Public Accounts and Public Administration Committee

Catherine Mealing-Jones, the Auditor General for Wales.

Matthew Mortlock, performance audit director at Audit Wales. I'll support Ant on this item if he needs me to.

Okay. Right. And your other two colleagues as well. Sorry.

Sara Leahy, audit lead at Audit Wales.

Seth Newman, senior auditor at Audit Wales.

Okay. Right. So, over to you, auditor general.

I'm going to pass straight to you, I think.

Thank you, Catherine. Thank you, and thanks very much to this committee. Hopefully, I'll give you an informative briefing in terms of some of the headlines from the recent audit round in terms of the 2025-26 NHS accounts. So, just in terms of the briefing, I'll split it up into three key sections. One is just to give the committee a feel for the pathway of the NHS audit, touch on some of the outcomes from the audit from this year and then provide some general high-level commentary around the NHS finances.

So, I'll start off with a little bit of the context to the NHS audit. We, of course, start off with auditing the 12 individual bodies across Wales. Those individual bodies have to prepare draft accounts one month after the financial year end. So, it's quite a quick turnaround for them to prepare accounts within that time period. So, the actual deadline set by Welsh Government for the preparation of the accounts is 1 May 2026. And in fairness to the NHS bodies, they did a really good job in terms of preparing some high-quality draft accounts and supporting working papers to evidence and validate the figures within their accounts. We then come along as the auditor—. Catherine, or her predecessor at the time, came along and audited the accounts, and we were able to audit or certify the accounts by the Welsh Government deadline, which was 27 June 2026. So, that was good news. Everything was done by the deadline. Then, following certification, we submit the accounts to Welsh Government, and, of course, each of the 12 bodies get laid before the Senedd.

One of the reasons the individual accounts are submitted to Welsh Government is because they prepare what are called the NHS summarised accounts. Basically, Welsh Ministers are required to prepare summarised accounts for the 12 NHS bodies under specific legislation. Ultimately, those accounts are being prepared. We're just concluding the audit, and, as I understand it, Catherine is due to sign those accounts tomorrow. So, we're very much in session, in process.

There is a final stage to the process. Those NHS summarised accounts for the 12 bodies are then consolidated into the big Welsh Government accounts; they form part of the Welsh Government group accounts. And, of course, those accounts will come in front of this committee at some point, they will be scrutinised by yourselves. But, ultimately, Catherine is due to sign off the Welsh Government accounts at the end of November this year. So, that's a little bit about the pathway in terms of the audit of the NHS.

I then want to just pick up on what were the outcomes of the audit and what were the conclusions from the auditor general. And I think it's important for the committee to note that there are two audit opinions we provide on the financial statements. One is called a true and fair opinion, where we comment on whether the net asset position—in old money terms, the balance sheet—of the NHS bodies are true and fair, and, of course, the expenditure they undertook during the year. So, that's the one opinion. That's the big opinion.

There's also a regularity opinion, which is quite unique to public services. This is where we comment on whether, in all material respects, the expenditure and income in the financial statements have been applied to the purposes intended by the Senedd and the financial transactions recorded in the financial statements conform to the authorities that govern them. So, in other words, you can't spend money unless you've got appropriate framework and approval processes to do so. That's important, and I'll come on to that. Because whilst we gave clean, true and fair opinions on the 12 accounts, we did actually report seven qualifications in relation to regularity. And I think—. Well, six of those were based on the fact that those health boards breached their financial duty to break even over the previous three years. I'll just put that into a little bit of context.

The National Health Service Finance (Wales) Act that came into play in 2014 requires that the seven health boards and the three trusts are required to break even looking back over a three-year period. So, you can report a deficit in year 1 as long as, overall, it comes to a break-even position at the end of three years. So, that's the back-looking bit of the Act. There's a forward-looking piece as well. This is where each health board is required to produce what is called an integrated medium-term plan, where, basically, their forecasts have to be balanced over a three-year period going forward.

Interestingly, the two special health authorities, which are Health Education and Improvement Wales and the Digital Health and Care Wales, also submit plans to the Welsh Government, but they don't have a duty to do so and the plans do not require ministerial approval. But they do the right thing, they do submit their plans. Those two bodies are only required to break even every year. So, they don't have the three-year period. So, there’s just a little bit of a nuance there.

So, as I mentioned, six of the seven health boards had a regularity qualification driven by the breach of that financial duty—because they spent too much money, and they didn't have approval to do so. Cwm Taf Morgannwg is distinct because the regularity qualification related to senior officer remuneration exceeded the levels approved by Welsh Minister pay bands. Despite, interestingly—. Cwm Taf Morgannwg did meet its financial duty, but the regularity qualification was on another matter related to executive senior pay remuneration.

I just wanted to touch a little bit more on that IMTP, if I may. As I mentioned, only four of the 10 bodies have an approved medium-term plan going forward. So, just a little bit of a briefing. Health boards and the NHS also have a duty to have a Welsh Government approved three-year plan. The plan must set out how they will deliver the services required to meet their population's health needs in the context of the funding available. Only one health board had their plan approved, Cwm Taf Morgannwg, for the second year running. The three NHS trusts also had their plans approved. So, that's the four. But, unfortunately, the other six health boards do not have a three-year plan approved, and this is why we're in the position that we're in. Given where the overall NHS deficit position is, it's unlikely to improve in the near future, and I think the fact that those plans aren't in place is testament to that.

It's interesting that, when you look at the outturn positions for the health boards over the last three years, you can see that in some health boards the deficit positions are getting better, some are getting worse. Aneurin Bevan as an example, Hywel Dda—their deficits are decreasing. They're still in breach of the financial duty, but it is an improving trend. Some are going the other way—Powys, Swansea bay health board and Cardiff and Vale as particular examples. So, I think there are some interesting trends there.

Just taking it up a notch in terms of those more general funding levels, NHS Wales received £12.39 billion of revenue funding last year. It was up by £823 million on the previous year. That represented a 3.8 per cent increase when accounting for general inflation year on year. When you look at the deficits—. I should say as well, in terms of the £12.39 billion, obviously that was up by £823 million on the previous year, but that was up by £2.63 billion compared to 2021-22. The deficit position last year across the six health boards was £199 million. The cumulative position was £506 million, compared to £457 million the year before. So, you can see the deficits aren't improving; they tend to be going the other way.

In terms of some overall messages from us, the accounts preparation is strong, and I think the NHS should be commended for that in terms of quality draft accounts and supporting papers. General financial management is strong in that they're able to forecast their in-year positions pretty well. Cost containment is the key issue. Overall, we commented, certainly through our NHS press release back in July, that the NHS are struggling to control day-to-day costs, despite funding increases over the last several years. Delivery of savings is key to containing the costs, and in our view, there is far too much emphasis on one-off savings as opposed to generating those recurring savings year on year.

To sum up for the committee, I mentioned the press release that we issued at the end of July, and something that the then auditor general included in that statement summed it up quite nicely. What he noted was that auditing the NHS, the biggest single area of devolved public spending, is one of the most important things we do in Audit Wales. As he finished his term as the auditor general, he wanted to recognise the work that goes into that very complex and intensive process and getting the accounts done in a very timely way. However, the picture painted by those accounts is one of financial pressure. You can see the trend. And the fact is the financial pressures aren't being contained, let alone reversed.

He goes on to report that there's been a persistent pattern during his eight-year term, compounded, in fairness, by the effects of COVID and, indeed, demand going upwards. But ultimately, as he pointed out previously, this is despite the Senedd, back in 2014, bringing in legislation to try and give a framework for which health boards and the wider NHS could work within. It hasn't really worked in terms of containing and managing the finances.

Turning the tide on NHS spending will not be easy, but turn it must. For the NHS, as for public services in general, a much sharper and relentless focus on the delivery of value for money is required, alongside a mindset shift to one focused on prevention and the longer term. I hope you appreciate that's a very high-level summary, but I hope there are some threads for you to get hold of as part of that overview. Thank you.

Thank you very much. Before I pass round to other Members, I've got just one quick question: would it be accurate to say that failure to comply with the statutory planning and break-even regime has now become normalised?

Yes. I think one of the concerns that the auditor general has had over the past several years—. When that position happens, we qualify the regularity opinion. It's losing its punch. It's almost becoming—. An accounts qualification should be by exception; it's becoming the norm. I think if you as a committee look back at the trend of some of these health boards in terms of their outturn position over the previous X number of years, you would see that become the trend. Therefore, the inevitable qualification ensues from that, yes.

Thank you. Alun Cox.

I'd like to return to that. There's a duty to break even. 'Duty' says to me that that is an expectation, not just a hope that that would happen. I think it's increasingly difficult to call that a duty to break even. It hasn't worked. I guess the reality is that, over many years, there's been little accountability for breaking that duty. I do understand, however, the pressures in the national health service, particularly those that may exhibit in certain times, where there are justifiable overspends that apply. What I find difficult with Cwm Taf is senior pay exceeding thresholds, which can't be a mistake. That must have been a willful decision by the board to exceed the powers that they have to spend money. That strikes me at another level of accountability for spending money outside of their ability to do so.

I'll come back in there. Again, I'll put this into a little bit of context. I think, over the past three to four years, we've had a number of health boards in this position; it happened to be Cwm Taf Morgannwg this year. So, there is a theme here. Indeed, the Welsh Government do set very specific pay bands for senior officials within the NHS. They can be exceeded, but, just like anything else, when you do exceed, it has to have proper Welsh Government approval to do so. And of course, when the Welsh Government determine that approval, they look at the rationale and the merits of doing so. Ultimately, there is a defined process out there to do that. If you do want to exceed your level, there is a defined process to go through relevant governance procedures. But time and time again, over the last few years, we've seen a number of health boards not going through that process. On the back of it, we've made a number of recommendations. Whenever this would happen, we would make recommendations to the health board, we'd make some wider recommendations across the NHS as a whole around these senior pay type issues. They do tend to be quite nuanced to the individual health board, but, ultimately, it shouldn't happen. I'd have to think carefully and reflect on what the individual circumstances would be, but, ultimately, there is a process and it's not being followed.

You're saying it's happened before, it's happened now, it's probably going to happen again. Is that because it's too complicated? I don't understand how we fix this.

I don't think it's too complicated. Pay tends to be a HR issue. There can be breakdowns of communication between HR and finance. But of course, the health boards do have remuneration and terms of reference committees as well, where executive pay should channel through. That should be a backstop in terms of capturing this type of stuff. I certainly don't think it's too complex. I think this is an oversight.

Do you have a follow-up, Alun?

Yes, I do. It strikes me, though, that 'oversight' is another word that we use for exceptional activities. What I'm seeing is a pattern of activities that are there because I believe those boards and senior managers do not believe that they are truly accountable for their actions. I think that's an area that we probably need to come back to in terms of their perceived and real accountability.

Thank you very much. Anna Nicholl.

Thank you. Building on that, I wanted to ask if we understand what is driving this and the difficulty that these health boards are clearly having in meeting the requirements. There seem to be some elements of this that are specific to places. Cwm Taf might have been the only one to do the remuneration, but also it was the only health board to get the integrated medium-term plan in.

Others are getting worse, some are getting better, so there's something about the specifics. It might be interesting, if not now, to understand from you how we scrutinise that. Others seem to be across the board. Generally, there seems to be there's something here happening where things are getting worse, as you're saying. So, are there ways that we can support health boards to be more innovative in the way that they're tackling these financial issues as we go forward?

Building on what Alun said there, are there things we should really be looking at now on how we strengthen the governance of health boards? Because something's happening here in that example where decisions are being made that, just in terms of good governance, perhaps shouldn't have been let through. Perhaps with all of this, we maybe need to dig down and look at the governance as well as simply the accounts.

Yes, I think that's right. I would very much agree with that. But I think as somebody said earlier as well, you look at this from a financial perspective and you can see that health boards, in terms of managing their finances, generally aren't doing what they should be doing. But again, it's very complex. It's very difficult. We mentioned earlier that demand is increasing, there are waiting list initiatives, there's pressure on. Funding is still tight in the general context. So yes, it is a tough equation, but I think, ultimately, even when it's tough, you cannot compromise on the accountability side of it.

There's certainly more to be done in terms of the value for money and securing the relevant savings. And there's something, surely, to be learned from Cwm Taf as well if they've managed to break even now over that three-year period, and they do stand out in that they're the only one to have done it. Others aren't really that close in relative terms. So, there has to be some learning in that respect in terms of how they must have done something differently. Maybe there's a structural argument there—I don't know. But certainly, from an improvement perspective and a committee probing perspective, I think there's a lot of mileage in what you're suggesting.

Shav Taj.

You've talked quite a bit about Cwm Taf Morgannwg, and we know that they've had a long-running dispute, of course. There have been previous disputes around pay, particularly in relation to the health visitors, and there have been other ones there. So, it's interesting, like you say, that they've broken even, they've met their duty, but they've got other long-standing, outstanding issues that they have to address. You've referred to the framework that came in in 2014. Is it a case that that is now broken and we need to revisit the framework? Is there something within the framework that is leading to the accountability element falling apart, or is there something else that we're missing here? If we were to revisit that framework, would that give us the opportunity to address some of these issues that we're discussing today?

I think the overall answer from our work is that the National Health Service Finance (Wales) Act 2014 isn't having the desired impact that it was first introduced to do. It was designed to drive some of the financial discipline, and incentivise and motivate that. So, I think looked at cold, that legislation has not had the impact that was expected back in 2014. Going back some time, we reported on that in isolation a little while ago. But there are questions there for the Welsh Government around the impact of that legislation.

And just to go back to Alun's point as well, finances are one of the themes within the escalation and intervention arrangements for the NHS, and you'll be aware that those are under review at the moment by the Welsh Government. So, it is one of the themes within the wider accountability framework for NHS leaders and NHS organisations. We've seen, in fact, for some of the bodies that Ant refers to, finances have been one of the factors that have influenced people moving up the escalation ladder in terms of Welsh Government intervention. But, again, that raises wider questions around the escalation and intervention framework, whether that is driving positive change in bodies, if in fact issues aren't being resolved and bodies are at a high level of intervention for a long time. So, there are some broader questions, I think, around the overall framework of accountability, both from the legislation and from the escalation arrangements that have been put in place around finances, and more broadly as well.

Chair, can I just—?

Yes.

One quick one. It says, in terms of the two executive director roles, that they were interim, but they paid them well above. Why is that the case? I mean, they were interim.

I don't know the details in terms of—. You're right. I—.

It just seems a bit strange. They're interim, they're going to be there for—. They're going to do a stint, they're going to leave. What was so special about them? Why did they get the extra, given, like I say, that there are all these other staffing inequality, pay inequality, issues?

I probably need to come back to you with the details on that, but I guess that could have been part of the equation in terms of why they were paid above defined levels.

Okay, thank you.

I think, Chair, Cwm Taf Morgannwg are possibly one of the organisations that you might be hearing from in a few weeks' time as well, so these are questions to put to the health board concerned as well.

Andrew R.T. Davies.

Thinking aloud about the legislation that health boards are meant to come in at a break even over three years, I can remember that legislation coming through the Senedd and Mark Drakeford, I think, who was the Minister at the time, had high hopes for it. Clearly, it's not working. As auditors, are you able to point to good practice elsewhere that the committee might wish to look at, so that we could maybe make some recommendations to Welsh Government in relation to improving that legislation or toughening it up? Because, from your presentation this afternoon, it would seem quite clear that, in nearly all the health boards, there's a total disregard for the obligations placed on them by the legislation, and yet record amounts of money are going into the health boards, and yet poorer outcomes with longer waiting times are the result.

I think it's a very good point. I think it's quite unique legislation to Wales. I think we could point to what happens with the NHS in Scotland, and indeed a very different regime within NHS England. I'd be reluctant to say whether that was good practice, but it can at least be a point of reference in terms of understanding how the legislation could be moved into a more supportive piece of legislation.

But I think, as my colleague Matt mentioned earlier, it's wider than the legislation, it's the overall governance framework, and I think Dr Andrew Goodall, when he presented to you in his earlier session, did talk about the fact that the escalation arrangements, which are at the heart of this, are being looked at. Because I think, if you take it at a higher level, when we see health boards consistently not delivering on their finances, you would argue that the escalation arrangements aren't doing what they're supposed to be doing as well, in terms of grabbing hold of it and doing what it needs to either support or help that individual health board turn the financial position around. So, I think we've got to look at this in the round, but certainly the starting point is the legislation, and we can indeed look to see how this is delivered elsewhere across the UK and beyond—and beyond.

Chair, I was just going to add as well that, ultimately, choices on the budget are a matter for the Government in terms of the amount of money that goes into the NHS, but I think our message has been that the position we've seen over recent years is just not sustainable over the medium and longer term—that growing size of the overall Welsh pot going towards the NHS. Something has to change in that arena, or the rest of public services are going to get even more heavily squeezed. So, this is a really important area of focus, I think, for this committee and for the Senedd as whole in terms of how does, as Ant was alluding to, that tanker, if you like, turn around, and that's not an easy, quick fix necessarily, in terms of turning around what's becoming a longer term trend in terms of the overall pressure on NHS finance and its impact more broadly.

Thank you. Anything else from any of the other Members?

Yes. Your audit reports usually say something bad all the time. But how bad is this? Because I read it and I go, 'This is mental.' But I'm wondering what are your opinions on just how bad you think this financial situation is.

I think—. We want to have a position where the NHS is balanced every year. We're not in that position this year. We've not been in that position for a number of years. So, I think the issue is around the consistency of that and the delivery in terms of the finances. And I think, more importantly, if you go back to the fact that part of the legislation not only looks back, it looks forward, those three-year plans are, basically, health boards presenting to Welsh Government a viable, sustainable plan to say, 'We will deliver health services to our populations given the finances we have, and we'll deliver those to a balanced position.' They're not. So, I think that's actually the big trigger for me: it's not just the current situation, it's the fact that we do have a consistency of financial imbalance and a forward-looking position where those integrated medium-term plans aren't telling us what we want to hear in terms of the balanced position going forward. That's why, I think, if we look at our outlook, it's not a rosy one in terms of the NHS being able to turn this position around quickly.

I understand that, but I'm trying to understand the scale of how important this is. Because we've spoken about that someone's been overpaid slightly—well, I don't think that's a massive issue and we can resolve it, and it probably already has been resolved. But the issue with the health boards—six of the seven health boards—failing to meet a legal duty sounds pretty important. I just want the opinion of Audit Wales when it comes to how important, on the scale of 10 to zero, is the Government dealing with this issue.

In my view, it's very, very important.

Yes. Just to come in, we've said it's a significant portion of the Welsh Government budget, and there isn't a credible plan to turn it around. So, I think those two things together make it a very significant and serious issue—a structural issue that needs to be tackled, if that answers your question.

I would agree.

Thank you.

Can I ask a quick question, Chair?

Yes.

Going back to that point then, is there something—? Does the Government have all the powers that it needs in order to turn things around, to hold people accountable, to have a genuine plan to scrutinise properly? Or is there something that we're missing here, maybe? Have we got all of the necessary powers that we need to do that?

I think the powers are there, and, in fairness, when these plans come into Welsh Government, there is a huge amount of scrutiny, and they do impose accountability, so therefore they're not just passing any plans. Only one plan has been passed. They will not approve plans that do not cut the mustard. So, ultimately, I think—

Does it go back then? Do you say, 'You haven't delivered—go back, start again'?

They will return to the health board and look for a way forward, but, ultimately, because they're in an annual framework cycle, they then have to resort to interim one-year plans. So, again, you're looking at short-term solutions and fixes, as opposed to what the legislation is trying to do, which is to develop plans over a medium term, say three years, which it does. So, yes.

So it's back to the legislation.

And against this backdrop of normalisation of qualified accounts, so where's the—?

So what.

And there's something here about to what extent is it legislation, or something—. Clearly, the legislation hasn't worked, then. To what extent are you saying you have to—? It feels like this is—. Well, all bar one—so, there are definitely lessons to be learned from that one. But there's something happening here where generally health boards aren't meeting—. Do we need to find different solutions, or—? There's something that's got to shift perhaps beyond just saying, 'You've got to do it.' Why aren't they managing to do it just overall consistently, I suppose, is something perhaps for us to get to the bottom of.

The big underlying pressure is still questions around service redesign, transformation in services. We'll be talking next week, I think, around digital transformation as well, the future in that regard. The NHS has to change more broadly than just in how it manages in the finance team its accounts and its finances. There is a need for wider service transformation. We've touched on some of this in areas we've reported on recently around planned care, urgent and emergency care. That's where some of the pressures on the system are coming. But even where money's gone back in—. So, on planned care, there's been quite a big chunk of money gone back in to try and reduce waiting lists, but some of that has been spent on short-term initiatives, short-term fixes, not necessarily dealing with the underlying issues. So, the numbers might be coming down, but actually is that a sustainable position? So, there is a—. I'm coming back to Cai's point. There are some bigger questions here, and it is a platform that needs some significant change, I think. Because, as I was saying earlier, you can't look at the trend in how much the NHS is drawing from the public spending pot and think that that's sustainable for the medium to long term, certainly.

Thank you. Just one final question from me before we move on to the next item: if you were us sitting in our seats on 12 October, when we get the three health boards coming in, what are the two or three findings that you'd be least prepared for them to explain away?

Well, they should be providing an explanation around the point you raised around qualifications, what went wrong in their situation leading to the specific qualification at Cwm Taf. I think a perspective from health boards on the tension between—. You may hear things around how much funding they're actually getting in the first instance, so you may hear a call from some bodies that they feel they're underfunded relative to other bodies, and so you might get a bit of interplay, I suppose, between different health boards' perspectives on whether some of the financial performance in the system is down to the amount of money flowing their way. That brings you back to broader questions around the Welsh Government's approach to allocation and things, but they are ultimately accountable for delivering a balanced bottom line. They're accountable for delivering good quality accounts to us. As Ant says, some of the work in that regard that they do is good, and we've recognised that, but they're at the head of turning around some of this as well, so they need to recognise their responsibility. It can't just be a bigger system problem as well.

Effectively nothing, in that case. Thank you, Auditor General, and your staff, for that briefing session. We are taking evidence from the NHS—three bodies—on 12 October as part of our accounts scrutiny work, so that's going to be helpful in informing that session for us. I think we have some distinct lines of questioning that we may wish to go down with those health boards when they come in. So, thank you very much.

Children and young people with additional learning needs include some of the most vulnerable people within our communities, and that ALN system around additional learning needs learners can help those learners fulfil their potential. Ultimately, this is about children and young people being at the heart of this, and that's why we thought this was an important topic for us to explore.

So, in terms of what we focused on, we looked at that wider system that supports children, learners and young people in the context of changes that were brought about by the 2018 legislation, the Additional Learning Needs and Education Tribunal (Wales) Act. So, just to look a bit further into that legislation and what changes came about from that legislation, Members might already be aware of some of the context and some of the history around this topic, but some of the key aspects of the changes included the aim of this Act to create a more integrated, a more collaborative and a more person-centred approach. And there was a significant amount of work involved in efforts to reform that system for the better.

One of the key changes was the introduction of the individual development plan, so the IDP. The IDP replaced both the non-statutory and the statutory statements that were in place in the previous system. So, previously, there would have been an escalation of school action, school action, and a special educational needs statement, commonly known as 'statements'. And the IDP replaced that to have one system in place, which was a statutory provision for learners assessed as having ALN. So, the Act extended the provision to children and young people from zero to 25. Before that system, there was no statutory protection for the early years age category, and under the previous system, there was a separation of a system up until the age of 16 and then a separate system post 16. So, this system aimed to bring all of that together, and that new and old system operated in parallel, through a phased transition, between September 2021 and August 2025.

So, our overall audit question wanted to ask: do public bodies understand ALN demand? Do they understand the workforce and the skills? Do they understand the costs involved in supporting the system? And do they have a level of understanding about the outcomes and the impact from that? The audit focused mainly on Welsh Government and councils and their remit in relation to schools, although we also touched in the report on further education and a little bit on health as well. So, our evidence base included document reviews, data analysis and interviews with over 30 stakeholders, and we drew on reviews by notable colleagues in Estyn, the Children's Commissioner for Wales and the work concluded by the Children, Young People and Education Committee from the sixth Senedd.

So, in terms of what we found, the report sets out that we felt that the system is under strain and is facing challenges that threaten its sustainability. Our findings show that public bodies do not have that complete picture, or enough information for effective planning and budgeting and ultimately to assess value for money. And we have concerns about the current performance of the system in supporting learners to meet their full potential. This picture is not unique in Wales; our audit colleagues in other parts of the UK have highlighted similar issues in recent years. So, our conclusions are based on evidence showing us that the system does not have good enough data to understand the extent of growing demand and complexity. There's patchy workforce data that limits the system's understanding about a range of capacity and skills challenges. Public bodies don't have a good enough understanding of ALN costs, and we have concerns about the system's financial sustainability. The goals of the ALN system are clear, but there is only a limited picture of whether it is delivering good outcomes for learners. And the system remains adversarial, despite evidence of some improvement.

So, just to go into a bit more depth on the key evidence highlighted in our report, for the academic year 2024-25, we're looking at around 48,000 learners in Wales aged zero to 25 who are recorded as having ALN or, previously as it was called, special educational needs. However, our report explains that this is an incomplete picture. The available data shows that there's been a 58 per cent reduction in the number of school learners recorded as having ALN or SEN between the years 2018-19 and the years 2024-25, and the reasons for this are disputed. Over the same period, the number of school learners with ALN having that statutory status to that support through a statement or IDP—that's increased by 164 per cent.

So, the spending involved in supporting learners with ALN has been increasing, and this puts pressure on the wider budgets. While we cannot put a firm figure on it, the sums we can more easily identify suggest current annual spending approaching £1 billion, but this is not the full picture, and the true costs are likely to be higher. Councils' budgeted expenditure on ALN or SEN increased by 34 per cent in real terms between the years 2018-19 and 2025-26, and while the Welsh Government described the previous system as complex, bewildering and adversarial, our field work suggests the system can still be adversarial, although this may be difficult to avoid entirely, and stakeholders described the difference that can exist between expectations and delivery, and that that can create tensions.

The available data does show a fall in the number of appeals going to the Education Tribunal for Wales. However, this alone does not show the system is less adversarial, and other factors may contribute to that decline. Wider disputes are also difficult to assess because no routine data is collected on challenged ALN decisions that do not reach tribunal stage.

Alongside our report, we also published a data tool that helps to set out how much councils are budgeting and spending on additional learning needs services. Following on from those findings, our report's recommendations focus ultimately on improving information and improving the data around the system. The recommendations were written to focus specifically on the Welsh Government as the leader over national ALN policy. However, other public bodies, including councils, will need to be involved if these recommendations are to be effectively implemented.

The recommendations do emphasise the need for more consistent data about learners with ALN across age ranges and settings, publishing clearer information about ALN costs and monitoring data on outcomes for learners with ALN. We're currently awaiting the full response from Welsh Government. Ideally, we and the committee would have had that response by this point, in which the Government would have set out how they would have intended to respond to those recommendations. The timings of the Senedd elections in May, the summer recess and the time it's taken for the new Government to embed have impacted on the timing of the response, and the Welsh Government agreed this revised timetable with Audit Wales.

A letter was issued by the director general for learning, communities and culture in June 2026, which confirmed the Welsh Government acknowledged our report, and that a full response to the recommendations would be finalised during the autumn. We've continued to engage with Welsh Government officials, and we understand that a full response is being prepared currently. We will be having further conversations with Welsh Government officials before that is finalised to consider whether we think that it shows a full response to our recommendations.

Just to briefly touch on other developments since the publication of our report, we're aware of several developments around this topic since the publication in April. Members will be aware of the discussions around ALN spending during the Senedd's consideration of the supplementary budget earlier this year. We've also noted that several of the data sets that we refer to in our report have been updated since we published. From our assessment, none of these fundamentally change anything we said in our report, and the direction of travel has continued to be the same, with costs continuing to rise, the overall number of learners with ALN continuing to decline, but those with the statutory status of the report continuing to increase.

So, that concludes the briefing element. Thank you for your time. I'm happy to take any questions or observations you may have.

Thank you for that briefing. Quite a scarily worrying briefing, about £1 billion pounds, and we can't get any measurable outcomes. A quick one from me before I throw the questions open to the floor. You said that the reforms were intended to move away from the system that was described as 'complex, bewildering and adversarial', and you conclude that it remains adversarial. Is that principally an implementation failure, or is there evidence that aspects of the system itself need reconsidering?

I think that the aim around it becoming less adversarial was part of the additional hope for the reforms and that there would have been extra clarity from the changes in policy that would have made it a lot less adversarial. And whilst we did consider what data is available around this space that could help to shine a light on this, we looked at the education tribunals data, which does show that there are, perhaps, some signs that there are fewer appeals going to tribunal stage. But there's complexity around that data, and certainly our stakeholder interviews emphasise the point that, from the experiences of both families and learners, as well as public bodies who are involved in delivering the services, it is not their experience that the system is becoming less adversarial. By nature of it being a rights-based system, there will also always be an adversarial element to this. But, looking back to the original aims of Welsh Government, if the original aim was for it to become less adversarial, then we didn't see much evidence that that has been achieved so far.

Chair, just to add to what Sara said, we know as well—we touched on it in the report, but we've been in touch recently—from the children's commissioner, for example, that this is still an area that features heavily in their casework as well. I suspect that many of us will know people, whether through your constituency work or just through family and friends, actually, who have personal experience of trying to navigate this system. Indeed, within Audit Wales, while we were doing the work, we looked to some colleagues just to softly get a feel for their experience as well, and I think that some of those stories are quite salutary, really, in terms of the difficulty that individual families sometimes face in navigating their way through.

Of course, some of this has still been in transition, as we were going through our work. As Sara said, it is only from September 2025 that the new system has been fully in place. So, there has been a period of transition as well, and perhaps people are almost trying to get to grips with, and public services are getting to grips with that double running. But we are now in the new environment where those expectations should be being delivered more consistently across the piece.

Thank you. Are there questions from Members? Alun Cox.

Diolch yn fawr iawn am yr adroddiad. Yn nheitl yr adroddiad, rŷch chi'n gofyn a yw corfforaethau cyhoeddus yn gwybod a yw'r system yn gweithio. Heb roi popeth i ffwrdd, gallech chi fod wedi aralleirio hwnna trwy ddweud nad yw'r corfforaethau cyhoeddus yn gwybod a ydy'r system yn gweithio, sydd yn broblem, dwi'n meddwl. Nid yw'r demand costs yn glir o gwbl. Mae hwn yn gyffredinol, efallai, ac wedi digwydd dros amser, ond mae'r nod yn glir ond mae'n hollol aneglur beth yw canlyniadau'r gwaith rŷn ni'n ei wneud yn yr ardal yma.

Un o'r pethau dwi eisiau gofyn cwestiwn ynglŷn â fe yw'r gwahaniaeth yn y niferoedd yn y siroedd gwahanol sydd ag ALN. Mae'r ystod yn fawr, o 6 y cant i dros 17 y cant—teirgwaith yn fwy mewn un lle nag mewn llefydd eraill. Mae'n rhaid bod hwnna i lawr i ddehongliadau gwahanol, ac mae hwnna'n codi cwestiwn ynglŷn â rhywbeth sylfaenol ynglŷn ag a ydyn ni'n gwybod beth rydyn ni'n siarad amdano, ac os nad ydyn ni, mae'n anodd iawn i fesur unrhyw beth. I ba raddau y dylem ni ddisgwyl gwybod beth yw e a chael dehongliad cliriach fel bod y corfforaethau yn gallu ymdopi'n well?

Digon teg. O ran dehongliadau cliriach, mae'r Llywodraeth wedi bod yn ymwybodol bod yna sialens wedi bod rhwng y cynnwys o fewn y ddeddfwriaeth a'r cynnwys o fewn y cod—y cod sydd yn tanlinellu'r ddeddfwriaeth—a'r amser mae wedi cymryd i gyrff cyhoeddus ddehongli'r cynnwys cyfan. Felly, mae hwnna'n rhan o'r llun a'r gwaith mae'r Llywodraeth wedi dechrau ei wneud i ymrwymo i roi'r clirder yna i gyrff cyhoeddus ar y llawr. Ond rŷch chi'n cyfeirio at y gwahaniaethau sydd o fewn y cynghorau, gyda llawer iawn o wahaniaeth yn rhai o'r ffigurau, ac mae'r hanes ynghlwm â phob cyngor a'r ddarpariaeth mae'r cynghorau'n gallu ei rhoi yn wahanol. Mae gennym ni 22 o gynghorau yng Nghymru, felly mae gennym ni 22 o systemau sydd yn gweithio o fewn y maes yma, so mae hwnna'n ychwanegu at y cymhlethdod. Rwy'n credu y byddai'n deg dweud bod pawb sydd ynghlwm â'r system yn 'develop-o' dealltwriaeth ar y pwnc yma, ond byddwn i'n dweud, wrth edrych nôl ar ein hadroddiad ni, nad yw pawb yno eto, a'r gobaith, o'r argymhellion yn yr adroddiad, yw tanlinellu'r pwysigrwydd i bob un sydd o fewn y system i gael gwell dealltwriaeth am y demand, y gost a'r dehongliadau allweddol yna sydd yn galluogi'r system i helpu unigolion ar lawr gwlad.

Diolch.

Diolch. Shav.

Diolch. I guess, thinking about the data, it's clearly really varied. You say there are the 22 local authorities. It's meant to be a needs-based system. So, it's meant to be designed around the needs of the individual and not just to have a one-size-fits-all approach. The data, as I say, is varied and the annual schools' census data that's done on a national basis seems to be the best so far. But it doesn't actually cover Welsh-specific needs, Welsh language needs, and that's, obviously, really concerning, given that that's the most reliable data that we have. Do you think that what we need is one framework in terms of at least recording the data? Is that something that you would recommend that the new Government focuses on, because, without data, how can we genuinely track through what is happening on the ground, but also make sure that when it comes to our equality duties around the Welsh language, we are providing individuals, as I say, if it's meant to be about the individual needs, with the right level of provision, because it seems like there are real gaps here?

Do you want me to pick that up? I think we touch in the report on how the previous Welsh Government consulted on a range of measures towards the end of the period of our work, so there was some moving context in terms of some of the data, and some of that was around consulting on new data collection arrangements in a range of different areas. I think, until we see the Welsh Government's response to our recommendations now, there's a bit of uncertainty, at least in our minds, about to what extent those actions are now committed to, going forward. So, I think the picture of our report is that, right across the piece, whether it's who's in the system, how the system's performing, what's happening in terms of outcomes, across all those areas, there is scope in our view for better data about how it's delivering.

And recognising the point that—. The IDP title is deliberate—it is individual, it's tailored to the individual. It should be. But, within that, there are also some expectations in the legislation about how quickly some of these parts of the process are delivered in terms of turnaround times and things. But, again, we don't know anything, really, at the moment about how well public services are delivering on that. I think Sara touched on the concept of expectation earlier. Well, if the code and the framework gives you an expectation that you can expect public bodies to respond within a certain amount of time, is that being delivered on, for example? We don't know enough about that at the moment.

But based on constituency work, and other—

But not based on the stories, so—

It's pretty horrific.

On one level, you could say, 'I'm putting a total number on that'. You could argue that we already know that the bigger picture is that there's lots of noise in the system and that that isn't being delivered on. But we think it would be better to have some hard facts to back that up as well.

Which is why I was wondering whether it be helpful if we had—. If it is about needs, then having the one framework, at least, would help, then, in terms of auditing.

I think, just to add to that, in terms of data collection on this topic, by nature, it's an education policy. So, a lot of the data collection infrastructure is specifically attached to schools—you mentioned the school census data. But the aim of this legislation is to cover zero to 25 in multiple settings, not all in school. So, I think the aspiration for a single framework to collect comprehensive—

For schools, at least.

—ALN data would, I think, be something that our recommendations would welcome. But it's about how you capture that data in the early age category, and in that post-16 space, with children and young people who perhaps aren't in any formal education, collecting that data is more of a challenge.

Thank you.

Thank you. Cai Parry-Jones.

My main takeaway from this Audit Wales report on ALN is that the data is just not there. Have you looked at how England has this data, and is that any better?

So, we were briefly aware of the work undertaken by audit colleagues covering England, Scotland and Northern Ireland. Certainly, at a high level, I think all audit agencies have reported about challenges with collecting consistent data, consistent quality data, that truly helps to answer the question about that understanding of what's happening on the ground on ALN. We didn't look to compare in detail the Welsh approach versus the English approach, so I can't provide much more detail on English data collection methods.

There are different policy frameworks in different parts of the UK, but some similar underlying goals. It's a similar picture, I think, in terms of some weaknesses in data collection elsewhere, but we haven't done a full compare and contrast on all the different components.

Thank you. Anna Nicholl.

Thank you. Clearly, as you were saying, we all know people who've been caught up in this and families who feel very much in need of support and feeling like they can't get it. So, the data you present here is really interesting. I suppose one of the things I was thinking about is to what extent, maybe, some of these things could be addressed in a kind of short-term, 'We need to do the data collection thing, it's a one-off activity, and then it's set up', and to what extent these are things that we really need to be building in over time so that this isn't something that can just be, I don't know, done over the next six months, but that we kind of need to build it and lock it in.

Yes, I think our recommendations wanted to encourage that the recommendations are drafted for Welsh Government as the national leader, but with a view to working with local authorities and with service providers on the ground to provide that realistic infrastructure—

And families.

—and families, indeed—to provide that infrastructure of data collection that is both meaningful and useful for them as a policy area. So, time and time again on this audit, we were looking at the data but feeling that it didn't provide the full picture, and a number of the recommendations touched upon that, including the workforce data, including the finance data, including the outcomes and the impact data. So, there's something there already, but our recommendations really encourage the Welsh Government to engage with the sector to try and find an enabling way to collect more data and information to help their understanding of the sustainability of the system.

And there has been some evaluation work on specific aspects to do with ALN implementation, but it's not about a one-off evaluation; we are talking about the system going forward having a better evidence base of what's being spent, how it's performing, who is in the system, and that sort of thing. And I think, if we were being generous, we'd say, as I said earlier, 'The system's only just transitioned out from that double running.' But, at the same time, we're talking about eight years now since the legislation came in and a long period of transition. So, there is a counter argument to that, I would recognise, which is that, in an ideal world, Government would have been ahead of this a bit sooner so that we wouldn't have been coming in in 2025 and saying, 'We don't really know the answers or can't find the answers easily to some of the questions we're asking.'

Also, just to make a point around proportionality as well, we're not talking about a small amount of money and a lot of industry around evidence and data collection; we're talking about, as Sara alluded to, a system as a whole that spends a lot of public money for well-deserving people who need that support, but there's still a need to ensure that that money is well spent and having the impact that you want it to have. And if it isn't, you pivot and you look at why that is, and you improve service delivery. But we're talking about this in the context of that big figure around some of the annual expenditure on this area.

Thank you. Anyone else? Yes.

A really quick one. In the previous one, we were talking about health budgets, and then, obviously, in some cases, in terms of the individual needs, there is that overlap there as well. And it was mentioned previously that maybe the focus needs to be around prevention. It seems to me, in this situation, that we do really need to focus in on what exactly—. If we are saying this about individual needs based, and we're talking about prevention, and we're talking about money yet again, data does help us to track and to see, 'Is there a pattern? Are we missing something? Can we spend this money better?' In terms of the service provision element as well, there's often the case that different organisations are given money for the year. They don't know what else is coming down in three years' time. So, they can't necessarily also provide the individual with the right level of support that they need, and that's something that I've picked up in conversations I've had with a variety of different organisations and other authorities.

Okay. Well, thank you, auditor general and your staff, for that briefing. We're going to be discussing the next steps during our private session on this one. As usual, you'll receive a copy of the transcript to check for factual accuracy, and this will be published on the Senedd's website in due course. Further updates about the committee's work will be available on the committee's website, including details of future meetings.