we're going ahead with that. When that director is in place, there are elements of change that have been identified during the capacity review that we'll be moving ahead with, with the benefit of input from that new director. But this isn't unusual; this is business as usual—continuous change, continuous improvement.

Thanks. Speaking with my dual hat—with my public accounts hat on as well—will you ensure that any future voluntary exit schemes deliver value for money and fit in with the recommendations of managing early departures?

Yes, we will. We would point to previous voluntary exit schemes where that has been the case and we would continue to conform to those recommendations and indeed the lessons that have been learnt through those previous exercises. I'd emphasise no decision has yet been made to move forward with a VES, but if it happens it will be with a very tight focus on refreshing our skills to enable us to cope with new demands within the headcount maximum, rather than saving money as such.

Where does the funding come from for voluntary exit schemes—apart from coming from the Assembly budget, obviously?

Yes, that's where it will come from.

It was a bit of a daft questions, really, wasn't it? [Laughter.]

Part of the calculation will be whether it is affordable and whether we can manage the operational budgets to allow it to take place.

Can I just make a point? I think it is worth mentioning, because the effort that has gone into this capacity review is exceptional, and it's—. We've mentioned before before this committee that the constitutional changes and extra powers and things are giving us new challenges that we have to meet from within the confined budget, and the need for particular skills is starting to bite now. You'll have noticed that, in the Scottish Parliament, and certainly in Welsh Government, they're taking on new staff to meet these challenges now that they're biting, and we're not doing that in the Assembly. We're sticking to the headcount that we agreed to do at the last meeting of this committee, and I think we should be proud of that, actually. It's quite an achievement.

Is that—? You've said that in Scotland there's a different situation. Is that sustainable going forward, or ultimately will you have to bite the bullet and say, 'Brexit and other issues will require greater capacity'?

Well, we've given an undertaking to try and manage within the existing establishment posts maximum for the duration of this Assembly. But, going back to the helpful point that Mike made about the necessity sometimes for supplementary budgets, if we do have a huge change, a change in the size of the Assembly, something of that magnitude, then I think we would have to recalculate and come back to discuss that with you and discuss it with the Commission again. But the very considerable additional resources already being demanded by constitutional change and Brexit are, at the moment, being absorbed. 

Thanks. And agency staff—has the removal of agency staffing been due to a policy change or, in effect, how the posts are recorded?

This is more of a technicality than an actual thing. Nia, would you elaborate, maybe?

Where we presented the FTE figures was in the annual report. I don't think we referred to them in the budget itself. So, I can remember back to the annual report. We showed an overall decrease in the number of FTEs, which again is quite an achievement, when, as Manon mentioned, the Welsh Government and Scottish Parliament are increasing. There was a decrease from around, I think, 448 down to 445, and within that we break it down in employed and agency staff. We looked back to the figures we had last year and what we'd stated within agency were actually fixed-term employment contracts, who are actually employed by us rather than via an agency. So, we discussed with WAO around the reclassification of those. So, the figures you will see in the annual report for 2017-18—we don't have any agency staff, and the fixed-term contracts are actually employed, so they're within the category of employed. So, it was a reclassification, and those tables within the annual report are subject to audit, and they had a thorough audit by WAO.

So, more technical rather than policy.

Very much a technical reallocation. There has been a decrease in the number of fixed-term contracts because, in the 2016-17 financial year, we had a number of maternity leaves, et cetera, and short-term issues. So, there has actually been a decrease in fixed-term contracts as well.

Okay. Thank you, Nick.

Chair.

Yes, David.

Just on that point, you just mentioned Welsh Government taking people on and the Scottish Parliament, and the arguments they are giving for those are Brexit and the need to prepare and increase because of the extra workload that they anticipate. Now, clearly, we've discussed very much the legislative workload that will come through this institution. Have you had discussions about the possible increase in workload and the need you might have for additional staff during that period to ensure that we can operate as smoothly as possible, as Welsh Government are increasing staff to take on those responsibilities? Have you looked at that situation?

The capacity review was very much about assessing future need as well as understanding the current distribution of resource. So, yes, very much so.

So, Brexit was in that future need.

It certainly was, and it's very challenging to keep to the requested cap on growth and still meet all those needs. So, it's not easy, and I wish we could employ more staff to do that, but we're mindful of the wider constraints.

Yes. I'm going to move on to workforce issues and start with sickness absences and just looking at the trend, and I just wondered if sickness absences have changed since March of this year and what action you've been taking to reduce sickness and also to support mental health, which I very much welcome as a key performance indicator.

Yes, absolutely. 

Can I just ask why March in particular, out of interest?

Well, it's just trying to see if the trend is changing, because we've obviously got—. In the last financial year, it was rising. 

Ah, right. Okay. Because, of course, it will vary during the year, so—.

It's just helpful to know whether, hopefully, you did try to start to address this in terms of—. Well, at least look at it, in terms of a KPI.

Shall I—?

Well, yes, if you want to take the detail on that. Yes.

I haven't got the figures in front of me for the months of this current year, so I can write to you with those, unless Nia can find them meanwhile. But, certainly, we've been aware that the sickness rates are higher than—. Obviously, any sickness rate—you're trying to minimise it always.

Looking at last year, we have analysed what was behind that. With a relatively small cadre of staff, obviously, it only takes a few long-term sick cases to actually have a disproportionate effect on the figures, and there is bit of that. Unusually, in last August—in August 2017—there was a spike, which we haven't seen before or since. There happened to be a number of long-term absence cases, an unusual concentration of hospital and medical procedures at that time, which—

Takes a lot of time out.

—did lead to that. I would say that it's been a turbulent year—it's been a year of change and uncertainty—and that is acknowledged to have an effect on sickness absence and, indeed, on turnover rate, which is also higher this year than it was the year before. And I think we have addressed that. 

It's certainly true that mental health is an obvious cause of many of these sickness absences and, whilst being very glad that we are clearly reducing the stigma around stating that that is the reason for absence, because it gives us a chance to address it, there are measures that we need to take. I think we have been looking a lot at mental health during the last year. We now have two business partners who are specifically appointed to work with heads of service on managing sickness absence generally and the programme of action we've got—. I've got a list here—we've been supporting the Time to Change Wales campaign, we support the World Mental Health Day in October. We have established a network, a staff network, which is called MINDFUL, and we have a mental health champion on the senior leadership team, and allies, peer support—we have encouraged people to come forward and offer that. We have offered a lot of training as well to promote awareness of this amongst line managers and amongst people who may be suffering from mental health problems themselves. So, it's something we do take very seriously and we will continue to take seriously and monitor what happens. I would say, though, that even though we are not meeting our own challenging target, we are there or thereabouts in terms of the Chartered Institute of Personnel and Development reported public sector average.

Right. Thank you.

Perhaps I could just add as well: there's a modest increase in the investment in health and well-being of staff in next year's budget as well, which is identifiable.

Before we move on, I think Helen wants to come in on this particular point.

Yes, it's a slightly different but related question around staff well-being. It is possible—. We would hope not, but it is possible that the dignity and respect agenda will throw up additional complaints, concerns, that will need to be effectively addressed. Has the budget taken into account—. Suzy, you mentioned an increase in terms of the health and well-being of staff, but—. Have you made any provisions in the budget for the inevitable costs of dealing with those? I mean, obviously, Chair, we're hoping that the dignity and respect agenda won't throw anything up, but I think the truth is that it may very well. Have you made any accounting in the budget for additional costs to manage those procedures if that's necessary?

We have, yes. As Suzy mentioned, there is a modest increase in our budget line. And also, in terms of staff resource, we have prioritised the staff resource in that area. The standards committee has asked us to look at the support to the standards commissioner, so that's something that is separate. But within our own staff, we have appointed officers within the HR department to receive special training in supporting people through cases, whether they have made a complaint or a complaint has been made against them. And we made sure that all of those arrangements were in place before we surveyed staff over the Easter recess, so that the process of being asked the question of whether you'd undergone any harassment or bullying in the past, if that aroused any bad feelings, then we had arrangements in place to deal with it straight away.

That's very reassuring. 

Thank you. Jane.

Yes, just moving on in terms of staff satisfaction—have you been able to take any action to gauge staff satisfaction since the capacity review, which started last autumn?

Yes, absolutely. Staff satisfaction continues to be very important to us, and as I mentioned, we were aware that the capacity review as a process could be unsettling. Change is unsettling, though necessary. We do survey staff annually. This year's staff survey is still to come. It's in November. We moved it from its usual slot, because earlier in the year, we were already surveying AMs and AMSS staff, as we do every year, and we were asking people about the dignity and respect issues, which I mentioned just now. So, we didn't want to overburden staff by asking them too much, but we have been engaging very thoroughly with staff, and I'm extremely grateful for the commitment that my colleagues have shown to that process. People have taken time out to help us think through the challenges ahead of us, and to give us the benefit of their wisdom from different parts of the organisation so that we can come up with collaborative solutions together. So, the whole thing has been a very positive exercise, as far as I'm concerned, and, of course, if we can keep staff engaged in this process, that is an important indicator of their well-being as well. 

Thank you. You obviously have, as you mentioned earlier on, had quite a lot of churn and change—significantly—but have you noticed anything particular in terms of turnover rates of experienced staff? Exit interviews are useful, and other ways of analysing features in terms of turnover rates. But, you know, anything to comment on in terms of those issues—.

Well, our turnover rates have been higher in the last year than they were the year before, but they're still well below the sector average. They ran at 9 per cent last year, and 15 per cent, I gather, is the public sector average. Certainly, we do conduct exit interviews and we do analyse those. About a fifth of the people who left did so because they were either retiring or coming to the end of a fixed-term contract. Of those who left for a new job voluntarily, about a third were transferring to another Government department. A big theme that came through was that people were moving for reasons of promotion and career development. I think we have to recognise that, again in a relatively small organisation, that is going to happen. We have exchange protocols that facilitate people moving into other parts of the public sector, and, in fact, we would be rather proud of the fact that the skills of our staff are such that they are rather sought-after by other parts of the public sector in Wales.

Including Welsh Government.

Including Welsh Government.

That's encouraging. Yes, there used to be a lot of movement each way in the early days, but that seems to be continuing. How are you ensuring that changes to recruitment practices don't negatively impact on recruiting the skills that you need, particularly in those priority areas of legislation and Brexit that you've identified in terms of skills and experience?

Well, the only changes in recruitment practices really that we've made would relate to the timing of them. We take a longer time to consider the job descriptions and make sure that we are appointing people to jobs that meet the need of the Assembly going forward. From that point of view, the slightly increased turnover has been helpful in allowing us a bit of headroom to move staff resource around to where the need is greatest. We have also tried to maximise the expertise available to us by working with the higher education sector, and we have a whole academic engagement programme whereby we work with our universities and places like the Wales Governance Centre to make sure that work is taken advantage of and is made available to Assembly Members on a broad range of specialist topics.

Moving on to wider equality issues—and this is a challenge for all employers—how are you addressing poor representation of black, Asian and minority ethnic staff in middle to senior roles in the Commission?

You're right, that is a concern of ours, and we are giving ourselves as ambitious a target as we can there. We certainly—. I'm conscious that your question was about the middle grade to senior grade roles—. We have been establishing mentoring schemes to encourage people to develop within the organisation. We're putting a lot of effort generally into encouraging the development of career pathways and training within the organisation. We have a network of staff from different ethnic backgrounds, which is called REACH—race, ethnicity and cultural heritage—and that is also a sort of support network. I would say, though, that we have a greater turnover, obviously, at the more junior grades, and therefore we have been focusing very much on recruitment in this area to attract people in. For our current apprenticeship campaign, we've had considerable success in attracting people from black and minority ethnic backgrounds, and that meant that we adopted a different advertising campaign; we had a suite of outreach events and partnered with community leaders and were guided by them on processes to try and decrease any barriers to entry. So, we hope that getting people in that way will then enable us to develop them within the organisation and undertake succession planning.

Yes, mentoring is crucially important. I know that the Chwarae Teg mentoring scheme is important, but clearly this needs to be addressed for BAME—ensuring that mentoring for BAME staff moves on. Is there any issue about the new language scheme, recruitment scheme, which could deter BAME groups from applying for these posts?

Can I just answer that—perhaps with a question, if that's all right? Are we talking about the courtesy Welsh requirements here by any chance?

Yes.

It's obviously for people who don't speak Welsh, isn't it, regardless of their background? So, that could be people who aren't from the BME community as well. The point of the courtesy Welsh is that it's a piece of training you get when you get here. It's not an entry requirement. So, I'm not really sure why that would necessarily put anybody off. We are talking about some communities where they have more than one language anyway. So, I don't see it as a deterrent myself; it's actually an increase in your skill set when you get here.

I would say, as a piece of evidence to support that—on the recruitment that we've undertaken since bringing that requirement in, which is the apprenticeship scheme that I talked about for this year, we had a much greater BME response than usual to that. So, that suggests that, again, that is not seen as an issue—it's not a barrier.

Excellent.

Diolch, Jane. Helen.

Thank you. Looking at resourcing the process of Assembly reform, and looking particularly at the second stage, the budget documentation states that there might be some additional cost to facilitate extra policy advice on technical issues around any stage 2 reform. Will this be funded from resources highlighted in the draft budget, and if so, from where?

There's something in the budget already for specialist advice. It's not a huge amount and I don't think it covers this in its entirety.

The issue with all of that is that we can't commit funds in the budget in advance of decisions being taken that they're necessary. So, we're waiting to take the Assembly's cue, really, on constitutional reform, but then we will reprioritise, if necessary, within the operational budgets to provide that advice.

That comes on to my second question, really, because if this—. I completely appreciate what you say: you can't be making financial planning for the things that may or may not happen, but if this does happen, and if you are then faced with this new and very substantial piece of work, how will you ensure that core areas of the Assembly business support are not deprioritised to make this happen?

This is the kind of dynamic management that we are constantly engaging in. We would aim to delay anything that we can delay and manage budgets—manage any savings that we made in-year—to provide for new needs like that. Ultimately, we'll have to come back to the Commission and to you if we can't. But, at the moment, our calculation is that the budget, as presented, is the right balance between affordability and meeting the needs that need to be met.

Thank you. Off on a slightly different tack, and this is a question that you, no doubt, would expect me to ask: we did touch on this before, but could you tell me where in the budget the costs for running the Youth Parliament are? Because I think we'd all agree that this is a very important and exciting initiative for the Assembly, but it's not going to work unless it's both properly resourced and unless that resource is secure. So, can you tell me a little bit more about that?

Yes. I think Manon mentioned earlier that we're treating the Youth Parliament as a permanent fixture and so it has to go into the 'business as usual' categorisation, if you like. I don't know if you have table 7 of the budget available to you there, which is on page 39. It's 'analysis of other costs', if that helps. There are about a dozen or slightly more lines here, one of which is 'promoting awareness and understanding', and it's actually in that budget line. So, it's just been absorbed now as part of natural business that we have to budget for every year, which we do. It will vary when we get to election years, I think, but apart from that, it's a very static cost, I think.

It's £100,000 this year, the current year, because of the election expenses. It's £50,000 next year, within that budget line. This is the further detail of budget that I referred to earlier.

Could you tell me on what basis that—? Obviously, the election years are going to be more expensive, and the initial year is going to be more expensive because you're setting up. But, in terms of that £50,000 budget on ongoing costs, can you tell me a bit more about on what that is based or are we at the stage where it's a bit of, 'Well, we'll try it and see'?

Do you want to take that?

Well, it's a bit more than that. Obviously, we work with the team who are delivering the service to define what services we think need to be delivered and then forecast and estimate those costs to our best ability.

There's the transformation service, isn't there? Oh, travel and subsistence. There's quite a lot in there.

Yes, so there is quite a lot in there. Obviously, for the budget next year, as well as the travel and subsistence costs for the young parliamentarians, there is a certain amount of communication work that's included there as well, and engagement work.

Okay, thank you, that's helpful.

Yes. Rebecca Evans, Minister for Housing and Regeneration.

Emma Williams, senior responsible officer for this Bill.

Huw Charles, housing policy, Bill manager. 

Diolch yn fawr. Okay, I'll kick off with a few questions to start. I'd like to ask if you feel that the regulatory impact assessment complies with Welsh Government guidance and recommendations made by this Finance Committee in its cost of legislation report.

Thank you, Chair. Yes, we're confident that the RIA does comply. We've worked very closely with Welsh Treasury colleagues to ensure that the RIA does reflect the committee's previous recommendations. So, you'll note that it includes an upfront summary table, which sets out the costs, benefits and key assumptions of the analysis, and that's consistent, of course, with the committee's previous calls for greater transparency and clarity within the RIA. We've also considered the impact on all of the main parties, so, letting agents, private sector landlords, tenants and the enforcement bodies, and also tried to put a clear differentiation between cash costs and non-cash costs within the RIA as well.

It's important to note that consultation on the Bill was undertaken before the committee's report, so no draft RIA was produced as part of the consultation, but there's been really wide and significant consultation with stakeholders throughout.

Okay, thank you for that. Can I ask then, given there is a large degree of uncertainty around some of the evidence and the assumptions that you make—I've been looking at some of the range of costs, for example, and the range is quite substantial. I'm just wondering how confident you are that the estimated costs that you've used are an accurate reflection of the options that are there.

We used the best data that was available to us in producing the RIA at the time of drafting, so we've been fortunate in Wales and we're in a position that England aren't, in the sense that we do have Rent Smart Wales, and they've been a really important source of expertise, looking at their experience, as well, which has helped inform our RIA. The collection of data through them has been significant because, again, this is an opportunity for us to engage directly with landlords and with agents in a way that England can't, for example, in the production of their Bill.

Our consultation was another really important piece of work in terms of accessing data from stakeholders. We had more than 600—

Six hundred and eighty-three.

—683 responses to that consultation, and the RIA was also informed by key estimates that were sought through the representative bodies from across Wales to test the assumptions that we've made in the RIA.

It's also important to recognise that Welsh Government commissioned some independent research to inform the Bill and the RIA, and that was really detailed, thorough work that employed best practice in terms of desk-based research of data, qualitative interviews and also surveys of people working in the PRS and with relationships with the PRS—so, tenants, landlords, letting agents, and so on, both in Wales and also in Scotland, where they legislated in 2012 to achieve the same thing as our Bill sets out to achieve. So, we've been very keen to learn from them in terms of their experience. 

Okay. You mentioned that you've used the best data. How reliable do you feel is the Welsh-specific data?

I think the Welsh-specific data is as reliable as it can be. Again, we've looked at the best possible data that's available using reliable sources, Welsh Government sources, Office for National Statistics sources, and so on, alongside the independent research that we've carried out to inform both the development of the Bill and also our thinking in terms of what the impact might be on the various sectors involved.

Okay. I mentioned earlier the sensitivity analysis and the broad range of costs. I was looking at option 1, for example, and the lower range estimates are around £27.2 million for total tenant fees over a five-year period, but the higher estimates are up to £63.2 million, which is a huge cost range, really. It's £36 million, and I'm just wondering how have those sensitivity analyses been applied to policy decisions, because with such a broad range, surely that's a difficult process.

So, we've taken the range of costs in the RIA, reflecting both the best-case scenario and the worst-case scenario, and then we have that central area where things are more likely to end up in, and that analysis has been really helpful in understanding each case, but also understanding those less likely outcomes as well to give us a broad picture. 

I think providing that wide range, although it sounds counterintuitive, does provide us with a degree of certainty in terms of where things might fall, and, again, we've based it on the best available evidence. 

I don't know if Huw or Emma would like to add anything at this point.

I think you've covered it very well. The range of estimates reflects that there are substantial differences in practice between individual landlords and, indeed, across the agents market as well. We did seek to ensure that we identified outliers in the data that we received, and excluded those from the sensitivity analysis, but, as the Minister says, taking the low, medium and high estimates enabled us to look at both best and worst-case scenarios and tweak the sensitivity estimates according to the policy area.

So, you're confident, then, that you've worked through the implications for all of those on that spectrum, really, in terms of coming to your policy decisions.

Absolutely. Yes.

Okay, thank you. Mike.

I'm very pleased you've taken a range. When legislation first started coming through, people would take a mid point, and that gave us no understanding of exactly how much it could end up costing and the range. It's not an exact science, and to pretend it was was, I think, a failure in the past. I'm very pleased to see you going in that direction.

Can I raise two other very brief points? Charges to tenants for call-out fees have been omitted from option 1 due to limited evidence. In your view, what impact did such fees have on the total cost faced by tenants? Could the money be made up by additional items such as call-out fees?

No, we're very clear within the Bill on what is a permitted payment. So, those are the holding deposits, security deposits, rent and payment in default of contract. The kind of payments that are most frequently required, which are ones that will be banned under the Bill, are the exit fees, so when people come to the end of their contract. And also renewal fees; these will also not be allowed in future as well. So, those are the additional fees that are most often charged.

We don't have a great deal of evidence in terms of call-out charges and how frequently they're applied. There could be circumstances in which call-out fees would be allowed under the proposed legislation. So, for example, were somebody to be in default of contract, then there could be a call-out fee were they to have lost their keys, for example, and that would be default of contract. That would be a legitimate payment. However, were there to be a call out because of a fault that wasn't default of contract, so perhaps a faulty boiler perhaps fitted by the landlord, for example, then clearly it would be not appropriate to issue a call-out charge there. 

I think the Bill is clear in the sense of the four payments that are allowed and, obviously, we'll be working to ensure that contracts are very clear so that individuals, landlords and letting agents will be very clear when an individual tenant or tenants are in default of that contract. 

And the RIA notes the current enforcement opportunities are not consistent, and that option 2 would require additional costs for enforcement. Having spoken to local authorities quite a lot in recent weeks, they have a feeling that we pass legislation and they end up having to fund it out of their diminishing resources. How do you intend to fund this enforcement, and how much do you think it's likely to cost an average authority? Will they have anything other than an, 'It's in your rates support, get on with it', reply? 

So, it's worth stating at the start, really, that we expect compliance with the Act to be very high. This is because we've had good engagement already with all of the people involved, so tenants' representatives, landlords, agents, and local authorities as well. We've looked to Rent Smart Wales as a model, which has been a really transparent and straightforward way of enforcing what's required under the Renting Homes (Wales) Act 2016 [correction: Housing (Wales) Act 2014] there. We don't see this to be any different in terms of being a simple and transparent way forward, and we would expect, as I say, very high compliance. So, because of the high compliance we expect, we would then expect the cost to local authorities to be low. 

The main role, I suppose, for local authorities would be with regard to the fixed-penalty notices, and, as they operate within this sector, they operate in a very simple and clear way, so addressing the behaviour of people who've breached the legislation in the same way as is the case with Rent Smart Wales. The issuing of fixed-penalty notices isn't particularly burdensome on local authorities; it's not particularly complicated when you compare that to other enforcement arrangements. So, we would expect the costs not to be burdensome to local authorities and, of course, local authorities under the proposed legislation will be able to keep the fixed-penalty notices money, which will offset, if you like, the cost to them of enforcement.

If I could just add there, it might be quite helpful, that our experience from Rent Smart Wales is that they estimate the cost of investigating a purported breach and issuing a fixed-penalty notice to be around £150 to £200. Local authorities themselves estimate a slightly higher cost, but still well within the £500 fixed-penalty levy that they would be able to retain to cover that cost. Prosecution costs would be slightly higher, but still not excessive. We estimate those to be around about an additional £300 to £400. Local authorities estimate, again, a slightly higher figure of maybe up towards £1,000, but, in the event of a successful prosecution, of course, costs could be awarded. So, as the RIA sets out, we envisage this being pretty much self-funding. 

I'll just say costs can be awarded but not necessarily collected. 

I would say, as well, that we do provide local authorities with wider funding for their enforcement duties that they already have as local housing authorities. So, we've provided a figure of £275,000 annual funding to support local authorities in undertaking the range of activities, including those that are needed to respond to, investigate and take enforcement action under Part 1 of the Housing (Wales) Act 2014. 

Thank you. Okay, Nick. 

I didn't expect to get to my questions quite so efficiently. Morning, Minister.

Morning.

In terms of understanding the transitional costs and how they're treated, can you elaborate on why transitional staff costs relating to Welsh Government, local authorities, and Rent Smart Wales for option 2 are seen as opportunity costs rather than actual costs?

So, we would expect those transitional costs to be very short term—so we don't expect a long-term financial outlay from any of those partners. And those sums we wouldn't expect to be large; we would expect them to be generally related to communication activities. And we've already done a lot of communication so that relevant parties know that this piece of legislation is coming forward, and they've had, obviously, ample and multiple opportunities to contribute to it. But, after the Act is passed, tenants, landlords, letting agents and local authorities will need to understand their responsibilities, and their duties, and their opportunities, particularly for tenants, under it. So, we estimate that the costs for Welsh Government would be £4,000; £25,000 to £34,000 for local authorities; and between £5,000 and £6,000 for Rent Smart Wales. And, again, this is particularly with a focus on communication activities. We would expect that most of that work would be able to be absorbed within their existing budgets without any undue difficulty, and it's for that reason that we look at that as an opportunity cost.

Is that the middle range of costs, again, you've taken there?

The £25,000 to £34,000 is the full range of costs for local authorities. It primarily covers sending existing officers on training and developing their skills and local information.

And the estimates for Welsh Government and Rent Smart Wales are obviously much firmer—the £4,000 for Welsh Government, and the £5,000 to £6,000 for Rent Smart Wales—because, obviously, we understand the operation of what we would need to do, and what Rent Smart Wales would need to do, much more clearly.

And can you explain why you felt that the salary for managers and directors in retail and wholesale was the most suitable proxy for letting agents and landlords when estimating the transitional costs?

Yes. The Office for National Statistics doesn't have a category for landlords, so we looked at the things, really, that could be similar. So, salaries for managers and directors in retail and wholesale we used as a proxy because we saw the landlords, really, as being managers within a retail environment. So, that seemed to be the closest that we could—

They're not exactly in Tesco, though, are they? It doesn't quite carry over.

No, but it was the closest, really, that we could find within—

Why haven't ONS—it's not your issue—got a category, I wonder?

Because there aren't enough of them, I guess.

Well, that's one for us more than for you, I suppose, isn't it? There we are. Okay. Thank you, Nick. Okay, we move on to David, then.

Thank you, Chair. Just to highlight the point before I go on to my questions, this range, this cost to local government, may I remind the Minister that local government keeps telling me they are at bare bones level, and any additional cost—and they are continually expressing the view that legislation costs always on local government—. So, whether it's £35,000 or not, that's going to be an impact upon local government, at this point in time. So, we must not treat that as if it's only £35,000; to the local authorities, it's a lot of money at the moment, when they have to cut services because of the austerity agenda.

Other people are, obviously, facing very great difficulties, and that's many of our citizens who are on benefits as a result of this. And the RLA itself recognises that this may have an impact upon them as they struggle to cope with the likelihood of higher rents, because, if people are not making money through fees, they're going to try and put that money onto the rents. So, how are you going to identify the risks associated with those individuals, and how can we mitigate those risks? Because, linked in to that, I know that the Housing (Wales) Act 2014 allowed local authorities to discharge their duties through a private rented sector tenancy mechanism, but, again, there's a limit on how much they're going to have available if rents go up, and that will be an extra cost upon local authorities if they go through that route, and, if they don't go through that route, how are they going to support those individuals who are struggling? So, what assessments have been done of those scenarios?

Okay, thank you. So, there are several issues there, and I will return at the start to the point you made about local authorities and the cost to them. So, I did mention that we already provide the annual funding of £275,000 for enforcement activities, but it's also important to recognise that local authorities haven't raised concerns with us in terms of the additional cost to them through this Bill, because, obviously, they can retain the fixed-penalty notices.

Come to my local authority and I can assure you that you'll get the message that I've just given you.

And also, their costs will be essentially in staff time, rather than, you know, additional costs to local authorities. But, we've had extensive discussions with local authorities and it hasn't been raised as a strong concern, has it?

There were no significant concerns.

As I said, perhaps you want to come to my meetings.

But, anyway, it's a situation that will benefit the claimants, and, clearly, an important aspect there.

Okay. So, we've looked very closely at the legislation in Scotland to understand whether or not a knock-on cost had been the increase in rents. Actually, it can't be proven that the legislation, which achieved the same aim in Scotland, did lead to a rise in rent, and that's something that there's been independent research into, and a UK Parliament scrutiny committee also looked into this issue. So, this Bill, were it to become an Act, does not have to necessarily have a knock-on impact in terms of increases in fees [correction: rent]. However, we've recognised that there is potential for it to happen.

The real concern is about the growing gap between local housing allowances and rents. This is something that clearly is a wider concern beyond this Bill, and it's something that we continue to lobby the UK Government on, because, of course, local housing allowances have been frozen, and they'll have been frozen for five years by the end of that freeze. And also, the level went from the fiftieth percentile, which meant that a reasonable amount of properties were available to people, down to the thirtieth percentile, which really does curtail people's choice and options. So, I appreciate that this Bill is part of a much wider picture.

But we do have some leeway in terms of discretionary housing payments, which local authorities are able to provide to people in order to assist them with their housing and the costs of it. In previous years, we've seen that local authorities haven't been using that fund to the maximum, but now, the vast majority of local authorities are using that fund, which I think is important in terms of supporting people, particularly on benefits.

You did mention the Housing (Wales) Act, and I think it's important to recognise there that, although the PRS can be used to alleviate and prevent homelessness for six months within that Act, actually the local authority has to discharge their duties by considering the needs of the household and affordability of the property as part of the consideration that they have to make in terms of discharging their duties. So, local authorities shouldn't be supporting people into housing that they simply can't afford and where tenancies will break down as a result of that. And, again—

But, on that point, is this Bill therefore going to put an additional financial burden upon either the individual or the local authority to ensure that there is sufficient stock with which they can support people into housing?

So, there are other ways that local authorities, and also the third sector with the Welsh Government's support, support people on benefits and low incomes into properties. These include our bond schemes, for example, and we offer other opportunities for start-up costs for people who are moving into a home, potentially for the first time, or are on release from prison, and so on. So, there are various schemes there. But I think that the removal of fees—and let's not forget that, actually, local authorities end up paying some of these fees—would actually mean that local authorities, potentially, could have more to spend on supporting people into accommodation as a result of not having to pay the additional fees that letting agents charge.

So, an assessment is that the additional fees that the letting agents charge, if they disappear, would compensate perhaps for higher rents that may be paid for private rented accommodation or to support individuals. So, local authorities would be no worse off in that case.

There's potential for that but, equally, we can't be certain that rents are going to rise as a result of this legislation. We've been honest that it is a potential response that the sector could have.

Mike wants to come in here, and then Nick. So, Mike first.

I disagree with the direction of travel that David Rees has been going on. I see letting agents' fees as windfalls. Does anybody really think or has anybody told you that landlords say, 'I've had my letting agent's fee, now I can drop the rent. I won't let it at market rate, I'll let it at a little less than market rate because I've had this windfall', or that they actually rent properties out at market rate every single time? When you sell a house it's the seller that pays the estate agent's fee, not the buyer. So, if we passed the set-up fee on to the buyer, the price of houses would go down. Is that a method of reducing house prices? I just find this idea that a windfall that falls to letting agents and falls to landlords every now and again when they let a new property as something that means that they, out of the goodness of their heart, reduce the rent of the property they're renting to below the value of which they could rent it out at—. Have you ever seen any evidence to say that?

I think you've hit the nail on the head in terms of the power relationships that are involved within the private rented sector. One of the reasons behind this Bill—or the main purpose of the Bill—is to help people enter and move within the sector, but one of the reasons it is so hard is because tenants don't have a choice, in the sense that the tenant looks for a property that suits their needs in a location that they want to live in and at a price that they can afford. So, the tenant doesn't really have a choice about shopping around between letting agents. Whereas the relationship between the letting agents and the landlords is an entirely different relationship. So, the landlord can shop around and find a letting agent who can provide them with the level of service they want at a price they're willing to pay. So, the power relationship is very much at that end of the spectrum, not at the tenants' end.

If I can just add to that point? There's huge variation in terms of charges made. There's quite significant difference in terms of landlords with individual small portfolios and large agents and what they charge. There doesn't appear to be a correlating difference in rent that would appear to point to your point being correct, and indeed not all commercial agents actually charge fees to tenants. Around 8 per cent in our research indicated that they made no charges, and, again, there doesn't appear to be evidence that there is a significant difference in rental levels there.

Okay. Nick.

Mike Hedges pretty much answered my question. But, you phrased it again there that there's no evidence, it's not proven. You were finely legally nuanced earlier, Minister, when you said that there's no evidence from Scotland, but clearly rents fluctuate all the time for different reasons, so I imagine it is very difficult to get that hard evidence. Are you going to make sure that, once it's implemented, you are monitoring this closely to see that if any evidence was to come forward that there is a knock-on effect for tenants, which is what we want to avoid, that that can be assessed at that point?

There is a natural monitoring process as part of the collection of private rental data that we collect in order to deliver data to DWP for their assessment of local housing allowances, so it is something that we already monitor and we will be able to keep an eye on whether there appears to be any significant impact on rentals. 

I imagine that the data that would come from Wales—. In the budget yesterday, we heard about the landfill disposals tax and the issues there with the amount that's raising. It seems to be Wales does quite good, once you do get the data of giving quite a good indication of how things are going. Maybe that's the size of the base within the country.

The data is fairly consistent. We're required, in order to deliver on our duties in relation to DWP, to collect data on different property sizes in specified area, and to meet a minimum standard in terms of the proportion of the market as far as it can be assessed to be in that area. So, the data is robust and fairly comparable and collected on a regular basis. 

I'll just add, in terms of the research we've done on the experience of Scotland, we used the most reliable data, so that's the ONS index of private housing rental prices, and when we reviewed that data and when others reviewed that data, they couldn't attribute changes to rent levels in Scotland to the legislative changes they made in 2012. When rents did go up in Scotland, they didn't go up at the same level for different types of property, nor were they out of kilter for rent levels changing across the rest of the UK over a prolonged period as well. And Scottish stakeholders told researchers that the ban coincided with changes to deposit protection rules, and those affected agents' cash flow. Also, their enhanced health and safety legislation was introduced, which required electrical safety tests, and they came into force at the same time. So, it's expected that the combined effect of these changes might have affected the rent levels in Scotland.

My only word of caution with that—as you were speaking earlier and then again, it's been popping into my head, an analogy about when we talk about climate change. We know that the climate is increasing in temperature and we know that there's more carbon dioxide in the atmosphere; it's not possible to prove that there's a causal link, but we all know that there is some sort of link there. So, I know it's a strange, left-of-field analogy, but just because something can't be proven, that doesn't mean that there isn't a link there. So, I think—. But you've recognised that you're going to watch the data closely to see what is happening in reality.

And I think the point you make speaks to the wider housing issue of supply and demand, in the sense that we need to be, and we are doing much more to increase the numbers of houses that we build. And I think, obviously, that will have an impact on the market eventually, when we are able to scale up and achieve our ambitions there in terms of greater numbers of both social housing and affordable housing as well. So, it's part of a big picture. 

Okay, well, we're not straying into global warming for now.

I'm surprised you didn't shut me down there and say, 'That's the wrong committee'. My mind works in strange ways, and there was a point there, that I failed to make.

Okay, Helen, you have questions.

Thank you. I want to explore a little bit more the potential impact on letting agents. We all know that there are some letting agents who behave pretty unscrupulously and take advantage of tenants. But it's also true that letting agents provide a very valuable service, and they do provide a valuable service, particularly to people who might have one or two rented properties that they use as their pension, where you don't then want to be dealing with all the compliance issues and things like that. So, under option 2, letting agents would lose £8.7 million of fees over five years. Have you made any assessment of how this might impact on particularly smaller letting agents in Wales—the companies that might be a one or two or three-person business, not part of a big chain? Is there any evidence from Scotland, for example, about the impact on letting agents, and particularly the smaller ones?

In Scotland, they had a thriving letting agents sector before, during and after the introduction of their legislation. I think I'm right in saying that the total number of letting agents has actually increased in Scotland since they introduced the legislation. Did you have anything further?

As the Minister said, the evidence from Scotland seems to be that there isn't certainly a negative impact. As you rightly say, the difference between different letting agents is quite significant. We know, as I mentioned earlier, that some letting agents currently don't charge fees already and they manage to successfully run thriving businesses. So, there's no reason to believe that others can't adjust their business model to be able to either absorb or find alternative ways to ensure the validity of their businesses going forward.

That's encouraging. My second question partly comes out of that. One of the benefits of having letting agents is that they are able to support smaller private sector landlords in complying with statutory requirements, ensuring that properties are of a good standard, and so on. I would have a concern if this legislation led to more unqualified private individuals trying to manage their properties themselves, because that can be quite a challenge and I'd be worried about the potential impact on the quality of service that the tenants would then receive. So, following on from what you've just said, would it be right to say then that there isn't evidence from Scotland to suggest that people go from using letting agents to self-managing properties? Have we got any evidence, or have you made any estimate about whether that is likely to happen?

I'll pass over to Huw in a moment—he's our resident expert on the Scottish evidence. But, just to say, looking back, similar concerns were raised when we introduced Rent Smart Wales, and we certainly didn't see a significant shift at that point, so those concerns weren't realised. To go to your point about training, of course, we do have Rent Smart Wales, which would require a minimum level of training and awareness for any landlord, whether they be an individual landlord directly managing their own property or an agent managing on behalf of other people. So, I think we have a fail-safe there in terms of quality and making sure that all of our landlords, as far as we can, are operating to a minimum standard. I don't know if there's anything particular from Scotland on that point.

[Inaudible.] The conversations I've had with colleagues in Scottish Government have indicated that there hasn't been that change that you suggest, so I think the likelihood that it will happen under this Bill is unlikely, I suppose.

It's worth noting as well that the support that we provide through Rent Smart Wales for landlords, in order to help them become good landlords, has been really well received. I think more than 90 per cent, or around that kind of figure, of landlords who undertook the training believed it would make them be better landlords. They found it useful. So, I think that's really positive. It's all part of a wider agenda, really, about seeking to professionalise the sector in order to give tenants a better deal and a better service.