Finance Committee

So, our first substantive item today is our scrutiny of the draft budget for 2026-27, and this is our fourth evidence session. We're joined by our witnesses here, and I'll ask Derek and Marie to introduce themselves for the record, please.

Bore da, I'm Derek Walker. I'm the Future Generations Commissioner for Wales.

Good morning, I'm Marie Brousseau-Navarro. I am the deputy commissioner and director for health.

Fantastic. Croeso cynnes, a warm welcome to you. As normal, we're able to do simultaneous translation from English to Welsh—from Welsh to English. We could do it the other way, ideally, but we do it that way because that's how we're set up. But there will also be a Record of Proceedings for you to be able to check for accuracy afterwards.

So, if we start this morning by just exploring how the Well-being of Future Generations (Wales) Act 2015 has influenced the budget and to see your thoughts on that. The Welsh Government's budget improvement plan says that they're proud of the work to embed the WFG Act and its five ways of working at the heart of fiscal decision making. What's your reaction to that statement?

Thank you very much for giving us the opportunity to provide evidence to you this morning. I agree that the budget-setting process for the Welsh Government and all of our public bodies is a cornerstone of delivering on the well-being of future generations Act. So, it's good to see a Welsh Government seeing and recognising its importance.

We're at the end of a five-year period of the budget improvement and impact advisory group process of looking at budgets, and I think my overall assessment of that period has been that we've seen some significant and important improvements in the application of the well-being of future generations Act, and some action on the advice that we've been giving, but we've still got some way to go in particular areas. I can perhaps talk about that in a bit more detail as we go through the evidence session.

As you'll know, just by way of context, my office has taken a different approach and come at our support to Welsh Government around the budget in different ways in different years. Last year, for example, we commissioned the ZOE Institute to provide us with some analysis of how the Welsh Government's budget aligned to the well-being goals, which was a useful exercise. In previous years, we've done different things. This year, we've taken a much more sort of direct involvement approach, so we've been involved in providing support and training to the BIIAG and the SIIA—strategic integrated impact assessment—processes. Sorry for using these acronyms. So, we can share the experiences of those processes.

The final thing I just wanted to say by way of introduction, I guess, or context, is the Welsh spending review really provides us with a great opportunity going forward to further embed the well-being of future generations Act to budget-setting processes. So, we really want to harness that opportunity.

Just in terms of some of the detail with regard to this year's budget, where we've seen some of the improvements has been in some of the application of the five ways of working. Considering and applying the five ways of working, I think, is an important part of taking budget decisions, with the long term, et cetera, in place. I think, particularly, we've been pleased with the level of involvement that's taken place this year, which has been increasing year on year—the involvement of young people, for example, and the involvement processes, not just that this committee has undertaken, but that the Welsh Government has undertaken itself, have certainly been progress.

I think the Wales economic and fiscal report is a great document as well. That considers future trends as well as the current economic context. Clearly, we need to be looking at the future trends for the country if we're going to apply the future generations Act effectively in decision making. So, that's really good to see, and I think there's been an improvement in the information there.

We might come on to that a bit, actually. You talked about young people having an input, but then that it wasn't clear how maybe the input has gone on to change the budget or to make any meaningful changes within the budget as it goes along. What would you like to have seen in this draft budget, or would it be more in the documentation of understanding how those decisions were being made?

I recognise it's difficult to provide every detail in public documents about the decision-making process. Actually, I didn't mean to say that about the young people's involvement, because the young people's involvement has been one of those areas where we have seen how the Welsh Government has considered the views of young people—

And that is tracked.

And that's tracked in the documents. What I meant earlier on was in relation to the future trends information, for example. What I'm particularly thinking of is AI, which is mentioned quite a lot in the economic analysis document, and climate and nature. Clearly, climate change is another long-term issue for the country. So, as a result of recognising that, if we don't act now, things are going to cost us more in future, or we'll miss opportunities around AI, or climate adaptation will cost more, et cetera, et cetera, how have you then taken different decisions as a result of that information? I haven't been able to see that. I don't think either of us have been able to see that. You can see the context and you can see the resulting decisions, and we know not much has changed this year, but how that's been applied is not always easy to see. I recognise that's difficult, you can't show every working, but I'm just explaining how it can be quite difficult to take an analysis on that basis.

And just to illustrate that point as well, another important trend for Wales is our ageing population. For example, the older people's commissioner is predicting that we will have over 1 million people over the age of 65 by 2031. So, how is investment made today to enable us to prepare for all these things? We know they're coming, but we seem to see that the budget is still looking at immediate crises, the immediate present, and not anticipating the next things, which will become crises at that stage. But we should be investing now to avoid them becoming crises along the way.

Okay, so it's a bit of a mixed bag in that sense, and it's also a bit of a mixed bag in the proportion of the budget that is positively contributing towards delivering the seven well-being goals as well. You've commented on that. Could you unpack that a little bit for me, especially in light of the draft budget this year?

We haven't done the analysis that we did last year, and part of the reason why we haven't commissioned that analysis this year is because we expect it to tell a very similar story, because we've got a roll-over budget. What the analysis showed us last year is only a few budget lines were actually negatively impacting on the goals. Most of them could have been aligned to the goals. So, we expect that to be similar. I know there have been some changes and commitments on prevention around flooding, improving school attendance and homelessness prevention. Those are some of the areas that the Cabinet Secretary has talked about as being prevention measures this year. But largely we expect it to be a similar picture.

The reason we think this is important is because—. There are a number of things. We see it happening in other countries, and they tell us how it can be very useful, but also because the legislation, the Well-being of Future Generations (Wales) Act 2015, is our common vision as a country. We've got these seven goals and the 50 ways of measuring those through the indicators. That's meant to give everyone a common direction about where we're heading, and bring alignment to the public sector to work together to achieve on that common vision. So, if we're not understanding how our budget is aligning to those goals, then that's a challenge. But we've also made that recommendation to other public bodies as well. So, it's not just the Welsh Government that needs to do that, the rest of the public sector needs to do the same.

In what you're describing there, with a direction of travel for the public sector, and that's what the Act was meant to do, is this budget helping or hindering that, in what you can see? Is it broadly helping to embed that across the public sector, or is it causing issues across the public sector?

Sorry, is the Welsh Government's budget causing issues for the rest of the public sector to—

Yes. You described that everybody's travelling in the same direction.

I see what you mean.

But is this budget, because of the way it's structured and the way it's being put together, and maybe that roll-over part with potential impacts on health and local government, is that effectively cutting across some of that and pushing some parts of the public sector off that direction of travel, I suppose?

I don't think we've seen evidence of that. I think it would be more helpful for the rest of the public sector if we had that information about alignment of the goals, because then that can pass down to other public bodies and they can see the connections in their own budgets, although they'll be able to do a lot of that work for themselves.

I haven't seen that the budget process this year has caused a distortion and moved public bodies away from delivery of the goals. We'll come on, perhaps, a little bit later, to some of the work we're doing directly with public bodies around their own budgeting proposals in terms of prevention, but we haven't—. It's not to say that that hasn't been the case, but we haven't seen evidence of it.

Okay. Fine. You've used your ways of working maturity matrix to assess how well the five ways of working have actually been applied in that budget-setting process. Can you offer us any insights as to that in regard to this budget?

I guess it comes back to some similar points made earlier on. We didn't apply the maturity matrix this year. We asked the Welsh Government to do that, and they haven't done that, that we can see. They haven't provided evidence of doing so. What we provided this year was support and training around the five ways of working to the budget improvement and impact advisory group and the strategic integrated impact assessment group.

So, they took you up on the training, but then actually—

We don't think they've applied the maturity matrix.

Or you haven't seen anything.

We haven't seen that they've done that. But, overall, I guess it takes me back to this assessment that I gave in answer to my first question in terms of where we see things have improved. Our assessment, without using the maturity matrix, is—. In some areas—involvement, for example—we've seen some improvements. There's better data around futures and future trends, one of the other ways of working, some improvements around collaboration, but less strong there, and prevention is the area I think we need to give more focus to.

Could I just add as well? We gave, for example, a presentation to SIIA on the work you are describing—again, the goals, the five ways of working et cetera—at the end of September. I was interested to see in the SIIA that this was a draft SIIA, and that the input of witnesses and the workshops we are doing will be reflected in the final SIIA. To us, really we reserve judgment until we see that final SIIA. On the application of the goals, five ways of working, we really hope to see some movement, and they said they might do some prevention analysis in the final one. On goals, we have seen no indications, and of the five ways of working, in the evidence they have given us, we don't always agree with how they have applied the definition. Derek mentioned on prevention they say stability from one year to the other will help prevention. That's not what we meant. We were talking of much longer term and greater stability, and greater consideration and preparedness for the future.

So, hopefully, when the final budget is announced, alongside it then we'll have some of this, and you're hoping to see that reflected in that final budget documentation.

Yes.

Thank you. Sam.

Thank you, Chair. Just to pick up that point around these five ways of working, why do you think the Welsh Government haven't used that as an assessment tool?

The maturity matrix itself? I'm not sure, actually. Marie might have a better answer on why they might not use the tool. We're finding the tool is useful, so we've asked all of our public bodies to apply the tool. It's basically a self-evaluation tool, because they can then see for themselves where they are in terms of applying the five ways of working, and then it also provides advice about what you do to get to the next stage. It's an iterative tool, so we're improving it as we get feedback on how it's working. We are finding that the rest of the public sector is finding it useful, but we haven't had a response to why they didn't use the tool in the budget-setting process.

Maybe I can just add a little bit as well. What we have seen is tremendous staff turnover in the Welsh Government. In the BIIAG in particular, I was thinking it's all new civil servants now, and so we have had a lot of stop-start, stop-start, so maybe that's part of the story. We would need to ask them directly, but I suspect it's part of the story.

I can understand that being an issue. I guess it's a cultural thing, isn't it, as well? So if something's embedded within the culture of an organisation, whether people move positions or there's turnover, you'd hope that the culture of that self-assessment, using tools like this, would be embedded within it. You made the point, I think, Marie, a moment ago, that you'd hope to see some assessment of this before the final budget perhaps comes out. Could that be described a bit like the cart before the horse, perhaps? Because you'd hope this type of assessment would be a part of the process, not something that just happens at the end, which might tick a box to say it's been done, but I'm not entirely sure how useful it would be. Is that a fair comment for me to make or not?

Yes, I think it's fair. Also, what we have seen, as I said, is we were invited at the end of September, and the workshops were taking place in September, October, to influence the final budget. So how can we bring all of that earlier in the year, which is the advice I have given to the officials as well, so there's a chance to influence the draft budget to start with? So it's another improvement we hope to see next year.

Can I touch on this a bit further? I'm always interested to understand collaboration and involvement as two separate things, and I'd agree with you—I think often people make the mistake of thinking it's one and the same thing. And I think, Commissioner, you mentioned that there have been some improvements—I think it was the collaboration area, perhaps.

Involvement in particular, yes.

Yes, sorry. Do you think it is taken seriously, that involvement from the Welsh Government? Or is it more of a box-ticking exercise? Because there's a qualitative element to this and a quantitative. You can have lots of moments of involvement, but in terms of the quality of that involvement, do you think it is more quantitative than it's qualitative?

I think we both get the impression that it is taken seriously, and there is certainly more involvement than previously, so you're right about the quantity of involvement.

I think the other point about the involvement work that's being done is it's happening over a longer time period. So, it's happening on an ongoing basis. We do see some evidence or statements about how the involvement process has affected decision making. We mentioned, didn't we, in terms of young people, the Youth Parliament, that talking to young people about Welsh language in education is referenced in the documents. That's all positive to see, but you can't always see the workings there. There are examples of how the workings have happened, but there would have been other involvement processes where we don't know what impact that might have had with different groups. And yes, I think sometimes, in the paperwork, we felt there was a bit of confusion between what we mean by collaboration and what we mean by involvement. As you were explaining, there is a difference—involvement is involving people in the decisions, asking their views, very much being alongside them. And collaboration is more about partnership, so working with other bodies, even within Welsh Government, even within directorates, to come to decisions.

I must admit, there's collaboration with the commissioners, for example. So, we sit down with the Cabinet Secretary to give our views on the budget and how we would see the priorities and why we would see the priorities, and that is a productive exercise. I know some of that is referenced in the document and it does happen, but I think it's weaker than the involvement work.

Okay. And just to expand on that point and the conversations, perhaps, you and others may have had, last year you described the budget in terms of climate change mitigation, adaptation and nature recovery, and the proportion of the budget seeking to address those issues I think you described as alarmingly low. Has that changed in this next budget?

We can't see evidence that that's changed in this budget. There are some commitments. Because it's a roll-over budget, I think it's likely to present a very similar picture. We didn't do the same analysis as we did last year. There are some commitments in the documentation around flood management, for example, which would fall into that category. So, that's welcome, but to what extent that's new money or that's existing money, it's been difficult to tell. What we think is it's a very similar picture from previously.

On another area, I was at the Culture, Communications, Welsh Language, Sport and International Relations Committee yesterday, and we were talking about the cultural and arts sector and the challenges facing the culture and arts sector. My assessment and the assessment of others has been that the culture sector has really suffered over the last decade or more. As a result of that, I would expect, if you're saying the culture and arts sector is in crisis—and I know the Welsh Government hasn't said this—then you would expect some adjustment to try and reflect that, and to help the sector going forward for the long term. We haven't seen that change in the budget, because the fact is it's a roll-over budget.

And can I just add, as well, that's why we need some form of assessment and exercise mapping of the budget against the goals to see that—to see the spread across the different elements of well-being, and to help rebalance decisions and budget accordingly, I think. And that's why we advocated that they do it, and they have rejected that recommendation.

Do you think it's the wrong decision to roll over the budget?

I can understand why they've done that, given the Senedd election is coming around. When I have had conversations with the Cabinet Secretary and officials around this, we're always calling for longer term budget thinking and approaches, because that's clearly in line with the legislation and is helpful for the rest of the public sector as well. So, I can understand why that has happened. I think, by doing that, there are, potentially, missed opportunities to reflect some of the areas that we've identified in terms of climate and nature and of arts and culture, because you're not moving things around to adjust areas that need more attention, in our view, for the long term. But I can understand the politics and I can understand—. As we know, there's money kept aside for budget negotiations. So, things might change through those negotiations and we'll see where we get to in terms of the final budget.

Have you identified any unintended consequences of a roll-over budget beyond some of the more—? Of moving moneys around, is there a longer term impact, potentially?

Yes. I think it's that general point: the challenge of a roll-over budget is that you're not reflecting, perhaps, what we might see in this office as the longer term priorities, or the areas that are being underfunded, compared to those that should have more priority, and you're just repeating the situation from the previous year. So, there's, maybe, an opportunity, as the budget is being finalised, to make those improvements, to recognise where we think we're falling behind in meeting the well-being goals. I guess my advice is always driven by the well-being goals and the indicators. So, what are the well-being goals and the indicators telling us for the long term? These are the measures you've set yourself as the Welsh Government to judge your success. So, if we're falling behind in certain areas, then adjustments should be made to catch up in those areas and reflect what the well-being of Wales report is telling us.

Can I add also—? The proportion of the health budget overall moved from a third to half of the budget. We heard witnesses say that part of the unallocated part of the budget will have to go to health as well. So, as Derek was saying, it's this balancing of things—so, between the health share growing, which might impede on culture and nature and others, and, also, looking within health at the proportion of money that is going to primary care or social care, which is closer to the community and, maybe, closer to prevention as well. That's something, maybe, the committee would like to look into, as we haven't conducted detailed analysis this time, but it's really something to look at.

I think that's something, certainly, that the health committee will be exploring with the health Minister, within that. Thanks for your comments there. Sam.

Thanks, Chair. I'll try and move on a little bit. I'm really intrigued by this. We had a really interesting little discussion a moment ago about involvement and the culture of collaboration. Then a roll-over budget appears, which flies in the face of what—. If I was perhaps in those moments with the Welsh Government—I feel like I'm collaborating, I feel like I'm involving myself, my energy and time, then I'm presented with, 'Well, thanks for all that time and energy you put into that, but we're just going to do what we did last year'—I guess there's a risk there that that could make organisations, or bodies, or whoever it may be, involved in that thing, ask, 'Well, what was the point of all of that?' I guess there's a risk that engagement in the future may be less forthcoming because, perhaps, some people have been stung by that. I don't expect you to comment on that, but it's just a little reflection from our discussion just then.

I want to move on to the prevention agenda, as it were, or whatever you want to call this. I think, in the past, you've referred to the prevention budgets—if they can be identified separately, of course—in terms of being cut, as an act of collective self-sabotage. I expect with, as we've just discussed, a roll-over budget here again, your view on that hasn't necessarily changed.

Yes, that's right. I think this is one of the weakest areas in terms of applying the five ways of working—prevention. There's huge consensus for the need to spend more money on prevention, because we know that, the less we do, the more it costs in future and the impact on the population as a whole. So, the moral arguments and the economic arguments, the value-for-money arguments, are all very clear, and many witnesses would have shared their views on some of that. So, we've got to get better at that. We have to get better. As Marie was intimating, if we don't get better at that, the NHS budget will just continue to grow and grow and won't leave much money for other initiatives. Having said that, we've seen these new investments that are very much in the preventative spend category, around school attendance and flood prevention, and the things I mentioned earlier on. So, it's good to see that sort of thing.

One of the areas that we've argued hard about in the area of prevention is around the Marmot principles—so, Wales becoming a Marmot country. That's all about prevention, and that's very aligned to the well-being of future generations Act. Marie has worked a lot on this with Welsh Government, and we were very pleased that the health Cabinet Secretary committed to Wales becoming a Marmot nation. But maybe a question that you could ask, and we'll certainly try and find out ourselves, but we can't see where the budget line is for this initiative. This is a prevention initiative, we want to roll it out across Wales and I know they want to start in certain areas, but where is that money going to come from? So, that may be within the budget lines, but we couldn't see that.

This is perhaps the place to talk about our disappointment that our recommendations around prevention have been rejected, and that of the auditor general as well. It was a big theme for both of us in our reports. We suggested ways in which prevention budgets could be ring-fenced so that we safeguard that money and so it doesn't get lost—and we can talk a little bit about the pilot work that we're doing at the moment—but we haven't seen that happen, and we're disappointed that that's been the case. I've already met with the Cabinet Secretary for Social Justice, who leads on the Well-being of Future Generations (Wales) Act 2015, to discuss the Welsh Government response to all of the future generations' report recommendations, and I've expressed my view to 'sit down', I guess, is the way to say it, with officials, to go through some of the responses and understand why some of the responses are as they are. Mostly it's very positive, but some of them are more difficult to understand, and this is one of the ones that we want to talk to them about. There may have been a misunderstanding, we don't know, but the response that they've given around why they can't do more to consider prevention budgets is one we need to understand more. I mean, this is not—

[Inaudible.]

Yes, exactly, and we could share this with you. I think it's largely around—have I got the wording here; yes, I've got the exact wording here—hypothecating. I think we used 'ring-fencing' in our document, but, 'Hypothecating funding reduces institutional budget autonomy. Isolating prevention funding equitably is difficult and risks undermining broader prevention efforts and responsibilities institutions must manage effectively' was the exact wording that we had in response from the Welsh Government. I don't agree, frankly, that that's the case. This is advice that people like Demos and the Health Foundation are also giving to the UK Government, and others, to consider, because we have to think differently. We know it's difficult, but if we carry on as we are, we will go further down the path of dealing with the consequences rather than dealing with the root causes. So, this is one way in which we think we can improve on that.

And just to, perhaps, wrap this bit up before I finish, Chair, is part of the issue around the definition of preventative spend? We made a recommendation previously that the Welsh Government work with you to come up with an agreed definition, and they had agreed that in principle. Have they had those conversations with you?

Yes, we have, and I'll ask Marie to come in in a second. We came to the view that we had these definitions of prevention, they were agreed with my predecessor and the Cabinet Secretary for Finance, in his post as it was then, and they weren't being applied. So, when I came into this job, right across the piece my focus has been on delivery and implementation. So, there's no point having guidance that's great and is not being applied. So, we got a sense from some people that, perhaps, the definitions weren't right. But how do we know until we try? And so, rather than change them without actually putting it into practice, let's work with a number of public bodies to put the definitions into practice, and understand where the challenges are and whether they can be improved. Marie has been running a great pilot project with a handful of public bodies to do just that, and then the plan is to say, 'Well, actually, this is what we found and this is how we think the definitions could be approved, or not'. But so far, we're finding that the definitions are pretty good and they're working for the public bodies we're working with. So, Marie, I hope I haven't stolen your thunder, but you were doing this work.

No, not at all. We did many workshops with a variety of public bodies to test the definition, and what we found—

Who are you working with?

So, they were open workshops that we did jointly with Audit Wales, but the people who were there were representatives from local authorities, local health boards, the police, fire and rescue services, and NRW.

So, a broad range.

A broad range. And we did three or four of these workshops. So, I have spoken to at least 50, 60 people, and each time we presented the definition, we asked them to apply it to their own activities—can they understand it? So, what we found is that the definition is really easy to understand by many different types of sectors and professions within this sector—so, finance, doctors, police et cetera. Then we found that it was really enabling a different way of thinking, understanding the different types of preventions and what 'acute' or 'non-preventative' really means. And the tiny little tweak we would make is that there's a reference to universalism—. I can't remember the technical term. So, that's one I tend to not use when I present the definition.

So, our conclusion is that the definition has worked really well. And there is another definition used by the health, public health, organisations, so they were more difficult to convince at first. But I tested the pilot fully with Hywel Dda and we found that our definition was very easy to use, especially in engaging with their finance department, which could then easily translate in public health terms. So, we are very happy with it and I don't think I would recommend that we change it after we have tested it.

Okay.

But we're still going through the pilot, so we'll see what others say, but so far so good.

So far so good.

And when is that pilot likely to come to a conclusion?

The end of this financial year. So, we have drafted, now, a tool to do the actual mapping, and that's what we are testing. So, we created it with two or three public bodies and the Chartered Institute of Public Finance and Accountancy and Rhondda Cynon Taf. So, we are learning from others who are trying to do the same thing. So, we've aligned our definitions as much as we could. We have a common understanding of how we classify things, so now it's really a question of applying it to different budgets. And we've completed the first one with Hywel Dda and we are very happy, so now it's really taking it to the next step: how will this change the budget allocation and the minds of boards, chairs, the executive? So, we are really excited and happy about the work so far.

Good. Okay. Thank you. It will be interesting to see how that proceeds. I'll bring Mike in to follow on with some questions in this area and some other areas as well. Thanks.

Diolch, Cadeirydd. As you know, you wrote to the Cabinet Secretary in January, noting that, without action, spending and prevention would continue to be a casualty of intense pressure on day-to-day budgets and a victim of short-term thinking. We know, for example, that preventative spending on obesity would reduce the number of people with type 2 diabetes and would reduce the number of people who have heart complaints. So, we know these things. So, what I'm asking is: do you know any examples of good practice where preventative spending has been entered into, and, as such, has reduced overall expenditure?

Yes. I haven't got them listed here, but there are plenty of examples of this in Wales and elsewhere. And so this is why I'm a bit confused by some of the responses to this. For example, one of the examples that we used to cite in my previous role was Peterborough prison and how it had a social impact bond—it was one of the first social impact bonds. And it was how you invest in prisoners and their education and so forth, and the support would reduce re-offending, which would then reduce the cost to the taxpayer of people coming back into the prison system. But, like you say, there are examples in smoking cessation services that do exactly that: you invest in that and you get the savings further down.

So, I wonder, you know—. What we're asking for is these grants or these funding programmes for the public sector to be much more frequent so we identify where we can invest in primary prevention or upstream of prevention, put in place resources to see that happen, so that we will then see the results. So, you can see them—. It's not just in health, it's right across the piece, I think, that we will be able to see them.

We haven't said in our documentation in these budget discussions about specifically the types of things—. Well, actually, we have said. In the future generations report, practically all the recommendations are around prevention—so, when we make recommendations around the real living wage, for example, and how, if the public sector can pay the real living wage, the impact on the economy, the impact on retention, the impact on well-being and so forth is all helpful for prevention.

So, there are lots of specific suggestions we've made around this happening, but the point we've made in budget discussions is generally just being much more directional about this. We need to put more of our money into preventative spend and moving it higher up the hierarchy and realising those results. So, the point we've made here is general. The points we've made in the future generations report are much more specific about where we want to see that happen.

And that's where the mapping, using the definitions of prevention, mapping, line by line, the budget, would give us that transparency, visibility. We would know exactly where this money is intending to act on the level of either acute and treating a crisis or a problem, or trying to prevent things in the future.

As you know, I've been a long-term advocate of paying everybody the real living wage, and I'm taking part in an event next week that is promoting it. But what would you say to people who say that the best prevention is education, that you improve the quality of education, improve educational outcomes, you bring in more high-value employment, therefore that is a preventative measure against poverty?

Yes, I agree. I agree. It's right across the piece. Education is a key area for prevention, but so are interventions around health, so are the interventions around action on climate, so are the Marmot principles that we've advocated for as well. So, absolutely, I think it's a fundamental part of prevention.

Your letter to the committee says progress appears to have stalled in terms of mapping parts of the Welsh Government's budget for preventative spend, and I assume you still think that.

Yes.

Your evidence mentioned a pilot project led by your team to explore the budget of several public bodies, including health boards, to start mapping out spend in prevention and learn the lessons to share with others. When is that likely to conclude?

This is the pilot project Marie was just talking about, and we're hoping to have the pilot project concluded by the end of this financial year.

And then roll out in future years.

Yes, exactly—so, learn from the pilot, look at the definitions, understand how it works, perhaps develop tools, and, clearly, work beyond the handful of public bodies that are part of the pilot.

And on that—

And is that—? Sorry.

Nineteen public bodies have accepted that recommendation in the future generations report—so either adopted, accepted in principle, or accepted—so I'm really excited, and it will be the list I will start with, of course.

So, at the end of the pilot, will that be something that your office will offer, then, to the public sector as a whole? Or how do you see that actually rolling out?

So, as I said, we have created an Excel spreadsheet now to enable the mapping. We will produce guidance with it, and, so far, I am offering help, so doing it with public bodies. So, depending on our resources and budgets in coming years, either I'll continue to do that, like as a one by one, offering direct support, or the guidance and the assessment tool will be enough for people to do on their own. And we are piloting all sorts of ways of doing the mapping, by workshops with only some people, so, again, to be able to provide practical advice on how to do it, actually, and—. Sorry.

No, carry on.

And we are also ensuring we map everything with what CIPFA is doing and other bodies are doing, to avoid confusion and so that we are all in the same direction and really enabling—

So, you're getting it done in the same way in every—.

Yes, as far as we can. There are always little differences, but we are all going in the same direction, and they can do one or the other, it still gets them to a better consideration of prevention and real investment. What we want to do is to change the mindset and have visibility of the decision taken and of its intention. Or, on the contrary, if it's going backwards, then we will see it and then we can intervene, as well, much better.

Yes. All I was going to add is I suspect that we will have to do much more one-to-many work, rather than the one-to-one work. The pilot programme is really to understand how the tools and how the definitions are being used, and whether they're the right ones and so forth. But this is all part of the strategy that I've put in place. So, we heard from public bodies that they wanted more time with us. We were perhaps being perceived as spending a lot of time with Welsh Government and needing to spend more time with the wider public sector. So, this is all part of the strategy to do more of that as we deliver on my strategy.

Okay. Diolch, Mike.

Diolch. In your 'Future Generations Report 2025', you recommend the Welsh Government bring forward the formal budget-setting process—as we're all aware, budget setting starts at the end of the budget process for the following year, but the formal part starts a lot later—and to produce multi-year funding settlements. What difference has the two-stage budget process made, and do you think the Welsh Government has appropriately balanced considerations by setting a single-year budget?

Yes, this is something that is raised with me all the time by public sector organisations, the need for earlier public decisions. I think we’re all aware of that. So, I think this process has been a welcome innovation to the budget-setting process. Perhaps it’s too soon to tell to what extent that has had an impact, but to bring things forward as early as possible, recognising the constraints of the UK Government budget-setting process and so forth, I think is certainly a welcome thing. I know it’s a matter of a couple of weeks, in some cases, between the budget and the detailed budget. So, to an extent, how helpful is that? But everything that’s a bit earlier than previously, I think is helpful, and we absolutely welcome it.

I note the fact that, actually, this isn’t an approach being followed in Scotland and Northern Ireland, as far as we understand it. So, they’re waiting on the UK budget, and I think that it's a good thing that the Welsh Government has sought to give direction earlier. And, hopefully, this doesn’t need to just happen in this way in an election year, and this can continue in future. So, we will see. I guess part of the test of this will be the UK Government budget and to what extent that results in changes having to be made to the Welsh Government’s draft budget. But, given that we’ve had some indications and direction from the UK Government in terms of the multi-annual budgets, maybe now has been the time to do this.

So, yes, we absolutely welcome it. I think the key thing for me is looking at what now happens after the election, because that’s a golden opportunity, isn’t it, to set a multi-year budget by the next Welsh Government, and to not go into annual budgets and give clearer direction for the longer term, or for the three to four-year period. And so we’ll be working with the Welsh Government and seeking to see that in that instance.

The other thing to flag—and I don’t know if it’s come to your attention—is that we are seeing, or we are hearing, that some third sector organisations are getting three-year indications this year about their budgets. So, that’s welcome, and I think they’re seeing that as a welcome—. Obviously, things could change when the new Government comes in, and there will be caveats around all of that, but I think that can be really helpful. As a former chief executive of a third sector organisation, having some sort of understanding of where your budget might be for a particular programme for three to four years is incredibly helpful.

I'll finish on this question. Of course, being told what your budget is going to be is helpful, but if you're told your budget is going to be cash flat for the next four years that isn't helpful, isn't it? So, I would urge you to be careful of what you want, because I'm sure the Government, or any Government, could offer you cash flat over the next four years; I'm not sure that many organisations would want that.

Well, absolutely, of course they wouldn't want that; I would never have wanted that when I was in that situation, and wouldn't want that now. But, if that is the case, it does allow for better planning. So, clearly, people want an increase or at least level with inflation, but if I'm told, even if in this situation, that I've got a cash-flat budget and then I get a vacancy in the organisation, I know, then, that I'll recruit for a part-time post, or I'll wait and see what the final budget is before taking a decision. So, it's not welcome to get a cash-flat budget, but, in terms of planning purposes, to understand that that is likely to be the case is helpful, I would say.

I won't push this, but inflation is different for every organisation.

Yes.

And the inflationary pressures on local government and health, I would say, are much different to the inflationary pressures on you.

Yes.

I would also say that we use the consumer price index, and very few health boards or local authorities have foreign holidays as part of their expenditure.

Thanks for that, Mike. I've got a few final questions. From listening to you on the workshops that you've been doing and your work on preventative, looking at the budget documentation that you get from Welsh Government, is there enough detail in there for you to be able to apply your model or the way—? You talked about line by line, well obviously we have main expenditure groups and we have budget expenditure lines, but we don't have much below that. So, is there something that Welsh Government could do and publish more detail below the BELs and those levels to be able to apply and to be able to do the analysis that you were talking about?

So, the answer is 'yes', and the answer is also that we don't see all of the information. So, that's why our recommendation is that they do it and they show it to the rest of us. So, in our pilot, we are using cost centres. And that's where we are starting to see the detail we want. Often, I would say a quarter of the time, we have to go back to teams and say, 'Can you tell us, we cannot work out from this label what’—

What this cost centre means.

And if there's a preventative element to it or not. So, discussing with the Chartered Institute of Public Finance and Accountancy—. So, we've created a group of practice with CIPFA, ourselves, the Scottish Government, which is doing amazing work on preventative spend these days, and RCT because we are doing a pilot as well with the Health Foundation on the same mapping of budgets. And there are two ways of doing it: a top-down approach and a bottom-up approach. So, we are doing, like Scotland, the top-down, where we are looking at the expenditure at the top level, so often in the finance department and myself, costing things. CIPFA and RCT are doing it the other way around, so they look at activity and the mapping of activity to then try to work out the cost attached to it to do the mapping. My learning from all of that is that I've been able to map a full budget within eight to 10 hours over two months, and they have only been able to map some services because of the granularity and the detail of it. So, I think their work will be much more precise than mine, but it's much more resource intensive and is taking a longer time. And I think Welsh Government will follow that activity model.

I note as well that they said in the final strategic integrated impact assessment that they will present some elements of preventative mapping, and I'm just a bit curious because it takes a lot of time, so how will they do the exercise in that? But also to say that earlier in the year, we worked with the health department of Welsh Government, which had started mapping the activity, I think, and they were much further ahead of us. I learned a lot from them, their methodologies, how they were presenting the different definitions of spend, but I haven't seen it progress recently, and we are still in conversation, but that's why we need Welsh Government to present the information to us. They need to do the analysis because they have the information.

Okay. Thank you for that. You've noted that your office has been working with the budget impact improvement advisory group and others within the Welsh Government Treasury to better understand how the future generations Act has been embedded into the budget process. You've talked about some of that engagement, and we've had the discussion about collaboration or involvement. Have you identified any gaps or any good practice that you could elaborate on within BIIAG in particular?

So, in BIIAG, as I said, it's been a difficult year, because many meetings have been cancelled, we have had so much staff turnover. So, our colleague did a full presentation of our evidence from last year to BIIAG, I think in September, or around this time. We think that BIIAG has so many great experts on it, but we really need the Welsh Government to make the most of it. So, as I said, I think that it was a rocky year this year. I'm really hoping, especially—

Is that because of the turnover and churn?

The turnover, meetings cancelled because of staff turnover, starting again, so repeating a lot of what we had said to previous officials et cetera. And we really welcome that the SIIA has involved BIIAG in their work as well, but as Derek was saying, the spending review is really key, and that's where I really hope that Welsh Government will make the most of BIIAG—and we are a member of BIIAG—to really get their input and to really help to shape that. So, that's something that we have been really trying to get involved in in the sense of a conversation, not a consultation or being updated on progress, and we haven't been very successful so far. So, I really hope—. They said we will part of the stakeholders they involve, but I really hope that we will be very involved and we will be able to help them shape the content of the spending review.

And as the Cabinet Secretary said, the spending review, effectively, is a rolling spending review within Welsh Government, so being part of that helps to embed some of that preventative spend.

Yes, we're really keen to—. As I mentioned at the very beginning, I think that it's very important and we'll put resources into supporting that, absolutely.

I think in terms of good practice, the other good practice example that we were talking about was in terms of gender budgeting and the approach that Welsh Government has taken in that area.

And finally from me, is there a risk that Wales is falling behind other countries with this? You talked in quite glowing terms about Scotland in some of this. Are there places that we should be looking at for good practice? What are the risks for Wales in falling behind in some of this work? Just maybe some closing remarks as to what needs to be done next.

Yes, thank you. Budgeting is a crucial component to embedding long-term thinking and future generations within Government. And when you look at other countries, and how they're doing this—the OECD did some work on this, actually—and you look at the types of things that you would expect to see in a country or a Government doing this sort of stuff—we've got many of the good things in place, so we've got the legislation, we've got the indicators, we've got the strategy, we've got some of the future trends information that was produced.

But I think in the area of budget and budget decision making, this is where we are relatively weak, compared to some countries. And we've highlighted good practice examples that we've been able to gather from other parts of the world, as initiatives that they talk about positively as guiding their decision making that we think we could be implementing much more effectively in Wales to take much more of a well-being budget approach to that. And some of them have come up through the course of this conversation. So, if you look to Malta and the Republic of Ireland, for example, and how they consider their budget lines against, in some cases, the sustainable development goals or their well-being framework, we're not yet doing that. And that's a call we continue to make, and in terms of how we protect funding and increase funding prevention, that's clearly an area that we need to do more on. And then I think the other area, as we've been talking about, is how we embed this right across the public sector, not just within Welsh Government, but within the 55 other organisations.

So, overall assessment is where I started, really. I think, over the last period, we've seen some significant improvements in certain areas, and we've welcomed the engagement of Welsh Government officials and the actions that they've taken. It's not always easy to see the workings, and I understand the challenges of that, but in some areas we believe we've got a good way still to go to put in place the best practices that we see around the world.

Sam, do you want to come in?

Yes, thanks, Chair. Just reflecting on the hour we've had together, and perhaps this is outside of your remit, but we haven't mentioned or talked about private enterprise or business in our discussions at all. I don't think they've come up in terms of any of the consultation exercises that may have taken place, or the engagement. I know we've even heard Wes Streeting recently talk about things in terms of preventative care, social prescribing work for people, or as a way of preventing some issues down the line. I was just wondering what your reflections might be on Welsh Government's engagement with the private sector and whether there's a missed opportunity, in that they are ultimately paying taxes to deliver these services—what your reflections might be on the fact that we haven't mentioned it in this hour we've had together so far as well.

Yes, I think it's a good point. I mean, the whole point of involvement in terms of budget decision making is to consider involving all aspects of society. And, clearly, the private sector is a big part of society and very important for the delivery of the long-term goals we have as a country. So, I think that is a gap, potentially, and certainly is a constituency that we seek to do more work with and engage with and we would hope Welsh Government do the same. I think there are opportunities—perhaps it's a different conversation, but I think there are opportunities in other areas to lever the sort of expertise and knowledge of the private sector, but also for them to help us with the delivery against the goals. So, to be more specific, we won't achieve our long-term goals if we don't—. It can't just be done by the public sector, it has to involve the private sector and the third sector. One of the specific examples I gave in the future generations report is how we achieve our net-zero ambitions and our biodiversity ambitions. We cannot do that without private sector investment, there just isn't the public sector money to do that, and so we called on Welsh Government to pull together a task group to look at how we engage with the private sector in that, and I'm pleased that they've done that.

But there are other ways in which we could be, I think, using public money more effectively to work with the private sector to deliver on our long-term ambitions. And one of the areas—I know you know, Sam—is in terms of public procurement and social value and community benefits. I think, when we're giving out public money, we should be asking private sector bidders to tell us much more clearly how they can support delivery against the long-term goals that we have for the country. We've done some work to support Welsh Government's thinking in terms of well-being outcomes, and they're being rolled out, so that would support alignment. But we're not there yet. Often, public bodies are using slightly different approaches, which I think is quite confusing for the private sector, and we're not always perhaps, from what I'm being told, scoring those things in the way that we need to, or monitoring delivery of those commitments by the private sector. So, I think there's a—

Is that in procurement processes?

In procurement processes more broadly, so I think it's a really good point. And, yes, it's something that we can continue to look at.

Thank you, Chair.

Well, thank you very much. That brings us to the end of our session today. As I said before, there's going to be a transcript available for you to check for accuracy. We'll take a short break now, but before we do, I'd just like to thank you very much for making the time to come and talk to us in a very interesting session this morning.

So, we'll take a break and we'll be back at 10.45 a.m. Diolch yn fawr.

Diolch yn fawr. Thank you.

Croeso cynnes yn ôl i'r Pwyllgor Cyllid. Rydyn ni'n symud ymlaen i eitem 4. Mae gennym ni ail sesiwn y bore yma ar y gyllideb ddrafft.

We're joined by some some witnesses, so I'm going to ask them to introduce themselves for the record.

Gwnaf i gychwyn efo ti, Steffan. Diolch.

Dr Steffan Evans, prif weithredwr Sefydliad Bevan.

Hello. I'm Simon Hatch. I'm director of Citizens Advice Cymru.

Jessica Laimann, policy and public affairs manager at the Women's Equality Network Wales.

Croeso cynnes ichi.

A warm welcome to you, and thank you for making the time to come and talk to us today about the Welsh Government budget. I want to start this morning by looking at the impacts of the cost-of-living crisis and how they're reflected in the current draft budget, and then the Welsh Government's progress towards alleviating cost-of-living pressures in the sixth Senedd. The Bevan Foundation said that the cost-of-living crisis is still having a significant impact on people in Wales. What is your analysis of how the cost-of-living pressures and levels of poverty have changed in Wales over the past 12 months?

Gwnaf i gychwyn efo ti, Steffan.

Members might have seen that we published a report yesterday, actually—if you haven't, we'll circulate it to you, I'm sure, by the end of the day today—based on the 'A snapshot of poverty' series that we've been doing with YouGov over a number of years now to get a sense of how people are managing. We published a report yesterday that was based on data from late September, early October, and it had a really big sample size of 2,000 people, so we're fairly confident that the findings are robust.

What it shows is that there are glimmers of things getting better, but I think 'glimmers' is the right word. In terms of the proportion of people who report that they've gone without essentials, that's dipped from 15 per cent to 12 per cent, but that's still quite a bit higher than we were in May 2021, where that was 8 per cent. When we look at specific stuff like going without food, going without heating, there's been no real change there.

The one positive place we've seen a bit of a trend over the last two years is children going without food. In 2023, 21 per cent of parents said that they'd cut back on food for their children. That's dropped to 13 per cent in the most recent survey. So, there are some hints that some stuff is getting better, but I think the fundamentals are still really, really difficult for a lot of families.

Is that reflected in Citizens Advice, Simon? Is that something that you're seeing as well?

Yes, Chair. Over the last year, or just under the last year, our local Citizens Advice in Wales have helped over 100,000 people. It was around a year ago we produced the report 'Reaching crisis point', which really reinforces the points that Steffan was making, and we haven't seen any big changes. A lot of that poverty is absolutely baked in and considerably above the levels that we saw pre COVID.

There are a couple of quick, specific areas to reinforce that. In terms of debt, just over half of our debt clients are actually living in a negative budget now, meaning that their income just isn't enough to cover all of their essential outgoings at the end of the month. A wider piece of research that Citizens Advice have done across England and Wales describes just over 190,000 people who were trapped in a negative budget during 2025, which is around 6 per cent of the population. Across that population, we're particularly continuing to see people with disabilities or long-term health conditions facing disproportionately high levels of struggle and hardship.

The same question to you, Jessica, but also, if you could go on after that question to look at—. The budget usually has included measures to tackle the cost of living. Could you assess how successful those measures have been, in your view, across the Senedd term? But, obviously, your reflections on the first question first as well.

Thank you. I think on the first question, it's encouraging to hear from Steffan that there are glimmers of hope that we're seeing. In other areas, there's no indication to suggest that things are getting better. We know the poverty figures for single parents have recently gone up again after reducing in previous years. We know that's mainly mothers, and I guess from our data we can see that the real issue is the gendered impacts and the mechanisms that make women more vulnerable to that are not really moving.

Women still have that unequal position in the labour market, which hasn't really improved. They remain two and a half times more likely than men to be working part-time, they are three times more likely to be economically inactive due to caring responsibilities, and overall economic activity rates remain higher. It's gone up for women and men, but the gap there has slightly widened. It's worse for disabled women and ethnic minority women; those figures were already higher, but they're also rising at a faster rate now.

Quite interestingly and concerningly, those figures are improving for men of these demographics and they're getting worse for women. So in general, we're seeing very little movement. The dynamics continue to push women, and oftentimes their children, into poverty, and there is, unfortunately, little to indicate that we're moving in the right direction there.

Should I go on to—

Yes. Some of the measures that the Welsh Government have put in place over the Senedd term, what's your assessment of them? Are they making a difference? Because you're painting a fairly bleak picture there in what you're saying in the statistics.

I think the discretionary assistance fund and the continuing funding for the council tax reduction scheme remains absolutely vital. We know that women tend to be on low incomes and are more likely to experience poverty, so these measures can really be a lifeline. We are unable to fully assess the gender impacts, because there's a lack of data. I believe, especially on the discretionary assistance fund, there was a recommendation by the committee a couple of years ago to provide that gender data, but that still isn't available to us. I think the take-home message is that headline poverty rates remain stagnant. The income support may be critical to preventing that from getting worse, but it doesn't seem to be enough to reduce, let alone address the underlying issues.

Simon, you were nodding to some of that about the discretionary assistance fund there. Is that something that you could comment on, some of the measures that the Welsh Government have been putting in place and whether or not they are successful?

Thanks, Chair. I was nodding. I think the discretionary assistance fund continues to be vital, and as Jessica said, similarly with the council tax reduction scheme—absolutely. I think the Welsh Government has, over this term and over recent years, definitely demonstrated a consistent commitment to tackling poverty in Wales, so you see a significant number of people not paying council tax at all, you see access to crisis support via the discretionary assistance fund. But in terms of what our advisers are seeing, both reflecting the broadening and deepening of poverty, there is an added level of complexity. Advisers in Citizens Advice in Wales are seeing people needing advice and help over around seven issues per person now, whereas it was four around the start of the pandemic. Therefore, we are looking at some of the wider issues, the wider vulnerabilities that the Welsh economy has, and also the balance between the levers that the Welsh Government have compared to the UK Government.

I echo what Jessica and Simon have said already, I think there has been some good action taken, but it's always difficult with stuff like this, it's almost counterfactual and I'm sure things would be even worse if it wasn't for stuff like the discretionary assistance fund et cetera. I think there are two broader points to consider that give context to that. The Joseph Rowntree Foundation's 'Poverty in Wales 2025' report, which Members might have seen, highlights how those in poverty are living in much deeper poverty now than the case was in the mid 1990s. In the mid 1990s—I'm trying to remember the figure off the top of my head—it's around £3,000 extra that an average family of two adults and two children of primary school age living in poverty would need to lift them out of poverty. Even adjusted for inflation, that's now about £7,600. So, in terms of the schemes that the Welsh Government have got, it needs to plough far more money into the same family to lift that family out of poverty than the case would have been 20 years ago.

There's a tension around that and that means that we sometimes, maybe, don't appreciate that just because we're not lifting people out of poverty directly, we're still making an improvement in their lives. I think it also reiterates the need, when we're looking to the next election, for bigger levels of investment in long-term preventative stuff, which I know we'll come on to discuss, around childcare and stuff like that, that might be able to make more long-term differences as well. I think a lot of the short-term measures that have been put in have made positive differences, but we just need to see that greater level of investment if we want to make a substantive difference in the longer term.

One aspect of that, I suppose, is the free school meals in primary school. That's a longer-term measure.

Yes. You can't draw too many conclusions from polling data, because you can't look underneath it, but one of the thoughts that came to my mind with parents reporting that their children were cutting back on food was whether that's one of the positive effects, potentially, of that policy playing out. If they're having a meal in school, that means that the money you're now not spending on sandwiches is money that you spend on cooking the meal that evening. You can see potential indicators there about how those policies can play a role.

With a roll-over budget, does that mean that—? Because effectively, the priorities match from last year to this year, rather than changing. Could you comment on that sort of roll-over? Are the priorities of the Welsh Government in the right places to be able to help alleviate the cost-of-living crisis?

As Simon and Jessica both said, I think a lot of the energies are in the right space. If you were starting a new four or five-year period, you might possibly start talking differently about some of this stuff, but I think it's broadly in the right space. But there are concerns we've got. We did some work with Barnardo's last December that showed that over half of children living in poverty in Wales live in a family where the youngest child is under five. Actually, there's less support for those families from the Welsh Government. A lot of that support is targeted at children of school age.

Because you have a roll-over budget, some of the weaknesses in the approaches with regard to those families are still not going to be addressed in this one. So, there are spaces like that where there may be opportunities to—. It's stuff like the baby bundle. That has been a pledge that we've had for a long time from the Welsh Government, but it doesn't appear to be any closer to being delivered. The budget for that wouldn't have been huge, and delivering that would make a difference to the first few days of the lives of some of the most vulnerable families in Wales.

Jessica, we talked about baby bundles a little bit there, and children of below school age. You talked about mothers in your first set of answers. Is that something that you're seeing as well? Are the priorities in the right places?

From our perspective, the most impactful thing that can be done, both from a gendered lens but also the wider prevention agenda that we're trying to get to, is investment in public services. We welcome seeing that again in health, in social care, and childcare. I think all of those are critical to our society and economy, and, of course, also massively gendered. Women are more likely to work in these services. They're more likely to rely on them, particularly childcare, as you mentioned, but also social care. So, if services are to be cut, it's mainly women as workers who lose their jobs. It's women who have to work under often very stressful conditions. But it's also women, more generally, who lose time, income, and have to stretch themselves to fill those gaps.

Thank you, Jessica. The same sort of question to Simon, but maybe linking through to the Welsh benefits charter that was published in January 2024. Has there been an impact of that over the last year and a half, nearly two years now?

We definitely welcome the Welsh benefits charter and the focus on it and the collaborative working with the sector, with organisations like all of ours here and others and with local authorities, but we would like it to be stronger and faster. We'd like it to be moving faster. We're very aware of the evidence that we all see in terms of those families who—and our advisers report this consistently—face real complexity in applying for those locally administered benefits. The principle behind that work—. Some progress has been made, definitely, but more needs to go forward. And also, just more widely, to echo the point Jessica made around public services—we can get onto the particular role of advice again in more detail—but also Steff talking about children and the child poverty focus, if we are thinking about the next four or five years, and I know we're looking at this budget, we definitely think there is a space for different types of investment, and you will know others have called for the idea of a weekly Wales child payment, like the one that's been introduced in Scotland, for example.

Steffan.

To pick up on the Welsh benefits charter point, I completely echo what Simon said about the fact that there has been progress. Some stuff has happened around the council tax reduction scheme in terms of being able to passport people—well, 'passport', we're not allowed to use that word—in essence, getting people from UC on to the council tax reduction scheme more easily. Some estimates have suggested that 60,000 households could benefit from that. So, that is a real positive. But I think there is a bit of a frustration that it isn't moving quicker, and there is a conversation to be had, possibly for the next Senedd as well, about how do we do that. Is it a budgetary thing? Is it that local authorities are feeling the pressure, possibly, of the increased take-up of benefits? And if that's the case, do we need to see more money in the benefits system, or is there something else that's going on that's holding it up? Is there a case that there might be a need to bring forward legislation in the next Senedd to grease the wheels and enable some of this stuff. Those are the sorts of questions I think that are probably worth exploring on that.

And then, on stuff like a child payment, from some of the modelling that we've done with Policy in Practice, the two policies that would have the biggest impact on poverty rates in Wales would be a child payment and action on childcare to get parents—more often than not, mothers—back into work. Those two things would make meaningful long-term differences to the rates of poverty in Wales.

Any comments on that, Jessica?

I guess I could dive into the child poverty and how that is linked to childcare point. I think it's really positive to see investments in childcare. We know they have the potential to make a massive impact in terms of reducing barriers to work, but we recently did some research that is suggesting that the schemes and the way they're working now are not very well designed and delivered to do that. We know we've seen investments in Flying Start and into the childcare offer with the Flying Start scheme. It's just providing too little, and it's too inflexible, the 12 and a half hours, for that to make a meaningful impact on employment. You need to be able to afford wraparound care around those 12 and a half hours, which families on the lowest incomes just cannot do.

On the childcare offer, families on the lowest incomes are excluded by the eligibility criteria. I think the Welsh Government's own evaluation data shows that most of the families who benefit from the childcare offer were already in work previously and were already able to afford formal childcare previously. So, I think the take-home message is that we cannot address poverty and child poverty without getting serious about removing the barriers to women's work. And I don't think we should talk about investment in childcare as addressing those issues when the current schemes are not well targeted to do that. I think there are very positive elements about the current schemes that we can build on, but a lot has to change, and we recently published a report that makes some recommendations around that.

Steff, wyt ti eisiau dod i mewn?

Focusing on the budget in particular, one of the challenges I've found in the last year is working out what difference that extra £30 million allocated to childcare has delivered. We know that Merthyr has completed the roll-out of Flying Start, but there's no publicly available information that I've been able to find, or in communications with people either, about where we are at with the other 21 local authorities. And so what has happened with that? Where are we? What are the plans with it that are having a real impact? Just on a personal level, I've got a 10-month old in nursery, and I have no idea if Flying Start will be available for her by the time that she turns two. And if I can't work that out, as someone who does a lot of work in this space, what hope does any other family have? We know that these things impact on decisions that parents make now about employment patterns and all of that stuff. So, I think there's a real need for greater transparency from Welsh Government of actually what the plan is, where we are at with it and when we are likely to see that full expansion.

Diolch yn fawr. I'll come to Mike Hedges now with some questions. Diolch, Mike.

Diolch, Cadeirydd. The first question is: to what extent does the draft budget address your priorities? And what would you like included in the draft budget? And what would you like removed from the draft budget?

Who wants to go first? I'll pick on Simon. There we are. Simon, do you want to—? What would you like to see in the budget and what would you like removed from the budget, I suppose?

That's a very good question. Certainly, in terms of what we'd like to see in the budget, we really welcome the continuation, as I said, of support around the discretionary assistance fund and the continuing recognition and funding of independent advice services in Wales. It's an incredibly important area. And in terms of the huge preventative impact, which is the language the Government's been using, it is key in terms of delivering money into people's pockets, bluntly. We're writing off over £20 million in debt and generating over £155 million in additional income into the Welsh economy through Citizens Advice Cymru advisers.

I think something brand-new would be absolutely to really look at and test the Wales child payment idea. I absolutely do think that, as Steff said, that is something that has been tested, and obviously they could do more piloting or modelling for Wales. It's not exactly the same as Scotland, but there's some really important learning from the impact that appears to be having in Scotland, Chair. So, that would be my new thing.

And I'm going to dodge the second part of the question, I think, because in terms of these areas, we know there are complex choices for the Government, just as there are for our partners and for public services, and I'm not going to pull one area out and specify it as lacking need. We're in a position where the deepening of poverty has been described in these areas, and specifically if we're talking about the areas that the Government have to address, and the levers they have to address poverty, we need to be looking in the other direction at bolder and more additional resources, frankly.

Steff.

Yes, I guess to build on what Simon said, I'm not going to cover the ground on what I've already said about childcare and child payments and some stuff around Welsh benefits, but I think free school meals in secondary schools is another one. So, to put that into context, the eligibility criterion still is £7,400 a year earned income. That was the case in 2019. At the time, if you worked 17 hours a week, you could get free school meals. Now you can only work, I think I’m right in saying, 12 and a half hours a week. So, no working parent, as per the Welsh Government's own definition of a working parent for the childcare offer, can actually get free school meals in secondary school now. That erosion has made a real difference to the situations of families, so I think that's another space.

And social housing—we know we've had a lot of investment into social housing from this Government, but given the extreme budgetary pressures that local authorities are facing around temporary accommodation, I think the need for that long-term action around social housing is vital.

Maybe to think about part (b) of Mike's question, our view is that social housing is the long-term answer to the temporary accommodation crisis. Therefore, could we be looking at some of the other places where funding is going in to develop a housing sector in Wales, and actually just allocating more of that into social housing rather than some of the other choices? Those are the sorts of decisions that, if you want to maximise your returns, we would argue might be worth taking a look at.

Any comments on this question, Jess, yourself?

Yes, I think I've talked about the importance of public services earlier, and we welcome the investments there. I should add that we don't think that the uplifts are enough to meet the increasing demands and cost pressures that services are seeing. I guess it is quite important to continue with those investments, but also ensure they're made in a careful and considerate way. As I said, we've developed some proposals around how that could be done in childcare. I think in social care, it would be really important to work towards solutions for reducing reliance on agency staff and on short-term contracts.

Simon, did you want to come back in?

Only very briefly, if I might, Chair. I just want to reinforce Steff's point around housing and to reinforce the point that we know that still Wales has some of the least energy-efficient housing in the UK. And so really speeding up the process of retrofitting poorly insulated homes and really thinking about how that piece of work can be developed to protect people from energy price fluctuations is absolutely another priority.

Thank you for that. I'll just make one comment before I ask a question. I was brought up in a council house. I am one of these people who is an advocate of council housing, and normally when I attend meetings like this, I'm the only one who was brought up in a council house. I really am keen that we build council housing at the scale of the 1950s and 1960s, and that's not really a Welsh Government action—it needs the Treasury to change the rules to allow local authorities to borrow against the value of their property, like they used to do. So, I'll just end with that comment, but as you're there, Simon, I'm going to ask you a question. The Welsh Government has allocated a total of £16 million in advice services. What impact do you think this will have? And can I just as a comment say I think Citizens Advice in Swansea and Neath Port Talbot is doing a phenomenally good job, and it's very well run.

Thank you, Mike. Yes, they are—absolutely right. The question was about the impact of advice. I think the figures stand up for themselves in terms of the whole of Wales. There are obviously different challenges being faced by the local offices, the local citizens advice bureaux, in the way you described, and they are well run and very efficient models of support. We are looking at increasing numbers of people coming to us, as I said, particularly in debt, particularly around homelessness, particularly around crisis. We have put £155 million back into the pockets of people in Wales over the last year and, as I highlighted earlier, in addition £22 million has been written off in debt.

I think it's important to also reflect on the sort of model that we're evolving in Wales. The ownership and the management of the single advice fund is now regional, and it's a new development in the last year that is giving a greater level of ownership and influence on that spend by the local CAB, as per Swansea and Neath Port Talbot that you've described, Mike. I think that, combined with the additional resource and income that Welsh Government have sought to find and have consistently found, actually, over the last year to support the bedding in of that work, and to support the opportunity for local regions and individual local Citizens Advice to develop and respond to their community need, or to evolve a response via technology—via using new technology, for example—is absolutely positive. It's essential, given the wider picture that we're talking about, if we go right back to what Steff was saying at the beginning. If this hadn't been here, we can't imagine the impact on people in Wales.

Thank you. Again, this is to everybody: the draft budget increases the discretionary assistance fund in capital investment to create a capital funding programme for credit unions. Now, I speak as somebody who's very keen on credit unions, even though the one in Swansea eventually closed. Is that putting enough help and support into credit unions, because they are far better than high-street lenders, never mind far better than pay-day lenders and unlicensed lenders?

Steffan.

One of the questions we've got, actually, in our snapshot survey is where have people borrowed their money from. I double-checked before coming, and the proportion of people who had chosen credit unions in the snapshot survey from September to October was 0 per cent. Up until now, it's been 0 per cent to 1 per cent to 2 per cent—it fluctuates around that. So, clearly, it is not—. Whilst credit unions do fantastic work, it is not getting out there as a major source of lending for the population. So, the money, whilst welcome and will make a difference, given how low the starting point is as a proportion of the Welsh population using credit unions, based on our survey responses, I suspect that there's a need for much longer-term work there, to really change and to increase people's participation. Because there's a lot of really good work, as you said, Mike, going on with credit unions in Wales.

Do either of our other two witnesses want to comment on credit unions, or—? No. Okay. Mike.

Finally from me, I'm going to talk about housing, which, as you know, Peredur, I do very often. I've got a question: there is capital being made available from financial transactions capital to registered social landlords, who most of us call housing associations, for house building. What impact do you think this is going to have on housing need? It's £26.8 million, which is going to develop, build, about under 300 houses, isn't it, after that, but every house is important. So, I'd like to see more of financial transactions capital being used in this way—would you?

Who wants to take that? Steff.

Yes, I'd agree with Mike: 300 homes are 300 homes, and they're not to be sniffed at and they're a step in the right direction. But given that, as of June, we had over 2,500 children living in temporary accommodation, that gives a sense maybe of how much more we need in that space. So, yes, I completely echo what you're saying, that, yes, it's welcome, but we need more.

I should say as well that we did some work over the summer looking at the experiences of children in temporary accommodation. We did find some quite harrowing stuff about children being placed in bed and breakfasts and hotels across Wales without cots for babies to sleep in. So, yes, we need this longer term investment, absolutely, but there's also a need to make sure that—. Is it cash that is preventing that from happening to make sure that babies have actually got a safe space to sleep at night in state-provided facilities, or is it something else about how the regulation around that works as well? So, there is something on that, but I absolutely agree with your broader point.

Simon.

If you permit me, Chair, would I be able to just add one caveat to my comment on advice funding from Mike? Because I think I forgot to frame that in the huge level of demand, which is outstripping our ability to supply that. Thinking ahead, we definitely endorse the language around prevention and the steps that have been taken in this budget and in previous years, but there's undoubtedly a need to go further. I think that that's crucial for us to recognise, that, despite the consistent understanding and engagement and investment from Welsh Government around advice, there are ways in which we need to be more innovative and to really think about where that could look and move in the next 10 years. Because anyone who looks at the independent needs analysis that was delivered for Welsh Government about 18 months ago around advice demand will see the picture that I'm describing. So, while it's really important, the progress that's been made, we definitely need to continue and move further and faster, and there are opportunities to do that.

Okay. Diolch. Jess, did you want to come in on the housing question?

Yes. I really wanted to echo Steffan's point on the importance of that and the increasing demand that we're seeing. Steffan talked about the impact on children. We know that women are also more likely to be reliant on social housing. We know that single-parent households, which, again, in the main, are led by mothers, are over-represented on the social housing waiting list. The Wales Women's Budget Group has recently done some research that hasn't been published yet, but I'm happy to share it with you when it will be, which looked at the income levels of women in different local authorities and the income you need to be able to afford a mortgage or private rent. That research found that private renting is unaffordable for women in 16 out of our 22 local authorities, and that women's income fell short of the average income required for a mortgage in all of the 22 local authorities—so, just to drive home the importance of that from a gender perspective.

Thank you for that. I think that, as somebody who grew up in social housing, I'm very keen on it and keen on its development. But on what we talked about earlier—and I can't remember who said it—about children being in bed-and-breakfast accommodation et cetera, and that damages their education, I was one of those people for whom education gave me opportunity, and, when children are moving school, moving where they're living continually, that damages their opportunity in education, which is the great way of getting out of relative poverty. Would you agree with me?

Everybody's nodding Mike, so I think they all agree. Sam.

Thanks, Chair, and thank you all for being with us this morning; I appreciate it. Perhaps I'll just direct this to Simon initially, and perhaps others will want to come in as we go along. We've seen the impact of the increase in employer national insurance on third sector organisations such as yourself, Simon. I'm just wondering if you'd be able to just outline how that has impacted you and the services you're able to deliver as a result of that.

Yes. Thanks, Sam. It was a particularly worrying time, and it definitely caused a lot of concern this time last year, for the period into the start of 2025. There has been a really positive response from Welsh Government, I have to say, around that, and additional funding was provided earlier in the year to cover the amount lost by local Citizens Advice in terms of the increased employer contributions. That funding, I believe, is being carried forward to next year, which is absolutely essential, because there's a range of sizes that you may know in terms of—. There are 18 local Citizens Advice across Wales. Some are quite big—it's all relative—and some are very small. The impact on all of them would have been really considerable if that additional funding hadn't been provided.

Okay, thank you. I'm not sure if others want to come in on the impact of the national insurance increase at all.

Again, we're a relatively small organisation, so, for ourselves, the impact has been less direct, possibly, than for others. But I know, from talking to others in the sector, that it was a real squeeze for a lot of people last year.

Steff. Sorry, Jessica.

Jessica, did you want to talk about—?

Yes. I just wanted to add that I think that, again, there's data suggesting and our personal communications with partners in the sector are that this is hitting women's organisations particularly hard. There has been recent research by the Rosa foundation that shows that 90 per cent of women's organisations are seeing an increase in demand, compared to 65 per cent across the wider charity sector. And this is expected to grow. We've still got a very competitive funding landscape, with only a small number of grants for women's organisations, especially those who are focusing their work on Wales. And, I guess, on a personal level, we are working very hard to fill the gap that has been left by Chwarae Teg. But, without this additional funding, that is proving very difficult.

Okay, thanks. I'll just come back to, Simon, your point about the additional support that Welsh Government were able to provide you, I guess recognising the particular types of services that Citizens Advice may provide as independent advice. It's interesting that, because I guess part of the argument around the national insurance increase and who is supported with that and who isn't—. So, there was funding obviously that came through for some public sector organisations to be protected from the impact of that national insurance increase, but providers of public services weren't necessarily protected from it, whether it's third sector or private sector organisations providing what feel like public services to ordinary people, they weren't necessarily protected from that. So, have you seen—? In terms of the clients or the people you're supporting as an organisation have you seen any impact of that? So, people who would ordinarily be getting support from other organisations who had to reduce some of that support because of the impact of things like the national insurance increase.

I honestly don't have direct evidence, Sam, around that. We could certainly go and ask our local teams and find out. I know that, across the wider third sector and across some of the smaller organisations that are supporting people—and, as you said, we've got larger organisations as well—there has been an impact. But I don't have any specific evidence about the feed-through to us from that decision in last year's UK budget.

Okay. That's fair. I think it would be fair to suggest that it's quite difficult to always see a direct correlation or to draw that line exactly across, so that's a fair comment.

And then, in terms of prevention, the Cabinet Secretary has told us that this year's budget places strong emphasis on investment in prevention. It's an interesting comment, considering its role in the budget. So, you wonder: was last year's budget also a strong emphasis on investment in prevention? But, yes—perhaps Steff first of all—would you agree with what the Cabinet Secretary has said? And if not, why not?

I think—. There's clearly stuff in there that is preventative in nature, but I think, as already alluded to, there are steps to go far further if we're serious about doing this at scale. So, we've touched on stuff around children already, the role of childcare, actually providing enough funding to have a service from nine months for children, getting parents back into work and the educational benefits for those children. That's a genuinely preventative thing that benefits various parts of the Welsh economy, various parts of the Welsh budget. There are the things around social housing that we discussed with Mike.

But, yes, there is investment in there. It's a step up on investment from—. Over the course of this Senedd, we have seen a step forward in terms of the funding that's going into that, but still, set against the budgetary demands on the crisis support side of things, is it enough to genuinely be preventative in that sense?

So, I think there are elements of it that are preventative, but, of course, I'm going to be here saying, 'I want to see much more,' and going into some of those areas that I just mentioned there.

Thank you. Jessica, was there anything you wanted to comment on in terms of that preventative agenda from your perspective?

Yes. I guess I want to start with the positive points. We've seen some real improvement around the budgetary process—gender budgeting pilots have been published, there have been improvements to the strategic integrated impact assessments, and I think that's going to be something really important in the longer term for the prevention agenda.

I think the investment that we've seen in women's health is a positive. Again, that has the potential to have, I think, a transformative impact. We know that women are often misdiagnosed, it takes very long to be diagnosed, to receive treatment. So, if that was done earlier, I think there could be a significant cost saving in the long term. It's critical that that plan is, I think, resourced at every step of implementation appropriately.

I've talked about public services and those investments and said that they're welcome, but I don't think they're enough to effectively support the prevention agenda, so we need more investment. And I think, in some places, there's also scope to invest that money in more considered and effective ways.

Okay. Thank you. Simon, did you want to briefly comment on that as well?

I think just to reinforce the point that I referenced earlier around advice as a preventative measure, Sam, and it's been proven time and again to reduce pressure on public services, and the importance of that in terms of stopping people's problems occurring or stopping them escalating, stopping many of the additional costs, despite the complexity that we're seeing increasing all the time, supporting mental well-being, supporting physical health, boosting—crucially, of course—household incomes. The investment in independent advice in Wales is crucial and is undoubtedly a key preventative measure in the budget.

Thank you, Simon. I'll pick on you, Steffan, for the philosophical question. Is part of the issue around this that everyone can argue whatever they do is preventative? Mike Hedges asked a question to the future generations commission in the last session, ‘Isn't education a preventative agenda?' And then he went on to comment that also, of course, health services are part of the preventative agenda. We've been talking about this for years. It's come to a point where actually we say, 'Nobody's ever happy to define what this thing is and can't get a grip of it, and everyone will just argue whatever they do is preventative.' What are your thoughts?

I think that's an interesting question, and I think there's a point in there somewhere.

Thanks. [Laughter.]

And I think there's also an inherent tension in terms of the way that we deliver public services as well. So, talking about those, what was it, 2,500 children in temporary accommodation, the reason we did that work was that we think the long-term answer is to get those families into social housing. But that's not going to happen overnight. So, the preventative idea is to build social housing, but you also need to prevent the harm to those children who are going to wait for decades until those new homes are built. So, what is, effectively, a form of crisis support needs to be better, because of the harms that that causes if that's not done well. So, I think that illustrates your point, really, in terms of no-one would say that spend on TA is preventative. Spend on TA is crisis support. But, actually, you do need to spend on TA to make sure that it's right for those kids, that they've got a safe place to sleep, a space to do their homework, and can get to school on time, because if you don't do that, then for those children, the educational harms, et cetera, the long-term harms to them are going to be even greater if you didn't do that.

So, I think, absolutely, there is an inherent tension that you can't just spend all your money on long-term preventative stuff because you are leaving people without, who need it now, and that is the tension that no-one's really got to grips with, and that has undermined a lot of the discussions around it, I think.

I'm really sorry, Chair, I've a couple of other questions, but I think you've already answered those. I had questions around children and young people, but I think you guys have commented on that, and also around childcare as well. So, I'm not going to jump into those, Chair. I'm happy to move on from those.

But just on this preventative thing again, do you have any confidence, whatever the political fallout is after May, that that Government will be able to get a grip of this? Jessica.

I don't think I can answer that question.

That's for us to answer, I guess.

I think there are things that we've been able to show, we've been able to model that would make a difference. So, the question is: do we get to grips and get on and do some of those things? And, going back to the question Mike was trying to get at, about what would you cut, those things are going to be inherently unpopular if you go, 'Actually, you know what, for the long term we need to do that, and therefore that means we don't fund this.' We know what works around a lot of this stuff, but it costs money and it's going to need investment to do that, and I think that goes to your question again: are people going to be willing to have those discussions to make those decisions so that—

Sorry to interrupt. Obviously, we're seeing a much more populist political landscape at the moment, so do you think the risk is that this will go backwards rather than forwards?

I think you can see risks and opportunities in different areas. I do think with something like childcare, there seems to be a bit of a head of steam building behind that. There's a recognition, in particular given the reforms that have been made in England on it as well, that we need to be doing something different, that we need to be taking action on this. In other spaces though, I think you're absolutely right. Some of the conversations around social housing, some of the questions around TA, you can see how these things are at risk of becoming toxic because they get caught up in other discussions that are not to do with the fundamentals around it.

So, I think there is, absolutely, a risk around some of those, and also in terms of local government's ability to deliver as well. Local government is responsible for delivering a lot of these things. Well, you'll know from your time in local government, a lot of that is felt more keenly by councillors, in terms of the local populism stuff. That prevents people from being able to take forward—. You could have a new Welsh Government come through with a policy and a proposal that we think is really, really positive, but if local councillors are facing that kickback locally, it becomes much more difficult for them to realise some of those ideas.

Is there an element of—? We heard it a little bit from the future generations commissioner's office in the session before, about how we measure preventative and that definition, and they've been working on some of it, and the old adage of what gets measured gets done. Is there an element of being better at measuring the outcomes, to be able to see that progress, and to see where you're getting the most bang for your buck, if you like?

Yes, I think so. And stuff like housing, I think there are quite obvious ones, so that you just have fewer people in temporary accommodation. That is an easy thing to track, and if what we’re doing around housing is not leading to that reduction, that would be an obvious thing. The number of people using foodbanks is another one, and I’m sure Simon and Jessica will have their own ideas as well. But there are things that we know, that people only use this at a time of crisis. So, if we’re serious about prevention, the number of people using crisis services should be reducing.

And Jessica, you wanted to come in on that, or on a related topic.

Yes. And I agree that measuring is important, but I also come back to the point that there are interventions where there is already very good data that they're working, both in the longer term and as a medium measure, that put more money into people's pockets. And we're then going to come back to childcare. There's very impressive data on the Sure Start scheme in England, and how that, I think, more than pays for itself in the longer term, for instance by reducing the number of hospital admissions of children.

In terms of the point around getting a grip, I think I want to reiterate that there are some really positive things that we're already seeing, for instance, in the Welsh Government's approach to childcare. I think now is the time for doubling down on some of those things, and just supporting the most disadvantaged children and families, improving equality. So, I think that there are positive things that we can build on and information that shows us what needs to be done.

Going to that—. Oh, sorry, Simon, I'll bring you in in just a second. But just with regards to the gender budgeting pilots that have been done, do they help in measuring some of this, or bringing it to the fore? Or how are those pilots going?

I think we're very pleased to see the pilots published. They point to the positive impact, that this can happen when it is done well. I think it's an ongoing and sort of iterative process of what we're learning. There's a lot of learning on the back of those pilots that could be implemented, that will make a positive impact in the long term if they are. I guess part of the gender budgeting agenda is to make sure that that information is available, is being used, that it is clear and transparent on how it has informed budget decisions, and we're seeing improvements around that. So, I think, absolutely, that's positive, and we need to keep the momentum going.

Okay, great. And, Simon, sorry, I cut across you before. Did you want to come in on the previous point?

Only to state what you might expect me to, Chair, in terms of your point about what gets measured gets done. I know I'm repeating myself, but I think it's worth repeating. In terms of the impact of the advice sector in Wales and Citizens Advice Cymru, if you're thinking about income maximisation, boosting people's incomes, financial support, and the incredible figures that we're talking about, there is still a lot to do. But what better way to measure that than actually thinking about and making investment in advice? That does not mean that that's a binary issue, because we're very cognisant of the points that Steff and Jess have made around crisis issues, and the highlighted issues around the discretionary assistance fund. But in terms of bang for your buck and the overall impact, given the huge levels of demand, advice, you know, quality measured, impartial advice can be measured, and it creates a really significant impact for people in Wales. That is an area that is preventative and can be developed and grown in future budgets.

Okay. Moving on slightly, more around how the budget is presented. We've heard from stakeholders like yourselves in the past that clarity on budget allocations, and the strategic integrated impact assessments, those form part of the budgetary process, and this year, I think, there's an interim and there's going to be a final assessment produced, the detail within the draft budget and obviously we're doing a two-stage process this time, which is supposed to be the norm, but it hasn't been for the last seven years. So, it's back to what should be the process. Do you want to comment on the transparency of the documents, of the information provided, how it is provided, and does it help your organisations really to understand what the Government is trying to do and that impact on your own organisations? Steff, shall I start with you?

Yes. I think that there are definitely improvements, and I think that being able to easily see where our money is spent, et cetera, makes it much easier for us to hold Welsh Government to account and work out what's going on. There are still challenges, though, that are beyond presentation but are actually in terms of how things are set. So, part of the reason that I find it difficult to work out exactly what's going on with childcare is that the childcare budget is split across three ministerial portfolios. So, actually working out what happened to the Barnett consequential from the expanded childcare expenditure in England is really quite difficult to do, because there isn't a childcare budget; it sits under each of those different headings. So, there are still issues around that. And I think that childcare is unique in that, because I don't think that it makes much sense to have part of it under the health budget, part of it under the equality and social justice budget and part of it under the education budget. It would make much more sense for that to all appear in one place, and that would then make it much easier for us to be able to scrutinise exactly how much is being spent and then what returns the public are getting for the money that their taxes are being spent on.

Okay. Jess or Simon. Jessica, did you want to come in?

Yes. I would say that I agree with Steffan's point there, and I think that childcare being split across those three different portfolios is a problem that's not only playing out in the budget, but across the board. In the interim, I see marked improvements. There's more detail and there’s clear reference to key sources and how they informed the spending decision. There's more recognition of the negative impacts and how the Welsh Government has sought to mitigate these, and I think it's crucial that we are transparent about these and understand what is happening there. In terms of going forward, I agree with Steffan that it's sometimes difficult to link budget decisions in the narrative to the actual budget expenditure lines, because things are split across different portfolios, because slightly different terminology is used. So, I think it would be useful to have more detail and more consistency across that.

Okay. Thank you very much. Simon, anything further?

No. I absolutely noted Jess and Steff's points, Chair, but nothing really further to add.

Okay. Thank you. That brings me to my final area of questions—well, a question, really. When it comes to the levers that Welsh Government have got, the fiscal levers, within the draft budget to address the cost-of-living crisis—. Mike talked about growing up in council houses, like my parents did, and that's using borrowing powers to help to build properties, and then you've also got borrowing and you've got taxation. There are two elements within the Welsh budget. What are your thoughts on whether the Government is making the most of those? And would you deploy it in a different way if it was your budget, I suppose? Steff. You're smiling at me, that's I why I—. [Laughter.]

I guess that there's always the discussion, isn't there, about why aren't we making more use of our tax powers, potentially. The Wales Governance Centre and others have noted the issues that, really, you need the threshold powers, possibly, to make more effective use of them, but there has been work that I know they've produced in the past that showed that there was a choice to be made, that you could raise similar revenues from increasing income tax as putting the pressure on councils to raise council tax, for example. So, there are still those questions. I know that the can has been kicked down the road a little bit on council tax reform, but that, again, is a space where we could be taking action and raising income, possibly, in a more progressive way.

We've done a bit of work ourselves recently looking at land transaction tax and council tax premiums, largely looking at what it tells us about the housing market in Wales. That's been the main thrust behind it. But, we are keen to look at that again. There are limits around some of that. Some of the discussions in England have been about raising capital gains tax to offset some of the losses from removing stamp duty. Obviously, we don't have the powers to do that, but there is stuff around that. And it struck us how, through the council tax premiums, of the 12 local authorities who reported how much they raised, they raised £49 million through those premiums in the last financial year. And that's with only six local authorities charging the maximum premium on empty homes and none charging the maximum premium on second homes. So, that could be another lever there, potentially, that has not been explored as it could be within the taxation system, both to raise income and also, maybe, to try and shape outcomes within the market.

Something that the Women's Equality Network have said, I think, is that linking that council tax reduction scheme more closely to income and making it automatic for low-income households, as well as introducing care-giving discounts to unpaid carers, would be a way of making council tax a bit more progressive. Do you want to unpack some of that for me? We've gone over slightly on time, but I just wanted to hear what you have to say on that aspect.

I think, subject to all the caveats that Steffan has mentioned, in terms of making those reductions automatic for low-income households, I think there would be potential to link that data better to data from the Department for Work and Pensions. I believe this work is being trialled in Scotland, so I think that would be something to explore, to ensure people are not missing out on those reductions.

In terms of adjusting eligibility criteria for unpaid carers, we think the current criteria are quite strict. They require a person to be in receipt of carers allowance, which we know many are not. They require people to care for at least 35 hours a week, which often isn't a reality because, especially, many women balance these responsibilities together with working, sometimes together with responsibilities to care for their own children, and they are under immense pressure emotionally and financially. So, if that criteria for unpaid carers could be widened, I think that could make a really positive impact.

Thank you very much for that. That does bring us to time this morning. Thank you so much for your involvement in this evidence session. It's been very interesting, and we're very appreciative of you making the time to come and talk to us. There will be a transcript available for you to check for any inaccuracies. Thank you very much.

Now, under Standing Order 17.42(ix), I resolve to exclude the public from items 6, 7, 8 and 10. Are you happy? Yes. Thank you. Diolch yn fawr iawn.

Croeso nôl i'r cyfarfod yma o'r Pwyllgor Cyllid. Mae'n braf bod nôl efo chi. Gobeithio bod pawb wedi cael rhywfaint o ginio yn y brêc. Rydyn ni nôl ar gyfer eitem 9.

We're back for item 9, and that's on the financial implications of the Development of Tourism and Regulation of Visitor Accommodation (Wales) Bill, in an evidence session with the Cabinet Secretary. Could you introduce yourself and your team for the record, please?

Diolch yn fawr, Cadeirydd. Mark Drakeford ydw i, Ysgrifennydd y Cabinet dros Gyllid a'r Gymraeg. Gyda fi y bore yma y mae Rebecca Hawkins a Helen John, sy'n gweithio ar ochr bolisi y Bil, ac Andrew Hobden, sy'n canolbwyntio ar y pethau yn yr RIA, nid jest am y Bil hwn ond yn gyffredinol ar draws y Llywodraeth.

Croeso cynnes i chi y prynhawn yma. Mae'r sesiwn yn ddwyieithog, ac mi fydd hefyd trawsgrifiad i chi ei tsiecio ar gyfer accuracy ar y diwedd.

I'd like to start, if I may, with exploring the overall costs and the benefits and uncertainties presented in the RIA. It notes that the costs incurred by the visitor accommodation providers are approximately £32.4 million across the 10-year appraisal period. Given these costs are in addition to those that will need to be absorbed by accommodation providers through the Visitor Accommodation (Register and Levy) Etc. (Wales) Act 2025, what impact could the accumulation of costs have on the visitor accommodation sector, and what are you basing your evidence on? That's a fairly specific question to start, but maybe, in a preamble to that, could you explain what the Bill is trying to do?

Diolch yn fawr, Cadeirydd. The Bill is designed to assist the industry in its future development, to provide confidence to visitors to Wales that, if they book into self-contained accommodation on a short-term let basis, that accommodation will be [correction: should be] of a standard that would guarantee that they would be safe and that the licensing scheme obligations had been met.

It attempts, as well, to level the playing field between short and longer term lets. We know that there has been a considerable expansion in short-term letting in Wales, and the obligations that you face if you let on a short-term basis are less onerous than if you choose to let on a longer term basis. That means that some accommodation that could have been made available to people who wish to live more permanently in places has been taken away from that part of the market and put into the short-term lets. We think that the obligations are unfairly balanced at present. This Bill seeks to redress that balance, and that's because tourism has its impact in particularly concentrated parts of Wales. It's very important that the industry is able to live in harmony with the communities that support it and who are supported by the tourism industry, and the Bill has that purpose as well.

In terms of your specific question, Chair, first of all, you are right when you say that those costs are over a 10-year period. They are modest to begin with [correction: for a start], and they are actually over a 10-year period. You referred to the costs that accommodation providers will face in the visitor levy Act, but, actually, if the local authority in which you are located chooses not to take up the permissive power of the visitor levy Act, the only costs that you will face will be the opportunity cost of the between 10 and 15 minutes that we think it will cost someone to register under the system. So, for very many providers, there will be no cash costs at all involved there.

The RIA estimates that the annual cost of a licensing regime for a typical provider with two self-catering properties is expected to be around £172 per year, and that is for both properties. That's less than £1 a day if you are letting those properties for three months of the year. Now, three months of the year is less than half of the 182-day threshold that is part of the landscape of this industry. So, if you manage to let a property for less than half [correction: more than half] of the 182 days, the cost will be less than £1 a day. I don't think that's going to be the determining factor as to whether or not anybody enters the industry or decides to continue to operate within it.

You touched in your answer there—as it was part of my next question—and you talked about that shift, potentially, from longer term lets into shorter term lets. We've seen that trend happening. Part of the research and part of what providers are saying means that some providers may leave the industry, or non-compliant visitor accommodation providers may leave the sector, leading potentially to fewer overnight stays, which then has a knock-on effect on the industry. How concerned are you about that, or have you quantified the size of that, the opportunities and the threats to what you're trying to achieve through this, and the financial impact that could have?

Well, Chair, I'm not unduly worried about it, partly because there isn't evidence from elsewhere where there are licensing schemes in place that that is what happens. But I think, in some ways, you captured the reason for my not being anxious in your question when you said that these will be people who are non-compliant with the conditions of the licence, and remembering that, to get a licence in Wales, there are five specific conditions that you will have to meet, four of which are already legal obligations. So, if there are a small number of providers who cannot meet those basic standards—they can't show that they've got an electricity certificate and a gas certificate and that there are fire arrangements in place—and if those people decide to exit the industry, I'm not sure that that is entirely to be put in a loss column, because if they can't manage to meet those basic things, they shouldn't be operating anyway. I think there'll be very few. I think most people in the industry absolutely want to do the right thing and already invest in the things that they ought to invest in. The licensing scheme will probably mean that some people who inadvertently are not doing that will become aware of their obligations and then will meet them. So, I think it's unlikely there will be a significant exodus from the industry, and if some people do choose to leave, then there is underused capacity in the industry already. Forty per cent of providers do not let their properties for 182 days a year. So, there will be still many operators who do meet the conditions for the licence who are underoccupied and will be able to pick up any marginal slack there may be for that small number of operators who find that they can't meet the requirements of the licensing scheme.

As part of the scrutiny we were doing as a committee on the previous Bill, it came through in evidence there that quite a few of the operators were keen to see some form of regulation in stamping out some of that worst practice that might be happening.

The RIA then notes the scheme will have a positive impact on the tourism industry in Wales, but it says that it wasn't possible to put a meaningful financial value on those benefits, and that goes somewhat to what you were talking about a few minutes ago. What consideration did you give to utilising data from schemes in Scotland and Northern Ireland to support the quantification of some of those benefits, and why weren't you able to at least have an estimate of it, or to be able to quantify some of it so that you've got an idea of what you'd expect to see from bringing this Bill in?

I think there are three reasons. One is that it is inherently difficult to provide quantitative estimates of things like improved visitor confidence, and one of the central purposes of the Bill is to improve visitor confidence—that if you come to Wales and you go to self-contained short-term lets, it will be of a standard that you can rely on. But quite how you capture that and put a figure on it I think is difficult in any context. So that's one reason.

Secondly, the scheme in Wales is a different scheme to the schemes in both Scotland and Northern Ireland, so it will be difficult to draw direct comparisons. And then, in a slightly paradoxical way, it's difficult to draw conclusions of that sort from Scotland because the scheme is very new, and it's difficult to draw those conclusions from the scheme in Northern Ireland because the scheme is very old. In the Scottish case it's difficult because the scheme has only been fully in operation since the start of this year, so you've got less than one year's evidence to draw on. That wouldn't be enough, I think, to be able to put a reliable, quantifiable, comparative figure.

The Northern Irish scheme is one that's been around for decades and therefore predates many of the more recent developments in the industry that are partly the reason for this Bill. The Northern Ireland arrangements completely predate anything like online booking platforms and all the things that have made entry into this market much easier, and I think that makes it difficult then to draw comparisons with the position that we've tried to respond to in this Bill. So I think for those reasons it isn't actually easy to use even experience elsewhere.

We have relied on advice from Visit Wales, particularly about our own indigenous experience and the work that they've done on quality standards—voluntary, of course—in the industry, and how that sort of signal to visitors has an influence on people's behaviour.

We've talked a lot in the visitor levy Bill about setting up the register, and that that was going to happen regardless of whichever local authority was taking that on board. With the difficulties that you've just outlined in Scotland and Northern Ireland in finding quantitative data, would it have been better to have waited for the register to be able to then know the scale, to then really work out the benefits for this Bill, and delay the introduction of this Bill to be able to have confidence in the numbers?

I understand the case that's being made there, Chair, and it is certainly the case that there are considerable uncertainties in the data, which we rehearse in the RIA and in the explanatory memorandum. Those estimates of the number of beds that are available for short-term letting in Wales vary widely depending on the source that you use, and that will be resolved through the register, so I understand that case.

The reason why I didn't feel that that was the right thing to do was that this piece of legislation was a commitment in the manifesto of my party, and other parties, at the last Senedd election in 2021. It's there in the programme for government, it's there in the co-operation agreement, and if we waited for the evidence that will come from the register, that would mean we couldn't legislate in this Senedd term. We would not be able to fulfil the commitment we made to people in Wales on those successive occasions.

We moved the register early to make sure it got ahead of the licensing scheme, but it still wouldn't be available for legislation in this term. I thought it was important to bring that legislation forward given our commitments, and we're not going to get the direct benefits at this stage. We will have those benefits quite a lot in the operational dimension of the scheme that will fall to the next Senedd. But you weigh those two things up, and my feeling was the commitments ought to be honoured.

Before I move on to one of my colleagues, how confident are you, given what we've just rehearsed around the uncertainties of numbers, in the costs within the regulatory impact assessment, and what leeway is there within those figures to potentially get it wrong, positively or negatively?

I think we're as confident as we can be in the conditions of uncertainty that we rehearse in the RIA, and we explain why we've come to the figures that we have come to. They are, as I say, figures informed by people who are already operating in the field here in Wales. In many ways, I think we have taken a precautionary approach to some of the costs, because we have not included in the costs some of the ways in which those costs might be reduced in the future.

I'll give you just two examples of that. If we have underestimated the number of providers that there are in this sector, then that will lower the cost of a licence per provider because the fixed costs in the licensing scheme will be shared amongst a larger number of people. We've not assumed that that would happen, but if it were to be the case—if we have underestimated the number of providers—the cost for the licence will go down.

I am optimistic and very determined that we will use the advantages of contemporary technology to make the administration of the licensing scheme more automatic than it would be in other circumstances, but we've made no assumption for that either. We've assumed that every time a certificate is submitted, a human eye will have to be cast on it to decide whether or not this is a valid certificate. We've assumed that if you get a reminder that you need to renew your licence, that will be a human being pursuing that and sending you the reminder. I am much more optimistic that lots of that will be capable of being automated. That will reduce the costs that are reported in the scheme.

I think if the costs in the scheme are awry, it's a plausible case for saying that they're awry because they've been overstated, rather than because they've been understated.

Thank you very much. I'm going to turn now to Hannah Blythyn. I welcome Hannah to the committee. Thank you for joining us this afternoon. I think you've got some questions to take forward. Diolch, Hannah.

Diolch, Cadeirydd, and apologies for being a few minutes late. I hot-footed it online from the Economy, Trade and Rural Affairs Committee in which I saw the Cabinet Secretary on this similar issue just last week, so it's good to have an opportunity to question you again, Cabinet Secretary.

I think you said in your previous answer to the Chair that it's not easy to make direct comparisons and use experience elsewhere because the scheme that's proposed here in Wales is different. But have you been able to take any lessons from the schemes in Scotland and Northern Ireland in terms of delivering a licence scheme in Wales that is both cost-effective and straightforward for visitor accommodation providers to interact with? Diolch.

Diolch yn fawr i Hannah Blythyn, Cadeirydd.

Yes, I think there are lessons we have been able to draw from the experience both in Northern Ireland and in Scotland, but the lessons we've drawn are driven by the evidence that we have accumulated from the sector itself. There was a very strong message from the sector that they wanted a licensing scheme—which many people in the sector have welcomed, Chair, as you said and as we heard in the visitor levy experience—that was as simple and straightforward as possible.

In the Northern Ireland experience, every licence that is granted requires a physical inspection of the property by an inspector who has to go there. Northern Ireland itself is considering moving away from that to a more risk-based scheme, and I think the lesson we drew from Northern Ireland was that we did not need that level of intrusion, if that's the right word—a physical inspector knocking the door, checking everything is in place—that that was over-engineered as a scheme. So, we decided not to do it that way.

In the Scottish case, I think the lessons we have drawn—and they were the same lessons we drew in the visitor levy context—are that a national scheme with a single set of rules that operate in every part of Wales and that is nationally administered is preferable to the Scottish approach. That may be, of course, completely right for them—they're bigger than we are, they have greater variation between different parts of their nation. They have a locally based scheme, with local authorities responsible not simply for the administration but for setting the conditions of the licence. So, if you're an operator that has properties in three different local authorities, you may have three different sets of rules to observe.

Because I was very keen that we listened carefully to what the industry is saying to us, we've decided not to follow that part of the Scottish experience, and to have that national scheme, nationally administered, starting with the requirements that are the ones that are most familiar to the sector. Because of the five specific requirements that you will have to demonstrate that you can meet in order to get a licence in Wales, four of them are things you should be doing already. Then, on public liability insurance, our contact with the industry tells us that very many providers already do that, and have to do it if they operate through some of the umbrella organisations that operate in the sector already. So, simplicity, straightforwardness—those are the lessons, I think, we've taken from elsewhere.

Diolch. The RIA, as you'll be familiar with, outlines three options, but only has cost estimates for the preferred option. I think I can rationalise why that would be for option 1, the status quo, because things would remain as they are. But can I ask why you've not included a cost analysis for option 3, which would introduce a nationwide visitor accommodation licensing scheme delivered solely by the licensing authority? Does that relate to some of the points you just made previously and lessons learned from, perhaps, Northern Ireland?

Yes, exactly that, Chair. Option 3 is much closer to the Northern Irish approach. The sorts of criticisms that are made of it is that it is intrusive, burdensome, bureaucratic and complex. Those were exactly the messages we were receiving from the sector that we ought to avoid. Those were the things we should not have in our scheme. We rehearsed earlier, Chair, in one of your opening questions, that it's quite complex to get accurate information in this area already. I didn't want the team of people who were working on preparing the Bill to spend a lot of their time preparing costs for a scheme that I wasn't going to operate, when it was quite difficult to get reliable costs for the scheme I did want to operate.

Option 3 is a proper option, and you need to provide those options in an RIA, and that's what we've done. But it was clear to me early on that option 3 was not going to be the one that we would pursue. I should say that there are some elements of option 3 that are part of our preferred option, because, while I expect the vast majority of accommodation providers to get a licence through that process of just being able to present the evidence and get the licence—that's where the vast bulk of people will be—there will be a residual number of cases where you will need someone to visit a premises, because there are uncertainties about the evidence, or there's information from others that leads you to believe that simply relying on bits of paper would not be sufficient to give you confidence the licence should be awarded. So, the preferred option does have those elements that look more like option 3, but they are for that smaller number of providers. The bulk will be done on that more automatic basis.

If I can move on, can I ask who will be the licensing authority?

The Welsh Ministers are the licensing authority—

And you will delegate that to—

You are able [correction: We are able] to use powers in the Government of Wales Act 2006 to pass that responsibility, to discharge it through others.

And who are you—? Who is going to be doing the work, I suppose?

At this stage, Chair, my expectation is that the Welsh Revenue Authority will be the authority that deals with the more automatic end of this process. And that's because of the synergies with the registration system. I'm very keen indeed that we do not have a position where accommodation providers have to go to multiple different portals and multiple different systems in order to comply with what, originally, was going to be one Bill and was severed into these two Bills.

Where it is straightforward, and for most people it will be very straightforward, you provide evidence of the things you need to provide, and the WRA is able to issue a licence. I think they are best placed to do that, well placed to do it, and the synergies between the two systems can be emphasised as a result.

Where you need someone to be on the ground, and making a judgment, having visited, I do not think the WRA is likely to be the right organisation there. It doesn't have that experience, it doesn't have those other skills. There we're more likely to have a version of Rent Smart Wales, which relies on a lead local authority, or you could make it the responsibility of each local authority, in those minority of cases, to do the legwork on the ground. Or you could think that Visit Wales might be the right organisation. That's a decision that doesn't have to be made at this point.

There are a number of things where I think Ministers have to be a bit careful not to get too far ahead of the legislature. There is no Bill, the Senedd has not decided whether this is a Bill it will support, we're not even at the end of Stage 1. The extent to which, as Ministers, you should be sponsoring work that costs money in order to resolve those questions—. I think, as a Minister, you ought to be careful of that line, really. So, there are some questions that will lie beyond this stage of scrutiny, but if you're asking me how I think the landscape will evolve, I think the WRA will do the bulk of the work, the automatic part of the work, and then you'll need some other body to deal with the minority of cases where it's more complex.

Sam.

Thank you, Chair. I guess, Cabinet Secretary, to build on the Chair's points, as a Finance Committee we'd want those assurances that, like you rightfully said, the Bill is at Stage 1 still—. The estimated costs of set-up in terms of whoever that licensing authority may be, and whether that's split in terms of some of the enforcement or on-the-ground action versus the automated action—how that's being considered within the cost estimates you've put together. You're right, I understand why you would say that Ministers shouldn't get ahead of themselves and dot every i and cross every t to the exact, before this becomes law, but I suppose we want to have assurance that it's been thought through enough that the cost estimates are about accurate.

Well, I think they are, Chair; we have confidence in them in that way. I understand the Welsh Local Government Association was positive in the Economy, Trade and Rural Affairs Committee this morning about local authorities discharging that part of the Bill. And you will see that how the costs of that are to be covered reflects the Rent Smart Wales approach. There will be, and are much more likely to be in that part of the spectrum, some enforcement action, there will be penalty notices. In the end, the scheme will be self-funding. We provide, in the RIA, a sum of money in the interim, because I wouldn't expect penalty notices to begin to accumulate for quite a while, because this is not a Bill—. Just as I've said in front of every other committee, enforcement is a last resort in this Bill, not a first resort. So, it'll be some time before we work through all the other ways in which you hope people will become compliant, before you have to start issuing penalty notices and so on. So, we provide a sum of money, £100,000 a year, to fill that gap in the early stages, and then the scheme will become self-balancing.

I have agreed, and with a lot of thought, really, to £430,000 being provided to the WRA, even at this stage, because the work on the register is going ahead already, and if you want to get the maximum synergies between the two systems, you need to be devising the licensing, the background, the IT, all of that sort of stuff, before the register system is all set in stone. Because I want to make sure we are in a position to gather those advantages, I have provided £430,000 in-year to the WRA, so they can do that discovery work now, so that the alignment between the two systems can be as close as possible, because I think that will generate significant benefits later—financial benefits and benefits in terms of ease of use for the providers. So, that sum of money has already been secured.

And in the discussions you've had with WRA, they are confident they can discharge what you're asking them to do?

Yes, Chair, they are. This is new territory for them, it's beyond what they were originally set up to do, but once they were confident that they could do the register, because the licence and the register are such a closely aligned pair of activities, then, yes, we are confident that they can do that as well.

I'll come back to Hannah. Sorry, we cut across you there, Hannah, so you can keep going with your questions.

No problem. An important line of questions.

Cabinet Secretary, just looking at when the costs have been estimated for the preferred option, it's on the assumption that the number of properties and providers doesn't change over time. However, the RIA mentions that the highly variable nature of the short-term lets market makes it difficult to accurately predict future market behaviour based on historical trend data. Would you be able to explain to the committee why such an assumption has been made, given that dynamic nature of the sector, and how it could potentially impact any cost estimates?

Well, I think there are a number of reasons why, Chair. It is important just to emphasise that the aim of the RIA is to consider the impact of this Bill on the sector. The RIA is not about the wider forces that operate around the tourism industry and the providers of self-contained accommodation. So, some of the points that Hannah Blythyn has just made are slightly beyond the scope of the RIA, which is designed specifically to capture the impact that this Bill, in its narrow sense, will have on the sector.

Even if we had tried to go beyond that, and to make an estimate of what the dynamic changes in the industry might be, I think I would have been at risk of a line of questioning from the committee that would have said to me: wasn't I offering you a rather spurious exactitude in that? Because it is genuinely impossible, I think, to be able to predict, with an accuracy that would lead to a figure in the RIA, whether this is an industry that will continue to grow—. It has grown very rapidly, this particular slice of the industry, but other parts of tourism in Wales have not grown at all in that way. There was a line of questioning from the Chair earlier that suggested the industry might contract as a result of the Bill. So, firstly, I think it's slightly beyond the scope of what the RIA was attempting to achieve, and, secondly, had we been drawn into that debate, I don't know if I could have said anything to you that would have been sufficiently reliable for you to feel I was offering you something that you could draw plausible conclusions from it.

Taking that on board, and Hannah's line of questioning there, with the scope beyond just this, as part of any post-implementation review, rather than the narrow impact of this Bill, would you expect it to look at a combination—? Because, obviously, this is a pair of Bills that will hopefully turn into two Acts that work with a lot of synergy, would you want the post-implementation period and the review to actually look at the combined impact? And is that something that you'd planned for?

Well, we are committed, through an amendment to the visitor levy Bill, to a post-implementation review. It's absolutely my expectation there will be a post-implementation review of this piece of legislation as well. Given the connected nature of the two pieces of legislation, it would obviously make sense. But I don't know how you could carry out a post-implementation review of this Bill if you haven't taken into account the success or otherwise of achieving the register. So, I think it's inevitable that they will—both post-implementation reviews will need to draw on one another, and, of course, I've tried to answer a line of questioning that was particularly true in the ETRA committee, but there are other impacts on the sector beyond these two Bills. And would you not need to take those into account as well, if you were making a rounded assessment of the contribution that these Bills are making to the future of the sector? So, I understand that point as well.

Thank you. Any further questions, Hannah? No. I'll move on to Mike Hedges, then, please.

Diolch, Cadeirydd. The first two questions are going to be on the IT system, and we know that IT systems can be expensive. What's your expectation at the moment—and, obviously, you can't be held to it—on whether a new system will be created? Will a current system in use somewhere else in Europe, or in Northern Ireland or Scotland be used, or will you try and tailor another system to work?

I don't anticipate, Chair, that there's an off-the-shelf system available anywhere else, because our circumstances, as I explained earlier, will differ too greatly from systems elsewhere. I anticipate the system will be built by a combination of the in-house experience of the WRA. The WRA have an in-house team; in fact, they've grown their in-house capacity in recent times. But they will draw in specific, additional capacity, where either they just need more hands on deck, or where there is a particular piece of expertise that isn't available to them in-house. It's how they went about building their systems for the landfill disposals tax and the land transaction tax, and I think they will want to go about the IT system they will need for the licensing scheme in the same way.

As you know, the costs of IT systems can vary substantially. I think there have been lots of examples, both in the private and public sector—the London stock exchange is an example, where, in the private sector, the costs went up dramatically. How will you ensure that costs associated with developing the licensing system will not go through that level of rapid increase? I always remember a district council in England that actually spent a third of its total revenue on its IT system.

Well, I think we can take confidence from the WRA's record in this area, Chair. As I say, this is not the first system that they have built. The very first system they built completely. These were the first fiscal responsibilities ever discharged in Wales, so they genuinely were starting from scratch, with a blank canvas, and they didn't run into the problems that Mike Hedges quite rightly has pointed to elsewhere.

There are lots of checks and balances in the system here, aren't there? The WRA is a non-ministerial public body, so it has a board that it is answerable to, who have direct oversight of it. I meet monthly with the senior management team of the WRA, and this is always an item on the agenda. It's a wider agenda than this, but it's always an item on this agenda. And, of course, the Finance Committee has independent rights of access to the WRA as well, were the committee ever to feel that you too needed to scrutinise the costs as they were developing.

The costs involved in this Bill, as you've seen, are at the modest end of things, in any case. And I don't anticipate that there will be the difficulties that Mike Hedges has illustrated. But I do think that there are lots of eyes on this, and if it did start to go wrong, it would be spotted early.

The RIA—

Sorry, Mike, if I may: on that point, is there any concern that using the WRA, in this and for the previous Act as well, is going beyond what it was designed to do in the first place? Are there any concerns that it's working beyond its expertise, I suppose, because it collects money and it distributes money, and that's what it does? Now you're asking it to administer different parts of policy that wasn't necessarily the intention when it was first designed. I'm just wondering whether there are any concerns from the board or from the senior management team that you're asking them to do something that they're not necessarily set up to do.

Well, I absolutely recognise that this is developmental as far as the WRA is concerned, although, in the visitor levy context, collecting taxes is what it is set up to do and the visitor levy is close to that. But a lot of discussion did go on with the senior staff and through the board. I think the general view was that this is the right moment for the WRA to move beyond its original set of responsibilities because I think its record in discharging those responsibilities is a strong one. It is a highly regarded part of the landscape here in Wales. It has demonstrated considerable success in discharging its original responsibilities and it's now five, six, seven years into that. So, it's more in a steady state as far as those responsibilities are concerned, and now was the moment to use the expertise that's been built up and the success that it has created to use that platform to allow it to develop and to take on new responsibilities. I think it's an important question to ask every time whether these are responsibilities that are closely enough aligned with the core purpose of the WRA for them to be the right responsibilities for it to move on to. But I think there is confidence that they are.

Okay. Thank you. Diolch, Mike.

We know that AI is in the very early stages of development, and the expectation is that it’s going to become much more important and a much more powerful tool, and you've said it may reduce operational costs and the burden on visitor accommodation providers. Do you still think that?

I do think that, Chair, for some of the reasons that I set out earlier, although, as I said, to be clear, none of the advantages that I'm about to outline have been taken into account in the costings in the RIA. For the purpose of the RIA, we are assuming that none of these things can be realised. But, to give just one of the examples that I gave earlier, Chair, if automation simply means that the reminder you get as an accommodation provider is generated by the system itself, and it tells you that, in order to renew your licence, you don't need to provide your gas certificate because that's still in date, you don't need to provide the electricity certificate because that is still extant, but you do need to provide evidence that your public liability insurance is up to date, I think that that's already a significant gain over someone having to go manually to check that and to draw up a letter each time you do it. You'll get better information, you'll get it automatically, it'll be easier for you as the accommodation provider and the costs will be lower than the RIA assumes. I, myself, believe that automation can go beyond that, but even with that one simple example, I think you can see where the gains can come.

Yes. I'm a great fan of automation, as you'll have heard on very many occasions across a whole range of areas, and automating more systems will make life better for everybody, including the people paying tax in Wales.

My last question is: what engagement do you have with the visitor accommodation providers when estimating the costs to be incurred by them?

Well, Chair, there has been, I think, extensive contact with the accommodation providers, particularly because of the overlap between the visitor levy Bill and this Bill, because while I have not myself had a meeting specifically to deal with the costs in the RIA, whenever I've met the visitor economy forum—and I met them as long ago as 2022, alongside Adam Price when this was part of the co-operation agreement, and I met them again last month, and I’ve met them in between as well—costs are always part of what is discussed. So, at the ministerial level and certainly at the level of officials who've been more closely engaged than that, discussions about the costs have been part of that engagement. And, of course, I understand that the message you get from the sector is that they want the scheme to be as efficient as possible and as low cost as possible, and a licence will cost, we think, £75 a year—that's our current estimate. I'm sure that will be refined as the process goes on, but I hope that that is a demonstration that we have listened carefully and designed a scheme that could be low cost, as efficient, but still sufficiently robust to ensure the integrity of the scheme.

Sam.

Thanks, Chair. And just to build on that best estimate of £75 per premises for the annual licence fee, could you just briefly explain how you came to that number?

Yes, of course, Chair. It is based upon that being a national scheme. It's based upon the scheme, essentially, relying on things that people are already familiar with and where they should have four of the five certificates they need to have already. So, the bulk of the £75 is made up of the additional costs that we think the sector will need to absorb in order to have universal public liability insurance. That is the single biggest—Helen's going to correct me now—or that's one of the biggest items.

That is the biggest element of the total cost to the visitor accommodation providers. That's not in the £75—£75 is our licence fee to them. In terms of the £75, we learnt a lot from talking to Rent Smart Wales about their processes and things like that. Obviously, we talked earlier about the uncertainty in terms of the volumes. To some extent, that doesn't affect the licence fee very much because you're multiplying up the work, but then you are dividing by a bigger number of providers, so—

So, just to be clear, the licence fee is seeking to meet the operational cost of administering the fee, essentially—

Yes.

It depends on the number of premises, and the estimates—. Because of the data being poor, which we have all discussed before, the £75 is about where we think the number of premises are, aligned with the estimated cost, the operational cost, of covering the fee.

Yes, and in the explanatory memorandum we gave some illustrations of what if the total costs changed and what if the total number of premises changed. They are just illustrations, but we reckon that costs of around £2 million a year ought to be enough to run the scheme.

Yes. So, can I just ask the Cabinet Secretary on this issue: the Association of Scotland's Self-Caterers have said that this estimate is, in their words, entirely incredible on evidence from Scotland? So, Scottish fees range from £205 to almost £5,700. So, how do you think the estimate of £75, being so far away from what Scotland is experiencing, or how are you able to argue against their point of it being entirely incredible?

Thank you to Sam Rowlands for that, because I saw that evidence as well. I think there are two confusions in what those witnesses said. First of all, our £75 is an annual fee and, in Scotland, local authorities can issue a three-year licence. So, if you were issuing a three-year licence for £205, you'd be pretty close to the £75 annual fee that we have. So, it is really important to compare like with like. I felt that, on that temporal question, they were not necessarily doing that.

And then I think the second way in which maybe their evidence didn't entirely understand the context is, if you were running a Scottish scheme in Wales, then maybe £75 wouldn't be enough everywhere, because each local authority would have different requirements and each local authority would be asking different things of you, whereas in Wales that will not be the case. So, yes, in a sense, if you were running a Scottish scheme in Wales, £75 might not be enough. But we are not running a Scottish scheme in Wales; we are running a Welsh scheme in Wales, which is pretty different, particularly, as I say, on its national basis, the nature of the requirements that we have in it, the national administration of it—all of which, I think, makes our costs more understandable in the Welsh context than if you were looking at it simply through a Scottish lens.

And I guess, Cabinet Secretary, you may also be able to argue that, with it being a national scheme, there are efficiencies of scale that can be achieved through this scheme versus individual local authorities.

That is absolutely inevitable, really.

I haven't—[Interruption.] Sorry, Chair.

Could I just ask one question? We talked about it earlier and, a couple of times, you have said four out of the five bits of information is stuff that visitor accommodation providers will have, probably, anyway. What's the fifth?

The fifth is the public liability insurance.

Is that all you were talking about?

You're not legally obliged as a visitor provider to have public liability insurance. We reckon that about 75 per cent do already, and, as I said, if you want to be a member of certain umbrella schemes that already exist, you've already got to have public liability insurance. But, for a quarter, we estimate, of providers, that will be a new cost, and we reflect that in the RIA.

And part of the costings for this, because you're talking about the £75 as we've just rehearsed there, that's for administering the scheme rather than the cost of getting those five things, because it, obviously, costs money to get a fire certificate and the rest of them.

They do, of course, yes.

So, we haven't included the cost of the four things that people should already have under current law, and guidance and things like that. We have included, in the cost to the sector, an estimate of a quarter of the people needing to go out and get public liability insurance, so that's why the Cabinet Secretary was saying that is actually one of the biggest elements of the cost to providers of this Bill.

And that goes back to one of my first questions, then, of that £32 million over 10 years.

Yes.

Yes.

Thank you. Sam.

Thank you, Chair. Forgive me if I've missed it, but I couldn't see within the RIA or elsewhere a cost associated with any appeals. So, just going through the logical process, someone applies for a licence, they're pushed back for whatever reasons, and then they appeal that. For me, I couldn't see where any cost associated with that would be. Have I missed it, or is that something perhaps you should consider, do you think?

I'm going to ask Helen, because she's more likely to have that detail than me.

So, on compliance, we've assumed that there will be an additional income stream from fixed-penalty notices and, as the Cabinet Secretary outlined, the Welsh Government would make some provision in the early years. The licence fee will be able to accommodate an element of the compliance, plus those other two elements that I've just discussed. So, the appeals will be in there too. We haven't gone through and identified separately what we think are the costs of appeals, partly back to the uncertainty over the total volumes, and then a question of what we are assuming about the level of compliance and then what we are assuming about the level of appeals against things. So, it's not separately identified—you're right.

Okay. And then, Cabinet Secretary, you did mention the upfront funding to recognise that any fixed-penalty notices or suchlike wouldn't necessarily come in those first couple of years. I'm just wondering how you've estimated it. I think you put it at £300,000 in those first few years to handle that. I'm just wondering how you've estimated the value of this. I expect some of this is just best-guessed on the intelligence you have available to you, but is there any further logic than that?

Well, it's based on the experience of Rent Smart Wales and the work that they do. So, the RIA assumes 1,000 cases a year need some sort of support with compliance. Again, I'm absolutely proceeding on the basis that most people will, once they've got good advice and they know what they're meant to do, will be able to go ahead and do it. We assume, though, that 10 per cent of the 1,000 cases will need some more help beyond just good advice and being pointed to the code [correction: guidance] and all of that sort of thing. So, that 10 per cent of those 1,000 cases, we assume, will need a full inspection. We allow 10 hours for each of those inspections and we make [correction for each of those inspections, making] an allowance for how long it will take to write up a report following an inspection. When you do all of that, then that's when you get the figure that you see in the RIA for the level of initial financial support that the Welsh Government will provide until the system is in balance.

Okay. Thank you.

Based on that, then, the fee will still be £75.

Yes, because those costs are enforcement costs, and they will come through the penalty notice regime primarily, although there is an element of contribution from the licence fee to it, but it's the penalty notices that will, we believe, cover the cost of compliance in steady state.

But if somebody has applied for the fee, they've provided the five bits of information that they need, they believe that that's fine, and the licensing authority decides, 'Actually, we're going to do a spot check', or 'We're going to go and check this out', there's no additional cost to the provider because it's covered by that fee; it's just how you capture any enforcement beyond that.

Beyond that, yes.

Okay, fine. Sorry.

Okay. Thanks, Chair. Just a final question from me, and I think you probably addressed this, Cabinet Secretary, in your opening remarks, but I just want to be really clear that you do not believe that the introduction of this would impact or provide barriers to providers considering entering the market at the moment, or that we would significantly see a contraction in the amounts of self-catering accommodation that exist in Wales at the moment.

This is an area, Chair, where market access has become so much easier in recent times. If you decide you want to let a property on a short-term basis, essentially you've just got to advertise it on an online platform and off you go. The barriers to entry are very low indeed, and compared to the barriers for longer term letting, there is a disproportionate impact on the individual, which this Bill does attempt to redress a little. I don't think there will be people who will be put off from entering the market by the requirements to get a licence. I think very quickly—and you've certainly heard these voices from the more organised part of the industry—they will regard this as a scheme that endorses the offer that they make. They'll be keen to advertise the fact that they've got a licence to operate, because that would give people confidence to come and book with them. So, rather than being an inhibition to people entering the industry, I think it'll become part of what the industry is able to use as part of its own offer to people who are thinking of making a booking with them.

I did say final question, Chair, but may I have two minutes?

Carry on, yes.

I thought I'd make the most of it. Some may say from a cost perspective that—. They may say that there may be future requirements. You've got the five at the moment, four of which are existing law, one of which is certainly at least best practice in terms of public liability, but I guess there may be assurances sought from the sector that that won't just be the start of a long list of things to come in future years. Is there anything in the legislation that you think would give assurances to the sector that the future costs of such a scheme aren't going to become out of reach for some of them?

The assurance I would offer to the sector, Chair, is that Welsh Ministers cannot go beyond what is on the face of the Bill without the express approval of a future Senedd. So, all Ministers can do at the moment is to run a licensing scheme for self-contained, self-catering, short-term let accommodation. It can't go beyond that, nor can it go beyond the requirements that are set out on the face of the Bill, the general requirements and the specific requirements.

The Bill does open a path to a future in which further sectors of accommodation—caravan sites, camping sites—[correction: caravan sites, camping sites, for example] could be added to the licensing regime, but that can only be done with the express approval of the Senedd, and any future requirements beyond what are in the Bill are in the same place. It creates a pathway to that happening, but it's not an open pathway; it's a pathway that has the Senedd sitting on it. And only if a future Government can persuade the Senedd that that's the right thing to do, and the Senedd would have to vote on that specifically, would things develop in that way. That's the assurance I would offer.

And we'd have to do a regulatory impact assessment for those additions, whether that's additional conditions or additional types of accommodation. So, as part of the Senedd scrutiny they'd be able to see what we thought the cost burden on the industry would be.

Thank you. Thanks, Chair.

And just to clarify, a final question: this is not designed to make money; it's designed to cover its own costs. So, if you found that you'd miscalculated and it was £60 for a licence fee, then it would be £60—

Absolutely. That's what it would be. There's no revenue raising.

Yes. It's not a tax; it's a licence.

It's a cost-recovery model, but it's certainly not a revenue-raising model.

Yes, right. Thank you very much.

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