Finance Committee

Okay. If we move on to papers to note. Are we happy to note the papers? Yes, great. Okey-dokey.

We’ll then move on to our substantial item this morning. I notice that we have a Cabinet Secretary with us. That’s a good start anyway. [Laughter.] We have the financial implications of the Environment (Principles, Governance and Biodiversity Targets) (Wales) Bill, and it’s our evidence session with the Cabinet Secretary. Can I ask you to introduce yourself and your officials, please?

Diolch yn fawr iawn, Peredur. As you say, I have responsibility now. I'm slightly terrified now as we’ve got the Minister who actually brought this forward originally sitting on the committee on scrutiny. But I’m taking this Bill forward as it currently is, and, of course, we’re in the process now of going through all the committee considerations in the different committees.

I have two very good colleagues here with me, and it’s probably worth saying as well, in the hour ahead of us, if we don’t get to a level of detail that you want, we are more than willing to supply additional detail as well, because we’ve got a small group of people behind our top table here today. But, Alice.

Thank you. Bore da, good morning. I’m Alice Teague, I’m the deputy director for marine and biodiversity, and I lead on the biodiversity targets aspect of the Bill.

Welcome.

Bore da, Naomi Matthiessen, deputy director for landscapes, nature and forestry, and I lead on the principles and body elements of the Bill.

Fantastic. A warm welcome to you all.

A warm welcome to you all. So, as normal, there will be a transcript available for you after the session. Of course, this is the Finance Committee, so we're concentrating mainly on the financial aspect, but to start off with, we'd like to look at the changes in estimates for the Bill and previous groups' recommendations.

So, how do the proposals in, and the related financial implications of the Bill, compare with the White Paper that the Government published in 2024, and what are the main changes?

Thank you, Chair, and it may be worth, on this item, just reflecting in some detail the changes that have come through. One of the important things to say is, whilst we have made revisions to policy based on what we heard on the White Paper, and the stakeholder engagement and the consultation—. Two things to say: first, the very encouraging nature of that feedback, and the broad consensus around the pressing need for this legislation; and, secondly, that the refinements we’ve made don’t impact significantly on financial matters, but it is important, I think, for the committee to be aware of what those changes are, so that you can see them, so that I can flesh them out for you a little bit.

Sorry, the other thing to say is: it’s not just based on that feedback and consultation on the White Paper; we’ve also done extensive engagement with counterparts in England and Scotland, on their legislation, their procedures, their approach, and learning lessons from that. But, as I said to the other committees as well, this is not ‘For Wales, read England’, or ‘For Wales, read Scotland’. We have a bespoke legislative and policy framework here in Wales, into which this comes, so this legislation needs to reflect us.

But there have been some changes. So, specifically, things such as not just the 'have regard duty', but the 'have special regard duty'. We're all very familiar with the common 'have regard' approach, but we've substantially strengthened the duty on Ministers and NRW to have special regard. So, this means giving additional considerable weight and importance. We've been through this with other committees, but that's a strengthening of this.

We've also widened out the application of the principles, based on feedback, to include NRW when making policy and public authorities when undertaking their strategic environmental assessment. But, again, the analysis is that what this will do is to make sure that they're complying with the principles, the approach to the targets and so on, as opposed to a fundamental rethink of their organisations and additional resources. They will need to marshal their approach around this.

In respect of the Office of Environmental Governance Wales, the OEGW—I'm getting used to saying that, OEGW, it's another acronym now—one of the common concerns that we picked up from stakeholders, Chair, was that we ensure the maximum independence of the body. So, as we fleshed out with the policy committee when we appeared in front of them, there are a range of areas where we've actually strengthened the independence of that body in response to those concerns, in very practical ways. We've also reflected on the feedback that we had about the size and composition of the body. It's probably worth saying that this will be a powerful, independent and expert-led body. We've looked at the effective comparators, for example, with Environmental Standards Scotland, who have a similar devolved remit to our proposed OEGW. Now, this will, of course, the size and scale of this body in Wales, impact on the operating budget, but I have to make clear that, if we're going to set this body up to do what it needs to do, it needs to be the right size, the right shape and then adequately resourced to do its job, because we've been waiting for this for some time. We now need to get this absolutely right and resource it.

There are a couple of other things that we've adjusted. So, following responses to the White Paper, we refined our approach to biodiversity targets slightly, but the fundamentals remain the same. We've still got the duty to set targets, and it's for Welsh Ministers to set the targets, but it's supported by robust monitoring and reporting provisions. We've also refined the monitoring and reporting provisions themselves. One of the changes there is that we're not—. One of the areas we looked at is: should SoNaRR, ‘The State of Natural Resources Report', which all of us as MSs are familiar with, should they be the ones that should actually be required to report on and monitor progress? Well, actually, they've got a set job to do already, so we've changed that as a result of feedback.

The White Paper included proposals to create a national biodiversity strategy. I've got to be clear: we're focused on actually delivering these things and getting on with them and achieving them, and in fact that's what we've been doing over the last few years, not duplication. That's why we're including a requirement for Welsh Ministers to set out the actions to achieve the targets within existing legal requirements. So, the section 6 plans become very important. They are strengthened through this—the targets and the delivery are strengthened through it, rather than requiring a new separate policy document.

The overall envelope is the same, it's just how you're targeting—

Indeed.

—so, having special regard to the word 'direct', where funding would be directed to within that envelope, or—?

Special regard is a very good example, because the special regard that I will have to have as a Minister, or whoever is in this seat—and it is a higher level—and the special regard that NRW will need to take, because of its all-encompassing environmental regulatory function, means that we will have to comply and make sure that we are complying with that higher level of regard to environmental protection, halting and reversing the loss of biodiversity. But it doesn't by implication mean more resources; it means align your priorities to deliver what is set out in the Bill with the principles, the targets, and knowing that the OEGW is sitting there ready to work with you, or possibly, sometimes, to come for you as a Minister if you don't deliver. So, rather than additional resources, it's using your resources to deliver what we're all agreed on, which is those principles and targets.

I think you commissioned some work from the Young Foundation to estimate the financial implications of this Bill, taking into account all the information that you've just given us, and quite a detailed view of what you are trying to do and where you're going to be focusing resources and your efforts. How accurate do you think those are?

We've got confidence in it, because the Young Foundation report provided that base evidence for the cost-benefit analysis of the RIA. But in addition to that, almost as a quality assurance sort of approach, if you like, in shorthand, the team have worked closely, including with the Young report analysis, with Treasury officials throughout the drafting process. So, not just when it's presented, but actually in the putting together of this to check the calculations and the validity of the assumptions that have been used by the Young Foundation report. So, we have good confidence in that. And of course, in commissioning the Young Foundation report, this is a standard approach to actually get some external rigour into it, but it's been run through the Welsh Treasury as well.

When you come to negotiating a budget for your department and for allocations to NRW, will this Bill strengthen your arm, I suppose, in saying, 'Well, somebody is going to come for me if I don't do this, so therefore, we'd need to make sure that there's adequate funding'? Is that a by-product, I suppose, of this legislation?

As an overall by-product, it is, but this Bill doesn't stand on its own. When I was talking about that bespoke approach here in Wales, it's because we've also got the Well-being of Future Generations (Wales) Act 2015. This isn't simply that this is a drop-down from when we had the EU withdrawal and now we put in place a new organisation that gives citizens and legal persons—sorry, I just used air quotes, I shouldn't do that—the ability to challenge Government: are they complying with environmental law and policy?

It also sets out principles and will, through secondary regulations, bring through really well-targeted, really well-focused targets that will drive Government—Ministers will hold them accountable for compliance with the targets, the environmental law, the principles—but will also drive across other relevant public bodies and NRW as well. So, it absolutely means that we are going to have to marshal our resources to deliver on this. And we've been trying to do this before we get to this Bill, by the way. There's a lot of work that has gone on in recent years; a lot of work went on under my predecessor as well in trying to do this. But this actually ramps it up.

On your question of does it make it easier, in some ways, yes, it makes it more compelling for Government and public bodies to do the right thing by these objectives.

And you're making sure that there aren't any duplications, because you talked a little bit about that earlier. Obviously, duplicating work is using up resource in a different way. How have you made sure that this is aligned, that it's not creating more of the same, if you like, and that it actually is targeted and effectively using that financial resource, which we're interested in here, in the best possible way?

That's a really good point, and this is one of the big takeaways that we had from the feedback in the consultation and on the White Paper—avoiding duplication. This, by the way, curiously, even though we've been a longer time coming than Scotland and England, is a benefit in learning then from what's gone on with them as well. So, I can give you some really practical examples here. One is that we've taken from the original proposal, we've adjusted it to actually now focus on designating public authorities in regulations that are able to contribute to specific targets.

The reason that that is important in avoiding duplication of effort and waste of resource is because, on many of these aspects, it's hard to see where it wouldn't bind on environmental policy or law. So, if you look at things like transport or whatever, it'd be pretty easy to see how there's a read-across into how does that public body in that situation take account of what we are trying to establish here in law. But there might be examples that don't, that are a million miles away from touching any aspect. It's hard to see them, but there will be examples, in which case, we've said, 'That's the approach we're taking. It's where this will impact on what we're setting out in the legislation.'

But also, there are issues such as—. I think the practical example is potential overlap and duplication between OEGW and other public authorities. One way we've guarded against this is we've included specific measures, because this does come to the heart of this committee's work, avoiding waste of money through duplication and so on. So, if you look at section 16(7), for example, it expressly provides that a compliance notice, which is one of the tools within the OEGW's toolbox for ensuring compliance, may not require any action to be taken in respect of an administrative decision in relation to a particular person or case, like, for example—to bring it to really grass-roots basics here—the granting of planning permission under the Town and Country Planning Act 1990, or an infrastructure consent Order under the Infrastructure (Wales) Act 2024, made under those Acts. Those are administrative issues, so what we've tried to do in this is to say, 'Here's where this legislation should and must and will bind.' There are other areas we want to keep it away from duplicating, where there's already the Town and Country Planning Act, where there's already the infrastructure Act and so on.

I think, by the way, that's also a job, we've noticed, as we're coming in front of committees, of explaining not only in terms of committees, but also to the wider world as we take this legislation through, what this three-pillared stool of the OEGW, the principles and the targets does, and what it doesn't do in terms of replicating. We've had some discussions saying, 'Well, does this allow you to step onto a farm somewhere and do x, y, and z?' No, but what it does do is it allows us to look at the systemic issues and that whole body of environmental law and policy and is it working. That's what it's about, not tackling individual decisions that NRW might be doing or a local planning authority might be doing.

Thank you very much. I'll bring in Lesley Griffiths at this point.

Thank you, Chair. Looking at the very significant costs of the Bill, you've calculated the costs over a 10-year appraisal period, and then the costs and the benefits over a very much longer 78-year appraisal horizon. Can you explain why you've taken that approach and which you think will be a more accurate description of the Bill?

Yes, indeed. It's worth saying right at the outset that the approach taken with a 78-year appraisal, which, by the way, is based on the Environment Act 2021, it's the same approach they've taken, going out to the end of this century—. So, we think that's a good and reasonable proxy to work on.

But it is worth saying that the benefits then in application of this are illustrative, but they are the best illustrative idea we could have. They're not definitive, because they won't be definitive until we've bolted this down and we actually see what the targets are, what we're pursuing, then it'll become much more definitive. But it's as close a proxy as possible that we can do at this stage, and it is based on what's been done with another.

So, we presented this indicative estimate because we cannot at this moment monetise benefits from most aspects of the Bill, which are yet to be determined, those targets, et cetera, where that will drive action. The targets are a really good one because the scope of those targets, the duration of those targets, the metrics of those targets, all of those are currently being determined. We've got great work going on with the biodiversity targets advisory group and others to get them absolutely right.

But in the absolute rightness of them, we will then be able to better calculate more precisely the costs there. But the costs within that are good, we think, as an illustrative. The comparison is with the 10-year appraisal period that we’ve done, but that’s standard Green Book approach. So, whilst we’ve taken this approach with the illustrative costs, the 10-year appraisal period is standard Green Book Treasury approach and legislation book guidance.

Going back to the 78-year appraisal horizon now, you’ve estimated that the costs will be £664 million. I just wonder how you calculated that, because if you look at the regulatory impact assessment, it’s not clear to see how you’ve come up with that figure.

It’s a good point, and it’s probably worth going back to the point that I made before. These are indicative, but we’ve included them within the RIA so that we can give context to the possible longer term benefits, because we know that some of these targets driven by the principles could have long and enduring benefits. The benefits of having better biodiversity and better functioning natural ecosystem services could have really good and complex long-term benefits. But they are indicative.

Those indicative costs of £664 million are derived from the Environment Act 2021 impact assessment. So, they’ve been refined, we haven’t just lifted them and dropped them down; they’ve been refined using research that we commissioned and adapted to this Welsh context. I’ve got to keep ramming that home: this is not ‘for Wales, read England or Scotland’. So, we’ve refined them through a commissioned piece of work. And that includes, for example, using population and land area ratios as well, so it really does reflect the Welsh context as far as we possibly can.

But the original indicative estimates were from the DEFRA policy modelling, and they were based on things such as—which means it’s a good base for us—habitat restoration, water quality improvements, woodland creation, air quality measures and all of that. By the way, just to touch on another area to avoid duplication, as I'm touching on air quality, of course, we have a unique piece of legislation that is based on air quality and soundscapes, so one of the things that we’ve done to avoid duplication within this Bill is that. Sorry, a slight aside there, but it just reminded me how detailed our avoidance of duplication and waste has been. Sorry, I hope that helps. I went off on a tangent there.

No, no, it's good to hear about the policy too. You commissioned the Young Foundation to give you a report and that does set out the cost-benefit analysis, and there were three scenarios, but you’ve chosen to only go with one of the scenarios, the middle one, for the RIA, and I was just wondering why you did that, why you didn’t set out the analysis for the three.

We've got a very good reason for this. Part of this is to do with clarity and ease of understanding. We have, as you say, those three high-low estimates and we've chosen to go with with the central one for this clarity and ease of understanding. But also we believe that the central one is actually the most realistic of all the scenarios. It applies the most relevant population and land ratios—and I just described how we refined our model to reflect those—to each of the categories of benefit that could arise. So, the presentation of this central estimate reflects the approach we've taken when setting out the actual costs over the 10-year appraisal period. Whilst it's still an estimate, we are confident that using that single value, that central value, improves the accessibility of the understanding of this by using that comparatively to a cost range we could have done. So, those are the reasons why we've focused on that.

Could I just add something? Just to say that the high and low estimates were included in the RIA, but in the summary tables we just included the central one. So, the full detail is there, but it was just for clarity.

So everybody can see what the others would be.

Over 78 years, I suppose those those low, central and high could diverge quite a lot over that time. Is the central figure the best way of indicating it? Is taking that middle ground—? Bearing in mind the further you get away from this point now into the future, divergence might be quite dramatic.

Well, it might, but it might not. And that's the reality we're dealing with. So, these are estimates, but we feel that, based on the fact that we've modified this for Wales, we've commissioned research and we've modified it based on our population, our land-use analysis and so on, that we're giving the opportunity—. You can see in the detail of what we've put through in the RIA the three different models, but the central one for us, we think, is compelling. But it will change over time, as we get more detail. Will it change significantly? We don't know. We don't know. But, for now, this is a good model and, I think, a fairly well-established model of doing it. And drawing on the Environment Act 2021, I think, gives us a very good base, because of the working assumptions that they put in, which are the working assumptions we would have put in as well.

I think, on that 78-year time horizon, you're right—how on earth can you categorically say that that central approach is the right one? Well, we acknowledge we can't, but it's a really good working premise. And the 78-year time horizon, we think, particularly for targets, is a very useful horizon to look at. That's why it was in the Environment Act, because some of these are not going to be five-year benefits; some of these are going to be 10 years, 20 years, 50 years. If we get this right for the environment, then you're right in terms of the costs, but the benefits could be significantly better as well.

Deputy First Minister, could I just add, as well? As the Deputy First Minister has said, these are based on the Environment Act impact assessment. Obviously, as we have our targets developed, we will do our own modelling. There will be a full RIA when we make the secondary legislation, with the targets in. That will be a more accurate reflection of what our targets will do. But, as the Deputy First Minister has said, until we have our targets formed, we're using the Environment Act as the proxy. But, we will have more accurate figures for the RIA for the secondary legislation.

So, that detail will come with the secondary legislation.

And how often will you review to make sure that, effectively, your modelling is correct and to keep on top of it? Rather than the formal reviews, which we'll probably look at a bit later on, but as this policy and Bill develops and becomes an Act, hopefully, for you, how do you make sure that you're not diverging too far away from that central estimate?

Absolutely. Constantly, because we've made clear within the Bill that one of the things we're doing from a policy perspective, but it does have an impact on our financial analysis as well, is we're not only doing the work to bring forward the right targets, some of which will have different time durations on them as well, but also the ability at any time—and that is important, 'at any time'—to revisit these targets, in case we see it's not quite the right target, or the target could be out of date, or there's something new we need to really focus in on. And, as we do that, we will need to revise then the financial analysis of what we do. So, as well as keeping under review, on a constant basis, the targets—that's why we've put in the 'at any time' function—we'll also then review the financial impact assessment as well.

Can I also suggest, with any target, if it's driving the wrong outcome or the wrong behaviour—

Precisely.

—that you hopefully are able to change that target, because a target shouldn't be there to hit people over the head with, it's a target to drive behaviour and to drive forward the right outcomes, if you like?

And that's precisely—I know this is diverting into policy, but it does have financial impacts as well—the reason why we've put that 'at any time' provision. Some people have said, 'Why? Why don't you do it every three years, or every five years, or whatever?' Well, actually, it's because we might know sooner than three years or five years or 10 years that the target isn't quite right and it's driving the wrong behaviours. So, we should be able to dive back into this at any time. A Minister sitting in this position should be able to say, 'Actually, the target is having unintended consequences. It's driving the wrong behaviours, which we didn't anticipate. We need to review, refresh, modify it, or we actually need to introduce a new target, because we've seen clearly—'. Now, I don't think it'll come to some significant changes, because the quality of the work that we're doing with the target advisory group is so strong, and the drop-down from the global biodiversity frameworks that was worked into this is so clear and precise, we will get these targets right—and I know there'll be people listening to this committee—if we're given the appropriate time to get these targets right. But then we'll also have to revise what the financial cost-benefit analysis would be of those as well.

And I suppose—before I bring Lesley in, in a second—the other thing is that it does give you the opportunity if you are not hitting those targets, and nowhere near hitting those targets, to say that you're revising rather than scrapping them.

Revising rather than scrapping them. Sorry, I know we're diverting slightly into policy terms—

But it does have a financial impact.

It does have a financial impact. So, you could get to a position where a future Minister says, 'That target that we did all the work on, and we thought was absolutely right, we're now being lobbied by the environment groups to say, "It's wrong. It is wrong. Get rid of it.''' I can't see it happening, but it's a possibility—'We need a different target, Minister'. This would have to be done under the full glare of Senedd scrutiny, because Ministers would have to come back and say, 'Here's how we're refining the target', or, 'Here's how we're scrapping one and putting a new one in place, in full view.' That's my belt and braces. If it's not me here in future, any Minister is going to have to come back and then also put forward the full cost-benefit analysis of what the new target, the refined target, will be—full glare.

So, that's a commitment, then, to make sure that, if something's changed, there would be a review of the financial implication of that.

Absolutely. The Bill also places limitations on Welsh Ministers as to when they could revoke or lower a target, so it's not an open power. They would only be able to do it in very certain circumstances, having gone through that review process, laying reports in front of the Senedd, for Senedd security. So, the way the Bill is drafted is to limit the occasions on which targets could be revoked or lowered.

Okay. Thank you. Lesley.

If I could just pick up on the cost benefits. You've put £1.7 billion over that 78-year appraisal horizon again. Again, you've used that central scenario. Is it because that was the most compelling? I presume you can't give as many assurances that it absolutely will be that, because of the length of the time.

I think it's very much based on the work that we've derived from the Environment Act, on that 78-year horizon, on the remodelling we've done to reflect the Welsh context. But, again, I come back to that place—it's a very good basis for our estimations of that £1.7 billion, but it's a 78-year horizon. So, as we do bring forward the further modelling on targets, we'll get much more precise detail on it.

Thank you.

Talking about 78 years in the future, we might have people in the gallery that might be here in 78 years. We probably won't be, but welcome, anyway. Sam, over to you.

Diolch, Chair, and, Cabinet Secretary, thank you for being with us this morning with your team as well. I just want to spend a few moments focusing on your new favourite acronym, the OEGW—the Office of Environmental Governance Wales. Just from a finance perspective, could you outline why setting up a new body is better than extending the Office for Environmental Protection here for Wales?

Sam, yes, I can. One of the other committees suggested we should find a new name for it that was more catchy, but I don't know. The reason why is, first of all, there's no existing body in Wales suitable or capable of fulfilling the role that was previously held by something that looked like the EU Commission—something that gives that independence, but also the ability of citizens, a legal person, an individual—I keep using Mrs Jones in Tredegar—or an environmental body, or a citizen science body, to say, 'Hey, we think something's going wrong.' There's no automatic body. Natural Resources Wales does a very different function. It's a fully scoped regulatory body, with teeth to go out and monitor, enforce, comply and work with—whatever. It's an environmental regulatory body, for example. So, in all circumstances, in the application of the principles, the taking forward of compliance notices, monitoring compliance with environmental law and policy, and potentially, by the way, within this Bill as well, challenges up to and including the High Court, there's no body there that can actually do these functions.

And it's important to reflect as well that the other consideration is we have devolved control of environmental law here in Wales. We've used it numerous times to achieve environmental outcomes in Wales. So, the organisation responsible for overseeing this law must, therefore, reflect the Welsh context. And that is really important. It's not just the Well-being of Future Generations (Wales) Act 2015. There are other policies and legislative pieces in our framework that are not in England. And the new body would have to do that. And that's why, by the way, we did—. The RIA does evaluate the pros and cons, for example, Sam, of using the UK's Office for Environmental Protection—that they could take on this role for Wales. But let's be quite frank, this would be really sub-optimal, based on what I've just said. The OEP also is mainly accountable to the UK Parliament, not to the Senedd. So, in terms of your scrutiny, that would be a backward step there. The Senedd would actually end up having less influence then over this new body. And the body itself, because it operates in a predominantly England context, might actually prioritise that framework more than it does our framework here. But we also, by the way, if we were to go with the UK option, the OEP in England, would still have to provide resources to it to deliver for us, and with, frankly, an expected budget and staffing budget of a similar order that would be needed for a dedicated body to reflect our Welsh context.

So, what we've done, based on the feedback, based on our analysis of this needing to be a body that's lean and efficient, but which also reflects the Welsh context, is that our design here with a Wales body means that we're not constrained to the same systems and approaches as the OEP. It enables us then to reflect lessons, going forward, about what works and what hasn't worked. But we did look at—to give you the assurance—and we've reflected in the regulatory impact assessment other options that were looked at, but there are good policy reasons, as well as that we'd still have to fund the other functions within an OEP or something, why we've chosen this way.

A number of times, Cabinet Secretary, you've mentioned there the Welsh context and the bespoke or unique circumstances we have here in Wales, but you've based this cost on the Scottish model, which flies in the face of your comments about the bespoke Wales position and the context we have in Wales. So, I'm interested in why you've chosen to do that, considering all you've said about the bespoke situation we have and the Welsh context.

And a second on that point: the Scottish model costs just over £3 million. They have four times the land area and nearly twice the population of us here in Wales, but the cost of the OEGW, as you've outlined, is nearly the same amount as what's estimated in Scotland. With that in mind—the scale—how can you justify the cost being the same as the Scottish model?

Sam, it's a good question, but, on the scale issue, it's not the scale that's the important thing; it's the functions and the authority and the independence and the capacity of this organisation to do what we require. It's not a question of hectares or acres—it just isn't. It's the functions of that organisation. They need to be properly resourced and equipped to do the job we're laying out in the legislation. It's a fair question, but those aren’t the factors that lead us to the conclusion of what the quantum of funding required and the staffing numbers are.

Sorry—it must be a measure of the factors though, because if the land area was, say, the size of the United States, for example, that must be a factor in terms of cost.

Bear in mind that what this body is doing is it is looking to ensure compliance with the principles and the due regard and the special regard—the due regard on wider public bodies, the special regard on me, other Welsh Ministers and also NRW. And it's also compliance with environmental law and legislation. It could be in achieving those targets, but it could also be the wider piece of, 'Are we making the right decisions across those public bodies, NRW and us, to halt and reverse biodiversity loss and improve protection of our natural environment?' That is not a function of hectarage. Just to add to what I said previously, they're not double-guessing a town and country planning issue. They're not double-guessing an environmental consent issue. There is a regulatory body called NRW out there who does that. There are local authorities who do those functions. So, that's why I say it's not a question of the hectarage or the size of the country. It's more an issue of the functions this body is carrying out.

However, there is a parallel with Scotland. It's not direct. The parallel with Scotland is actually in the expected number of staff to operate an organisation with those functions. They're based on a hypothetical extension of a similar staffing structure to the OEGW and reflect estimated civil service staffing costs for the right type of roles in that organisation. It will, however, be for the OEGW ultimately to use their expertise to determine the most effective staffing structure to deliver these functions. We'll need to provide the budget and the structures will be subject to ministerial agreement, but it's for the OEGW to decide, 'These are the people we need in these roles in order to deliver the high-powered functions that we have.' Does that make sense to you?

It does make sense, yes. I appreciate the point you're making in terms of the remit of the body, not just about space or population, but you must accept that a larger country with more population would be likely to have more duty or more work to undertake, just as a matter of—. As you said, you described earlier the types of individual or bodies who would want to approach an organisation like this. So, I take exception to your point saying that that's nothing to do with it, basically.

Indeed. So, here's the interesting thing, if and when, subject to the will of the Senedd and Royal Assent as well, this body is established. The people who are sitting there around the executive in these roles, on the board and so on, will have to make really clear decisions on priorities. That's going to be one of their biggest challenges. Now, if they actually—. We've set within the Bill how we avoid duplication of functions carried out by other bodies already. So, Sam, that burns off I think a lot of the things that you might be thinking in your background about a thousand Mrs Joneses from Tredegar, because what the body will do is it will say, 'We've had one from one Mrs Jones in Tredegar, but it is of such significance and our investigations and analysis say that one Mrs Jones will lead us to pursue this on a systemic basis, because we think there is a failure of environmental law and governance and planning.'

It would only take one Mrs Jones of Tredegar, but it could be a thousand. But it doesn't matter that it's a thousand, because that OEGW board and executive will have to decide: is the one equally as valid as a thousand? What they shouldn't be doing, Sam, is running around simply—. Here would be my simple layperson's explanation of it: they shouldn't be running around trying to duplicate what other bodies are doing, but what they should be doing with their expertise is saying, 'Is this an issue that Huw Irranca-Davies is failing on because one or 500 Mrs Joneses have said we've got an issue on x, y or z—you need to look at it?'

Thank you. Sorry, Chair.

Mike would like to just come in on this point.

If size doesn't matter, or is irrelevant to the cost—which is I think what you've said, unless I've misunderstood you—an England-and-Wales body would cost us 10 per cent of this?

Sorry, no, Mike. Because of the issue of the bespoke legislative and policy framework here in Wales, we would have to put the same quantum into an OEP in England in order to deliver this for Wales and to translate it into the Welsh context. So, yes, it's an understanding of what this body is doing and what it's not set up to do. With that strategic approach to oversight of environmental law and policy, wherever they were, we'd have to put that quantum of expertise in.

Well, I remain unconvinced of that. And the last point I would make, which you'll also probably not agree with, is that you're going to have lots of people sitting around doing nothing if we're going to have the same number of people as Scotland.

No, I'd entirely disagree. We've drawn on Scotland, their office of environmental governance, because we think it's a fair model. It's quite reflective of what we anticipate. That's why we've come up with an assessment that we think it's around about 15 full-time equivalents, on a range of grades, by the way, reflecting what is taking place in the Scotland model—Environmental Standards Scotland and non-executive members. But to be crystal clear, there isn't going to be anybody in this organisation sitting around twiddling their thumbs. We anticipate it will be lean and mean, very directive, very efficient. And there will be an expectation, frankly, from the public that this organisation that we've been waiting for for so long for will deliver for the people of Wales, and for the environment in Wales. So, that's where I would take issue—that there will be anybody here sitting around twiddling their thumbs. It'll be lean, mean. And I expect them to be coming at any Welsh Government Minister who's failing in their duties, or any public authority.

But they'd also need—. By the way, the nature of this—it's worth reflecting on. One of the things that we responded to in the take-up is that there is an approach here, based on the well-being of future generations Act, that we try and actually work with people to achieve environmental outcomes as well. So, the approach that they will take, we would expect, first of all, would be based on collaboration, engagement, trying to work compliance. But if they don't, they have teeth, Mike, and they will come at organisations using those teeth up to and including the High Court. But they have information notices they can serve, they have compliance notices, they have urgent compliance notices—a range of tools at their disposal. There won't be anybody sitting around twiddling their thumbs.

Sam. Diolch.

Thank you, Chair. I think you're missing an opportunity for a rhyming triplet there, Cabinet Secretary, of mean, lean and green—

Thank you. [Laughter.]

—of course, with the environmental credentials. You might want to take that forward.

You mentioned the expertise around the table for this body. Do you have concerns that other organisations, particularly within Wales, could risk losing some high-quality staff to join this, and how will you mitigate some risks around that?

Yes, we do recognise that there are some genuine concerns here, but it isn't just in this sphere. So, if you look at the work that we're currently doing, for example on flood and coastal risk management, and the work that we're doing on the Mining Remediation Authority, this is another area. It is an area of concern. However, what we are doing in all of these areas, including this, is actually working on those issues of recruitment, skills, pipelines for training and skills, which, by the way, would include things for this organisation—very much, I think, the calibre of individuals that we would have in it, with very specialist skills. We recognise the concerns around things such as skills loss within an ageing workforce. We will need specialist training provision within this.

So, with the work that we're doing in this and other areas, the Bill actually provides opportunities to strengthen the skills gaps that we've identified, including, by the way, those that would impact on the section 6 duty within the Bill. So, we'll need bespoke training, we'll need peer-supported learning, we'll need cross-sector collaboration. We will need to build capacity. I can reassure you that we are working right across the sector to find the solutions to these challenges.

So, I'll give you one example in another area that we're already working on. We've got a task and finish group within the floods and coastal erosion risk management workforce. We've surveyed where the gaps are. We've identified how to fill those gaps. And I would say that the flip side of this, Sam, is there are incredible opportunities in this and in all those other areas for people with high skills here in Wales, and to develop those skills into really well-paying jobs to do this work going forward. So, yes, I do share those concerns, but we are right in there working on how to fill those skills gaps.

Okay, thank you, Cabinet Secretary.

I think we have one more question from Sam, and then over to Mike. Just to appreciate time, maybe we could keep the answers relatively concise.

I'll try. [Laughter.]

Thank you, Chair. So, as brief as possible, then, there is some wording here that makes members of the Finance Committee kind of uncomfortable, I suppose. It's the words 'unquantifiable costs', which you've associated with the authority here. Could you just help us feel a bit less twitchy around those 'unquantifiable costs' and explain why you can't quantify those costs at the moment?

Yes, indeed. This draws a little bit on what we were describing before as this lean, mean operation, or, as you said, lean, mean and green. Indeed. Sam, it came out of your mouth—well done. So, the unquantifiable costs associated with the OEGW link to also some risks that could, if they're not dealt with, decrease its ability to become operational and effective within the expected timescales we have.

So, first of all, the analysis points towards the risk that the smaller board and the larger executive, by its nature, requires that lean and clear target operating model. It's the executive that will have to do the heavy lifting on some of these really important things, and they're going to have to be really good on prioritisation. They're going to have to cut through the mist and get to the things they really want to work on. And it will be for them to do and decide—we're very strong on the independence of the OEGW and their ability. The analysis also recognised the risk referred to previously around specialist staff and the need to identify the gaps and fill those gaps. Now, that includes the specialist staff who will be required for the board and, of course, the executive as well. We need to secure those ones because, otherwise, there's a risk to the effective functioning. We can do it, and we're on it.

So, the unquantifiable costs that you refer to could arise because challenges to securing these resources could result in the OEGW being unable to operate key functions, or to operate functions as effectively, until it has those staff in place, the full board in place, so it can undertake all of its functions. That, by the way—in case there are any policy people listening here, or up in the gallery, or whatever—is why we need to give that time for this organisation to be fully set up, before we operationalise all of its functions, because if we do it before it's fully set up, then we're almost dooming it to failure from word 'go'. It needs to be fully resourced.

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

On staffing, how does the grade mix in Wales compare with those for the corresponding work in England, Northern Ireland and Scotland?

I might bring Alice or Naomi in, but it's reflective of the skills mix within the Scottish model, but Alice—.

So, we've looked at, as the Deputy First Minister has said, the cost comparison and the staffing mix put out by Scotland, and that in England, and also looked at comparable models here in Wales. So, we've looked at the net-zero model in terms of the reporting and monitoring requirements, and based it on that. We've covered a mix of different grades and different skills as well. So, there will be policy staff like myself, we will need analytical roles like economists, specialist ecologists, and a range of other specialist areas. We've looked at a mix of other countries where they've had target setting already in place, and then the reporting on net zero, because that will be a similar style to what we use in Wales for reporting on the biodiversity targets.

You say natural resources will incur minimal costs, but you knew what the costs were when we were a member the European Union, and the European Union were undertaking this. How do the costs you've calculated compare, and how much did NRW have their budget reduced when we left the European Union?

So, NRW budgets, of course, are set separate from what the budget from the OEGW will be, and they have very different responsibilities as well. I can't give you, Mike, what's happened to the NRW since we left the EU, but I think it's fair to reflect that their overall quantum of funding has been significantly impaired over the last few years, because of the settlement that we've had from UK Government over the last few years. That's an open secret. So, they've had to prioritise for their regulatory function, but it doesn't have a direct implication on this. I'm trying—

Perhaps I didn't phrase it very well. When we were a member of the European Union, the European Union carried out the functions that this new body is going to carry out. If I've got that wrong, stop me now.

No, that's right.

If, however, that is true, then we know how much it used to cost NRW when we were a member of the European Union.

No. No. Two different animals: apples and pears. So, NRW carry out an enforcement and regulatory function on behalf of Welsh Government across a wide range of terrestrial, river, marine issues. That's their task and finish. They were not carrying out the work of the European Commission and other bodies, which was to hold governance to account. So, what the commission would do—and I say this as a former member of the Council of Ministers—was they would hold Governments to account, and that's what this Bill is seeking to do in a Welsh context, separate from the functionality of the NRW. And that separation, Mike, continues. This new body will be the Wales version, if you like, in simplified terms, of what the commission used to do to hold Governments and public bodies to account.

I think what I was trying to say at the beginning—and I think you tend to agree with that—if everything you've said is true, why does NRW have any additional costs?

Sorry, why does NRW have additional costs?

Why do they have any additional costs? You say they're doing different things—I do listen to the answers—you say they're doing different things, that they are not involved in the same area as the new body, so why would they actually have additional costs?

Oh, sorry. Right. I've got it. Okay, I'm going to pass to Naomi in a moment. Yes, so there will be marginal costs that apply to NRW and to other public bodies, without a doubt, but they are marginal costs, because this is to do with public bodies and NRW aligning within the principles, the biodiversity targets and the other aspects of this legislation. It's not as if we're asking them to do something different, we're asking them to do something better and align with the principles and the targets set out within this Bill, and to be aware that there is a new sheriff in town called the Office of Environmental Governance Wales that will hold them to account if they don't do it. But it's marginal costs, because it's actually aligning behind this, as opposed to, 'We're asking you to do wholly new things.' But I get what you're saying, now, Mike. Let me turn to Naomi.

Yes. Thank you, Deputy First Minister. So, I was going to make same point about the marginal costs for NRW, particularly in relation to the application of the principles. There is also, obviously, a scenario where NRW is subject to an investigation by the OEGW. And in that instance, there could be additional costs on NRW. We have also tried to assess those in the regulatory impact assessment. We've done that as a total quantum of the expected cost across any and all public authorities that could be subject to those investigations over the course of a year. So, that's estimated at a total of £25,000 per annum. Obviously, we don't know at this stage whether there would be an investigation of NRW, but those costs are in there as well.

I think the one thing we should say is that your financial estimates could be wrong; they might end up higher or lower, and they might be almost correct, but they're almost certainly going to be out by a small amount due to circumstances beyond anybody's control. When will we actually have a chance—or the committee, whoever deals with it in the future have a chance—to look at the actual costs as opposed to the estimates?

I think, Mike, that'll be—. As per our previous discussion, when we have the details on the targets we're pursuing and what the implications of those are, that will also come alongside more precise cost-benefit calculations. So, as we develop those—and that work is ongoing—this committee and others will be able to see where the cost-benefit analysis relies more precisely.

There are also, of course, within the legislation, comprehensive monitoring and reporting requirements right across the provisions. So, yes, one of the key pillars of the Bill is setting up the OEGW, the new sheriff in town. I'm a bit worried I'm saying this, because the sheriff is also going to be coming at me if I'm failing in my responsibilities. But they'll also have that role in monitoring all environmental law, including the law introduced through this Bill in the form of the principles and the biodiversity targets as well.

So, for you, it will be when we refine the detail of what targets—. And the OEGW has to have a role in this. This is why it's important that we don't rush, that it's not a Government Minister picking the targets. Although we've got work ongoing, we want them to actually, then, say, 'And here are these long-enduring targets that we have', and the costs and benefits that come from them.

Thank you very much. That's me complete.

On that point, and just thinking of that analogy that you've used, that the sheriff might be coming for you, but you're setting the sheriff's budget, or providing finance for it—how does that compute and how do you square that circle, in that sense?

So, we've put in place here, we think, very practical, black-and-white illustrations within the legislation that show what this body has to do, how it will need to work very effectively and prioritise its work. But also it is there to ensure compliance with environmental law and that it is achieving those outcomes very precisely of higher environmental protection, but also halting and reversing biodiversity loss. It needs to have the resources to enable it to do that, but that doesn't mean you just open—if anybody uses them any more—a cheque book and say, 'Here's an open cheque to do whatever you want.' They will need, as I've been very clear in my response to this committee and others, to really focus in on where they think they should prioritise their work. Should it be on individual targets and chasing and pursuing those? Should it be wider systemic failure? Could it be a mixture of those? We need them to decide.

Now, they will want to appear in front of you and the policy committee and others and say, 'We're doing this work, we are adequately funded and resourced to do it, we've made tough decisions on what we should prioritise. We're not chasing the whole world, we're going after the things that really matter and make a difference.' I've got to say to you, as a Minister, I want them to take that responsibility on prioritisation, as well as saying, 'We need the right resource.' But I am aware that there are people out there who are saying that, in some of the other legislation across the border, there is a phrase that is put into it called 'sufficiency of funding'. My interpretation is that that is a declaratory statement, because in whose view is it sufficiency of funding: is it this committee's, is it you, Chair, is it me, is it somebody else, is it the wider world, is it a bunch of lawyers out there? So, it's an interesting statement of intent, and we agree with it in that we think this body, in its independence, in fulfilling its functions, will need to have sufficient funding. What we think we've done is we've built it into the Bill.

Yes. So, who will scrutinise their budget?

So, you as a committee will be able to actually bring in me, bring in them, to see whether they are able to fulfil their functions that they've set out to do, and to see, I have to say, whether they are adequately focusing on the right priorities in fulfilling those functions.

So, in a similar way to any other directly funded body?

Yes, very much.

But this isn't a directly funded body that you're setting up, is it?

No, indeed. But there is a read-across to other bodies, because we could also apply this sufficiency-of-funding point to NRW or others. And it would come back to the same loop, which is: and in whose determination is this sufficient or not? What we've done is put in the Bill mechanisms that say, 'Here are clear functions this organisation has to do. You can scrutinise whether it has sufficient funding to do them and it has properly prioritised the work it needs to do to fulfil its functions laid out in law.'

Okay. Thank you. Thank you very much. Unless anybody has any other questions, that brings us to time. Obviously, a transcript will be available for you to check for accuracy there. But thank you so much for coming in—a fascinating session with yourself, and thanks to Alice and Naomi for coming in as well.

So, under Standing Order 17.42(ix), I resolve to exclude the public from the remainder of this meeting and the start of the meeting on 9 July. Is everybody okay with that? Yes. Thank you. Diolch yn fawr.