Finance Committee

Ian Rees, cadeirydd bwrdd Archwilio Cymru.

Kevin Thomas, executive director of corporate services.

Thank you for being with us this morning, and thank you for your time previously, as well, in working with the committee and sharing the work that you do. We have a number of questions around the report that you've published as well. I'll kick off with some questions initially and we'll take others from around the table as we go along.

Can we just double check that the translation's okay for you, before we go into those? Is that okay? Just to make sure that everything's—.

[Translation: 'Un dau, one two, un dau, one two, un dau one two—if you can give me a thumb's up if you can hear me. Yes. Thank you very much.']

Give us a thumbs up if we're all good. Okay. Great. Diolch yn fawr iawn. Lovely. Thank you so much.

I guess the first question is in relation to the report that's been published. Clearly, that was signed off by the previous auditor general, and we have a new auditor general with you here today, Catherine, and I was wondering—you're the one who's going to be scrutinised on the performance of the previous auditor general—how you feel about that and how you've sought some assurances to ensure that you're assured that the signing off process for that was appropriate.

Well, obviously, there's an absolute date at which I became Auditor General for Wales and took up responsibility for my role, and I think we have to distinguish, really, between looking backwards and the process that Adrian went through to put this plan together, and put the annual report and accounts together, and then me taking on responsibility for the past performance of the organisation, but, obviously, the delivery of the plan.

I have to say that I'm very proud to take on an organisation that has the kinds of results and ambition that I see in the organisation. I had a very thorough and thoughtful induction process with Adrian, so, whilst I didn't have accountability at the time, he did talk to me about the plans for the annual plan going forward, knowing that I would be taking on responsibility.

So, since I've come into post, obviously, I've worked very closely with my colleagues, all of my colleagues, and, again, am really proud to take on the great team that Adrian's built, and have worked very closely with the board and my executive leadership team, and through my induction, to really understand our performance, our results, and begin to form my own views about where we might go in future on the back of that. So, yes, there's a sort of absolute answer, and then there's an assuring myself about the performance answer.

Thank you for that. There's accountability and there's responsibility, and you used the word 'accountability' there, which I think is appropriate, because, of course, the responsibility for the previous performance could be with the previous Auditor General, whether it's good or bad or indifferent, but, in terms of accountability for that performance going forward, I suspect you—

That's with me, yes.

Absolutely, okay. And then in terms of the assurance that what has been reported is accurate, how have you gathered that assurance?

Well, I've gathered it through looking back at the past minutes of the executive leadership team and the board. I was able to join the board meeting that signed these off, as an observer, so I was a witness to the level of debate that was had around those documents and so on. And obviously, I'm familiarising myself with the performance reporting regime and so on. So, I was there as an observer when these things were signed off, and, since then, I've looked back at the record to satisfy myself about the process that was gone through.

Okay, thank you. So, a significant part of your report is in relation to key performance indicators, the KPIs; I know colleagues have some questions around those. Elfed, do you want to come in first on that?

Yes, thank you very much—diolch yn fawr. Just to come to the KPIs, I've noted that only nine out of the 18 KPIs were met. If I just point out a couple of them that stood out: KPI No. 1, 94 per cent of principal accounts audit opinions were delivered, this is 5 per cent down from the previous year; KPI No. 6, 70 per cent believe that the work of Audit Wales has led to improvements, this is 10 per cent below the target. I used to run a charity organisation before coming here; I would have been hauled over the coals for only meeting half my KPIs. I'm sure that there's a good reason, but what steps are you taking to improve your KPIs, targets, meeting those KPIs?

Diolch. I'll give you my answer, and perhaps turn to colleagues for a bit more detail on the specific KPIs that you've raised. First of all, coming into the role, I think I would have found it challenging if we were not setting ourselves stretch targets with our KPIs, as the kind of organisation we are. So, I think they are not targets that we know we can comfortably achieve, and therefore, with many of them, they're quite near misses or were very stretch to start with. We won't meet every target every year, and I think the other thing about some of these specific targets is that significant progress is being made—things like the carbon emissions target, for example—but also we are heavily reliant on the bodies that we work with in terms of, particularly, some of those audit completion targets.

But perhaps if I can turn to—. I don't know if you are able to tackle the specific KPIs that were mentioned.

Which ones did you want to—

Well, I think it's just, generally, how are you going to—? What steps are you going to take to improve meeting these targets?

Do you want me to take the carbon one, and you do the audit one?

I'll do the audit one, yes.

I think, in terms of carbon reduction, as Catherine said, we've made significant progress. We'd set a target of a 50 per cent reduction from our baseline in 2019-20. We've achieved over 40 per cent, which is significant, but it's still short of our 50 per cent target. I think what we have done is we've made significant progress in terms of our estate use. Our carbon reductions there are well over 50 per cent by moving to three smaller, more environmentally friendly and more cost-effective offices.

The challenge for us now is in terms of travel. That is where our carbon reduction still needs some reduction. But there is a balance to be struck between the need to travel for things like audit-quality purposes and for things like the development of a team spirit, working with colleagues, which is really, really important, but we've got to make sure that we travel only when necessary. So, the things that we are looking at this year—. As you'll see from our annual plan, we've actually changed our target to a further 25 tonne reduction, and we've been working with staff to see how we can achieve that. It equates to something like reducing travel by car by about 10 per cent to 15 per cent—so, swapping a car journey for active travel or public transport—but also things like, in the winter, turning the heating down by a degree or so, or, in the summer, not putting the air conditioning on quite so much. So, we're really looking to engage with staff right across the organisation to help us to meet what is still, as Catherine said, a stretching target. But we think that that 25 tonne target, for example, this year is achievable.

Ann-Marie, do you want to come in on the other part?

I'll go on to the financial accounts one, which I think you were referring to. That's KPI 1, and there was a small reduction this year in the number of accounts that we were able to audit by the agreed or statutory deadline. And in large part, that reflects a very challenging delivery environment. So, in the NHS and central Government sector, we received all of the accounts by the agreed deadlines. They obviously have to provide them to us by a certain date in order for us to get them audited. There was one NHS body that we had an audit issue relating to, which meant that we couldn't meet the deadline. It had to be investigated, we had to look at the audit issue and get to the bottom of that, which would be one of the reasons in the NHS sector why we didn't meet that 100 per cent.

With regard to the local government sector, we have more challenges—I think the committee may be briefed on that already—and we only received 16 of the 32 local government body accounts that we needed to receive in. And to be perfectly honest, the quality of those accounts was not in all cases where it needed to be, and there were a larger number of audit issues arising. If there are audit issues, it's our responsibility to work with the audited body to bottom those out, which means that we don't meet the deadline. Quality must come first, and we have to issue a safe opinion. And that would explain, therefore, why there was a slight reduction on the accounts delivery side during 2025-26.

For this year, the picture is slightly better. I don't know if you want me to go on about this year, but we have received 22 of those 32 sets of accounts that we need to deliver by the 30 June deadline. And we're continuing to work closely with the sector to improve the quality and the timeliness of accounts delivery. Adrian, prior to him leaving, had written to the local government bodies, and I have written more latterly. So I think we're doing a lot of work in this space. We're holding good-practice events and working really closely with them. We've got very good relations with them, and there are signs things are improving.

Thanks. Ian.

Gaf i ddod i mewn yn sydyn? O safbwynt y bwrdd, dŷn ni'n derbyn adroddiad cyflawn bob chwarter ar berfformiad Archwilio Cymru, a dŷn ni'n edrych ar KPIs a risgiau ac yn gofyn am eglurhad ac yn gofyn pa gamau gweithredu sy'n cael eu rhoi yn eu lle er mwyn datblygu hynny. Felly, dŷn ni'n hauled over the coals hefyd, fel yn y gorffennol.

Do you want to ask anything else on that?

Gwnaf i droi i'r Gymraeg. Roeddech chi'n sôn, Ann-Marie, am y cynghorau lleol, ond oes yna broblemau efo cynghorau plwyf a thref? Mae gen i bryder amdanyn nhw hefyd a sut maen nhw'n rhoi eu accounts i mewn i chi fel auditors.

Yes, we also have challenges with the town and community councils. We have over 700 bodies that we audit and we have had, over recent years, a significant backlog. We've worked through that backlog, and I'm very impressed with how hard the team have worked, and I would say that now we don't have, really, a backlog in that space, but we do find that the bodies are, in some cases, delayed in submitting annual returns to us for audit.

Anything further at all? Diolch yn fawr. Iain, was there anything else that you wanted to bring up on the KPIs at all?

Yes, there were a couple of questions that I had. The annual report and accounts say that arrangements for assessing audit quality provided results that were the strongest in 10 years. I'm just wondering how that has been achieved and how it will be maintained.

Do you want me to take that one? I'll take that one as well. Thank you. So, as we set out in the annual report and accounts, we voluntarily submit ourselves to quality review by the quality assurance department of the Institute of Chartered Accountants in England and Wales, and this is something that I am very passionate about, and I am very pleased with the results that our teams were able to achieve this year. I'm always a little wary, because it's a sample-based review, and there is always a risk that, this year, they picked really, really good audits, and that, next year, there might be one or two where the results are good, but they won't be quite as positive. We had three financial audits this year that were in the very highest category that can be awarded.

So, I think it reflects the significant investment that we've made over the last few years, in large part, actually, thanks to your predecessor committee, who provided us with additional funding to support this. And we have invested a lot in our audit development and guidance team. So, we have employed an additional member of staff in that team, to help us in terms of making sure that our staff receive the guidance, the training that they need. That's really important, because people are huge in that quality space, as you'll be aware. We also invest significantly, as you'll be aware, in our trainee scheme. And we bring in, every year, 12 to 15 graduates, and people straight from school, to train them through the associate chartered accountant qualification. And we really do invest in those individuals.

We've invested in technology and tools. In our performance audit work, we've adopted INTOSAI—International Organization of Supreme Audit Institutions—standards as well, which are internationally recognised standards for performance auditing. We have worked very closely with the Chartered Institute of Public Finance and Accountancy, the accountancy body, to support the new performance audit qualification. We work closely with the institutes themselves, we have very good relations with the accounting bodies, and with the other PAF bodies, the public audit forum bodies. We worked very closely, for example, with the Northern Ireland Audit Office to bring in a new methodology and write a new audit manual, following the introduction of the new auditing standard, international standard on auditing 315, a couple of years ago.

We've set up technical networks, so, hopefully, you're getting the picture that we have invested significantly in this space. For me, quality—and I know for Catherine too—is absolutely everything. Our reputation, everything, rests on the quality of our work. And so it's an area that we absolutely have to have at the forefront of our priorities.

Okay, thanks. Iain, do you want to come back on that?

Yes, thank you for that. I've got another question—

Yes, sure.

—that I'd like to put as well. The employee engagement and staff survey scores show positive trends. I was just wondering how you, Catherine, were using organisational intelligence such as this to understand the organisation, and do you see any gaps or risks that need to be prioritised?

Thank you. First of all, I was, frankly—I can't think what the word is—really pleased with the employee engagement scores that we have in Audit Wales—well above the comparator across the Welsh civil service, for example, and the civil service generally. So, I think it gives us a really strong evidence base to put our offer to staff together and understand our organisation.

We do do a lot of digging underneath the results as well. We really analyse the free text comments that come out. We triangulate what we're getting with further engaging with staff, and this year, I think, we've invested in a new tool to give us an even better run at our staff survey figures.

So, I think that, coupled with really strong engagement with our trade union side and so on, gives us an opportunity—with challenge from the board on the results as well—to really dig underneath those results and get to grips with what it's telling us about our organisation, whether there are any gaps and so on. Obviously, this is going to be crucial. I think we're live with the survey now, or in a few days, at least, and, obviously, I'll watch those very closely. It will be the first ones, partly, as I've come into post; nobody wants them to slip when they've taken up a new organisation. But that will be a really important baseline as we come into this, as we are through this transitional year, and as we work and engage with staff on our new strategy going forward. And, inevitably, that will lead to some change for colleagues, and having a really robust way of running the staff survey will be part of how we will track whether we're getting the right buy-in to where we're going.

The new provider also enables us to do pulse surveying as well, so we'll be able to do targeted pulse surveys around particular things. So, I am satisfied coming in—No. 1, I think they're a great set of scores, and No. 2, I think we've got some really good tools and techniques to help us really understand and engage our staff base.

Thank you.

Thank you. Great. Huw.

Thanks, Chair. Just one question. So, KPI 7, savings identified: a target of £30 million over three years of potential savings, productivity gains and other financial benefits. You've achieved it. That's great. Well done. Could you just explain how you quantify that level of saving and where it comes from? But then also, if I can be a bit more challenging, you audit billions and billions and billions of public expenditure—ought that target of productivity gains not be higher than £30 million over three years?

Thank you for that question. As I say, we exceeded the target. We were very, very proud and pleased with that. The KPI is worked up based on the work that we have undertaken, calculating what the potential savings would be. We do that in a variety of different ways. We can certainly send the committee more information if that would be helpful to you. But it would be that, where there is a quantifiable saving, we would identify that and we would quantify it. And we can certainly share more information on that with you if that would be helpful.

I think the point I would make in this space, though, is that, whilst saving money is a huge part of our role, it is not the only part of our role as well. So, we have a responsibility to look at financial governance of organisations and to look at whether they have proper arrangements in place for the delivery of value for money. So, I think, whilst the delivery of financial savings and how we quantify those is clearly—. We are very transparent about that, and it's very important. I would just remind the committee that it's not the sole purpose for Catherine and the whole extent of her remit, really.

We have certainly, over the last few years, moved towards identifying or looking at areas where we can identify savings. And you'll know that things like the national fraud initiative—that does identify significant savings for the Welsh public sector every year that can be re-diverted to other front-line services.

Do you want to pick up a bit further, Huw, on that?

If that's okay.

Yes.

I'm not suggesting that identifying savings is the primary scope of your work, but it is part of it—

Huge, absolutely.

—and that's why it's a KPI, and I'm just posing a question whether, given the scale of public expenditure, that target ought to be pushed higher, not least because the Wales audit office has, in the past, raised concerns about the ability, for example, of local government to drive productivity gains and efficiencies itself, given the scale of demographic growth it is facing. So, I wonder whether it's appropriate, therefore, to push your own targets in terms of identifying productivity gains within those organisations as well.

I wonder whether, Catherine, as the new auditor general, that's something you've reflected on at all, in terms of how you quantify some of those savings and report on those more transparently. 'Transparently' is the wrong word, sorry, but more readily, perhaps.

Yes, I would say it's something we're having a very active discussion about in the frame of the new strategy, actually, in terms of how we really demonstrate impact in all its many forms. And I think that traceability point is something that we're very alive to. I think it's fair to say we're having quite a transformational conversation about all the different impacts that good public audit can have, absolutely built on a foundation of quality, which Ann-Marie's already described, but all the way through to the role that public audit plays in reassuring inward investors that we're a stable place to come and invest your pound, right through to how we support individual bodies to get on to that preventative agenda and so on. So, it's quite a holistic conversation. So, I'm sure it's something we'll have more to say on when we come back to the committee, perhaps, in the future.

Diolch.

Okay, diolch yn fawr iawn. Thank you. Lyn.

Thank you. During the year, the former executive director of communications and change left the organisation. Audit Wales appointed a new executive director for audit modernisation and impact in place of the previous executive director. And it implemented changes—sorry about this—to the directors. What led to these changes and what benefits is this change expected to bring? Sorry, I haven't got my glasses.

Do you want to take the first part, and I'll add a bit?

Fe wnaf i gymryd y rhan gyntaf. Diolch am y cwestiwn. Mi wnaeth y cyn-gyfarwyddwr gweithredol adael i symud ymlaen ei bywyd gyda phethau gwahanol—ac rŷn ni'n dymuno'n dda iddi hi—ond roedd yn dod yn amlwg ar y pryd fod yr agenda moderneiddio yn dod yn fwyfwy pwysig, a hefyd arloesi o fewn y sector. Mae'n bwysig ein bod ni hefyd, fel Archwilio Cymru, yn edrych ar sut i arloesi.

Yn ogystal, mae'r bwrdd, fel y clywsoch chi pan oeddem ni yma ryw bythefnos yn ôl nawr, dwi'n meddwl, yn dechrau rhoi mwy o sylw a phwyslais ar effaith ein gwaith ni. Er mwyn gyrru'r gwaith yna ymlaen gydag egni, roedden ni'n teimlo ei bod hi'n bwysig cael rhywun ar lefel yr uwch-dîm i arwain ar y gwaith ac i roi sylw a'r egni dyledus iddo, a'r neges hefyd i bawb fod hwn yn bwysig i ni fel sefydliad.

Bu ychydig o newid yng nghyfrifoldebau aelodau'r uwch-dîm er mwyn dod â rhai agweddau o waith at ei gilydd. Derwyn Owen, y gwnaethoch chi ei gyfarfod y tro diwethaf roedden ni yma, sydd nawr yn arwain ar y gwaith yna. Ond mae hefyd yn gyfrifol am gyfran helaeth o'r gwaith mi oedd Anne-Louise yn ei gyflawni gynt. Dŷn ni'n meddwl bod hwn yn caniatáu i ni fel sefydliad addasu ac esblygu'n barhaus fel ein bod ni'n gallu sicrhau'r gorau i'r cyhoedd yng Nghymru.

If I could just add, coming in, I was pleased to see this change in focus. I think this profound questioning about how we trace through our impact is something that we're going to have to really tackle over the next few years. I think the influence that we can have on the international world of auditing through our role, and also how we're going to support public bodies in Wales to themselves deal with some of the innovations and changes that they're going to have to tackle, as we are, in terms of the use of digital technologies, and particularly AI, is going to be very profound for us.

As I've come in, I'm pleased to find Derwyn in post, but we're asking ourselves again, 'Do we need to make further changes to bolster our skills, tackle that issue even more and add more capacity there?' I think it's a really important aspect of our work in Audit Wales. I think, as we move into the discussions about our new strategy and future, this is something that we'll be doing more and more of. So, I think it was a good first step to make those changes to the executive leadership team, and it's definitely bringing a different focus to us in our discussions.

You were £923,000 below your net resource in 2025-26. How much of that is a recurring saving, and how much arose from vacancies or work moving into this year?

In terms of the overall underspend on resource, around £650,000 is related to underspend on staffing costs, and the balance related to non-pay costs. A lot of the underspend related to issues within the audit delivery team, where, as you know, we are doing an awful lot of work to catch up with the backlog that came around during the COVID crisis. We're now in a position where we expect to have met or addressed that backlog during the current financial year.

What we've been very keen to do is to ensure that we avoid redundancies and that we ensure that we have sufficient staff to deliver the work to finally clear that backlog. So we have held a number of posts vacant during the year, and we've managed the position whereby we have a number of temporary contracts in place so that we can smooth the journey from completion of backlog to a new steady state. We anticipate, as a result of the audit transition to beyond backlog, that there are around 20 posts in total that we will need to remove from the establishment. Obviously, that will be reflected in future budgets and estimates that this committee sees, but, of course, alongside that, there is a corresponding reduction in audit fee income. All of that needs to be worked through, and you'll see that in the estimate and the fee scheme that comes to this committee in about a month or so's time.

Thanks for that. Lyn, before you jump back in, Sera, do you want to pick up anything on this point here now?

Ydw. Dwi'n mynd i droi i'r Gymraeg, os yw hynny'n iawn. Diolch, Sam. Roedd cwestiwn gyda fi ynglŷn â thanwariant ynghylch staff. Mae'r wybodaeth alldro yn dangos £649,000 o danwariant o fewn costau staff, a rŷch chi newydd fynd drwy'r rhesymau am hynny. Rŷch chi wedi sôn am sut mae hynny wedi digwydd, ac yn sicr i'r maint mae wedi digwydd, ond i ba raddau y dylai hyn fod yn ffactor i ni fel pwyllgor wrth ystyried yr amgymgyfrif yna y gwnaethoch chi sôn amdano'n fras ar gyfer 2027-28?

I think in terms of the consideration of the estimate for 2027-28, what you will see in there is a revised staffing establishment that we have going forward. That is, if you like, as much as there can be, a steady state, because there are always going to be changes and variances there. We expect that, for 2027-28, it would be, if you like, more of a steady line, but of course, you always have to look at things in parallel; it's not just the reduction in staff costs, it's also the impact on audit fee income.

Before we go any further on this, to be clear on this, the 3.2 per cent underspend, essentially, are you over-egging your estimates every year? In the previous financial year it was 3.2 per cent, this time 3.2 per cent—quite a way from the 2 per cent target. Are you over-egging it every year?

I would say not—

The evidence seems to show that you are, doesn't it?

Yes. I think the issue for me is that we have had this backlog, we have been prudent in how we've managed that and we have looked to, as I say, hold these posts vacant so that we can both address the backlog but also avoid any compulsory redundancy. What I would also say is that, at year end, Audit Wales cannot keep reserves, and any surplus is returned in full to the consolidated fund, so that there is nothing that is making, if you like, Audit Wales's life easier by doing this. That said, we have set a key performance indicator target of 2 per cent and 3.2 per cent is clearly some way off that. We have carried out quite a bit of work to analyse the reasons for that. We've looked at our income delivery and we are just under 0.5 per cent off our income target of £18.6 million, so we think we're there or thereabouts on that.

In terms of non-pay expenditure, there are, overall, very small variances. The key variance is because of these staffing costs. We have got a number of measures in place so that we can absolutely have that grip on staffing costs once we have cleared that backlog in 2027-28. Just one other point to make is that, although we've put those measures in place and we feel that we've got a far more targeted approach in the current and next financial year, we have asked our internal auditors to look at our overall budget management processes. They're doing that now, they'll be reporting to our audit committee in December, and I'm sure there will be recommendations for further improvement that come from that.

It's a slightly strange thing to be challenged on, because it's an underspend not an overspend, isn't it, so I appreciate that, but I guess when you're coming here looking for estimates for next year, it is about understanding how accurate those may or may not be.

There are a few Members who want to pick up some more questions. Sera, there are a couple more bits from your side. One second, Elfed, before you come in, I just want to get the order of things organised here. So it'll be Sera, then Lyn and then Huw. But before that, you want to come in on this particular point, Elfed, yes?

Yes. I'm just trying to get my head around you saying that you've got an underspend on staffing, but you're saying that you're probably going to be looking at making 20 posts redundant.

Taking 20 posts out of the establishment, not making them redundant, because we're managing them through fixed-term contracts, which we are tapering down as we clear the backlog.

Okay. I just wanted to clarify that.

Sera, I will come back to you, and then I will come back to you in a moment, Lyn, okay?

Diolch, Gadeirydd. Jest i gadw ar y thema o danwariant a hefyd staffio, roedd dros 50 y cant o danwariant ar gostau'n gysylltiedig â'r fenter twyll genedlaethol, gyda rhywfaint o'r tanwariant hwnnw'n cael ei defnyddio i gyllido rôl newydd yn nhîm dadansoddeg data Archwilio Cymru. Pam ddigwyddodd y tanwariant, i ddechrau? O ystyried natur gylchol costau'r fenter twyll genedlaethol, sut bydd y rôl ddadansoddeg data newydd yn cael ei chyllido tu hwnt i 2025-26?

Do you want me to take that? Thank you. The £48,000—I think it's £48,000 in the note to the accounts as undespent—was not actually a £48,000 undespend, because we used some of the funding, around half of that, to support additional capacity in our data analytics team. The data analytics team, in their expertise and skills, have been able to help us to do more fraud prevention work or fraud identification, things like in the GP registration area and in community pharmacy as well. They've also helped us to identify a tool that has helped us to interrogate NFI data, matching information in a more effective way, and to help inform our follow-up work as well. So, it's a great area for us to be using the NFI money for, and it has really helped us to identify areas of saving going forward. I think you'd all agree that it's a hugely important area of Catherine's work as auditor general.

This year, I don't think there will be an underspend at all. In fact, we're probably going to be in a position where, internally, we have to try and work out how we're going to invest more money in this area, because the costs of the access to the tool have risen considerably, above inflation. So, we're in a position, really, where—. And we've got more bodies who want to join the national fraud initiative as well, which is great, great for Wales. But what that does mean, of course, is that costs are going up, and so, at some point in the future, we may need to talk to you about that.

My question was around that role, and is that going to be continually funded, then, if you didn't anticipate an underspend.

Certainly this year, we have used some of the money to support additional capacity in the data analytics team. I imagine that it will be an area that we would want to continue to invest in, because I think it's a hugely helpful way in which we can identify fraud more effectively.

But it might not be part of that NFI underspend money.

The data analytics capacity that we're funding would probably be funded from NFI. But as I say, we do have this issue where the costs of the NFI tool and access to it are rising considerably, and so we may have to make choices, to be perfectly frank.

Diolch yn fawr iawn. Thank you. Lyn, back to you.

There were two severance payments made out. Were posts deleted as a result of this activity, and if so, what has happened to the work and tasks previously undertaken by those roles?

The committee will understand that I have to be a little bit careful about what I say in public session because of the sensitivity and confidentiality of these cases. Just by way of explanation, any exit payment has to be supported by a business case, which is reviewed by our executive leadership team, so that's the auditor general and three executive directors. It has to meet a number of criteria. They include that the payback mustn't exceed three years. They've got to comply with civil service compensation scheme rules, and they've got to meet business continuity and workforce planning requirements.

In this case, each case did meet the criteria. They were approved by the executive team. But, in addition, we reported what we had done to our remuneration committee. That's only required for payments that exceed £95,000, but I think for full transparency, we kept the committee fully apprised of what had been done.

Both posts have been deleted, but we have created one single new post. The reason for that is that changes in business processes, technology, service demand and working patterns meant that we needed something different in that space. The volume and nature of work had changed, the skills required to deliver that work had changed, and that is what has been wrapped up in this single new role that we have, designed to meet current need, but also our expectations of future need in the business.

Okay.

Thank you. We'll have to move on, I think, because time's really flying here. I do apologise. I know, Huw, you had some questions as well.

Yes, thanks, Chair. So, we're still in the remuneration and staff area. It's really great to see the section about fair pay and the differential between higher and lower salaries, but I wonder whether you could just confirm whether the audit office is an accredited real living wage employer.

It is, yes.

Fantastic. Okay. There's no mention of it, but that's okay. I was then just going to ask about—and we have touched on it—the decrease in the number of people on permanent contracts and the increase in the number of people on fixed-term contracts. I think you've explained a little bit about some of the strategy behind that, but do you anticipate that you will, on a longer term basis, rely on more people on a fixed-term contract?

I think Ann-Marie may want to come in on this point as well. I think as we move back to that steady state that I mentioned before, I'd anticipate more people being on the traditional employment contracts with Audit Wales. In the past, we did always take on temporary staff, but that was very much for specific peaks in workload, when we have audit deadlines to meet—there are two or three specific ones during the course of the year. So, I would anticipate moving back more to that model, so there would be much shorter fixed-term contracts specifically to deal with those peaks, rather than a backlog of work where we've needed to take people on for 12, 18 months to give some continuity.

So, dealing with core audit work, but outside of that and looking further ahead, I can see a situation where we would need to use fixed-term contracts for specific skill sets, so, again, back in the digital and AI space, sustainability reporting, natural capital reporting, et cetera. There are going to be fundamental changes to the types of work that we're going to be getting into, and I think those might lend themselves to injections of fixed-term contracts to bring expertise or skill us up in a particular area, and so on. So, I think we need to distinguish between our core skills and then thinking more about the skills of the future and so on. That's much less defined, though, but I wouldn't want to leave the committee with an impression that we wouldn't do that, and I think that is a possibility.

Huw, perhaps before we move on to something slightly different from your side. From a board perspective, Ian, I wonder how you get those assurances that the balance is about right between temporary staff to deal with peaks and troughs and then permanent staff to provide that continuity of service.

Diolch yn fawr. Mae gan y bwrdd bwyllgor, y pwyllgor cyflogaeth, ac rydyn ni'n edrych yn fanwl ar hyn. A hefyd, wrth gwrs, mae gennym ni strategaeth y gweithlu, sy'n cynllunio ymlaen sut rydyn ni'n meddwl rydyn ni eisiau datblygu'r gweithlu i'r dyfodol, a sgiliau, a sut mae rôl archwilydd yn newid i'r dyfodol, sut mae'r corff yn newid i'r dyfodol, a'r staff fydd eu hangen, ac mae hynny wedyn yn dod trwodd yn hynny. Felly, rydyn ni fel bwrdd yn cadw llygaid arno fo. Rydyn ni'n derbyn cyngor proffesiynol gan Catherine a'i thîm. Ond, yn sicr, mae strategaeth y gweithlu yn bwysig iawn i ni ac mae'r pwyllgor staffio yn rhan annatod o baratoi a chadw trosolwg dros hynny. Diolch yn fawr.

Diolch yn fawr. Huw.

Yes, staying in this area, staff composition specifically, over half your employees are female, but only 20 per cent of your senior leadership are female, and likewise I think the board is currently two thirds male. I appreciate, Catherine, with you coming in, you will have changed those leadership figures slightly, but it's still a significant differential. What's your assessment of the organisation's ability to support women to progress through their careers to the very top of the organisation?

Well, I think it comes in different areas. So, we do have our strategic equality plan. In fact, we've just put together a new strategic equality plan that deals with this. I think one of the key issues is bringing women through the audit route, so we now have female colleagues who are making their way into the director cadre and hopefully will go further than that. So, I think it's something that's part of our workforce planning, it's part of our strategic equality plan. I hope that more visible female leadership—. If our colleagues look at our executive leadership team now, it's now 50:50, which is encouraging. So, there is a—

So, the new leadership team is now 50:50?

Yes, so Derwyn and Kevin and me and—

In your new structure.

Yes. So, yes, it'll be a process over a period of time.

O safbwynt y bwrdd, gallaf ateb rŵan neu ei bigo fo i fyny yn y cwestiwn nesaf, os ydych chi eisiau, fel y mynnwch chi.

Cer di, Ian; ateb e nawr.

Ocê, gwnaf ei ateb e nawr. Y bwrdd ar hyn o bryd, mae gennym ni naw aelod. Mae pump yn cael eu hapwyntio drwyddoch chi, ac wedyn mae yna dri o staff—dau drwy etholiad, ac un drwy apwyntiad gan Catherine. Wedyn, i raddau, mae pwy sy'n ymuno â'r bwrdd, o safbwynt y bobl anweithredol, yn eich dwylo chi a ni. Dwi'n ddiolchgar iawn i fod yn rhan o'r broses, ac mae'r broses yn cychwyn rŵan i apwyntio aelod newydd.

Os ydyn ni'n sôn mewn ychydig bach am effeithiolrwydd y bwrdd, yn yr adroddiad a gawsom ni, roedd o'n nodi bod aelodaeth y bwrdd ddim yn amrywiol iawn, ac rydych chi'n berffaith iawn i godi hynny. Mae o'n rhywbeth sy'n bryder i ni, ond, i raddau, sydd y tu allan i'n dwylo ni hefyd. Felly, mae'r neges wedi mynd i'r pwyllgor yma yn y gorffennol, a bydd yr un neges yn mynd rŵan, wrth apwyntio aelod newydd, o ran pwysigrwydd cael amrywiaeth o ran aelodaeth y bwrdd. Rydyn ni'n cydnabod hynny ac rydyn ni'n gwneud beth allwn ni i'w ddatblygu o.

Diolch, Ian, ac mae hwnna'n rhywbeth, dwi'n credu, i ni fel pwyllgor ei ystyried. Dwi'n credu, yn y deunydd hysbysebu ar gyfer lle ar y bwrdd, mae yna esiampl—

Bethan sydd yn ei wneud o, ie.

Bethan, yn union, ie. Fy nghwestiwn olaf i—.

Chair, just to stay in that area of board effectiveness, actually, I note the effectiveness review that you carried out and I commend you for undertaking that work. I wonder if you can just say a bit more about the findings, given that that identified you as operating in the second quartile of board excellence.

Nid da lle gellir gwell.

Nid da lle gellir gwell, yn sicr.

I don't know, so, give us a sense of the findings and what you're doing.

Absolutely, diolch yn fawr. Jest i roi cefndir, mi ydyn ni fel bwrdd yn mynd drwy broses mewnol bob blwyddyn ar effeithiolrwydd, ac wedyn yn cymryd camau. O leiaf unwaith pob pum mlynedd, mae'n rhaid i ni fynd yn allanol, a dyna beth wnaethon ni, ac rydych chi wedi cyfeirio at yr adroddiad. Cawson ni adroddiad gan y cwmni Board Excellence, yn cyfeirio at feysydd o gryfder a meysydd lle dylem ni ddatblygu.

I roi pictiwr cyflawn i chi, roedd y meysydd o gryfder yn cynnwys amryw bethau. Roedden nhw'n sôn am gyfarfodydd effeithiol, papurau da. Roedden nhw'n sôn am gefnogaeth dda gan ysgrifennydd y bwrdd. Roedden nhw'n sôn am arweiniad gan y cadeirydd, fframwaith llywodraethol effeithiol, ymwneud efo staff. Rydyn ni'n rhoi lot o bwyslais ar dryloywder ac ymwneud efo staff—mae gennym ni staff yn dod i mewn fel sylwedyddion yn y cyfarfodydd—ac agwedd dda at reoli risg. Felly, roedd y rheini'n gryfderau.

Yn sicr, roedd yna rhai pethau rydyn ni eisiau eu datblygu. Dwi wedi cyfeirio at un yn barod efo'r amrywiaeth mewn aelodaeth. Un pwynt penodol buaswn i'n tynnu sylw'r pwyllgor ato yw bod gennym ni un aelod sy'n cael ei apwyntio gan yr archwilydd cyffredinol, ac mae o'n drefn ryfedd. Mae'r person yn berson arbennig o dda, ond mae o'n drefn ryfedd. Ac efallai, os ydyn ni'n edrych ar newid yn y ddeddfwriaeth, fod hwnna'n rhywbeth y gellir edrych arno fo.

Maen nhw'n teimlo bod y bwrdd yn gorfod sicrhau bod gan yr archwilydd gynllun dilyniant i staff hŷn. Mi oeddwn i'n rhan o'r newidiadau rydyn ni wedi clywed amdanyn nhw'n barod, ac roeddwn i, ar y pryd, yn siarad yn rheolaidd efo Adrian am ei gynlluniau fo, a dwi'n cael yr un math o sgyrsiau efo Catherine.

Hefyd, mae gan y bwrdd rôl ddiddorol iawn, ac weithiau cymhleth iawn, o safbwynt cyfrifoldebau Catherine fel archwilydd cyffredinol ar yr un llaw, a phrif weithredwraig ar y llaw arall. Mae ein cyfrifoldebau ni wedyn yn amrywio. Mae'r rôl gynghori o fewn y rôl archwilydd cyffredinol yn rhywbeth rydyn ni wedi bod yn trio clirio mwy, o ran beth y mae 'cynghori' yn ei feddwl—achos mae annibyniaeth yr archwilydd yn hollbwysig—a sut rydyn ni'n gwneud hynny.

Hefyd, rydyn ni wedi sicrhau bod y cyfarfodydd yn fyrrach ac yn fwy slic, yn fwy effeithiol. Rydyn ni'n adolygu trefniadau llywodraethiant yn flynyddol ac rydyn ni'n parhau i ymwneud efo staff. Dwi, yn bersonol, yn ceisio ymweld â phob swyddfa o leiaf ddwywaith y flwyddyn i siarad efo staff, ac fel roeddwn i'n dweud, rydyn ni'n rhyddhau papurau lle medrwn ni. Mae rhai fedrwn ni ddim, ond rydyn ni'n rhyddhau papurau i staff, cofnodion a phob dim, ac yn croesawu staff i arsylwi. Felly, nid da lle gellir gwell, ac mae gennym ni gynlluniau yn eu lle i symud pethau ymlaen.

Diolch yn fawr. Okay. Ben, we've got about 10 minutes and then we'll wrap things up.

Thank you, Chair. Just to return to the finances for your organisation, the lease rental payments that were reported were £73,000 higher than those that were budgeted in the estimate. What was the reason behind that?

Within the estimate, we include an estimate for the lease rental payments for three main Audit Wales offices. So, Cardiff, north Wales, at Llandudno Junction, and in west Wales, Penllergaer. We account for those in terms of resource accounting evenly over the lifetime of the lease. Within the accounts, though, you'll see reference to the cash payments that we physically make to the landlord, and there can be variance in those cash payments from one year to another. So, I think, in the case in question, the £73,000 difference, there were three payments to one particular landlord in 2024-25; there were five payments to that landlord in 2025-26. It's purely a timing difference. The cost of the lease remains the same over the lifetime of the lease.

Okay. Thank you. And in terms of your audit fee income as well—we've touched on this a little bit—that was £311,000 less than expected. Has this had an impact on the organisation at all? You've touched on it already, but how are you managing the workload and staff in live issues around deadlines?

So, the audit fee income on our accounts work and on our performance work was £311,000 less than budgeted, but you'll note that the income from grant certification income was £230,000 up. Obviously, it's the same staff that work on all of the audit work, so it was just a redeployment of resource, essentially. So the underdelivery, if we want to call it that, was £81,000 on a budget of £18.6 million. And £69,000 of that related to an accounting adjustment. So, the staff in audit delivery actually brought audit fee income within £12,000 of an £18.6 million income budget, which is nothing short of phenomenal really. So, we're very proud of and pleased with that.

Okay. Thank you. And then just finally from me, when looking at the RSM audit findings, an average loss rate was discussed in relation to town and community councils. This was listed as 80 per cent, which was significantly higher than the 50 per cent that was anticipated. So, why were losses of this magnitude expected in this area and why wasn't the initial estimate more accurate in your view?

The estimate was recommended to us by our external auditors, and it doesn't reflect what happens in practice. We would expect to get around £370,000 per annum. We've recently undertaken a review and looked at what we've written off, if you like, in the 2026-27 financial year so far. So, up until this point in time, we've only written off £7,000. And for the prior year, the year that we are looking at, it was £4,000. So, we don't recognise an estimate as large as that, and we are going to be working with our auditors going forward to actually make sure that the estimate is maybe more realistic going forward.

Okay. Thank you, Chair.

So, before we look forward a little bit—Chair's prerogative—a few more little questions. I'm interested, on the KPIs, there's a particular KPI around social media, which is an interesting thought, and you measure trying to achieve a certain amount of engagement. I guess the problem with social media is that, if you really want to get lots of engagement, you could say something absolutely outrageous and then you would smash that target every year, but I guess that's not the usual behaviour of auditors. So, I wondered whether you've reflected on how, as an organisation, you engage with social media and how helpful or healthy it is from time to time, and whether there's consideration as to how that might change in the future, as the world of social media changes, and whether—. As I say, I appreciate why you may have put a target in there; you've got to measure it somehow and justify why you do things on social media. But, as I say, if you want to hit a target, you can just say something absolutely ridiculous and you'll hit that target in one day, probably. So, any thoughts, perhaps as a new auditor general, on how that works.

Well, I won't take that as a recommendation to say something outrageous to get the hits. [Laughter.] There are a few different spheres to this. First of all, we've talked about how proud we are of our trainee and apprenticeship schemes, and we've also talked about the diversity of Audit Wales and the need to reflect the communities that we serve. So, one purpose of our social media is to have some kind of resonance with those who might join us or feel that a profession in public finance or public audit is something that they can make a difference in. There is a way you go with comms and social media to address that. But the biggest reason that we do social media is to—. It comes back to 'Assure, Explain, Inspire'. We're trying to explain to people what we're finding with our work and what that means for the public services that they use, and also it is a very important part of our impact, and with many of our reports, the impact they can have is shining a light on something or bringing something to attention. That underpins public trust, which is something that we're thinking through—how to really put that at the heart of everything that we do.

So, I think I'm going to answer it by saying I think we have to have a social media strategy. I think how we engage with social media as a public audit body is quite a challenge. It's a very different challenge to ones I've had before. Engaging on space programmes is a lot easier than engaging on a bunch of public audits, but I think it's just as important. Whether hits is the right measure, I'm not sure. Whether we need to be in different social media, I'm not sure. Whether we need to be the ones talking about our work all the time is also tricky. And, obviously, how we really engage with Welsh language-speaking communities and raise our game in that sphere as well is also something that we're really thinking about. So, we're reflecting on it. Whether that's the KPI is something we'll ponder.

Okay, thank you. I'll bring Sera in to wrap things up. Sera.

Yes, very briefly. I think it's a good time to refer to page 38 of your annual report and accounts for 2025-26, because you've got very low prompted public awareness of Audit Wales: 4 per cent in 2026 knows 'a lot' about you, 18 per cent say they know 'a little bit' about you, but a large proportion, 51 per cent, say they've never heard of you. So, again, would that be more of an accurate metric in terms of—? Is that a metric to strive to improve, because I saw there was a reduction this year, albeit 1 per cent—5 per cent to 4 per cent—in the people who know you well? But I think perhaps social media can play more of a role there. So, just a comment more than a question, really.

I think general awareness was up. I think strong awareness was slightly changed. I think it comes back to this: we want people to know our work and so on. Does everybody need to know the public audit body? It's a question. But as we sit as part of this kind of fabric of trust amongst the Welsh public about public services and the role of public audit within that, I think it is important. It's certainly something that we're thinking about. 'Are we as well known in Wales as the National Audit Office is?' is more generally a question, and 'Do we want that?' is another question. So, it is something we're working through, but we are quite conscious of it, and for me, with my auditor general hat on, I think the public having confidence that I'm looking at the things that they care about is important, and how that is reflected is what matters to me.

Diolch yn fawr iawn. The work of audit, generally, is so important and powerful in that trust issue, certainly at a time in public life and in institutions where the risks are around trust and how organisations are perceived, so we value your work immensely. We also recognise that some of the KPIs in here aren't where you'd want them to be. And if you think about the core work of Audit Wales—audit accounts and performance audits—there's clearly work to be done. There are reasons why, perhaps, some of those measures aren't where they should be. But I wonder, then, as a final question, looking into the next year and beyond, how in your role, Catherine, as a new—? We will stop saying 'new' at some point—

Yes, I've stopped saying it. [Laughter.]

Yes. As the newish auditor general, what sort of plans will you want to present, sooner rather than later, to get those measures up to the place where you'd want them to be, and to continue to support institutions here in Wales to establish that trust?

So, on the measures and things in the annual plan, obviously, we've already spoken about the robust processes we have in place, from the board level, the executive leadership team level and right across the organisation. And, again, I have to say, coming in, I have been really impressed at the really relentless focus on results that the organisation has, and I take a lot of assurance from that. We don't take it for granted, but we really push forward.

I think this year is one where we are starting the conversations about a new strategy, asking ourselves some quite profound questions—what are we here for, what difference can we make, how can we deliver for Wales, generally? So, I think, tilting our new strategy to something that is much more explicitly outward-facing is something that we're talking about, and, in fact, we had a really good board session just yesterday, led by Ian, where we had a good conversation, with some of my early thinking, and the thinking of the team, around impacts, how we measure that and so on.

So, yes, I think—. I wouldn't want to say to the committee that we're going to hit our KPIs—. As I said earlier, I think we want to stretch ourselves. We are an ambitious organisation. But getting that core work right is absolutely fundamental, those quality measures Ann-Marie spoke about before, and really valuing the professional expertise that we have is really important, and then how that weaves into trying to arrest this—reading the social attitudes survey the other day—concerning decline in public trust in public institutions, which continues to slide. And any part we can play in pulling that back, I think, we want to. So, yes, it's a moment of profound reflection about our role and where we can really make a difference, particularly in the value-add space, if I can put it like that, building on this bedrock of the work that we do every day on performance and finance audit.

We touched on it last time as well, but if we are able to take the advantage of just making those few tweaks to our legislative framework, so that we can really focus where risk is, and elevate the impact of some of our thematic work, we would really like to do that, and that's something, perhaps, we'll return to when we look at the estimate discussion.

Thank you so much, and thank you for all your time with us this morning; it's very much appreciated.

Hi, I'm Andrew Jeffreys, director of the Welsh Treasury.

Diolch yn fawr. Thank you again for being with us this morning. We have just over an hour together to talk through this pre-budget scrutiny. I appreciate, Cabinet Minister, it's your first budget to plan for and work towards. I'm just wondering, perhaps, as a kick-off question, you might want to describe how allocations are being worked through in conversations with your Cabinet colleagues, and how those allocations may be agreed to at some point in the coming days, weeks and months.

Diolch am y gwahoddiad bore yma, a diolch i chi fel pwyllgor am neilltuo amser i gynnal y drafodaeth yma ar y gyllideb flynyddol. Jest i ddweud, efallai, o ran cyd-destun i gychwyn, pa mor anodd a heriol yw'r cyd-destun ariannol rŷn ni'n ei wynebu ar gyfer y flwyddyn ariannol nesaf. Byddwch chi'n gwybod bod y gyllideb, fel mae wedi cael ei chlustnodi ar hyn o bryd, yn wynebu toriad yn y flwyddyn nesaf o 0.7 y cant mewn termau real, a bod yr amcanion ar gyfer y setliad ar gyfer y tair blynedd nesaf, o ran cyfalaf, hyd yn oed yn fwy heriol, gyda chwtogiad, dros dair blynedd, o 9 y cant mewn termau real i'r gyllideb gyfalaf fel y mae ar hyn o bryd.

Felly, mae cyd-destun y gyllideb yn heriol, ac felly mae'r cyfuniad o hynny gyda Llywodraeth newydd Plaid Cymru mewn Llywodraeth am y tro cyntaf yn arwain y gyllideb yma, yn cyflwyno'r gyllideb gyntaf, ac yn cyflwyno rhaglen lywodraethu newydd sydd angen cael ei hadlewyrchu yn y blaenoriaethau cyllidebol—mae'r cyfan yna'n dod at ei gilydd tuag at broses sy'n fewnol o fewn y Llywodraeth ar hyn o bryd. Dwi'n arwain y broses gyllideb hynny mewn cydweithrediad â'r Cabinet ac yn gosod y cyd-destun heriol ariannol i'r Gweinidogion, ac yn disgwyl iddyn nhw wedyn fod yn gwneud y blaenoriaethu sydd eu hangen i gydbwyso'r angen i ddiwallu a chyflwyno gwasanaethau cyhoeddus effeithiol, ac i gyflwyno, drwy y gyllideb, y modd i wireddu'r rhaglen lywodraethu.

Perhaps it's worth reflecting as well, in leading the budget process through the Government at the moment, that it is, yes, led by Ministers in their own portfolios, in prioritising their budgets and in marrying the programme for government priorities into their budgets. But the cross-cutting and the oversight of that work is done by myself, the First Minister and the Cabinet, in wanting to see that there’s a coherent budget that reflects the priorities of the Government in what we produce in, as I have said, a very challenging financial settlement for the next financial year.

Thank you, Cabinet Minister, and you’ve outlined those challenges in terms of the real-terms cuts that you will be having to manage. Clearly, there are areas outside of your control, outside of many of our control, in terms of global events and the pressures that that's putting on things like inflation and then pressure on things like interest rates and the impact that has on you and your ability to plan. How are you taking that into account, and are some of the assumptions you've made underestimating some of those pressures, do you think? Inflation, we hear, is likely to probably rise at a rate higher than people would have wanted or expected. Is that impacting some of those plans you'd want to be making?

Well, the budget is predicated at this point on a gross domestic product deflator that was announced in March of this year of 1.94 per cent, and that's where the figure of a 0.7 per cent real-terms cut is derived from then. But we're expecting that figure to be revised and announced in the next few weeks in anticipation of the UK Government budget. I think we can all collectively agree that that is likely to be increasing. The inflationary pressures that you've alluded to are very real. We see them in our petrol pumps and we know how they are affecting people in their everyday lives, as well as how the Bank of England will be reflecting on that, with changes to the interest rate, possibly, as well.

Is it different to what you expected in terms of the challenges you're facing?

The budget itself—. In terms of—and I've spoken of this previously, possibly in this committee—in terms of this current year's budgetary pressure, the financial pressure within the delivery of public services in this financial year is slightly different and more significant than I expected. In terms of the next financial year, the settlement is as was expected and as was announced previously, but the circumstances of everything that's happening around us and to us is changing all the time. So, the pressures on that budget and the settlement that we have for next year are challenging; it is probably the most challenging of settlements since the pre-COVID time. And, therefore, the effect of that, in terms of how we deliver public services and how we, as a new Government, put into action a programme for government that we are committed to, all of that will provide challenge.

There's significant overlap, of course, between the programme for government and the delivery of public services, and therefore we need, in how we integrate all these different strands of the budget together, to be coming to decisions that reflect on what is an effective delivery of public services, but also with the most recent set of priorities that the people of Wales have voted for.

Thank you, Cabinet Minister—

Can Andrew add?

Sure.

So, I think the evidence available suggests that inflation next year is going to be significantly higher than we thought it was going to be back in March and, certainly, even more recently than that. Expectations keep on ratcheting up a bit. The bit that we'll find out more about, in addition to what the Office for Budget Responsibility's forecasts are in the UK budget, is whether the UK Government is increasing expenditure in devolved areas in England as a result of that and, obviously, whether that follows through, then, into consequentials for us. It makes a big difference, obviously, if that kind of higher than expected inflation leads to additional public expenditure or whether public expenditure stays at the same level whilst we're dealing with higher inflationary pressures. So, that's something else to look out for in the UK budget—not just the OBR's forecast, but whether the UK Government's increasing expenditure to sort of compensate for that, if that's the right way of putting it. We don't know that yet.

Thanks. Just before I bring Sera in, just one last point from me on this, then. So, whilst there may not be anything concrete ahead of the Chancellor's budget at the end of this month, I'd be interested in any mood music that you may be hearing as to what that might mean—I appreciate if there's not much there. And I suspect the other—in response to, Andrew, your point—challenging message might be that there may be a higher settlement than expected, but, if inflation is higher than the proportion of the increase in the settlement, I guess that might be a challenging message to manage, because people may see us receiving a higher settlement, but the costs of delivering everything is even higher. Is that something you've considered, in how you might try and manage that?

Yes, in terms of the mood music, the mood music is as we hear it from a particular party conference we've just been listening to, where the UK Prime Minister and the Chancellor again spoke of difficult financial challenges, and we can expect that to be replicated in some way in what comes in the UK autumn budget. So, I've got no further insight to the mood music than any member of this committee would have.

But the point that Andrew Jeffreys has just made in terms of how we—and as I have done in a letter recently to the Chancellor—look to see how our settlement, and the settlements across the public sector investment by the UK Government, and how the Barnett consequential works for us in that—. That's a hugely significant part of the budget that we will be putting together. We have no idea whether that settlement will increase in order to allow public services to be able to breathe sufficiently to accommodate what are the inflationary pressures that we've already alluded to, or whether it becomes a very real task of needing to live within the settlement we know as it is, which is around £450 million additional in the next financial year.

We have to be very realistic with the people in Wales, with those people who work in the public sector or who receive services from the public sector, or grants into the business sector, that if it is the case that the UK Government decides to continue to press down on spending next year, and the inflationary pressures are as they are, and there's no reason to suspect that they'll change in the immediate future, then that's a particularly tough set of circumstances for us as a new Government, for this Senedd, to be contemplating in the running of all the devolved services we run.

Diolch yn fawr iawn. Sera.

Diolch, Weinidog. Mae gen i gwestiwn ynglŷn â chynllunio aml-flwyddyn. Yn y gyllideb ddrafft, yn ogystal â chyllid ar gyfer 2027-28, ydych chi hefyd yn darparu dyraniadau cyllid dangosol ar gyfer y blynyddoedd i ddod?

Ydyn. Y bwriad yw y byddwn ni'n edrych ar—. Mae'r setliad rŷn ni'n ymwybodol ohono ar hyn o bryd yn caniatáu inni fod yn gosod cyllideb adnoddau ar gyfer y ddwy flynedd nesaf, 2027-28 a 2028-29, ac wedyn i edrych ar y gyllideb gyfalaf, sydd yn gyllideb tair blynedd. Mae hynny yn caniatáu, wedyn, i'r rhai hynny sydd yn gweithredu o fewn y cyllidebau yma i gynllunio'n well ar gyfer y meysydd maen nhw'n gyfrifol amdanynt, ac mae'n caniatáu, o ran y gyllideb gyfalaf yn enwedig, i fod mor effeithiol â phosib yn sut rŷn ni yn defnyddio'r gyllideb gyfalaf sydd gyda ni mewn ffordd sydd yn effeithiol dros gyfnod hirach o amser. Oherwydd dydy gwariant cyllideb gyfalaf, fel rŷn ni i gyd yn gwybod, ddim yn gweithio'n syml o fewn blwyddyn ariannol, ond yn mynd ar draws blynyddoedd ariannol. Efallai yr un health warning y byddwn i'n ei roi ar y gyllideb gyfalaf, wrth gwrs, yw bod y gwaith mae'r Llywodraeth Deyrnas Gyfunol yn ei wneud ar wariant yn y sector amddiffyn ar hyn o bryd yn golygu ein bod ni'n ymwybodol y bydd yna doriad i'n cyllideb gyfalaf ni o fewn y flwyddyn ariannol yma, ac, o bosib, y bydd hwnna'n mynd ymhellach o fewn y blynyddoedd i ddod. Ond dydyn ni ddim yn mynd i wybod yn union beth yw hynny tan gyllideb y Deyrnas Gyfunol ddiwedd mis Hydref.

Diolch. Un cwestiwn arall wedyn: ydych chi'n bwriadu cynnal adolygiad o wariant i gyflawni eich rhaglen lywodraethu ar draws y tymor seneddol hwn, ac, os felly, pryd bydd e'n cael ei gyhoeddi?

Wel, mae'r Llywodraeth cyn fy amser i wedi bod yn gwneud gwaith ar Welsh spending review—ac efallai y gall y swyddogion sôn am hynny damaid bach yn fwy manwl na fi. Wrth inni fod yn edrych ar sut mae'r gyllideb yn gweithio o ran delifro gwasanaethau cyhoeddus ac yn y blaen, fe fydd yna system o fonitro parhaus, nid jest ar y gwariant, ond byddwn i'n dweud taw efallai'r hyn sy'n nodweddu fel rŷn ni moyn gwneud ein gwaith fel Llywodraeth yw edrych ar allbynnau—outcomes—yn enwedig. Felly, mae alinio'r gyllideb gydag outcomes yn rhywbeth sy'n waith parhaus dros y pedair blynedd nesaf yna, byddwn i'n dweud, fel bod pawb, yn ein cynnwys ni fel Llywodraeth, ond pawb sydd yn edrych ar sut mae gwariant cyhoeddus yn cael ei ddelifro ac i ba bwrpas, yn gallu gweld hynny'n well.

Would you like to say something about the spending review work that you've done?

Yes. So, in the previous Government, we undertook some medium to longer term planning in terms of a Welsh spending review. That looked at probably two key areas. One was the spending envelope and maximising the spending envelope we have, what does that mean, what are the opportunities to make our levers go further, whether it's tax levers or, indeed, borrowing, and is there scope for us to go further in those areas. That work has been done and will be picked up again in the new year, and we'll have a conversation with Ministers about the direction they want to take that in.

The spending review also looked at five challenges or opportunities facing public services in Wales. We looked at housing, elements of health, we looked within education, economy and transport; so, transport, for example, looked at buses. We brought together analysis and evidence, along with independent policy thought. So, the work was led by Welsh Treasury but also colleagues outside those policy areas, so that we had a real cross-Government approach. So, we've got a good suite of evidence and information and recommendations there for Ministers to look at in the new year. But, of course, the new Government will want to look at different things as well, and there's a very clear emphasis on maximising our funding, the effectiveness of our funding—that's bound to be a feature of the next spending review as well.

I think also, just to build on your previous question about the longer term budget—. So, the UK Government will reset our budget next year in the next UK spending review. So, we'll have an updated three-year resource settlement and four-year capital, which will take us beyond this Senedd term—so, 2030-31 and 2031-32. Again, there's an opportunity, bringing together the spending review work in Wales as well as the UK one, to give another longer term settlement if that's what Ministers decide to do. We'd be happy to come back and speak to the committee as that work evolves in the new year if that's of interest.

Thanks, Sera, and thank you for that response as well. I'll bring Ben in in just a moment. I appreciate, Cabinet Minister, that you haven't sat in this position before, but, perhaps from officials' perspective—. Because spending reviews have taken place in the past; I wonder, when you reflect on them, how effective they've been, and, when this spending review takes place, how you might do things differently. If you're able to answer it, Cabinet Minister, maybe, but I don't know if you can.

Well, probably I could try and answer, but it would be more meaningful, I think, coming from officials in reflecting on the work that's been done in the past.

One thing—well, maybe two things—to say. One is that we're trying to move away from this idea of a spending review as episodic—every few years, you look at everything, and then you put it down again until you do another spending review. We're trying to do it as a more continuous exercise of reviewing, in a medium to long-term horizon, what it is the Welsh Government spends its money on, what benefits that's delivering, and how you could do that better in the future. So, we're trying to move to more of a rolling programme of spending review work rather than this kind of episodic approach. I think we're still trying to get that embedded, but I think that's definitely the direction of travel we want to go in.

And then maybe the second thing to say is just on the budget exercise that we're going through now. Because we've got a new Government, and we're looking two years ahead on resource and three years ahead on capital, we are doing a much more fundamental exercise of looking at all of the spending programmes the Welsh Government has responsibility for, and whether they're fit for purpose going forward. It's a much more, like I say, fundamental budgeting exercise than perhaps we would have done in the last few years.

Thank you. Does anybody else want to add to that? No. Diolch yn fawr iawn. Ben.

Thank you. You mentioned outcomes a moment ago, and the First Minister has obviously made comments that the Welsh Government has been measured too much on actions taken, rather than on outcomes achieved. So, what are you doing to ensure that there is a link between funding allocations, Government priorities and the outcomes that are achieved? And how would we, as Senedd Members and the wider public, be able to see those links?

Yes, this is most definitely a piece of work that's being driven by the First Minister's aspiration to make this Government focus more on outcomes rather than on just budget lines in an annual budget, and for us all to be thinking about whether a budget line is increasing or decreasing, and us assessing the success of something just by that. It needs to be more meaningful.

To put that into operation then, you will have heard of the work that the Cabinet Minister for Government Effectiveness and the Constitution, Dafydd Trystan, has put in place already on looking to align priorities set out in the programme for government with clearer milestones, data and evidence. That is then being brought together as a vehicle known as a digital dashboard, and therein lies the answer to the second part of your question, really, and that's on how do Members here, how does Government itself, and how do the general public then assess the effectiveness of the use of budgets for outcomes that people in Wales experience.

It's quite a big change, quite a big piece of work that the Government is keen to do, and in doing so, it will mean that in this first budget and budgets to come, there may be quite a significant movement in budgets in order to ensure that how and what we do meets the outcomes most effectively.

So, in terms of the Cabinet and how we've set the priorities for Government Ministers in assessing and coming forward with their ministerial budgets, making sure that we target funding more meaningfully rather than just looking to increase or overcommit budgets, and that it's not an effective way of thinking about how you make those outcomes, and that higher spending is not a measure of success in itself. We need to be ensuring that that is effective.

So, we're trying to embed a slightly more innovative and empowered way to take decisions, which may look as if the budget for something is reducing, but it's reducing because it never possibly needed that much money in order to create a better outcome, because there's more drive on what it achieves rather than how big the pot is. So, there's work on that, as well as integrating that into the programme for government as well.

It may be that this budget that you see as our Government's first budget will look and feel different to budgets in the past, in order to embed some of these new ways of thinking about a budget. It's not just how much you spend on something, but it is what you spend it on, what are the outcomes for people who hopefully will benefit from that budget.

Cabinet Minister, I think Emma wants to come in as well.

Yes, just to build on the Minister's point and your question about how you'll see it as well. In addition to the digital dashboard we have across Government, associated with our programme, we're also looking at how we reflect this within the suite of budget documentation that the committee will be familiar with that we publish alongside the draft budget. So, we publish a narrative report that tells the story of the budget, and a key part of that will be thinking about how we demonstrate that linkage between the input of the finance and the outcomes that we want to achieve. That will also be reflected in things like our impact statement and, potentially, our distributional analysis. That's a very live discussion at the moment and, obviously, we can talk more about that after the publication.

So, obviously there can be positive outcomes, and the Government would hope that there will be when it comes to budget allocations. But also, given the difficult financial position that you've described, there may well be negative outcomes that arise when the budget is published. So, what's being done in terms of the transparency side of things to make sure that the full picture is being covered and it's not just the good things that any Government would want to focus on that are being captured in any dashboards or reporting?

The dashboard and reporting will reflect the programme for government, so that's what the test for a Government always is: what did you promise the people of Wales and then what did you promise the Senedd that you would deliver as a programme for government? And therein lies the greatest need for a level of scrutiny of a Government, by you and by others. So, in being able to highlight that work, it may be a rod for our own back, but it's the right way to be seeking to embed a culture within Welsh public spending that reflects not just, as I said, the quantum of a budget that's available for any particular measure, which isn't a positive outcome. So, a Minister thinking, ‘I've got a higher budget to do something’, for me, that's irrelevant. What is important for me is what is the right level of budget to increase the outcome that we want to see from that.

I suspect that, as we progress with this work and as we publish a budget, there may well be budget lines that historically have looked a particular way that may look different, even though what we're trying to achieve may be the same. But it needs to be seen in the context that the budget itself is better spent in a particular way in order to achieve the outcome. It'll be for Ministers to be able to—. It'll be for the systems that Emma has just spoken of, and the background material, to explain that, but it'll be for Ministers to be accountable and to explain to their various committees as well how this has been done.

As part of our preparations for the budget throughout the summer and in the autumn now, in the conversations that the Minister is having with her colleagues and in the conversations we're having at official level, as part of the process that people go through to set out what funding they need or don't need in their portfolios, we ask them to assess the impacts as well. So, we need to have an initial high-level, ‘What's the impact of additional funding or taking funding away?’ and that continues throughout the process, and that's something that is then discussed at a Cabinet level in terms of cumulatively, as well as unintended consequences of a decision in one budget area impacting another. So, it's something we do throughout the process, and again that's reflected towards the end of the process in our impact statement.

It's probably also worth drawing the committee's attention to the ‘Wellbeing of Wales’ report that was published today, which is where we publish the national indicators, the outcome indicators—things like life expectancy, household income, a whole range of different kinds of outcomes that Government activity intends to influence positively, obviously. But, yes, that's a very transparent and detailed account of the kinds of things the Government's seeking to influence in the wider world, which can be assessed against the spending that the Government's making.

Maybe it's also useful just to illustrate what we're doing by describing the process that we've gone through to date. The budgetary process is led by me, but it is a collective effort by the Cabinet to look at how cross-cutting work especially, but generally meeting the programme for government, works. So, by means of illustration, the way we've done this is to go through a period of work by Ministers over the summer, which led to what we call challenge and support sessions between Ministers and their portfolios with a collective of Government Ministers that included me as well as the Deputy First Minister and the Minister for Government effectiveness. So, in Ministers preparing their own budgets, there was a challenge session on exactly what we're discussing here. It's not just about the size of budgets, but what the outcomes on different pieces of work are. So, we've undertaken that exercise. The Cabinet will now reflect again over the next few weeks on how we match that to the money available and the programme for government. So, it's an iterative but, ultimately, a process that is cross-cutting, but also led by the Cabinet. It's not just a matter of the finance Minister talks tough to the individual portfolio holder, it's more encompassing than that.

Thank you very much, Cabinet Minister. Lyn.

How will you evidence how decisions being made in your budgets are supporting public services that are sustainable in the long term, for example, through increasing preventative spend and increasing public sector productivity and efficiency?

Thank you. I think this is just a follow-on from what I've just been describing, really. In terms of how we seek to ensure that one aspect of the programme for government is to prioritise preventative work in its wider sense of the word, we are doing that across Government. And that will not materialise just as one budget line on preventative actions; it will be in how the vast array of public work that's done in Wales looks to justify its continued funding and its continued work in how it contributes to preventative [correction: prevention]. So, as we all know, as you all know, the work on and investment in housing is as important as the work in preventative health—well, in fact, they're one and the same. So, there are all aspects around that, and productivity as well, with the work that Adam Price has been leading on in terms of how productive the Welsh economy is.

I think one of the interesting facets of the work that we've been doing is how productive is the public sector itself, before it starts to preach to the wider economy as to how productive it should be. There is a big job of work for us to do as a Government to work in terms of productivity in the NHS and across Government generally in the public sector. So, we are doing that as part of this budget, but ongoing budgetary processes as well.

Thanks, Cabinet Minister. Before Lyn comes back in, Huw Thomas has a question.

Just on the preventative side, Minister, you and I have already discussed issues around health spending and the pressures within the NHS on an annual basis, and much of that spend inevitably goes towards not preventative but responsive care. I was reminded just yesterday that in Cardiff and Vale Health Board, for example, with a budget over a £1 billion, the public health budget is £4 million—a fraction. Are you thinking, in your forthcoming budget, of some concrete steps to try and shift that balance slightly?

Well, we are obviously thinking about how preventative action and outcomes can be improved in order to avoid the spend that the NHS always has to spend as a last resort, rather than looking as to how we can prevent that spending from needing to happen for so many individuals. But what I would kind of guard against in this is not to look at it through the prism of one budget line, but to think about how preventative work is funded in different aspects. I suspect that is how Cardiff and Vale are doing their work, not just in that public health budget line, not just in the Welsh Government's public health budget line.

The challenge for us in that is then to be able to demonstrate how that works in practice across budgets, and not just speak it, as I'm doing here now, but to show what preventative means in different allocations of budgets. But I'd kind of guard against thinking that it's just going to be as one budget line.

I know I've just said that I'll bring Lyn in a second, but I'm really sorry, there's something just come into my mind with this as well. You've come into the role and have an ability to pull a lever and make a financial change in the public life of Wales or public sector in Wales. Have you found that different to what you expected? So, health boards in particular hold big budgets and make decisions week in, week out on how that money is spent. Would you expect, in your role as finance Minister, not necessarily to dictate some of that but to be able to align some of that funding more clearly with your priorities?

I'd expect the collective of the Government to think about that, and I'd expect it as a continuing conversation between myself and the health Minister. The health Minister and the programme for government speak about shifting towards preventative and community and primary care within the health budget. Those are big issues that Governments before us have grappled with. What I've found perhaps most—. The biggest shock to me has been how much the in-year management of the NHS needs to be proactively supported by the Welsh Government in ensuring that the NHS even currently is able to live within its means, let alone how we plan for future delivery. In coming into Government, that has been the bigger shock for me.

Diolch yn fawr. I think Lyn has some points on this subject. Lyn, over to you.

I'm just going to stray slightly off what I'm doing. What I'm getting when I'm speaking to people and generally just being out in communities and talking with organisations is that they would benefit from a three-year plan of having secure money, because it would help them budget better. In this preventative agenda, would that be something that you would be looking to consider? Is it viable in any way, so people can feel a bit more assured that, down the track, their businesses or their organisations that are helping preventative and different things are much more secure and they can organise better and maybe get better outcomes?

I would hope that, as we said earlier, in providing an indicative budget and allocations for two years in terms of resource and three years in terms of capital in the budget that we'll announce later this year, that will give some assurance to local government, to the NHS and to other public bodies of what the direction of travel of funding is for the Welsh Government in how it prioritises the allocation of funding. Hopefully then that will translate to those third sector bodies or public bodies who receive funding from within the totality of the Welsh budget, and they will see that there's an element of continuity there, and possibly that, in the contracts that they receive, there'll be greater stability given within those contracts. I definitely agree that being able to plan over a slightly longer period of time is effective for the delivery of public money. It's far better than chop and change and a wait until every February to know whether you can continue in April. That's to nobody's benefit, really.

Thank you, Minister. Anything else, Lyn, from your side, before I bring Iain in? No. Thank you. Iain.

Thank you, Chair. I've got three questions about public sector accountability, but I'd like to ask an extra quick little one, if you wouldn't mind, based on a response you gave to Sera Evans a few minutes ago. Correct me if I'm wrong, but I think you suggested that UK Government national increased spending on defence was going to therefore mean that we get less funding to Wales. Has a statement been issued to confirm that or is there any evidence to back that up at all?

In the—forgive me if I don't remember correctly what the defence plan that was announced by—

The defence investment plan.

The defence investment plan was announced pre change of leadership to the UK Government. This would have been in my time, it would have been around July. That plan looked to curtail the budgets within year of UK Government departments, and had a Barnett consequential then on our current budget [correction: our budget]. We've had estimates as to how much that is for our capital budget for this year, but we'll have confirmation of what it actually means in the consequential in the UK Government budget. That will be for budgets that we currently have, that reduction. We expect it to be in the level of around—. Is it £30 million?

Around £30 million to £40 million.

Yes, in this financial year. And then, of course, the plan—. And it may well be refreshed in the UK Government budget. The interesting thing there is that the Chancellor is now the previous UK Secretary of State for Defence who resigned over this very issue. But it will likely, even in its current published form, have reductions for our capital budget into the future, and we'll know what that is.

Just to add some further context there, a lot of that increase in defence investment funding is being financed by reductions in other areas of capital spending by the UK Government. Where that's being financed by reductions in devolved spending—for example, transport is taking quite a big hit in England—that then feeds through into a consequential reduction in our capital budget. We'll have further details of that in the UK budget on 28 October.

Thank you. Going back to my original questions on public sector accountability, how do you gain assurance from Ministers that spending in their particular areas is achieving value for money, particularly where funding is provided to third parties?

I think I've spoken of the discipline that's required of Ministers, and it's required of Ministers in any Government, but in this particular year, with a new Government, a programme for government that's new and a challenging financial settlement, bringing all of that together is a particular discipline for Ministers now to be able to present a budget that is affordable but also meets the priorities. Ensuring that that budget is able to reach the outcomes that it wants to, and then in terms of the partners that receive that money to deliver on those outcomes, is extremely important in making sure that every pound works as hard as it possibly can for the public purse. In terms of how that happens, there are regular—. I do leave it to Ministers to primarily lead on this in their portfolios, to make sure that that is part of their work and their own challenge—for the health Minister with his discussions with the health boards, for example. And productivity within the NHS is something that we are aware, as a Government, needs to be a focus for our and his work.

Thank you for that. The next one, then: given that almost three quarters of revenue funding is provided directly to the NHS and local government, how do you ensure that the current level of funding that you're providing is achieving your aims and achieving value for money at the same time?

Local government are democratically elected and they are accountable to their electorate on how they undertake and discharge the public services that they run, and therefore their analysis of how to run their own budgets and be accountable for those is really part of their work. They will challenge us on the settlement that they receive to enable them to do that work, but equally, they have their own strategies and outcomes that they want to achieve and they are very much, on the whole, in line with what we generally want to see in the delivery of important public services, such as education and social services.

In terms of the NHS and the local health boards, there is a very real and frequent interaction between the Minister for health and all local health boards, and any local health boards that are particularly struggling in the delivery of services. You will have heard him speak of the framework of accountability this week, or last week, so those are regular interactions and challenges within this system.

Thank you. Finally, a quick one: how will the work of the Minister for government effectiveness feed into the budget planning process?

I've sort of already alluded to some of this work in terms of the discussion we had earlier on outcomes and how we start to embed a system that more clearly identifies the outcomes that are related to Government budget lines and Government projects, so that that element of work is clear, tangible and transparent to people in order to assess—for us as a Government to be able to assess, but also for the wider public to be able to assess how we do that. That work is led by him in terms of creating that level of data and measurement.

As I also mentioned, towards the last part of the summer, as part of developing ministerial budgets and allocations, we held sessions with each individual Minister to challenge on their thinking on their budgets and outcomes. The Minister for Government effectiveness was part of that with me and the Deputy First Minister, in order to provide that cross-Government analysis of individual ministerial budgets and the challenge that he would bring into that conversation on outcomes, not just budget lines.

Thank you. That's helpful. Thank you, Chair.

Thanks, Iain. Perhaps on that last point, Cabinet Minister, are the Cabinet in the right place, do you think, in terms of thinking when it comes to—? I guess any Cabinet Minister that comes in front of you and your colleagues—the Deputy First Minister and the Minister for government effectiveness—will make a pitch for their portfolio. Are they within the realms of reality when it comes to what might be achievable?

They will be. [Laughter.] Just to reflect on your use of the term 'pitch', because it's certainly part of how the dynamic could work, has worked, in developing an annual budget. What I've been heartened by is that Ministers do see this as a collective effort across Government, and perhaps that's the benefit that we have in coming as one whole into these responsibilities anew. It's not a mix-and-match of Ministers of the same political party coming in and leaving. So, we come in as one, and we need to demonstrate that there's some added value to that, in that we then can take not just individual decisions around portfolios, but also what is the right collective decision for the Government to take.

I want the Minister for health to be as keen about the budget allocation for establishing a new economic development agency as the Minister for economy, and, equally, the Minister for economy as keen to ensure that there is adequate provision for waiting list reductions, so that even though there may be budgets that move around or even diminish in some places, that's not a reflection of individual Ministers, it's a reflection of where the priorities of the whole Government lie.

Diolch yn fawr iawn. Huw Thomas.

Just to pick up one line of inquiry from Iain on the funding provided to the NHS and local government, can you commit that any new responsibilities given to those organisations will be fully funded? Will you also continue the principle of providing funding unhypothecated and increasing the amount of funding that's unhypothecated through the revenue support grant?

I can commit, where there are new priorities that Government introduce for the first time, that we have a proper conversation with any delivery partner on how that priority needs to be funded in order to get to the outcome we all want to receive. The issue around fully funded is where I'd probably want to reflect on what does 'fully funded' mean in the context of any decision. Is it how much money somebody thinks they should have or want, or is it how do you match the budget to the outcome you want to receive? So, if we can just all think through how we work this out—that it's not just about the size of the budget, it is about marrying an appropriate budget to outcomes to be received. But I recognise fully that delivery partners have to have a very real conversation with Government when it comes to what the costs of delivering a particular service and getting to a particular outcome are.

So, I'm not seeking to avoid the question or—give the assurance that we want people to feel that, if we're saying this outcome needs to be achieved, we'll have a very real conversation as to how and what that means in financial terms, but it should never be just because the size of the budget always needs to increase. So, I'd caution against committing to that, but if we can have a proper conversation at all times around what 'fully funded' means, then that's a more realistic conversation for me to have, rather than just about size of budgets.

Sorry, before you jump back in, Huw, the unhypothecated elements of RSG as a general principle that, rather than specific grant awards to local authorities, fall into an unhypothecated pot.

I'm in the Andy Burnham style of school of devolving responsibilities, decentralising responsibilities, to those who deliver services closer to communities. So, I've not had a conversation in Government around any changes to that principle of enabling local authorities to have that unhypothecated area of work that they want to focus on how they prioritise locally.

Diolch, Elin. I think the point you make about 'fully funded' is a fair one, but I would just urge you to press ministerial colleagues when they are developing plans and legislation. Passing legislation here is the easy bit. Delivering it ar lawr gwlad is the tricky element, and, if funding doesn't follow, then all we have is a nice piece of paper.

Ie. Dwi'n cytuno.

Jest o ran amseru'r gyllideb, sut mae amseru cyllideb yr hydref y Deyrnas Gyfunol wedi effeithio ar gynllunio'r draft budget, a sut mae'r budget protocols o ran pryd mae angen cyhoeddi cyllideb ddrafft Llywodraeth Cymru wedi cael eu heffeithio, a sut ydych chi'n mynd i ymateb i amseru'r gyllideb yn San Steffan?

Felly, roedd y Llywodraeth wedi—. Roedden ni wedi cyhoeddi y bydden ni yn cyflwyno cyllideb ddrafft ar 17 Tachwedd, cyn cyhoeddiad cyllideb y Deyrnas Gyfunol ar 28 Hydref. Dwi ddim yn rhagweld bod angen i ni newid hwnna. Mae'r amserlen yn dynn, ond dwi'n meddwl ei bod hi'n well i ni fod cyllideb Llywodraeth y Deyrnas Gyfunol ynghynt na'n cyllideb ni, achos mae'n caniatáu i'r wybodaeth rŷn ni wedi sôn amdani y bore yma eisoes, sydd angen cael ei chadarnhau yn y gyllideb yna, i gael ei chadarnhau cyn ein bod ni'n cyhoeddi'n cyllideb ni.

Mae e'n golygu turnaround time eithaf tynn i ni fel Llywodraeth i gyrraedd yr ail ar bymtheg yna. Pan fydd yna newidiadau, bydd rhai ohonyn nhw'n fach, gobeithio. Efallai y bydd rhai ohonyn nhw'n fwy, ond fe fydd yn rhaid inni fel Cabinet gymryd y penderfyniadau hynny cyn ein bod ni'n eu cyflwyno nhw wedyn yn y gyllideb. Ond dwi'n meddwl fod yr amseru, gobeithio, yn gweithio mewn ffordd sydd yn weddol usable i bawb, sef ein bod ni'n cael y sicrwydd oddi wrth gyllideb y Deyrnas Gyfunol, ein bod ni'n cyflwyno'n cyllideb ddrafft yn llawn, ar sail y wybodaeth yna wedyn, a bod y broses sgrwtini o fewn i'r lle yma'n gallu cael ei chynnal dros y cyfnod sydd i ddilyn wedyn.

Diolch yn fawr. Thank you. Elfed.

Diolch yn fawr iawn. Dau gwestiwn. Beth yw eich amcanion o ran trafod newidiadau i'r fframwaith cyllidol, a pha linell amser realistig ydych chi'n ei hystyried ar gyfer cyflawni'r rhain?

Wel, diolch am y cwestiwn. Ar aspect ffisgal y gwaith yma, mae'r fframwaith cyllidol mewn lle ers degawd nawr, ac felly mae'n gyfle i fod yn adolygu'r fframwaith yna. Dymuniad y Llywodraeth yw ein bod ni'n adolygu'r fframwaith cyllidol ac yn cynnwys agweddau o waith ar fenthyca ac ar anghenion o fewn y drafodaeth yna.

Rŷn ni wedi gwneud y cais yna i'r Trysorlys, ac rŷn ni'n gobeithio y bydd y Trysorlys yn ymateb yn weddol o gyflym nawr i ganiatáu i'r gwaith yna i gychwyn. Mae'n gallu bod yn broses hir. O ran yr Alban, eu hadolygiad mwyaf diweddar nhw, fe gymerodd hwnna ddwy flynedd iddyn nhw gyflawni gyda'r Trysorlys, ac felly—. Proses o bartneriaeth yw adolygiad o'r math yma. Mae'n bartneriaeth rhwng Llywodraeth Cymru a'r Trysorlys i gael y drafodaeth ynglŷn â sut mae creu fframwaith sydd yn gweithio'n fwy effeithiol a hefyd yn adlewyrchu angen yn well.

Byddwn i'n dweud y byddwn i'n gobeithio, o glywed bod Llywodraeth y Deyrnas Gyfunol—rhywbeth mae'r Llywodraeth yma'n ei groesawu—nawr wedi ymrwymo i weld sut mae gwneud datganoli i genhedloedd weithio'n fwy effeithiol, yn ogystal â datganoli o fewn Lloegr, edrych ar y fframwaith cyllidol rŷn ni'n gweithredu arno yn ysbryd y dymuniad yna gan Lywodraeth y Deyrnas Gyfunol, a dwi'n gobeithio y byddwn ni'n gallu bwrw ati ar y gwaith yma cyn gynted â phosib.

Gwych, diolch. Mae'r rhaglen y mae'r Llywodraeth wedi rhoi ymlaen yn ceisio ychwaneg o bwerau ar reilffyrdd, plismona, lles, cyfiawnder, a mwy o bwerau trethi, ond mae angen dangos beth ydy'r ochr economaidd i hynny, ac wedyn mae yna ddadleuon ar yr ochr economaidd. Felly, pryd byddwch chi'n gweld sail i'r pwerau yma sy'n cael eu ceisio, a nodir gan raglen y Llywodraeth?

Wel, mae Llywodraeth Cymru eisiau gweld Mesur Cymru yn cael ei gyflwyno gan Lywodraeth San Steffan fyddai'n edrych i ddatganoli'r pwerau hynny lle mae yna dipyn o gonsensws ar beth ddylai'r pwerau newydd i'r Senedd fod a chael eu gweithredu yma yng Nghymru o dan oruchwyliaeth y Senedd.

Felly, o ran fel y mae hyn wedi digwydd yn y gorffennol, ac fel byddwn ni'n disgwyl iddo fe ddigwydd yn y dyfodol, byddai yna asesiad ar beth yw'r pwerau hynny o fewn Mesur Cymru, beth fyddai'n cael ei ystyried ar gyfer datganoli—heddlua, cyfiawnder, Ystad y Goron, beth bynnag yw'r union bwerau. Wedyn mae eisiau asesiad clir, wrth gwrs, o beth yw costau'r pwerau yna, a beth yw'r costau, sydd yn golygu sut maen nhw'n cael eu rhedeg nawr yng Nghymru gan Lywodraeth San Steffan, a beth fyddai angen ar Lywodraeth Cymru i gyflawni'r pwerau yna. Ac fel rhan o'r broses drafod yna, fe fyddai angen datganiad clir ar beth fyddai'n dod i Gymru fel setliad newydd yn sgil datganoli'r pwerau yna.

Mae yna dipyn o waith manwl sydd ei angen i ddadansoddi'n glir beth yw'r costau, achos dŷn ni ddim eisiau bod yn y sefyllfa—a byddwn i'n dweud hyn fel Gweinidog cyllid—lle mae yna ddatganoli pwerau, ond does dim o'r arian sydd hyd yn oed yn cael ei wario heddiw ar y pwerau hynny yng Nghymru yn cael ei drosglwyddo i Gymru.

Gaf i jest dod yn ôl ar hynny? Rydyn ni eisiau gweld, fel Pwyllgor Cyllid, beth ydy'r budd economaidd, a phryd buasem ni, fel pwyllgor, yn gallu gweld hynny?

Wel, beth fyddwn i'n dweud yw, os oes yna gytundeb drwy ddeddfwriaeth i fod yn datganoli grymoedd newydd i'r Senedd ac i Lywodraeth Cymru o'r Deyrnas Gyfunol, byddai hwnna'n dod ynghyd â dadansoddiad o beth yw'r gwariant sydd ei angen i gyflawni'r gwasanaethau hynny. Ac wedyn, wrth gwrs, mae'r asesiad impact yn newid fel part o'r broses hynny hefyd. Mi fydd e'n haws mewn rhai o'r meysydd yna, er enghraifft Ystad y Goron, i allu gwneud asesiad o ran, pe byddai Cymru'n cael pwerau dros Ystad y Goron, dyma fel y byddai Llywodraeth Cymru, neu dyma fel y gallai Cymru, elwa mewn rhyw ffordd ac yn hyrwyddo Ystad y Goron i fod yn hybu datblygu economaidd ar hyd yr ardaloedd lle mae Ystad y Goron yn weithredol. Felly, mae'r gwaith yna'n gallu cael—. Wel, mae yna waith wedi ei wneud ar hwnna eisoes, ond byddai yna fwy o waith yn gallu cael ei wneud i gyfiawnhau datganoli'r grymoedd yna.

Diolch, Elfed. Thank you, Cabinet Minister, for your response to those points. We have you here for pre-budget scrutiny for the next financial year, and I'm conscious that we're also sat here having had a supplementary budget yet to be supported within this year. So, I wonder if you are able to describe any current concerns you have with that and any potential impact that that may be having at the moment and in what sort of way this may be resolved.

Well, I've spoken, haven't I, about my role in managing the Welsh public finances in-year that I've inherited from the previous budget and how we've put together a programme for government and priorities into action for this year. So, there is no supplementary beyond the annual budget that we inherited at this point. That causes me concern, that some of the allocations that we are making within this financial year need at some point to be formalised by a supplementary budget. You'll know that discussions with political parties are continuing on how we can successfully navigate a supplementary budget through the Senedd. Those discussions are ongoing, and you will be amongst the first to know if there are any changes to the situation we're in at the moment.

They complement each other, of course, in terms of the work, both the supplementary and the annual budget, but they are two elements of work that I am progressing. The annual budget is the one that lands next year, but, in advance of that, I need to be finalising the work on this financial year, and therein lies the importance of supplementary budgets, both to begin that work, as the budget that wasn't passed by the Senedd, but at some point also to consolidate the end of the financial year with a second supplementary budget. That has been the usual process, and will need to be the usual process, of finalising allocations retrospectively, almost, for the financial year.

Okay, thank you. And then, going back to looking ahead, in terms of capital financing, I was reflecting on your comments about the current expectation of a 9 per cent real-terms cut to capital over a three-year period. Are you doing any particular work to understand if there are any more creative solutions to any issues that may cause and the role of local government and how they can be supported to make the most of any powers that they have as well?

Yes, so, the challenge on the capital budget is significant, and it will be more than that 9 per cent, because of the issues that I raised earlier on the reductions as a result of the defence investment plan. Therefore, there are two aspects to the answer on this. One is that we have undertaken a zero-based analysis of the capital budget in preparing for the allocations for the three years to come, so that we bring a fresh pair of eyes on the pipeline of projects that are coming from different aspects of the public sector—hospitals, maintenance, as well as aspirations for new build within the public sector. But therein lies the issue, then, around how we use innovatively the money at our disposal. You will know that the mutual investment model is one that is continuing and has a pipeline of projects that need to be assessed and are being assessed. That's a model that we've inherited from the previous Government and has worked very effectively in the delivery of new projects, new capital projects.

One of the issues that I'd emphasise in response to the issue around the fiscal framework is our own borrowing capacity in this context. That's an issue that I want to take into the fiscal framework review with the UK Government to provide that flexibility. And then there is, as you've outlined, again more work that we need to do with those that do have more borrowing powers—local authorities and Welsh Government, even—to think about how we look at that work, look at the ability of other aspects of work as well, when we think about pension holdings in the public sector as well.

Yes. Andrew.

Could I just add that the route to alternative forms of finance—? There are various ones that we've used in the past and will consider going forward. But, of course, any form of investment needs to be financed in one shape or form, and forms of borrowing require revenue funding to finance them and our revenue budget position is also extremely tight. So, there's a really difficult choice there to make about protecting current services versus protecting scope to invest in infrastructure using our revenue budgets to finance borrowing and other kinds of instruments. So, yes, it's a tricky one, that.

Yes, and I think we would appreciate that as a committee. I guess there are particular programmes I'm thinking about, maybe more than 10 years ago now, with the old spend-to-save programmes, where capital investment produced revenue savings in the long run. If, Cabinet Minister, you feel we're in a similar sort of position with the public purse—. I guess the risk is that so much disinvestment happens it creates higher revenue costs in the long run, and to understand that balance between capital investments, which produce those savings down the line, which I suspect is something you're already thinking through—. But I think we may be interested as a committee to understand what that might look like and what the opportunities are, and how looking back at that programme works. I think it was around 2012. There was a particular programme that took place. Has an evaluation been undertaken to understand whether it did deliver those savings that were expected in the long run? If it did, is that something that may be worth revisiting as a specific programme? I assume it happens anyway, generally, but as a focused programme of work—. It might be something you may already be considering.

Yes, it is, within Government, not as maybe a wholesale programme like the invest-to-save programme was in itself, but as a kind of means of thinking through how we make Government more effective. So, for example, digital transformation is one area of work; I think Welsh Government wants to look at how we use digital transformation to make the public sector that I've talked about more productive than currently, and that could be within the NHS, or should be within the NHS, as well as everywhere. So, you know, there are ways that we're currently looking at in terms of how we as a Government think in the frame of investing now to save down the line. I think it would be interesting to pursue a wider conversation about how we do that in the wider economy as well.

Diolch. Perhaps one last question, unless anyone else has anything they wanted to pick up at all. I'm conscious that, in terms of the pressures being faced, you've generally referred to general inflation and the impact of real-terms cuts. Are there any specific demand-led pressures that are on your horizon that you think will have a particular impact on your budget planning for next year, whether it be parts of social care services, or parts of the health service, perhaps, that are causing you concern, which then you're having to adjust your budgetary assumptions for at all?

Well, what I'm continually thinking through is general inflation, but in the context of public sector delivery of this budget, then, of course, wage inflation is going to be particularly pertinent to how we think through the ability of the budgets that we set to deliver. We are expecting that earnings and wage inflation will be increased from where they have been estimated to be. And therefore, if that is demand led, and, to a certain extent, I guess it is—. But then, when you think about the budgets, and if you think about local authority budgets, in the social care sector, where there is a particular element of demand, and where some of it is linked to wage inflation in that sector—. These, I think, are going to be the areas that will focus the minds over the next few months as we prepare our budgets into the next financial year.

Okay. Diolch yn fawr iawn, Cabinet Minister, and to your team as well. I can't see anybody else wanting to ask any more questions, so thank you for your time, and we'll see you again here soon, no doubt.

Members, we passed a motion earlier on to move into a private session for our final item here, item 7, so we'll do that now.