Finance Committee

Felly, symudwn ymlaen i eitem 3.

The third item this morning is our sixth evidence session about the Welsh Government draft budget for 2026-27. We're joined by a couple of academics who are with us today. It's lovely to have you here. I'm just wondering if I could ask you to introduce yourselves for the record. If we start in the room.

Thank you. Good morning. I'm Melanie Jones. I'm a professor of economics at Cardiff Business School, and I'm here, really, in my capacity as the academic lead for the Wales productivity forum, which is one of eight regional forums attached to the UK Productivity Institute.

Ffantastig. Croeso cynnes.

If we go online—there we are.

Good morning. I'm Arnab Bhattacharjee. I'm here in my capacity as the research lead for regional and distributional modelling at the National Institute of Economic and Social Research. That is only half my life. The remaining half, and where I live, is Edinburgh, where I'm a professor of economics at Heriot-Watt University. Thank you.

Fantastic. Croeso cynnes to you both. It's good to have you with us, to bring your expertise to look at the Welsh draft budget. I'd like to start, if I may, with looking at the productivity of the whole economy in Wales. It's only a very small bit, nothing—. No, of course, it's a wide-ranging area. But I'd like your overall view of how you'd assess Wales's productivity and productivity growth with reference to its relative position within the UK. So, if we start, I suppose, in Wales, and then we go to Edinburgh, then, after that.

It certainly is a big issue and there are many different dimensions. But the first thing, I guess, I'd like to say is that Wales is not independent. The UK productivity challenges around the slowdown of growth, of productivity, similarly are affecting Wales. So, the broader UK productivity puzzle is similarly replicated in Wales. But in Wales, we have additional challenges. Firstly, the level of productivity is lower. So, the gap in terms of the UK average tends to be about 15 per cent lower in Wales, and Wales is actually one of the lowest regions in the UK. Now, many regions are below the UK average, because you've got London and the south-east above the UK average. But nevertheless, the position of Wales has been relatively long term and persistent. So, it is a challenge.

The final part of that puzzle is also that, even when we talk about Wales, we're talking about very different areas within Wales in terms of productivity. And we have very much an east-west divide. So, the areas closer to the border of England tend to have higher productivity than the more peripheral areas. And Wales itself is a low-productivity region, but, actually, some of the areas within Wales have the lowest productivity in the UK.

I see you nodding along online there. Could you give us your view of that as well, Professor Bhattacharjee? There we are. Thank you.

Am I audible? Right. I agree, in the main, with most of the things that Professor Jones said, and very nicely put them as well. Wales has had a persistent productivity problem, but the productivity problem is, really, an UK-wide problem. It is not just a Wales problem, certainly not. So, there's a positive here and there's a negative here. And the negative is, of course, that productivity has been stagnating for a very long time. And actually, based on the latest data, we are not exactly quite sure where exactly it lies, because of uncertainty with respect to the labour market data as well, which has been well documented elsewhere. And so in the productivity debate, the way we measure it is we measure the output somehow produced by employment or labour hours, but because of a weakness in the publication of labour market statistics in Britain—and this has been around for a while—it is not exactly clear to pin down where Wales sits.

However, a couple of points can be made. One is that productivity is much lower than the UK, and parts of Wales, as Professor Jones said, are some of the lowest in the UK. Productivity in Wales tracks UK productivity trends fairly closely, which is good and bad, because it does not provide that much of an impetus, or in terms of data, we do not see that much catching up in Wales with respect to aggregate UK productivity. However, particularly with the south and east of England, there are closer interactions or externalities, and so Wales can potentially benefit not only from productivity increases in Wales, but if there were substantial increases in the south-east, that would generate positive externalities for Wales as well. But overall, the situation is quite mixed regionally across the different parts of Wales, but overall as well. Thank you.

In his evidence to us, the Cabinet Secretary talked about productivity growth in the Welsh economy being faster than in many other regions, in terms of narrowing the gap. Is that what you were talking about there? Because, then, in your written evidence to us you noted the substantial revisions to Office for National Statistics data on the labour market, which casts a new light upon Welsh productivity, and implies much stronger productivity trends relative—. So, is that complementing what Mark Drakeford was saying to us, or maybe could you unpack that, and maybe I'll come to Professor Jones, then, to put her take on that?

Yes. What we observe in the latest data, as far as our analysis goes, taking into account the uncertainty regarding labour market statistics, is that we project an uptick in Welsh productivity by the end of 2026, so now until the end of 2026. But that is a small uptick. The data basically moves around a bit, and that is largely not on account of output data, it is on account of labour market data. So, I think, taking that uncertainty into account, we would be a bit cautious with respect to projecting where Welsh productivity is going. But nevertheless, we are seeing a little bit of catch-up—way too small, perhaps, for comfort, but, yes, until the end of 2026.

And what are your thoughts on that, Professor Jones?

I think, because of the variability in data at a single point in time, I would always focus on the longer term trend. So, whilst there can be evidence of catch-up over any given period, I think my overarching impression is that, since devolution, productivity, the relative productivity in Wales, relative to the UK average, has remained fairly constant. And so my instinct would be that there's not going to be a natural convergence. There has to be a step change, a focus on productivity, a strategic shift towards making a difference if we are actually going to close the gap. I'd be very surprised if there'd just be a convergence over time towards the UK average.

It's a very complex area, and in the 'Wales Economic and Fiscal Report 2024', the Welsh Government said that the underlying factors for Wales's productivity are complex—both of you have touched on this—and also the uncertainty around that as well. To what extent do you think that those reasons are understood, and what are the main factors that contribute towards it? And then, are there—? Coming back to your point there about the need for a step change, what needs to happen, I suppose, is the—? What do you see as that step change?

I do agree entirely that it's not straightforward—there's not a 'Do x and you'll get y.' I think what we do know from quite considerable research on the issue, not least because at the UK level we've got the productivity puzzle, is that there are a set of known drivers of productivity. In the Productivity Institute, what we do is we look at these drivers, which I always think about as people, people working within organisations, and then organisations within that broader environment. If you do that sort of framework, the Productivity Institute would set out maybe 10 different indicators that we believe that if you improve in these areas, you'd improve productivity.

If you do that and you look at the relative regional picture, you'll see that Wales is consistently red. All of those underlying drivers are relatively low in Wales, consistent with there being low productivity. So, what might you do in terms of the areas that we highlighted in our report? It would be around investment, so that's both business and public sector investment. That's a known challenge at the UK level, but is even more acute in Wales. But there are also other areas, particularly around education. We have some challenges around a relatively high proportion of the population with low skills. We also have challenges around health, so a relatively high concentration of people with long-term limiting health problems. We also have, just by our geography, a relatively peripheral, a lack of agglomeration economy. We often think about productivity being highest in concentrations where you've got well-connected urban centres. So, things like investment in infrastructure, transport, digital infrastructure are all the kinds of factors that we can't pin down exactly what they're going to do to Wales's productivity, but if you invest in those areas, we believe that that would also improve productivity.

And looking at some of those interventions that you're talking about there, is it clear from what you've seen from Welsh Government policies—are they aligned to improve productivity? Maybe we have a Welsh view, I suppose, and then we have a view from outside of Wales to see if they match up.

Many of those factors are factors that you'd probably want to improve for other reasons as well—take education. I think what I don't see so much emphasis on is productivity, the gains that you can get through productivity. So, certainly in the short run post-devolution, you'd have targets around productivity growth converging on the UK average. We don't have that kind of, I think, high-level commitment to productivity growth in terms of the Welsh Government. I think productivity is one of maybe 50 indicators that's monitored, but it doesn't have the profile. And I think because it's quite a complex thing to understand, it doesn't have the public buy-in to productivity growth. But as soon as you try to explain to people that that's their wages, that's their living standards, that's their tax revenue, what we can spend on public services, then I think productivity is something that should have a higher level policy agenda, political agenda, and also awareness amongst the public.

Any comments from yourself on either the complex nature and the uncertainty, or also your view of how clear is the Government on some of the policies? Are they addressing productivity?

Right, okay. Let me take a little bit of a step back and point to some of the research that we have done, which I think was in August of this year. I can certainly go back and provide you with further details. That was looking not only at Wales, but at the local government level productivity performance across the whole of the United Kingdom. At the national institute, we do work for the whole of the United Kingdom. In that context, we found a couple of things that are not surprising. So, investment in skills, or upgradation of skills, by itself does not lead to higher productivity, neither does investments in infrastructure or building, construction, and so on and so forth, directly lead to productivity. But we find higher productivity or improving productivity in places where the two come together.

Within Wales, at least insofar as the data shows, there is a deficit in both of these relative to the UK average. So, it is not only skills and investment in skills and education and further education; it needs to go hand in hand with investments, particularly infrastructure investments. But then, infrastructure investments also need to go together with and should pull in private investment. So, that is one of the challenges that is there. Let me also add that, in terms of transport investments in particular, how one thinks about Wales is substantially different from many other parts of Britain, because it is road infrastructure, which would, in the medium run, probably generate greater benefits to Wales because of the terrain, because of the remoteness of certain areas. So, that is one thing that I would point out.

The second one is that, in order to make positive gains with respect to productivity, what the Welsh Government needs to focus on is trying to find some areas or some sectors, or specific areas in specific places, that have the potential to generate tradeable goods and services with higher productivity. Now, this needs to be very carefully done. Of course, we observe that certain areas are in the focus of the Welsh Government. Two things are missing there. One, I completely agree with Professor Jones there that, yes, we talk about productivity, but we are generally not very aspirational or don't set down productivity targets and the timelines that we expect to meet these targets. So, in other words, the Government, of course, comes in and in the budget they set down some objectives—so, investing in AI, investing in green energy, and so on. All of these are fine. Two things that we do not know is how far that is based on research as to the potential for Welsh regions to generate higher productivity through that, and in what timescale, so that, later on, once we collect the data, the Government collects the data and one can go and say, 'Hey, this was our plan. Did we achieve that? Or did we go halfway towards achieving it? How much further can we go?' I think, productivity being a very complex issue, that that kind of focus is probably necessary.

Thank you very much. I'm going to bring in Mike Hedges now, with some further questions. Diolch, Mike.

Can I start by saying that I look at it as good and bad productivity? Bad productivity is if you expect to give teachers a third more pupils in their classroom, therefore they're more productive in the number of pupils they're teaching, but their outcomes are likely to be poorer. Another example is care staff going out to visit people in their home. If you reduce the amount of time for each visit, then, obviously, they can have a 25 per cent, 30 per cent increase in productivity, but it's not necessarily good productivity. But you also have areas of good productivity, which I'm going to talk about later, which include areas where you're processing data. Do you agree with that definition?

I would probably describe it in a different way. So, when we think about productivity, we don't just think about the number of units of output, which is, essentially, what you're talking about in your bad productivity case. Getting more units, we talk about the value of those, and so if you think about you producing more units but they're worth less value, that's not necessarily a productivity gain. And in the public sector context, we often think about quality-adjusted units. That's another way of thinking about the value of that unit. What we clearly want is higher value from the same inputs, which doesn't necessarily mean more of any one thing; it means more value in terms of the total combination of output. So, that's the way I would think about it. But I think the way you describe it is very similar to the way that we think about it, in terms of economists.

Okay. Thank you. My former economics professor, Ted Nevin, would be very pleased that you were in agreement with me. He'd probably think I probably learned something.

To Professor Bhattacharjee, you say that greater attention is placed on data and evaluation mechanisms to verify spending on specifically targeted areas and the impact on outcomes, including public service efficiency and targeted investment in specific sectors critical to Wales, such as health and artificial intelligence. Can you expand on how this could be achieved or addressed?

I think there are two things. One is set down very clearly: how one targets, how the Welsh Government is going ahead with targeting specific areas of focus. And secondly, on set targets—not necessarily, because targets can be aspirational—it's not a question of setting targets and just achieving them. It is about where one wants the Welsh economy to go in time, and on what scale. The scale is quite important, because the persistence of low productivity means that that's not going to be a silver bullet that is just going to deliver huge amounts of productivity in a short period of time. Maybe even the timescale of a Parliament—devolved Parliament or Westminster Parliament—is probably not what we are looking at. But we are looking towards making consistent progress towards high levels of productivity.

So, two things there. One is targeting and placing the evidence base as to how they're targeted: why AI, why health, why green energy? What competitive advantage does Wales and regions of Wales, or firms or business units in Wales, have in these areas, and the relevant skills that are there, and so on? But, also, what do we look to achieve by that in what timescale? And then one can start actually thinking about how far are we achieving, are progressing, are we regressing.

Diolch yn fawr. Thank you very much for that. Two quick comments, really, and your view on them. We have had huge jumps in productivity. We had it in the 1980s, with word processing, the computerisation of payroll, when we had computer-aided design all coming in, creating huge productivity gains. And payroll was a big one, wasn't it? Pay clerks used to calculate everyone's pay individually. Now, it's done automatically. But what do you see as the drivers that, if addressed, are likely to have the most impact on public sector productivity? What role does AI play in this?

Do you want to start? Yes.

Right. Okay. I think AI has an important role to play there, and certainly in some of the more—. Well, in two ways. One is cutting out mistakes, which happen in any kind of delivery of public services and other services. So, we want to cut out mistakes. That has huge implications also for the first part of your question, which is, 'What is productivity?' Is it about being able to effectively support everybody in society—all sectors, all forms, all households and all citizens? That is one area where I think AI has a lot to deliver. The second area is, of course, cutting down on the time to do things—payroll, for example—and improving productivity that way. But it is not only Wales that is trying to do that; other parts of Britain are also trying to do it. So, this can lead to some gains in productivity. Is it going to lead to substantial catch-up is an interesting question. I think we need to gather more evidence on that and strategically move towards these directions.

If I may, who's doing it well at the moment, then?

Everybody's trying to do it. If you think about payroll and the use of AI, it's not only the devolved Governments. Northern Ireland has had its own challenges, but, you know—. Scotland is doing it. But also the local mayoralties in various parts, in the English regions, are trying to do it. It is going to improve things, and so one expects that. But is it going to provide catch-up?

I don't know if Professor Jones has got anything further to add, or from a Welsh context, maybe?

I certainly agree that there's a lot of expectation around AI, and I'm sure there will be productivity gains. I think what we know so far is that there have been examples of particular processes or particular firms where there have been gains. What doesn't seem to have materialised yet is the more general productivity gains. And I think there are challenges around people's training and skills in the use of AI and also the organisational change that needs to accompany it. So, it's not just enough to have the AI; it has to be part of a process.

But I do have, I guess, a more general thing about public sector productivity. Particularly in the public sector, we think about cost efficiency. There's quite a lot of pressure, particularly when we're thinking about budgeting, about cost efficiencies, and I see—a bit like the question was posed—productivity gains being different from cost efficiency. So, just because you've got a cost efficiency doesn't mean to say necessarily you've got a productivity improvement, because you could have a falling output as a consequence. So, when we think about public sector productivity in terms of the Productivity Institute, we think not just about budget efficiency, but we think about organisational efficiency, which is where these kinds of AI technologies might improve the way you translate inputs into outputs.

But I think there's a far broader and more fundamental question, which is: we've got a structure doing what it does and we can make that more efficient, or is there a way, actually, that we can rethink what we're doing with public sector resources? So, for example, a hospital can do lots and lots of operations, and it can do even more operations, but, actually, in terms of the health of the nation, do we need to invest in other areas perhaps to improve population health? So, that's the kind of prevention agenda, which is a very different ask. So, what you're doing is maybe you're focusing on budget efficiency, maybe you're asking organisations to produce more, but, actually, as a Welsh Government, we also have to think, 'Okay, are we investing money in the right places to start with in order to get what you might think of as the best, productive public sector outcomes?', which might be, actually, investing in a poverty strategy to avoid some of those health problems occurring.

And I guess that takes us back to the timescale issue. I entirely agree that this is not a single budget, and this is not even a 10-year ambitious plan; this is intergenerational. It will take a long time, and the investment now will reap benefits in the future. And I think that's why we need, probably, an external commitment. What we recommended was a kind of commission with external expertise to try and evaluate this, to try and make sure that Wales remains on that path long term to get the kind of meaningful convergence that I think we're talking about.

Thank you.

Can I just finish up with a question on absolute and relative productivity? I think that everybody wants to do relatively well, but everybody does need to do absolutely well to improve productivity. And can I just take up the last point you raised? We know that type 2 diabetes is driven, in a large number of cases, by weight. We also know that, if we can get people's weight down, we'll reduce the number of people with type 2 diabetes. Would you consider that to be productivity, if we concentrated on reducing obesity in order to reduce type 2 diabetes? There are other things that affect it, but that's a really simple direct correlation.

Yes, so I think that's the fundamental question—how we measure productivity. Do we measure it as a cost efficiency, which I don't think we should? Should we measure it as organisational efficiency? Or should we measure it, actually, in outcomes of the population? And I think it should be outcomes of the population, but I totally appreciate that that is a much bigger ask, because you're talking about different budgets. So, you're talking about maybe not investing in healthcare at one point, and investing in a perhaps different service. So, it really takes a really broad perspective and a longer term perspective, because some of those benefits are going to require investment now, but actually we won't see the benefits in terms of the kinds of operations we need or something in the short term—that would be a much longer term strategy.

With that then, is there a problem in—? If you're setting targets, and you both talked about targets and goals and that, is there a problem in that there's a lack of separated-out Welsh productivity data in the public sector that would make setting those targets really difficult in the first instance? Is there something around data and how we collect it, what we collect? Is that a fundamental issue that needs addressing to be able to do some of the things that you've been talking about?

Yes, so certainly where we're thinking about public sector productivity, it's really difficult to measure, because, as has been alluded to, there's no value measure of the output. So, first, I think there are a lot of challenges around measuring public sector productivity. Having said that, the ONS has done a really large body of work trying to improve UK public sector productivity measurement. Within those statistics, we get the UK aggregates, but then, when you try to break it down, you always see that it's England, and there are no comparable Wales figures.

Whilst many of the trends—we've talked about Wales following the UK in many respects—you can infer—. Some of the big changes around the impact of COVID, I'd be very surprised if the results were very, very different from Wales. So, in some senses, you can lean on the UK figures. But, absolutely, in a devolved context, where you might want to trial different policies or practices, how can you possibly evaluate them unless you've got the Welsh-specific data?

It will require investment, but I think the ONS framework is there. So, if the ONS have already developed these metrics, it would allow us then to compare with other areas in the UK. If we had consistent data collection, perhaps we could also compare within Wales where we might be doing different things across local authorities. So, yes, for me, data and the evidence of what is best practice. And it comes back to that point that everybody's going to be trying AI. Maybe it isn't sensible for everybody to do the same experiment and evaluate it, but maybe, in different areas or different health boards or whatever it is, do different things to try and work out what's best and then scale that across the public sector.

And in your research, Professor Bhattacharjee, disaggregated data is fundamental in being able to do that differential. So, what are you seeing? Obviously, you wanted to come in on that point anyway.

Yes. So, I wanted to come in on a couple of issues with respect to data and measurement. But let me come to your question first, and that is very, very critical. So we have a certain problem with the Office for National Statistics, and actually they have, very recently, and maybe quite damagingly, announced that they are going to reduce the priority for collection and publication of subnational statistics and focus on other things. In any case, Britain does not have—. The data that are available to support devolved Governments and local governments in various parts of Britain are not brilliant. And, on top of that, when this comes in, it is perhaps even more important, because the UK average is not going to provide that much information for the Welsh Parliament to work towards the improvement of the lives, living standards, of the Welsh people. So, somebody needs to do it. I think, certainly, what is important is that not only should there be some provision in the budget to go and spend money on making the lives of people better, but also to collect information on what has been done and what the outcomes are. And it is in the interests of the Welsh Parliament to do that. How expensive it will be, I do not know at the moment, but can we just perhaps encourage the Government to think about how we might proceed towards that?

I'll make one other point with respect to productivity in general and—[Inaudible.] A healthy population is important. A healthy population is important not only for the lives and livelihoods of people, but also to generate maximum productive output or productive activity from them. And that is what we want. One of the things that happens, and has been happening in Wales since the pandemic, is that participation rates have been very volatile. So, part of the small movements that we observe in part may be because of participation rates, and those have been very volatile. How can we get a substantial number of people out there working towards maximising the productive output, however defined? And also, it is not only about economic output; it is also about the well-being of people. And to its credit, I think the Welsh Government has placed much more emphasis on that than many other parts of Britain. So, I think one needs to have a holistic view there, but those are some of the questions that I would have.

Thank you very much. Sam Rowlands.

Thank you, Chair, and good morning, both. Thanks for being with us today. Melanie, I was reading your evidence that you sent through. I also read your report on innovation as well, so thanks for that. On the core recommendations in your evidence, there are a few phrases there that just really struck me, and I just want to scratch the surface of them a little bit. So, the core recommendations—there's a list of those, and I'll just pull up a few of those:

'The Welsh Government needs to establish a long-term commitment'.

'A national productivity growth plan should identify short, medium, and long-run priorities'.

And there's a phrase there that:

'There should be a focus on public sector productivity growth'.

This sort of language, for me, sounds more about will and desire, rather than ability. So, it's that there needs to be a 'commitment', there should be 'priorities', there should be 'focus'. So, with you, or with your team, writing those recommendations, is that pointing to the fact that Welsh Government currently does not have that will or desire in this space, do you think?

So, the forum is made up—. It's important to know the context. The forum is made up of business leaders, a range of stakeholders and academics. So, it's very much a collection and an impression of productivity not being as high up the agenda relative to what it has been. So, I think—. And that's not just amongst the Welsh Government. Obviously, we've seen an increase in emphasis more recently, in terms of the UK Government strategy around economic growth, but I also think it's about that public perception, it's about small and medium-sized enterprises, and it's about public sector managers. So, it's not just a Welsh Government sort of strategy, but I think the Welsh Government needs to take the lead, and it needs to explain why productivity is so important to all those stakeholders, including individuals. So, an SME leader has many different things that they're concerned about. Something as complicated as productivity, they need to have accessible information about why productivity is important, not just to their own business but how that fits into the broader infrastructure. So, yes, I think we talked about a national conversation, and I just mean talking about it and making people aware, not in complex economic terms, how you calculate your productivity. And we've done a few things in that space. So, now we've got a business toolkit, which, hopefully, will allow small business leaders to just get an idea of what productivity is and what are the kinds of things they should be thinking about in terms of drivers.

Okay. Thank you. I accept that point that it's beyond, I guess, just the role of Welsh Government. I'd agree with you in terms of that I think Welsh Government should be taking a lead on this. That's why democracy exists and why people elect leaders into positions. I just wonder, with you both being economists, as a broader—. Not just within productivity but broader points around the economy, I sometimes get the impression that the Welsh Government sees itself as a public service delivery body and not necessarily there with a role as an engine for growth for the economy or the broader aspirations of people across Wales. And that's interesting for us here in the Senedd as well. I was reflecting on a report by our own Commission here, which showed that, of the evidence that we receive in this place from organisations, only—. Less than 5 per cent of the evidence that we receive in our committees has come from the private sector, even though more than 70 per cent of people in Wales are employed within the private sector. If that was any other demographic, people would be jumping up and down at the lack of representation from the private sector. So, do you think that there is an issue within—? Our role here is to try to scrutinise Welsh Government specifically. Do you think that there's an issue within Welsh Government that the economy is far too often an afterthought and that they do just see themselves as a public service delivery body?

I think there's also the public. So, what are the public interested in? What can the public engage in? So, they can engage in things like NHS waiting lists or GCSE results. So, I think it's much more accessible also for people, maybe the media as well, to pick up on that kind of immediate spending, immediate benefits. But I entirely agree with you that not just those tangible outputs impact on productivity. So, the first thing is that how you spend your money does have an impact on long-term productivity, if you're investing in health and education of the population and so on, if you're investing in infrastructure. But also I do agree that there's a real lack of, I guess, understanding or awareness that how the economy is performing is actually a big driver. The UK Government, in terms of taxation revenue, is a driver of the budget, is a constraint on, therefore, what you can spend money on and what people are interested in. So, I think, yes, the Welsh Government need to be a communicator of that. And so we're not—. I sometimes think economic growth gets a bit of a bad profile in terms of, ‘What does it mean to me? Why is it important?’ But, actually, if you talk about your standard of living, your standard of living determines the education you can get, the health you can get, the environment in which you live, all of the things that people actually care about. And if we have greater productivity growth, greater economic growth, you can think about the Government being able to spend its resources on green agendas, on social equality agendas. So, I see it as a facilitator of all the things that people care about and the objectives in Wales. I think where we've lost maybe some of the communication and the focus is around how important it is as a driver.

Thank you. Professor Bhattacharjee, do you want to comment on those points at all?

Yes, please. So, I think the important thing here is: what is devolution meant to provide? If all the strategic objectives of the country are determined in Westminster, and the Welsh Government is viewed as a vehicle to deliver certain services, then I think a major part of what we want to achieve through devolution gets lost. Is the delivery of services the only thing that the Welsh citizens expect and deserve from the Welsh Parliament? I think all of us would agree that that is probably not setting us in the right place. I think what one needs to do in Wales, as well as other parts of the country, is to have local governments, not only at the level of the Senedd, but maybe even going down further to local levels, thinking strategically about how, in line with national objectives, one can give greater impetus to productivity gains or making the lives and livelihoods and well-being of people better.

Okay, thank you. And I just want to build on that point. I'm sorry, Chair, I know that time is flying, but I think this point is really important.

Carry on.

One thing that strikes me sometimes is the lack of Treasury responsibility for Welsh Government. So, if the economy is booming or the economy is falling off a cliff in Wales, Welsh Government, generally, will have the same amount of money to spend on the services it needs to deliver. And I wonder whether—I think it's the point you're making there, Professor Bhattacharjee—there is a lack of incentive, perhaps, for a Welsh Government to focus on the economy, because it'll still generally have the same amounts of money to spend on its public services that it sees as a priority or not. Is that a fair comment? And perhaps to build on that, and perhaps why we saw some of the differences in decision making when it came to things like the COVID pandemic, for example—I'm not saying who was right or wrong on that—was that Wales was slower in some of its decision making, perhaps because there wasn't a Treasury incentive or pressure to get the economy moving again, as a quick example. So, is that a fair comment, do you think, or am I incorrect there?

Personally, I think that that is a fair way to think about it. It's also a question of negotiation and bargaining between central Government and regional Governments. And that is a natural process through which our democracy functions, and I think it comes out through that process.

Now, if you think that, in Westminster, all their thinking is about strategic directions for the country as a whole, and less about the delivery of public services, that is not quite correct. I think this short-term focus on the delivery of the services of Government somehow, for many good reasons, stays at the forefront of thinking in budgetary and other terms. But, somehow, that has led to the situation where this country has lacked investment in things that matter for the future, over a very long period of time. And I think that all sides need to come together to try and see how we can do better. It is going to be long term.

All right, thank you very much. I will come back to this productivity question, Professor Jones, if you don't mind for a moment. I just wonder if there was anything within the Welsh Government budget that you think could be done differently in terms of resources to help drive up productivity in the public sector or private sector, and how the Welsh Government could use its budget to drive improvements in some of those areas that would classically or traditionally be seen to drive productivity.

So, it's obviously a really difficult question, because you've got a long-term driver. So, you've got investment in some public services, like health and education, which are fundamental drivers of productivity. But then at the same time, you've got an emphasis on investment, what I would say is structural change in order to facilitate productivity. So, it's obviously a difficult balance between day-to-day spending and longer term investment. For me, it's less about the immediate or the one budget; it's more about the messaging and the commitment to that longer term strategy, so that, each year, there is an emphasis on productivity, and there is a direct link between a series of recommendations within the budget and productivity growth.

And I think it's already been mentioned, but it's really important to evaluate those things. So, we're not going to get it right every time, but we do need to know what works, and we do need to know how far we've come and how far we've gone. And it's around that independent assessment and that long-term commitment. So, even when we've got relatively small budgets, crises in the short term, having that commitment to productivity, which might not seem so attractive immediately, is fundamental, I think, to our long-term economic and social well-being.

Thanks, Chair.

You've both talked about setting productivity targets, and you've talked about how complicated it is to do that, so what are the steps, then, that Welsh Government need to put in place, or things to get to that position to be able to put meaningful targets in place?

And in a political context, you could set a target and fail, then you get criticised for it, and that's possibly where the nervousness around setting targets in that sense comes, so I think the discourse is around targets as drivers of improvement rather than as an absolute. Could you give an idea of what you'd suggest that the Government needs to put in place now to be able to set some of those meaningful targets to move things forward? If I come to you first, Professor Jones, and then I'll come to you afterwards.

So, I entirely agree about the point about setting a target, missing a target; it's not easy to improve productivity, and I think we have to frame it in that context, of the long-term aspiration, rather than necessarily that we want to be 92 per cent or 95 per cent of UK productivity. But we also need to think about where we want to be aspirationally, because the UK average, like we've already said, is really dragged up by certain regions, so it might not even be an aspiration to get to the UK average, if that's—. What do we want to do? What is feasible in terms of the kinds of levers that we have to do that? But I think just that commitment to measuring it, tracking our progress at a national level, sends a big signal in terms of what productivity is.

I think you can then go down, so you can suggest to particular policies, you can suggest to any business initiatives, that productivity becomes a key performance indicator for investment for particular sorts of public sector innovations, and if we get people thinking about productivity in the things that they do, in a similar way to a lot of things are attached to how many jobs you are going to generate, I don't think we have the same narrative about job quality and the productivity of those jobs.

And then, again, you can come down into the public sector, and you can start individuals thinking about their own productivity in terms of their own investment in human capital, and what it means for them in terms of their lifelong income. So, I think it's not just about that one target and meeting that one target; it's about setting the public and the organisations on a commitment to improve productivity in Wales, and that it doesn't have to remain at a stagnant proportion of the UK average.

And before I come to you online, obviously this is the Finance Committee rather than the economy committee, so linking it back to the budget priorities and the budget, how does that manifest itself in budget lines or where does it go? How does it fit into the budget process, I suppose?

I think it can fit into the narrative as much as it can actually feed into the kind of individual elements. So, it's about thinking about long-term investment, and the priorities around the infrastructure, health and education as drivers of productivity. But I think it's also around the narrative of improving our resources and improving our economic resources as an economy as well, in terms of facilitating what future budgets can do.

And a similar question to you, Professor Bhattacharjee, but maybe following on from what Professor Jones was saying there in an earlier answer, that measuring ourselves against the south-east of England might not be a good way of doing it, but measuring against other regions of England might be. Would you have a suggestion of which region would best do that or how you'd go about doing it? But that's as an aside, I suppose, to your comments on what I was asking previously.

Okay, so let me come to the final question first, in how we see the externalities, the spatial externalities—this sounds a bit jargony, right? Which places does the Welsh economy derive maximum impetus from, and where does it also affect the lives and livelihoods of people? I think it is the south-west and the west midlands, if you want to put it that way, and they are sort of comparable.

Now, back to the question of how one would set targets and so on, I think one thing that might be good is if, in the budget documents, the Welsh Government could commit to setting up a small committee to think about what targets might look like, what kinds of measures might be involved, but certainly signalling that the medium to long run is very much part of what the Welsh Government is thinking about.

Just to give you one example of something that has happened in Scotland. So, generally, the objective of the auditor general is to evaluate whether the Government is spending money in the way that it had promised in the budget. But, somewhat unusually, the Auditor General for Scotland, I think late last year, in one of his reports stated, 'Well, okay, we have been doing this for a long time, and the Scottish Government has been following its stated path of spending money, but what we have not done is evaluate what that money has done, because we have been spending a lot of money doing various things, but what was it that it was aimed at? What outcomes would have come out of it and how far have we come? I think we need to collect more information there.' What information exactly, that requires a little bit of thinking and consultation.

I'm sure that there are great social scientists and economists in Wales, including Professor Jones, not least, who will be able to help. But in so far as the national level research policy institute is concerned, if you want any assistance or help, any insights or inputs from the national institute, I think the national institute would be very happy to contribute to that as well.

Okay. Finally, really, from me, in a spending review in 2025, the UK Government set out plans to reform key public services, and these include new technologies to digitise services, transform how Government operates, reducing administrative budgets, setting minimum efficiency gains, and asking Government to make reforms to arm's-length bodies. Two questions. Should Welsh Government follow suit? And if 'yes', then coming on from what you were just saying, is there a role within Government to create some sort of office or something to do that measuring, to do that data capture, to do ONS-type work—if the ONS isn't doing it, then for the Welsh Government to take ownership of collecting and analysing that data to help inform its strategy? If I come to you, Professor Bhattacharjee, first, and then then a final word from Professor Jones.

In the interest of time, I will be very succinct, and I would say certainly that would be very helpful to set up an office, to think through these things and collect information on Wales, and maybe other parts of Britain in relation to Wales.

Okay. Professor Jones.

I'll tackle the first bit, which is around policies and practices. I would say that it has to be evidence informed, so we have to know it works. I think it's very easy to say we can cut administrative budgets, but without really clear evidence of efficiency gains, that doesn't necessarily improve productivity. So, if there is duplication and inefficiency, then clearly that will improve productivity. If the smaller administrative function can't support the service delivery, you've got a reduction in input, but a reduction in output at the same time. So, I would say that there's nothing automatic about some of those things, although, of course, the technology point that we covered further seems more promising.

Absolutely in terms of what I would call an independent commission—that's what we recommended in our report—which looks at the evidence, evaluation and also best practice in what works, so that we can bring in from outside. The only comment that I'd make in terms of the data collection is that it really shouldn't be a Wales-only endeavour; I think we'll learn much more if we have comparable information. And I think we've already got an infrastructure from the ONS on which to build. So, we shouldn't start again on our own; it's really important that we have comparable, high-quality data on the topic.

Fantastic. Thank you very much for your evidence this morning. It's been a fascinating conversation and really informative. There will be a transcript available for you to check for accuracy. We'll now go to a break until 10.45 a.m. Diolch yn fawr iawn i chi. Thank you very, very much.

Thank you.

Croeso nôl i'r cyfarfod yma o'r Pwyllgor Cyllid. Dŷn ni rŵan wedi symud ymlaen i eitem 4.

And this is the seventh evidence session on the Welsh Government draft budget. We have done the physical and online swapping of seats, and we've now got some other witnesses in front of us. I'd like to ask them to introduce themselves for the record.

Diolch. Fe wnawn ni gychwyn yn yr ystafell.

Bore da, bawb. I'm Josh Miles. I'm the head of Wales for the Federation of Small Businesses.

Fantastic. Croeso. And we'll go to Marc.

Morning, everyone. I'm Marc Strathie, senior policy adviser for the devolved nations for the Institute of Directors.

Croeso. And Sara.

Bore da, bawb. My name is Sara Jones. I'm head of the Welsh Retail Consortium.

Thank you very much to the three of you for coming in this morning to talk, mainly about productivity in the Welsh private sector, as well as other aspects. But that's where I want to start this morning. What are the most effective levers to improve productivity in Wales, and how can the Welsh Government support these levers through its draft budget for 2026-27—from your own context, because you're all from different organisations that are focused differently in different parts of the private sector? If we start in the room with Josh, and we'll do it in the same order as we did the introductions—for this first question, anyway.

Lovely, thank you. Diolch yn fawr. As you will no doubt be aware, there's always a discussion around the levers Welsh Government has to influence on productivity trends. I think the received wisdom is that they tend to be things that affect in the longer term, so planning, skills, business support—those are the key areas where I think Welsh Government can make a real big difference. None of that is like pulling a lever and having things changed instantly, but it is really, really material to our members and to businesses the length and breadth of Wales.

If I may deviate slightly from the question as well, I think it's just useful to give you a bit of context on how things feel out there at the moment. Lots of businesses, I think, are struggling for confidence. We know from our surveys—we've got an index we do regularly of businesses across the UK—confidence is rock bottom at the moment. It's really, really low. We're in a position where more firms are telling us they're going to contract than grow, which is not a position we want to be in, and we don't often see that. Cost increases are really outstripping revenue increases. Lots of firms are reporting that revenue is going down. And when you ask what the biggest barriers are, they tend to be: state of the economy, tax, costs, in particular labour costs, and those sorts of things. All of those play into productivity, so it is relevant to that conversation. What those long-term levers do is shape the kinds of costs that the businesses face. So, there is an opportunity there, I think, for Welsh Government to have a positive influence on that dynamic.

Okay, thank you. We'll go to Marc for your organisation's point of view.

Thank you, Chair. Josh has covered quite a number of points there. One of the things I would maybe add into that, in terms of the productivity piece and solving that, is that on economic inactivity, Wales is almost leading the UK—Wales and Northern Ireland in particular. So, I think that's one area. I know that Welsh Government has been piloting a number of economic inactivity trailblazers as well. I think that's an area within the grasp of Welsh Government. That's something that we hear from members across the board, whether it be long-term illness, sickness et cetera, there are a multitude of factors that can go into economic inactivity. I think solving that particular aspect could go a long way in the productivity puzzle, if we want to call it that. I think that's definitely an area to focus on.

As Josh said, it is a very challenging time for businesses out there. Reflecting on the draft budget, in terms of some of the positives, there's obviously a degree of continuity there. But, again, another area of productivity—economic growth has strong correlations to improving productivity. Again, there's a real opportunity to really make this a budget, as we move forward, that focuses on economic growth, which can go a long way to solve productivity as well. The economic growth piece and economic inactivity I think are two additional areas, in addition to what Josh has already said, that could potentially go a long way to unlock that.

We've heard from Josh and Marc; now we'll come to Sara. From your side of things, what are your thoughts on what you've just heard, or do you agree with most of that? Is there anything extra, from your point of view, that you'd want to add into that conversation?

I'd very much agree with my colleagues that have spoken just now. It is a very challenging environment right now for both the retail sector and, obviously, the wider economy. What we publish, like Josh mentioned, in some of the data he provided—. We have our consumer sentiment monitor, which is often a really good bellwether of the wider economy and how consumers are feeling, how householders are feeling. And just to give you a snapshot, last month consumer sentiment around the confidence on the state of the economy fell to the second lowest data recorded on record. Their personal financial situation in terms of their confidence around that became the lowest on record that we'd received in terms of the monitor data. And so there are some really challenging statistics there from a consumer angle, a customer angle and a household angle. But I think, just taking it back to the wider question that you asked, Chair, if Welsh Government and if decision makers genuinely want to boost productivity in the retail sector, then they have to focus on reducing cost pressures, the cost of doing business. And that just means, effectively, cutting business taxes and easing the regulatory burdens that we're facing as a retail industry. That will allow us to invest, it'll allow us to have the headroom to be able to support productivity measures in the workplace.

And then, just touching on a couple of the points that Josh mentioned, because I absolutely agree: workforce skills and training development—investment needs to go into those areas. Digital adoption and technology—again, that's an area that can help grow productivity. And then also looking at infrastructure and logistics—that's a key thing for us in terms of our supply chain and the accessibility of the workplace—and being able to make sure we have efficient and productive operations.

Moving on from that, then, from what you're saying there, some of those investments are longer term aspects of investing longer term, as opposed to the short-term measures and short-term pressures that the Government is trying to tackle. How effectively do you think they are balancing the short term with the longer term productivity goals within the budget? And have you got any thoughts from your points of view as to whether or not they could have done things differently within the envelope that they've got? We'll go to Sara first.

This budget for us is very much a business-as-usual budget, and it isn't a long-term budget. It's focused on those short-term pressures. Understandably, Government is in a very difficult place and, obviously, in the election cycle as well, it's very difficult to look at that longer term strategic thinking. So, it very much prioritises the short-term stability.

There are a couple of areas in particular where levers have a particular impact on the retail industry, and on others such as hospitality, and that's business rates. You'll probably hear me talk about this a lot during the session because it's obviously the fundamental—. The biggest challenge for us as retailers is that penalisation of investment in bricks and mortar. And if we wanted to see some really strong thinking around investment and ability for retail to be able to grow, it would be addressing the issues around business rates. And there have been some positive measures. So, there's going to be a smaller multiplier for smaller businesses, smaller retail businesses, but there's a lot of cost pressure for those bigger businesses, those anchor stores that are potentially going to be facing a higher rate multiplier in this budget, albeit it's not been confirmed as yet. That's an area—. If Government really wanted to support business, it could look to tackle business rates in an effective and innovative way.

From the Institute of Directors, then, Marc, what are your thoughts of that balance bit between short term and long term, and some of the things that Sara suggested there could be done differently? Are there any further ideas? Hang on. Can we unmute Marc, please? Diolch.

Great, thank you. Particularly on the business rates piece, I completely agree with everything Sara said there. I think that's certainly one that would make a huge difference to a lot of our members in that space as well. I absolutely agree there. I think, as Sara said as well, it is a tricky time. We are also in an election year as well. Some degree of continuity in the budget is understandable, and, I suppose, for businesses, having a degree of stability is important. So, on that side, I agree there.

We'll be publishing our manifesto in the coming weeks, and one of the areas we focus quite heavily on is infrastructure and connectivity as well. Unfortunately, there didn't seem to be too much in the way of an acceleration of some of the transport or, indeed, the digital infrastructure projects that businesses across Wales really need to compete on a global stage. Now, obviously, we've got the UK budget next week, so we'll see what comes of that.

But I just also wanted to briefly touch on something Josh mentioned earlier on, about the skills and workforce development. Now, on some of those inflationary uplifts that we saw in the budget, I don't think that's really going to cut it in terms of skill shortages for sectors and tech, green industries, free ports as well. I think it really needs to be much more targeted and vocational training. From our point of view, obviously the clue’s in the title—leadership development. We’ve done a few things over the last six months with the Welsh Government about really trying to develop the next leaders in Wales. So, I think really honing in on focusing on leadership development is something that we'd like to see continue. I think there have been some positive steps there, but we'd definitely like to see more.

But, yes, in terms of the business rates piece, I completely agree with what Sara said there, but I think, on some of the other points Sara made, it’s a tricky one, and infrastructure in particular. Yes, it's long term on a number of things, but there does have to be some progress made in the short term as well. I think the budget has a bit to go in terms of addressing that short-term piece.

Josh, not to agree or disagree with your colleagues, but anything further to add to the discussion, or any further insight into what the Welsh Government could do?

Yes, I suppose, two things. First of all, it was billed as a continuity budget, and that's what we've got, by and large. But I think there is one very clear exception, and it has been touched on already, which is business rates. And I think there is a huge area of concern with business rates, in that the retail, hospitality and leisure relief is going to be removed as of April. That's £58 million that is going to be taken out of that budget that will come from businesses from April onwards. To some extent, the Welsh Government is going to be mitigating that with the new small retail multiplier that was mentioned earlier on, and that's really good news. We have no detail on what that looks like in monetary terms yet, so it's a little bit of an unknown and creates uncertainty.

Have you done any work as to—? Do you know what the size is? Have you got an insight into what you think the size of that is going to look like?

Well, we don't know. I suppose the assumption is it'll make up for the difference in the relief, which is what has happened in England. But the key bit is that's only in the retail sector, and the hospitality and leisure sectors, which are currently subject to relief, are going to lose out as a result of this. Now, I think this is really key, because if you think about it in terms of the high street and what we're trying to do with regeneration, we often talk about the high street as a whole, as a holistic thing, about regeneration happening across different areas, different types of businesses. I look at a couple of businesses not far from where I live with a rateable value of about £25,000—restaurants, nice restaurants, cropped up in the last few years. They're going to see bill increases of about £500 a month. At a time when confidence is really low and cost pressures are really high, if we're talking about improving productivity, if anything, that's probably going to take them the other way. So, there are material things in the budget, I think, that aren't quite continuity as much as, perhaps, is portrayed. From our perspective, we'd love to see that multiplier broadened out to include hospitality and leisure—that might not be possible because of the way the legislation has run—but, certainly, some consideration of how that relief is managed post April. Otherwise, I think we all risk having quite a big mailbag issue come 1 April.

On the substantive question around the short and long terms, this feels like a short-term budget, and there are really good cost pressure reasons why that's the case. Public services are struggling, and we all know about wage increases and how they’re impacting. I think my concern would be that we've had short-term budgets now for a long time, and at some point it picks up to a longer term trend, and that's a trend we haven't really grappled with. So, if I look at the key things that impact on productivity from our perspective—the Business Wales budget, the business rates budget we discussed earlier on, the apprenticeship budget—they've all been squeezed in the last 10 years, and they've been squeezed because of short-term cost pressures. At some point, if we want to shift the trend and we want to move away from our usual productivity growth, we have to ask the question, 'What's the longer term run rate here, and how are we going to get to it?' So, I do think there's a legitimate question there that I'm sure you're going to be interrogating around at what point a short-term budget becomes a longer term trend.

Okay. Thank you very much. I'll go over to Sam.

Diolch, Chair, and thank you, all, for taking time to be with us today. I just want to ask a broader question about—and it links to the budget—how you think the Welsh Government view you and your members, and then how that's reflected in the way they're spending the public's money here in Wales. I guess, on a scale, it could be viewed as the fundamental enabler of prosperity and all the benefits that prosperity brings in terms of good health, great skills, strong communities, fulfilment in people's lives. Or on the other end of the scale, they could view you as a distraction to them trying to deliver the public services they think the public need. So, on that scale, how do you think Welsh Government view you and your members at the moment? I don't know, Josh, if you want to kick things off.

That's a really tricky question, isn't it? Thank you for that one. I'd split it in two. As an organisation, we have a very positive relationship with the Welsh Government. We're involved in lots of decision making. They really engage us well, I would say, and they take what we say seriously. So, on that kind of level, I would say it's really, really positive.

But I think there is a broader question. We've got a member advisory council, which met only three, four weeks ago, and we were chatting about what's to come, with the election, the years ahead, and those sorts of things. And there was just a really strong feeling that they've got really strong aspirations to do things positively, but there isn't quite the right level of support—and this is not just the Welsh Government; I think it's Government across the board—to say, 'We're on your side and we really want you to succeed. We're going to help you do it.' So, there's a little bit of nuance there, and it'll be different for every different business, I'm sure. But there is a feeling—and it ties in with the confidence piece—that they're pushing against the tide rather than with the tide at the moment. And I think that's actually something that's quite easy for Government to change, because it's a narrative issue, it's a dialogue issue. And the budget's an opportunity to do that, I think.

Okay. Thanks. Sara, do you want to comment on that at all?

Yes. I'll take the same approach as Josh did. In terms of the Welsh Retail Consortium and our engagement with the Welsh Government, it's very positive. We're very fortunate to be a key member of the Wales retail forum, which was a group set up by the Welsh Government in a social partnership approach. I'm very proud to be a member of that and to also be chairing the Welsh Government's equality, diversity and inclusion working group, looking at EDI within the retail sector. So, there are lots of positive initiatives. We have an open-door policy in terms of engagement with our retail lead within the civil service. So, that's really positive.

Similarly to Josh, in terms of retail and how it's viewed as a sector, let's not forget it employs 115,000 people in Wales and it is in every single community. So, it's absolutely critical to the health of the economy and to the importance of all our daily lives. In terms of how it's viewed, I think we are a bit of a cinderella sector in that sense. We are a foundational economy sector and sometimes, maybe, I think that doesn't always get recognised. And I'd say the biggest challenge that we have, particularly when it comes to budget and cost pressures as well, is the fact that we touch on so many different areas of Government policy that, often, that gets forgotten in terms of the cumulative impact of when policy has introduced a new regulation. To take an example, we're looking to grow the economy, we're looking to support retailers, but then you look at things like the introduction of deposit-return schemes, which is a good initiative and it's something we do support. But the way in which it's being implemented and introduced potentially has a real negative consequence on our ability to invest and then to be able to deliver the economic growth aspirations that the Welsh Government has. So, I think what I'm trying to say is that we touch so many different areas of Government, and we need to make sure there's more of a consolidated overview of the effect that some policy and Government regulation has on the sector and the pressure that we'll face—the unintended consequences, I'd say.

Thank you. Mark, any comment?

As Sara and Josh said, for us, as well, we also have a really good relationship with the Welsh Government and the respective teams, whether it be around skills—. I think I mentioned an initiative earlier on about the economic inactivity trailblazer, which we've had really good engagement on as well and is something that we are really supportive of as well.

In terms of wider membership and the sentiment, I suppose, last year we published a state of the nation survey—we'll be publishing it again at the beginning of 2026—but 71 per cent of members didn't feel that the Welsh Government had the economy high enough upon its priority list. I suppose that just gives a little bit of a flavour as to where—. Obviously, economic policy is one of the key things that we focus on. I think, in the last few months, we've definitely seen a greater dialogue on initiatives around this—as I say, the leadership aspects that we've been advocating for, and governance as well. I think there is a bit of a broad dialogue there, in those key areas that we focus on.

But I certainly think, on the budget, as Josh said earlier on, if we are to shift the dial a little bit, it would be really good to see a real emphasis on business and entrepreneurship as well. So, continuity, yes, is important, but, at some point, the ambition and for Wales to really be a global player has to take it to that next level. So, hopefully between now and the publication, there are still some opportunities to get to that point.

Thanks, Marc. I'll come straight back to you with the next set of questions, and perhaps we can go in reverse order of people answering those. It's all well and good, of course, the Welsh Government listening and sitting around tables, and nodding their heads when you say things, and having sharp intakes of breath at the right moments as well, but they have levers, of course, that they can use to act upon the sentiments they may express. One of those is around business support services. I wonder whether you think there may be ways in which the Welsh Government could use their business support services in assisting measures to improve productivity, and are there any broader changes your members would want to see in terms of what the Welsh Government provide in terms of business support services?

I think, just on that, obviously, there are quite a number in the wider business support services ecosystem. We've done quite a bit in the past with the Development Bank of Wales and then, indeed, Business Wales as well. I think both of those respective organisations are really good in terms of what they offer. I think the challenge is always how they take it to the next level, and how does the Welsh Government really place autonomy in them to really trust what they're doing and have that confidence that them working with business and business to help inform that.

I think, from our perspective, what we'd like to see in that, whether it's around the board-level piece or the advisers, is more business involvement in those respective services that are provided as well. As I say, I think they do a really good job in terms of the outreach—certainly, some of the workshops and sessions that we've had have been really positive. But I guess it's about how business can really help to shape and inform that as well. So, I think that's probably one of the areas where we'd like to see a little bit more involvement. And then, even moving ahead to the next stage, I suppose it's how do we get even more of a Welsh global footprint across the world as well. So, I'm thinking around the brand Wales aspect as well and really focusing on the strengths of the economy. So, I think the free ports, for example, is one that is a real national and global asset. I guess it's just about those organisations having the autonomy to really deliver for businesses and really to help shape what Wales's international capabilities are.

All right. Thanks. Sara, in terms of those business support services, is there anything you think that the Welsh Government should be looking to change?

I'd agree with Marc, particularly on that point around involving business leaders—in my context, obviously, retail leaders—in shaping the discussions and shaping the way in which those support services are able to make the most impact for the wider business world. I think it's also about using best practice within the businesses that we have in Wales. So, for example, a lot of my members are working very, very diligently around their activity under our climate action road map. So, for example, how can you take that and how could the Welsh Government use some of those learnings and best practice to support smaller businesses, whether that's retail or any other business sector? So, I think that's probably what we'd like to see more.

I think, more widely, in terms of the business support services that my members would be accessing, it's more around the skills aspects, and, potentially, we might come on to talk about that. But, for us, there's a real challenge in accessing skills funding. That's predominantly because the majority of my members are paying into a levy that they can't access in Wales, which is the apprenticeship levy. For them, that's creating a huge disparity between Wales and England in terms of what's on offer to our colleagues. That's something that we've long called for to be addressed, and yet, still, unfortunately, is not really having the dial moved on.

We've got a good ecosystem out there of public sector support. Most people recognise and know what Business Wales is about, the Development Bank of Wales is well established and well recognised, I think, and does a good job.

In the context of productivity, you'd have seen this week the Welsh Government published an internal review of business support. There was a debate in the Senedd on it, and there are some good figures in there that I think we should use in the context of productivity. Business Wales, for example, £18 in gross value added for every £1 invested. Export support programmes, £20.50 in export value per £1 spent. The accelerated growth programme has surpassed its cost-per-job targets. All this stuff works. We know this stuff works. We know it increases productivity, we know it supports Welsh firms to do what they do and meet their aspirations and ambitions.

But in the context of the budget, this stuff has been in decline. The Business Wales budget this year is just over £22 million. You've only got to turn the clock back a few years, that budget was £30 million. There's a lot of discussion at the moment in the business community, and in the policy community as well, around whether there should be a Welsh Development Agency II, and how that might look. If you go back 20 years and look at the budget that had, it was £210 million in 2004. We're in a very different position now with the resources that are available, and those resources have been in decline, if we're being really honest with ourselves. So, if we're serious about shifting the productivity trend and we want to do something different, then we need to look at what's working, which I think we have, and really back it and invest in it.

Just on that point, with those multiplier figures, effectively, so the 20:1 or 18:1, or whatever those numbers are, but with a drop in the investment that's been happening, are those numbers getting better because the money's being used better, because there's less money, therefore it's creating the same amount but it's dividing by a smaller number? Or is it that if £30 million was put in, you'd still get that 20:1 or 18:1?

That's an excellent question. I think they drew on lots of evaluation evidence, so you might need to put that one to the evaluators. But I think you're getting at the key point there. We had a discussion with our members a couple of weeks ago. Everyone's talking about productivity, and our members were like, 'Nobody in business talks about it that way'. We think about it in terms of putting less money in and getting more out. So, maybe this could be a case of where Business Wales and the Welsh Government are getting more for less—maybe. But the trend line suggests that things aren't shifting dramatically, and if we wanted to turbo-charge that or do something different, maybe we need to look at the money as well. But it's a really good question.

I hadn't thought about it in that sense, so I thought I'd ask the question, seeing as I've got somebody who knows something about it. Sam.

Diolch, Chair. Sara, I'll come back to you. You touched on the skills and you mentioned the apprentice levy, which far too many of your members and others aren't able to feel the benefit of. Clearly, that's one barrier to skills development and training for SMEs in Wales. Is there anything else you'd like to highlight in terms of some of those barriers to skills development and training? How do you think this draft budget is going to help address any of those?

I think, over the recent years, we saw an increase in the flexible skills part of the funding that's available—the flexible skills programme. That's really positive, because I think what businesses need these days is flexibility in their approach to skills development. A one-size-fits-all, rigid approach framework is not always going to be the right fit for businesses, which are very people intensive and very busy, like retail, like hospitality. And so, often, it has to have a more flexible approach.

On the apprenticeship levy, I'm not sure how many years now that's been in place, but over all of those years, that money is simply being Barnettised in the consequential to Wales, and then it goes into the funding mix. So, the ability for us to draw down on that and then invest in our colleagues is very difficult. That's not to say retailers are not doing it. They are, but they're having to, effectively, double-fund some of their skills and training programmes.

I think, going forward, there's possibly a missed opportunity around digital skills adoption, and maybe more investment needed and budget needed in that, looking at how we can make a more effective output from digital skills, and using that to our advantage to increase productivity in the workplace. I think that is definitely something that could be considered and needs to be looked at as an opportunity in the future.

Thanks, Sara. Does anybody else want to comment on the skills access stuff?

Yes, I think so. Just on the apprenticeship levy first of all, a cautionary tale here, I think. Because whilst Sara makes some very good points about how it affects larger firms, when we look across the border into England, you see the delivery of apprenticeships has shifted quite significantly away from small and medium-sized enterprises because of the apprenticeship levy. So, whilst those are really good points, we do need to think about the 'who' when we look at skills funding and issues like the apprenticeship levy. There's a risk there of replicating what I think has, to some extent, gone wrong for our members in England.

I'd say the apprenticeship system and skills more generally—. We've got quite an SME-friendly apprenticeship setup here, I think. It's, on the whole, well received and well liked. I think that again, the budgetary situation with it in the last few years has meant that it's been a bit of a bumpy ride. We've had a push for starts, and then a slow-up because of budget uncertainty. I know you'll have been getting this evidence from training providers and colleges as well. They found that quite difficult in terms of them putting on provision with employers, because it's been a little bit of a rollercoaster. From our perspective, the more we can do to make sure that that's consistent and growing, the better, because there are opportunities there and our members do tell us they like apprenticeships and want to do more of it.

On skills more generally, again, it's a steady-as-she-goes budget. There's extra money gone into Medr, so I'd be interested to see where that ends up in the system. There's a lot of pressures on HE, for example. When we talk to our members, most businesses tend to engage with work-based learning and further education and there are gaps there and there have been pressures for a long time. So, I'd like to see how Medr's intending to use that money and I'd be really keen to hear about how they're going to engage with businesses in that decision-making process.

Can I just come back on that? I'm not sure if Marc wants to come in, but if I can just come back on Josh's point there about the desire to take apprenticeship roles. That's usually at an entry level within a firm or within a business. There's skill development when somebody's been in that firm for, say, five, 10 years. Are there any specific barriers, do you think—? Are we putting a cap on the skills potential by not providing some sort of support in the middle level to help people progress further again?

Absolutely. I think if you look at international best practice around skills, lots of European countries conceive a vocational education as initial vocational education, the first run-through of the system you get, and continuing vocational education. We don't have that conversation at all in a Welsh context. We put almost all of our focus on the 14-19 pathways—and for good reasons. It's a really, really critical thing that has a massive impact on people's life chances, but we do very little once people go into the labour market.

Actually, from an employer's perspective, most of the people you're recruiting or working with are people who have been in the labour market for a long time. We could do a lot more in that sense, I think, around lifelong learning, around continuing vocational education and training. That involves us really thinking differently about what we want to get out of skills interventions.

And just one last point, if I may. When you look at the evidence, what we find is that funding on skills and learning more generally tends to follow the people who've done the most learning already. If you've got a higher education degree, like most of us probably have here, you're more likely to do learning, and because of the way the public sector funds things, you're more likely to benefit from that spend. Conversely, if you never got any qualifications, you're much less likely to ever do any learning for the rest of your life—and that's a trend that has an impact on businesses, I think, and on the labour market more generally. So, we need to flip that, I think.

That's really interesting. Thank you. Marc, you may want to come in, but just whilst you think about that, perhaps you also want to address a question around the role of artificial intelligence, digital technologies, in supporting innovation and productivity in Welsh businesses, and whether there's anything within the budget that's been laid that should be adjusted to reflect the opportunity within embracing AI or other digital technologies. There are a few points there for you to cover, so best of luck.

Thank you. There was something I wanted to comment on earlier, and it was just on the wider skills piece and something Sara said that was key. I think one of the things we've been advocating for for a long time is the flexibility piece. Apprenticeships, as Josh said, a lot of our members are really supportive of them, use them, et cetera, but it's not right for everyone. In terms of the long-term piece and the long-term development, I think we had 58 per cent of our members who said that investing in current employee skills and long-term development was a high priority for their business in Wales, and actually, that's slightly above the UK average in terms of some of the other stuff that we've conducted. So that's really positive.

But I guess it just demonstrates that, whilst the apprenticeship piece is really important, I think, as Sara said earlier on, flexibility is key so that we do look at the upskilling and reskilling piece in the workforce, because, to answer the second part of your question there, AI is going to fundamentally change people who are currently in the workforce's jobs. So they've got a big role ahead of them in terms of upskilling and reskilling there as well.

In terms of the wider AI piece as well, as I say, in our 'state of the nation' last year, we did ask about AI, and I think it's one of the areas that we're seeing a bit of a trend, in that 59 per cent of our members were using it, and 37 per cent weren't using it. So it was a bit of a split, and I think we also asked did they see it as an opportunity or did they see it as a threat. So, 54 per cent saw it as an opportunity, 36 per cent saw it as a combination of an opportunity and a threat, and then 7 per cent saw it as neither a threat nor an opportunity. So, I guess, with the AI piece, it's a bit of a 'wait and see' one, I would suggest, in the sense that I think there's still a lot of uncertainty there just now. The cost-of-living crisis and business pressures that organisations are facing are probably more at the forefront of the average business's mind, as opposed to AI adoption.

But, going back to what we were discussing earlier on about long-term budget and long-term ambitions, I think it is important that AI is very much at the forefront of both the Welsh Government and the business community as well. For now, I think it's probably an area that businesses are fighting to get through the next year, the next six months, et cetera, but I think there will come a point when AI adoption will have to be embraced. But as we've discussed today at length, the cost challenges that everyone's facing are putting a massive strain on the potential to adopt AI in business.

Thanks. I don't know whether Josh or Sara want to comment on some of those opportunities, and whether there's anything within the Welsh Government budget that should be considered to make the most of the opportunities.

On AI specifically?

AI and digital technology broadly.

I'm happy to comment, but I'm aware I've spoken a lot. I don't know if Sara's got anything to say first. No. Okay. Just to reiterate those points, really. There's a load of noise around AI at the moment, and it's a little bit like the wild west. Fifteen years ago, when social media exploded, there were hundreds of social media experts and consultants and, from a small business perspective, you get flooded with all this noise around, 'So-and-so can help you do this with your business.' It's very hard to work out what is actually going to make a difference.

I feel like we're at a point where there are lots of exciting opportunities there, but we're at risk of just chasing after it because it's exciting. So, from my perspective, I think it's great that the Welsh Government are starting to think about it. I know it's something they're thinking about quite a lot. They need to be in that space and supporting businesses, but it needs to be done in a really considered way, in a long-term way, and in an intentional way, and really to try and help businesses cut through some of the noise on it.

From my perspective, it would be much better to start with where the businesses are rather than think, 'Here's a scheme we've offered out, over to you. Why don't you take up our scheme?', sort of thing, because businesses will know where the opportunities are for themselves, and it'll look different in different sectors. We know, for example, in financial and professional services, information technology, the adoption rate is much higher than in things like construction or in other types of sectors. So, yes, start from where the businesses are, let them identify the opportunities, and support them with it, I think.

Just on that point, how do they do that, then?

It's a tricky one, isn't it? I suppose part of it is the business support system. One of the things we've called for elsewhere is allowing a voucher system. A business might say, rather than having to just have things delivered through Business Wales, they might get a voucher where they can spend it on the right kind of support to improve productivity in the area they're focused on. I think it is tricky, because a supply model is easier to do from a policy perspective, and our skills interventions are quite supply driven as well, rather than demand driven. So we don't really have the mechanisms there, and some of this is structural. But if we can just perhaps create co-funding schemes or funding schemes that allow businesses to identify an opportunity, have the conversation with someone like Business Wales, and then be supported fleet of foot, that may be the way to do it. But it is a tricky one, I think.

That's my question. I don't know if Sara wants to respond at all, but there's no pressure to, if you don't want to.

Yes, again, echoing everything that Josh and Marc have said. At the moment, for retailers, we're firefighting a lot of the time, in terms of the costs pressures. So, it's difficult to look at that longer term investment piece. But, absolutely, AI and digital innovation and adoption are critical, both in terms of our business operations—so, take for example, inventory management, personalised marketing, all these sorts of initiatives that are going to help us improve productivity, improve our customer service, for example—but also from a consumer side of things as well. In terms of businesses being able to have the ability to invest in AI and digital innovation and adoption, it's going to help the consumer, potentially, and give them both a better experience and more opportunities in terms of the accessibility of offers and ranges, for example.

But, again, that leads to a risk as well, because it's the ability of households, individuals, communities, to access that AI and digital adoption themselves. So, it's making sure everyone stays in the same place on the journey, and they're not going to get left behind as part of it. And I think that then brings it back to Josh's point, that this is all very exciting, but we're at risk of going off in one direction without fully grasping an understanding of the strategic approach to how we invest effectively in digital innovation and adoption.

Diolch yn fawr. I'll bring Mike Hedges in at this point. Diolch, Mike.

Diolch, Cadeirydd. This is a question for Sara. There used to be online and physical retailers. There's become a blurring of it over recent times. With some of the better ones, not only do they provide targeted marketing, but they also allow you to buy 24/7 from them, and everything is automated. Some of the less good ones fail to do both of those, and I believe that those who are working in that way are going to be much more successful. Is that a direction you are supporting with the firms who are involved with you—the retailers—and are you asking for any Welsh Government funding support so that everybody can offer an online shop as well as a physical shop? And there are some great examples: a jeweller in Llandeilo that is phenomenally good at it. If they can do it, why can't the others?

Yes, you're absolutely right. There's an absolute blurring of online—. It's omnichannel, isn't it now, and those retailers that are successful are the ones that are able to harness omnichannel retailing. It's really important, because eight out of 10 of the largest physical bricks and mortar brands have an online retailing presence. So, it's completely harmonious between the physical and the online.

In terms of being able to access Government support, or any Government initiatives that will enable other businesses to be able to harness that online presence, or digital presence, I'm not aware of that, albeit I would suggest that, possibly through Transforming Towns funding, that might have been something that has helped around high-street regeneration, and the sort of digital side of that as well.

I think it's one that needs to be considered in greater detail. And it's certainly—. Again, going back to that point around business support, and bringing in business leaders to help with that approach from Government, that's something we can support, because, again, going back to an earlier contributor's point, a successful high-street ecosystem is reliant upon all the businesses on it. So, we want to see success for every business, small or large, hospitality, leisure or retail. And that can be both a digital and a physical presence. It can be a harmonious opportunity and offer.

Josh wanted to come in on that as well.

Yes, just really briefly, because I think this is a really good question and gets to the heart of the productivity discussion quite well. So, we focus a lot on the cutting edge, around where really good technologies are, and what innovative companies are picking them up, but we focus very little, in policy terms, on diffusion and getting average businesses, who perhaps aren't at the cutting edge, to do things that other people are doing, and to do them well. So, I think the question is spot on.

I suppose the question for me is: whose responsibility is that? And, in Government terms, I think, from a Welsh Government perspective, there hasn't been a huge focus there. There isn't like an innovation body for Wales whose job it is to diffuse that across the business community. There isn't an organic space within the business community itself to do it. And that's probably a gap, I think, and stops us making sure that good practice really spreads and that people take it up.

We've had initiatives in the past that have blown hot and cold. So, you might remember Superfast Cymru, which supported businesses after the Welsh Government puts loads of money into rolling out broadband. So, that was a good innovation, but those things tend to have come and gone. So, we could systemise some of that, I think.

Can I just say that Government need to support and you need to promote? When I say 'you', I mean the whole of that sector. You need to be promoting people to get into online selling. It works so phenomenally well for companies, and going back to Llandeilo, online selling meant that they sold things to Australia. That's the sort of thing that you'd never do with a shop in Llandeilo. That's just a comment, really.

How could the draft budget help your members to invest in innovation, research and development and to access new markets? I think that part of the means of accessing new markets I was promoting earlier, but your comments, please.

Shall we go to Marc, because we didn't speak to Marc for that last question either, so he may want to add something on to that as well?

Yes, I'll just add to that. Mike, you mentioned some examples there. We've got a few members, one of which is in the perfumery trade, who are now trading on a global basis. So, there are massive opportunities there. I think, as well, it goes back to something that I mentioned at the start there about brand Wales. So, if you're seeing these, whether it be jewellers or perfumeries, that have got that 'made in Wales' brand and it's in Australia or whatever, I think that is really powerful because not only does it showcase the product, but what it also does is to put Wales on a global map. So, I think there are a number of benefits there as well, as well as opening markets and so on and so forth.

Just on the point around the innovation piece and the budget as well, I think in some ways it's somewhat similar to the question that we spoke about regarding AI, in the sense that I think there is a lot of appetite, certainly among some of our members, to really take R&D and innovation to the next level, but again it seems to be coming back to timing right now in terms of the cost pressures and whatnot as well. We are hopeful that we'll break that cycle and they really will start to invest in that, but I think that this is where governmental support and buy-in is more important than ever, really, because when business confidence and, I suppose, the appetite to invest is somewhat at a moment whereby they're struggling, I think that's where Government could really help, whether it be around some sort of match funding or, indeed, we spoke earlier on about the supporting agencies as well. So, I think they've got a really critical role here to play as well.

I think what we would like to see as well is more international dialogue in terms of how do we get more Welsh—whether it be trade missions, but how do we get more opportunities for businesses to tap into these markets, working with some of the trade specialists. And I know that there are already some of those in Welsh Government, but I guess that would certainly be an interesting avenue to explore, particularly when we're thinking about R&D and innovation as well. Josh mentioned maybe not having a Welsh specific innovation body, but obviously Innovate UK is another area as well. I know they've signed various initiatives in Cardiff, Swansea, and they've been up in Wrexham with some stuff as well. So, I think tapping into some of the wider UK innovation piece is also really important as well.

If I may, Mike, how important, then, following on from what you were saying there, are those budget lines within Welsh Government budgets to support offices in European countries, in North America, in India? Do they help facilitate those conversations to broaden those horizons and to be able to link people and businesses with businesses in other countries and develop that international trade? Is there value for money in those offices, if you like?

I think, Chair, definitely. As I mentioned at the start, I actually cover the devolved nations, and in particular Ireland are very good at that in terms of having that presence all over. Scotland's getting there as well, and Wales are on that journey as well. So, I think definitely having those offices and really tapping into the expertise in the key sectors across Wales and those emerging sectors around green industries as well, and I think having that footprint in, whether it be places like Singapore, North America, et cetera, is really important, and I do think there is value for money.

Increasingly, we are in a world now whereby trading with our nearest neighbours in Europe, yes, is still important, but the dynamics of trade have changed. You just need to look at the UK Government's trade deal. So, I think it is important that the Welsh Government keeps on the pulse in terms of where trading markets are going and where those new emerging markets are as well, to try and get ahead of the curve there as well.

Does anybody have a contraview to that, or—?

I don't have a contraview, but I do have something to add, which is, I suppose the question is what we task them to do as well. So, to take Mike's example of the jeweller in Llandeilo, in the example you gave, they're selling to Australia, which is great news, isn't it? That's almost like an accidental exporter: a company that we probably wouldn't put in that conversation usually is now all of a sudden exporting to the other side of the world. I suppose having people in strategic markets that they can then go on and have a conversation with and think, 'Okay, how do we do a bit more of this? How do we raise the aspiration?', would be quite useful. So, yes, absolutely have the footprint in key markets, but just make sure we task them with being open to conversations with the types of firms that we want to get into those spaces, I think.

Thank you. Back to you, Mike. Diolch.

Thank you for that. I mean, when you're trading online, it doesn't matter if you're trading a mile away or the other side of the world, all the data movement—. And if you're trading in IT or computer games, it matters not one jot whether it's in the street you live in or the other side of the world. So, that's just a comment.

To what extent is there overlap between business services provided by the Welsh Government and also provided by the UK Government, and are there gaps?

Who wants to take that?

Shall I go first on that?

Thank you, Josh.

So, there's definitely confusion is what I'd say. So, business support in the way we conceive is devolved. So, the bulk of it is done by Welsh Government, but I think the economic governance of Wales has become increasingly messy in the last few years. So, we've got Welsh Government doing different things; we've got city and growth deals that emerged; we've got corporate joint committees that sometimes are the same as the city and growth deals and sometimes aren't—it's a developing picture. We've got local authorities that were tasked with delivering the shared prosperity fund, for example. We've got UK Government with the Department for Business and Trade and some of its offers also taking place in Wales. It's a bit of a minefield, from a company's perspective. You don't really mind who's delivering what, but the wiring needs to be hidden a lot better. And I do feel like the governance geography of economic policy in Wales has just become a bit of a mess. So, how we solve that one, I don't know. It's a question for politicians, really, because there are different political layers involved in this. But I think we could do better and we could do much more to think strategically about who does what, where and why. So, yes, answers on a postcard for that one, but it is a bit of a mess, I'd say.

Marc, yes.

Yes, sorry, just one thing I'd maybe add into that as well on the business support landscape, I think one of the things that we hear from some of our members in the more rural parts of Wales is that they often don't know they exist—these support initiatives. So, if you're based in some of the—. If you've got exposure to the city and growth deals, you've maybe got some sort of familiarity with Business Wales, et cetera. But if you're based in some of the more rural regions, then it can sometimes be trickier to access and even have the awareness of them. So, I guess one ask from myself and IoD would be getting some more literature and getting some more outreach to those in the more rural communities as well, so that they also have the opportunity to access the support services as well.

Anything to add, Sara, or—?

Yes, I mean, nothing to add specifically on the business support services and the overlap or not between UK and Welsh Governments, but more so around policy divergence, which I appreciate isn't specifically a budget question, but I think it's becoming increasingly challenging for the businesses that I work with on either side of the border to understand what is expected of them in terms of various regulations, policy divergence that's taken place, and it's coming even more quickly now. And whilst it's absolutely right, clearly, that Welsh Government takes an approach that is right for Wales, the challenge is communicating that when you've got a very porous border, with consumers that hop over the bridge, over the border, to do their shopping—communicating those changes, communicating why buying a bottle of wine costs more in Wales than in England, for example, why they're going to have to return a glass bottle to a vending machine, but they don't have to in Bristol. These sorts of things, they're small examples, but, when you add them up, it's becoming increasingly difficult for businesses to operate cross-border when there are very many different barriers and challenges, and it's communicating that as well to the consumer; it's not just the business, it's the consumer impact that it has in terms of lack of understanding of the policy initiative and the driver for that approach in the first place.

Returning to productivity initiatives, which we've talked around for some time, back in the 1980s—the advantage of joining employment in the 1980s is I remember these things—there were a large number of productivity gains from word processing, from automation of payroll et cetera, and people wrote them down, and they produced examples of that, which were then shared amongst the sectors. Is there any intention of doing that with AI for any of your bodies, or should the Welsh Government be doing it, and are there things the Welsh Government would then learn from this production of the successes of using AI?

That's a really good question. Are we doing it as a body? I suppose not in the way you describe, because we don't provide business support and those sorts of conversations, I think. Although we do quite a lot of events with our members that focus around best practice, so we do do a bit of that.

I suppose where we could do better is almost like peer groups, and this is something that I think could be dialled into business support. Quite often, running a business is a lonely endeavour. I was chatting to a business owner earlier on in the week in Bangor, and he was saying, ‘I've run a business on my own for 20 years; I took part in a voluntary project where I was involved with 10 other people who were in the business space, and I actually realised there's a lot to be gained from just chatting to other people doing the same sorts of things.’ So, how we do that in an age where everything happens online and people are in rooms much less often is a tricky one, but I think we could do much better as business organisations ourselves, and with the right support from government of different levels, to network people, create peer groups and really create space for learning informally and those sorts of things. So, I do think there's a weakness there in the business support landscape.

I suppose we talk a lot about sharing best practice, and you can tell people, and we do share the practice, but some people say, ‘Well, yes, but it's not for me.’ It's moving it from that sharing best practice to adopting best practice, or adopting good ideas, and that's the struggle, I suppose. It's inherent in, maybe, our make-up as people as well, to find the reason not to do something rather than find the reason to do something. So, if somebody can unlock that for me, then I think we'd probably learn quicker to do things better across the country, because I think we—. There's bad practice, or being able to point out things not working, but when we do share that best practice, it's then not adopted, and I don't know if there's something that your organisations could do to help with that, or is there a role for Government to say, ‘Well, actually, just do it’? Marc, you unmuted yourself, so it's your fault I've picked on you; there we are.

Yes, no, no, no, thank you, Chair. Just reflecting on what you said there, I think that's spot on, and I think definitely there's value in doing that. Similarly to Josh, something that we're looking at doing is learning best practice, how can members learn from each other. I think what I would say as well is it's important to remember what might be productive for one business may not necessarily be productive for another one. In Wales, you mentioned Government, business there; Cardiff business school do quite a lot on the productivity piece as well. They've got a business productivity toolkit. I know they have a National Productivity Week as well, in Wales, so there is a bit of a growing dialogue on that as well. I was at the Welsh Government tax forum last year, and the Productivity Institute were doing a piece that looked at Welsh productivity comparatively to the UK. So, in actual fact, a big part of this is, dare I say it, productivity literacy, so getting more of that in amongst business and Government, so that people actually know what it means and what it means to them, because, as I say, it does mean different things to different businesses.

I think the point you made there about adoption is ultimately the key thing. How do businesses become more productive? What does it mean to them? What does it look like for a manufacturing company versus a small tech start-up? Probably quite different things. But I think if we can get more businesses to be discussing it in a variety of forums, whether they be business forums, Government forums, academic forums, then that can only be a good thing. There is definitely more and more of it being discussed. The fact that we've got a productivity week as well—I think things like that are small steps, but are important as well.

Well, that brings us to time this morning. Thank you so much for your time and for your insight into our questions. I think it was a very useful session, and thank you very much. I know you're busy people, and it's great that you've been able to spend an hour with us this morning. So, there will be a transcript available for you to check for accuracy. But, yes, thank you very much.

So, under—. I propose in accordance with Standing Order 17.42(ix) that the committee resolves to exclude the public now from items 6, 7, 8 and 10. Everybody happy? Yes, I see that. So, we'll go into private, and we'll be back later on this afternoon.

Croeso cynnes yn ôl i'r cyfarfod yma o'r Pwyllgor Cyllid. Rydyn ni yn symud ymlaen rŵan i eitem 9.

Yes, we're moving on to item 9, the financial implications of the Senedd Cymru (Member Accountability and Elections) Bill. This is the evidence session with the Counsel General and Minister for Delivery. Could you introduce yourself and your officials, please? Diolch.

Diolch, Cadeirydd. I'm Julie James. I'm the Council General and Minister for Delivery.

Will Whiteley, deputy director for Senedd reform at Welsh Government.

Ryan Price, head of Senedd reform policy at Welsh Government.

Welcome, and thank you very much for joining us this afternoon. We've got quite a few questions to go through, as you'd expect. There will be, obviously, a transcript available for you afterwards to check for accuracy. Before turning to the questions, I just wish to declare at the outset that I'm a member of the Standards of Conduct Committee and took part in the inquiry relating to individual Member accountability that's relevant to this Bill. I'm familiar with some of the policy background, but, for the benefit of other Members and the public record, are you able to give us an overview of the Bill, please?

Certainly, Chair. The purpose of the Bill is to enhance the accountability of Members of the Senedd by strengthening the systems that currently exist that regulate and sanction their behaviour and conduct—or I should say 'our' behaviour and conduct, since I'm obviously one of them. It does a number of things in order to facilitate that. It makes provision for a system of recall. It makes provision around the standards system that exists and makes it a statutory necessity to have a standards committee. It amends the Government of Wales Act 2006 to place a duty on Welsh Ministers to prohibit the making of false or misleading statements. Then there's a whole series of transitional and consequential provisions that also arise as a result of the provisions of the Bill.

In preparing the cost estimates for the Bill, can you outline the process that you've taken and what's presented in the regulatory impact assessment? How satisfied are you with the RIA that the committee and the Senedd has as full a picture as possible of the potential costs of this legislation?

Yes, it sets out our assessment of the costs arising from the implementation of the legislation. We've had a whole series of detailed discussions with stakeholders in an attempt to understand fully what we're looking at. But, obviously, this is a new system, and it's being imposed on a new electoral system, so we've had to make some assumptions around that. They are based on, we think, good evidence for why the assumption is as it is, but we don't have very much in the way of historical data to base it on.

So, for example, the costs relating to the appointment of lay members, or potential appointment of lay members, to the standards committee have been discussed with the Commission, and the Commission have developed the figures. I should say as well, Chair—I've said this in all of the committees and, indeed, in Plenary each time we've talked about this Bill so far—that this is an unusual Bill because this is a Bill that the Government is bringing forward to give the parliamentary authority the powers to do things, but the Government is very keen that the Executive arm doesn't tell the parliamentary authority how to do it. So, we've tried to couch it in permissive terms. But I am expecting the committees that are looking at this to take a view as to what to do with that permission, if you like. I think it's obvious already that some of those will turn into duties rather than powers. We've tried to reflect some of that in our cost estimates for the Bill. So, we're assuming that lay members will be appointed, but, at the moment, it's permissive. So, you'll see things like that occurring as we go along.

Then, for example, for the recall provision, obviously, we have to look at the costs of a recall poll. I'm sure the committee will be familiar with the recall system, for example, in Westminster. So, a Member will have committed an egregious offence such that the recommendation is that they're subject to recall. Recall means that the electorate in that Member's area, new constituency, are asked whether they want that Member to continue to serve them, and therefore you have to hold an election. Now, obviously, we've never done that before on the basis of the 16 new constituencies, so we don't, as we speak, even have the next election to look at in terms of cost. We've tested all of that with the electoral management board, we've discussed the implications of that event with the Electoral Commission, and we've had discussions with the commissioner for standards as well and so on. So, we've taken a lot of stakeholder evidence into account, and then we've come to what we think is a reasonable assumption based on that. We have no historical data, so that's the methodology we've used.

And the assumption of cost, where does that poll—? What associated costs have you—? What sorts of figures are we looking at?

Well, we've looked at how much it costs to run a by-election now, we've looked at what the areas of the 16 new constituencies might look like and we've extrapolated the money necessary to run that poll based on that. But, obviously, nobody has run such a poll, so we've had to extrapolate costs based on that. And that's what I mean about—. We've spoken to the Electoral Commission about their assumptions, and we've taken stakeholder views and advice on what their assumptions are.

Because they're like—. As you said yourself, if we're unlucky, maybe one or two in a Senedd term. How confident are you, in that engagement with the Electoral Commission and others, around the mechanics of what's being proposed, the production of ballot papers and the stuff that goes around it? We're looking—. I sit on the Llywydd's Committee and we've recently gone through the budget for the Electoral Commission for a whole-of-Wales Senedd election, and, of course, there are some relatively large numbers there, because you're having to communicate with the electorate about a different system and that sort of thing. Has any of that been taken into account—that, for that first one, when or if it happens, there might be a bit more money needed to explain it, and then a steady state, where, down the line, you might not need as much to explain to the public what's happening?

Well, 'sort of' is the answer to that. A recall poll is a much more straightforward poll than a single transferrable vote over a large area with multiple candidates, obviously. The ballot paper is a 'yes/no' ballot paper, so it's a much more straightforward process.

One of the problems we have in Wales, of course, is making people understand that there's an election at all, so there will be some money involved in doing that. And, frankly, I think that it doesn't matter if you're the first one or the eighth one, because making sure that the people in that area understand that a poll is happening and that they should take part in it will be one of the costs we've looked at.

But, in terms of the administration of that poll, it's a great deal less difficult than running a, I don't know, 12-candidate STV vote for that area, for example, because it's a straightforward 'yes/no' referendum-type poll, isn't it? So, we've tried to factor in the various bits of that in the conclusion we've come to.

Thank you for that. In the RIA—and this is my last question before I bring Rhianon in—the RIA outlines benefits, which have not been monetised. Can you elaborate as to what analysis you undertook to determine potential quantifiable benefits and how will you monitor the delivery of those benefits to ensure that the Bill does provide value for money?

Yes, we provide the Senedd with powers to deal with serious cases of misconduct. We enhance the democratic accountability of Members of the Senedd by allowing their electors to have the final say on whether the Member should be removed from office or not. We think that improves trust in democratic accountability and in the Senedd more generally. And by introducing independent external perspectives and expertise to the standards committee, we think we strengthen the process. Yesterday we had a report from the standards committee, in which it was vaguely suggested that it might have had some political motivation. I think this strengthens the assumption that there is no such motivation, because you're taking it entirely out of the hands of politicians. So, I think that that's actually self-evident, just between yesterday and today.

Monetising that, though, is—

Well, they're not monetisable, though, are they, really? We haven't tried to quantify them, but there are clearly a series of benefits here that I just don't think lend themselves to that kind of monetisation at all, really. So, we've tried to separate out the actual costs of doing it from the benefits overall, but I don't think they can be quantified in that sense.

Okay. Thank you very much. It's good to see Rhianon Passmore with us. Welcome back, Rhianon. We've missed you on this committee. I know you haven't been too well, so it's good to have you back. I know you've got some questions.

I do. Thank you, Chair. Diolch for that. There are some noted inherent uncertainties in undertaking an assessment of the likely time required for the Welsh Government to develop comprehensive regulations regarding new powers as a result of the Bill. Considering those highlighted uncertainties, are you confident that there has been provided a full breakdown of all costs that may fall to the Welsh Government when implementing this Bill?

Yes, thank you, Rhianon. It's really nice to see you back as well. I've not seen you before now either. As I said, in setting out the parameters of the Bill, this is an unusual Bill because it's not a Welsh Government Bill; most of it is for the parliamentary authorities. So, the costs that will fall to the Welsh Government are just about developing the implementing regulations, depending on what the parliamentary authorities want those regulations to look like, and the opportunity costs associated with that. Obviously, when somebody's working on that, they can't work on something else. I don't need to explain that to you.

So, we think that the figure—it's £190,800—is based on the amount of hours we think it will be necessary to give up, if you like, to draft the implementing regulations. We're pretty good at estimating those kinds of things. We have to do that for most Acts, and I'm pretty confident that the regulations can be delivered inside that estimate of opportunity cost. As I said just now, we're imagining that a recall poll will be run on as similar a basis as possible to a normal Senedd election, so that we have a set-up system that's ready to go. We're making assumptions that the same rules will apply, so we don't have to do a conduct Order, for example, that's very different to the conduct Order for a normal election. The statutory instrument will be a mini version of the conduct Order, so we don't think it's a particularly onerous task to do.

Okay. In terms of the presentation of the cost of a recall as a 'unit cost', what assumptions have been made on this on which to base that cost?

As I said, it's a demand-led thing, isn't it? So, it's impossible for us to get. I would very much hope that we would not have a recall poll. Ideally, there would not be such a thing, because no Member would do anything so egregious as to result in this. But we've assumed that they'd be very rare. One a Senedd term would be too many. So, they're demand-led. And it's dependent on the cohort of Members, and how the standards of conduct committee takes a view. There are a number of imponderables—if that's the word I'm looking for—in here. It's impossible for the current Government to have a set opinion on how bad or otherwise the behaviour of the next Senedd Members will be. It's not an appropriate thing for a Government to have a view on. As I said, we've looked at trigger systems elsewhere, particularly at the UK Government as an equivalent. They're pretty rare there. Almost half of the people who have been subject to a recall petition there have actually resigned and not gone through with it. So, we're assuming they'll be pretty rare.

Yes. You've covered a number of these points previously, so apologies if they're overlapping in the line of questioning. In terms of the approach, then, for calculating the cost of administering a recall poll, in particular, how did you account for the cost variances that could occur across different constituencies? I'm conscious that you've gone into that territory, Cabinet Secretary.

So, Rhianon, we've done a number of things. We looked at the actual costs incurred in the 2021 Senedd elections, although we were still in COVID restrictions—I'm sure we'll all remember how unusual some of that was—and we've tried to adjust it for the change and size of constituencies. We've tried to average out the difference in size and geographical area for each of the constituencies, but you can absolutely see that one covering—I'm sorry, trying to remember the new names of the constituencies is probably going to defeat me—the west-coast constituency, as opposed to one of the Cardiff constituencies, the geographical area, the coverage and so on—. The costs will be a little different, won't they? So, we've tried to average it out across it to come up with this.

In the 2021 Senedd election, for example, the costs were between £61,000 and £183,000 between constituencies. So, it's a fair variable, depending on the geography and population make-up of each of the constituencies. So, we've come up with an average.

Did you use the general election at all? Because those were closer, footprint-wise, to—

They're not our figures.

No, but whether or not there were any figures published that you were able to—.

I don't think we have used those, no. We've used our own election figures, because they're the ones that we have best access to. But we haven't got any administration cost data for the 2016 ones. You'd have to combine each—

Cost, yes.

Well, you know this already, right? Again, it's a best guess, isn't it? So, we've come up with a cost of £274,900, but that's a sort of mean, really.

Okay, thank you. And my final question: the RIA identifies the cost for the Electoral Commission will be met, or could be met, shall be met within existing resources. What engagement has been undertaken with the Electoral Commission regarding costs? Is there a confidence that you have identified all potential costs that fall to them regarding this legislation?

We saw a lot of the Electoral Commission for Wales during the development of this legislation, I think it's fair to say. We wanted them to be sighted on the implications all the way through, and to be happy with it. The Bill requires them to prepare and publish a report on the administration of each recall poll, and it requires the Welsh Ministers to consult them prior to making regulations under section 11 on the conduct of recall polls. But we've asked them for their assessment of the likely cost implications, and they were very satisfied that the cost would be negligible and would be met from existing budgets, because that's basically business as usual for them. So, they were pretty clear that they weren't expecting it to be anything other than business as usual.

And not having to come to the Senedd to ask for a supplementary budget or anything like that.

So, the rarity, the similarity with the normal conduct Order and so on—they weren't expecting that to be anything other than business as usual.

Thank you very much. Sam.

Thank you very much.

Thanks, Chair. Cabinet Secretary, thanks for being with us this afternoon. I want to touch on the cost associated with the standards of conduct committee. The legislation sets out the opportunity for lay members to be included on that standards committee. The RIA has costed advertising estimates and a use of an external recruitment company for that role to be between £5,000 and £20,000. Could you elaborate as to why you'd be looking to use an external recruitment company for that role?

The decision as to whether and how to appoint lay members is one for the commission, and not for us. Just to start off with, this is exactly on point about how unusual this Bill is. So, we had to just come up with an assessment of the likely cost of appointing the lay members. So, we've discussed potential approaches with the Senedd Commission officials, and we've been very guided by the Senedd Commission officials' view of this. So, we've concluded that it would be reasonable to assume that the process of advertising for recruiting and appointing lay members would be comparable to public appointments previously undertaken by the Senedd, and the experience of the Senedd conducting such exercises in the past. That includes the cost of advertising. They do use external recruitment companies, to ensure the best candidates are attracted. Because I have to say—and I know this from my own experience in local authorities, for years and years and years—it's quite hard to attract lay members. Putting an advert in your local paper doesn't produce you an enormous number of people who are interested. So, you do have to headhunt them a little bit. So, we think that's a perfectly reasonable way forward. But in the end, it's the Senedd Commission telling us how they're likely to go about it.

Of course. Thanks for explaining that point. And then, just from a calculation perspective, it looks as though the calculation has been made for the recruitment over a Senedd term—the cost per Senedd. My understanding of the appointments for members of the committee is it may be a six-year term. Is there a reason why the cost has been calculated over what's likely to be a four-year term and not—. You recruit, and you expect recruitment to take place every six years therefore, wouldn't you? So, I was wondering why that difference has happened.

So, this is the problem with the Bill—it's permissive at the moment, so it might not happen at all. So, we've got to come to some view, somewhere along that spectrum, of what's going to happen. In terms of the term of office—. I'm sorry, the Members on the last committee I was in front of as well have probably heard this already. So, the six years has been put in place as a maximum, but we think any Commission would be fairly foolhardy to appoint all the lay people for the same term of office. So, obviously, the idea is that that's a maximum, but you would appoint some for—. You wouldn't want an all-out process, all the time. So, you'd want to appoint the first ones on a rolling, I don't know, two, three, four, five-type thing, so that you changed lay people after a while, on a rolling programme—you don't have an all-out. So, you've got some experience each time, you don't have—. So, obviously, the start-up is more difficult, then, so you're going to have shorter appointments for some and longer for others and so on.

But, again, this is a guess by us, because, obviously, the Commission will be in charge of that. But I think any sensible Commission is going to see the problem of having an all-in, all-out policy for that kind of person—you absolutely want to maintain expertise and so on. So, we've done a set of minimum assumptions, so none at all, and a set of maximum assumptions. As I say, we've set out that they might choose to appoint the maximum number, and also none at all, that the number of elected members on the committee is six, that they're remunerated at around £600 a day, which is the remuneration scheme for lay members in the UK Parliament, and that they would be required to sit for three days a month, while the Senedd is sitting. That's around 25 days a year, so that's equivalent to the UK Parliament as well. But in practice, it might be lower than that—it might be much lower than that. It's really difficult to know. So, the estimated cost is a range from nothing to eighty-seven-and-a-bit thousand pounds, to reflect the range of things that might happen. So, I guess we thought it would be helpful to set out the widest range of costs possible and not make any real assumptions, because, until the Commission comes to some conclusions, it's hard to know.

I will say I think this Bill is quite unusual, because, as the committees get to grips with it, as there's a special purpose committee looking at the policy of this, a number of amendments will come forward. I suspect those amendments will start to make some of these provisions mandatory—that's what we're assuming; that might not happen. And then we'll be able to firm up—if the Commission must appoint lay members, then you can come up, from nought to whatever you think the minimum is. So, I think there will be a little bit of a drift as we understand what the Commission and its committees are likely to ask the Government to do on their behalf.

And that's where any updated RIA would come in?

Yes, absolutely. So, as the amendments come forward, we'll be able to take those into account, in doing it. This is the first time as a Government—. I've been a Minister for a very long time, Chair, forgive me for mentioning this, but it's the first time I've done a Bill where we're just enabling somebody else to do things, and so a lot of these decisions we feel very strongly are not for me as the sponsoring Member and not for the Government in general. So, there will be a much more iterative process, I think, as we go through.

Thanks, Cabinet Secretary. I think you've accurately described what's reflected in the RIA. It states that there's low confidence in the accuracy of the assumptions made regarding the remuneration costs of those lay members. So, I think you've just reflected on that point.

The RIA also—just moving on to engagement with political parties—states that costs and savings for political parties are not possible to quantify, as it may vary extensively between each political party. I wonder if you could outline what engagement you've had with political parties regarding any potential costs associated with the Bill.

I'll get one of the officials to say a bit more about this in a moment, but the officials attended a Senedd political parties panel that was convened by the Electoral Commission back in July, and again earlier this month they attended it. They had a conversation there that set out what we were proposing and what that might look like, with a view to trying to make an assessment of it. But I didn't attend the panel, so I don't know if one of you wants to talk a little bit more about how that went. Ryan, was that you?

Yes, certainly. It was certainly a really helpful session. I think it was primarily us explaining the policy, as it was emerging in the Bill development itself, and I think we drew a lot of compare and contrasts, almost, with how political parties campaign during a recall petition process at a UK parliamentary level. I'd say 'contrast' far more than 'compare', particularly given the fact that any vacancy created through a recall poll will be filled by normal vacancy procedures, so the next candidate on a party's list. I think it's very difficult to make an assumption on how parties will campaign or not campaign or behave or spend during a recall poll. I think it's very difficult to lift and try and extrapolate from the UK figures. So, it was very much us explaining the policy intent, but without that baseline of how political parties are likely to behave. We thought it was very difficult to make an assessment of what those costs are likely to be in reality.

Just to add to that, this is something that we're going to have to explain a great deal to the electorate as well. Because of the list system, the recall system for the Senedd holds no jeopardy for the political party. The jeopardy is all on the individual Member. Obviously, if you face a recall poll for the UK Parliament, then your party faces the jeopardy of not returning a Member of its party to the Parliament. Here, if the Member loses a recall poll, they are replaced by the next Member on the list. So, it's very hard to know what a political party is going to do in those circumstances—whether they'll rally around the Member or whether they'll take the view that—. It's really hard to know, isn't it? It's a fairly unique system in that sense, and I'm sure the policy committees will want to engage with quite how that will work. But given the list system, that's where we are.

I assume the only variance there would be if that Member had left that particular party, then the next person on the original party's list is what's in the Bill, I believe. Therefore, that would create something akin to a recall position in Westminster, with a two-horse race, effectively. But I suppose that's the only variance where there might be something different from what you've just described.

Yes. And if you think of how very rare that has been in the entire life of the Senedd, the chances of both of those things happening, coinciding and causing an actual political clash, if you like, at that point, are pretty small, I'd say. But you're right, as it's currently drafted, that is the only jeopardy for the party.

Thanks, Cabinet Secretary, and I think they're fair points. I just want to double-check on a point of clarity. The engagement with the Senedd political parties panel, is that just with political parties who, at the time, were represented in the Senedd?

Yes.

Okay. So, there hasn't been engagement with parties who hadn't been elected into the Senedd at that point in time.

No.

Okay. Thank you.

Just to say on that as well, that's very difficult to do. Because a very large number of parties stand in the Senedd elections. It wouldn't be just with parties that you think might win; if you were going to extend it to that, you'd have to do it with every single party who might stand a candidate.

And the last time—. Was it this term, did you say—? So, at that point, every party that's represented here at the moment was engaged in that process.

No. Because there's a Member who's moved parties since.

Yes, but in this term. So, the latest—

I thought you said June or July was the date.

It was July, but there's been one very recently.

There was one recently as well. That's what I was just clarifying. Sorry.

Just to confirm, these are convened by the Electoral Commission, so every party currently represented in the Senedd was invited; that doesn't necessarily mean that they all attended.

Of course. That's fine. Thank you. And then, my final question, Chair, if I may, is in relation to the costs related to the new powers that may be given to a commissioner for standards, in particular the potential for own-initiative investigations. In the regulatory impact assessment, you've come to the conclusion that no costs will be incurred to undertake these investigations. I appreciate that it may be difficult to quantify that because you don't know how many of these own-initiative investigations a commissioner for standards may wish to undertake, but I was just wondering how you've come to the conclusion that there will be no cost at all.

In conversation with the commissioner for standards. The officials discussed with the commissioner for standards how it might work, how many times you might want to investigate. The Bill, as you know, gives the commissioner for standards the ability to investigate under their own volition. But the commissioner was pretty clear that they didn't think there were any additional costs in that. They weren't imagining that that would give rise to—. Well, they obviously thought they would be able to manage it inside the current envelope. It's not for us to say. That was very vehemently the view taken.

On that point, before I bring Mike Hedges in—. The commissioner for standards is funded through the Commission currently, and that's not been proposed to be changed within this. When it comes to lay members and the costs associated with that aspect, how do you foresee them being paid for? Does that come as a separate line within the Commission budget, rather than in with the commissioner's budget?

No. I would imagine—. Well, that's a matter for the Commission.

Of course. But how do you see it—

But I would have thought the Commission would set out a separate line; have a separate BEL for the appointment of lay members.

As it is currently with the standards commissioner, the standards committee takes a look at that annual report and that aspect and looks at that budget line—doesn't comment on the size of it, it's more about the scrutiny of the budget. You'd expect something similar to happen with—? Where would the scrutiny around the lay members—? How would you see the budget line being scrutinised?

I'm afraid I'm going to say 'it depends'. Because there are several things in the Bill that we don't quite know where they're going to land yet. There's an outline of an appeals process in the Bill as well, and that has the potential for being a separate appeals committee or a sub-committee of the standards committee, and so on. So, I think until it becomes obvious how that landscape is going to come out, it's really hard to answer that question.

If you end up with a standards commissioner and lay members on a standards committee and a sub-committee of that committee, you can see it could be scrutinised as part of the standards line, if you like. But if you end up with an appeal committee that's separate to the standards committee and is a stand-alone committee in its own right, then clearly, that wouldn't be appropriate. So, I think we're going to have to take a view once we see the eventual shape of that.

But it is a question as to how it's accounted for and how that's—? So, it's something that's legitimate to ask.

Yes, completely. The Commission will have to take a view. When we get to Stage 3 and we know what the likely Bill is going to look like, they're going to have to take a view at that point.

And is that something that Members here should take a view on? Or do you think that it's up to the Commission to make those decisions on how to deal with a budget?

I think the Commission is looking very much forward to its committees making recommendations to it about how this should look in the future, because that's how they're going to come to the conclusion. As I say, the Government has enabled the conversation, but it's very much a matter for the Commission and its committees to come to that conclusion. For what my view is worth, I think your report will be looked at by the Commission in order to come to a conclusion, and, obviously, the Government will then implement what the Commission and its committees want to do. So, as I say, it's a very unusual Bill, because we're not pushing any particular point of view on it.

On the previous response to my question earlier about the standards commissioner feedback that doesn't foresee any additional costs related to own-initiative investigations, my experience with barristers and solicitors is that they charge for all sorts of things. Were you surprised at that response from the commissioner?

I didn't have that conversation. One of the officials will have.

Ryan spoke directly with him, but it's probably worth me just saying I think that there are two prongs to this, because, of course, there's an office that supports the standards commissioner as well, so there was a line of dialogue that we were having with the Senedd Commission as well in relation to that element of it. Obviously, the view of the standards commissioner, which Ryan can touch on, is that there was a sense that there wasn't expected to be any obvious additional or anything that wasn't negligible. Some of that, I think, is perhaps around the standards commissioner's experience, where that power was available to them in a previous role in Northern Ireland, but also the likelihood that, actually, any area in which they may conduct an own-initiative inquiry was also very likely to attract complaints in any event. So there's a sort of slight blurring between the two. But Ryan spoke to the commissioner directly.

I don't think there's anything more than that, Will. I was only going to make the Northern Ireland point. This is something the commissioner has previous experience in and, in his own assessment, was very comfortable that it could be dealt with within existing envelopes.

Okay. This is not for a response. You've received the feedback from the commissioner, as you've just shared. I think it's worth us reflecting, Chair, that when the commissioner was here, I think he said that, in the last term, there were two areas he would have likely investigated if he'd had these powers at the time. So, there could have be instances, and so that's an interesting way of calculating that potential cost. That's it. Thanks.

Thank you. I'll bring Mike Hedges in for the final set of questions. Diolch.

Diolch, Cadeirydd. The affordability assessment focuses on costs to the Senedd Commission. Why have other costs for other organisations been excluded from this assessment?

We expect the Bill to result in cash costs as opposed to opportunity costs for the Commission. The Welsh Government costs are all opportunity costs, and so are not included, really, and the unit cost isn't annualised, so it's not included in the affordability assessment because they're unit costs. The cost of running a recall poll would be an additional cost to that, I guess. I don't know if that answers the question, Mike, but we've gone through a process of trying to work out what an annualised cost might look like, and then what the unit costs look like. That's where we've arrived.

I've listened carefully to everything you've said, both today and when you spoke to the Legislation, Justice and Constitution Committee earlier this week, and the one thing I take away from it is this Bill is likely to change because it's not a Government Bill and the Government won't be opposing amendments to it. It's almost a Senedd Bill. Will you undertake a legislation review in terms of the possible costs after some of these things have actually been quantified?

Again, Mike, we very much take the view that you've just outlined. It is a Government Bill, but its genesis is from two Senedd committee reports. The provisions are largely designed to give effect to the recommendations of those reports. It creates a system for Members of the Senedd and strengthens existing standards issues in the Senedd, but these are all issues for the parliamentary Commission, and very much not for the Government. If there is going to be a review of the provisions of the Bill, that review should be taken by the Senedd and not by the Welsh Government. I might go so far as to say that you might want to wait until a recall poll has actually happened in order to do that review, because, otherwise, what would you be reviewing exactly?

But I really do think it's a matter for the Commission to see whether it's working or not. And then other Senedd committees may make recommendations for change and so on, and you'll end up back in the same position where a Government Bill would come forward with permissive powers that the Senedd Commission would then take advantage of, basically.

Well, I agree entirely. I think the first time this Bill is used, which, hopefully, will be a long time in the future, it will be inevitable that there'll need to be a review of it. Is the Government going to recommend that, or is it just saying nothing at all on whether it should be looked at or not?

I think we're sort of hoping the committees will make that point for us, Mike. And, as you rightly said, the Government takes the view that, whatever the committees want to do, we will endeavour to give effect to. And we'll obviously continue to talk to the Commission itself all the way through this process as well.

Thank you very much.

Just finally from me: looking at the appeals process, I think, that is laid out in the Bill, have you done any further work on the costing of it as it's laid out, and what costs might be incurred in that process? Or is that something, because it's currently not fleshed out as to exactly how it would work, that's very difficult to do?

So, we've attempted to include it in the maximum envelope.

Okay.

But that's—

That's as far as you—

Yes, and until we know—. As I say, until we know—. At the moment, we don't even know whether the appeals process is a standalone committee, or whether it's a sub-committee or what. I find this very difficult, Chair, as a Government Minister, I have to say, because I'm also a Member—

I can tell from your answers that it's quite—

I'm also a Member of the Senedd, so I have a personal view about how all of this should pan out, and I have a fairly vehement view about that in my personal capacity, or my capacity as a Member of the Senedd. But, obviously, that's not my role today. My role today is to facilitate this Bill so that the Senedd Commission can take advantage of it. And so, I find myself wearing, very firmly, a hat that doesn't allow me to express those opinions in quite the way I normally would.

How conflicted are you as a Senedd Member, as we all are, compared to what your—?

Well, I will feed my views in as a Senedd Member to the Commission in the appropriate ways, but it's not appropriate for me to do that when I've, very firmly, got a Government Minister's hat on, I'm afraid.

Fair enough. Well dodged. [Laughter.]

Thank you very much. I think that brings us to the end of our line of questioning today. So, thank you very much for making the time to come and talk to us. As you say, it's a very unusual Bill from your point of view, and I think that there are some very key points within it that probably we need to get right. And, obviously, our report will feed into the work of other committees, as we take this Bill forward through committee stages. But—

I wonder, Chair, whether I could just make one final point—

Of course.

—which I made in the Legislation, Justice and Constitution Committee as well. So, the timing of this Bill is exceptional. If the Bill goes to plan, then we will vote on Stage 4 of this Bill on the last Government Plenary day of this Senedd term. So, I fear that any slippage at all will mean that it falls off the edge.

So, I've been just emphasising that point to all the committees. I mean, we are where we are. But I think—. To express my own personal view for a moment, I think it would be a shame to lose the opportunity to put a recall system in place, but the timing is right up against the wire. So, I just wanted to make that point.

As a Minister for delivery, I suppose there's a—

So, this is not an optimal position to be in. Normally, we would introduce a Bill that allowed the committees to have enough room to manoeuvre and to come to the right sorts of conclusions. This isn't the right committee to say some of the things about what's not in the Bill, but some of the reasons that the things that are not in the Bill are not in the Bill is because there isn't time to do it properly, and anything that causes the timetable to slip loses the Bill completely.

So, I'm making that point in every forum that I'm appearing in, just to say, because I think—. You know, it is right on the edge.

Thank you very much. There will be a transcript available for you for review. And, as we voted on earlier, we'll go into private now, but diolch yn fawr iawn i chi.