Finance Committee

We'll now move on to our first substantive item of the morning, which is the first evidence session with the Cabinet Secretary on the Welsh Government's draft budget. I'd like to ask Mark to introduce himself and his officials for the record, please. Diolch.

Bore da. Diolch yn fawr, Cadeirydd. Mark Drakeford, Ysgrifennydd y Cabinet dros Gyllid a'r Gymraeg. Gyda fi y bore yma mae Andrew Jeffreys, pennaeth y Trysorlys yn Llywodraeth Cymru, a Jodye Kershaw, sydd wedi bod yn arwain y tîm sydd wedi gweithio ar y manylion yn y gyllideb.

Thank you very much.

Croeso i chi y bore yma.

The outline budget was laid before the Senedd on Tuesday this week. We had an initial discussion in the Chamber on that day. I'd like to thank you for the conversation we had before laying it, so that I was aware of some of the headline items. We'll obviously go through that today now in more detail.

I'd like to start, if I may, by exploring the funding available to the Welsh Government and what your approach has been to setting this outline budget, and then some of the principles underpinning the budget this year. You've referred to this budget as a business-as-usual budget or a rollover budget. Could you explain in more detail what that practically means and why you're taking that approach, and maybe explore some of the risks and some of the mitigations that you've put in place as to why you've approached the budget in this way?

Diolch yn fawr, Cadeirydd. The budget responds, I think, to three key factors. The first is that it's a budget that has £1 billion more to use in it, which comes through the Treasury in London. That's through the comprehensive spending review announced in June. So, there's more money. There's also the impact of the way in which our own fiscal responsibilities have been used and the fact that that also contributes additional spending power. This is a budget where there is more to use. So, that's the first thing.

The second thing is that this is a Government without a majority. Therefore, as we always have in order to pass a budget, we have to find a path that allows at least one other party to work alongside us to reach a point where a budget can be passed.

And then thirdly, it is a budget presented in the closing weeks of a Senedd term, with an election very closely on the horizon. I think this is the sixth time that I've been involved in the final lap of a Senedd term, and it does change the dynamics. This is a political institution, and those political realities make a difference to how you are able to get business done. So, in those circumstances, the Cabinet's decision was to begin the process—and that's what the draft budget is: it's the start of a process, not the end—by setting a budget that takes last year's decisions, restates them and uplifts them for inflation.

Chair, I just wanted to make a point that I think didn't come through that strongly in the Senedd's discussion on Tuesday. The major decisions about how you use new resources were made last year. The year before, we led a budget process that took £600 million out of the budget, and that was a very, very painful and difficult exercise, but it was the reality of the time. Our budget was shrinking compared to the spending plans we had, and we had to take money out of the budget. Last year, we had £1.6 billion new, and the big decisions about how you would prioritise that money were made last year.

What we're doing this year is we are reinforcing those decisions by continuing to invest in those key areas, and that's why you see that uplift across the whole Government. We took last year's budget, restated it into the next year, added in some other things, which you could argue are more at the margins of a restated budget, and then uplifted all budgets in line with the Office for Budget Responsibility's forecast for inflation in April of next year.

I'll bring Mike in in just a second. For me to get it right in my head, you are anticipating the extra £1 billion, because of the spending review coming in. So, as part of your spending plans generally, effectively, the best part of £600 million of that had already been allocated in plans, and you've got £380 million left over, if you like, after you've worked out the uplift of 2 per cent and 2.2 per cent on pay, and any plans that you already had baked into what you said you were going to do in the next financial year. Is that right, in a very simplistic way?

I'll say the same thing in a slightly different way: the draft budget allocates 98.6 per cent of all the resources available for next year, so there is 1.4 per cent yet to be allocated, and that's the £380 million. In allocating 98.6 per cent of the budget, there is £800 million more already accounted for in the draft budget. That's exactly what happened last year at the draft budget stage: there was a sum of money that was yet to be allocated. That becomes a subject of negotiation with other parties in order to try to find a pathway to passing the budget, and then we put the unallocated sum into the final budget against the additional priorities that have been agreed. That's the process I hope we will be able to embark on and complete this year as well.

Mike Hedges. Diolch.

Why are you taking the OBR rate of inflation, as you and I both know the consumer prices index includes things like holidays and new cars, which are not part of health or local government expenditure? Why aren't you looking at the inflation rate for local government, and the inflation rate for health, and uprating them at that, which would actually be a standstill budget, or a rollover budget, as opposed to using figures from CPI, which bear no relation at all to the increase in cost of local government and health?

I have to use a figure that is independent and authoritative. I'm offered all sorts of figures of what some people think inflation may be next year, but I can't take an estimate of inflation just on the basis of the say-so of a particular interest group. I have to go on the most authoritative, the most independent source that we have, and in that way, I will be doing exactly what the Northern Ireland Executive is doing, exactly what the Scottish Government is doing, and exactly what the UK Government is doing. If we were to do anything else, we would be an outlier, and we would have an awful lot of explaining to do. I think it is much stronger ground for us to do what is the accepted way of doing these things and to rely on the advice that we get from an independent and authoritative source of advice, as every other UK Government does.

So you think CPI is a suitable inflation rate for public services.

I think that's a completely different question, Chair. We could have a very good debate, and Mike has made some very important points, about the limitation of that measure. But that's a different question as to whether or not you have a different authoritative figure that better reflects public sector inflation. We don't, and therefore we end up relying on the best figure we have for now.

The two indexes we mainly have regard to in thinking about inflation in public services are pay growth in the economy and the GDP deflator, which is the OBR's and the established measure of domestic inflation. It's not CPI. CPI is a factor, because that's the general inflation in the economy measure, but it's really the GDP deflator and the growth in public sector forecast pay growth that we have most regard to.

So what you're telling me in a very nice way is, ‘Save it up and ask it to the OBR’.

Going back to what I was asking earlier as well, with the outline funding now for different departments, and obviously the Welsh Government have got spending priorities and have made commitments, so as part of setting this budget and taking a rollover that each department has a 2 per cent—if we conflate the two at the moment—inflationary rise across, have you had to make allocations to departments other than that to fulfil some of those spending commitments?

We talked about the BSL Bill that's going through at the moment. I know that's in a slightly different category again, but certainly there are other bills like the bus Bill, there are all those elements going through at the moment, and a lot of legislation coming through this committee. Those spending commitments need to be funded next year if the budget is passed. What discussions have you had with departments, and how have you handled, potentially, Bills that might cost a fair bit more than 2 per cent of an uplift on a budget? Or have you asked your colleagues to manage it within their budget allocations?

I think there are two answers to that question. There are definitely elements in the draft budget that are there by choice rather than because they were there this year and were inevitably needing to be restated. I provided a list of some of those things in the Chamber. The budget agreement we had with Jane Dodds was a one-year agreement. You could argue that we've discharged that this year and that those things don't appear in next year's budget. But we have made a decision that the £30 million for social care, the £30 million for childcare and some of the other slightly more modest in expenditure terms items will appear in next year's budget.

So, there are some choices beyond the 2 per cent straightforward uplift, yes, and I tried to outline some of those. That includes, in much bigger figures, the over £200 million for the public sector for national insurance contributions and £137 million that has been found additionally in-year to meet pay cost inflation. I've decided that those things will be part of next year's budget, and those are choices.

On your point about legislation, the way that I approach this is that if my colleagues want to bring forward legislation and there will be costs attached to that, they have to manage that within the envelope that they have available to them. They will be all making choices within the additional money that's available to them as to where their priorities lie. I made an exception for the BSL Bill because that's not a Government Bill. That is a private Member's Bill, which the Senedd seems very likely to want to approve, and I thought there was a special case for making provision for that. But I don't make a special case for Government Bills, because those are decisions that my colleagues have made and they have to manage the consequences.

Thank you. Julie, did you want to come in on this?

Yes, just to say, really, that I'm very pleased that extra money is there for the BSL Bill, because I'm on the committee that's scrutinising that. So, I think that's very good. The money that was agreed with Jane Dodds, the two lots of £30 million, is that built-in, then, into the budget for future years?

Yes.

So, it's part of the budget.

Those are baselined. They'll not just appear again next year. Those are now in the baseline and therefore will continue into the future.

Thank you.

And do you foresee any Bills that are going through at the moment, because of the decisions you've made around the inflationary rise within the main expenditure groups—that you might have to pull back any of the legislation because you just won't be able to afford them?

I don't—. I've had no indications from any of my colleagues that legislation that has been part of our legislative journey in this Senedd term will now not go ahead. There will always be issues of timing, the point at which different components of legislation are triggered, but that's normal, that's what you do every year. There will be Bills passed in previous Senedds that have been enacted in this Senedd, and my colleagues will always be making judgments as to how quickly those components can be brought forward. In that sense, people will be doing that, but that is genuinely business as usual.

Okay, thank you very much. Moving on to more of the budgets, the way that we set budgets in this place, and this is the first time in seven years—. Before I was elected was the last time that we had an outline budget published before a detailed budget, and we've had numerous conversations about that, and with your predecessor, Rebecca Evans, about that. Do you have any initial reflections about how different the two-stage process has been for you and your officials, or maybe I should ask the officials rather than you, but particularly how the UK Government's autumn budget is the main fiscal event of the year in Westminster? And you can possibly reflect, because you stated earlier this isn't your first rodeo—

Indeed.

So, are you able to compare and contrast this time compared to maybe eight years ago when it happened last time?

Well, I think I was the finance Minister the last time this was able to happen. Our approach in Wales has some very significant strengths, and it does have some things you've got to cope with as well. We have an obligation to bring forward our budget at this point in the year, and the timing of the UK budget, particularly now when the Chancellor says this is to be the main fiscal event of the year, does create difficulties for us, or challenges for us. I believe the Northern Ireland Executive has decided not to publish a budget until December, and the Scottish Government won't publish their budget until January. So, the Scottish Parliament certainly—and, it appears to me, the Northern Ireland Assembly—will have far less time to scrutinise their Government's budgets than is available here in the Senedd when the process starts in October.

So, I think that is a strength of the way we do things, but it does leave us vulnerable to having to make relatively last-minute adjustments if a November budget changes some of the figures on which the draft budget has been predicated. The two-stage process—I hope it gives the Finance Committee, particularly, more time. I think it allows a focus on the big building blocks of the budget. It allows a chance to focus on how money is raised, as well as how money is spent. Because I probably would say, over the years, the very significant majority of time that Senedd Members speak on the budget, it's all about spending money—it's a minority of time that is spent on people looking at how the money is actually raised and how the money is available to us. The fact that we now have this early stage, where the big building blocks—income and expenditure—are the focus of attention I think does allow for a more rounded debate about the budget.

Some subject committees will argue, I think, that they have slightly less time to do their job, because we won't publish the budget expenditure lines until 3 November, and they probably get one week less than they would have had last year, when we had the single stage. But they also will have had the advantage of seeing the big picture of the budget and understand how their particular set of responsibilities fit into the wider picture. But I think some people will argue that the two stages give them slightly less time.

Now, I think it's hard to draw too many conclusions from this one year, because of its unusual nature. I think if we'd had a two-stage budget last year, some of the tensions might have been a bit greater because we would have published a budget with some significant movement of money, and I think most people will have wanted to know, if there's £100 million extra going into this area, then what it is going to be used for. I wouldn't be able to say that because you won't know that until the second stage. So, I think there are circumstances in which this early stage might be a little bit harder to understand or to navigate, because you know the big things, but what people will really want to know is, 'Does that mean more for X? Does that mean less for Y?', and you wouldn't know that for another couple of weeks.

Bearing in mind what you said at the end of the summer term last year, that you were intending to have a roll-over budget, well, a lot of the information is already known, so the scrutiny on the building blocks—. Well, they're the same building blocks as we had before. So, it's a little bit of, well, is there much to scrutinise, I suppose, or any—? I suppose there's a lot to scrutinise, but the decisions have already been made last year, and it's only a roll-over this year. So, therefore, it might have been more prudent to wait and use the same arguments as we've had for the last seven years that, 'Oh, there are special circumstances, we should wait.' I know it's a choice, and you've made this choice. I wonder how much consideration did you give to the, 'Well, actually, should we wait because there's an election coming, because of circumstances in Westminster'? Would it have been—? I know this committee always wants as much time as possible, and we commend you for that, it's just—. Again, it's timing.

Well, look, I accept—I think I did in what I said—that this year is a slightly artificial test of the two-stage process, and it would be different if this was a budget with more changes in it. But I've been acutely conscious in the last few years of always coming to this committee to say that there are special circumstances why we can't do the things that we've agreed with the committee we would do. This year was a chance to revert to the process that we'd agreed was the best one. Although I could have argued, as you say, that there's another set of special circumstances, despite the fact that we can't draw all the conclusions we might do because of the special circumstances, I still think it's right to do it when you can. We've had seven years when we can't; this is a year when we can, and I'm glad that we are able to do it.

Okay. Peter.

Your point is it's obviously a lot easier to budget if there's a little bit more money coming than having to do a budget when you've got to take out a couple of million, or half a billion, or whatever. So, I can see that it's the right time to try that system out. Yes, it makes sense.

Thank you. Andrew.

So, I think one of the key things for the—. When the next Senedd is thinking about the budget process going forward, I think the point you were touching on about the timing of the UK budget is really key, because one of the wrinkles of the way we're doing it this time around is that we have to do the budget now based on forecasts from March, and then the Office for Budget Responsibility produce their Welsh taxes forecast based on that position, and then you've got new forecasts in November, and then we have to do another set of Welsh tax forecasts based on that, and those OBR forecasts affect the numbers in various ways. So, that is a bit clunky. But the problem with waiting for the UK Government budget is that, of course, that delays things quite significantly. We'd be going at least seven or eight weeks later, I think, if we were waiting for the UK Government, and that has all sorts of effects. So, there are no easy answers to these questions, but I think it is an issue for the next Senedd in thinking about how it wants to do the budget process going forward.

And, of course, this committee has met just before Christmas on a number of occasions, and it was nearly that close to Christmas at one point, we were having Christmas dinner. [Laughter.] So, I appreciate that explanation and the understanding of the 'wrinkles', as Andrew puts it.

Finally from me, before I move on to Mike Hedges, you talked about the decisions that Northern Ireland has done, Scotland is doing something similar, but in January, and laying their budget then. There's going to be—. Following that budget on 26 November in Westminster, there will be changes to, potentially, the block grant adjustment figures, tax revenues, the OBR will reforecast, and things like stamp duty could change within that. How much of that will be discussed on Friday in the Finance: Interministerial Standing Committee, and what are your priorities, I suppose, in going into FISC with—? Are you going to be discussing with your colleagues, or maybe in a one-to-one with the Chancellor or the Chief Secretary, around borrowing powers, about some of the key asks of the Welsh Government with the Treasury?

So, Chair, there are two opportunities at FISC. There is the plenary and there's an agreed agenda for that. The agenda focuses, essentially, on non-fiscal measures. The message from the Treasury is: you know what you're going to get; we told you that in June. The budget will not be an opportunity for large, new subventions of revenue or capital to anybody. So, we're focused on non-fiscal measures and, essentially, the two big agenda items will be fiscal flexibilities, where all three Governments have a shared interest in trying to have a better set of tools to manage the budgets that we have, and then ways of making the Barnett formula work better. There was no agreement on an agenda item on replacing Barnett, but there is a shared commitment to try to make the current system work better. So, there's an agenda item on that, and that'll be pursued between us all.

Then there will be an opportunity for some bilateral meetings, and I'll have a bilateral meeting with the Chief Secretary to the Treasury, and that's where I'll be able to talk a bit more about some Welsh-specific issues. I will be pressing very hard in relation to fiscal flexibilities, because I think we have the most constraining set of arrangements, more so than Scotland or Northern Ireland. So, I think there's a particular Welsh angle there. But there'll be some other things that I will want to talk with him that would not be of interest to everybody else in the plenary, for example border post funding. We have an ongoing issue about the negotiations that the UK Government is carrying out with Europe. Will border posts be needed in future? Well, we have one already in Holyhead that has to be paid for. I cannot see why I am being asked to pay for something that is entirely as a result of non-devolved responsibilities, and I will be discussing that with the Chief Secretary to the Treasury. I'll be discussing with him some of the decisions that lay behind the comprehensive spending review in relation to Wales, the core Valleys lines, for example. I want to talk to him—. But these are much more specific, much more Welsh-specific, items, and that's what the bilateral is for. The two big debates will happen in the plenary itself.

I'm sure we'll be very interested in the outcome of the plenary, but also the bilateral discussions, and possibly pick up on it in a future session with you as well. Mike Hedges, I'll bring you in now.

Yes. I would like to talk about borrowing and reserves. I think that we're going to have a lot of agreement here, because I think we're both very pleased at the increased flexibility offered in terms of accessing the Wales reserve. I think we both believe that, at the very minimum, borrowing should be indexed and that reserves should be available to add to or take money out of at any time. Have you had any further discussions with the Treasury or with the Chancellor to achieve that?

Well, Chair, I agree with all the points that Mike Hedges has made. It has been helpful to us to have unfettered access to the Welsh reserve this year, and I will certainly be saying to the Chief Secretary that it would be a retrograde step if we return next year to the levels of micromanagement of money, which is actually the Welsh Government's money, by the Treasury. I've had one relatively brief but useful introductory meeting with the new Chief Secretary to the Treasury, who I'd already met when he was the Exchequer Secretary, and I was able to make sure that he knew the significance of this issue to Wales. It is one of the frustrations of the turnover of Ministers in Whitehall, and this has been a particular feature of Chief Secretaries to the Treasury, that you do end up having to start again, to a certain extent, in alerting or sensitising a new Chief Secretary to a list of issues that are important to us, but probably don't pass his desk all that often. But that introductory meeting was an opportunity to make sure he knew that this was an important matter for us, that it would be on the Finance: Interministerial Standing Committee agenda and I would be asking him about it in the bilateral meeting we will have. So, the ground has been prepared for the meetings on Friday.

Thank you for that. I think that what I can't understand is why it matters to the Treasury. Once the money's been given to the Welsh Government, whether it sits in the reserve or whether it's spent, it's already gone out. So, I'm not quite sure why they want to get involved in micromanaging it after that, but I'm sure you don't either.

The question I want to ask is: we've talked about the budget and the importance of the budget—and you did say a lot of this in Plenary this week; I'd like you to repeat some of it for the record of the Finance Committee—what actually happens if we don't pass a budget by 1 April, and what will that mean for local government, which has to set its council tax by some time in early March?

Well, thanks to Mike Hedges for the opportunity to restate some of these points. Look, Chair, what I don't want to do is to catastrophise. What I'm trying to do is, in as sober and as factual a way as I can, to set out what the consequences would be if the Senedd did fail to pass a budget before the end of this term. And the Government of Wales Act 2006 is both draconian and clear that, if we fail to pass a budget, then, for the start of the next financial year, public services in Wales will be funded at 75 per cent of this year's budget. And not only will it be 75 per cent, but it's 75 per cent of every budget line. There's no flexibility to start moving that money about to try to protect the most important things; it's 75 per cent of this budget as this budget is constructed.

An incoming Senedd would have further opportunities to try to pass a budget. If, by the end of July, there still was no budget, that 75 per cent becomes 95 per cent. Now, I said earlier that the draft budget in front of the Senedd adds £800 million into the capacity of our public services to spend. If you were setting a budget at 75 per cent, you would be taking out £6.3 billion. And even if you get to 95 per cent, you're taking out well over £1 billion. So, instead of having £800 million more, you end up with over £1 billion less, and that's why I tried to make the points on Tuesday about just how impactful that would be, both on the number of people who are employed, because most of the money that we have in public services goes on the people who provide them, and on the service itself, and we would not be talking, just to say it again, we would not be talking about marginal changes: we would be talking about cuts to the very core of what is currently available to Welsh citizens.

And Mike Hedges is right to point to the very particular circumstances of local government. Because, whereas you could argue that if the Senedd passed only the draft budget in front of us—and I hope we will do much better than that, but—the £380 million will become available next year and other services would get their share of that, that doesn't work for local government, because local government has to set a budget somewhere between 10 March and 13 March, based on what they know they will be getting next year. That's what their monitoring officers will tell them, and the fact that there may be more money next year, they will not be able to take the 'may be' into account; you just have to do your budget on what you know you've got. And that's why, even within the restated budget, we are in conversations with our local government colleagues about some other measures we could take to assist them, even within the constraints of a restated budget. And we've already started to do that, because you know, in the restated budget, the assumption that I make on non-domestic rates is that local government will keep all of that next year, including the growth that we anticipate there will be in that income. We are going to have a floor for local government again next year, and those two measures by themselves mean that local authorities will see a 2.5 per cent increase in their budgets, not a 2 per cent as everybody else is seeing, and that the minimum uplift for any local authority will be 2.3 per cent. And once you've introduced the floor, actually, even within that, some local authorities will see over 4 per cent, because of the distributional impact of the formula and so on. But I still recognise that—

Sorry, just on that point then, the floor and the average—so, therefore, the range for the RSG, as it's called, would be 4 point something per cent down to the floor?

The range in EAF, external aggregate finance, would be between 2.3 per cent and 4.1 per cent on the current, if you—

If you just rolled over what was there now.

Yes. We won't be able to do the local government settlement until November, based on—. There's some data that we need to finalise the local government settlement, but that's the indicative distribution at the moment. The actual distribution will be in the draft settlement, sometime in November.

And based on that, does the—? Do you set the range, and then put the floor in? Or do you put the floor in and then redistribute what you've got?

The—

So, if you've got this amount of money, you distribute it, and then say, 'Well, actually, I'll find more money to do that', or your envelope is the same—you don't have any more money to play with, it's just how you distribute it—but that—. Sorry, I don't know if I'm making myself very clear, but it's a rather technical aspect.

Andrew has properly reminded me that I am sharing with you the internal figures that we have, and that the local government settlement figures will have the final range and so on. This has happened in both ways in the past. Sometimes we've had a funding floor that is a dampening mechanism, where you take money from those local authorities who do the best out of the formula and give some of that money to those who are doing the least well. That's not what I'm proposing for next year. I'm proposing additional money to create a floor below which no local authority can fall.

And that will then be within that main expenditure group, and the MEG won't go up by more than 2 per cent.

No, that will be additional.

Additional.

Additional.

So, that will come out of the £380 million—

No, no, it's in the local government MEG already, that money. There's £8 million, or something like that—

It's £8.3 million.

—for the floor, already in the local government MEG.

So, it's already there.

Yes.

Right, okay. Peter, did you want to say something on that?

That will be welcome news, that that's sort of been baselined in the floor. That's a good way forward.

I suppose, with that real issue of, what if we don't pass a budget, a 75 per cent situation, I'm sure most councils would try to subsidise that situation through budgeting with their reserves, on the likely possibility a budget will be set at some point—

Yes.

—for those who do it. So, I'd perhaps be less concerned about—. They'd be initially concerned, especially those who might not have reserves to be able to budget. But I would have thought that they could find a way to manage that situation a bit.

Well, Peter Fox is right in that way, Chair, and Mike Hedges has made this point—he made it in his contribution on Tuesday—that local authorities who have reserves can make choices about their reserves. Because even when they are earmarked reserves, you can decide that you can un-earmark them because this is more urgent than the purposes for which you’ve earmarked them. But we know that the position of reserves in Welsh councils is very variable. And there are some councils that have a significant amount of reserves, normally because they have significant expenditure plans that they are earmarking that money for. But there are some councils where reserves are at the very skinny end, and that manoeuvre, that emptying your reserves on the basis that you'd get the money back next year, would be a risk that they wouldn’t be—. There’s a risk they wouldn’t be able to use that, or their monitoring officers wouldn’t be prepared for them to use it.

I'll bring Mike back in now. Diolch, Mike.

What happens to the Welsh rates of income tax if we don't pass the budget? Does it stay the same?

Well, I think, if we don't pass Welsh rates of income tax, there are two possible outcomes. It is possible that they would stay the same, but that would be because the UK Government has stepped in to make a decision that is a different decision from the one that the Senedd has made. Because if the Senedd doesn't vote for Welsh rates of income tax, in effect, the Senedd has voted for a 10p cut in each of the three bands. That's over £5 billion, more or less, is it?

Four billion.

Four billion pounds that would therefore not be available for next year, for the budget next year. So, one possibility is that the UK Government would step in and instruct His Majesty's Revenue and Customs to continue to collect Welsh rates of income tax as though the Senedd had not made that decision. Now, that is constitutionally very uncomfortable for me, but, financially, of the two outcomes, I think it's the one I'd prefer, because the other one is that we do indeed cut all three bands by 10p in the £1, thus denying ourselves £4 billion-worth of investment in Welsh public services.

And I suppose, in the discourse around the budget and where votes happen, there's a vote on the WRIT, the Welsh rates of income tax, before the budget, because you have to work out how much you've got before you can actually spend it. So, I think that's part of the discourse in Plenary, to be able to make that distinction between the two, because any Government would need the envelope to be able to decide how to spend that money. So, we'd need to be very careful about how we discuss budget votes in that sense as well. Would you agree with that?

I agree very much with that, Chair. So, almost the whole of negotiations every year about the budget are about how you spend the money. The vote on the income tax—the Welsh rates of income tax—is making sure you've got the money to spend. So, even if you have disagreements amongst some parties as to how you would use the money, it's very hard for me to imagine that any party would not want to have the money, and that's what the vote on the Welsh rates of income tax is. If you voted against that proposition, and remember that, this year, it is a standstill proposition—it's to not change those rates—but if you were to vote against that, then in effect you are voting against having the £4 billion.

It's also worth saying that the budget motion itself is the thing that authorises the Welsh Government to spend public money. So, without the Senedd authorising the Government to spend the budget, that means you can't spend the income tax money or the rest of the budget. Now, that's why we have the provision in the Government of Wales Act 2006 to allow—. Even without the Senedd having approved the Government to spend money, there is some provision to allow funding to continue to flow to public services in the way that was discussed earlier.

Okay. Thank you. Mike Hedges.

One final question from me. I think everybody hopes there's going to be a budget, but if you reach an agreement with another party or parties to bring the budget forward that involves additional expenditure, will you come and talk to the Finance Committee about what that actually means?

Yes, I'd be very happy to do that, Chair. I share Mike Hedges's ambition. What I absolutely hope we will see over the weeks ahead is that we manage to have conversations—and there are parties who've already indicated that they are open to having those conversations—about the £380 million, so that we end the Senedd using the maximum amount of resource we've got available to us for the purposes that Senedd Members would wish to see. In a way that was not in the least unexpected, many of the contributions on Tuesday were asking for more money—more money for very important purposes, purposes that would be widely supported around the Senedd. There is £380 million as yet unallocated that could help to meet some of those needs, and I hope we'll have the conversations that will allow us to make those allocations in the budget that is finally voted on, and if we succeed in doing that, I'd be very happy to come back to the Finance Committee and explain how that money is now to be deployed.

Diolch yn fawr. I'll bring Peter Fox in at that point.

Can I just continue on that last point, just so that I'm clear? On top of the unallocated £380 million, is there still discretion to access reserves, to supplement any negotiations you might have to have?

Well, there's no central reserve anymore and there hasn't been for a number of years now. What there is is next year's Wales reserve, and there have been years—and two years ago was one of them—when things were so difficult that, in order to make the budget add up, we anticipated drawing money out of the Wales reserve in the following year. I'd be very reluctant to do that, but it is a possibility. Peter is right to say that it is a possibility to allocate money next year, anticipating it coming out of the Wales reserve. But now that we no longer have a central reserve to manage unexpected eventualities, it's only the Welsh reserve that the Government has to manage all of that, and if you start emptying it in advance, then you are even further constraining your ability to—. If there's flooding this winter, and the Bellwin formula, or whatever we now call it, kicks in, the Government has to find money for that. There is no money in the budget for it; you have to have a reserve to allow you to meet those unforeseen events. And if we empty the Wales reserve as part of negotiations, then the next Government will have an even tougher job on its hands.

Remind us what the size of the reserve is.

Currently, this year, it's been around £360 million, or £350 million.

Yes, £350 million is the maximum we're allowed to hold in the Wales reserve.

Yes, sorry, £350 million.

It's close to that maximum at the moment, but plans this year are to draw on the bulk of that.

We will this year, in this year. That's fine, because that's part of our management of this year. What I would be more reluctant to do is to start spending next year's.

So, because we're getting towards the back end of this year, if you like, that's why you're more confident in taking money out.

Yes, the more you go into the year, the more you can. So, the £137 million pounds for public pay pressures this year comes out of the reserve.

Yes. Thank you for that. One of the things that I'm pleased you did last year, and I know that you pledged to do it because it's baselined and is going to roll on, is the servicing of local government borrowing for capital works. That's a good initiative, so I'm pleased that that will go forward. I suppose, because of the length of the term for borrowing for local government, that has to be baselined for 25 years, I'm assuming. That's the term I think that they generally borrow on, so that's positive.

Chair, on the particular things—it's £120 million for local roads and pavements. Local authorities are borrowing £60 million this year and they'll borrow another £60 million next year. It's a 20-year repayment period, as it happens, for this scheme, and it'll cost £10 million next year. That's in the draft budget, and that £10 million will have to be provided every year for the next 20 years.

And is that a fixed rate, or could that change with the base rate?

It depends. So, the rate is when the local authority actually does the borrowing, and yes, the rates change quite frequently. So, yes, they're estimates. They're about the rates that will apply.

Some of the questions we've already touched on I was going to ask, because you've clarified how you've applied the increase of inflation in line with the OBR and haven't had any specific differentials for different areas of the service provision, such as the NHS. But I have a supplementary on that. It was around September that the auditor general reported that health boards in Wales continue to experience significant financial challenges, and I just wondered—it's early days with the draft budget—what assumptions you have made about NHS funding in the draft budget, other than what I'm assuming is just a rollover-based budget with an inflationary lift. There's no other additional thinking applied to that at this point.

No, Chair, that's absolutely right. The health service will get everything it's got for this year, plus a 2 per cent uplift in the draft budget. The health service doesn't operate under the same constraints as local government in terms of budget setting, so they have a bit more freedom to anticipate additional money next year, and they will need additional money next year. If we manage to deploy the £380 million that's not yet allocated, then I am completely clear in my mind that the health service will need a share of that, because the 2 per cent won't do everything that they need, just as 2 per cent won't do everything that local government needs. So, if we come to negotiate—. No-one should believe that the £380 million is somehow sitting there for lots of shiny new things that you can do. A significant slice of it will be needed just to help public services to manage the pressures that they will face next year, because the health service faces increasing pressures every year, given the nature of the population and the fact that the health service is always able to do more through new drugs, new technologies, all of those things. So, either that money will, as I hope, be identified as part of negotiations, or if it's not and it falls to an incoming Government, they will still have to use a significant slice of that £380 million to sustain the health service and local government.

Thank you for that. I think that you've already shared a little bit about public sector pay, but can we revisit the assumptions you've made in terms of public sector pay in the budget?

So, just as I've relied on the 2 per cent inflation forecasts, I'm relying on the OBR's forecast of what pay inflation will be in the public sector next year. They said in March it would be 2.2 per cent, and I've therefore provided pay at 2.2 per cent in the draft budget. That makes a bigger difference in those main expenditure groups where there are lots of employees and less of a difference in MEGs where there aren't as many people being employed. If you're talking about the health MEG, it does have a big impact, because the health service employs over 100,000 people; if you're talking about the social justice MEG, the social justice MEG employs directly very few people, so it doesn't have much of an impact there.

I was going to ask about assumptions on local government funding, but you've made that clear—we know how that's likely to be uplifted and a base put in and funded within that wider settlement, so that was good. How will your approach of uplifting budgets by inflation work with mechanisms like the local government funding formula? Will local authorities still be allocated funding through the formula at a variety of levels, or will there be a uniform inflationary increase? I think you've answered that as well, to be honest.

Yes, Chair. The money will go through the formula. Although it's a uniform sum of money that goes in at the front, by the time it comes out at the end, taking account of all the different elements that the formula has in it, then the range will be from 2.3 per cent—that is the bottom line for any local authority—and some will do better than that, and we'll have the proper figures for you when the local government settlement draft is published in November.

What about the grant funding that goes to local government as well, because that makes up a fairly significant chunk of money that goes to local government? Will that be a uniform 2 per cent across those?

Those will be decisions that will be in the hands of my Cabinet colleagues, but I think it would not be an unfair anticipation by local authorities—

In their planning assumptions now, I suppose.

—that some specific grants—. My colleagues are getting 2 per cent, and those specific grants will be part of what they will be spending money on. So, if I was a local authority treasurer, I would be anticipating that there will be extra money there too.

And part of the work that—

That will be in the settlement, as well—the detail of each specific grant.

Part of the work that your predecessor, Rebecca Evans, was looking at was simplification of grants and doing that. I don't know if that now still sits with you, or does it still sit with the Cabinet Secretary for local government, because, obviously, she held both roles at the time?

That is more a responsibility of Jane Bryant. But the Government's policy approach remains the same: that we should move more of the money into the RSG and away from specific grants. Once a specific grant has funded the purpose for which it was originally intended—once it's up and running—the money should go into the RSG, and it should do it in a timely fashion; it shouldn't be strung out over many years.

You know, this is always very controversial, Chair, because if you speak to a leader of a council, they are emphatically in support of that policy, and as you leave the room, you're inevitably collared by one of their cabinet colleagues, who says, 'But don't you do that to mine'. [Laughter.] Because, at the Cabinet level, they are worried that the money goes into the RSG and they won't see the benefit. But you have to trust local authorities—that's my view. You have to allow them the flexibility to do that.

There will be some discussion—I can't anticipate the outcome of it—between draft and final, on the £30 million for social care, because there are some calls there for that to go into the RSG for next year. It was a specific grant in the first year. At the moment, I show it as a continued ring-fenced grant for social care, but I've already heard and I've already received representations from some people saying that that should be an RSG allocation this year. So, we'll continue to have those discussions. I can't anticipate the outcome—that's the nature of the debate.

Cabinet Secretary, looking at the bodies that sit outside of the Government but are dependent on the Government—arm's-length bodies—what assumptions have you made regarding the future budgets for them?

They should be planning on the same basis as the rest of the Government—a 2 per cent inflationary uplift, with their current budget restated into next year.

Okay.

But you also talked about the Welsh Revenue Authority as a special case as well.

Well, thank you for the chance to advertise that, because I do think—this is the second year—it is a success story, because you have to work hard here to persuade the OBR that if you give more money to the WRA, they can use that money in a way that will bring in more income than the money you're investing. So, there will be a sum of £285,000 additional for the WRA in this draft budget, which is anticipated to raise £715,000 in additional income through enforcement practices. That's particularly in the field of landfill disposals tax, and that's a particularly challenging area to demonstrate that more money in enforcement leads to greater income, but the OBR was persuaded by the case the WRA made, and that means I'm able to put both figures into the draft budget, and I think that's a significant success.

A last point from me. We've covered it a little bit as well early on, but could you restate your position on how you're going to address the employers' national insurance situation in the coming year?

Thank you, Chair. So, the draft budget restates in full the £220 million that we have provided to help with those additional employer national insurance contributions. The bulk of that is the money that we received from the UK Government, but, as you know, we believed that the UK Government chose the wrong mechanism for deriving that figure. They should have used the actual costs, not the Barnett consequentials of what was needed in England. That left us £72 million short of what was actually required, and the £220 million includes the £36 million, half of the £72 million that we were able to provide from Welsh Government resources. We're going to do that again next year, so the full amount we've spent this year is restated and baselined—in Julie Morgan's earlier question—and baselined next year as well.

And you'll be hoping and arguing for the additional £36 million when you get the opportunity.

We continue to make the case, and my colleagues in Northern Ireland and Scotland make it as well, because they were even more adversely affected by that decision.

So, is that a plenary discussion in FISC, or is it more a bilateral?

It's not an agenda-ed item for the plenary, but I would not be surprised at all that it will be raised, because there are 'matters arising' sort of items on that agenda as well, which allow anybody to go back to things that were discussed last time, and this certainly was discussed back in the summer.

Okay, thank you. I'll bring Julie Morgan in, then, please. Diolch.

Diolch. Cabinet Secretary, you know that this committee has engaged with the Youth Parliament and had a workshop with the Youth Parliament, and it's great that they're here in the public gallery today. I wondered if you could say how any of that work has influenced your budget, and could you give us any examples of the way that it has?

Well, thanks to Julie Morgan for that question. It's very good to see Members of the Youth Parliament; I'm looking forward to discussing things directly with them this morning. I wanted to thank the Finance Committee for the general approach that you've taken to engagement, which is a very rich source of information for us, but particularly your work with the Welsh Youth Parliament.

There are a series of investments you see in the budget that are the result of the conversations that we have had in many different ways with young people, and particularly the Youth Parliament. So, some of the investments that you've seen this year in relation to mental health—those are directly the result of the conversations we've had with young people and their emphasis on the continuing impact on mental health of the pandemic and the aftermath of the pandemic. Some of the additional funding that still goes into education to deal with the tail end of that impact you'll see in this budget as well.

I think you can see two new ones. Given that this is a restated budget, there are a limited number of new things that you would see. But I do make provision next year for the remaining months of the £1 bus pilot. So, that's some £22 million altogether over the two years, and that is a very direct response to some of the things that we know young people have said to us about the importance of being able to travel—sometimes for college, sometimes for work, sometimes for leisure, sometimes for culture—and the importance of being able to have affordable transport for young people, and from our point of view to recruit the future users of public transport as well. So, I think you can see that as a specific.

We've had quite a lot of conversations with young people about Welsh language education, given the fact that we had a Bill going through the Senedd this year on that subject, so we've had a lot of engagement with young people around that topic. And there is £700,000 additionally in next year's budget to support the implementation of the Welsh Language and Education (Wales) Act 2025, and that particularly will fund investment in Welsh language immersion units, which have been one of the big success stories of the more recent past, where we have literally hundreds of young people, including in parts of Wales where the language isn't spoken, necessarily, every day, who missed out on the early part of Welsh-medium education but now want to enter into it, and those immersion units are astonishingly successful in bringing those young people to a level of proficiency in the language where they can join mainstream classes. That's another example, I think, of us listening directly to the views that young people passed to us during the passage of the Bill.

So, you would say, really, that young people have had a direct influence on the budget.

Yes, I think they have. Not simply in those new examples, but in some of the underlying decisions that we've made in recent years as a result of those conversations.

Thank you very much. You'll have the opportunity to directly speak to the young people afterwards.

Yes. I'm looking forward to that.

In July you told Plenary that you've been undertaking a review of the strategic integrated impact assessment and would try a new approach this year. So, could you tell us a bit about that? Has that influenced any changes that you've made?

The approach to the strategic integrated impact assessment is changing in a couple of ways this year. One is that last year we laid the full SIIA at the draft budget stage, so by the time we came to vote on the final budget, there was no assessment of the impact of those additional allocations that we'd been able to agree during that budget process. So, there was no assessment of the impact of the £30 million on childcare, for example, there was no impact assessment of the £1 bus travel, because we published the full SIIA at this stage. Now, this year we are publishing a sort of first-stage SIIA at this point, but we will publish the full one at the point of the final budget. I hope that that will help people to see the full impact. And if we've been able to come to an agreement on allocating the additional £380 million, then we'll be able to assess the impact of that, and that will be a material factor, in the way that Mike Hedges suggested, should there be another session of the Finance Committee looking at those additional allocations, and you'll have the full SIIA alongside that. So, that's quite a major change and I think an improvement that sits alongside the budget process.

The way the SIIA itself has been drawn up has also been reviewed; there was a review that concluded over the summer. The review demonstrated that the SIIA had been successful in a number of ways, raising awareness of the key duties that the Government has, and in particular, trying to address a challenge that I think all Governments have, really, because of the scale of what Government does, trying to make sure that decisions made in one part of the Government don't undermine efforts that are being made in another part of the Government—that you look right across what the Government is doing and try and draw all those decisions together and balance their impact. So, those were encouraging results of the review. But it also said that we needed to have a more engaged process. So, the process tended to be led very much by the Treasury team in conversations with—. Colleagues across the Government weren't necessarily directly involved. So, this year, we've had a series of workshops involving people right across the Welsh Government in the preparation of the document. That means we've had people from our evidence and analytical units, policy and finance colleagues, and external involvement as well—the Wales Women's Budget Group, for example, which looks at the budget from a gender budgeting perspective. They've been involved in those discussions as well.

So, we're hoping that the outcome of all of that will make it a more useful product and a product that more people will have been involved in and taken an interest in, and therefore has a wider impact in the way that the budget is constructed.

It's obviously very difficult to balance the impact on lots of different departments and to bring it together. That is quite a—. But you've seen progress towards that.

Well, I think so. I understand and think there is merit in some of the individual impact assessments that are done in relation to children, in relation to gender and so on, but the job of the Cabinet in the end is to try to make that difficult balancing exercise. What the strategic integrated impact assessment allows you to do, as I say, is to bring to the surface any unintended examples where a decision in one part of the Government ends up countermanding a decision that another part of the Government is making. That can only really be done around the Cabinet table, when all Ministers are there, and you can have discussions about sometimes some quite difficult trade-offs.

Yes, thank you for that. I was going to ask you now about preventative approaches. The committee has taken an interest in this area of work. How are you supporting preventative measures and balancing these with funding for current demand?

Thank you for the question, Julie. This year's budget placed a strong emphasis on investment in prevention. There is a series of things I could point to there. There's a big new investment in this year's budget on measures to improve attendance in schools, and we know that children who get a good experience in school and come out of it successfully—that's very preventative in terms of avoiding difficulties that they would face otherwise in life.

I think our flood prevention programme this year, in terms of public investment, is the greatest investment we've ever made in that. We know that, in an era of climate change, the more we can do to protect communities who are newly vulnerable because of extreme weather events—that's hugely preventative in terms of the quite devastating impact that that can have in the lives of individuals.

Homelessness prevention: the approach we take to homelessness in Wales is very different. We spend over £200 million now on services that are designed to stop homelessness from happening, rather than services to deal with it after it has happened. That's in the current year's budget.

There are big investments now in the health field, certainly, which are trying to move activity upstream. Greater access to and speed of diagnostics, for example, with all the new equipment that is available to allow that to happen.

So, those are all investments in this year, and the fact that we are restating the budget into next year means that all those investments continue into next year. I think it's the well-being of future generations Act commissioner who has argued that stability is good for prevention. What I think he says he has seen in some years is swings in preventative spend, where you get a year when there's more of it, and the next year that seems to move to somewhere else. But stability and consistency of spend in that preventative area is good for prevention. I think we can demonstrate that in the budget that we are restating for next year, because all those preventative programmes continue.

As part of your discussions with your Cabinet colleagues, when you're saying, 'This is how much you're going to get', basically, how much of a discussion do you have around—? Or how much direction can you give from your office to say, 'This is how I would like you to spend it', in the sense of, 'I'd like you to prioritise part of it as preventative'? Is it down to every individual Cabinet Secretary, or do you do that at Cabinet level, setting an expectation? I'm just interested in how the mechanics of that discussion happens.

I do think different finance Ministers take different approaches here. My own approach has always been that it's my job to try and maximise the amount of help that I can provide to any Cabinet portfolio, and then I do leave it to my Cabinet colleagues to make those decisions. I don't send them little bits of money in envelopes saying, 'Only to be spent on this.' Sometimes that does happen, because you're talking about a very particular investment, but, overall, I try and avoid that. I don't think it is for me to tell them how to manage their own main expenditure groups. But the Cabinet does set overall expectations. I've never been in a Cabinet that didn't have the ambition to move spending upstream, to put more in prevention so that you end up needing less to deal with the consequences of failure, and that certainly will have been part of this year's discussion. And, in some cases, Cabinet colleagues come forward to have discussions to see whether they can be supported in that.

So, how aspirational is this budget?

I beg your pardon.

How aspirational is this budget?

I think the budget is hugely aspirational, because we aligned our budget for this financial year with the key priorities that the First Minister had set out, and the budget for next year continues to be aligned with those aspirations—all the aspirations in relation to health, to prosperity, to good public services. These are the key things that this Government has been interested in and invested in, and the budget for next year reflects that absolutely fully, because it restates into next year all the investments we've been able to make in this year, the first budget in which we've had real growth for over a decade.

Peter.

On that theme, in that environment where there is more growth, clearly, at the moment, in many service areas, we're in a reactive state—the health service is a good example—but we know we need to get to the preventative state, which requires frontloading, but whilst still funding the reactive. What sort of steps are—? Progressively, especially when you've got more money, wouldn't that be a sensible step to start embarking on, to make that shift, because it's investing to save, isn't it, ultimately?

I certainly agree with that last point. Preventative measures, where they're done properly, do release savings, and not only release savings, they do more good in people's lives. I could point to—I haven't mentioned it at all today—the major experiment we've had in this Senedd term of a universal basic income for care leavers. We know the outcomes for care leavers are not what we would want them to be—they end up disproportionately in those very expensive services that rescue people when things have gone wrong. UBI was an attempt to give those young people money at the start of their post-care lives, so that they could set themselves up on a footing that meant that they wouldn't end up disproportionately in prisons, in mental health facilities, in all those aspects of what we do. We're still tracking that, and, if it succeeds, then it's a very good example of how you can spend money in one part of the system and save huge amounts of money elsewhere.

It's become very evident and clear for me through a different committee doing an inquiry into local GP practices how actually we are seeing a desire for preventative, but that can't happen, and actually we're putting more pressure into secondary care as a result. There are clear opportunities around how to make that shift, but it's a big shift, and it can only be done when there's money about.

I understand the point that Peter Fox is making, Chair, about double running. You need to keep the current system going while you're trying to shift it to somewhere else, and that is expensive, and we're not yet at the point where we've got money sufficiently to do a lot of that, but there are still things you can do. I think if you look at—well, I'm sure Peter will have been looking at—the optometry contract, it is a very good example of where it's not money that is changing, but it is the way the money you've got is being invested, and more of it is being invested in the high street, where we've got a very skilled workforce who we don't make sufficient use of, and where people don't need to go to secondary care, and won't be going to secondary care in Wales in future, because the money is being redeployed in a more preventative, more primary care direction.

And that would be reprofiling within that MEG rather than any extra funding going into that budget line, if you like.

Yes. Yes. I'm not disagreeing with Peter that actually sometimes prevention does need more money, because you've got to do both things at the same time, but it's not always necessary, and I think the optometry contract is a good example of that.

Julie.

Yes, I was going to ask you about productivity in the public sector. How do the allocations in this budget seek to address the low levels of productivity, both regionally and nationally?

Well, I think this is genuinely a complicated question. Generally, I think productivity is a factor of three or four different components. How skilled your workforce is: the more skilled the workforce, the greater the productivity is likely to be. So, there are big investments in the budget in apprenticeships and skills development and so on. Infrastructure: we know that infrastructure investment drives productivity, so you would certainly expect to see the core Valleys lines, over £1 billion-worth of investment there, that that will pay off in terms of people being able to move to jobs, and to move to jobs where their skills will be used to improve productivity. Agglomeration is another nice word, isn't it, but that's another thing that is always associated with productivity. City regions tend to do better in productivity terms than areas where populations are more scattered. That's another factor that has been behind the core Valleys lines investments—to try to use the Cardiff wider region as an economic agglomeration to drive productivity. But demography matters in it as well, because you need people to do all these jobs, and that is a challenge in the Welsh context, and is a challenge, in a way, I think, in the wider political context, because productivity in Wales will depend on us being able to attract more people to come to Wales to work, and yet the efforts to attract more people to come into an area are, I would say, strongly misrepresented by some voices, and certainly it has become a more contested area. But if we only had our own population, then we will have fewer people in Wales in future, because the reproduction rate is below just maintenance, so we rely on being able to attract other people in for productivity reasons.

So, I think those are the four things that you're trying to do, and I think there are very specific investments the Welsh Government has made, reflected in this budget, that are designed to try to help us on that journey. Productivity in the Welsh economy is below where it is in other parts of the United Kingdom, but gains in productivity have been faster than in many other regions. So, we start from a place where we wouldn't want to be, but, in terms of narrowing the gap, we've been doing reasonably well.

And we are—. Again, controversially, I guess, Chair, if you look at the UK Government's industrial strategy, it does say in very explicit terms that one of the ways in which productivity will need to be enhanced in future is by moving people out of low-productivity parts of the economy and making those people available to work in areas of the economy that have greater productivity potential. We have quite large parts of the Welsh economy that are in that low-productivity area. If you're working in hospitality, there are only so many meals you can serve in a night. It's not easy to increase productivity in some parts of the economy, and we have quite a large part of the Welsh economy still rests in those parts where productivity gains are the most difficult.

Thank you, Chair.

Sorry, part of that shift would then be training and colleges and universities, and we're seeing the direct result of Brexit, in the fact that people coming here to study, helping to increase the funding for our universities, in particular, so that they can then invest in local students being trained—. That has a damaging effect on productivity as well, I'd imagine.

I would argue that Wales has benefited from those years when we were able to recruit students from elsewhere in the world more freely, and where those people were encouraged to stay in Wales, not indefinitely, but for a number of years after they graduated, because they put their skills to work in the Welsh economy. Now, that is much more difficult and much less attractive, because people aren't allowed to bring dependents with them, they don't have that ability—they come, they study in smaller numbers and they go away again at the end. There were gains that we could have made but we're denying ourselves because of the way in which that wider policy agenda has developed.

Thank you, that's helpful.

Thank you very much. Just finally from me, then, a couple of questions around—. In our stakeholder event in Bangor this year, we identified the need for Wales to get more from less funding, which is something that we've been trying to do for as long as I can remember. How are you measuring that public sector productivity in Wales? What specific things are you putting in place to evaluate the impact of any funding that you're putting in, maybe developing a bit further some of the conversations we've just had?

Well, the first thing I would say is that I don't think that this is easy territory at all, because you can very easily end up measuring the wrong thing and ending up with a result that is perverse. I'll maybe think about what Peter's been doing and give you my take—and it's only my take—on the dental contract. When we had a contract that rewarded dentists for what were called units of dental activity, the way dentists got rewarded was by seeing a lot of people who didn't need to be seen, to give them just check-ups. So, you could get a lot of people through the door in the day by doing simple work on people whose teeth turned out not to need anything. Now you could say, 'Oh, they're seeing 10 [correction: 20] people a day—that's very productive, isn't it?' But it's not 10 [correction: 20] people where you'd think that there was the greatest value. Maybe they would have been better seeing 10 people a day who needed to be seen, and doing more work on them of clinical value than simple check-ups. But you could say, 'Well, that's much less productive, isn't it? Those people are only seeing 10 people a day, whereas people next door are seeing 20 people a day.' There is a real risk that you end up measuring the wrong thing and thinking you're being more productive, when actually what you're not achieving is value out of that activity. So, I think it is complex, and it's not easy to make sure you have the right measures.

There are quality issues involved here as well. When I first came to work in the Assembly, as it was then, working alongside Jane Hutt, who was the health Minister, it was absolutely normal practice in the NHS for a surgeon to start an operation in theatre A and then to move halfway through the operation, leaving others to carry on, to theatre B to start another operation next door, and then to leave that one to go back to theatre A. You could say, 'Well, that person must be very productive, because they're seeing two patients.' But from a quality point of view and a safety point of view, this was risky. Now, what we have is someone doing the operation who stays with the operation that they started with and sees it through to the end. They look less productive, but the outcomes for patients are undoubtedly better. So, how do you capture that in your productivity measure as well—the quality of the service, not just the quantity of it?

Now, we have the report—sorry, Chair, this is my last point—we have the report that was commissioned from the advisory group in health, that reported in April of this year, and they have worked hard on trying to find a measure of productivity in the health service that doesn't end up either measuring the wrong thing or forgetting that there are quality as well as quantity issues at stake here. The hope was we would have had that to influence this year's budget, but there just wasn't time—it's taken 12 months [correction: it will take 12 months]. That work will be completed by the start of April next year, and then we will have, in the health field, certainly, a more sophisticated measure that we can use across Wales that will allow us to track the productivity issues that are the right ones, rather than, if you're not careful, the wrong ones.

It goes back, I suppose, to measuring the right things, but having expertise in knowing what you're measuring and how you're measuring it, and, as you say, the qualitative and quantitative aspects of data. It's not for now, but I think there is a discussion about, across Government, how we share data and how we capture and analyse data. I think that's something that will probably need to be unpacked further—as I say, not for this committee, at this moment in time, but it has a direct bearing then on productivity and on value for money, in equal measure.

And we haven't mentioned this morning what might well turn out to be the single greatest impact on productivity over the next decade, and that is the impact of artificial intelligence—that a lot of what white-collar workers have done in the past may now well turn out to be automated. Chair, you will be familiar, I'm sure, with the report that came out just in the last week from the association of Welsh translators. When the Assembly first started, a human being literally translated everything. Now, we use technology to do that, and we use the skills, the absolutely necessary skills, of human beings to review that translation, make sure it's nuanced and it captures the right things. But it's a very different job people will be doing, and the productivity potential of that is very real.

There we are. On that note, that brings us to time this morning.

Diolch yn fawr iawn. Mi fydd yna drawsgrifiad i chi tsiecio, i wneud yn siŵr ei fod o'n gywir.

We'll now go, hopefully, into private.

Dwi'n cynnig, o dan Reol Sefydlog 17.42(ix), bod y pwyllgor yn penderfynu gwahardd y cyhoedd o eitemau 5, 6, 8 a 9. Ydy pawb yn hapus? Ydyn. Iawn. Fe wnawn ni fynd yn breifat.

Croeso nôl i'r cyfarfod yma o'r Pwyllgor Cyllid. Rydym ni rŵan ar eitem 7.

We're moving now on to item 7 and our second substantive item this morning. We're joined by the ombudsman and her colleagues. Are you able to introduce yourself and colleagues for the record, please?

Bore da. Michelle Morris, Public Services Ombudsman for Wales.

Bore da. Katrin Shaw, executive director, casework and legal.

Bore da. Heather Beynon, executive director, corporate resources.

Croeso cynnes ichi y bore yma.

Thank you for the documentation that's come in. We'll start this morning, as we've done in the past, by looking at the performance in 2024-25, in particular in terms of case load and targets. From what we've seen there, you've said that there was a 1 per cent decrease in cases overall in 2024-25. The estimate for the year was prepared on the assumption there would be between a 5 per cent and 12 per cent increase in casework. To what extent were resources available in the year for adequately achieving your aims and objectives, and are you confident that your methodology for casework forecasts is robust?

Thank you. Just, perhaps, to say—a short preamble, Chair, before I get into the answers—that I think the office has had another strong year last year, and we'll talk about some of that as we go through the evidence. As you've already referred to, we've seen the number of complaints this last year increase, and we've closed more complaints than ever before. So, we continue to be very busy and we continue to see a lot of complaints being brought to us. I would like to say, because I might not get the chance later, that our staff have done an exceptional job again this year. They've achieved a high level of performance faced with increasing case loads, they've improved performance around quality and the time taken to investigate complaints as well. So, I want to put that on record. And there are other areas that I'm sure we'll highlight as we go through evidence this morning.

Turning to your specific question, yes, last year's estimate that we submitted to you projected an increase of 3 per cent overall in terms of cases, and by cases we mean every single contact. So, we thought we'd have 3 per cent more contacts from people—that includes enquiries, some of which will then flow through to being complaints. What we actually saw—. As I said, we projected 3 per cent overall—sorry, a reduction—but what we actually saw was a smaller reduction in cases: it was the -1 per cent. Importantly for us, the complaints that we saw flowing from that increased 10 per cent. So, that's the important figure for us, because, as Members will appreciate, when complaints are properly made and go through to assessment and investigation, that's the resource-intensive aspect of our work, and a lot of time is spent dealing with those complaints. So, last year that went up, and we had over 3,500 complaints, which was in excess of the previous year, and, indeed, any other previous year; it's the highest we've ever received.

You asked a question about the way that we're doing that forecasting. It's not a perfect science. We continue to refine and to try and improve how we're estimating future case numbers. I take some reassurance from the fact that, in the current year, we've seen an increase in complaints of 12 per cent, which is in line with the projected 13 per cent. So, I think we are refining and improving our forecasting as we go through the years.

In relation to the resources, which is the other aspect of your question, I think I talked to the committee about this last year when we gave evidence. We felt that we were operating very close to capacity with the case numbers we experienced the year before, and given the increases we've now seen last year on top of that, we really do feel that we've reached capacity with our current workforce. I'm sure we'll come on to talk about that a bit more when we come on to talk about the estimate later on.

I'm just trying to unpack that. So, the overall case load went down by 1 per cent, you were projecting that it would go up by more than that, or was it going to be a flat—?

Three per cent.

You thought it was going to go up by 3 per cent. Why do you think that is? Is it that people are making fewer complaints, or—? In other words, are people happier, or—? What's driving that behaviour?

We had fewer contacts from people than we thought we would have, and it's hard to say why that is. Obviously, what we want to have are contacts that then flow into duly-made complaints. For instance, if we have a contact at the beginning, an enquiry, and that issue is perhaps out of our jurisdiction or it's too early and we can't deal with it because perhaps they haven't already been to the public body concerned, then those aren't complaints that flow through into our complaints processes. We've done a lot of work on communications to try and make sure that people know they can't come to us at that early stage and to encourage them to go through the proper channels before coming to us. So, there might be an element of that.

You've passed them to the right place. Rather than them coming straight to you, you've said, 'Well, actually, that's with the local authority or the health board or—.' So, there's more signposting, I suppose.

Yes. And we will always do that. With our enquiries, everyone who comes through to us, regardless of how they contact us, will get a response. If we're able to help them, we will, and we'll progress; if we aren't, because it's too early or perhaps their matter is in jurisdiction for another body, another ombudsman, then we will signpost them there. So, we don't just say 'no' to people, we will always signpost if we can't deal with their enquiry.

Over 2024-25, the time it's taken for a case to complete has reduced to 53 weeks.

Yes.

What impact has that had on your capacity, and where would you like to get it to? If it's on 53 currently, where would be the sweet spot, I suppose?

We were really pleased to see that that reduced. I think a few years ago, that was at 64 weeks and there's been a conscious effort on the part of our casework teams to reduce that; so, we were very pleased to see it reducing last year. And we've set ourselves a target to reduce that further—I believe by one week in the current year. So, we're trying to track that down through a more challenging and improving target every year to reduce that.

It's a balance, really. We need to take the time that's necessary for the complaint that's in front of us. I'm sure Katrin will talk about this later. We're continuing to see a lot of complex cases that require some really detailed investigation and it's right that that investigation is thorough. We need to make sure we take the proper amount of time. Some will be more straightforward and can be done in a quicker way. So, it's about spending the time we need to to properly and thoroughly investigate that complaint. But we do feel there is scope to gradually bring that time of investigation down over the next few years as well, and that's what we would be aiming to do through the targets we've set.

Because I suppose waiting a year for a decision is a long time in anybody's book, especially if somebody is complaining about an issue about health or something. It plays on somebody's mind for that long—and the people being investigated as well. It's good that it's come down from 65 to 53, but it's still a year. I hope that you'll be putting things in place—. Katrin, did you want to just talk a little bit about what you've been putting in place to manage that down even further?

Yes. Thank you. I think it's important to say as well, as we've said in previous sessions with the committee, that we only investigate on the public service complaints side when we really feel that is necessary. The vast majority of our cases are dealt with at an early stage, where we can try and find resolutions and early settlements. Because, as you say, people do not want to be left in a position without having an outcome when things have gone wrong for up to a year.

As Michelle was saying, where we have those serious cases where there are real public interest issues that it's right for us to shine a light on, we need to spend that time to do thorough and complex investigations. We had an example of that last week, where we issued a public interest report with some serious failings. As Michelle was saying, we are, of course, aiming to reduce on those detailed investigations. It is very challenging at the moment. This year, to date, we are up 12 per cent on complaints, and I'm sure we will cover, perhaps, our thoughts on the reasons for that shortly.

But what we are also trying to do—we recognise we can't stand still—is we are trying to trial new ways of working. We had a particular issue, as you know, on code of conduct investigations. So, we have moved some staff into that team. We have trialled new ways of working there with some different posts on a temporary basis, and we cover that in our estimate submission. So, it is very challenging, but we are doing what we can to really try and adapt the way we work to make sure we can focus on those long-standing investigations and really try and get that down.

And on that code of conduct work, because, obviously, the current time it's taking for average code of conduct work is increasing, are you putting some extra resource into that or reprofiling your staffing complement? Are those the types of things that you're looking to do?

Yes, absolutely. We're really concerned about the length of those investigations, as you know. We have, on a temporary arrangement, asked one member of staff to go into the team to do the majority of the assessing of the new cases. That's been really positive. We've closed a very high number of code open investigations so far this year. That allowed our investigators the time and space to really focus on those old cases. We also have trialled a temporary paralegal-type post, a law graduate, who is able to provide support to the investigators in that team. As you know, those investigations are very different to the public service complaint investigations. They require a lot of witness interviews and evidence taking. That's been really positive as well. So, we're reducing that time and reducing the number of cases that have gone over that 12 months, because we do recognise the impact on all the parties in those cases is very significant when things drag on any longer than they need to drag on. So, we've really focused on that. I think the difficulty we've got is, as Michelle was saying, we are absolutely at full capacity. We've moved resource into that code team, but now we are seeing pressures elsewhere in the service, on the public service complaint side.

Okay. Thank you very much. I'll bring Mike Hedges in at this point, please. Mike

Diolch yn fawr, Cadeirydd. You say fewer people request to be communicated with in Welsh, and your research shows that confident Welsh speakers prefer to make complaints in English. I have two questions on that. Is there an age profile on that? Is it people who confidently speak Welsh at home and with their family, but don't use it in a work environment? Or is it right the way across the age groups?

Thanks for that question. We haven't done any profiling on age around that particular issue, but it's interesting you raise that, because that is something the team are now planning to do this year, to try and understand a bit better why people don't feel confident to submit their complaints in Welsh, and what we can possibly do to help them and encourage them to do so, if they want to. They, obviously, have that choice. We look at this closely every year. We are very diligent, I think, in terms of making sure that access to our service is available to people speaking either English or Welsh. All of our resources, all of our information is bilingual, our website is fully bilingual. So, all of those opportunities there and all the work we do on things like social media, it's all bilingual. So, we're all fully complying with the Welsh language standards in that respect.

I think the other thing, which is a big positive, is that we have, this year, and we've reported it in the annual report this last year, seen more of our staff are able to speak Welsh. We have more Welsh speakers on our workforce. So, more people are able to work with complainants through the language of Welsh.

I think it's an interesting question, and we don't really know the answer: why is it that people who do comfortably speak Welsh at home and in social situations don't feel able to, or don't feel confident, or don't want to, for whatever reason, make formal complaints in Welsh? I don't think it's an issue just for our organisation, I must say. We've seen the Welsh Language Commissioner do a lot of work on this subject and identify that this has been an issue across Welsh public services. But we are going to do that work, to try and profile complainants a bit better, and to see if there's more we can be doing to encourage them to formally make their complaints in Welsh. Everything is there for them to be able to do so, but they're just, at the moment, not choosing to use that.

Perhaps the one last thing to say on this is that what we quite often find—and, again, I think we need to try and capture this better in our data—is even though people don't formally make their complaint in Welsh, when they then track through and start working with an officer who's dealing with their complaints, they quite often, if they want to, then use Welsh as the language of communication, in talking to people on the phone about their case. And it's good that we've got a lot of staff across all teams that can provide that if people want to use the Welsh language when dealing with us. And, again, we've got a good representation of staff who are in our front-line service, doing the call handling, who can take calls in Welsh as well. So, a lot of those more informal connections, if you like, contact, goes on through the medium of Welsh, despite the formal complaint perhaps coming in in English. But it's an area we need to keep working on.

Do you track any of that—as in, understanding what that split is, because, again, it's behavioral as well, isn't it, rather than the language of the complaint, and those conversations that happen?

No, and I think that's what I was referring to. I think we need to do a bit more work on that, to understand how many of the complaints that come in English then actually track through to perhaps more verbal use or oral use of Welsh as we deal with that complaint with the individual. So, I think we need to do a bit more work on that. I think there's a lot more of that that goes on than we're able to present you data on at the moment. So, it's something for the future.

I think that's something you need to come back to, to whoever is in this committee in the future, because I think that you are going to find that there will be an age difference, and there will also be a geographical difference.

Yes.

And the other problem is that people don't know the Welsh words for more complicated technical matters when they know the English words. So, I think that's something. I'll just pass that over to you.

You've completed your second own-initiative investigation, which your predecessor was really keen on having. What plans do you have for future own-initiative investigations, and what have you learnt from the two you've now done?

Okay. Thank you. We're going to be launching the next consultation on our next wider own-initiative investigation early next month, so in a couple of weeks' time. And, subject to that consultation, and what it tells us, I hope to be in a position to launch that investigation early in the new year.

In addition to that, I'd just like to point out that we also have three extended own-initiative investigations in progress. I think it's important not to forget about the extended OI investigations, because, in doing those, I'm using powers that were given to me by the new Act in 2019. And, actually, on one of those OI investigations, we'll be publishing a public interest report on that in December of this year. So, that will be—

And the distinction there is something you've found, but then widened because of a number of cases—just for clarity.

Yes. But it's very important that those powers are there because of the new Act; they weren't there previously. So, there's quite a bit of work going on in that area at the moment.

In terms of your question about what we've learnt—I think, as we've discussed with committee previously, when you did the evidence sessions around the review of the Act—we've learnt a number of things. I certainly learnt a number of things from doing my first own-initiative investigation. I think the first was that we need to be probably more concise when we do that consultation. This time, the consultation we'll be doing is very targeted at bodies that we feel will have a view about the subject we're considering. So, we're going to make that quite targeted, which will allow us to do that consultation quicker.

The other thing is that—and I've spoken to committee about this before—I think, previously, the scope of our wider own-initiative investigations was quite broad, quite large, and that made them very big investigations that took a lot of time. We want to shorten the amount of time that the investigations take, so this time we're very mindful of focusing on a much narrower but relevant scope, and that's what we're consulting on, or will be consulting on in a few weeks' time.

And I think the third area is our engagement with public bodies. I think we need to be clearer from the outset when we go to a public body and say, 'Right, we've done this consultation; we're now going to start an investigation and you're one of the public bodies we're going to investigate,' we need to strengthen our contact at that point and be very clear with them what it means, what our powers are, what we would be looking for from them, and hopefully get that working relationship off to a better start than perhaps we have in the past. That, again, will help our investigation process move more swiftly to a conclusion. So, those are some of the things we've learned that we're putting into practice, and, as I say, there will be quite a bit of activity around this now in the coming months.

Are you in a position to tell us what it's about yet, or not? Or are you going to keep that—?

Well, I'll be consulting on it, so to be fair, I can probably—

You'll wait until the consultation. That's fine.

What I'm minded to look at is the issue of social housing and the issue of disrepair, damp and mould in social housing, and particularly how that affects more vulnerable groups within our community. But I'm trying to narrow that down and get the views of public bodies, tenants associations et cetera, Members of the Senedd—you'll see a lot in your constituency casework, I'm sure, about this—to allow me to, first, confirm that that is the right way to go, and then the exact scope that we would want to follow.

Thank you for that. Mike.

Finally from me, you note that the target groups you have identified for outreach make few complaints, despite appearing to be aware of the service. One of the areas that we discussed—it was either with you or your predecessor,so apologies if it wasn't you—was homeless people, who have got lots of things to complain about, on occasion, but tend not to go through with the complaints, if only because they can lose contact with you and you can lose contact with them. Have you made any progress in terms of dealing with people in some of the harder-to-reach groups, such as the homeless?

I think that's why my predecessor did his first own-initiative investigation on people within the homeless community within Wales, because they are hard to reach and hard to get to. I think, if your question is more general about how, as I understand it—. Can I just check that your question is more general about how we reach hard-to-reach groups?

Well, to reach hard-to-reach groups—I just used homelessness as an example, but there are lots of hard-to-reach groups. You're in a room with politicians who can tell you about hard-to-reach groups, especially at election time. So, it's how you can actually make sure that you get to hard-to-reach groups so that they are not the ones that lose out.

Yes. Well, obviously the own-initiative power—and the reason that the Senedd put that into the Act is that this was an important aspect of this—is recognising that certain people will just probably never come to us with a complaint, and therefore allowing us to target people who are homeless, unpaid carers, and perhaps in the future more vulnerable people in the community, regarding housing issues. It allows us to do that, as long as we have that reasonable suspicion of maladministration. So, that's an important way that we can do it. But we do do a lot around outreach as well, and engagement, to try and—. If we can't reach people directly, we can quite often work with groups, whether they're in the third sector or the public sector, that are working with those communities and can help us get access into those communities, or can make sure those communities and people are aware of what it is we do. That's very much the focus of our our outreach and engagement work. We will be reviewing that strategy this year, following on from the recommendations you made when you reviewed the Act, but also because we'll be putting a new strategic plan in place next spring, and that strategy will need to be reviewed off the back of that. The sort of thing that we've been doing is getting out and attending events where we think we can meet people, giving us an opportunity to talk about our work and promote our work to people that perhaps wouldn't normally know about us. An example of that is that, in the last couple years, we've been at the National Eisteddfod. That's been very successful for us.

I've visited you there, so, yes.

Good. Good. But, talking about reaching into Welsh-speaking communities, the National Eisteddfod has been a good event for us. This autumn, we'll be at the Tenant Participation Advisory Service conference, which is reaching out to tenants of social housing. That's a very, very important event for us. And we'll be at the minority ethnic communities health fair as well this autumn. So, these are important events to reach into different sectors.

The other thing that we did, which again we've talked to the committee about previously, is that we did commission some research earlier in the year around how we can improve engagement with the third sector across Wales. It’s very important for us to reach some of these harder to reach communities. We've done that piece of research and we're acting on those recommendations now. So, we attended Gofod3, which is a big third sector event, a Wales-wide event. We attended that earlier in the year and we're now engaging with the Wales Council for Voluntary Action to look at how we can link into their networks and some of the things that they're doing to promote our work and start having conversations with the people working in the third sector across Wales that can help us perhaps reach into areas or identify issues that we haven't previously identified. So, we've done that research and we're starting to act on that already.

And the other thing is, and you mentioned it yourself, as elected representatives, we’re very conscious that your constituency offices will be very busy dealing with issues on behalf of people. We've been running some sessions for constituency staff to help raise awareness and have dialogue about how we can help and how we can receive complaints and how they should frame those. We're engaging with the Senedd Commission to look at how we can plug into induction arrangements for new Members of the Senedd next spring, again to promote what we're doing with a greater number of Members but also with constituency staff. And next month we'll be at an event in Westminster to do a similar thing with MPs and their staff, joining other ombuds organisations from across the UK.

So, quite a lot of activity, getting out to try and speak to organisations and get into communities so they understand what we do but we perhaps understand them better and what the issues might be. So, that work continues and we'll be refreshing our strategy in the spring on the back of our strategic plan.

Okay. Thank you.

Peter.

Good to see you all. I'd like, if I could, Michelle, to just explore a little bit around the governance arrangements and the financial performance—just a few questions around that. It was quite interesting to see that you've moved some of your funding on your strategic aims—so, moved them from strategic aim 1 to aim 3, about proactive improvement work. Does that suggest that you're changing direction towards more proactive improvement? And I just wondered, if that is the case, what difference is that going to make, through allocating in that way, to your casework?

Okay. I think, first, to say, that we're—. I'll explain a bit of the detail as to why those figures have changed, but we are putting an increased focus on the proactive work, as we've already discussed today, but that isn't at the expense of casework. So, that change that you've seen between the funding allocated to those two priorities was just for that particular year. It'll return to a normal balance this year. So, just to explain, it's quite a detailed answer, but the funding that we put into strategic aim 1 dropped by about 2 per cent, and strategic aim 3 went up by about 1.3 per cent. So, these are small, marginal amounts in the budget. But it was just the proportions that changed. Actually, the monetary spend that we put into both went up. So, we put more into both strategic aims. And the reason for that was a very simple one. In our service improvement team, we had two people on maternity leave within the year. Now, we don't have the budget, usually, to cover people for maternity leave, but, on this occasion, those two roles were really, really critical for us. One was a compliance officer and the other was our head of policy and communications, roles we felt we couldn't leave unfilled for a whole year. So, we put funding in from elsewhere in the budget in order to cover maternity leave. Both of those officers are now back in work, so the funding will return to its normal level in the current year. So, it's one of those technical things that has caused it, but we are not—. I think we are doing more around proactive work, but we're not doing that at the expense of casework.

No, you're not reprofiling money to do it—no, I get that. That's clarified that well.

Just looking at the breakdown of costs associated with the PSOW Act, can you outline what the cost avoidance benefits, efficiencies and improvements were that arose from the Act during 2024-25?

Yes. Well, we've gone back and looked at this again. I think, in terms of cost avoidance, it's always a tricky one to try and estimate. The way we would do it is, if we look back at the regulatory impact assessment that was done at the time of the new Act, it predicted that, if the new Act wasn't put in place, i.e. if the old Act had remained, then our workload last year would likely have increased to between 5 per cent and 12 per cent—sorry, the case load would have increased between 5 per cent and 12 per cent. And I think that we talked about this a bit previously with the committee. So, that could have been an increase of between 10,000 and 16,000. We could have ended up with the case load being between 10,000 and 16,000 in that one year, which would have been way above where we actually are in terms of our case load.

So, if we look at that and look at where we're at, then we've received fewer complaints than we would have if the new Act hadn't been in place. And our estimate based on the unit costs, which we have in our annual report, is that that could relate to a cost avoidance of between £135,000 and £3.2 million, just in that one year. I know that's a huge variation, but 10,000 to 16,000 is also a huge variation in terms of where it may have been. But I think the basic point, which is correct, is that, if the Senedd hadn't put the Act in place, it's likely that our case load would have been much higher. The work that we've been doing in the interim period, the powers we have in the new Act, have allowed us to slow down that increase and we've therefore not had to fund the cost of dealing with that increased case load. So, that's what we would suggest. It's not perfect science—

But there's no adjustment there for COVID or anything like that in the middle of it, where things changed completely? There are lot of variables, aren't there, in that? But the best estimate, I suppose, is that—

It is the best estimate. Cost avoidance is always a tricky one, but, yes, we know that, in the COVID year, our complaints went down. It's the only year they ever have. And as we say in our annual report, over the last five years, it's gone up something like 43 per cent. So, you know—. What we don't know is where would those figures have been if we hadn't had the new Act and the new powers in place—those are the assumptions that we're making.

So, that's the issue on cost avoidance, and I think that, in terms of benefits, efficiencies and improvements, our submission to the committee earlier in the year regarding the review of the Act contained quite a lot of detailed information about that. But some of the things that I would point out today, probably, as good examples, I think, is that we can show that there's now a reduction in complaints about complaint handling by public bodies, which suggests an underlying improvement among our public bodies in dealing with complaints. We've got common complaint standards now in place across health, local government and housing. From our own research, and again it's referenced in the annual report, people are saying that they're generally having a better experience if they make a complaint to a public body, and we hope that this is all part of the complaint standard, the training and the work that we've been doing with the public sector.

And then, finally, the point about the own-initiative powers: using those powers, we've done reports on Gypsy, Traveller communities, homeless communities and unpaid carers. There are benefits there that we would not have been able to achieve if it hadn't been for the Act being in place.

Well, thanks for that. A few more technical questions: I note that your communications costs rose quite considerably—to £15,000 from £1,000 on issues associated with the Act. Can you give us a little reflection on that?

Yes. There are two reasons for that and it will fall back to normal levels this year. So, there are two things that we did last year that caused that increase. The first was that we did publish our second own-initiative investigation, which meant that we incurred additional costs around translation, design and printing to be able to publish that report. And the second was that we commissioned some additional stakeholder research, particularly around doing in-depth interviews with chief execs and senior leaders in public bodies, again to try and assess the impact of the new powers we have and the work that we've been doing around that. And those two things together led to that £14,000 increase, but we expect them to be one-offs and that level to fall back down in the current year.

And is that in preparation, then, for reviewing the Act, or part of that, especially the interviews with—?

Yes. The stakeholder engagement we did particularly to inform our response.

Because we were reviewing the Act, you needed to do the work to be able to report back to us what had been happening.

Yes. So, the second part was largely driven by that, but the first part was our own-initiative work.

We note, too, that there's a new budget line of £8,000 for professional fees on top of the £1,000 that would normally be spent. Can you clarify what that's about?

Yes. Again, a similar answer. This was the research work that we commissioned around the third sector that I just referenced—again, probably largely driven by the fact that the Senedd was reviewing the Act, but actually it has been a really beneficial piece of work for ourselves to understand how we can better engage and work with the third sector. So, that was about commissioning additional research as well. It was just allocated to a different budget code.

And do you suspect—? Will that go back down again?

Yes. We wouldn't envisage doing that again next year.

It's not an ongoing, baked in—

No.

Moving on to case load a little, we note that your open case load is higher than in previous years. What proportion of this case load is aged investigations and what is the impact of these investigations on your resources—if they are aged?

Katrin's going to pick that one up.

Thank you, yes. At the end of the financial year, we carried over 562 open cases, compared to 481 the previous year, so quite a lot higher. Of those, there were 531 open complaints and, in line with our key performance indicators, we refer to our aged investigations as being those that have gone over that 12-month period. There were 31 cases at the end of March that we carried over to this financial year, so that was 5.8 per cent of the open case load. We tend to track those aged investigations by comparing them to the numbers within the cases we're investigating, rather than the whole open case load, but, as we've been discussing, really, the impact on resources is quite significant. Our staff are under a lot of pressure. We set the maximum numbers of cases that we think are the optimum level for them to be able to handle cases, ensure there's progression and to protect their morale and well-being. So, the impact on resources is quite significant.

As I mentioned on code cases, it's been great to see the improvements and a number of those aged cases coming down, but we are seeing significant pressure. We do have a high level of assessment cases on the public service complaints team. As we did with code, as I say, we're trialling new things, we've moved staff over to deal with those assessments, but now we've done that we have pressure again, now, on our public service complaint investigations. So, as soon as we move resource to assist in one area, we are so stretched that we start seeing issues in another. But there is a specific issue that we think is driving some of our new assessment cases. It seems that complainants are using AI tools to submit their complaints. So, we're really trying to take action. We've put messaging on our website to advise, look, if a complainant chooses to use an AI tool to make the complaint to us, they need to check that information. So, what we're trying to do is trying to really funnel those complaints, either through oral complaints or through the website. Because that way, as Michelle mentioned, we have the complaints checker, or on the telephone we can give people the right advice on what we can and cannot deal with. So, at the moment, we do have a very heavy case load at the front end of our service, and that's knocking on, because we've had to move some resources over. So, it's a constant juggling act, really, and we are fully stretched.

Yes, I can imagine.

Two things, I suppose: the AI bit is interesting. Before I come to that, what's causing those longer delays? Is it that you're waiting on information, and that's what causes delays in those aged cases? Is it responses from public bodies, or is it responses from—? I suppose it's a combination, but what are the trends, I suppose? Is it that complainants are taking longer to come back to you or is it more that the response you're getting from the public body—? Where's the bottleneck, I suppose?

I think there are a number of factors, as you say. I think all of those could well be relevant on a number of cases. Particularly, the longer investigations are those public interest concerns, and we will have a lot of engagement with public bodies as we share draft reports, findings—likewise with complainants. We may have more engagement if someone is unhappy, you know, with our draft findings. So, it all contributes. At the moment, because we do have those high pressures at the front end—we've mentioned in our budget estimate—we're queuing cases at investigation start stage and when they come through the door. The clock starts when we receive full information to assess a complaint. There are a number of factors.

We've made improvements on how we access clinical advice on health matters, so that's very smooth and effective. But we are sometimes finding it difficult to find a specialist adviser, say, on a particular case. It can take a long time, then, to find somebody suitable. So, there are a number of factors. Plus, as I say, we have that maximum optimum level for our investigation officers in the investigation teams. But we're not just standing still where those cases are in the queues. We are really trying to make progress. So, we have a couple of experienced members of staff who are trying to manage that work for us and make progress, even though a case might not have a dedicated case owner.

And if I may, the AI aspect—can you unpack that a little bit for me? What are you seeing? Is it people submitting evidence using an AI tool: 'Please, write me something that tells this—'? Is that the type of thing that you're getting and then people are not necessarily checking that the facts in what they're submitting reflect their own situation?

That's right. We're getting a lot of premature complaints at the moment. If somebody has done that research and been advised to just send their complaint to us, they're sending it to us early, before having made the complaint to the public body, which is the general requirement before we can look at a matter. But it all takes processing and administration at our end. The difficulty we're finding as well is sometimes the AI tools will give incorrect information. There are lots of ombudsman jurisdictions across the UK. Somebody might have been given the wrong information about what we can and cannot do. Also, the Welsh position isn't always reflected, we think. So, we have seen some repeat patterns, very similarly worded complaints on particular issues, like waste or what have you, and that is also following through our process. We do have a significant pressure on our review case load at the moment, and we've seen examples there of repeat, identical wording for, you know—

And coming from people who are unrelated, I suppose.

Yes.

Interesting.

On recruitment and training, we note that your costs have trebled between 2023-24 and 2024-25 due to increased recruitment costs. Could you give us an indication of how many recruitment campaigns you undertook in 2024-25 compared with the previous year, so we can get a feel for the breakdown of why those costs have so significantly increased?

Yes, of course. It was a busy year for recruitment. As the numbers indicate, we spent £78,000 on recruitment across the year. We had 11 new starters during the year, but we also recruited three new members to our audit and risk assurance committee and advisory panels. So, there was a campaign around that. We also did the recruitment for a number of posts, even though those people, such as Heather, didn't take up the position until the following year, but the recruitment costs were actually in that year. So, that's why the figures are high. In the previous year, we had seven new starts—it was much lower, particularly when you factor in those recruitments that we did for people that then started in the current year. Some of the positions that we were recruiting to were senior positions, so an executive director and a head of IT, and we did use external agencies for those posts, because we felt it was important to have good campaigns and to have a good reach to get the best calibre of candidates, which we believe we did. All of those are factors as to why it cost more. We'd expect, again, this year, for it to drop back to a normal level—I hope.

Yes, to drop back down. Okay, thanks for that. We also noted that there's an in-year use of about £144,000 for the provision of dilapidation costs. Can we have a bit of an expansion on what that is?

Heather will explain that to you.

I'll take that one. The dilapidation cost, the £144,000, relates to—I think it was discussed last year—where we went from three floors down to one floor in the current office space. It happened in April 2024, so that's when it appeared in the accounts. The provision relates to a resource—it's not cash; there was no cash that changed hands with this—it's looking at putting the building correct for one floor, rather than for three floors. During the audit, we worked with Audit Wales to come up with that new provision to make sure that we reflected that we had one floor. We've got no plans to leave the current floor that we are on, and we have subsequently got an independent assessment of that. I'm pleased to note that that came in in September. It doesn't have a material difference when you take into account inflation for that year. We will discuss this with Audit Wales during our audit planning, but we don't anticipate it'll have any impact on the estimate that we put forward.

Okay, that's helpful. During 2024-25, we know you appointed an interim executive director to cover the role of chief operating officer from March this year, but note that that appointee was employed on a half-time basis, a 0.5 full-time equivalent. Why was this the case and how were the remaining aspects of the role being discharged? How are you backfilling that?

Yes, that's correct. The interim director worked with us between March and August, during that period when we were recruiting for a new executive director. I was very mindful of having proper experienced cover during that period, because it was end of year, we were doing accounts, end-of-year audits—it's quite a busy period, particularly around our finance and statutory reporting. That interim director was responsible for finance, human resources and IT. That's a narrower area of responsibility than the chief operating officer previously had. They also had responsibility for our service improvement work. During that interim period, the service improvement team reported to Katrin as director of casework and legal. The role was split, if you like, during that interim period. The interim director that came in only had part of the responsibilities of the previous officer, which is why it was only a half-time post.

I see. Have you now appointed a full-time chief operating officer, a new one?

We've changed the structure, so that post has been deleted. We now have two executive directors covering the area of responsibility.

Right, so that's how it's going to work.

So, this is your senior leadership team.

This is my senior leadership team, yes.

Right, okay. That all makes sense, then. Finally from me, then, in your accounts, you note that you've employed one highly paid off-payroll worker—and that might be the person we were just referring to earlier—who earned about £245 per day or more in 2024-25 and at the end of March. Can you expand on what role was this, and why have you made an off-payroll appointment?

It was actually a different role. During the same period where we had a vacancy around an executive director, we also had a vacancy for head of IT. Again, looking at that period, I felt that was a vulnerability for the organisation, given the criticality of IT, cyber and our important work around that. So, we went out to try and find someone that could cover that area of responsibility during that interim period, while we were recruiting a head of IT, and we did that through engaging someone on a short-term basis, a consultant on a short-term basis. And we did that through a third-party company, as is quite common within the IT industry. But just to assure committee, we went through the proper processes with that. We looked at our procurement. We followed His Majesty's Revenue and Customs guidance around IR35, which governs that type of activity. We followed the guidance and it showed that it was appropriate to fill this role in this way. We also discussed the issue with our ARAC and were transparent with them about the costs. It was all checked, and the treatment was approved with Audit Wales as well, when they did our year-end accounts. And as you can see, it's quite clearly stated in our accounts, how we filled that position. Again, that's come to an end now, because the new head of IT started work at the end of August.

Okay, thank you. That's all from me.

I'll go over to Mike now to look at some of the future pressures and how they factor into the estimate. Mike.

As you know, we deal with your budget, and you might think we give you a pretty hard time over it, but we probably wouldn't think so. But eventually your budget becomes part of the Welsh Government's draft budget. You also cannot fail to be aware that there is a possibility of the Welsh Government's budget not passing. What are the implications to your own budget if the Welsh Government's doesn't pass?

Okay. I'll take that one. My understanding is, if it wasn't passed, it would be a 75 per cent budget that we'd be looking at. If I could just start by reminding the committee that 80 per cent of our costs are staff costs, so that's quite a direct impact straight away for us. As detailed in our estimate, 2026-27 is seen as a step-change year, so that's where we're looking to get vital additional resources to help us cope with the demand, and as we've mentioned earlier, we're up to capacity at the moment. It's also to futureproof the organisation against the future workload challenges, and then it's also in line with the medium-term financial plan that we put forward. So, our estimate not being approved could mean—well, it does mean—that we've reached capacity, as we've discussed earlier.

But in terms of a scenario of 75 per cent, we do feel that, if this did materialise, it is possible on a short-term basis that we could manage that, but that would be on the understanding that the estimate that we've put forward would be approved after that case. How we feel we could manage it would be by holding vacancies, delaying project work and by doing less, essentially, because we couldn't do as we're doing now with less resource. However, in terms of the vacancies and holding that, it's only possible if we do have vacancies come available. So, if those vacancies don't come up, then we won't be able to do that.

The other part is, as I'm sure you're aware from previous meetings with ourselves, the annual pay settlement is beyond our control. So, if that was settled in the first half of the year, that would obviously cause us significant challenges, because that would materialise—that additional cost. Did you want me to go on to discuss if this carried on for a longer period of time?

I suppose, at the end of July, then, it would go to 95 per cent if it's still not—. So, maybe unpacking it to that length anyway. Sorry, Mike.

No problem, I'll explain that. So, in terms of a 95 per cent budget—that would be based on our current-year budget going to 95 per cent—unfortunately, if that did materialise, we would be looking at a reduction in staff resources and it would have a direct impact on our output, because we wouldn't be able, due to this 80 per cent of our staff costs—. Essentially, we would be facing redundancies in that scenario. Even in this scenario, we wouldn't be able to absorb those redundancy costs, so we would be coming back with a request in a supplementary budget to cover those redundancy costs.

Any reduction in staff numbers, as we discussed earlier, would have an adverse impact on the complainant experience. We would have less time to engage with individual complainants, we'd have longer response times, we would have less detailed consideration we'd be able to do on some of the complaints, and we'd possibly have to look at raising that bar further. We've already looked at that in the past, as my colleagues have discussed. That would reduce the proportion of complaints that we’re able to positively intervene in, to manage that demand with limited resources.

And the other thing that we have in our estimate paper, in terms of our development work, is to futureproof the organisation as well in terms of technologies. That would have to be used elsewhere, so it would need to be redirected. Potentially, it looks at diverting resources away from our proactive improvement work, which we wouldn't want to do, and then a delay in investing in technologies, which we feel puts us at risk from a cyber security point of view, so we would be concerned about that. So, essentially, it wouldn't allow us to achieve our strategic aims and objectives, we feel it would expose us to a significant risk, and it would take us a long time to recover from.

Thank you very much. You note an increasing case load. You state that, currently, you're queuing public service complaint cases to manage staff workload. Can you describe at what point they are queued, how cases are prioritised to progress, and whether you queue other types of complaints, for example code of conduct complaints?

Thank you. Obviously, I've touched on the way that we are approaching the queue. So, on the public service complaints side, when cases are received, they are held and queued at that front end until an experienced caseworker is able to oversee the sifting process of those cases. If anything urgent is seen at that stage then we can prioritise that case, but generally cases are dealt with in date order. We might put requests out for more information. So, often we'll be waiting for information, but we look at them in date order at that point. As that sifting sort of exercise is undertaken, where cases are then referred on for investigation, as I mentioned, there is a holding area there also where we queue cases until we're able to allocate the case, until a dedicated officer can pick that up. But we are looking at ways to ensure there is progression on those cases even when they are in those queued areas, by, for example, starting investigations or discussing the scope of an investigation with a complainant.

Because we have made good progress on our code investigations and casework, we aren't queuing those cases, I'm pleased to say. Case numbers in that team have come down quite significantly because of the temporary measures and additional resource that we have put in, and that's why we've outlined in the budget estimate, as Heather was saying, the additional request for funding, which we believe is modest in the circumstances, but would give us an opportunity to have that reset, look at what has worked for the code team and look at how we could review our practice and approach on the public service complaints side, particularly at the front end of our service, where we are seeing these high pressures at the moment.

Mike, can I just come in for a second? So, on that, you've moved resource from this team to that team to bring that casework down, so it's a bit of whack-a-mole, and then you're moving them back to here. So, the budget estimate is asking to be able to have, effectively, two hammers.

Well, to move it up.

So, moving upwards. Right. Okay.

But also, I think, the experience of the trial and the temporary roles would give us an opportunity to have a proper look at that.

To see if it actually works.

See what has worked and what is fit for the future, because we've discussed the particular reasons for some of these pressures and approaches, so it would give us that opportunity to reset, really.

Diolch. Mike.

Diolch, Cadeirydd. The next question is on your medium-term financial plan. What assumptions have you made and how important are percentage wage increases to the medium-term financial plan?

If I take this one, in terms of the medium-term financial plan, it takes into account public finance challenges, and it considers challenges and pressures facing us internally. This plan looks ahead to those pay and price pressures facing us into the next three years. So, we have taken into account what's happened to date and where we expect that to end. On the pressures of increasing demand for our services, and then capacity, we've done some modeling around that in our medium-term financial plan. We look at volume efficiencies, so as we're able to do some more cases. We look at other efficiencies, where we've got, possibly, future procurement on websites. We do have rent reviews coming up. So, we try and look at what's coming our way in terms of our medium-term financial plan. There's also technology costs—so, embracing some of these new technologies, to help us with efficiencies. It does seek to identify the resources that we need.

So, in the medium-term financial plan, we do have additional resource to cope with the demands and the pressures that we've discussed. Fundamental to this plan is the statement of principles. They've been considered at every stage of the financial plan. In terms of the estimate, our estimate submission is driven by the medium-term financial plan, so that, if we weren't able to achieve the estimate, then that would have a direct impact on our medium-term financial plan because it's seen as a step change, as I discussed a little earlier. So, it's a chance for us to reset, to catch up to where we need to be, to put in place the additional staff, but then also look at some of the things that Katrin's mentioned, where we trialled different staff in different places, but then also allow us to have that flexibility to move things around, because we found that that helps when we've got pressures in different parts of the organisation.

Finally from me, I note that you intend to bring further public bodies under the standards. The estimate states the process for this will require adaptation and will provide additional demand on already limited resources. How are you planning to achieve this?

Okay. I'll take this one because that's in my remit. We are currently working on the work programme, because it will consider how best to roll out to the other bodies, because there's quite a number of bodies that we're looking to roll it out to. But it will take into account the current resources—so, we haven't asked for additional resources for this. That will be available by the end of the financial year, so we're currently working on how we will achieve that, but we're not asking for additional resource—we'll move around the resource.

But it's an aspirational movement towards that.

Yes, and we'll need to consider our approach, because it will be different possibly than what we've done before—when we brought across the housing associations, for example.

And I assume you'll be learning lessons from that work and be able to adapt your process accordingly.

Yes.

Okay. Did you have anything further, Mike?

No. I'm quite happy with what I've heard so far.

Lovely. Diolch. Talking about the medium-term plan, but also the estimate that we've got ahead of us, you've asked for an extra £157,000 to meet an anticipated 3 per cent pay award for 2026. We heard the Cabinet Secretary in Plenary on Tuesday, and again this morning, talking about his assumption of 2.2 per cent inflationary pay pressure across, and his assumption is 2.2 per cent, or 2.3 per cent, or thereabouts. Why have you gone for 3 per cent, basically?

I'll take this one. The reason we've gone for 3 per cent—. We've looked at the pay settlements in the last two years and what we understand from other pay forecasts from other public bodies. So, we've taken that into that. As you're previously aware, we were in a unique position where we don't have input into our pay negotiations, so we can't control—

Because you're benchmarked against—

Yes. We've looked back at where we were, and we've looked at other public bodies, and we thought that 3 per cent was a sensible place to land, but what that will end up like, that will be outside of our control.

So, potentially, if the public pay award comes in at 2.3 per cent, then you will potentially have asked for more than you need. So, that would either be sent back, or—?

Yes.

Yes. Okay. You note efficiency savings of £87,000 from professional advice work by a changing approach. Can you elaborate on what you've changed, and will this be a recurring efficiency or is it a one-off efficiency?

I'll take this one as well, the efficiency savings—. So, it's risen over the last number of years. We're now in a position to be able to—. Well, we've requested within the estimate that we move this saving into our future staffing costs, where we're looking for an increased number of staff. So, it will be a recurring saving, but then we'd be looking for that to come under our new staffing.

What we've done is it's been driven by—. We've invested money into our case management system and that's made the process more efficient. Therefore, we've realised a saving there. We did some work on reverting back to a single point of contact, and that's been successful, between our office and the advisers—the professional advisers. So, that has hugely streamlined communications. So, we've recognised savings there.

We are now seeing the benefits of our proportionate approach to investigations, and we're only focusing on the serious heads of complaints. So, that has resulted in more focus, then, for the advisers that we use. So, that's generated that saving of £87,000, which we're now able to recognise.

And as part of the estimate, then, you're looking at £237,000 for additional staff resources, so reprofiling that £87,000, and I think there's £29,000 of pension provision there as well.

Yes.

Can you outline, then, how many of those staff you are going to be recruiting? Is it part of what we were talking about earlier, and that's how this is paid for, basically? So, it's the direct link, of what we've just been talking about with Mike Hedges, and that's the price tag.

Yes, absolutely. We can't say, you know, how many that will be or where they'll be, because what we want to do is to take the opportunity to have a fundamental look at how we organise those services and reconfigure them to match where we're at now in terms of case load, but also to futureproof it so that we can project over the next few years where we're going to be and try and put in place an arrangement with those modest additional resources, where we don't have to come back for increases in the next few years.

And with regard to pay, again, with the national insurance contributions, how did that affect you in the end, or has that had any bearing on what you've needed to baseline this year?

I don't think so, because we have a supplementary budget, which was approved by the Senedd.

So, that's already baselined, and therefore—

So, that's already in there, yes.

And the figures that we're looking at here has the assumption, going forward.

Yes. That's right.

Yes.

And the estimate seeks £28,000 to invest in Microsoft 365 Copilot licences, initially aimed at improving staff personal productivity. Can you expand on what other sort of AI projects—. We've talked about AI already, from complainants coming to you. Well, what are you doing in using technology and balancing that cyber risk with efficiencies, I suppose, using emerging technology?

Maybe if I talk about one of our specific projects, which is our portal project, I believe that you may have been aware that this is going on at the moment. So, it's early stages, but we are looking—. So, the portal project is around streamlining engagement and communication with the relevant bodies. That's where we aim to start it. So, that will make that more efficient, that process. We want to grow that to include professional advisers, and then, down the line, we'd also like to look at how complainants can become involved. So, it's a way of giving notifications and actions, which drives our workflows, which then creates efficiencies. We'll be quicker at being able to respond and people will know where we are in the system, because currently this is a combination of phone calls, e-mails, document sharing. So, the hope is that the portal project—and it's looking really positive, coming together—and what that will do, means it's all done in one place. So, that, on its own, creates more efficiencies. Around the additional staff that we've got in our estimate and then projects such as this, we hope that we can have those efficiencies in place to be able to manage the case loads that we have, but then also, in turn, hopefully, that will help with the time taken to address any delays that there are in the system. So, if we've got this, then that may help as well.

You talked earlier about recruiting a new head of IT. Does that person then have some experience of doing this, I suppose? I hope so. I hope the answer is 'yes'.

The answer is 'yes', and he sits within Heather's team. He's bringing some good ideas, thoughts and experience to us about how we can use automation, new technology, but to do that in a safe environment, in an ethical environment, particularly around our cyber risks. So, yes, absolutely.

Maybe if I can expand and give you some other examples of what our head of IT is currently looking into as part of the project. We hope to look at technology to improve us in assisting with oral complaints, to be able to do that in a more streamlined way; streamlining case management, so that's in line with the portal, but also in terms of our internal processes; document handling, so how we can summarise quite lengthy documents; whether it can help us with our pattern detection, so if we can see that there are certain types of complaints coming in, so a little bit more on our data side and how we can use technology to assist us with that; data-driven insights, so that's supporting our KPIs and trying to see what's impacting them, using a lot more of our data; and improved accessibility, so this could be looking into the future around AI-driven chatbots.

This wouldn't be in terms of case handling. This is some of the work outside. We're not suggesting for a minute that we have AI making our decisions, but it's just in terms of using some of these technologies to assist us in being able to streamline some of our processes. And then also looking into how AI can identify skills gaps through relevant training and how that can assist in supporting our staff and their well-being as well. So, we're looking into that, trying to look internally and externally using some of these new technologies, but with our new head of IT who's got that experience as well, and making sure that from a cyber point of view and the rest of it we're on the right track.

I seem to recall from previous budget rounds that you made an investment into somebody that would do data handling and data analysis. Are you seeing the fruits of that recruitment coming through into being able to have better estimates and a better understanding of your data?

Yes. That person has been with us for just over 12 months, I think, so it's early days on that, but we do have a data strategy in place now and we have started to see improvements in how we present data internally. I think the next stage for us, working with the new head of IT, is to look at how we can present that more externally to the organisation and use that data in a bit more of a proactive way, as Heather has identified, in our insights and detecting trends in our case load as well. So, we've made a start, but there's a lot more to be done on that, I think.

We talked earlier about what happens if the budget doesn't pass, but parking that to one side a moment, could you talk us through what the headline percentage, I suppose, increase—? You've talked about a step change. What part of that percentage is the step change bit and what would be if you were just to do a 'do nothing' budget, I suppose, or a rollover budget, as we've heard from the Cabinet Secretary this morning about what he's looking to do for the Welsh Government?

Shall I take that one? In total, it's a 5.4 per cent increase that we've requested in our estimate. Three per cent relates to pay and price pressures that we're talking about. The 2.4 per cent then is looking at the additional resource and then investing in the technologies to futureproof us. So, that step change part is 2.4 per cent of our increase in our estimate.

Thanks for that breakdown. That's useful just to understand what you're doing and to understand what we've been asked to scrutinise and look at.

Thank you very much. I have no further questions unless you have any comments to make before we bring the session to a close.

I don't think so. I think we've covered a lot of ground.

There we are. Great. Okay. Therefore, as we agreed earlier, we'll now go into private for the next sessions. Diolch yn fawr iawn.