National Assembly for Wales

Prynhawn da. Good afternoon. Can I welcome Members to the meeting? If I drop out, Jenny Rathbone will temporarily chair while I try and rejoin. Are there any additional declarations of interest? No.

We now start our annual scrutiny of Natural Resources Wales. I would like to welcome Sir David Henshaw, the chair, Clare Pillman, the chief executive, and Ceri Davies, director of evidence, policy and permitting. Croeso. Welcome. That takes me on to questions. If I can go first, just stating the obvious, it's been a year different from any other, so to what extent has NRW's 2020-21 business plan had to be adapted because of COVID-19, because of Brexit and the Welsh Government prioritising biodiversity?

Thank you very much, Chair. It's good to see you all. Obviously, we, like almost everyone else, had just signed off our business plan when we went into lockdown. And so, what we did was, in June, after the first quarter and after we were emerging from that first lockdown, we set about a review of our business plan and our budget. Obviously, we were before you in, I think, early July on the subject of the budget. We took a revised business plan to the board in July, with further discussions over the summer. That was signed off by Welsh Government in October, I think it was, and has been published. So, effectively, our revised business plan takes account of the changes in our budget; it also introduces a new strategic priority around response to the pandemic. It also includes clear work strands on Brexit and green recovery. It previously was very much focused on the nature emergency and the climate emergency, and that has continued. It includes work on new woodland, restoring peatland and sustainable management of natural resources. So, what we have now is a budget and business plan that will see us through the rest of this extraordinary year.

Thank you very much. Can I just ask you about the Government's remit letter? Because from my viewpoint, the Welsh Government seems to be asking NRW to do more and more, but not necessarily providing you with any more money, and quite often less. At what stage does the remit letter become impossible to fulfil? 

Well, clearly, every year we negotiate with Welsh Government for our budget, and we have an open conversation with them about what is achievable. It is true that, in every year, except this year, since NRW has been created, our budget has reduced. I think that we have also seen, across many areas of our work, an increase in responsibilities, whether those are new regulatory responsibilities or responsibilities for things like reservoirs on our land and the regulation of reservoirs off our land. So, it is, as you can imagine, a complex negotiation. We talked, when we last met, about flood, and the requirements on us coming out of the recently published Welsh Government action plan and the strategy and, obviously, the findings of our own flood review. We've all seen the findings from the spending round, and I'm expecting that we will be having a robust, but quite difficult, discussion about priorities with Welsh Government over coming months, because the scale of the challenge in responding to the climate and environment emergencies, the need to support communities who are at risk of flooding, and many, many other things—tackling biodiversity; all sorts of different things and, indeed, working towards a green recovery. So, we will be making our case very strongly over coming weeks. I don't know, David, whether you want to come in on that.

Thank you, and thank you, Chair. Yes, Clare's spelled out the position in terms of negotiations with Welsh Government very clearly. But, obviously, we have to pay regard to where we are, and the context of future public expenditure settlements as well. And also, I think we have a responsibility to look at actually how we might do things differently. Some of the ways of working we need to examine. One of my own particular issues is we should be looking to get others to help us do some of the lifting. So, perhaps some of the traditional approaches, we have dealt with in regulatory terms; we need to change those approaches, bring other stakeholders into play, helping us, et cetera et cetera. So, reducing, if you like, the cost to us directly, but at the same time, being more effective. It should be what we're doing as a matter of routine, but I think it's even more pressing currently.

Thank you. Janet Finch Saunders.

Just on that one, Chair, who would you be thinking of introducing—? What sort of regulatory bodies would you be thinking of passing some of the load to?

Well, I'm not saying 'passing the load'; I'm sharing the load. So, for example, if you take water quality and the way we operate our regulatory controls, maybe there are more effective ways of attempting to deal with that. One, by using different techniques, and they may be more around what is commonly called a 'nudge', as opposed to carrot—or stick, rather. Secondly, can you bring all the stakeholders alongside you so the problem is owned by all—the farmers, the fishermen et cetera? So, it isn't just us being the regulator on the side; we are working together in a shared endeavour. That can often be seen to be more effective, and that's been one of the themes of partnering that we're seeking to pursue.

Thank you. The quarter 1 2020-21 dashboard report was caveated with reference to the impact of COVID-19 on your duties, including field work being curtailed, reliance on partners who have redirected their work, and pressures of working from home. What impact has those issues had on your ability to demonstrate progress towards meeting your well-being objectives, and with your stated commitment to become a flexible and efficient low-carbon organisation post COVID? What measures are you implementing to track the success of meeting this commitment, and how do you expect your performance to change to meet these goals?

Thank you, Janet. Clearly, the first three months of this financial year were exceptional for everybody, and we were very much in crisis-response mode, supporting our staff, supporting stakeholders like the environmental non-governmental organisations, who clearly were having a difficult time, and our customers. So, supporting our regulated customers, our timber customers, all those with whom we deal.

We were not able to carry out field work on other people's land during this period, so a number of our programmes had to be delayed, so, for example, the work that we'd been doing on metal mines and working with others on peatland restoration all had to be postponed. But we got back on track pretty quickly, and all those measures that are in our business plan, we are now seeing good progress against them, and I think that, at the end of September, all measures in the business plan were either green or amber, so no red measures at that point. Clearly, the focus on support for staff and the well-being of staff remains at the heart of our response and will continue to do so.

We are now very much starting to turn our minds towards what the future will look like, in terms of our operating model, and also talking to other members of the public sector, but also private and voluntary sectors about how their operating models will change. We have, therefore, set up a renewal project that is engaging with staff, stakeholders and customers to look at how we can operate most effectively in the future, and really take some of the—I mean, there have been huge negatives from the pandemic, but there have been some positives too. We have obviously been using a lot less carbon in terms of travelling during the pandemic. We would not be wanting to go back to that previous way of working, so we will be looking at more flexible models that respond to what our staff want, but critically also what our stakeholders and customers need from us. So, it's very much 'Watch this space'. We, along with others, will be working over the coming months, and, hopefully, that will inform our next year's business plan in terms of investment in ICT, looking at our office estate, and also looking at the terms on which staff are contracted.

Thank you. Now, according to your—well, my reading of the 2019-20 annual report, of the 26 measures on this year's business plan, 13, of course, were amber, but three were red. Now, you've repeatedly told the committee that your budget is impacting your ability to deliver services and take on new duties, so with this in mind, what steps have you taken to confront those red bandings? What representations have you made to the Minister on concerns of budget to decrease the number of your amber measures, because, let's be honest, we all want to try and work towards green? And do you expect the number of red and amber measures to increase by the next report, given the absolute impact of COVID-19?

The figures that you were talking about were in our last year's business plan, and, clearly, there's always a balance to be struck in terms of setting performance measures as to whether you are going to set them at a level that is pretty easy to achieve, or more stretching. We have been very clear that we want to set more stretching measures, so we always want to achieve our outcomes, because they are very much about improving the environment and serving communities in Wales, but, equally, sometimes, whether through financial constraints or other issues, we will not always succeed.

Currently, with our current business plan, all our measures, as I say, are either amber or green. We had a good discussion of them with the board last week, and looked at the trajectory for year end, and I think we are feeling broadly confident that we should not have any red measures at the end of year, but clearly, we do have some way to go yet.

Thank you.

Right, Ceri.

Ceri, I think, wanting to come in.

Yes, I was just going to add in that one of those areas that we mentioned last time when we were with you, around the flood risk, is around our maintenance around high-risk assets, and that's as a result of the storms that we experienced in February, and that's added a whole series of additional maintenance requirements against that, which was already planned for the year, so those sorts of things, I think, are things that we will try to manage to a green position as best we can. But when you have those sorts of significant events, then it'll be difficult to move that out of an amber position by the year end. But we will keep focusing hard on that. So, just an example of those things that happen whilst we're setting the framework for the following year.

Okay. Moving on to Joyce Watson.

Good afternoon, everybody. I want to look at the gap between income and expenditure. I know we've talked about budgets, but I want to talk specifically about the gap. And you did say and it's set out in your annual report and accounts of 2018-19 that you were filling that gap by carrying forward income from your timber income and other incomes to fill it, but you did say in April earlier this year that those reserves are now not going to be available to you. So, the obvious question that will flow from that: how are you going to fill that gap going forward? And I know that Sir David mentioned asking other people to carry out some of the tasks that fall to you, so maybe that's one avenue, but we'd be quite interested to hear a fuller account.

Thank you. So, the Welsh Government announced something it called an alignment project, which basically means that we will not be able to from the end of this year carry money from one year to the next, so we will not be able to carry timber income and other commercial income between years. So, they have given us due warning of that, so we have this year used, and are on track to use, all the income that we earn this year, and effectively to exhaust our reserves. Now, clearly, this is done at the behest of Welsh Government because of this alignment project, which brings them into line with wider Government accounting standards. So, the budget discussion this year is very much on the basis of not having access to that carry-over between years. So, for example, this current year, we benefited from being able to carry over nearly £20 million into this year from last year. Without that, clearly we will have potentially a gap in our funding, but that is something that we are discussing with Welsh Government currently, and given that they have been very much encouraging us to work down our reserves, I hope that those discussions will be positive.

Can I just have one to follow through? Just so that we're absolutely clear, do you have one single budget—revenue and capital? Because I want to understand whether you're allowed to carry forward any capital that is clearly allocated but might not be delivered, and particularly this year.

Right. We have a single budget. It is split into capital and revenue, and we will not be able to carry over either capital or revenue. Within our budget, though, we have some ring-fenced areas—so, flood, for example, is ring-fenced, so both the capital and the revenue expenditure for flood are ring-fenced by Welsh Government, and a number of other areas. We also, of course, earn income from charges, regulatory charges, and that can only be spent in pursuit of the regulatory purpose. So, we have that, we also then have our commercial income and there are some restrictions in terms of what we can spend that on, but much less restriction. So, it is a complex budget, but broadly made up of those three blocks—commercial income, regulatory charge for income, and grant in aid. Obviously, the reserves issue really impacts in terms of the end of this year and the move into a different regime.

Thank you. Neil Hamilton.

I'd just like to follow that up, this alignment project, if I could. No commercial business runs itself on the basis that you have to meet all your in-your expenditure in that year, and that inflexibility could in many instances create huge difficulties for an organisation. Now, you're not entirely a business, of course—you're part public body and part commercial enterprise. And I just wonder what the implications of this change are for you, given that the Government is probably going to be very reluctant to say that, if, as a result of your inability to use reserves, that would leave you with a funding difficulty, potentially, in certain circumstances. That makes it difficult for you to plan ahead, or to plan multi-annual projects. Sometimes you might have to forecast expenditure for three or maybe even more years, especially if they're large capital projects, or projects that could be delivered only over long periods of time. So, could you tell us what the implications of this change of approach might be for you in terms of the way you run the organisation? And especially as, from what you said a minute ago, there are of course restrictions on how you can spend your commercial income, and, by statute, your regulatory income can only be used upon those regulatory purposes. So, you don't have complete flexibility over all your resources to use them for whatever purpose you want, so I'd just like to understand how, looking ahead, this might affect your organisation adversely.

Well, I can say that we are not thrilled at the idea of having to work within this new regime in terms of not being able to carry forward the earned income. It is something that has affected other arm's-length bodies. So, when I was working in the Department for Culture, Media and Sport some years ago, this regime was brought in then, and it does create some challenges for us. We will be, effectively, managing a very tight cash budget every year. It is much more difficult then to run things over the end of the year, and it does mean that, potentially, you are handing back money, which I never like doing, because you can't spend it, effectively.

I think the other challenge is, as you have said, that we are an organisation that is doing large capital projects. Some of our projects—. I mentioned the peatlands project—that's a project that needs to span many, many years, and we have been very clear that we would be in favour of multi-year settlements, even if they're only indicative; we would understand that completely. Welsh Government have been very receptive to that, they understand the challenges for us, but, clearly, they are not in a position to make commitments beyond the current spending round. Obviously, the UK Government only announced a single-year settlement, so we're in that position. We're just going to have to manage that as best we can, but there are significant constraints on the way that we can operate. I think that—you know, if we had greater flexibility, we could deliver more and better, but, clearly, Government accounting rules and the budget settlements are what they are, and they filter down to us.

I think this is something that we'll need to follow up in due course. 

Okay. Thank you. On to Llyr Gruffydd. 

Sir David wanted to say something. 

Yes, if I could, Chair. I think Clare's explained that very well. The flip of this, though, is, as part of our ongoing improvement programme, to make sure that we actually spend the money effectively on time and on budget, because there's nothing worse—. In some ways, one of the reasons for the changing regs by UK Government was actually to avoid people amassing vast underspendings and not delivering programmes. So, what we have done, as part of our change agenda, is build in a programme office to make sure projects are delivered on time. They're under constant review to make sure money is spent on time, so we aren't in a position of handing a large amount of money back. And I think that's a very important point. 

I agree with Clare, though, that, from a board perspective, a multi-year settlement approach would be far better to give you a longer planning horizon, but we all understand the circumstances we're in currently and the limitations to that. But we are working very collegiately with colleagues in Welsh Government on these challenges, particularly around how we carry over income, or how we use income from our commercial activities where we could find a mechanism to invest in a different way to, if you like, increase the activity around wind power, et cetera, et cetera. 

We'll come to that later. Llyr Gruffydd. 

Yes, thank you, Chair. When we heard from you back in July, you indicated that the Welsh Government's £5 million guarantee was sufficient to help you close the funding gap, and I'm just wondering, now that we're further into that financial year, whether that's still the case, or whether there are ongoing concerns.

Yes, we are forecasting a balanced budget at year-end. When we came to you in early July, our timber income estimates were very much based on an extremely volatile few months in the timber market. I think you know that, unlike colleagues in England and Scotland, we maintained a constant supply of timber to market throughout lockdown, which meant that the timber sector in Wales remained productive during that period. But prices were very, very volatile. We have now, obviously, had results not just of the June sale, but the September sale and the November sale, and we are now predicting that—. So, our original budget for timber income this year was £22 million. Our current projection is £29 million, so those later sales were—. We put as much timber as we could. The industry were calling for as much as we could provide, and we did that, and the results have been very good.

That means that we have been able to say to Welsh Government that we will not need the totality of that capital guarantee, though we are in discussion with them, because we can spend more money on flood capital projects this year. So, that is something that we have already agreed with them.

Okay. Well, you've answered my next question, which was about the timber. So, thank you for that.

Oh, right. Okay.

That's fine—no, that's good.

On to Jenny.

Thanks very much. I wanted to come back to your commercial activity, and particularly the remarks you made to us, I think sometime earlier this year, about being able to keep more of your windfarm income.

Yes.

I'm still reeling under the fact that you keep £3 million of it and the Welsh Government gets £8 million—that doesn't seem a very fair distribution.

Well, that is—. So, effectively, this year, we're forecasting, I think, £11.5 million income from onshore windfarms on our land. Of that, we will be keeping—it varies from year to year—around £3 million, which is the cost to us of operating those ventures on our land. So, we don't keep any of, effectively, the profit from them—that goes back to Welsh Government under a historic agreement. We have talked to Welsh Government about us keeping that income. I think it would be sensible, it sort of gets the incentives right, but, clearly, that is an ongoing discussion with them as part of the budget negotiations.

But it doesn't really assist the, if you like, commercial nous that your organisation might need to develop, given that local authorities are developing a lot more commercial activities, because needs must when there's less money around and more demand. So, if you're not able to keep any of the surplus value, it rather disincentivises you to go and search out more business. Clearly, you're covering your costs—

The incentives are—. You know, we have to be incentivised to support Welsh Government, effectively, and that feels—. I think it would be better if we could say that all the gain from the schemes on our land went back into great projects to enhance biodiversity, plant more trees, et cetera, et cetera. So, I think that you're right that getting the incentives in the right place would be good, but, clearly, that is a discussion that is ongoing with Welsh Government.

So, is that one of the reasons why the relationship with these large commercial organisations, which are making lots of money out of our wind—? You know, there's an imbalance here, isn't there? They are making a load of money is what I'm hearing, and not enough of it seems to be coming back into the Welsh—for the benefit of the Welsh population. 

Yes. I think—

Sir David, you wanted to—

I think we would like to move to a different model, not perhaps for every project, but the existing ones, things like Brechfa and Clocaenog, have brought real benefits to local communities and there's been good money coming into local communities because of those projects. But we're talking to Welsh Government about whether we could do those in a different way, do, perhaps, some smaller scale developments with communities, that sort of thing. And those discussions are working their way through. Sorry, David, you wanted to come in.

Only to pick up Jenny's point, really. I think there's a bigger, wider issue here about the initial development of wind power, for example, and, if you like, the business models used to do it. My own judgment—and I think the board have talked about this—is that Wales has now got the experience, the capability, to do a lot more of it itself, as opposed to looking for third parties from outside Wales to be part of that equation. So, if I was stepping back—and we have discussed this with Welsh Government, it's part of an ongoing dialogue—where there is a better model to incentivise, for example, Natural Resources Wales or some other architecture like a joint venture or something like that, in the public sector, to do more wind power so we advance the green agenda, at the same time increasing the income, the profit, which can then be reinvested in, if you like, the green issues that we're facing at the moment. So, I think there's a bigger issue at stake here, which is about thinking differently about Wales's own capability, and how we can actually, if you like, push that forward more quickly than the current model allows. 

Okay. Well, that seems quite urgent, but at the moment you haven't got beyond sharing a bit more of the resources. Anyway, I think we need to come back to this. For me, this is really, really important. 

Also, you mentioned that you were exploring expanding your income stream including hydropower, and I wondered if you could tell us a bit more about whether you've managed to diversify further on that?

We have some small-scale hydro projects on our estate. Clearly, a lot of those happened when there were grants attached to hydro schemes. There are some issues around us being able to benefit from these schemes that we're working through, again, with Welsh Government, but small-scale hydro is part of that suite of potential opportunities that we are always interested in. 

Okay. But, it seems to me that this is every single town—. Every single settlement in Wales, historically, is built on a river, for an obvious reason. And, therefore, there must be a huge potential here for enriching our communities, is there not?

Absolutely, and I think it would be something that, going forward, locally sourced electricity, whether it's hydro or wind—. I think that the idea that, somehow, electricity is made miles away from the point at which you use it will become something that, in 20, 30 years' time, people will look slightly puzzled at why we thought that was a sensible model. And so those locally-based schemes, I think, will be a really important aspect of future energy production, and we obviously have a role to play there, alongside others like local authorities and community interest companies in towns and villages. And some of the expertise that we've built up over the last 10, 15 years, I think can really help that.

Thank you. Llyr, did you want to come in?

Yes, thank you. I was just interested—. You mentioned a few small-scale hydro schemes that you have on your estate. Of course, you mentioned as well that there were grants available. Were those capital grants for developing the schemes, or was that a reference to the—

I think there were schemes in the past that we, along with others, took advantage of. So, yes.

Many of us have been very aware of the Welsh Government's intention to cut the business rates grant that has been a key support element for a number of small-scale hydros particularly. I was just wondering whether you might be aware of any potential effect of losing that sort of support on any schemes that are currently on your estate, or alternatively, of course, the potential impact on your ability, not directly maybe yourselves, but through other partners, to develop further schemes in the future.

I'm not aware of any impact on those that we currently have, but, clearly, it is a factor in terms of making investment decisions, going forward. 

Okay. Thank you.

Okay. Jenny. 

Lastly on this area, it's nearly two years now since the Grant Thornton review following the sorry saga of timber sales. How successful do you think you've been in implementing the recommendations, particularly around having a single organisational culture?

I think, and I've said this to you and to the Public Accounts Committee when David and I appeared in front of them, and you were part of that, Jenny, that this is not a short-term project. There were some very big, difficult issues that we needed to tackle head on and we did that, and the Grant Thornton report was incredibly helpful in pinpointing those and giving us that real clarity about what we needed to do first. But this is a major piece of work across all aspects of what we do to improve the way we work and, as you say, create that single organisational culture. We're making good progress, but this is a long job and anyone who's done huge organisational change will know that organisational cultures take a long time to change and shift and develop. 

We're doing some really good work at the moment on risk and risk management within NRW and I think that is changing the way people think and operate. We've done some good work around compliance and governance, and we've just appointed a new head of governance. The board challenge us on this issue all the time. But one of the things I think I would observe that the last eight or nine months have done is that they have brought us together as an organisation and, I think, strengthened people's connection, not with the legacy bodies of the past, but with NRW as an organisation. And I think that has been very powerful and I think that, in some ways, the current challenges and perhaps things like the work that we've done in the wake of the flooding in February have brought us together and started to really deal with some of those integration issues that I think you were very conscious of in terms of some of the historic staff surveys and things like that.

So, as I say, it is a work in progress, and I think something that will take time fully to come to fruition, but I would say that NRW is a very different organisation to what it was two or three years ago. It is evolving into that single integrated environment body, capable of delivering real change for the people and communities of Wales that everyone wanted when we were set up. But we have some significant challenges—we've talked about the funding challenge, and, yes—.

Okay, but it's a bit worrying that you're still saying that it's still a work in progress, because in the context of obviously the financial challenges ahead for everybody, we can't really be having people saying, 'Oh, that's not my job'.

Oh no, I don't think I—sorry, I didn't want to imply that. I think that integration is happening. We had our big organisational redesign. That has brought teams together in place for the first time with integrated services. So, flood and forestry and nature services all brought together. And that's made a huge difference on the ground. But I suppose what I'm saying is, organisational culture takes time to evolve and develop. We all know that, who've worked in organisations that have been melded together. I've worked in the courts—Crown, county and magistrates' courts were all brought together. That took real time to create a new organisational culture. We're making good progress, I think. I think people are increasingly proud to work for NRW—to be part of what we're delivering across Wales. And so, I think if I were to say to you, 'Oh, yes, it's all done', I don't think that would be a realistic assessment. There is more that we need to do.

Does your chair want to add something?

Yes. I fully support what Clare has said. I think the two bits I would add, as well as the coming together, we've also been working on quite some major change in the way the whole organisation processes and business model has been built in the past, or not built, and you were very well sighted on this in your previous meetings about how bad things have got, for example, in timber. Those things are being radically improved all across the whole organisation, and the board is feeling good about the progress we're making in that regard.

The biggest sign, though, for me, is what Clare just referred to, in a sense, in the way we've changed our organisation to be based on place, and it's an integrated organisation at a local level. And so, for the first time, well not the first time, but you're starting to see the real benefits of one environment organisation as opposed to three separate organisations, as still exists in other parts of the UK. And I think, as we go forward, we'll see more and more of the benefit of having one organisation dealing with all these elements because on the ground, at the place level, you can see the working together. And the flood issues earlier this year were a very good example of other parts of the organisation coming in to support colleagues in that part of the business. So, I would agree with Clare, it's not finished and it never will be finished, because they never are finished, these sorts of things, but we have made considerable progress. There is still a significant way to go, but I'm seeing a lot more confidence in the organisation, which is the most encouraging thing.

Thank you.

Some of the differences between—. I referred to the fact that we kept timber production going through lockdown; our colleagues in England and Scotland didn't. We could do that because we were not just a forestry organisation, we were an emergency responder. We could do that. We're the only part of the UK that kept going in terms of the monitoring of bathing waters. So, we were able to do that. And again, I think it's that strength of having a broader organisation that can flex and deal with some of the challenges that we've seen over the last nine months.

Thank you. I think Neil wants to come in.

Neil.

I wanted to ask you about this organisational redesign, which, clearly, is very well advanced, if not complete—although Sir David says it will never be complete because life moves on, which I fully understand. In your evidence to the committee after the last annual review, you wrote to the chairman in April and said:

'We will need to show how the ways of working are improving not only external deliverables, but also the effective and efficient resource use, risk management and cultural improvements'.

Can you tell us a bit more about that, how this monitoring and evaluation process is being undertaken?

Well, obviously, we instigated the new design on 1 July 2019, so it's been in operation for nearly 18 months now, and we are just about to start a review of how it is operating, how different elements of it are operating. For example, the business boards that we've introduced, business boards for different functions within the organisation, also looking at that integration of teams on the ground, how that's working, whether there are things that we need to do to further support, and things like that. I think the balance between what happens at the centre and what happens out in place, we also just need to make sure that we've got that right. I was going to ask Ceri, perhaps, whether she wanted to come in on the functioning of business boards, because, clearly, they play a very important role in bringing together the experts at the centre of NRW, so our scientists and ecologists, and those place-based teams who are delivering on the ground. But, Ceri, do you just want to come in on that?

Yes, if I can. So, yes, as Clare has said, we've gone for this mixed model with most of the resource being out in place, but supported by technical specialists and policy leads in the centre, and bringing those two groups together, so that we look at all of our delivery from end to end, from the policy right through to delivery, and agreeing, at the business board at the start of the year, what the service plan is going to be, and then setting in place what that means for each of the six terrestrial and marine area delivery across Wales. It's a really close working model and involves an agreement between the people who lead those places and the marine board with the heads of business, so that we're looking at both the national delivery and the requirements that come down through the natural resources policy, but also with, you know, what are the requirements through the area statements that are coming up through place, so that we can be delivering both the national requirements, but from a local place-based delivery, and ensuring that all of the work that we've done on the area statements, for example, is planned through that model, so that we can ensure that we deliver with our partners and across the priorities that occur in place.

We've had to manage some risks. Clare and Sir David have talked about resources and, obviously, we've had to cut our cloth according to our means. By pushing the resource out into place and across a number of places, it means that, in every single place for each single action that we've trying to deliver, it may be that we don't have all of the resources that we would want, and that's where the heads of place work together to ensure that the whole of Wales is covered, to ensure that they help each other out and to ensure that everybody has the resources to deliver together, if you like, against the requirements that they've got set out in their place plans.

Workload is variable across Wales. As you will know, there is a concentration of industrial activity on the south Wales coast and on the north Wales coast, and there's a concentration of land management activity in the middle. So, again, it's about drawing together the working arrangements so that we make the best use of having the right people in the right place, but then supplementing that with support from other places, if it's required, to ensure that each place in Wales can deliver. In that way, and by having those agreements, and making sure that we identify where the risks and the challenges are around that, and having those set out, Clare has mentioned that we've done a lot more work on our risk appetite and our risk registers. So, again, in each of those places, and at the business board level, there are delivery plans, there are risk registers where we are identifying what the issues and challenges might be there, so that we can look to mitigate those and manage them accordingly.

So, the working model is working well. It certainly has brought the evidential teams, the policy teams and the national delivery teams much closer to the six terrestrial places and the marine delivery teams. They are now looking across these things from end to end to ensure that we are delivering what's required with our partners and for the communities within that place. But also, as Clare said, we are testing that model now. We're doing a review to ensure that, you know, are there any unresolved tensions, are there things that we need to focus on to make sure that we tweak the model to ensure that it's effective, and continues to remain effective as we move forward.

The other sort of thing that we've done over the period of the last 18 months is to bring in more support and rigour around programme, portfolio and project management, so that staff are well supported around that sort of delivery, and that they have good standards to work to, good guidance and models and approaches there.

And, finally, I'd say there's been a lot of work to ensure that we look at our delivery through the lens of the customer. It's all very well for it to be working for us in NRW, but that's not the point; it has to work for the customers out on the ground. And I think some of the feedback, from the area statements process that we went through, the feedback has been really positive about how we've brought together that requirement to deliver on Welsh Government policies, but also how we've listened and engaged really proactively with the communities and the organisations that are working at a more local level to ensure that we've brought those two things together. So, it's early days, obviously, the area statements were only produced in April, but the feedback from that process has been really positive in the first real demonstration of that integrated place-based model, supported by the centre.

Thank you. Neil.

Thank you very much. That's a very comprehensive and detailed statement. So, how does this differ from your previous directorate managed risk approach? It seems that you're doing a lot of things that you weren't doing at all before, as well as things you're doing in a different way. 

Gosh, yes, there are some things that we are doing differently as a result of the new model, and there are some things that we are doing for the first time and I think that—. Ceri talked about area statements. We published the first iteration of those in April. They are completely new. They are a different way of working, a different way of approaching things for us as an organisation, working very much in collaboration with local partners, setting priorities collectively at a local level with public services board partners, but also other land managers and people who are involved in that place. So, it is a mixture of new stuff, so, as I say, area statements are new and different and a really different approach, and then in some areas, like risk management and project management, it's about getting better, doing it better and doing it consistently across the whole organisation in a consistent way.

If I could come in, Chair, just to put another lens on that, what we had before was a very highly centralised organisation being driven out of Cardiff. So, everything went up and down the silos, and what we've moved to is a matrix organisation, effectively, with, obviously, still many responsibilities, but a matrix organisation where people are working across as well as up and down. That's quite a shift, and it's devolving power, devolving responsibility to the lowest point of contact with the areas, and that is a model that, actually, we know works from other organisations. So, that journey from where we were to where we are going to is a big one and a big challenge, but I think, as I said earlier on, the progress has been quite significant, and I think it's liberating many of our people, realising that they've got far more power to influence things, change things, than they had before. 

That's very interesting, because you've had to bring together three quite separate organisations, so there's been a vertical integration at one end, but, on the other hand, looking at it from the functional perspective, you have a lateral integration approach, so that you combine the two, and then you have an integrated organisation that works in a flexible way according to what you do, rather than who you are, which I think is a sensible way to go forward.

There's limited time, so I think I have to move on to my next question, and that's to ask about a sentence in your 2018-19 annual report, where your internal audit manager stated that he could offer only a 'limited overall assurance opinion', highlighting 

'wider governance issues which are rooted in organisational culture'.

Perhaps you've already answered this in what you've just said about how this has been addressed, but have you got anything to add to what you've already said?

Sorry, I was on mute for a moment, I thought. We've talked a bit about this now and it is a challenge for us, and getting that consistent approach to compliance across NRW continues to challenge us. It is part of that change journey, it is getting common standards, a common approach, and we are really continuing to work on that. So, yes, it is very much part of our current agenda, and will continue to be going forward.

Thank you very much.

Llyr Gruffydd.

Thank you, Chair. It feels as if we've been in this sort of cultural reorganisation and change from day one, really, doesn't it? And it's a shame that it's taken so long to get to where we are, but that's more of a historical thing than a reflection on the current incumbents in some of those roles, I suppose.

But, of course, all this has an impact on staff well-being and this brings me to the question I wanted to ask. Because, clearly, we discussed quite a bit of this about a year ago with you, I think, the issues around well-being, mental health and well-being, and sickness absence rates as well, and you indicated that you clearly wanted to improve the situation, aiming for bronze level of the Public Health Wales corporate health standards. I'm just wondering if you could update us, really, on where we are now and how things are panning out.

I'll start and then I'll hand over to Ceri, who is our executive team lead on health and well-being. Clearly, nothing, really, has been more important during the last nine months than the safety and well-being of the team, and I think that in common with many organisations, we've seen sick absence reduce during this period—there are a number of reasons for that. But equally, I think we have seen concerns around mental health issues, and for some people, it's about juggling multiple responsibilities whilst trying to do a job from home, so whether it's shielding or looking after elderly parents, or home schooling; for others, it is issues of loneliness and isolation, and we have been looking at all of those. The fact that we had got as far as the silver standard in terms of the corporate health standard helped us, but as I say, I'm going to hand over to Ceri, because she's done a great job in this area and continues to do so.

Thank you, Clare. As Clare said, I think achieving the silver standard laid some pretty good foundations for us that we've been building on, and they've really come to the fore through the different way of working in this pandemic, and really focusing in on those things that are challenging our staff with the new way of working. We were very much able to move to a working-from-home situation, but recognising that in the first lockdown, people had a range of working responsibilities and caring responsibilities, and ensuring that we were really clear around the priorities for work and able to give people the flexibility to be able to deal with both the working situation and the home situation. We stepped up a lot of the services that we had already put in place around both our occupational health but also our mental health and employee support schemes, so that staff had ready access to very quick occupational health support, if that was required. But also that there was a range of tools and available information for dealing with a new situation for all of us, and our healthcare providers were providing a range of different guidance, techniques and tips and daily webinars so that staff could take part in them.

So, there was an element around that support and providing that support and real prioritisation around work, so that staff were able to manage that workload balance. But also really clear messages around understanding where our staff were vulnerable, risk assessment work and talking through with their line managers to understand those members of staff who might be shielding themselves or shielding others and putting in place specific plans around those staff to keep them safe, healthy and well. We have a very active staff well-being group, and we've been meeting very regularly throughout the whole of the pandemic and taking information in from staff and then thinking about what we can do to help. A small measure, but one of the measures that's proved really popular, is introducing a well-being hour so that staff could get out and about in the hours of daylight in work time, and do whatever they felt they needed to do to be able to support their well-being.

We've also stepped up our support for keeping our staff connected, because whilst the technology is brilliant, staff, as we all do—you bump off each other, with that camaraderie that builds up working in your teams. We've stepped up the facility for and the support for staff to run coffee sessions and quizzes. We held an NRW fest over two weeks just a week ago, where there was a range of quizzes, opportunities to talk to key staff members, presentations about work areas that people were involved in—so, trying to really support that connection of staff to each other, and then supporting individuals within the organisation who might want to set up networks. So, for example, we've had a really successful Cwtch network running for 12 months now, which is aimed at those staff who have very responsible caring requirements on them, and having a network where they can talk to others who are in a very similar situation.

So, there's been a huge amount of work. We're corralling all of this information in terms of our submission to Public Health Wales. Obviously, they've got other key priorities at the moment, and we understand, in terms of the assessment for us at the next level, to try to attain gold—we understand the focus at the moment is looking for those people whose standards are due to run out, so they'll be focusing on those first. But nevertheless, we've shared with them the work that we've been doing throughout this year and during the pandemic, and we've had very positive feedback from them around the activities that we've run and the embedding that we're doing to empower staff to feel that they can set up and do things themselves locally.

I don't want to curtail questions or answers, but we're now into the last 10 minutes of our allotted time, so if both questions and answers could be more focused, we might actually get through everything we've got on the agenda. Jenny.

I want to ask you about the area statements. A huge amount of work has gone into creating them. Do you think they're now becoming useful tools?

Ceri, do you want to—?

Yes, I'll nip in and I'll try and be brief. There are a couple of things that we're doing around that. We've set off a project that is looking to draw together the experiences of our partners and communities who've worked with us on the development of those, so that we get that feedback from the horse's mouth as to how it felt for them, because that will help us to shape how we continue to use them. We're using them extensively in our work with PSBs to ensure that we are helping to deliver the well-being plans in line with the things that have come through the area statements. And the third area that we're looking at to look at the effectiveness of the area statements is the feedback that we had from the WAO audit of the area statement process, which looked at some of those things that might be measures of success if the area statements are working properly. So, there was a whole range of evidence coming forward from other bodies, for example, where other bodies have worked with us to deliver things that they wouldn't have normally. But there's a whole host of areas within the WAO audit—a really positive audit about the area statement process—that we'll be pulling forward now as part of our success measures, which we can then score the area statement process and continuing implementation against in the future.

Okay. And then moving on to the SoNaRR reports, how are we applying these to horror stories in the background like soil depletion, not to mention soil erosion, and of course the nature crisis that is talked about a great deal these days?

As you will be aware, we're about to publish the first phase, if you like, of SoNaRR 2020. Because of the impact of the pandemic, and the impact of that on our ability to do the engagement work that we wanted to do over that period, we've split the reporting of SoNaRR into two. So, the first chunk will be on 18 December when we'll produce that report for Welsh Government, as is required by law. And then the second chunk, which will be the more detailed evidence that sits below the key messages, will come on 18 March. And we will be running a whole programme of work and engagement around that from 18 December right though to 18 March, and beyond that.

But, clearly, I think SoNaRR 2 is quite a different report than the 2016 report. You'll appreciate that the 2016 report was done within a year of the legislation coming into place. We have learnt a lot since that time, and we have worked really hard with partners and stakeholders to look at this in terms of our assessment against the four aims of sustainable management of natural resources, to provide a really interactive report where you can explore content, to make it as usable as possible. And then also in this first report phase, we'll be looking at the conclusions that will set out those bridges to the future. So, those challenges that you mentioned, Jenny, and how we need to address those—we'll be setting those out in this first report in terms of those being bridges to the future, what we will need to do to move to that, and then, in March, we will do the detailed reporting that sits behind that.

All of that is ready, obviously—we've used that to develop the summary report and the bridges to the future—but we wanted to be able to develop that in a way that is useful for our stakeholders, and we couldn't do that in the midst of the COVID pandemic. So, that's the piece of work we'll be doing between now and March. 

Okay, but in this second iteration of SoNaRR, you've been able to fill the data gaps that, understandably, were there in that very initial report. 

Yes. Many of the data gaps have been filled. We did a summary of some of them in the interim report last December, but, for example, just to name a few, there's been a lot of soil mapping work done in terms of climate change impacts on cropping, there's been work through the Welsh Government GMEP data and ERAMMP data, there's been the area statement work, which has obviously filled in many of the gaps, and there's been literature work, review work, that we've been able to build in. So, there have been quite a lot of gaps filled. Some of the gaps that we'd identified in the 2016 report are less important now, because we're looking at it more from the achievement of the sustainable management of natural resources, so we've deprioritised some of those areas that were identified as gaps previously. And then there are some areas of work that have led to the organisational change that we've put in place within NRW to deliver some of those evidence gaps as well, and to fill those evidence gaps. So, we've set up an integrated evidence group to help us to do that.  

That sounds excellent. Thank you. And lastly on this section, what are the resource implications and the roles that NRW need to develop the refreshed nature recovery action plan? 

We've done a lot of work on the nature recovery action plan with Welsh Government, and we took to our board earlier on this year a focused plan, if you like, of where we were going to try to really add value in terms of moving the requirements forwards—so, rolling out nature-based solutions and driving those through the area statements, leading by example on our land, and really trying to improve the condition and resilience of protected sites and delivering particular target action species. 

In short, we've been very successful at some pretty good landscape-scale projects that will help us to deliver against some of those. You may have heard us talk previously about the Sands of LIFE project, which is looking at sand dunes and looking at getting those into favourable conservation status. There's the LIFE Welsh raised bogs work, which again is a landscape-scale approach to restoring the seven SAC raised bogs. There's the River Dee, the LIFE restoration programme, which is a multimillion pound, multi-year project. And we've got two others in the mix as well: one in the south Wales rivers area in terms of improvements for fisheries, and also some more bog restoration work. You know, we've had money this year from Welsh Government. We had £3.3 million extra capital this year, which we've put into the national people and action plan, which Clare mentioned earlier, so I won't talk more about that. But we've also done, importantly, and we are continuing to do, some important work on the Natura 2000 network.

But I think the message is that we need this to be multi-year funding. We're struggling, at the moment, with year-on-year funding. We're doing really well at identifying other resources to fund these things, but what we need to be able to retain good capacity and good capability within NRW is multi-year funding from Welsh Government to enable us to really get a longer term programme in place that is sustained and deliverable and then we see the benefits from that.

Thank you. That's wonderful.

Thanks, Jenny. We haven't run out of questions, but we've definitely run out of time. So, can I thank Ceri, David and Clare for coming along and answering our questions today? We've got a large number of questions that we haven't got to, which would probably take us the best part of an hour to complete. Janet, you want to say something.

Could I just remind Clare—I know I've had one about the Tan Lan embankment and then it was recalled. I'm not sure whether another—[Interruption.] Sorry about the noise in the background. If I could just chase that, please.

It's been sent. I've had a message from Kate that it has been sent.

It was recalled and then I've been on this, so—

Okay. You should have it. Llyr is saying that you have got it. Good. Thank you.

Thanks, Llyr. Thank you, everyone.

Thank you for coming along. As I say, we've got a whole range of questions that we didn't get to. If we send them to you, can you reply in writing?

Of course. Very happy to do that, Chair. And thank you all very much. It's been good to talk to you all.

Thank you very much.

Can I now ask us to note the following papers? Correspondence from the Chair to the Minister for Environment, Energy and Rural Affairs in relation to interim arrangements for environmental governance following the end of the implementation period; correspondence from the Chair to the Minister for Environment, Energy and Rural Affairs in relation to the Agriculture (Model Clauses for Fixed Equipment) (Wales) Regulations 2019; correspondence from the Chair of the Petitions Committee in relation to biodiversity; correspondence from the Llywydd in relation to environmental governance; and correspondence from the Deputy Minister and Chief Whip regarding the socioeconomic duty. Can we note those? Yes. Thank you very much.

Can I now move, in accordance with Standing Order 17.42(vi) and (ix), that the committee resolves to meet in private for the remainder of today's meeting? Are Members content? Yes. Thank you very much.