Public Accounts and Public Administration Committee

Thank you, Chair. Well, you've started with a big one there, and let me find a way into it. I think, to begin with, on this point of complexity, you're absolutely right, that was one of the central points that my predecessor made in his equivalent valedictory reflections eight years ago.

We are a small nation, 3 million-plus people, broadly equivalent in size to the metropolitan areas of the west midlands or Greater Manchester, and yet we have an incredibly complex and convoluted landscape of public service delivery, both in terms of formal public organisations that are in place, but also a web of further structures that we've layered on top of those to try to support greater partnership working and collaboration. And, from my seat, all of those things, I think, come from a good place—the rationale behind all of that will be there at an individual level. Yet, you piece them all together and what you're left with is this spider's web of complexity, and that manifests itself, then, in things that will be directly of interest to you, because that manifests in terms of a confusion, sometimes, in terms of lines of accountability—who is responsible for what—confusion for the public and service users as to who and how to access the most relevant part of the system. And it comes with a real cost, both a financial cost but also an opportunity cost in terms of how senior public leaders are using their time and effort. What has been the barrier to reducing that over my eight years? Bluntly, a lot of that comes down to politics. It's one thing to put new organisations and structures in place; it can be a very tricky thing to disentangle all of that, especially when, as I say, there will be sound rationales at an individual level for pretty much everything we've got.

What I have recommended several times during my tenure is that, at the very least, we need not to be layering further complexity into the system unless we're simultaneously stripping something out as well. And if we are to have the sort of systems that we have in place at the moment, then we should be testing them at a much more forensic level for them to demonstrate their value for money, rather than accepting that as the status quo. I'm grateful for the fact that it's not my job to say what the alternative patchwork should look like, because I appreciate that's a difficult thing to do, but a very strong message I would leave you with is that it is too complex for a relatively small population, and if we could untangle that, I think we would have a more efficient system with clearer lines of accountability, and we would be able to reduce some cost burdens and see some greater efficiency in the machinery overall.

Thank you. I'd like to invite Alun Cox to ask the next question.

Thank you, Chair. In your letter, you reflect on two decades of financial pressures on public bodies in Wales, austerity throughout Wales, and you mentioned some of the measures that we've tried to introduce to regulate spending, regulate how we spend. What are your reflections on how that has shaped our public bodies and shaped our response to efficiency? Is there a problem with austerity and efficiency? Do we not have the money in order to do the things that we need to do to change our public bodies?

Yes, I see what you mean. So, the starting point that's important for me to recognise is that the vast majority of what I see in our public services is a pretty positive one, if I'm honest. It has got a lot of good people doing good work in very challenging circumstances. The financial challenge is undoubtedly one of the major ones, especially over a long period of time, as you've described.

I think one of the consequences that I have seen that we're now paying the price of is that, in times of tight budgets, it is very tempting to pare back on some really important things that are not particularly high profile or impactful at that time. However, 10 years down the line, you see the price. So, for example, one of the points I've made in my reflections is the importance of just routine maintenance and upkeep of capital infrastructure. Very tempting to pare back on that in-year to make your finances work, but you see 10 years of that and then you start to see it manifest in far more serious ways.

We also see it repeatedly in our work in some of the workforce challenges that the public sector faces, often in quite small, niche areas. So, we've done work, for example, around flood defences, around local authority planning departments and so forth, and many others, where what we're seeing is real pressure for quite small but crucial areas of expertise, and, again, those have been neglected over that period. So, these things do, I'm afraid, store up trouble for the future. Where we are right now, unfortunately, is we're having to deal with those pent-up consequences. We're also in a position where, in my view, as I've said in my reflections, I don't think our public services are on a sustainable trajectory at all, because we are having to deal with high levels of pent-up demand, in part from the pandemic period, and we're having to deal with rising demand across all of those areas of public service and shrinking or flat-line financial support at a time when inflation at a local level in some of these specialist areas is very high. If you put that cocktail together, you can't square the circle. So, what is needed, in my view, is some far more fundamental transformation of our approach to public service delivery. In large part, that's around the preventative agenda—a sharper focus on value for money, long-term thinking, all of the things I've flagged in my paper. The political difficulty that comes with that, of course, is that those things will take time to deliver and, in the short term, we're faced with severe pressure points. So, I'm afraid I can only speak as an observer in this capacity, but, in my view, we have to grasp that nettle, otherwise we're just storing up further trouble and we'll be in this place, or worse, in a further eight or 10 years down the line.

Thank you, auditor general. Andrew R.T. Davies.

Thank you, Chair. Auditor general, thank you for the work you've done over the last eight years, and your officials in particular. Could I ask you, in relation to the paper that you submitted to the committee, you emphasised productivity and the importance of productivity in driving change and outcomes, because there's no point in putting more—? The health service is a good example of putting lots of money in, but, actually, if you look at the productivity of the health service, we're not getting the numbers coming back out, we're not. So, is that a structural issue, is it a leadership issue, or is it a combination of both, and, actually, the whole thing around public sector delivery needs a complete refresh and rethink so that productivity is placed at the centre of our decision-making process, so that, on a value-for-money basis, we are delivering the change that's required?

Yes, thanks, Andrew. It's a bit of all of those things, I would say. First and foremost, I think it's important, when we talk about public sector productivity, to keep in mind that we need to be talking about outcomes as well as outputs. You know, we're not just looking to generate more activity. So, we need to be clear on the outcomes that we're looking to obtain, and that's another weakness that I see in the system. There are some clear areas in my view where we should be focusing if we're serious about increasing public service productivity. No. 1 harks back to Mr Cox's point about the importance of investment in those building blocks around infrastructure, routine maintenance of our estate and assets, building capacity within our workforce, and so forth. Those are not high profile to many people, but they're crucial if we are to see greater productivity further down the line.

Secondly, to your point, it's about how we are deploying the resource that we do have, because even in these times of tight finances, this place and the Welsh Government control the best part of £30 billion of public spending. That's a third of our GDP in Wales. So, we have some very significant financial levers still. But what you will see from our work, time and again, is that we're missing opportunities, in my view, to be utilising that resource in different ways that would deliver different outcomes and better outcomes, certainly, further down the line.

So, just to draw a couple of examples, just in the last few weeks, I've published a couple of pieces that are NHS focused—one looking at NHS handling of planned care, the other looking at emergency and urgent care. In both those examples, you will see clear opportunities, I think, to deploy our resource in different ways. So, over the last few years, for example, we have invested the best part of £0.5 billion in measures to try to bring down the longest waiting times. Some of those steps have been successful, but also expensive. They're expensive and unsustainable approaches. For example, greater utilisation of the private sector, or weekend working for surgeons and teams, effective in pulling down those waiting lists, but you can't keep on with that as your model. Similarly, you look at out-patient waiting times. Something like 200,000 out-patient appointments were missed. If we could shave a fraction off those numbers through better data systems, data sharing for teams on the ground, you would save very significant sums of money.

And finally, delayed discharges. I'm sure you're all familiar with the issues there. The work that we've just done recently suggests that we're looking at something like £175 million of resource that is not being used efficiently because we've got people in hospital who are medically fit to be discharged. If we could unlock that through utilising that resource in a different way, you'd be delivering far better outcomes for people. You'd be also addressing some of the other challenges that you'll be familiar with, about ambulance waiting times and the flow all the way through the system.

So, there are opportunities, undoubtedly, in my view, to deploy the resource we've got in different ways to deliver better outcomes. But it will all come back to the point I made earlier: politically, some of these things are quite challenging and difficult to communicate, because they will inevitably come with a shorter term cost and consequence in order to deliver some longer term gain.

Thank you. Carrie Harper.

I would have asked what your suggestions might have been in terms of simplifying the spider's web in terms of structure that you referred to, but you did say it wasn't your job. [Laughter.] So, I'll leave that one alone for now. But one thing that you've pointed to is the pandemic response as evidence of something that can be achieved when public services unite around an objective. So, what lessons can we learn from that period? What should be embedded and why hasn't it already happened?

It's a really good question. So, I remember at the time of the pandemic pledging to myself that I would avoid looking back at that time as auditor general, with the benefit of hindsight, and doing the classic audit-y thing of raking over the coals and pointing out where everything had gone wrong. Because I was part of that time, as we all were, and it was extremely challenging. So, my general observation of the public service in Wales at that time was that it performed remarkably well. We saw some superb work on the ground, with people at the coalface really delivering important public services in completely different ways.

At a more strategic level, I think the thing that worked best from my perspective in Wales—well, two things. No. 1, there was undoubtedly a higher risk appetite. There was permission that came from the top of Welsh Government to public organisations to say, 'These are extraordinary times, and we're going to have to do some things that are riskier than normal and they won't all go right.' And that is undoubtedly how things panned out. But I think that fundamental message was a good one, and will be a good one to carry forward. That doesn't mean, 'The shackles are off, just crack on and do what you like.' These things have to be well managed. Risks have to be managed proactively. But I think the public service can be overly risk averse. And so, the first thing I'd point to is that, at the time, culture shift that I saw.

Second was the level of collaboration that I saw in the system. And this is a word that we use a lot in Wales, that we will be very proud of our collaborative approach and it, in part, tracks back to the opening question about the complexity of the system. Lots of the complexity is there to try to encourage partnership and collaborative working. But what I saw was that collaboration really working, and I think key to that was that, because of the extraordinary times that we were in, organisations and individuals became less focused on their own operational delivery—who would take the credit, who would take the blame, whose interest trumped somebody else's—and there was much more of a collective will to pull in the same direction. So, I think it was the severity of the challenge that brought that about, a genuine sense of us all being in it together and wanting to pull in the same direction

Now, we should be able to deliver a large part of that, in my view, in normal times. We can't always be operating in crisis mode, but I fear that some of those good features that I saw at the time had been lost as soon as we all started to settle back into the normal pattern of events. By extension, I remember being in front of another committee a few years ago, answering questions about the public sector's readiness to address the net-zero agenda, and bluntly, it wasn't there. We don't know how much it's going to cost us, we don't know how we're going to achieve it. The only way you will be able to rise to challenges of that sort of magnitude—you could point to the challenge in the NHS or social care, all the things that you'll be well versed in—is if there is that collective drive to address it, and to move away from some of the organisational boundaries that unfortunately we have in Wales at the moment. All these things interconnect. The complexity of the system is part of the answer to your question.

Thank you.

Thank you. Cai Parry-Jones.

Coming back to Andrew's question and your answer on the web of complexity and the fact that, eight years ago, Audit Wales was saying the same stuff you're saying now, when it comes to the pipeline of change, from getting information from you to it being solved, where do you think the issue is? I know that somewhere you mentioned that committees were under-resourced in the 60-Member Senedd system. Do you think the committee could have done more to stop you saying the same thing that you guys said eight years ago?

I don't think any single committee, the public accounts committee or any other, could have shifted that dial in a significant way. Bluntly, in Wales, most roads lead back to the Welsh Government in some way or another, and you will, I'm sure, during your time in this Senedd, come across that issue time and again, and the tension that exists in the system between the Welsh Government as our system leader driving and being responsible for everything, and an understandable desire to devolve responsibility down to other parts of the system and other structures. And that's a balance that has to be struck. I wouldn't suggest you go to either extreme. However, if the challenge you're looking to address is the one of complexity, no other single part of the system will address that complexity without a really strong leadership message coming from the Welsh Government. And so, that would be where I would lay the challenge for addressing that, first and foremost. Once that's done, as long as all of the subsequent policy and funding signals and decisions are coherent with that, and I think if you get something done, there will be political noise about change on that scale, but that's where the catalyst would lie, in my view.

But you don't think—. For example, for all the recommendations the previous committee made in the legacy report, it’s not about dealing with complexity, it's focusing on Industry Wales spending strange money and things like that. Do you think we should be making more recommendations just focusing on complexity, because it's such an important issue?

I think what a committee like this should be doing, absolutely, is focusing on the big-picture things that matter most, and complexity is undoubtedly one of those; productivity and value for money are undoubtedly one of those. The risk with any committee, but this committee probably more than any, is that because your remit literally covers everything, you can be drawn down into the weeds like that, and you will be missing an opportunity if you do that. Sometimes, you've got to have the detail to back up and form the evidence base for your more strategic work, but I definitely would encourage you to try to keep that in mind. Stay at the strategic level in your focus, perhaps drill into things that are illustrative examples of a wider issue, but don't get pulled into the weeds on specific things that, in the scheme of that £30 billion, are small beer.

Thank you. Anna Nicholl.

I think this question might have already been covered, including by the last question. Thank you for your report. I think it picks out some of the key issues that we need to be looking at, one of which is long-term thinking and prevention, which has been picked up, actually, a couple of times, and your emphasis that this isn't just about tweaks here and there, and increments, we really need a transformation here and a shift in mindset of how we think about this.

You mentioned also that we've got some good levers to push us in the right direction of long-term thinking and prevention. I know this Government as well is focused on prevention and the Well-being of Future Generations (Wales) Act 2015, but that there are also various things that are holding us back. I guess it's not the institutional complexity that maybe comes out, but it's almost like we've got now this new push, but we've got all sorts of different target setting, and maybe even the way we do audit or budgeting is actually going in the other direction. Are there things that you think we should be looking at on what is holding us back, and how do we keep our focus on that?

Absolutely. I think the challenge, if I can be blunt, is to turn the rhetoric into reality, because the debate about prevention is not really a controversial one, so far as I can see. It's not unique to Wales, it's a debate that is happening internationally, and there seems to be a broad level of consensus that it is a sensible approach to take. So, there are various parts of challenge, I think, to try to address your question, Anna.

No. 1 is that you as a committee need to be holding the Government to account, I would say, to make sure that the signals that the Government gives to the rest of the system are coherent and consistent with that higher level strategic message of, 'We want to transform our public services to a more sustainable footing, and part of that is a focus on prevention.' So, to give you an example, later this week I will publish a short note that summarises our audit of the NHS accounts for last year. Spoiler alert, it will paint a similar story to one that we are familiar with, where the system as a whole is in deficit and showing no real signs of coming out of that. Well, if we're serious about breaking that cycle, then some of the accountability framework that we have in place needs to shift away from holding organisations to account for this year's budget, or driving down waiting times right in the here and now, to a longer term approach. We still need to hold people to account for it and ensure that they deliver it, but you've got to break that cycle somehow. And part of that from the Welsh Government perspective is about sending signals into the system that are consistent with a higher level message about long-term thinking and prevention. It's not peculiar to the NHS; we see that across the board.

I'll also be publishing this week—I'm having a busy week before I go—a national report, which will come to this committee, I'm sure, on the local government funding formula and approach. And again, that will point to some familiar themes about how the Government funds local government: the relatively short-term time horizon that it gives to the sector, the temptation, always, to push grants out of the door late in the year and say, 'Use this to good effect.' Neither of those things helps if you're serious about saying to the local government sector, 'We want you to think and plan for a five-year or a 10-year time horizon', if your focus is just on the here and now, 'Here's a pot of money that we can't promise you'll have next year either', and 'Here's your funding for this year and we can't tell you what you'll be getting next year.' So, you've got to change that fundamental approach in some way, in my view.

The Welsh Government will kick me for saying this, because they're probably sick of me saying it, because I've said it several times as well, in terms of the prevention agenda. Last year, I published a statutory report, which I have to produce once in every Senedd term, on the Well-being of Future Generations (Wales) Act 2015—my assessment, based on all the work that we do, of how the public service is delivering against that piece of legislation. And one of the core ways of working in the Act, as you know, is prevention and also a long-term approach. I made four recommendations, all of them to the Welsh Government. One of the recommendations related to prevention and, in essence, said that my recommendation to the Welsh Government is that they sit down with all other parts of the system, all those who are subject to the Act, and work together to try to identify, first and foremost, how much we are spending in a preventative way at present, because we don't know; how we can protect those areas of spend from erosion; how we can incentivise other areas of spend; and also how we can learn from what others are doing outside Wales. So, I framed that in a way that I thought was eminently acceptable, but that recommendation was rejected and, to this day, I don't really understand how it can be rejected and how it can square with the higher level message that I hear from the Government about its focus in that area.

So, the new administration may take a different approach and may revisit that, but it's certainly one—. Again, to this committee's remit and to Cai's point, hold the Government to account at a macro level, at a strategic level. If prevention and a long-term approach is what we say we want the whole system to do, then we need to see it manifested in the detail as well, not just as a high-level message.

Thank you. Shav Taj.

You've given me so much—I've got so many questions, but I get one, so I'll try and stick to the one. I will do my best.

You've talked about the COVID-19 pandemic, and you have also talked about austerity and how we've arrived here. But you very clearly also referenced—you said something along the lines of—'We're too layered for a population of this size', and the fact that, during the pandemic, people were working much more closely together, and, of course, there was the pandemic review and Wales was somewhat running its own review as well, at the same time. I've never really understood how the two have ever collided. But, based on a lot of what you have said, what, I guess, one of the questions that I have—. It's quite a clear question, and that is: what is the current exposure that we have? What are the risks to the taxpayer in all of this in terms of service delivery? Because you've talked about local government, for example, where lots of expertise has been lost, partly because of funding, austerity and so forth, and we've now arrived at the point where we need skilled individuals. Have we ever actually conducted a full root-and-branch skills audit, for example? Have we got the right people in the right place? Do we have the right levels of staffing?

Well, a lot of the work that we've undertaken illustrates workforce challenges, and, as I said earlier, that ranges from quite small, niche but crucially important areas, where we just haven't got the expertise in potentially quite a competitive environment. That is a definite challenge for us. One way through that might be for a small country to think a little differently about how we look to attract and retain that sort of very specialised area of resource that we need, rather than try and replicate it in lots of different organisations across the country.

More generally, absolutely, we've got workforce challenges in the education sector, in the NHS, within the Welsh Government itself. Undoubtedly, they are there. I'm not aware of—we certainly haven't done it—an across-the-board assessment of what those weaknesses and shortages are; however, they are there. I'm afraid addressing them all plays back to my central point that none of this is quick and easy. It means training people, attracting people, putting terms and conditions in place that retain them in Wales, being really hard-nosed and clear, focused about what areas we're going to prioritise in the immediate term. But none of these things will magically go away either; unless we grasp that nettle, then the workforce challenge will be one of the weights that holds us back from making further progress. It's fundamental to just about every area of public service.

So, we are extremely exposed is what you're saying.

Yes.

Okay.

It's not in the same space, but I'd say our approach to digital across the public service is in a similar space, really. It is fundamental to public service delivery these days, but everybody's trying to recruit talent in that space, everybody's trying to transform their service models in the private sector, public sector—England, Wales, internationally—so we're in a competitive world. But we see it day to day in lots of our work—the reality of the infrastructure and the capacity that parts of the public sector have to really capitalise on the kind of productivity and delivery gains that are undoubtedly there, but I'm afraid we're falling some way short at the moment.

Thank you. I'll move on to the last question for this session. What are the main areas the committee should prioritise in its future work programme to have the greatest impact on improving value for money, governance and accountability across the Welsh public services?

Well, 'Take as your starting point the Auditor General's excellent legacy piece' would be my central message. And joking aside, the reason I've picked on those themes is because they're not the only issues within the system, but they are the ones that I see most frequently coming through all of the work that we do—this isn't based on a single piece of work. And they're also the issues that, from my seat, I feel that if we were able to address these, we could move the public sector in a much more positive direction. So, 'Take that as a guide' would be my plea.

To Cai's point earlier: be clear-eyed. And I know you've got a conversation coming up next on the agenda about what your work programme is. It's going to be very tempting to you to try to bite off more than you can chew, so be focused—you won't be able to address everything that's important. So, be disciplined and clear-eyed in your selection of topics.

I'd also encourage you to be pacey in your work, and what I mean by that is that you will receive a report from us, for example the one I referenced earlier about the local government funding model—it would be very tempting to receive that and say, 'This is a big issue, hundreds of millions of pounds involved. Let's do our own piece of work on the back of that and build on it,' and to come up with a list of witnesses that you want to call in from the local government sector, the Welsh Government, third sector, you name it. And before you know it, you'll have used up three or four of your meeting slots and six months will have passed before you're in a position to say something in that space. If you look at your equivalent committee in Westminster, they take a different approach. They look to build on the work of the National Audit Office routinely and then have one or maybe two evidence sessions on the back of that to amplify the message that comes out of that and to build their own messages and recommendations from that. So, to try and balance those two, not biting off more than you can chew, but still trying to do justice to the breadth of your portfolio—that would be my advice to you.

Thank you. Thank you. That brings the session to a close, and I thank the auditor general for his attendance this afternoon. As usual, a copy of the transcript will be sent for you to check for factual accuracy in due course. As this is the auditor general's last formal appearance before the committee, I'd like to thank him for his service to the Senedd over the past eight years. Although your interaction with this committee has been very short, I'm grateful to you for your advice and support and look forward to meeting your successor, Catherine Mealing-Jones, over the next weeks and months.