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Y Pwyllgor Cydraddoldeb, Llywodraeth Leol a Chymunedau

Equality, Local Government and Communities Committee

15/11/2018

Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

Gareth Bennett AM
Jayne Bryant AM
Jenny Rathbone AM
John Griffiths AM Cadeirydd y Pwyllgor
Committee Chair
Leanne Wood AM
Mark Isherwood AM

Y rhai eraill a oedd yn bresennol

Others in Attendance

Alun Davies AM Ysgrifennydd y Cabinet dros Lywodraeth Leol a Gwasanaethau Cyhoeddus
Cabinet Secretary for Local Government and Public Services
Jo-Anne Daniels Cyfarwyddwr, Cymunedau a Threchu Tlodi, Llywodraeth Cymru
Director for Communities and Tackling Poverty, Welsh Government
John Howells Cyfarwyddwr Tai ac Adfywio, Llywodraeth Cymru
Director for Housing and Regeneration, Welsh Government
Judith Cole Dirprwy Gyfarwyddwr, Llywodraeth Leol, Cyllid a Phartneriaethau Gweithlu, Llywodraeth Cymru
Deputy Director of Local Government, Finance and Workforce Partnerships, Welsh Government
Rebecca Evans AM Y Gweinidog Tai ac Adfywio
Minister for Housing and Regeneration
Reg Kilpatrick Cyfarwyddwr Llywodraeth Leol, Llywodraeth Cymru
Director for Local Government, Welsh Government

Swyddogion Cynulliad Cenedlaethol Cymru a oedd yn bresennol

National Assembly for Wales Officials in Attendance

Chloe Davies Dirprwy Glerc
Deputy Clerk
Jonathan Baxter Ymchwilydd
Researcher
Naomi Stocks Clerc
Clerk
Osian Bowyer Ymchwilydd
Researcher

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.

1. Cyflwyniad, Ymddiheuriadau, Dirprwyon a Datgan Buddiannau
1. Introductions, Apologies, Substitutions and Declarations of Interest

Welcome, everyone, to this meeting of the Equality, Local Government and Communities Committee. Item 1 on our agenda today is introductions, apologies, substitutions and declarations of interest. We've received two apologies from Siân Gwenllian and Jack Sargeant. Are there any declarations of interest? No. 

2. Craffu ar Gyllideb Ddrafft Llywodraeth Cymru ar gyfer 2019-20: Sesiwn Dystiolaeth 2
2. Scrutiny of the Welsh Government Draft Budget 2019-20: Evidence Session 2

We move on to item 2 on our agenda today: scrutiny of the Welsh Government draft budget 2019-20 and our second evidence session. I'm very pleased to welcome Rebecca Evans, Minister for Housing and Regeneration; Jo-Anne Daniels, director for communities and tackling poverty in the Welsh Government; and John Howells, director for housing and regeneration in the Welsh Government. Welcome to all three of you. Is there anything you would like to say, Minister, by way of introduction, or are you content if we move straight into questions?

Happy to move straight into questions, Chair.

Okay. Thanks very much for that, then. Perhaps I might begin, then, by asking some general questions. In making budget allocations, Minister, to what extent have you thought about the five ways of working set out in the Well-being of Future Generations (Wales) Act 2015? And are you able to point the committee to anything within the budget that's changed as a result of adopting that way of working?

Thank you very much for those questions. I would say that the five ways of working run very much through all of the work that we do within our department, so not just work related to setting of the budget but actually all of our policy work. Certainly, whenever I receive any advice on policy issues from officials, then there is a specific section within that policy advice that explores to what extent and how the advice that I'm being given does meet those elements of the future generations Act and also particularly the goals of the future generations Act. 

In terms of the budget, then, nothing has changed as a result of the budget that we originally set, because the five ways of working are just so embedded in the way in which we work anyway. It's not an add-on and we don't test things afterwards in terms of how well they fit with the five ways of working, because thinking in the long term is absolutely central to the housing portfolio. Integration again, clearly, is something that we're very keen to drive forward in the portfolio. Involvement and collaboration are crucial as well and prevention, clearly, is very much the approach that we take. 

In terms of prevention, we could look, for example, to the money that we are investing in preventing homelessness. So, an additional £10 million this year and next year, and £10 million to prevent homelessness and relieve homelessness specifically amongst young people next year. And that also, I think, reflects a long-term way of working, because we understand that, when we look at young people who potentially might become homeless, we can identify them at quite an early age. So there are things that we can be doing to prevent it and to take a long-term approach there. 

In terms of integration, I would point to the integrated care fund and the way in which we're working very closely across Government, but particularly across housing, health and social services, and the £105 million that we've identified over the coming three years to invest in housing-led solutions to social care needs.

Collaboration: I think the work we're doing in terms of our co-operative housing agenda is particularly strong there, and collaboration clearly is at the heart of the ethos of co-operative housing. Involvement is very important to me, especially in the light of the Grenfell tragedy, when we understand that the residents there felt that they didn't have their voices heard. They tried to speak up, but no-one was listening. So it's very important to me that we involve people who are on the receiving end of the services that we provide and the housing that we seek to build, that we listen to them in terms of what their aspirations and needs are.

09:35

Okay. Thanks for that, Minister. In terms of 'Prosperity for All', how closely aligned would you say are the budget allocations within your responsibilities to the priorities contained in 'Prosperity for All'? 

I would say they are very closely aligned, because we're very clear that we need to deliver on those promises that we made in 'Prosperity for All'. So, an example would be the funding that we're putting into Help to Buy—Wales. We're very clear that we want to support people to purchase a home as well as continue to invest in social housing as well. We've supported the construction and sale of over 7,400 homes since January 2014, and we have put a £290 million investment in the second phase of construction, and we would expect to see over 6,000 houses brought forward by 2021 as a result of that investment. And, of course, those 6,000 then go towards our aspirations, or our goals, of building 20,000 affordable homes over this Assembly term. 

The innovative housing programme would be another example. We're very much committed to exploring ways to mainstream the building of houses that are much more innovative, which keep bills lower for the residents, which are much better in terms of helping us meet our carbon reduction targets. We've approved £43 million of funding to support 26 schemes to build over 650 new homes in phase 2. And obviously, we're committed to opening phase 3 next year of that project as well. And that's a £90 million project over three years. 

So, we can give numerous examples of ways in which we're investing funding in delivering on our promises in 'Prosperity for All'.

Okay. Thanks for that, Minister. We'll move to some questions that Mark Isherwood has, moving on to some welfare issues and the discretionary assistance fund. Mark.

Thank you. The discretionary assistance fund specifically, and if I could just mention a couple of other related questions. As you'll be aware, there was an overspend of £40,000 in 2017-18, although in previous periods, I understand there'd been an underspend. You've now added an additional £2 million from reserves in anticipation of future demand. How was that estimated? On what basis was the £2 million arrived at? 

09:40

Thank you for that question, and I remember sitting in budget scrutiny last year talking about the discretionary assistance fund, and the questions then were to what extent were we confident that we would achieve full spend of that funding last year. And we were confident, but, as you've identified, actually there was an overspend last year. That really does reflect the pressure that there is on this particular fund, and the reason that we've come to that estimate of an additional £2 million being needed to meet the demand of the fund is based on the actual monthly spend figures from April 2018. Since April 2018, the DAF spend has reached more than £6.1 million, and that compares to £3.8 million for the same period last year. So, demand has continued to increase month on month. October has seen our highest demand thus far since the fund started in 2013. So, we'll continue to monitor the expenditure to ensure that we do have sufficient funding within it to meet the demand.

I'd also say that over the course of the last year as well, we've extended the eligibility for that fund. So, we've expanded it to people who are facing sanctions, for example—they were previously unable to access the fund—and we've extended the support available to refugees under that fund as well. But, clearly, there's huge demand on the fund as a result of universal credit and the impacts of welfare reform.  

Did you want to add anything on this?

Just to add that, this year, the discretionary assistance fund saw an additional £1 million compared to 2017-18, again reflecting the slight overspend last year and our expectation, as the Minister said, that demand would continue to increase, partly because of universal credit, but partly because of the wider package of welfare reforms that have seen families increasingly struggling.  

Again, can you just clarify that it is a fixed sum for the financial period 2019-20? So, if it's less than we need, fantastic; if it's more than we need, there won't be any more unless there's exceptional funding we don't know about in the future. Again, it's how you arrived at that figure. What was the evidence base for the £2 million, rather than just assuming there's going to be more demand coming down the road? 

So, arriving at that figure was based on looking at the actual monthly spend and how it has been increasing incrementally over the course of the last year, and the fact that, in this financial year, the funding that's gone out through that fund has been £6.1 million as compared to just £3.8 million in the previous year. So, there is increasing demand on that fund, and we know this by the number of calls that the fund is also taking.

We get very detailed information from Northgate Public Services who manage the discretionary assistance fund on our behalf. So, we're able to track the trends in applications on a weekly/monthly basis, and we're able to see whether or not there are particular pressure points emerging, and we can respond to that. Clearly, if the fund looks to be reaching a point where money is potentially tight, we have the opportunity, of course, to look at whether there's funding from other budgets that can be used to offset. So, for example, in 2017-18, where you referenced the £40,000 overspend, we have flexibility across the budgets to move money to be able to cover such eventualities. 

I'd better start by declaring I have two daughters who work in the third sector on money debt advice, before I go into my next question. We know that the UK Government has recently announced direct funding for Citizens Advice to support people through the universal credit process. We know that the Department for Work and Pensions has appointed community resource teams in different parts of Wales who have to have had lived experience of a range of disabilities and protected characteristics, and we know that Remploy got the UK Government contract to support those out of work for more than two years mandatorily, but also voluntarily for disabled people with long-term health conditions. Not surprisingly, 80 per cent of those accessing those services are doing it voluntarily from the community who are disabled or have long-term health conditions. But how are you ensuring that your schemes and your budgets add to, or run alongside, those UK Government-funded pots and programmes working within Wales?

09:45

I would say that relations between UK Government and Welsh Government on this issue, certainly at official level, are good because we've set up a joint working group between the DWP and Welsh Government officials to explore how we can better work together, because we do recognise that there is certainly more that we need to be doing. We need to be having much more advanced notice—and this is a common theme, I think—more advanced notice and more early engagement with the UK Government on various aspects of welfare reform. But, certainly, in terms of the operational side of things, there is good engagement and opportunity for us to be trying to maximise Welsh Government's views in terms of the particular concerns that we have about the impact of welfare reform on the Welsh population. I know Jo-Anne is particularly involved in that. 

Yes. So, I have a group, as the Minister has mentioned, with the DWP director in Wales. So, we're able to discuss issues around the implementation of universal credit and the roll-out and the impacts of that. I should also say that the team have already met with Citizens Advice to talk about the new universal support programme that they'll be running from April next year, and to discuss the shape of that, and how the transition will be undertaken between the role that local authorities have so far played in delivering universal support and how that will be transitioned across. 

We also work very closely with third sector organisations more broadly who are providing advice and help, and so, for example, with the DAF, we encourage applicants to the DAF to do so through third sector partners, so that while we are helping them with the immediate financial crisis that they face, whether that be a washing machine or being able to buy food, we are ensuring that they're in touch with advice services that can help them in a more long-term, sustainable way, to ensure that the repeat need for emergency payments is reduced as far as possible. 

And given your reference to third sector providers—and I've declared a family interest, although they're not dependent on me any longer—we know that the Welsh Government has, over recent years, predominantly funded advice services, including debt and welfare, via CAB and Shelter. But we also know that Welsh Government policies, strategies and legislation encourage and require commissioning to support local and community benefit, where sometimes you've got the locality-based third sector bodies who are doing a great job on the ground. What, if any, proposals does the Welsh Government have to review its support for those organisations to ensure that the Welsh Government support pound is being used in the most effective way it can?

There has been an ongoing programme of work through the national advice network in Wales, which brings together all of the advice bodies, because, as you recognise, there are many different bodies providing advice across Wales, some large, but then, also, some very small advice providers locally. So, they've been working very hard to develop a set of standards to move towards a quality framework, so that organisations can demonstrate themselves that they can meet the standards that we require, because, actually, we know that the only thing worse than no advice is bad advice. So, it's really important that we can be confident that the advice that is being provided to people is thorough and up-to-date and impartial. And, equally, organisations can have an understanding of what's required of them. So, some work has been going on in a very collaborative fashion across the advice sector to develop that quality framework, and I hope to be able to say more about that shortly. 

We're also looking to see what we can do to bring together some of our funding for the advice services as well, because, again, there are so many different organisations providing advice. We have four different advice funding streams at the moment, so we're looking across that piece of work to see what we can do to make things more sustainable, and mainstream where appropriate.  

I know there's one large network in Wales that feels it's not being able to maximise its offer.

But, moving on finally to credit unions, we know that, last August, the Financial Services Compensation Scheme had to step in when My Community Bank Wales, with the Loans and Savings Abertawe Credit Union Ltd, got into difficulty. And we also know that, following the crash and tightening up of banking regulations, credit unions are now subject to far tighter capital adequacy requirements, more aligned to large banks, which has caused a number of them problems, and they've had to come to Welsh Government for support. I actually wrote to Welsh Government this summer after being approached by credit unions. So, how sustainable is the credit union sector in Wales without Welsh Government support, both short term and, potentially, longer term, where I know from correspondence with the Welsh Government the objective is to restore their sustainability, so that that extra support doesn't need to be embedded long term?

09:50

The goal is to make the credit union sector sustainable. At the same time, we do recognise that there is very much a cost to the credit unions for the work that they undertake. The financial inclusion and outreach work particularly does bear a cost. However, the social value of that work is very clear to us, in terms of preventing people from engaging with loan sharks, going to those high-cost money lenders, for example, and also building up their own financial resilience. So, credit unions do fantastic work in that area, and that's why we provide £422,000 revenue funding to credit unions to help them move towards a place where they are more sustainable. We've seen some mergers, and I think that that is a positive thing, because that will make those credit unions more sustainable for the future. But you did mention also the importance of having that revenue-to-credit balance that is required of them, which is why Welsh Government put in place that £1 million financial transaction capital fund, which some credit unions—in areas represented around the table—have drawn down funding from to make them more sustainable in the long term. And we were happy to be able to put that funding in place.

And they tell me that, actually, the issue in most cases isn't savings with them, it's the ability to broaden their lending offer and reach broader markets. How, if it's always the Welsh Government engaging with them over that—? I have privately; I hosted a meeting with them and the registered social landlords last week to see how there might be better working. But how are you able to work with them to broaden their offer, to develop that sustainability and justify your contribution to their capital base?

We work with the credit union sector to try and promote the work that they do in the first instance, because of course the better known that they are within the community, the better chance they will have of people using them for both borrowing and then also saving as well, which is important. They do great work, I think, starting with people at a very young age—so, working in schools, in terms of having some saving clubs and so on and working closely there. And then the enthusiasm you can see—and I've seen it for myself when I've done the visits—goes from the children, who just enjoy the saving element of it, and it's incorporated into some of their numeracy lessons and so on, but actually then it's the parents who are engaging and having a good benefit from that as well. So, I think that there's lots to do in terms of the outreach, but they are very much an active sector, I would say, in terms of promotion and outreach.

And lending—because saving's always an issue, but, at the moment, in order to deliver that sustainability, they have to reach far wider markets for their lending. And that's where—. Obviously, we're not going to encourage lots of schoolchildren to go and borrow from them, but we do want them to get into a good savings habit. But in terms of using alternative and wider channels to promote their offer as lending organisations—.

Do you want to add? [interruption.] Okay. We'll write to you with further information on the work that is being done by credit unions in terms of promoting their lending facilities.

Okay. Before we move on, Minister, could I just ask a further question about people moving onto universal credit? So, there's additional money for the discretionary assistance fund, there's the ongoing funding for advice services. Is there anything else that you would point to in the budget in terms of provision for those moving onto universal credit and the issues that involves?

I would point to the additional £7 million that has been provided, not through my budgets, but to ensure that people who are eligible for free school meals continue to be eligible for free school meals, and then also to expand the number of people who are eligible for free school meals, as a result of the changes to universal credit. There's lots of work going on there to identify and narrow down the people who will be affected by that, because obviously we're at a stage where universal credit is only partially rolled out, so we'll see much more—we'll be able to say much more on this, or certainly colleagues elsewhere will be saying much more on this, in due course.

09:55

Okay, thanks for that. We'll move on then to Gareth Bennett and some questions on housing support grant.

Thanks. The previous proposal to merge 10 budgets into one mega-grant suggested that it would lead to a reduction in administrative costs. Given that the housing support grant merges three grants, do you expect this to result in any efficiency savings, and will these savings be reinvested into the grant?

Thank you for the question. The main purpose behind the proposals to merge those 10 grants into what you described as a 'mega-grant' was really about improving outcomes for people and removing those barriers that local authorities said were there in terms of being able to provide some of the most vulnerable people with appropriate packages of care. 

Now, the work that we've done in terms of the pathfinder projects and the evaluation that has taken place did show that there was a natural alignment between the housing elements of those grants and then the family and children support elements of those grants. That, alongside listening to the sector through the Housing Matters campaign, for example, did lead us to the conclusion that the appropriate way forward would be through the two grants. So, those grants were never really about cost-cutting or saving money—they were about improving the outcomes for people, because people’s lives don't neatly fit into the mechanisms that we've put around our grant structures. What we do expect is for the bringing together of these grants in those two new streams to be able to facilitate some more innovative work on the part of service providers. Hopefully, that will lead then to better outcomes of reduced pressures on services further downstream, if you like.

The cost of existing Supporting People administration is met through the authorities' revenue settlement and we wouldn't expect the overall administrative cost of the housing support grant to be any greater, because Supporting People is very much the largest part, by quite a long way, of the housing support grant.

Okay. Thanks. You're mentioning Supporting People, but to what extent is it evident that that programme is delivering value for money and how clear is the Welsh Government’s understanding of the programme’s impact?

We are well aware, really, of the criticisms that there have been in the past through a number of reports, particularly the auditor general's, in terms of how we evidence value for money for some of our schemes, one of which, particularly, was Supporting People. But I would stress that the evidence base that we do have now for Supporting People is probably the most comprehensive that we have for a scheme of this type.

So, we’ve got an outcomes framework for Supporting People, which was developed in partnership with the service providers, and that tells us to what extent our Supporting People programmes have increased individuals’ abilities to manage their accommodation, to manage their relationships, manage their money and improve their mental health, alongside a host of other domains as well. So, we do have that evidence. We also have, of course, the outputs from the programme—60,000 units of support have been provided by it.

But I think the most important thing in terms of evidencing the work of Supporting People is the data linkage project that is being undertaken. So, that links people’s Supporting People data with their health records. Although it is early days, it is starting to provide us with an answer to the question as to what impact Supporting People has on health services and on social services more widely. We’ve done some modelling and we understand that, for every £1 spent on Supporting People services, a saving of £1.68 is delivered to other services, and we intend to increase and build on our evidence base in that area.

Okay. Thanks. Thanks for that information, which was very useful. Has splitting the early intervention, prevention and support grant in two provided a long-term and sustainable solution and is it the best way to deliver both value for money and better integrated services?

Well, we believe that it will be the right way to deliver value for money and integrated services, but, of course, it doesn't actually come into force until April of next year. But all of our understanding, from the evidence that we have through our pathfinder projects and the evaluation that has taken place of those pathfinder projects does suggest to us—which is why we've taken the decision—that this is the right way forward in terms of improving the outcomes for people and delivering a programme that does give local authorities that element of flexibility that they were looking for when designing support that meets people's needs, which can be much more complex than we often appreciate when we set grant boundaries. 

10:00

Minister, we've all had correspondence from those organisations that rely on Supporting People funds to deliver services for people with high levels of need—people fleeing domestic violence, people with mental health problems, et cetera. So, I just want to probe a bit further on the decision to, if you like, keep separate budgets, because you indicate that you thought there could be efficiency savings of £13 million a year if you were to provide a single integrated blob of money for local authorities so that they could spend it in a better, integrated way. So, I appreciate that the commitment from your paper is that the way we're now going to do it in this year is going to be for the rest of the Assembly term—I just wondered if you could elaborate a bit on the lessons learnt, both in terms of the anxieties created from organisations who thought that they were suddenly going to lose their money to some other cause, and what emerged from the pathfinder in local authorities as to how it wasn't possible to reassure those people that it wasn't going to lose them valuable services but was going to enable them to make efficiency savings. 

I'll say something to start about the anxieties that you referred to that organisations certainly felt when they saw the original proposal for the mega-grant or the 10-stream grant. I think those concerns were natural, as they would be when there's a potential for change within the sector, but, having said that, I do have a great deal of respect for the way that the sector did step up and say, 'Right, change has to happen', and also provided a reasonable and sensible alternative. So, this alternative does require change of them. We've been very clear that the reports, for example, through the audit office report—and I know committees have looked at Supporting People and so on—. So, it's not about having no change in the Supporting People sector by any stretch of the imagination. This is about responding to various concerns that have been raised and doing things differently, but in a way that does protect that housing element and also then gives the flexibility across the other grants.

We were very fortunate as well to have the Welsh Local Government Association very much engaged with us through our national Supporting People advisory group. They also explored that possibility for the two-grant solution, and then they felt that actually, yes, local authorities can support this as well. So, that—. I think had there been more anxiety in the sector about the proposal of that two-way split, then we perhaps would have found it more difficult to come to a solution that everybody is satisfied with. So, there's been really good collaborative working, is what I'm trying to say there, in terms of right across the sector. 

There were some—

You think local authorities have understood that, by changing, they can actually save money that, obviously, they can invest in more services. 

Yes. I think certainly local authorities are very much up for the challenge of doing things differently. But it really isn't—. This isn't a programme about saving money. If there are efficiencies, great, and they can be reinvested, but, really, this is about meeting people's needs and breaking down the barriers that local authorities and others were telling us existed in terms of those needs. 

This is not about saving money; it's about limited pots of money that we have to use most cost-effectively. So, by doing it this way, do you think you're still going to get similar savings or similar administrative reduction in costs, or—? Are you able to put a number on it? 

10:05

Perhaps if I just talk a little bit about the evaluation process and the piloting that we've been doing since April. Also, just to clarify for committee members that, across the 10 grants that have been involved in the pilot so far, there was, set out in the indicative budget last year, a reduction of £13 million. The revised budget now replaces that £13 million, so there's no expectation of savings across those 10 grants. But the point is still very much the case that, if there are efficiencies that can be made in administration, then we would want to see those ploughed back into the front-line services that do that valuable work.

We set up the pathfinders in April. We've met with them very regularly—both the local authority pathfinders and stakeholders. So, Cymorth, for example, the WLGA and the Wales Council for Voluntary Action have been part of that group. And so, we've been monitoring the work that local authorities have been undertaking quite carefully and, obviously, alongside that, a formal evaluation. I think it's fair to say that we're still now only just over six months in, and so it's very early days in terms of the changes that local authorities sought to make, but I think the evaluation highlights some important and positive early signs that, by asking local authorities to work differently, they're starting to have different conversations. They're starting to have conversations across the authorities that, perhaps, they didn't have before with different parts, different departments talking to one another and finding out that, actually, there are synergies in some places and, actually, there are fewer opportunities for integration in others than they, perhaps, might have expected. So, I think we've seen really positively, across the pathfinders, a bit of a change in the way of thinking and a change in the way of approaching how they commission services and the degree of integration that is possible to reflect the complexity of people's lives.

The evaluation did also show that the feedback that we got, which was reflected also in our meetings, was that people felt there was a more natural alignment between some grants than others. And so, they felt there was a more natural alignment around housing and a more natural alignment around non-housing. So, as the Minister said, that's the basis on which we'll be taking the grant forward for the remainder of this Assembly term. 

Okay, thank you very much for that. Perhaps we can look at this more in detail on another occasion.

Thanks very much. I wonder if you could tell us to what extent the recent evaluation of homelessness legislation has helped to inform budget allocations.

Thank you very much for that, So, there've been two evaluations of our homelessness legislation and our approach, over the course of the summer, and they have provided us with a useful evidence base in terms of allocating future spend on the homelessness agenda. 

So, we have already allocated, as you'll be aware, some additional funding to address some of those evaluations in this financial year. So, we're not waiting for the next financial year to be addressing that. For example, we added additional funding to the prisoner pathway, because we know that there are particular concerns there, and additional funding for local authorities to ensure that they address the spirit of the legislation as well as just the letter of the legislation. And this is something that I feel very keen—that it's not just about, simply, discharging the legal duties, but, actually, there's a whole spirit of the legislation, which is about prevention, which is, I think, much wider. I had the opportunity to talk to all the housing representatives of the local authorities very recently about the spirit of the legislation.

The evaluations also provide local authorities with a very good base on which they can be building and finalising now their homelessness strategies, which should be published, or will be published by the end of the year.

In terms of the additional funding for youth homelessness, I'll be making a statement to the Assembly on Tuesday of next week and that takes into account the work that we commissioned from the Wales Centre for Public Policy, which looked at international evidence as to what works in terms of preventing youth homelessness particularly, and also what's working well in Wales. So, without giving too much away ahead of next Tuesday, my intention would be to provide additional investment for things that we know work well in terms of preventing homelessness for young people, but also allowing a space for innovation as well. Obviously, I'll say more on that next week. I will say, though, that it has been a piece of work that we've done across Government, because in terms of preventing homelessness, as you know, the real levers do lie in education and in the support that we give to families, rather—. When you get to housing, it's almost too late.

10:10

The final report of the evaluation that was done by the University of Salford and Wrexham Glyndŵr University, the one that was published in July, said that there was variable progress across Wales in terms of implementing the Act. Can you use your budget to incentivise action to be taken quicker?

We can use our budget and target parts of our budget to areas where we know there are particular pressure points for homelessness, and we've done that very recently with additional funding for Cardiff, Wrexham, Newport and Swansea, because, as you'll appreciate, those areas are areas where there's a high volume of homelessness, but also people with particularly high levels of complexity in their lives as well—mental ill health alongside substance misuse, women who are involved in the sex trade, and so on, so very, very, very vulnerable people with complex lives. So, we can use our funding to target additional money there and support additional projects. Each of those four areas has developed different approaches to spending their additional funding. So, in that sense, I think that we can target areas with additional resource, but at the same time allowing them the opportunity to decide how they best use that resource.

Okay, thank you. Given that the additional funding allocation for youth homelessness is only for a single year, can you tell us what impact you expect that to make on the goal of eradicating youth homelessness by 2027, please?

The first thing to say is that budgets, generally, are agreed on an annual basis, but I would certainly see tackling youth homelessness very much as a long-term commitment, and that's what I would want to be—. 

So, this extra money will be in next year's budget as well.

Well, I can't make any commitments. All I can say is I will certainly represent strongly my desire to see additional funding for youth homelessness in any future budgets, because clearly it's something that is a long-term agenda. What we can do next year, as I say, is really put additional funding into things that we've identified as being those key areas of intervention in people's lives when they are most likely to start to fall into homelessness. But also, having that innovation space as well, because we know there are so many fantastic ideas that are brought to us, and I think that it's right that they have the opportunity to be tested out, as well. So, we'll work closely with the End Youth Homelessness Cymru campaign, as we do, but also the ministerial task and finish group, which we set up to advise specifically on housing first and youth homelessness, and that brings together a wide coalition of bodies around the table. The police and the police and crime commissioners are there, youth justice, education, health—all of the services you'd expect to be having an impact in that area. But clearly, I know we can't solve youth homelessness in one year, and I would personally be making strong representations to colleagues in future years, should I be able to.

I'll be keeping an eye on how well you do that, Minister. Thank you.

Thank you. First of all, just focusing on the exceptional £207 million that's in the housing support grant for this year, this financial year, I just wonder if you could tell us—. I appreciate that's in order to kick-start the building programme that's in the programme for Government. I wondered if you could just tell us what progress is being made in spending that exceptionally large grant already—

Yes. Sorry. I beg your pardon if I—. Apologies, Minister. So, the social housing grant of the £207 million that's in this year's budget—how successful are we being at spending that exceptionally large grant, at this stage in the year?

One of the exercises we're engaged in at the moment is designed to improve our ability to predict spend across the course of the year, and we've already managed to bring forward commitments that would, in previous years, have been falling into the end of the year period for confirmation before the end of the calendar year. So, I'm pleased to say that, at the moment, we're well on course to spend this year's allocation. It's worth probably mentioning that this allocation does reflect a broader range of initiatives than was previously the case, so, we're supporting rent-to-own and shared ownership projects coming forward from local authorities and housing associations as well as more traditional social housing grant projects. But a key part of being able to deliver against this significant budget allocation has been the preparation that we've been involved in with local authorities and housing associations for the last—well, since the beginning of this term of Government. We have deliberately shared with them our future budget scenarios so that they were prepared for this level of spend this year and for the wider ministerial ambition in terms of the sort of projects that should be coming through. So, we are beginning to see the benefits of that because—people are working very hard out there, but we're seeing that coming through now in schemes that we're able to support.

10:15

Okay. So, you're predicting that you will have managed to allocate all that money by the end of the financial year.

Thank you very much. There's currently an independent review of affordable housing supply under way at the moment, so what flexibility, Minister, is there in your budget allocations to respond to any recommendations that they will be making in the next financial year?

The independent review of affordable housing is very much set up to take that kind of longer term look at what we need to do in Wales. So, there are sub-groups of that looking at what local authorities can do, the capacity of the sector, rent policy, land for housing and so on. So, this is a large piece of work. And, as I said, it does take that longer term look, so I don't imagine that, when the report is provided to Ministers in April of next year, there will be immediate changes that will need to be made to budgets. However, the freedom is there to look at changes, should they need to be made immediately. But this is about really enabling Government to set more stretching targets for house building, to change the way we build houses to try and address those concerns that we do have about the carbon impact of our housing sector and so on. So, it's a long-term piece of work, so I wouldn't imagine any immediate budgetary changes to be made in April of next year when the report comes in. But, that said, it will be tremendously influential in shaping future budgets.

Okay, well, we look forward to that. Our objective is to remove the housing revenue account borrowing cap. When do you think it will be lifted in Wales, and what impact do you think it's likely to have on the ability of local authorities to build more homes?

We were delighted when the Prime Minister made the announcement that the borrowing cap would be lifted. Welsh Government has been pressing for this for a very long time indeed, and we do see it as potentially being a real game changer in terms of allowing local authorities to be building at the scale and pace we would be wanting them to and wanting to support them to. So, in terms of removing that cap, in Wales we have a slightly different scenario to England. So, there's a voluntary agreement with the relevant local authorities at the moment. We're looking to end that agreement as soon as possible. We've had some good discussions already with the WLGA. There's real ambition and appetite to be building amongst local authorities. My message to them would be, though, that, as we move into this kind of new era, I hope the way to do this would be through collaboration amongst local authorities, so collaboration between one another and also collaboration between local authorities and RSLs. This needs to be something that is done in a way that brings together and pools resources and expertise. But we're hoping to remove it as as soon as possible.

There's a link to your last question. When the review kicked off, we didn't know the cap was going to be lifted, but we'd been campaigning for it. Now that it's happened, it's important that the review is able to place any recommendations in the context of what is a very significant development as far as local authorities are concerned, but the real challenge will be how we develop smart partnerships able to respond to different sorts of funding made available for housing for the longer term. So, whilst the action is being taken immediately to lift the cap, the really interesting question is what arrangements can we put in place over the next three, five, 10 years to deliver on the possibilities that are now open to us.

10:20

Just on the specifics, does actually getting the cap removed, as opposed to a commitment to do it, require detailed negotiations with the Treasury? No.

It's been confirmed by the Treasury that the cap has been lifted, and we just need to do a technical exchange of letters with local authorities, which is happening now, and then, technically, the cap is removed.

Well, that's excellent news. Okay, so then we're moving on into the type of housing we want, et cetera. All right. Just looking back for a moment, the statistics for last financial year, 2017–18, showed a fall in the number of affordable homes delivered with the capital grant funding we were then giving out. Could you give some insight into the reasons for that, and how do you think we can ensure that is avoided moving forward?

The first thing to say is that we remain very confident that we will reach our target of building 20,000 new affordable homes over the course of this Assembly. The dip in the number of houses built last year was anticipated, in the sense that it followed the—. So, John talked, in answer to a previous question, about sharing our investment plans with the sector in order to help them be able to plan their building, and so on. So, we were very much anticipating that drop that year because it reflected how much was invested and at what points in the previous Assembly. However, in discussion with the sector now, and because they have seen and they've had the opportunity to plan in terms of our longer term budgets, we do expect a significant increase in the number of houses built this year and next year.

Just before you go on, Jenny, I think Mark wanted to come in on this particular point.

Yes, thank you, very briefly. You talk about the term 'affordable housing'. When I worked in the sector, the social housing grant meant almost exclusively 'for rent'. Now it covers a wide range of things, and the 20,000 target includes Help to Buy—Wales, which is recyclable Treasury loan finance. How are you ensuring that those differences are factored in, to the extent to which the 20,000 actually includes x thousand, potentially, help-to-buys, which are a low-cost ownership option, from separate recycled finance, and ensuring that we have clear comparators for social housing built for rent as opposed to intermediate rent, rent to own, et cetera?

We're managing both. They are quite different in nature—one being dependent on the activity of commercial house builders, and the other being directly linked to the funds that Government makes available. Although there's a link between the two, there will be clarity in the official statistics. The figures that were published in October were the official statistics relating to affordable housing, which does not include help to buy. Those figures will continue to be published, so you'll be able to see the success we're generating with regard to Government-funded schemes.

Separately, we are publishing data on a regular basis with regard to Help to Buy, and so that contribution to the 20,000 is being regularly published and made available to anybody who wants to see it. So, there'll be clarity on the rate of house building, both in relation to the more traditional definition of affordable housing and Help to Buy.

I'm afraid we've got very little time, Mark. We do have to press on.

I think the Minister mentioned the latest estimate on Help to Buy, which is 6,000 or 7,000, and the rest will be the more traditional definition of affordable housing.

It would be helpful if we could have some clarity over how many traditional, what we used to call 'council houses' are either RSL or council owned.

10:25

Yes, we could write to the committee on that.

Okay, that would be very useful. Thank you very much. Jenny.

Just going back to the excellent news about the removal of the borrowing cap, how, moving forward, are you going to make sure that the social housing grant and the housing finance grant are going to be delivering value for money and not delivering projects that we regret with the benefit of hindsight?

All the affordable housing schemes that are funded through the social housing grant and housing finance grant have to comply, in any case, with Welsh Government criteria on value for money. So, those schemes would have to comply with the acceptable cost guidance figures, which Welsh Government publishes. Also, they are subject, then, to detailed scrutiny by officials, where necessary, as well.

Okay. So, you're not concerned about the controlling local authorities that enter into relationships with private loan finance?

Actually, one of the key strands for the affordable housing review is how do we structure grant arrangements in future to deliver a better deal for the public purse. Activity in Wales will involve local authorities procuring housing and RSLs engaged in state-funded projects. So, there's a mix, but one of the themes of the review is looking at efficiency and effectiveness across all of our interventions.

We have to stick with budget scrutiny, okay? We haven't got much time.

Yes, sure, okay. Apologies. So, in terms of how you're going to use the Welsh Government funding to influence the type of homes that get built, how are you going to link that to the decarbonisation objectives?

We've got a major piece of work going on at the moment, which is looking at decarbonisation in housing. Chris Jofeh, who I know has given evidence to some committees in the Assembly, is leading on that particular work. That piece of work goes hand in hand with the work that we're doing to understand better the condition of houses in Wales. So, we have the Welsh housing condition survey, which will be published later on this year, and that will give us a really comprehensive look at the kind of houses that we have, and the quality of those houses, with a particular focus on the potential for improvements in terms of reducing their carbon footprint, and so on.

We've got the review of Part L of the building regulations, which is being taken forward at the moment by Lesley Griffiths, and that's going to be important in terms of setting standards and quality in future. We're very aware that we need to be building homes in future that are low or near zero carbon, and we're doing lots of work through our innovative housing programme, which is £90 million over three years, in order to scope out the kind of homes that will work best here in Wales. We have some really exciting projects going on there.

The innovative housing programme is fantastic; we're seeing lots of good work. However, the long-term goal of that has to be to inform us of ways in which we get to a point where we do understand the two, three, four types of houses that work best for Wales, and we want to see those kinds of homes, then, mainstreamed. So, zero carbon, low carbon can't be an exciting thing that we all go and visit because they're so rare; it has to be something that is just mainstream and the way we do things. I think the innovative housing programme will help us on that.

Obviously, a lot of SMEs have been successfully awarded innovative housing grants to build some of this exciting new decarbonised housing. How do you think they're going to continue to be able to build on that expertise, rather than the mass house builders who currently build stuff that absolutely doesn't meet these objectives, and aren't simply going to just take over from them, so that we've got a 'made in Wales' excellence?

I think SMEs are perfectly positioned to be taking advantage of the innovative space that we're creating, partly because they can be partners with the RSLs who have been accessing that funding. Almost always, it is SMEs that are actually building these innovative housing developments and homes. But also, SMEs have always been the ones that are able to take risk and they're willing to take risks in the way that the volume house builders just haven't been willing to. So, I think that their attitude to housing is quite exciting—the fact that they are open to this kind of thing.For the first time also this year, we opened up the innovative housing programme to private developers, so we supported two projects for SMEs directly through that as well.

I also see a really important role for SMEs in future as we come to a point where we've better developed our proposals for retrofitting in Wales. SMEs, I think, are ideally placed to be doing that work, but I actually want to see them getting back to house building. So many have left in recent years and now they're concentrating on things like renovations and so on—repairs—but we need them really to be building houses. So, the stalled sites fund, which is a £40 million fund, I think really is helpful in terms of helping SMEs start building. It can be to improve their cash flow or it can be to go towards some kind of remediation of a site that has been stalled for some reason over time. That's really exciting, and we're exploring as well things about self-build and custom build. I'm really interested in that area, and when I do get to a point where I'm able to bring something forward on that, it will be SMEs that are benefiting in that area as well.

10:30

And in terms of retrofitting, how much focus is there on bringing long-term empty homes in the private sector back into use?

I'm really keen that we redouble our efforts in this area. I think we've got in the region of 24,000 empty homes across Wales, or empty properties, I should say, across Wales, which is clearly too much for so many reasons. Not only are there people who need homes, but actually these properties often end up being a blight on the communities because there's no upkeep of them, and then they just seem to have been deserted. So, we do have £50 million available through the town-centre loan scheme, and a further scheme that we have for local authorities to make money available to those property owners to bring their property up to a level at which they can be rented or used for other purposes. I think it's really good in some areas. In Swansea, for example, those loans are given and then the local authority will say, 'Well, you've brought this house up to standard. Now we can guarantee you a tenant for x many years'. So, it takes that kind of concern away from the owner.

So, this £50 million—how many homes is that likely to bring back into use, in these empty properties?

We haven't got a specific target because it's covering a variety of local authority initiatives. It's also worth mentioning that this is part of the emerging town-centre agenda funded through regeneration, and there are going to be a number of projects in north Wales this year and next targeting empty properties around town centres that could be brought back into use.

The other loan scheme, which I forgot a minute ago, but now I've remembered, is the home improvement loan scheme.

Thank you, Chair. Just moving on to housing standards, the budget says there's £108 million allocated to the 'achieve quality housing' action. We know that 91 per cent of social housing has already complied with the Welsh housing quality standard. Will all social housing meet the Welsh housing quality standard by 2020?

Yes. I'm sure that it will. That was certainly the deadline that Cabinet previously had set down. We've had discussions with local authorities and they are reassuring us of the ability to bring all houses in scope up to standard by 2020. I just would remind local authorities that this has to be a priority. I know local authorities have lots of ideas and ambitions, but actually this has to be the immediate priority. We provide local authorities with £108 million of capital funding every year through our major repairs allowance and stock transfer. Registered social landlords have funding through the dowry gap funding, and that helps fund that improvement work. So, we very much would expect the deadline to be met.

And how will Welsh Government ensure that funding to support achieving the standard has been used efficiently and effectively?

We monitor the efficiency and effectiveness of the grant aid through a variety of means, including an annual statistical return on WHQS progress. There's a requirement for an annual business plan, and regular meetings with those landlords take place as well with officials. Alongside that, we also require them to use our grant aid to secure jobs and training and other benefits by maximising their approach to community benefits as well. So, we would expect the homes that are being brought up to standard actually to be having a wider impact on the community in terms of jobs and support for those community-benefit areas.

10:35

Okay. There's a £45 million allocation in the 2019-20 budget to the innovative housing programme, which is testing a new housing model fit for the future in terms of quality and energy efficiency. You've mentioned that briefly already, but what challenges does that present in delivering value for money?

Innovative housing, we understand, will at this point cost more than just continuing to build the kind of houses that have been built thus far, but we're so focused on the need to change the way that we build houses that we're happy to accept that things will cost more in the first instance. But when we do get to that point where we understand the ones that will work for Wales and we are in a position to want to see them being mainstreamed, then, clearly, the cost comes down as the knowledge and the skills base increases. 

This is a really interesting area. My job normally is to grind every last unit out of the money we have available, but in relation to the innovative housing programme, it's a bit different, because we have been prepared to support a variety of different sorts of interventions because we don't know what the answer to the low-carbon challenges are, so we are prepared to take on different kinds of projects if we feel they offer a prospect of a more effective way forward for the longer term. And it's one of the big challenges about year 3 of the programme: how are we going to distil the learning from years 1 and 2? Are we going to constrain the flexibility there has been up until now because we are beginning to learn lessons, even though I would say we're a long way from knowing all the answers to the low-carbon challenge?

I would just add as well that, even though we're investing through the innovative element of it, actually, the programme does lever in, obviously, the private finance. We've already committed £61 million of the £90 million through the programme, but then, as a result, there is £182 million of private money coming through to those developments as well. We should also mention that innovative housing funding is only available if the recipients operate on an open-books basis. So, we are able to understand very much the impact that that funding's having. 

Okay. And just finally, Chair, on fire safety. Given the expert group is tasked with taking forward the recommendations of the Hackitt review, and it's expected to set out a road map in January 2019, do budget allocations across portfolios provide sufficient flexibility to implement the group's recommendations?

I suppose the answer here would be similar to the one that I gave Jenny on her question regarding the review of affordable housing. The overall work that we are going to bring forward on fire safety by the start of next year will be to—. Sorry, John's just distracted me with this note on Newport City Homes, which I'll come to shortly. But the work that we're asking that building expert group to bring forward is to set us out on the path to making the kind of changes that we will need. And I really do see this as being a huge piece of work in future, because it will involve, I would imagine, legislation, changes to regulation and so on. So, there will certainly be costs in future.

On how they're dispersed, I think it's too early to tell, in the sense that, potentially, there could be costs for Welsh Government, but equally there could be costs for other partners—developers, local authorities and so on. But it is far too early at the moment to understand what those costs might be. However, we have been happy to provide Newport City Homes with £3 million of funding in order to help them with the work that they needed to do to remove the cladding that was found to have failed the large-scale Building Research Establishment tests. And we've had really good engagement, I would say, with the private sector as well and had some very good results in terms of the majority now of those buildings that were found to have the aluminium composite material cladding on them—getting to a point where the cladding will be removed and replaced without cost to the leaseholders. So the cost will be taken, for example, by the developers. I think that has been a really positive outcome.

Okay. If we move on, then, to adaptations, Minister. It seems that there's quite a complex picture when it comes to funding arrangements for home adaptations across different tenures. Do you think a more uniform approach would have the potential to deliver better value for money, more efficiency savings and, indeed, better outcomes for service users? 

10:40

Yes, I'm keen to see a more standardised approach, and that's why I've recently launched the consultation on housing adaptations service standards. That's ongoing at the moment and will close on 19 December. The aim of those standards, really, is to set the level of service that is expected of those people delivering the adaptations, but also give some clarity, really, to the people who are in need of those adaptations as to what they should expect from those standards. So, we would expect them to come into force in April of next year, subject to any—[Inaudible.]—in that consultation. But, certainly, the approach in terms of standardising this part of the sector has been very warmly welcomed. 

We do have 70 different organisations delivering adaptations in Wales, spending nearly £16 million and assisting over 32,000 people. So, I completely take your point about the need to ensure that there is a more standard approach that will help, ultimately, deliver better outcomes for people.  

And do you consider that—as you mentioned monitoring—Enable is sufficient to satisfy you that effective monitoring is in place?  

Yes, we've had good engagement now in terms of the responses coming through with Enable, allowing us to collect relevant equalities and monitoring data. We've made some explicit terms in the grants that we do provide, for example, to Care and Repair Cymru, which means that they have to, as part of that grant award, give us the data that we require through Enable. That data is currently being reviewed and analysed by researchers, and will be published by the end of this year.  

We're not there yet. We've said that the data collection needs to improve, but Enable is serving an important purpose in highlighting the importance of small-scale adaptations outside the disabled facilities grant envelope.

Okay. Minister, moving on—as I said earlier on, we haven't got a great deal of time; it's always the case, isn't it—to tenant participation. The money that Welsh Government provides to support tenant participation, do you think that's money well spent? Is it effective in enabling and giving a voice to tenants to a sufficient degree? 

Tenant participation is a really important part in terms of scrutiny and in terms of holding to account the housing associations who are providing services. As I said previously, I've really reflected on the roles of tenants and tenant's voices in the light of the Grenfell tragedy, and I'm absolutely committed to ensuring that people will always have their voices heard, which is one of the reasons I'm so pleased that the regulatory board for Wales is undertaking a significant piece of work looking at tenants' rights and tenants' participation in Wales. That will come forward, I'm sure, with some recommendations and some ways forward for us in Welsh Government. I'm looking forward to that piece of work.

In terms of the Tenant Participation Advisory Service for Cymru, who are funded by Welsh Government to undertake the work of being the voice and providing us with that link with tenants, monitoring takes place quarterly against the terms and conditions and outcomes that were set for them. So, that does give us a good understanding of how far things have come, but also gives us, then, the opportunity to explore whether changes might be needed to be made for the three months ahead to improve things.

There'll be another competitive grants process in 2019 and, obviously, that will be the opportunity I think that we can take to reflect some of the recommendations that Dame Hackitt made in her report.  

Tenant participation is something we all aspire to, but achieving it is—. It can be quite difficult to get people to take a sense of ownership over the streets where they live. One or two housing associations seem to be very good at it. Local authorities struggle, as do many housing associations. Where would you say the best practice is on really getting tenants to be stakeholders in their environment?  

I'm loath to mention any particular examples now in case they're not the correct ones, but I will say that I had a good meeting with the regulatory board for Wales, and they were able to talk about some examples of good practice. Now, I can't remember them exactly, but I'll certainly—

10:45

We'll share them with you, yes. I will say that Newport City Homes, in the aftermath of Grenfell, did an excellent job in terms of tenant participation and communication.

We all heard in this committee the excellent response from all local authorities, actually, on that one, absolutely. But that's not quite the same. So, really, I suppose the question is how you are using what information you do have about best practice to target your money at growing that best practice.

Well, I think that the work that the regulatory board is doing will help us in terms of identifying and growing best practice, because it is quite a significant, in-depth piece of work that they're doing, and they are engaging with all of the RSLs to explore and identify that good practice.

If you could provide a note on that, Minister, on where the examples are, as Jenny has mentioned, and how that's being drawn upon by Welsh Government to take policy forward and improve tenant participation, that would be very useful.

Okay, we'll move on, then. Leanne Wood. 

Thank you. Your paper states that four regional regeneration strategies have been prepared by local authorities under the terms of the targeted regeneration investment programme. How will expenditure under the four regional regeneration strategies be aligned with the three regional business plans that are currently being developed by the Cabinet Secretary for Economy and Transport's department?

I thank you very much for raising this, because it's really important that those plans are very much aligned and integrated. I don't think there will be any problem in that happening, or that there is any problem in that happening, because both of these pieces of work are aligned around local authority boundary areas. So, there won't be a problem in terms of aligning those pieces of work in that sense. The targeted regeneration programme predates the work that is currently going on, and ours relate to the four existing regional economic partnerships and footprints proposed for the city and growth deals. So, in terms of footprints, I think that we don't have a particular problem there because it is local authority-led. And that's one of the things with the targeted regeneration programme—it is genuinely putting the ball in the courts of the local authorities to collaborate. Welsh Government are providing the funding, but, really, it is for the local authorities to find those projects that they think will be strategically important and make a difference in their areas. 

So, you're confident there won't be duplication or competition, or people working against each other at all, locally, against Government priorities, or the Minister for the department for economy and transport. You're confident that they'll all be working together and not against each other, are you?

We are, but it is an important challenge to make sure that we actually are doing things in a joined-up manner. The best example at the moment is around the Valleys taskforce area with the strategic investment hubs, where we're putting in place local arrangements around what's happening in Pontypridd, and its plans for being a strategic hub, what's happening in Caerphilly, what's happening in Merthyr—where both departments, and the local authority, and anybody else who's got any money, are a part of the discussion about how we can align our forces to make a difference in those hubs. So, it is possible. 

Okay, thanks. I know it's tricky as well. Can I ask about objective 3 in the Welsh Government's strategic equality plans to identify and reduce the causes of employment, skills and pay inequalities related to gender, ethnicity, age and disability? Can you please provide some examples as to how this objective has informed specific allocations in the budget in relation to regeneration?

The first thing I would say is that the process for application for funding under the targeted regeneration programme does involve local authorities being required to detail the benefits. That will be delivered under each of the well-being of future generations goals, and, of course, one of those does include a more equal Wales. In terms of examples, the targeted regeneration programme is still very much in its early days, but most projects are in the development phase, which is an important time to be having those conversations about how we can ensure that the benefits are delivering against each of those objectives. 

An example, though, would be the £700,000 Colwyn Bay town centre commercial property investment scheme. And that will see the creation of employment and training opportunities through community benefit activities and working closely with employability provision to match opportunities to economically inactive and unemployed individuals. And we know that this will have a particular benefit for unemployed and economically inactive women, because they form the largest group of those people.

10:50

Have you got a percentage of that group that has to be part of that project? Are there quotas at all?

There aren't specific targets for specific groups underneath those projects, but the projects do have to demonstrate that they are meeting objectives, such as a more equal Wales.

Okay, Leanne. One further question, Minister, on legislation and the Renting Homes (Wales) Act 2016. If it proves to be the case that it's considered that there needs to be strong communication around the legislation to make it effective and successful and achieve its objectives, would there be flexibility within the budget to provide funding for that communication activity?

We think that the funding that we've identified in the RIA is sufficient to meet the communication needs that we have. However, should there be further funding required, then we would obviously keep that under review. We are fortunate, of course, because we have Rent Smart Wales, which gives us a direct link to all of the landlords and the letting agents across Wales, so we do have that direct link with them, and, obviously, it's relatively inexpensive to have communications to them when we do have that link. But, should further funding be required, then clearly we would look to find it, but I think what we have identified is sufficient.

Okay. Well, thank you very much for coming in today, and to your officials, Minister. You will be sent a transcript to check for factual accuracy in the usual way. Diolch yn fawr. 

Okay, the committee will break briefly, until 11 o'clock.

Gohiriwyd y cyfarfod rhwng 10:52 ac 11:03.

The meeting adjourned between 10:52 and 11:03.

11:00
3. Craffu ar Gyllideb Ddrafft Llywodraeth Cymru ar gyfer 2019-20: Sesiwn Dystiolaeth 3
3. Scrutiny of the Welsh Government Draft Budget 2019-20: Evidence Session 3

Welcome back to the committee. We are now on to item 3 and our scrutiny of the Welsh Government's draft budget with regard to local government and public services. I'm very pleased to welcome Alun Davies, Cabinet Secretary for Local Government and Public Services. Would your officials like to introduce themselves for the record please?

Yes. I'm Reg Kilpatrick and I'm director of local government and public services department. 

I'm Judith Cole and I'm deputy director of local government, finance and workforce partnerships.

Okay. Thank you all for coming in this morning. Perhaps I might begin with some questions on local government allocations. Firstly, how do the draft budget allocations reflect the Cabinet Secretary's priorities for the local government main expenditure group?

Member
Alun Davies AM 11:04:37
Cabinet Secretary for Local Government and Public Services

Can I say that I'm grateful to you for your time with committee this morning? Over the last year or so that I've been in office, I've attempted to pursue a very clear approach to local government, in that I see the creation of strong empowered units of governance, able to take decisions locally, direct services locally, but also shape the future of their communities, empowered both in terms of resources available but also in powers available, and in a capacity to act to secure very different futures for the communities in which we all live.

Clearly, I'm not going to come here today and say that this is a budget that I would have chosen to present. I disagree fundamentally with the approach that has been taken by the United Kingdom Government over most of the last decade. I believe that we are seeing a deliberate policy, particularly in terms of local government across the border, which is aimed to hollow out the public sphere, if you like. I think public goods, a shared sphere to which we all contribute and where we all share services, is fundamental for a democratic society.

All of us, whether in my case as a son and as a father and as an individual, receive and use services delivered by local government. So, we all have a stake in the future of local government and we all have a stake in the way that services are delivered. Many of us around the table this morning and elsewhere would want to see a financial strategy at a UK level that is aimed at enhancing and investing in local services rather than seeking to undermine local services.

11:05

Okay. So, within that context and your priorities for local government, how would you say that the current provision, the 0.6 per cent reduction in the local government MEG, will allow those priorities to come to fruition?

We have sought, as a Government—. We've had a number of long conversations within Government, as Members would imagine. We agreed a budget last year. We have a two-year budget agreement, as people are aware. We wanted to see—. Local government asked for that level of certainty, and I hope that we have at least been able to deliver that level of certainty. We've looked at how do we plan ahead and how do we ensure that we have the funding available that will enable local government to deliver the services they wish to deliver.

We have sought, over the summer, to increase the resources available to local government. Members will be aware that local government was planning for—I think there was a 1 per cent reduction in the total available to the revenue support grant on the basis of last year's budget. That has been reduced to -0.3 per cent in terms of reduction to the rate support grant available. In addition to this, we have sought to ensure that there is additional funding placed within the ability of local government to act and to direct. In total, since we agreed the previous draft budget, I think a total of over £100 million has actually been found to support and to sustain services delivered to local government since the draft budget was first published last year.

So, we have sought to ensure that we are, wherever possible, able to support and to sustain services, but we recognise as well that these are difficult days. I think sometimes a Minister can come here and say, 'We found this extra money and these additional resources, therefore we believe that the budget we are presenting is the budget that we would wish to present', but I don't want to do that this morning. What I want to be able to say to people is, 'This is the best that we're able to do in the circumstances available to us.'

We would wish, as a Government, to invest greater sums into the public sphere. We don't agree with the policy of austerity. We would want to invest greater sums, but we are not in that position. So, within the context within which we are operating, we believe that we have done what we are able to do, balancing all the priorities. You've asked, Chair, about the priorities available in the local government budget. Clearly, local government sits alongside all of the other priorities of Government as well. So, we have sought to put additional funding into the local government settlement, which I hope Members today will recognise. 

In terms of expectations, Cabinet Secretary, we heard from the WLGA that their view was quite clear: they thought more money would be available than the 0.3 per cent reduction to the local government settlement, which seems slightly at odds with what you've just told us. 

11:10

I did see their evidence session with yourselves. The planning assumption was a reduction of 1 per cent to the RSG. That was published as part of our budget papers last year. I think you scrutinised me on the basis of that, and that is the planning basis upon which we have been working throughout the current period, but recognising, of course, that we want to, wherever possible, protect local services.   

Was there an extent to which Welsh Government considered a cash-flat settlement for local government? Was that a realistic prospect? 

We considered a number of different scenarios. When you plan a budget, it isn't a linear process in the way that sometimes these questions imply. We looked through the whole of the budget available to us. I've had several long conversations with the Cabinet Secretary for Finance, and we've had several opportunities to consider all these matters at Cabinet, as a group of Ministers, as well. So, my objective is always to seek to increase the quantum available to support and to sustain local services. So, you ask me did we consider cash-flat. I looked at how we could maximise the value and the funds available to local government. So, I didn't set myself a target in the sense of 0 per cent, I set myself the target of seeking to maximise the funding available to local government. I would have dearly liked to have seen a settlement that is considerably beyond cash-flat, but we are where we are. Mrs May has a money tree but Mr Davies doesn't, and it is an unhappy situation that we are unable to provide the greater settlement that local government has sought and that we would seek as well.

Quite often, Chair, we see these conversations in very much a binary way—two opposing sides almost: Welsh Government on one side, local government on another side. Can I say that's not how it feels inside, that conversation? We meet local government formally on a regular basis. We have a partnership agreement in place, which Members will be aware of, but we also, of course, talk informally and talk on a regular basis between officials and between individuals. Throughout the period of the last six months, we have had a number of conversations where I hope that we've been clear that we are seeking to maximise the revenue funding available to local government, and local government recognised that, I think—that we were seeking to do our best within those circumstances. I hope that, as we move forward through to the final budget in December, we will be able to continue that conversation about how we can ensure that we're able to maximise the resources available to local government. 

Okay. If we move on to capital, and the money provided for highways refurbishment—that programme—could you tell the committee how that money will be allocated between local authorities, and to what extent we can be sure that it will be additional to planned local government expenditure on highway maintenance? 

I haven't taken a final decision on how that money will be allocated, but Members will be aware that there is an established capital funding formula, which will include a specific element for highways, and my anticipation is that I will use that basis upon which to allocate the funding. The conversation I had with the Cabinet Secretary for Finance over this was very much about how we can release capital to enable local government to provide the sort of refurbishment to the roads network that is required, and £20 million a year over three years is a considerable sum of money to do that. So, certainly, I hope that the capital will be used for substantial refurbishment of the network where it is needed most. I know it's been reported as filling in potholes, and I can understand that headline, but I hope that it will be used to carry out significant refurbishment of the roads network locally to enable us to deliver on the commitments that we've given.

11:15

Firstly, on cost-effectiveness, I recall that the Williams report highlighted quite substantial differences in the costs of repairing roads, for example, between Ceredigion and Powys. How are you ensuring that local authorities are learning from each other's good practice? 

You're absolutely right in terms of that example. I hope that local authorities will always do that, not just in terms of this particular subject. As you'll be aware, we have always encouraged local authorities to learn from each other in a more profound way. Do you know, one of the conversations we have in terms of reform of local government is to pursue exactly that conversation? You know, we've 22 authorities in Wales at the moment and, if we look at 22 different ways of doing things, that can be both a wasteful exercise and also an exercise in 22 reinventions of the wheel. So, I hope that—

So, sticking with the highways budget, how are you ensuring that local authorities are improving their value for money in some cases? 

Essentially, I think local authorities have a duty to secure value for money from their own expenditure and, as a Government, we will allocate them the £60 million over three years. We've—

Sure. But the Williams report highlights that some are more successful than others. So, how are we actually taking this forward? 

There will be differences—and it's some time since I've looked at the Williams report, but the road conditions in different authorities will drive different levels of investment. 

True, but Ceredigion and Powys are pretty similar in terms of rurality and that sort of thing. 

Yes. I couldn't comment on whether the condition of their roads is the same. 

But, essentially, our transport colleagues will be engaging with each of the authorities to make sure that that money is spent in line with the conditions around the grant, so that each authority secures maximum value and invests in the priorities that matter most locally. 

Well, perhaps we could have a note on this as to how you're driving the agenda for ensuring that highways departments are working towards the best.

I'm very happy to provide that note. But the fundamental point that you make, Jenny, is a good one, of course. Local government must always work with local government to learn from local government to deliver a range of services in a more cost-effective and efficient way and a better way. So, we should always—I've always wanted to rely on the power of local government, and the knowledge and experience of local government, to improve the delivery of local government services. 

Thank you, Chair. The draft budget proposes that Care Inspectorate Wales and Health Inspectorate Wales receive a cash-flat settlement, while Estyn's been allocated a 1.8 per cent reduction in overall revenue. Can you expand on these decisions within the MEG and changes on previous years? 

What we've sought to do with the inspectorates has been to ensure that we're able to deliver priority services. I wrote to the Cabinet Secretary for Finance in June and indicated that the conversations that we were having at the time could lead to a reduced capacity, which could have serious consequences for the public and a reputational risk for Welsh Government. What we've done as a consequence of that is to return the budgets of the inspectorates to the 2018-19 position, so we've released an additional £1.5 million to return those budgets to where they were.

In terms of where we're looking at the individual inspectorates, the committee will be aware that the Cabinet Secretary for Health and Social Services has committed additional funding to HIW both in the current financial year and an additional £500,000—over £500,000—in the next financial year to ensure that that inspectorate is in a more sustainable position. We also know that Estyn are looking at how they're going to be streamlining their work to align with the future delivery of education. So, I hope that the inspectorates, in their different ways, are looking at their budgets and ensuing that they both manage risk in a way that we would expect and anticipate they would, but that they will also continue to provide reassurance to the public that services are being delivered at the level and the quality that we would anticipate.

11:20

Have you had any feedback from them around how much uncertainty around their budgets—how that might impact their services and workforce planning, for example?

I haven't had any direct feedback. Have we, at official level?

No feedback other than, I think, they've welcomed the certainty of having the cut restored, which has given them a little more flexibility than they were otherwise planning for. And, clearly, having a two-year budget—or having been given a two-year budget last year—they would have begun to plan for that. So, they welcomed the restoration of the funds.

Three very important organisations, looking at three distinct areas of government—what sharing of back-office services are they either doing or contemplating?

I think, at the moment, CIW and HIW share the Welsh Government back-office functions. So, their accounting, their human resources and payroll functions are all done as part of us. Estyn are independent, although—I would have to check, but I think they have been in discussion with other sponsored bodies around the sharing of back-office functions. 

Okay, so as far as you're concerned, these bodies are already driving efficiency savings.

Yes, and, certainly, I can speak for CIW—they have made very significant administrative savings by digitising some of their inspection work over the last couple of years and released staff as a consequence of that. I think HIW are beginning to either consider a similar or the same system as CIW to begin their own programme of digitisation. So, overall, I think we are pretty satisfied that all three organisations are making or have made considerable administrative efficiencies over the last three to five years.

But you think Care Inspectorate Wales is the one that's doing the most work, most quickly.

Yes, and I know Care Inspectorate Wales most, so I don't want to do the others a disservice, but I know they have had a very successful and very embedded programme of IT development, which has transformed the way they've worked,

Thank you, Chair. When we heard from the WLGA in their evidence to committee, they suggested raising the funding floor to -0.5 per cent, and they said that would only cost £4 million, and would show a level of commitment to local services. Can you explain the rationale for setting the funding floor at -1 per cent? And is that something you would consider doing, raising it up by half a per cent?

Clearly, we gave consideration to a number of different areas where the funding floor may be held. The rationale for -1 per cent was that is the planning figure in the existing budget. The budget that we announced and we agreed last year contained a -1 per cent reduction as a planning assumption for the current budget—the budget currently under consideration. So, we felt that authorities would have already been planning for a -1 per cent reduction, so it was reasonable to place the funding floor there rather than at any other level.

Now, you ask, Jayne, are we giving any consideration to this. Clearly, we are looking at all the options available to us. We are continuing to have and we're responding to the findings of the committee in terms of scrutiny of the budget. And, as we respond to that, then we will be looking at all the different options available to us. So, I can't come here this morning and give you a commitment that we'll be looking at one particular option, but I don't want either to rule out any of the options that we may consider are appropriate in delivering additional resources wherever possible to local government.

I wonder if I could ask you about some of your priorities. You've already said that your priority is to protect local government services, but we heard from the WLGA, who told us that

'Today's settlement simply does not provide enough resources to fund local services, particularly when compared to areas which the Welsh Government directly control, like the NHS.'

We also heard from Councillor Anthony Hunt:

'We're trying to do what we can to prioritise preventative services, but we can't prioritise everything. Sooner or later, things are going to break.'

You've said that this is the best possible settlement in the current climate. Can you expand on that assertion in the light of the WLGA's comments, please?

11:25

I'm not sure I can to a great extent, Leanne. I don't disagree with the points that Anthony Hunt made. I did watch the evidence session with the WLGA. I don't actually disagree with the points that they were making, in terms of the pressures they are facing. I think those pressures are real, I think they exist, and I think managing those pressures continues to be a great challenge to all those people, both the professional leadership and the political leadership of local government—I accept that.

I don't want to get into a position whereby we are placing local government in competition with health, for argument's sake, in terms of—I did hear that argument made. I don't want to get into that position, where you rob Peter to pay Paul. We have to protect the services delivered, whether they are managed through a health board or through local government. We have to be able to do that, and that means that we have to find the balance that we believe is appropriate for the funding of those services.

What we are seeking to do is to protect the revenue support grant so there is a considerable body of funding available, in terms of unhypothecated funding, to local government to take the decisions in exactly the way that you suggest. So, we've got a -0.3 per cent allocation in the RSG, but we also, of course, have an additional £84 million, which is on top of the RSG, to protect some of those core services. You will be aware from the published budget that an additional £30 million is going to social care; an additional £15 million to education; an additional £13.4 million to the early intervention prevention support grant; £8.7 million in terms of the minority ethnic achievement grant; the £3.5 million in terms of the pupil development grant access fund, and so on. So, there are a number of different elements to that that fund services on top of the RSG. So, you've got the RSG, which provides the unhypothecated funding available for councils to determine, and then you have that additional £84 million on top of that to provide for key service areas in exactly the way that you've described.

When you bring these things together, you do have a funding package that does what we can within the current circumstances. Now, you and I would probably agree that we didn't want to be in these circumstances, and would articulate different views on whether we would want to be managing within this financial climate. But, we are where we are, and within that financial climate I believe that this does represent the best possible position that we have reached. But, we are continuing to reflect, and we are continuing to look at the consequences of not just the United Kingdom budget but also the scrutiny of our budget by committee. When the final budget is published in December, then we will, I hope, have reflected upon the conversations that we're having this morning.

It's clearly not enough for them to be talking about services on the verge of collapsing. We heard very clearly from them that the accumulative effect of cuts year after year after year has been a problem. I just wonder whether you consider the balance of funding between health and local government to be appropriate and sustainable, bearing in mind that NHS revenue funding has increased by 4.6 per cent and we've seen a 0.3 per cent reduction in core local government revenue. I understand what you say about the £84 million in addition, but there is a difference there between health and local government.

If you are suggesting that we should cut the national health service by whatever amount it may be—

I'm suggesting that local government is not as great a priority for you as health is, and that's reflected by the budget increase or decrease.

11:30

But you can't escape the consequences of that assumption, Leanne. If you believe that to be the case, then the consequence of that belief is that you then argue for a cut in funding for the health service.

This is not about my beliefs; this about your priorities, with respect.

Well, you're challenging me and I'm challenging you back; it's about a conversation as well. What you can't do, right, is say, 'Everything is a priority' so that everything has an increase in a finite budget. That's just not a credible position to take. If you are serious in that analysis, then the consequence of that analysis and the consequence of that assumption is that you therefore take money from the health service and you put it into local government. Now, I'm saying that that's—

But you know—. You know that expenditure at a local authority level prevents expenditure in the health service later down the line.

Absolutely. Absolutely. I'm not going to argue against funding local government. But the consequence of the acceptance of the assertion that you make, or the assumption that you make, the analysis—however you wish to describe it—is that you therefore move funding from the national health service to education. You therefore cut health spending. That is not something I would wish to do, it's not something this Government would wish to do, and it doesn't reflect our political priorities. So, we are looking towards finding that balance within the budget, and we would both wish to have a greater quantum available to us, and we've seen a real failure of financial strategy at the UK level over the last eight years. We've seen the growth within the United Kingdom fall from one of the top western European economies to the bottom, where the chaotic situation of Brexit at the moment can only lead to more difficulties in the future. This is a real question facing all of us, wherever we happen to sit in the Chamber: how do we then continue to fund core services where we have a failing United Kingdom Government, a failing United Kingdom financial strategy, which means potentially greater reductions in the future than we've seen in the past, at a time when we have economic stress that could lead to a significant reduction in the finance available to us? So, how do we, then—

Well, there's likely to be further cuts next year, and the year after, and the year after that—so what is your financial strategy to protect local services under those conditions?

You can read my financial strategy. It's the budget we agreed with you last year. It's the budget that we have a two-year agreement on. You were leader of Plaid Cymru at the time, so I presume—

We really don't want to go into challenge and counter-challenge. We're here to scrutinise your budget allocations, Cabinet Secretary.

It is an important conversation. Leanne is absolutely right about the challenges we face, and the budget that we agreed last year included a 1 per cent reduction in RSG. It's a fact; it's there on the record. Now, we've reduced that reduction, if you like, to 0.3 per cent, and we would like to reduce it further. I make no bones about that. That's absolutely my case, and I said, in answer to your earlier question that I didn't go to see Mark, to see the Cabinet Secretary for Finance, only seeking a 0 per cent reduction; I went to maximise the value we were able to find.

And I think you've been quite clear, Cabinet Secretary, in saying that the balance between health and local government allocations, in terms of the current provision for next year, you consider to be appropriate. But if we could perhaps just move on to Mark Isherwood, who I think has a supplementary on these particular issues. Mark.

Yes. I hope you'll agree it shouldn't be a case of either/or. We know that several years ago the Wales Audit Office confirmed the Welsh Government then had a different perspective, and they cut NHS spending in real terms in order to protect social services and local government spending. Now, you've just articulated an opposite view. However, the Social Services and Well-being (Wales) Act 2014 enabled and proposed greater budget pooling between the two, and that's supposed to be the job of the regional partnership bodies, who have, for instance, a £30 million—non-ring-fenced, but a nominal £30 million budget for this purpose. Local authorities are rightly making the point that this will lead to greater cost pressures on the NHS, whereas consideration of better pooling between the two would enable both to deliver more with the resource available. How do you respond to that?

I would expect that all units of local government are working with their local health boards to pool their budgets in the way that's been described in the legislation that you quote, in order to deliver exactly that sort of integration and approach. We have delivered an additional £30 million to the joint partnership boards to ensure that that is available to them.

But, you know, Leanne's original point is a very powerful one. We have these decisions to take. We have difficult decisions to take that will always have a real-world consequence. There is no faceless victim in this budget. If you do remove funding from the national health service, in the way that Leanne suggested, then what you do is you create pressures in the national health service. I don't wish to do that, and the Government does not wish to do that. What we wish to do is to find a way, through the legislation you've quoted—it provides a framework for that to happen—whereby we can fund social care, in the case that you're describing, in a way that integrates the services of the national health service and of local government, and we're producing the funding to be able to deliver that.

11:35

Well, how, therefore, do you respond to calls from the WLGA for that £30 million to be ring-fenced—which it isn't—to ensure it does go into those purposes, and what consideration have you given, as a Government and as a Cabinet Secretary, to the additional costs that the NHS will incur because we haven't had smart budgeting, we've have departmentalised budgeting? 

Well, I would disagree with that final assertion. I don't know what your evidence is for that. But your earlier suggestion that there isn't any ring-fencing for that isn't correct either, Mark, I'm afraid. We have said—and it's on the record—that the £30 million will go to the joint partnership boards between local government and health and it will be used through the integrated care fund. So, that is there for that purpose, exactly the purpose you've described, and the money has been provided—. The grant has been provided to deliver on that commitment, and I'm not sure what additional ring-fencing you would wish to see. 

Well, I'm referring to the letter that the WLGA wrote and sent to the Welsh Government highlighting that as one of their calls in response to this budget. 

I think they were arguing for it to go into the RSG—I think, they were, actually, weren't they? But—

Yes, but with the £30 million they actually called for a ring fence. 

Yes, I think they were arguing for it not to be ring-fenced in that sense, actually.

I think that's right, but we can clarify that. But we'll return to Leanne Wood. 

Thank you, Chair. I was just wondering, for the record, if I can put straight that I'm not suggesting that there should be cuts to the health budget. I am quoting the WLGA, and I'd be grateful, Cabinet Secretary, if you did not put words into my mouth.

I wonder if you can tell us to what extent the Welsh Government has taken account of workforce pay pressures within the 2019-20 draft budget proposal because the WLGA noted,

'whether this settlement is -1 per cent or -0.3 per cent, it's inadequate…a low settlement or anything approaching cash flat really isn't adequate and isn't going to cover the workforce pressures that we're currently facing.'

Yes. I saw that evidence, and I think it is an additional pressure for them. What we've sought to do—. The UK Treasury's taken some decisions on both pay and pensions. Now, the agreement with the United Kingdom Treasury is that they will provide the funding for decisions that the United Kingdom Government takes, and we would expect and anticipate that they will do that. Now, the UK Government has said that they would meet the costs of teachers' pay increases, for example, over the planned 1 per cent, and that money's been provided to local government above the 1 per cent in order to deliver on that, but I also recognise that there are some issues within pensions, for argument's sake, that are very significant pressures. Now, the Cabinet Secretary for Finance has written to the Chief Secretary to the Treasury. I think he wrote in September on that matter, and that matter's still under active consideration between our Governments, but the Scottish Government's in exactly the same situation on this, and I believe it's true to say—and if I'm wrong on this, Chair, I'll write to you to correct the record—but I think the Welsh and Scottish Governments are making joint representations to the UK Treasury to deal with the issues you describe over pensions. 

So, you don't know when those decisions are likely to be made, then.

They're decisions for the UK Treasury rather than decisions for the Welsh Government, but I hope that those decisions will be taken very, very quickly.

Okay, and we move on to Mark Isherwood with some questions on local government priorities in terms of the forthcoming budget for next year. 

11:40

I thought Leanne had done local government priorities.

Welsh Government priorities Leanne has dealt with, Mark. If we move on to local government priorities now—.

Right. As you know, the WLGA have said the settlement doesn't go far enough to meet resources they need to fund statutory services, let alone the non-statutory services for which they're responsible. Clearly, we've seen examples of some of the poorer-funded authorities being very innovative over recent years, with community assets and the establishment of community interest companies, partnerships with private and independent bodies. Some are only just reaching that point, but, for those who've already gone down that road, how do you respond to their statement to us that cuts will now bite deeper and more quickly?

I understand the point that they make, and clearly local government and local government leaders will make that point. It would be surprising were they not to do so, and I recognise the work that local government has done in continuing to work together to look towards innovative ways of working. What I will say to local government is that there is a requirement in the future to go further faster, quite honestly. Local government has agreed with me that they will follow a process of continued reform. We have a working group that is looking at reform, and I anticipate and expect that working group will bring a range of options for reform of delivery of services, structural reform and other reforms, to this place, and Members will have an opportunity to scrutinise that work in due course. But local government has said itself that it doesn't believe that current structures are sustainable, and I agree with local government when they say that. So, the issue then is what is sustainable, and we need to work together to deliver sustainability in the delivery of services, and I accept that.

In north Wales we've seen very close working between the six authorities as they develop models, and that's obviously a question for probably a different Minister today. But some of them have been better funded than others. Some of them have therefore developed a whole range of innovative alternative delivery vehicles over recent years for predominantly non-statutory services, ranging from leisure to libraries. Others are only moving down that road. But, where you've got those who are not sitting on vast reserves, have already been hugely innovative, and yet now are in the 0.5 per cent to 1 per cent cut bracket, whereas others are only just reaching the point where they're feeling compelled to become innovative, that seems to be a dichotomy in allocation. How do you address that concern?

Look, I'm not sure I've seen the evidence to sustain that argument, but put that to one side for a moment and let me make a wider point. I would hope that local government will learn to work together in a more profound way without being compelled to do so by some of the financial issues that you've described. I hope that people will do it because it's the right and proper thing to do and because it drives efficiencies and quality of services. I think those are the key issues, rather than being driven down that road by financial imperatives. So, I hope people would do it because it's the right thing to do. It improves and empowers local government and it improves local democracy if we're able to do that without the compulsion that you've described.

Now, in terms of where we are on that journey, you're absolutely right—there are some parts of the country that are in a different situation to others. I don't believe that's a consequence of the working of the formula. I think it's a consequence of political decisions that have been taken by the leaderships of those different authorities. The formula will give you different results on an annual basis almost, because it will react to the data that's fed into it. So, I think you are seeing some authorities being more innovative and seeking exactly the partnerships that you've described, and others being less innovative. I would hope that the working groups we've established, with external pressure as well within that working group, and external challenge, will deliver a greater imperative and a faster imperative for quicker, more profound change in the future.

11:45

I was just going to add to that—I think we need to look at local government in its regional capacity as well. So, we have three regions, and you'll be familiar with the North Wales Economic Ambition Board. I think it's fair to say that those groupings of chief executives and leaders have brought about a new and, in some cases, quite energetic and innovative approach to service delivery, which just three, four, five years ago wasn't there. So, I think those authorities that you raise, who may not be at the cutting edge of business change or business innovation, have now got a mechanism that they can engage with their colleague authorities with, which should enable them to identify and make use of opportunities in a much better and more effective way than they have.

That was clearly what I was alluding to, hence my comment about different communities, because although it covers everything, it's economy and transport-focused, and you're absolutely right, but the same authorities, because of that experience, are recognising that they can integrate and work together without having to formally become the same organisation. But I was alluding more, not to local governments working together, which, clearly, this is good evidence of, but them broadening their work with their own people, their own communities, their own third sectors, and even occasionally with the private sector too, as in leisure in Wrexham, for example. And that's where some of them, who have been traditionally at the lower end of the per capita funding range, have been driving that change for years; others are only reaching that point. Those who have already reached that point are those who are now facing potentially the biggest difficulties, and some of them the 1 per cent cuts. This doesn't seem to be addressed in consideration of allocation.

It is, Mark. Some of the issues you describe are longer term than a year-on-year working of a formula, but for me it's absolutely fundamental that we are able to drive forward exactly the sort of joint collaboration working, and, I think, structural change that you have partially described.

For me, a year ago, I listened to the leader of the WLGA tell me, and tell us, that local government is not sustainable as it's currently structured, as it currently exists, shall we say. And I agree. I agree, but the question is: so, what do you do? So, what do you do? My views are on the public record. I haven't changed those views. My view is that local government is now given a written undertaking, through the terms of reference for the working group, that they will work with Welsh Government and with others to seek fundamental reform of the way that services are delivered. That will deliver, I believe, more efficiency in services, savings in financial terms, but also protect the quality, and improve the quality, of services delivered to people, to citizens in the future. I believe that that is a fundamental challenge that we have to address.

Many of the issues that you've described, Mark, I would agree with and recognise, and I think you're right. It is now a matter to deliver those changes, and to deliver those changes in a profound way, and to ensure that those changes continue to be delivered.

A closed question: you see community interest companies, social enterprises, being integral to that. 

Yes. Look, Mark, I'm a member of a co-operative party. I believe that all these issues should be looked at. Yes, absolutely.

Okay. We're about to move on to some other issues such as schools funding. Before we do, Cabinet Secretary, you mentioned briefly the formula. The WLGA said in its evidence to us that that funding formula for local government is being

'held together by duct tape and sticking plasters'.

I know there's a well-rehearsed setting out of the position from Welsh Government in terms of it being local authorities themselves, and a particular sub-group that determine the formula, but, nonetheless, it would be useful to have on record, really, whether you consider that the funding formula as it stands is a fair system for distributing funding between local government, and do you have any thoughts about initiating a review yourself?

I look forward to receiving the letter from the WLGA asking me to do so. I know that Steve Thomas enjoys the language of rather colourful expressions. Can I say this: we review the formula on an annual basis? We work together on a formula, and this is the point I tried to make to Leanne earlier that, whilst you have the public perception of two sides on different sides of the table, with profoundly different views, my experience as a Minister sitting around the table with local government is that people are ruthlessly pragmatic in seeking to address problems that are recognised on an annual basis. I'm very happy that all the minutes of our distribution sub-groups, of finance sub-groups and the partnership council, are matters of public record.

Now, I have not received—my officials will correct me if I'm wrong on this—a letter from the WLGA at any time seeking a fundamental review of the formula. Were I to do so, then let me say this: I don't feel precious about this. I don't feel a level of personal ownership of the formula. If local government want that fundamental review, then they should write to me and I would be happy to undertake that review. I have no censure. I defend the structures we have in place, but not the formula itself.

What you tend to find is that individual authorities who, for whatever reasons, are at the bottom end, if you like, of the funding spectrum, will say, 'The formula needs to be reviewed, because we're losing out', but their colleagues, of course, who are in a different situation, will say, 'Well, actually, the formula doesn't need to be reviewed, because we're in line with that situation.' And you do get that. That's only natural. That's a human response, and I don't make any value judgment on that at all. But what I will say is that the funding formula was devised in 1999 independently—I think it was done by Swansea University at the time—and it has been reviewed and reviewed and reviewed, annually, quarterly, by local government and by Welsh Government, and nobody has signed that letter yet. If they wish to do so, then I would be happy and I'd have no objections to a fundamental review, speaking for myself, but I haven't received that letter. I haven't received that formal request, and I suspect that what you will find is that that review—and I don't accept Steve's description of it in quite those terms—but I suspect that we have the fundamentals of a formula that are in place, and I've heard no alternative to it either.

So, I suspect that we will have the framework of this formula in place, and I suspect that we will continue to review it over the years in terms of its impact on deprived communities and its impact on delivering services in sparsely populated areas, and that we will continue to deliver changes to the formula and it will continue to evolve.

11:50

Thanks very much. Do you share the WLGA's concerns about schools funding? And how do you respond to the WLGA's assertion that some local authorities are expecting school budgets to reduce by 5 per cent from next year?

I'm a father of a child being educated in this country, let me tell you. I go to his school and I worry about all of these things—all of us do, it's an entirely human response. We know that education is a priority; it's a personal priority for me and it's a political priority for this Government. And we have sought to ensure that the funding that we are making available will reach front-line services—schools, in this case—and will deliver the sort of protection for those services that we want to do.

But I must also say, Leanne, that this funding is not ring-fenced. We have indicators, as you know, but it's not ring-fenced. So, the funding available to each individual school is a matter for the local authority and local decision making, and local decision makers need also to accept that responsibility. Again, I think you and I would probably agree that we would want to see more powers held more locally than we do at present, and we would want to see a more powerful structure of local government than we have today. I certainly would. I'd want to see local government stronger than it is today, and I would want local government to be able to take more profound decisions than they do at present.

Now, it is a matter for each individual local authority to deliver the funding to schools that they believe the schools need and require, and to do that within the budgets available to them.

11:55

But this sounds a bit like what you were arguing—that your hands are tied because the Tories give the Welsh Government a block grant and there's nothing you can do about it, and local authorities are saying that their hands are tied; their biggest expenditure is education, they have to pass on a 5 per cent cut to schools. And that means that teachers and teaching assistants are going to face redundancies as a direct result of the local government settlement and increase in teachers' pay. What do you have to say about that?

We're always concerned about those matters. I am concerned about the education my son receives. We are all concerned about this. This is not a hypothetical or academic issue, it's something that concerns us all. And so this Government has sought to protect the funding available to local services and to schools. And you'll be aware that the School Funding (Wales) Regulations 2010 provide the framework within which those decisions are taken. But you must also accept, Leanne, that it is a matter of decision by local authorities the level of funding that is available to schools in Wales. 

Just as it's a matter for Welsh Government how much funding you make available to local government. Yes?

But we have sought—and you know this, you've served in this place longer than I have—to protect local services. Do you know, I was reading, when I announced the settlement, I think it was on 9 October this year, a report from the University of Cambridge, which showed that the Welsh and Scottish Governments have broadly followed a similar approach to local government in that we'd sought to protect local government in a very similar sort of way, within a couple of percentage points of each other. But Cambridge were very, very clear that, in England, that protection hadn't been there and a quarter of funding available to local government in England had disappeared, with consequences to local services.

Do you dispute what the WLGA is saying about redundancies, then? Do you not agree with them?

Look, the WLGA will clearly make their case, and I haven't come here this morning simply to disagree with the WLGA. It is their right and it is proper that they make their case in the way they do, and I've no criticism to make of that and I've no critique—

Would you take responsibility, then, if teachers are laid off?

I've got no critique to make of that, either. But you also are aware of the structure of governance of this country, Leanne. And in this country, education remains the responsibility of local government. It is not the responsibility of Welsh Government, in the same way as decisions are taken elsewhere. 

The budget for each individual local authority is a matter for that local authority. 

Okay. In that case, we will move on to social care and Jenny Rathbone. 

Thank you very much. Obviously, social care is one of the Government's six priorities. I just wanted to tie down a bit of the history. In the draft budget proposals for last year, 2018-19, the narrative says that your intention is to maintain the assumed Welsh Government share of core spending at 2017-18 levels for both 2018-19 and 2019-20, which equates to £42 million in 2018-19, the current financial year, increasing to £73 million in 2019-20. So, that was the assessment this time last year. Could you just tell us where the extra £50 million that you mentioned earlier sits in that? Is that part of that £50 million, or is the extra £50 million more than that? I can see in the integrated care fund there is an extra £20 million. It was £15 million, it's going up to £35 million. 

So, no, in the sense that what we've done is we've done what we said we would do in the budget last year. So, the additional money that we've put in—

It's what we've put in on top, but we had done already the—. It's a mechanical process through the settlement, in the sense that it's about prioritisation. So, in determining how we allocate the money, we reflected the prioritisation that we said we would apply to the money that went in. But I know—. Did you want to add, because we had correspondence about this? 

12:00

The Minister wrote to the committee this time last year explaining how the money would be put into the settlement, and we can let you have a copy of that letter that might help explain things. But put simply, we have done what we said we would do. The funding went in through the standard spending assessment analysis that we calculate every year. So, the extra money for this year was reflected in our calculations that we made last year. So, as Judith says, it's not additional money that you will see on the face of this budget because it has already been allocated, and it's already part of our standard spending assessment for this year.  

Okay, so you're doing what you said you were going to do. 

We are doing exactly what we said we'd do. 

Okay. So, can I just clarify in my own head, then? That is what accounts for the £20 million extra in the rate support grant?  

No, that's separate. 

Okay. I'm confused and I'm sure the public is. I appreciate there's an extra £30 million in the health and social services MEG. This is an important area because, obviously, local authorities are flagging up that the inflationary pressures are very significant. 

I think probably the easiest thing we can do is to write to you and give you a copy of the letter from last year, and satisfy your answer through that course. And then we would obviously put it it into the record—

Because we need to establish we're not double counting. 

The political commitment, Jenny, is to deliver on the commitment made last year, and to do that in a way that reflects the prioritisation process we've been through. So, the political commitment from the Government is to deliver on the commitments we made in the draft budget last year.  

Okay, thank you for that. Now, when we heard from the local government colleagues, they were concerned that this extra money may come with conditions. Jon Rae, who's the WLGA officer for social care, was saying that £20 million in the settlement, that helps, and then there's this additional £30 million, which I appreciate is not in Mr Davies's portfolio, but they're concerned about the conditionality that's going to be put around that extra £30 million, and I just wondered if you were able to elaborate, just because you can see that local government are wondering, 'Is this coming into our budget or isn't it?'  

Yes, and I appreciate that. Can I say that I know that the Cabinet Secretary for Health and Social Services and the Minister for Children, Older People and Social Care are having those conversations with local government at the moment. Clearly, the grant conditions are matters, as you suggest, for those Ministers rather than for me, and those Ministers will make statements on that in due course. However, what we want to do, as we seek to do on all occasions, is to ensure the right balance of conditionality and flexibility to enable the maximum use to be made of the funding that is available. So, I hope that we will see clarity on that in a reasonable framework of time.