Economy, Trade, and Rural Affairs Committee

Good morning and welcome back to the second panel for discussion on the local growth fund that the Welsh Government and UK Government have announced, which will be taking the place of the shared prosperity fund. We have two council leaders presenting in this particular panel session. I'll ask you both to introduce yourselves and the various positions that you hold in your organisation, for the record, and then we'll go into questions. So, could I start with you, Councillor Stewart, please? Could you introduce yourself for the record, please?

Thank you, Chair. Councillor Rob Stewart, leader of Swansea Council, but also chair of the Swansea bay corporate joint committee.

I'm Councillor Jake Berriman, leader of Powys County Council and this year's chair of the mid Wales corporate joint committee.

Thank you, gentlemen. The local growth deal is coming in in April, do you think it is fit for purpose and will it meet the needs that your areas and your organisations have identified for it? Councillor Stewart.

Thank you, Chair. Look, we certainly welcome the ongoing commitment in terms of the share of the local growth fund. I think Wales is getting 22 per cent of the entire fund, so that is obviously welcomed by us in terms of that continued commitment to channelling these post-Brexit funds into areas of most need, and I think that's something that we should continue to support and welcome. Obviously, since Brexit took place, the amount of money that's available has reduced from successive UK Governments, but again, we are grateful for the large share, as I said, in terms of the proposed allocations.

We do have some concerns in terms of the proposed change in terms of the revenue/capital split within that allocation. Primarily, we had around 75 per cent of the previous funding in revenue and 25 per cent in capital, and the new fund appears to be around 30 per cent in revenue and 70 per cent in capital, so that does prove somewhat challenging in terms of the programmes that are supported from the previous fund, as we move into the local growth fund. So, that is something that we're in active discussions with both Welsh and UK Governments about, and we have noted that in England the mayoral combined authorities and the allocations there are more around the 60:40 split, which of course would be something that we would want to seek parity on. I know ourselves and Welsh Government, from a local government and Welsh Government perspective, have raised that issue and are in negotiations with the UK Government about that. So, from our perspective, we'd obviously like to see more money flowing as part of the local growth funds, and we'd like to see that balance between revenue and capital addressed as quickly as possible.

The final thing, obviously, as we go into the new funds in terms of the structures and how the funding is allocated, we've been very successful in managing the funds through the local arrangements that have been in place, which are underpinning the regional arrangements, and again we see those arrangements as the best ones, because this is a local growth fund, and our view is that the more locally it could be managed the better. But we do understand if you do it entirely at a local level you do lose some of the regional strategic advantages that can come. So, making sure that our funds continue to come with as much local control as possible is something that we would definitely support.

Thank you. Councillor Berriman.

Thank you very much. I haven't got much to add to that oversight there, but firstly it has to be said that the local growth fund only partly replaces the UK shared prosperity fund, with less funding, and it decreases the revenue, as has been said there. I think this will have major implications on councils in terms of their ability to support key services at a local level and on their capacity, skill sets and expertise in delivering key interventions of benefit to local communities throughout Wales.

Following the ‘not a penny less’ principle, this doesn't feel like parity to us at the moment, either with where we are now or with authorities, as has been said, across the border. Add to this the funding gap that appears to be emerging with the distribution of the Pride in Place funding and it is difficult to see how there is parity, and that this is going to meet the ongoing needs of the rural areas that I represent in particular.

Thank you. Just one final point from me: obviously, this local growth fund is coming in in April. One would assume there'd been dialogue, with the organisations that you represent being critical partners. Can you confirm that you were consulted on and had the ability to input into the original announcement over the structure of the funding model that came forward? Councillor Stewart.

Chair, there obviously were conversations, but again, I think we would have preferred more detailed conversations earlier in the process in order to have fed in more of our learnings in terms of what's happened since the SPF funds were set up. Obviously, we have given a significant amount of information to both Welsh and UK Governments in terms of how those funds have been successfully managed locally and the impacts that they've had. So, we were very keen as we moved into a new round of funding to make sure that we took the best of what we've been able to do with the SPF and ensure that those learnings were built into the process. So, yes, there were conversations. We would have liked more, obviously, and I think we would have certainly liked to have been able to perhaps shape and iron out some of the challenges that the transition year that we're moving into now will obviously provide to us, because we want to continue with the momentum. We don't want to have any impact in terms of the potential risks to the revenue programmes, and again, I think having more discussions and more detail earlier in the process would have been beneficial.

Councillor Berriman.

[Inaudible.]—about the level and timing of engagement, and the communication in respect of the development and design of the new funding programmes, obviously. But that's where we are. We were looking for greater involvement, and we do think that input from councils is crucial in providing a democratic mandate and a key participative role in delivering local and regional place-based funding programmes and initiatives like this. There's an opportunity here, isn't there, for top-down to meet bottom-up to ensure effective design and delivery, and I don't think it's too late for that, but we have been late—. We feel we've been a bit late to the show.

Okay. Sorry, Councillor Berriman, your mike didn't kick in for the first 10 or 15 seconds of your contribution there. Could you just confirm what you did say, because it was quite critical to, obviously, the context?

Yes. Just at the start there, I was just saying that local authorities have expressed concerns about the level and timing of engagement and communication in the development and design of the new funding programme. You probably got it after that, did you?

Yes, that's fine. Thank you. That's helpful for the record. Thank you. Luke.

Diolch, Gadeirydd. We've alluded to that revenue/capital split within the local growth fund, and in the previous session, Professor Kevin Morgan raised concerns around the potential loss of expertise and capacity because of the way in which the growth fund has been split. So, in terms of your views on that revenue/capital split, I can imagine there's a lot of agreement with what we heard in the previous panel. What I'd like to just get out of you two today is the actual impacts that you see this will have, not just on actually being able to successfully deliver some of the projects, but also the impacts on your organisations, on the staff that are there ultimately delivering some of these projects. Perhaps I can start with Councillor Rob Stewart.

Thank you for that. Look, we've been really clear that we want to see the transition from the current funding to the new local growth fund be as seamless as possible, and for us to have time to reorganise how we do what we do at a local level, with a way that doesn't have negative impacts for our communities or for the people who are employed in the programmes. One of the challenges with the split that's been proposed in terms of revenue/capital is that we've got, across Wales, over 2,000 people employed on programmes that are supported through the current SPF programme, through the revenue that's provided. And obviously, as that gets converted to capital, unless there are some flexibilities within that, which I know ourselves and Welsh Government have asked UK Government to permit, then there could be some significant impacts. So, that's what we've been working to mitigate, and again, I think it came as a surprise to all of us to see some greater flexibility in England than we've seen in Wales and the other devolved nations. So, that is something that we're pushing for parity on, because they do underpin employability programmes, programmes that help people into work and help us to bring forward people with skills into the workforce. That's just one example of where, potentially, there could be impacts. But I know all local authorities and regions will be looking at how they can move around some of their resources and reorganise to try and mitigate that as much as possible. But it would be really helpful if we were able to see some further flexibilities from UK Government in terms of how this money can be deployed.

So, discussions have been ongoing, then. How advanced have they been, and where has the Wales Office been in those discussions as well? I mean, in the previous session, again, Professor Kevin Morgan said he isn't sure where the Wales Office has been in this whole process.

So, definitely, there have been discussions with the Wales Office. There's been a tripartite meeting between UK Government, Welsh Government and local government. So, this has been raised and been discussed. Obviously, there have been exchanges of letters as well on this issue, where we've raised the concern from a WLGA perspective. So, again, a letter has gone recently from myself, as the spokesperson for WLGA, highlighting our concerns and asking for us to be consistent with the approach in England. And those discussions are ongoing.

Would you hazard a guess as to why we're still behind on getting that parity with the English authorities?

Well, it's not that we're behind, it's just that what we appear to be able to see now that we've got the detail of the budget allocations is that, clearly, there is a different mix in the combined mayoral authorities in England than there appears to be for the devolved nations, and that's something that wasn't visible up until recently. We had been making progress already, which has been locked in, in terms of moving from a 25:75 per cent capital/revenue split to a 70:30. Obviously, it looks like the combined authorities and areas in England have a 60:40 split, which isn't what we currently have on offer in Wales, and that is the part now that we're focused on in discussions.

Councillor Berriman.

I've not much to say to that, but obviously any improvement on where we are at the moment will help to prevent some of the jobs that are, crucially, funded at the moment from dissolving away and we may not see them back. We've used the existing funding as an opportunity to drive forward not only employability programmes but things like our approach to net zero—[Interruption.] Sorry, are you hearing me all right?

Yes, no trouble. Keep going.

Yes. Sorry. And finding nature-based solutions to various things. So, this funding has propped up a range of job opportunities to support local economies, based on the needs that those economies and communities uniquely face. And it really is just, I suppose, the lack of detail and the lack of clarity, and the fact that we're racing headlong towards April 2026, and obviously the more certainty we can have the soonest will help both provide comfort to those people and security in terms of how we apportion our funding, going forward.

And finally, very briefly, are you confident that the funding within the local growth fund will allow projects to deliver on the strategic objectives that have been set out within the local growth fund?

If I can just come to that, obviously, in terms of the strategic objectives, we broadly agree them but don't agree them in full. Certainly, we see an opportunity for, as I said before, bottom-up, locally based objectives that are based on local intelligence and needs and the fact that we operate as local authorities within our communities and, collectively, within our regions. To some extent, I would say that it's this local level that is not as transparent or is potentially missing within the overall objectives as we see them at the moment. We do need the detail, and how the funding arrives, when it arrives, how it is processed—things I'm pretty sure that are set out in Councillor Rob’s letter already—are going to be crucial for us.

Good. Anything to add, Councillor Stewart?

No, I think that Councillor Berriman has covered it nicely there.

Thank you. Jenny.

Clearly, this money doesn't meet the 'not a penny less' criteria. I just wanted to focus on the purpose of the structural funds, which was—. The overarching objective was to bring deprived communities up to the level of the average for Europe. So, how are we going to ensure that this lesser money is going to be focusing on those most deprived areas within our communities and that that is indeed going to deliver on productivity and bringing more people into the workplace and better jobs? How do we do that when we've got less money?

Councillor Berriman first.

Okay. Thank you very much for that. Obviously, it isn't only about productivity, and we have to take the needs of our individual areas, and they are quite distinct and different right across Wales. And just to have that as a single marker really does disadvantage rural areas, where we are heavily reliant on the foundational economy and may have difficulty getting the added value that you might have in terms of productivity out of some of the more manufacturing-based centres—not to say that we wouldn't try. But the European structural funds were directed at impoverished parts of Wales previously that were deeply rural areas, and, as such, what we would argue is that we need to respond to the needs of our poor regions quite differently and distinctly. I referred to Pride in Place earlier, and, really, I can't see how it was a rural-proofed policy, because it hugely disadvantages rural areas. And I do think that we've got to be cautious about using single drivers there, but, of course, we have the shared aspirations to do this, both within our regions and across regions, and we might welcome too the distinction between national, regional, local and, of course, for us in Powys in particular, cross-border, because there are some really good opportunities to have inter-regional work and international work as well.

Okay. Councillor Stewart, is there anything you want to say about this, because, clearly, you have better-defined poorer communities up the Valleys in your region?

Yes, absolutely. Look, the reality is, when you've got less money, it is always more challenging, isn't it? We've just got to be clear that, whilst there were lots of commitments made at the time of the Brexit decision and discussion, they haven't been held to, and the situation is that this is not a direct replacement for structural funds. We know that the current Government have invested through many channels, specifically in—if I talk about my region—the investments going into Port Talbot and around the steelworks there; there are multiple streams of funding going in. So, this fund is not an apples and apples comparison for what the structural funds were before.

But I absolutely hold to the commitments that were made by the previous Government at the time, which is that we should not be a penny worse off, that there should be a Brexit benefit—and all of those things that were promised simply haven't materialised. And we are now seeing less money than we previously would have received under European funding. And of course, part of that is because the previous Government, in its iteration, where it went to shared prosperity, changed the criteria, changed the factors around need, so that money flowed elsewhere and away from areas of greatest need. As you quite rightly referenced, we've got a number of lower super-output areas—areas of deprivation and poverty—that the European funds were there to help improve and to grow.

To be more positive on it, I think, during the SPF period over the last few years, despite not having the criteria until late in the day, and having a condensed period of delivery for us to get those projects going and to get the money out the door, I think the reality is that we've been able to evidence significantly how well that money has been used and what impact it's had on our communities. And in terms of administration costs, for instance, the local management and the regional management of these funds is only 4 per cent—and I think previously, with Europe, it was around 20 per cent in terms of the administration burden—so, more money has reached projects and has had a significant impact.

But if you're asking me the question, 'Do I think we should have a higher level of funding?' certainly the levels—

I've never met anybody who doesn't say 'yes', so don't bother about that.

No, absolutely. We should be, and I'd go further than even 'not a penny less'. My mantra, and local government colleagues have heard me say it a number of times, is that we should be looking at uprating what we used to get from Europe to the level—. Because, obviously, inflation has had a significant impact on the value of that cash in real terms, so we should be looking for more, not less.

Okay. So, sticking with you, Councillor Stewart, we are where we are, this is the money we've got, but the consultation document indicates a huge breadth of options, which enables people to, really, translate it into what they actually want. So, what do you think the strategic objectives for this funding—which, unfortunately, seems to be limited to three years—what do you think are the high-level strategic objectives that we should be going for?

Yes, absolutely. Look, I'm quite wedded to what we've been doing in the last three years, because I can see the evidence base and the impact of what it provided to local businesses, local communities. And I think, whilst the current scheme did have challenges, as I said, because the previous UK Government were very late and slow in coming out with the criteria around how the programme would work, which condensed the time frame, the delivery through the regions and on to the local authorities to have that ultra-local approach has proven very effective. I would continue to invest in communities to build skills, to allow people to get the skills they need to move out of poverty into work and, hopefully, to get a career and a salary that they need without having to move away from the community that they live in—so, targeting into those pockets of growth that can really drive economic growth at a very ultra-local level.

But the part that was missing, which I think we do need to find the balance for, is that, inevitably, the condensed time frame led to people being more tactical and a little less strategic, because of the limited time frame for delivery. So, you had to make sure that you got projects out the door that could deliver in a shorter time frame. I think that's one of the challenges for all of us with this three-year period now. We'd have liked a longer period for the local growth fund, so you do have the opportunity then to do more strategic projects and to make sure you give people the confidence to come forward, to put themselves forward for employment in those programmes and projects, but also for people to come up with the ideas that can have that real strategic change for communities. So—

Okay, we don't disagree on that, Councillor Stewart, but we are where we are. Where would decarbonisation fit within your region's strategies, with one in four living in fuel poverty, and fossil fuels continuing to be eye-wateringly linked to global gas prices?

So, look, I can give you some examples from my region. Obviously, you can't look at this fund, as I said before, in isolation. We've been very successful, as other regions have, in knitting together various funds to make more impact. Within the corporate joint committee, we've now moved the Swansea bay city deal into that structure. So, the economic strand will bring together strands like the local growth fund and the city deal, and, within the specific example you've given there around fuel poverty, clearly, we've got commitments at both local level and regional level on net zero, on net zero by 2030. We've got a programme of decarbonising homes, of making sure that we support home owners to help reduce their energy bills. We're building modular, high-energy-efficient homes that give people energy bills of a few hundred pounds a year, not a few thousand pounds a year. So, we are already taking the steps to do that, and, obviously, this fund gives us the opportunity to continue to do more of that.

Okay. So, they would be your top two, would they, building skills and decarbonisation?

Yes, I think employability, for me, is one of the top things. Decarbonisation—I don't think it's necessarily the main focus of this fund, because there are other funds that we are already using to do that, but this fund will play its part.

Thank you. Councillor Berriman, what do you think the strategic objectives should be, based on your experience of mid Wales?

Of course, the decarbonisation agenda is really important to us in relation to this particular fund. I'm not seeing a direct link through to the local area energy plans that have been provided. So, work locally has been done to indicate what our transition to net zero looks like. We have a regional energy strategy that is adopted within the mid Wales region and there are a number of projects that we're already putting together through different funding, as Councillor Rob has said there. Therefore, whilst I think stronger links can be shown across from this fund to that, that's going to be really important.

Of course, skills are vitally important for each of the regions, and we want to see an investment, in particular, in some of those high-level tech manufacturing skills through the programmes that we are developing at the moment within Newtown and other places. So, it's the agri-tech sector for us that are coming through the Growing Mid Wales programme, but also there are some interesting cross-border opportunities that we wish to explore, and, of course, we shouldn't forget some of the inter-regional projects that we already have for the Welsh language, for instance, with the Arfor project, and we're not clear how that might get funding going forward through this.

So, what I think is that, yes, we can see what those overarching priorities are, but there still should be a clear opportunity for each of the four economic regions to work amongst themselves to reflect the differences they have and bring different approaches to each of the regions, sharing that with the stakeholders that they have locally. So, I wouldn't want to think that there's no flexibility going forward, because I think it's imperative that we do respond and adapt and retain that flexibility in delivering through both our local authorities and the regional arrangements that we choose to utilise.

Okay, so—

I'd like to make a bit of progress because we're going to be beaten on time otherwise, and there will be other questions that we might have to follow up in writing if that's all right with you, gentlemen. Sam.

Thank you very much, Chair. Looking at the delivery of this, how content are you that the right balance has been struck between local, regional and national delivery? We'll start with Councillor Berriman.

At the moment, I don't think there is sufficient evidence of the bottom-up approach that I talked about there. And I think that that does need to be strengthened as we go forward, and particularly the role, as I've indicated there, of local authorities having precedence within their areas. They are the democratically elected representative bodies for their areas, and obviously, each of those have their own economic development plans, their local development plans et cetera. And they're very clear about what those needs are. They knit them together at a regional level, and that's absolutely fine. But that's the way that that should operate, where we add value at each level.

But I think nationally, there will be opportunities as well, as I indicated there, with cross-border work. We've got the Marches Forward Partnership. We've got the inter-regional work that I just talked about a moment ago, and there may be projects, as, for instance, we develop the Royal Welsh Show site, and actually, there should be match funding and collaborative discussions at a Welsh national Government level around how we can add value to that. So, at each layer, I think we need to be adding value, not duplicating or simply supporting because it exists already. I think we need to show greater flexibility.

Thank you. Councillor Stewart.

My answer's simple. It's a local growth fund. It should be managed as much as possible from a local perspective. I think, within the regions, we've built mature relationships between the local authorities on those regional footprints. If the money comes through a regional structure, but then has some local control over it and local opportunities to make sure that it's targeted appropriately, I think it's not beyond our wit to do that effectively. That's what we've done for the last few years. So, I'm more relaxed on the local regional bit, because I think each of the local authorities plays a really important part in managing those regional structures, but I think it's the point here, it's a local growth fund, it needs to be managed at the local, regional level, but in a framework of national context—I think that's the point. It's making sure that we do have those strategic opportunities there to exploit.

Fab. And I believe this has been touched on already, but could you just give your views on the transition year that's been proposed? Councillor Stewart.

What we didn't want was to move to a new set of funding arrangements and find a cliff-edge approaching that was difficult to manage. So, the transition year—what we've been asking for for some time is clarity as early as possible in terms of the funding mix, in terms of the quantum. We're due to get, I believe, a letter of comfort from Welsh Government today in terms of that quantum and the allocations. We've been in discussions, as I've said, around making sure that the transition year gives us an opportunity to make sure that we can manage those allocations as effectively as possible to avoid impacts or negative impacts to the programme as we go through that change. So, that's what everybody's working to achieve, I think, at both local, regional, Welsh Government and national Government level—to make sure that that is as successful as possible. I think, clearly, the one thing that's remaining is those flexibilities around the revenue/capital split, making sure that we have the flexibility that appears to be on offer to the English mayoral combined authorities.

Thank you. Councillor Berriman.

Not really much to add there. Obviously, sight of the proposed funding agreement as soon as possible, and some clarity about the numbers themselves, either for the regions or as percentage breakdowns to local authority areas, would be really helpful as we plan the transition into 2026.

Thank you very much. Thank you, Chair.

Hannah.

Thanks, Chair. I was wondering if you could speak to lessons learned or perhaps not learned from previous incarnations of regional development funding. Perhaps if I go to you, Councillor Stewart, first and just ask you if you have any reflections on both the negative and the positive lessons that can be perhaps learned from, say, the shared prosperity fund and also EU structural funds, and how that can shape, perhaps, the local growth fund, to learn from that as well?

Yes, absolutely. Thanks. I think, look, if I start with the European funds, I think whilst obviously they were a bigger fund, and Wales did better as part of the European arrangements than we've done post Brexit, I think often there was a disconnect, which fed in clearly to some of the debates that were had during the Brexit debate, between local communities and the moneys that were coming from the European Union through the Welsh Government to schemes that did have a significant impact and benefit for communities across Wales. But I think, obviously, it wasn't as visible in terms of how that impact was taking place and how the funding was coming through. That's been one of the benefits, I think, of the shared prosperity era, which is we've had that more visible link as to the local direction of funds into local priorities. And I think that has been an advantage, even though the quantum of money, as I said, was reduced by the previous Government when they changed the criteria around the allocations.

What we lost as well as part of that was—. As I said, because the shared prosperity fund and this current fund are over a short three-year window, you lose the ability to be more strategic on some of those bigger programmes, then. That's one of the things where we could take learning into the current programme from the previous structural funds: having a longer time frame to deliver allows you to be more strategic, but retaining that local control, local knowledge and local targeting would give you, then, potentially the best of both worlds. So, those would be my reflections.

Thanks. And Councillor Berriman.

I don't think I've got anything to add constructively to that. I think that's covered the European funding in particular, which I would have drawn upon, in particular with the local growth fund not meeting the needs of rural areas in a way that that perhaps did. So, bearing in mind we're short of time, I'll leave it there.

Thanks for that. And just one final question from me, then. Do you have any reflections on how effectively the shared prosperity fund operated? And are there any examples of good practice from the projects that you are able to share with the committee? It might be something the committee wishes to follow up in correspondence too.

Yes, Chair, if you'd like me to come in on that one, I'm more than happy to share the information we provided to both Governments in terms of how effective we believe the management of the shared prosperity fund over the last few years has been. I think the biggest challenge for us during that period was the fact that, whilst the quantum was announced early on, the details of how the funds would operate, how the structure would be set up et cetera—all of that was a lengthy process, and then curtailed the period of time that we had to deploy the funds. So, again, we're more than happy to share what the impacts have been, and we think that those are very positive. But it was impacted, I think, in terms of the fact that the fund did take a long time to get set up and get going.

Okay. Alun.

I'd be very interested, Rob, in seeing that document, actually, because we haven't had any real evaluation of the shared prosperity fund, and there was, of course, as you've alluded to, very little in the sense of objectives set for it before the money was actually spent. Objectives seemed to be set after the money was spent, and I think that was a profound weakness in understanding what the purpose of the fund was rather than simply to go out and do relatively minor projects. So, I'm interested, therefore, with these new funds being made available—how would you look towards ensuring that we have very clear objectives set before we start to do the work, and then how would you monitor that and how would you evaluate it?

Well, I'd start from the evidence base. As I said, we've got, certainly in my region, a really good basis of data that says, 'Look, this is what we invested, this is how we invested it, this is the impact it's had, these are the jobs created, this is the economic benefit of it.' So, at a regional level, we can certainly do that, and hopefully that will help inform the choices we make going forward. So, at a very high level from me, I'd be saying, 'Well, look, that's clearly worked—let's continue to do more of that.' If there is stuff in there, as there always is in any programme, that hasn't been as effective as you'd like, then we look at how we can improve upon that. I think, again, just talking at that high strategic level, clearly having more time to work up more strategic programmes would be a benefit. Having a larger quantum of money to deploy would be helpful. And having an ability to align our programmes with what Welsh Government are doing at a national level and what UK Government are doing on a national level will be of benefit to all. All of those things are sensible to do, I think, which would be lessons learned from what happened with SPF.

Sorry, can I come back on that? What I saw in SPF was actually repeating the mistakes, not learning the lessons of previous funding rounds. If you look at Objective 1, for example, back nearly 20 years ago now, you had the lessons learned from the evaluations of the Objective 1 funding round. That was then hardwired into the following round of structural funds, and those lessons were then dumped, if you like, forgotten, when SPF was introduced, and we went right back then to the beginning of Objective 1, in a very similar sort of structure and governance and objectives, and what we'd learned through evaluation of Objective 1 was that that didn't actually deliver on the longer term objectives. So, I'm a bit concerned that we're going around in circles here, that what we're actually doing is getting these slugs of money, spending them, looking at what has been achieved through spending a lot of them, reporting on what's been achieved, but not actually looking at what the impact is on society and the economy. And I fear that we're going back into this circle at the moment.

I don't entirely agree with that, certainly not from my understanding of what's happened in my region. Now, you may have other evidence from elsewhere that I'm not sighted on, but certainly when we evaluate it, both at regional and local level, we think there's a really strong evidence base there of how we have contributed to growth, how we have contributed to tackling some of the challenges that we see in our communities. But some of these things won't become entirely clear, because they're generational changes, aren't they? You have that ability to try and use the structural funds, which is what one of the aims of the structural funds was, to deal with those areas of deprivation and to bring those areas up to a level of prosperity, of growth, of opportunity. So, you won't see some of those impacts, certainly not over the two and a bit years that we had for SPF. But what I can show you and what we can provide is to say, 'Look, these are the impacts in terms of creating jobs, in creating opportunities, in creating the ability for local businesses, for local people, to obtain employment, for us to support people with the skills agenda'—those sorts of evidence bases to say, 'Look, that has happened and it's happened faster and to a greater degree than we'd seen previously.'

Okay. I would be interested in seeing that, and if you could send that to the committee, Rob, I think we'd be very grateful.

Councillor Berriman, would you like to come in on the points that Alun Davies has been making?

Yes. Thank you very much. I think, as a sector, local authorities have been a really trusted delivery partner. We've reacted very quickly. I think we've learned from—. You talked earlier about the high admin costs of some of the earlier European funding. What we do now with 4 per cent admin is highly efficient and effective. We turn things around in a way that is based on clear evidence that we've gathered at a local and regional level. There are some really good examples that have come out of it. I don't know whether they're all in Rob's paper, or we can add them through a further call. In terms of some of the funding, the longer the term over which you can do it, the longer the term you can change things structurally.

Just in terms of the foundational economy—so agriculture, forestry et cetera—across rural mid Wales, for instance, a lot of the emphasis has been on supporting farmers to diversify, to use what they have locally to innovate into manufacturing, tourism, et cetera, to add value to what we already have in a way that will sustain the rural economy, the rural way of life, and therefore the Welsh language. It's difficult sometimes just to say, 'That's had no effect'. Actually, we probably need to better evidence what that effect is. I'm really happy to ensure that we contribute to that by getting the measures for monitoring absolutely right.

I'd be grateful for that. Just for clarity, Jake, I wasn't particularly worried about the admin criticism; I didn't think that that was especially fair in some of those earlier reports. But in terms of measuring these things, it would be useful if the two of you could provide us with this information, because I'm anxious not simply to measure activity, which is what we've largely done, but actually to measure the impact of that activity. But I'll leave it at that.

Thank you. Thank you, gentlemen, for giving us your evidence this morning. There are a few questions that we would like to follow up in writing, if that's acceptable to you, and we look forward to getting the responses. A record of your evidence will be sent to you as a reflection of the evidence that we've received from you this morning. If there are any anomalies, please inform the clerking team, but that will otherwise form the official record of the evidence that you have given. Thank you very much and merry Christmas to you and your families.

I appreciate it, Chair. Merry Christmas to you all. Thank you very much.

We'll now move into private session while we change the room around ready for panel 3. Thank you.

Welcome back. We're back into panel 3 of our evidence gathering for our inquiry on the local growth fund announced by the UK Government and the Welsh Government. We have three witnesses before us for the final session of today. Thank you for coming in and thank you for joining us on Zoom. First of all, before we go into questions, I'll ask you to introduce yourselves, and then we'll go into the questions. I'll begin by inviting Josh to introduce himself and the organisation he represents, and then Brian, and then we'll go to the screen.

Bore da, bawb. I'm Josh Miles. I am the head of Wales for the Federation of Small Businesses.

I'm Brian Hughes. I am founder of a business called Regeneras, which I founded back in 2014, 2016—around that time. I'm a former university lecturer in the school of design in Bristol, and I'm a Welshman from Gorseinon.

Thank you, Brian. Lowri.

My name is Lowri Owain, manager of Cadwyn Clwyd. We're a third-sector organisation based up here in north-east Wales. We span back to the previous century delivering community initiatives such as LEADER and, more recently, the shared prosperity fund. Diolch.

Given what we know about the local growth fund, are you in agreement with the objectives that have been set, or do you believe that it needs a reboot in the limited time available before its introduction in April next year? I'll begin with you, Josh, and then I'll go to Brian and Lowri.

The local growth fund structure that's proposed I think is a good one. It's good progress in a lot of ways from a strategic perspective. I think there are a couple of challenges. One is, which I'm sure we'll get on to, the amount of funding and the number of priorities within it. There are quite a lot of priorities in there, which means that deciding how to spread that funding across those priorities is going to be a real challenge, particularly when you look at the strategic themes. Each one within those has four or five practical actions within them. So, if we were to make changes, I think it would be to try and prioritise a little firmer within it on some of the actions included.

As a direction of travel, I think it's right. I think all plans get altered when you're in action, so to speak. That's inevitable as you start to move down the track and so on. But in general terms, we believe that it is the right direction. I think, as you move forward and that becomes more matured, if you like, then you start to look at it in more detail, more granular, and see what is the best way forward and how it can best be achieved. It's a chunk of money, but it's a very small sum of money, given the scale of what's needed. I think one of the things that one needs to do is to look at how that money can be multiplied, leveraged, if you like, using the terminologies of the financial markets, so that it can become double, triple, four times what is coming in—it just becomes your deposit, which you can then leverage and make it work and gain more traction with it.

I agree broadly with the four priorities provided within the local growth fund proposals. It does place a strong emphasis on boosting productivity, which is welcome. However, as a third-sector organisation, we do feel there needs to be a balanced approach with local delivery and local economic development, community-led economic development, and, in particular, the issue of revenue funding in terms of capacity building on the local level.

Also of concern is the rural aspect, generally, of the programme. I'll briefly refer to the economic review undertaken as part of the LGF. The Welsh index of multiple deprivation data clearly indicates that rural Wales is within the most deprived 10 per cent in relation to access to services, and I feel the proposed approach doesn't give sufficient focus to tackling rural issues such as access to services. The WIMD data certainly underlines a need for intervention to tackle rural development and rural poverty in the context of transport, access to services and barriers to employment, et cetera.

Given the importance of this scheme for developing regeneration in communities going forward, it's going to be the main driver of Welsh Government regeneration in schemes with the money that's available, and so it's important that discussions were held with organisations prior to its announcement. Can you give the committee an idea of the level of communications that you might have had with either the UK Government or the Welsh Government in helping inform and develop the scheme before its announcement? Because we've heard this morning from other witnesses that they didn't seem to have much involvement at all. Josh, you first, and then we'll go the same way.

I'm quite new in role so I may miss things that happened before I took up the role. I've been in place for two and a bit, three months. But our main route into this discussion has been a colleague of mine who sits on the regional investment steering group, I think, or one of those groups, which is great from our perspective, it's fantastic to be involved, but I think that's the extent of it. I think on the bigger question of how you engage businesses beyond just organisations like us, a little less has been done there, and maybe it's something to do as we look at the delivery model rolling out in the future.

Nothing at all, unfortunately. The first I really engaged with it was when I looked it up on the internet and downloaded some of the documentation. So, no direct involvement in shaping it. I'd like to think that we could help shape it now, thanks to Jenny, who I met on the train coming from London—it was a bit like a Brief Encounter moment. [Laughter.]

We do believe that we have now a great deal of expertise because of the work we've been doing in America, which has been our main focus, particularly working with the the Indian tribes in South Dakota. So, most of our activities have been in south-western America, et cetera, looking at the reservations. That has taught us a great deal, because these are really deprived communities, people in places like Pine Ridge, et cetera.

What was interesting when we got involved with the tribes, first of all the Sioux, then the Navajo and so on and so forth, is how similar it was to Wales. It doesn't sound very similar to Wales, but it's exactly the same. The same issues, exactly the same issues. Isolated communities. So, we started working with with the Sioux nation and looking at ways in which we could enable those communities, isolated communities, right at the end of the grid, to find a way to create economic regeneration.

Subsequently, we've been working in the rust belt at South Bend, Indiana. Americans always have great names for places. This is the rust belt, and American industry is pretty brutal in terms of, 'We're not making any money, we're leaving', and—

I'm sure the experience will come out in questioning. We're just trying to elicit a taste of what engagement the Welsh Government and the UK Government had. I think from your initial answer, very little to non-existent.

Very little, yes, if anything at all.

Thank you very much. Lowri.

Again, I think it's been limited from our perspective as well. We've attended a Welsh Government LGF regional consultation workshop online, and, obviously, we'll be responding in writing by the close of play tomorrow in terms of the online consultation. But we also recognise the need to ensure that you have things in place by April, so it's a balanced approach, isn't it, to the consultation requirements, but also that we hit the ground running in April.

Final point, and I'll go to Brian first and then go to Josh, then Lowri. We know that the quantum of money is going to be less with this particular scheme, in particular money drives activity, not necessarily drives outcomes, because obviously you need the management of the scheme to do that and you need to have the priorities right at its start. But what level of impact, in your experience—and it was interesting listening, Brian, to your experience in America—will the reduction in the quantum of money have on the achievements that we all want to see, which are more prosperous communities and more sustainable communities here in Wales? Brian.

I think the money is one thing; it's how you apply it. It's all about how you use the money and if you use it as intelligently as possible and get the maximum benefit out of the funding, and you create schemes in which others want to invest. I'm a great believer in community involvement and enabling the people to participate. There's an awful lot of, it's called 'impact investment', I don't really like the term, but there are an awful lot of institutional funds stacked up with nowhere to go because there aren't the schemes there for them to invest in, and that has been a problem. So, I don't think it is—. It limits your beginnings, but it doesn't limit the outcome, if you're creative with what you do with it and you set very clear objectives as to what you want to do. Clarity is everything, particularly for the investment classes, if you like.

Okay, thank you, Brian. Just a 'yes' or 'no' answer, if I may, before I come to you, Josh. Do you think there's clarity in the outcomes that are listed here that the two Governments have set?

I think it's a policy document. By its very nature, it is going to be broad based, so I think it needs tightening up, and there has to be an operational side to the money: what are you going to do with it, how are you going to do it, how do you achieve, through the application of the funds, the things that you want, which are community productivity, community growth, et cetera, jobs, all the good things that are in the paper?

Thank you. Josh.

I think, around this table, we've probably got 25 to 30 years of looking at regional funding and seeing what the overall impact has been. We've been through Objective 1 in the past, we've had the shared prosperity fund, the European social fund, European regional development fund and this is the latest episode in a long chain of policy discussions. We've always had the debate about how much impact has it really had. For a lot of those programmes, productivity was at the top of the tree when you looked at what the strategic objectives were, and if we're being completely honest with ourselves and we look at Welsh productivity today, our labour productivity is still bottom of the UK league, our overall gross value added or productivity levels are pretty much where they were 25 to 30 years ago. So, on that measure, we haven't quite achieved success yet and having less money is not going to make that any more likely, I think.

The main thing from that—and we can get on to this in a minute—is that we learn the lessons from that and we think about, 'Well, what is it through that journey, through the tide coming in and out on different policies, that we can take that can really add value?' And I think we've got a lot to say on that, haven't we? We've seen what that experience has been like and some of that is captured in the draft strategy. But let's be under no illusion: this isn't the policy lever that's going to change Wales's economic fortunes; it's a supplement, not the answer on its own.

Thank you. Lowri.

Yes. I think it's going to have an impact in terms of delivery, less funding, bearing in mind that the EU funding elements didn't cover just the structural funds, it was the rural development plan and the community initiatives as well. So, the lack of funding in comparison to what we had previously will definitely have an impact.

Also of concern in terms of the funding levels are the proposed structures, that we potentially have four or five stakeholders before the money trickles down to businesses and grass roots and community groups. We have the UK Government, Welsh Government, the proposed corporate joint committees and local authorities, so there is a concern there that there could be a potential management cost that is taken out of the fund, and therefore less fund in terms of local delivery, and less funds trickling directly to businesses and communities.

Thanks, Lowri. Jenny.

Thank you. To some extent, the policy document is a bit like motherhood and apple pie, but with only three years funding, there's got to be some focus on what do we want to do and how are we going to achieve it, given that we don't seem to be able to have much influence on the framework. The first panel was talking about learning from the past, what worked, what didn't work, and not losing the expertise built up in the last iteration, which is a danger here. So, shall I start with Josh? And then I'll come to Brian.

Yes, I think the expertise point is a really important one. In the transition from European funding to SPF, there was definitely a drop-off in the people, the staff that were doing this in different organisations, and then that's needed to be ramped back up. I think the main lesson from that is one of scale. So, we moved—. We've been through this cycle a couple of times, actually, haven't we, when you think about it. We've gone from a very local scale in the first tranche of European funding many years ago. We ended up having a much more strategic regional focus by the end of that programme in the late 2015s, whatever that period was. We went to SPF and we've gone back to local again, and now we've got a strategy that's looking a bit more strategically, nationally and regionally.

So, there's a really important lesson there, but the key thing is we keep longevity and we're really focusing on narrower interventions, I think, rather than, as you say, motherhood and apple pie. I can give you an example. From our perspective, we would put the competitive business bit at the top of the priorities, and the other ones should feed into that, by and large. If you think about supporting businesses, there's a bit in the document around start-ups. We already have policies focused around that through Business Wales, through the development bank. We need to make sure we're not reinventing the wheel with this money, and we're putting it into the existing policy landscape we've got, so that we're adding value rather than duplicating, I think.

So, we're also in danger of not doing any better in terms of cracking that productivity and the inequalities overarching objective. So, if we just do more of the same, it won't necessarily lead to different outcomes, will it?

I think that's a fair point, yes, and another question in this is evaluation. What's the evaluation we've got on what worked on SPF? As far as I understand it, there isn't a Wales-wide evaluation of SPF programmes that tells us what worked and what didn't, and that's a major issue, and one we can address in this next tranche of funding. I can't remember the figure off the top of my head, but business support, I think, returns something like £18 in productivity for every £1 invested. Double-check those figures because it's off the top of my head, but we know it works, so sometimes more of the things that work is a good thing, but we've got to be judicious, I think.

Okay. Brian, thank you for your paper, which obviously has a very fresh look at what we could do. So, how do you think this might fit into this straitjacket of three-year funding?

We've got to make a start, and as soon as possible, to maximise the time available. As I said earlier, we have now a lot of experience of working with communities, isolated communities, et cetera. We're working with a community here in Wales at the moment. I can't mention their name because we haven't tied anything up with them yet. But what we do as a company is essentially create the framework, the infrastructure for business to have an advantage. If you can give a business a head start—cheap energy, low-cost energy, low-cost accommodation, et cetera—then you're giving them a head start.

Also, finding businesses that have the potential to succeed. We're very focused, for example, on food production, because it's non-negotiable. You have to have food. And that was very much the thrust of what we were doing and still are doing in the US, linked interestingly with edge computing for AI, which is a relatively new development. But it's creating a plan. There has to be a business plan. What can you do with the money? You've seen the document, which is obviously written from a regionalist perspective of what we could contribute to isolated communities, et cetera. And not just in former industrial south Wales, the Welsh Valleys, et cetera, but bringing opportunity into rural communities. The point that was made by Lowri fell on very receptive ears, because they are communities and they do get forgotten about, because they live in nice places, but these are communities that struggle with all of the services that we kind of take for granted. So, I think that there has to be a cohesive approach, and you've got to use that money quickly and to its best advantage, because it's easy to fritter it away.

Okay. So, when I asked the leader of Swansea about decarbonisation, he instantly started talking about the decarbonisation of homes. That's absolutely fine, we need to do that, but the point is how on earth do we actually see the bigger picture, which is that, the current system, the national does hugely well out of, as well as the distribution companies of energy, but the money doesn't stay in Wales though. So, how are you going to convince some of the key players, which obviously are going to be leaders of local authorities, that they need to have a much more strategic approach to all of this?

In the conversations we've had thus far, whether that is in South Dakota or here in Wales, or New Zealand—we're working with a group in Rakaia—if you've got a compelling proposition, people are not stupid, they'll accept it. They'll say, 'Okay, that makes sense. You can produce energy here at scale and it's at a lower cost than we can import it from the grid.' That gives you, as a business, an edge. It gives you the ability to start up quickly, not having to wait for the grid to reinforce itself with how many billions were announced recently, et cetera. Because the big problem with renewables is that you can't get access to the grid, you can't get a connection point. Our position is that we don't need it, we don't want it. It's a bit like, in rugby terms, the referee saying, 'Use it or lose it.' So, we make it, we use it, we don't have transmission losses, we use it at that location for the benefit of the people living there.

Housing can be decarbonised. The simple way to do that would be to mandate that every roof in Wales has solar panels on it, and it's provided free of charge and paid for through the meter. So, there are ways of doing that. Houses actually don't produce that much in carbon emissions, homes, particularly if they're well insulated. The problem is industry, commercial offices like this, with air conditioning; these produce lots of carbon emissions.

Okay, but this building is going to be taking heat from what used to be called Celsa, or is it the—

Has that happened? It's 7 Steel now.

But they haven't got the money to expand that heat network into the local community in Butetown. So, all of this money that you say is sitting around looking for good projects, how are we going to—

You can probably see that we did a project for Celsa Steel, which is now 7 Steel, it's owned by a Czech company, I believe, and that was looking at capturing their waste heat. It was interesting, when we were consulting with them, their energy bill was £7 million a month, and during the energy spike it went to £12 million a month, and they know that 50 per cent of that energy goes straight up in the air in the form of heat. So, we looked at their process. And when I was a student, many years ago, I worked for a company called Duport Steel in Llanelli, and the most terrifying months of my life were spent in that location. I was aware of the fact that the steel production process produces 15 per cent slag, which they tip into a slag pit. Again, I had to dig them out when they were cooler. That's 15 per cent of the energy that's just being tipped away; it goes into a slag pit at 1,500 degrees centigrade. So, we looked at that and we said, 'We can capture that. We can capture that relatively simply. We can carry it away into an energy box on the site, and we can then store that in a sand battery'—sand batteries give you five months of long-duration storage without any losses, et cetera—and then we can use that energy for something. The—

So, just coming back, because we've got the local growth fund, it's a three-year project, and local authorities look like they're planning to continue with what they're already doing. How are we going to change, if you like, the—

I think you've got to change the narrative. You've got to say, 'What are you going to use the money for? What's the best use of it?' Taking the heat from Celsa, 7 Steel et cetera, the problem with all—. Let's regard it as geothermal. So, you've got to bring the heat somewhere, you've got to dig up roads et cetera. Retrofitting buildings with that kind of heat is expensive—this is extremely expensive. If you start afresh, a new build, then you build it in, it's designed into the system, then you can capitalise it. Because there's a lot of geothermal energy underneath Cardiff that's been known about for some time, but it's been in the news recently. But it's the retrofitting that kills it, because you're retrofitting homes.

Okay. Interesting conversation, but we need to move on. So, Lowri, what do you think ought to be the priorities for north-east Wales in terms of the local growth fund, because, obviously, it's pretty broad. What do you think are the things that north-east Wales are going to put forward as core, as key?

In terms of the four priorities, I think they're pretty well covered in terms of the types of projects that we would look to develop. To answer your question from a third sector perspective, the types of projects that we would be looking to develop are community-led projects. [Interruption.] Sorry, excuse me. We've worked on the—

Chair—?

Community-led projects.

Okay, community-led. Sorry, I hadn't—. Yes. Okay, go ahead.

We worked on the SPF in Flintshire and Wrexham, helping community groups to access the funding for community services, community buildings, community enterprises, and the wraparound support that we've provided has been invaluable to get those projects off the ground. In Denbighshire, we've delivered, under the SPF, a business support programme, and the types of projects that we have delivered under that project and the types of projects that we see there's a requirement for going forward, are, essentially, small-scale business grants and also collaboration between businesses, so, businesses are coming together to work on joint projects.

Shall I just interrupt? Obviously, you're welcome to send us some written information about the specifics, because I've not heard of your excellent grass-roots activities before. If you were pitching for the local growth fund, what would successful delivery look like, if you were successful?

It's having that grass-roots, wraparound support. The point has been made by previous speakers in terms of the lack of revenue element. I think it's important that we have sufficient revenue to enable projects to be developed. But Brian I think—if I've got your name right—covered previously, in terms of the energy sector, certainly on the community level, that there is a requirement or there is a need for the developmental aspects of those projects. Cadwyn Clwyd has developed the initial aspects of the Bonwm hydro project in Corwen, and also the Corwen hydro project. What we've found in those types of projects is that there a need for that risk element, so that initial development work. Finding the capital to actually implement them hasn't been problematic as such, but it's just doing that initial development work, taking the risk away from communities through that feasibility work, enabling them to get to the point where they are in a position to implement the capital elements of their projects. So, I think there's a requirement for a lot of hand-holding to help community groups through the process, but that also applies to the business sector as well. Some of your speakers referred to community-led local developments earlier as well, and I think that's such a catalyst to get community groups energised and to think of projects. How can they change their own situation for the benefit of their own local economy and social benefit as well? So, I think it comes down to empowerment. So, in terms of the revenue element, that's vital, and there should be a progression then to capital delivery.

Thank you. So, very briefly, what does successful delivery look like? Both from Josh and—.

Yes, I want to come back on some of that discussion as well, because I think, look, we're talking about productivity here. We had a long discussion; we've got a member council with a group of members, and they were like, 'Everyone's talking about productivity, but what does that mean for us?' And we ended up with the term 'real-world productivity’' and they were like, 'It's simple: you get more out of it and you put less in’, and it's as simple as that. And that can mean lots of different things to lots of different businesses. I think, with this, that's where our starting point needs to be. If this is about improving productivity, we need to find those opportunities, and we need to fund those, and the organisations themselves are going to know where those opportunities are. We've just had a really concrete example from Brian in a steel context, where there's a productivity gain from capturing heat. But you can ask every business, or a lot of businesses in Wales, and they’ll say, 'If I could do this, it would make me more productive.' So, the delivery mechanism has to be outward looking and trusting the organisations, be they businesses, social enterprises or whatever else, to say how they think productivity could be improved.

If we go down a route of having fund absorption, and it's given to the local authorities and they think, 'We'd like to decarbonise houses'—a really important issue, something we need to do—is that answering the productivity question? Are we missing an opportunity?

Well, it is, because of less sick people.

Okay, I want to move on to Alun's set of questions now, because, as usual, that clock doesn't stop going, it doesn’t. Alun.

Yes, in terms of where we are now, is the business support provided through a fund and adding value to existing support, or do you think that we need to actually change the way in which we are delivering support to businesses?

Do you want me to go first?

Yes. Sorry, I’m looking at you, so—.

Yes. Look, the economic geography of Wales is a bit of a mess, isn't it, if we're being completely honest. We've got local authorities doing lots of things, we've got city deals, we've got CJCs—sometimes they aren't the same thing, although that's the direction they're going—we've got Welsh Government having nationally backed programmes, and we've got UK Government doing stuff as well. It's complicated, and the businesses on the other end of it don't really know where to go for what, or don't really care, to be honest. So, I think the proposed plan here is a step in the right direction, or could be, in that at least it's setting out clearly who does what, and there is scope there for national-led interventions around brands we know work: Business Wales, the development bank, those kinds of things. But the proof of the pudding is going to be in the eating. If we end up saying to CJCs, 'Here's a chunk of money', and they go off and set up their own business support service, again we're just going to be duplicating something that already exists. So, I think the onus has to be on Welsh Government to be really clear and say, 'Use the mechanisms we've got. By all means tailor it or add to it or do something different to reflect your local area as a CJC, but please don't reinvent the wheel.'

Okay. So, you'd be—. I'm trying to take this forward a bit, Joshua. I don't disagree with your analysis, by the way. I think describing it as a mess is probably very generous. But how would you, therefore, look at what a better system would look like? Because I think it is easy to criticise what we're seeing at the moment; I think that's the easy part of it. So what? So what would the opportunity of these new funds, then, provide us with in order to create a more coherent and streamlined system?

Again, the devil's in the detail, isn't it? It's hard to do, so it's a good question. Let's take Business Wales and business support as an example, right? If start-ups are a priority, and we think they should be, we've already got that start-up service that exists. So, you might say to CJCs, 'Here's the baseline contract. This is what exists in your area. What is it you want to do on top of that? And we will contract that in via Business Wales.' That could be a really practical way of doing it. They could come up with their own strategic priorities, add resource to that scheme and then we could see it delivered. That might look different in different areas. You give them the contractual space to do that. I think that's the model that you probably would have to have if you wanted to have national models of delivery but with regional variation within it.

Okay. What about—?

Lowri, what do you think in north Wales?

From our experience, we have worked with Business Wales in implementing the business grants that we do, and that happens at a local level. It's important that we use the structures that are already in place and that we don't restart things. There is space to complement the work that Business Wales is doing. I note that in the proposals there is a suggestion that we should prioritise loans rather than grants, because I accept that there's an argument that, in the long term, it provides better value for money, but I'd also like to emphasise that the smaller grants that have been provided through the SPF in north Wales directly to micro and small businesses have made a difference. They've really filled a niche, in a way; they've filled a gap there and they've gone hand in hand with more mainstream grants that the Government provides for businesses. They've helped a number of small businesses across north Wales to innovate and to trial new products and new processes and new technology. And this, in turn, for those businesses, has led to a growth in carbon emissions reductions and also protected jobs and created jobs. So, I do think that there's a place for local provision and regional provision, as long as we work within the structures that already exist.

We have done an evaluation of our business project, and that's shown approval for the way that Cadwyn Clwyd and our partners in Denbighshire council have implemented this intervention directly with businesses alongside Business Wales without duplicating the provision that already exists. Thank you.

Okay. It would be valuable for us to have a copy of that, Lowri. If that's available, we'd appreciate reading that, because, if I've understood correctly—and correct me if I'm wrong, if I haven't got things right—you have been intervening, you have been offering grants to micro and small businesses, and that has had the impact that you've described. Now, for me, I want to understand what that impact is in the local community and in the local economy. So, it would be useful for us to understand that—written evidence would be sufficient to do that; we don't have to go through that now. But how would you like to see the new funds operating, so you have the freedom and the right to operate in the way that you've described, but also we in the Senedd, or the Government, have the opportunity to understand the impact that has had on the community and the local economy? How would you evaluate that?

There are two methods, in a way, in place in terms of how the intervention has gone from SPF to the local businesses. I'll use the example in Denbighshire in terms of the SPF. First of all, there are the grants that I mentioned, but, secondly, we have encouraged businesses to work together. There's a way to add value in that respect. An example of one of the projects that we've done is on the Colomendy industrial estate in Denbighshire; we've worked with groups of businesses there to provide training and mentoring, and that's been done jointly with the SPF grants to allow them to be more sustainable and to, specifically, reduce their carbon emissions. That way of working, to use the English term, the wraparound support, has been very successful and has been accepted very positively by those businesses that are taking part.

There's also a value to the fact that we work together and are in touch with bodies like the ambition board for north Wales, and we're able to refer businesses to strategic support and broader support, and, of course, I mentioned Business Wales. So, I think it's important that we do have the opportunity to provide that direct intervention to small businesses through small grants that do make a real and beneficial difference to them, but there's also the element of working jointly with businesses to trial new ways of doing things, and if that's successful, we can then look to spread that across the county, across the north-east.

Okay, thank you to Lowri for that. I appreciate it.

Could I just return to the witnesses in the room? I'm anxious that not only do you establish these funds in a way that is in line with what we seek to achieve, but that we set very clear ambitions and very clear targets for these funds, and we do that in advance, rather than simply just count what we've already done, which I think has been one of the issues we've had in previous funding rounds. So, how would a review seek to establish very clear targets, very clear accountability and very clear means of evaluation of the value for money to the taxpayer, as opposed to in terms of the impacts that the funding is having in the community or in the economy? Do you want to—?

Everything we do is place based, so we look at the place in great detail. I was talking to Josh when we were waiting in the pen that's outside.

It's a very nice pen.

I was saying this before we came in—

We've got to live in these pens, you know. [Laughter.]

—we were herded in et cetera. It's all about the community, it's all about the place, it's all about what can we do. We've spent the last six years developing our AI capability, which allows us to look at anywhere on the planet, almost, and extract meaningful data that we can then use as part of our strategy: what are we going to build, why are we going to build it, what's the need, what's the output in terms of the product? Jobs are everything. If you haven't got jobs, you haven't got wage packets, you can't rent your home, you can't do anything, you're stuck, there are no tax revenues that come from it, so jobs are everything.

So, I think you can take a very soft approach, and we know, don't we, that all of the business support and so on, with a few exceptions, I would say, has been wasted money. It's just a complete waste of money. If you were in business—

Say that again. Sorry, say that again, what do you mean by that?

If you're in business, you know your business, you don't need to have a consultant come in to tell you how to run your business. You might give a different perspective, but for me it was always a complete and utter waste of time, and I would say that's similar for my contemporaries.

So, you've also got to look at what's the quality of the advice that's being given. Meeting a university lecturer—I used to run a university department—and him telling me, 'Well, what you should be doing, Brian, to make your business—'. He's got no experience in business. So, it's an empty shell. So, you can put the conch to your ear and hear noise, but it's meaningless.

And I'm sure Lowri's done a great job, but—

Can I stop you there? I think there are a lot of management consultancy companies that have become very rich over the years, doing exactly that, so that might be contested, but my question was different, though, and that was: how would you establish value for money? We can have a conversation about the value of management consultancies over lunch, but how would you establish value for money for the taxpayer for the management of these funds?

Well, first of all you've got to decide how you're going to apply the funds, what you're going to do with them. Is it going to be soft or hard? We just talked about the soft one. So, you say, ‘Well, we're going to build a business, and we're going to build a business here, and these are the reasons for building the business here, because we've done a feasibility study’, and I echo Lowri's comments about, if you're in business and you're trying to get a development project off the ground, there's the gap of death, as we call it, where you have to fund all of that feasibility study, not knowing if it can go ahead because you're controlled by planning. And so it's very speculative. You have to create a business opportunity that people can buy into. If you've done your homework, then you can measure it. How many people have we employed? What is the profitability of the business? What has been its impact locally? How many people do we need to train to run the business? And so on and so forth.

I'm looking around because we are running out of time.

I'm going to have to move it on, I think, because I think the evidence that you've given, Brian, is very strong. Your point about consultancy is very, very well made, and I have a lot of sympathy with the points that you've made. [Interruption.] Yes, exactly, I agree. Sam.

Thank you, Chair. Lowri, can I turn to you and ask, s a result of the transition period and the shift from the shared prosperity fund to the new fund, what impact is this going to have on the voluntary sector and the workforce?

It does cause us concern as a third sector organisation, and I'm not the only one who has concerns in terms of that uncertainty. Of course, we want to keep staff who have years and decades of experience in this area. And, obviously, as a third sector organisation, we can't carry cash reserves to a great extent. So, that does mean that we're then in a vulnerable situation if there's any delay in April in terms of starting this programme.

Whilst we're pleased to see the three-year programme, compared with what happened with the European funding, where they were six-year programmes with another two years to finish the programmes off, there was also some overlap in those programmes, so you would always have that natural follow-on from one programme to the other. What's been quite frustrating with the SPF is the fact that we are looking at this stop-start all the time, and that isn't a good thing in terms of us as a third sector organisation. But more importantly, that's not a good thing in terms of the support that we provide to communities and to businesses, that that support comes to an end in March, and that there is that uncertainty until we start the programme in April. Truth be told, we should by now be making applications for the growth fund programme and to be working within that programme, and it's a cause of concern that we haven't yet reached that point.

So, certainly from our point of view and from the point of view of the communities we work with, and the businesses, we do need to ensure that things move forward with urgency.

And is there an opportunity for you to reflect these thoughts to both Governments, in Westminster and Cardiff Bay, regarding your concerns in the third sector? Do you have an opportunity?

Yes, we have done so through the consultation that we did online, and naturally, we will provide a statement on that before the closing date tomorrow. Apart from that, we feel that the third sector voice hasn't really been sufficiently heard in terms of developing these proposals, and I feel that I'm speaking on behalf of a number of organisations in the same situation. Certainly, the third sector has made a significant contribution to implementing the structural programmes of the European Union, the rural development plan and more recently the SPF, and certainly, we wouldn't want to lose that momentum and that learning and those connections, and also knowing exactly what happens in our local areas.

So, there are job implications for the third sector and there's also uncertainty. In terms of the individuals who work within the sector, there's cause for uncertainty in relation to their jobs also. So, apologies, to answer your question, I don't feel that we've had enough of a voice with the Government to be able to express that and to show the situation.

Okay, thank you very much.

Turning to Brian and Joshua here in the room, and this transition from SPF to the local growth fund, are you, in the sectors you're representing, content with the clarity of this direction, what that transition means, what April means in terms of that? Josh, I can see you nodding there. Is there enough clarity, or is there a little bit of, 'Fingers crossed, actually, in the new year, we might start hearing things'?

I think that there's enough clarity on the intent in the policy and the direction. This is about moving things to a much more regional basis than they were with SPF, and we think that that's the right direction of travel. It's also about having national programmes within that, and again we think that that's the right direction of travel. The devil is always in the detail. They're going to have a year of transition, by the sound of it, but ultimately there's a balance to be had between maintaining the expertise we've got at the moment and moving to something new. We have to move to something new if we want it to do something better than what was happening previously. So, it seems reasonable to me.

Okay. And that's what FSB members are saying as well—

Look, FSB members are not the people who are going to be absorbing this funding directly, they're going to be the recipients of the programme or people delivering it.

And they've had an opportunity to feed through to the FSB what they would like to see from this?

They wouldn't think about it in those terms, would they? So, the whole business, from our perspective, they don't really want to know about what this fund looks like, because they're going to be accessing business support services in their area and want those business support services to work. So, from our perspective, you don't want a dip in service as things go, but hopefully new things will be added as you move on.

But then that private sector voice is important in that discussion, is it not?

It's absolutely crucial, yes, it is, and as we move to a regional model of delivery, it's incumbent on the CJCs to set out how they're going to bring that private sector voice into the discussion. It's not there at the moment, for sure, but it needs to be there.

Okay. That's helpful. Brian, anything to add on that?

I think that Josh has said it all, really. The direction of travel is correct. We would certainly support that. I'm in the private sector. Our role is the building of infrastructure that enables others to benefit and to move on. So, we're very clear about what our role is in terms of how we can create more productivity, more jobs et cetera, through cheap energy, net zero et cetera, which enables businesses that would be tenants, if you like, within the facility to have an economic edge.

So, the direction of travel is there and you're content that that's the right direction to go in, this more regional basis. In terms of April and that transition that we've been talking about, is April okay as a date?

As long as it's not 1 April. [Laughter.] Yes, I would say. It's a date, you work to a date. It could always be the night before.

So, you wouldn't like a longer lag, you wouldn't like a shorter lag.

There's always a degree of inertia with any organisation and policy et cetera. You've got to live with that, and it's up to the individuals operating it to reach it on time.

Josh wants to come in.

Yes. Let's look at what didn't work with SPF, because I think this is illustrative. If you take a programme like Multiply, Multiply is fascinating on so many levels and the evaluation of that was going to be really important from a Wales perspective. There was lots of money put into that programme in Wales, far more than anywhere else in the UK. Local authorities in Wales got the money very late in the day—I think it was November or December-time—and they had to spend it by the end of the financial year. That is a crazy way to do a transition. Nobody spends money well when they've got five months to get it out of the door. It bent all of Welsh Government's existing adult learning budgets out of shape and ended up creating all sorts of weird types of stuff being delivered. Granted, some of it was great, some of it was experimentation and some of it will come back as useful learning, but that's not how you do a transition. How you do a transition is that you say, 'This is where we're going. We accept that we need a year in between where local authorities are still going to be in the driving seat, but they need to be working towards this regional perspective. We're going to set clear targets', as was mentioned earlier on, 'and be very clear about the evaluation methodology on it', and then you drive forward with it, I think.

Okay, thank you. Thank you, Chair.

Luke.

Diolch, Cadeirydd. I'm conscious of time, but what I would be interested in just exploring in this brief amount of time we have is how the funding is allocated geographically, taking into account some of the challenges that differ between urban and rural areas, and ultimately then the different priorities that are going to be in those areas as well. So, my question, really, is: how would you see the funds being used to tackle some of those geographical area priorities and issues that are across Wales?

Do you want me to go first, yes?

Yes.

So, ultimately, if we're saying it needs a regional footprint, we have to back those regional bodies to have strategic oversight of what they do and dictate that spending on a regional basis. That means we need to move away from thinking, 'There's this much for this local authority, there's this much for this local authority', and that way, we end up with all these little different small projects; it has to have scale, and it has to be strategic. We've created this tier of government around CJCs; this is one of the few instances where we're giving them a budget to do something, so let's let them do it on a regional level and hold them to account for that, I think.

As to how you divvy it up between the regions, I'm sure there are all sorts of different formulas you could use that would create all sets of winners and losers, so I haven't got a perfect answer for you on that. But if productivity is the driving measure that we're talking about, that has to be one of the key things in it, I think, as was the case a couple of programmes ago when we had the GVA discussions.

Brian.

I'm echoing what was said, really. If you're going to apply funds, apply it where you can get the best return economically: economically means the jobs; it means the output. Just sort of looking across Wales and saying, 'Well, we've got this much money, we're just going to divide it by the number of authorities': complete and utter waste of time. Identify where the money would be best used, and then put it there and put it for a purpose. It has to have a purpose and it has to have clarity of purpose, because if you haven't got that, it's all disappeared within 12 months.

And the funds become incredibly small by that—

You have to have scale.

Yes, scale is the important part.

It's the most important part.

Lowri, anything to add there?

Just to add in terms of the point that's been made on getting the best returns: I think there's a need to strike a balance with that in terms of tackling inequalities. It's not all about getting the best returns. There are some areas that lag behind in terms of development and so forth. So, we need to make sure that we're fair with communities across Wales and that we remember the equalities agenda. I think the point I made at the beginning of the session regarding rural poverty in the context of access to services emphasises that; where there's a need for balance between the best returns and also ensuring that we tackle inequalities in the programme.

Thank you. Hannah.

Diolch, Cadeirydd. I'm conscious I'm almost on minus time now.

Well, we can go on forever now. [Laughter.]

I'm sure our witnesses don't want that. [Laughter.] I was going to touch on what I've done in the previous sessions around lessons learned, both positive and negative, from previous incarnations of regional development. I think you've probably touched on some of them in your previous answers already. But are there any things that you think we should be aware of that you haven't had the opportunity to mention, and how do you think that should influence perhaps the local growth fund to improve it? I'm just going to pick on you first, Josh.

Yes, okay. So, the points have already been made around feast and famine, about funds stopping and starting, and the issues that causes. Three years, it's medium term, but longer term would be better, wouldn't it, in as much as we can do it. The point about evaluation is a really critical one.

The budget split: we haven't talked about the capital/revenue split. So, it's actually pretty small on the revenue side, which means it's going to do different things to what previous funds did. And when you look at those four priorities and you think about how you spend capital, you end up going much more towards things like infrastructure, green investments, green energy and transition. So, maybe let's be honest about that, and again, rather than trying to do lots of different things, focus in on doing a couple of things really well, with good targets and a good evidence base behind it, I think. But we've got loads of experience. We've been doing this for years. We should know what works by now and we should have that evaluation base to build on.

Brian.

Can I just answer to Lowri? I completely agree with the rural communities issue. When I say, 'Get the best economic return', I believe those economic returns can come in those disadvantaged rural communities as well. But it is about focus, it's about saying, ‘This is the pot of money. Where are we going to apply it, and what's the best return?’ And you want the return to be social, economic and environmental. Those three things are linked together. But, ultimately, if a business doesn't make money, it folds. And you can't keep on supporting businesses with public money forever and a day. You can't. It has to stand on its own two legs. And that's really how I think the money should be focused: a reasonable number of projects that give the best return. I'll take the word ‘economic’ out of it for a moment, but give the best return across those three headings.

Thanks. Lowri, are there any further examples of good practice that you want to highlight before we finish this morning that you think should be supported through the new local growth fund?

I think in terms of good practice from the previous fund, in terms of its structure and management, there was a good mix of both capital and revenue. That needs to continue. Obviously the revenue issue has been highlighted many times this morning. The SPF also provided 100 per cent funding, and given we've got three years to deliver this programme, it's still not a long period in terms of project delivery. Having to find match funding at the local level can delay projects and can also sometimes skew projects away from the original priority, because sometimes you have to be flexible and skew projects towards the requirements of match funding. So, having that 100 per cent funding would help enormously, but naturally, we would, as organisations, seek to lever in additional funding to complement the local growth fund.

Very briefly as well, I think one thing that hasn't been touched on this morning is the proposal to deliver the local growth fund through the current structures in year 1 and through the CJCs in years 2 and 3. I think it's vital that we don't end up with two mini programmes, so we lose the benefits of that seamless three-year programming period. I think that's been highlighted as well in terms of how SPF has been delivered, especially the last 12 months, where there's been a very concise and short delivery window. So, not to carve it up into two mini programmes under the local growth fund. Diolch.

Diolch.

Thank you, Hannah. Thank you, witnesses, for your evidence this morning/the afternoon now. We've gone past 12 o'clock. It will greatly inform, obviously, our deliberations when we're forming our conclusions around the local growth fund. Brian, thank you for dropping the papers in—

No problem.

—which have been particularly helpful, and obviously an insight into your workings. A Record of Proceedings will be sent to all three of you to confirm that the evidence given is recorded correctly. If there are no problems with that, that will form the official record of the evidence that you've given us. If you have concerns, please speak to the clerking team. But, with that, thank you very much.

You're welcome. Thank you.

Thank you, diolch yn fawr.

Diolch yn fawr.

Could I invite colleagues to note the papers to note, please?

I thought the one from Rent Smart Wales was very interesting in terms of identifying that the enforcement arrangements in the Housing (Wales) Act 2014 didn't really have any levers of enforcement, which we may want to reflect on in the visitor levy Bill.

That debate is actually the first week back we have, then. Our report has been taken on that. Any other points out of papers to note that anyone wants to raise? Okay.

Could I invite a Member to propose, or I'll propose and ask for a seconder, to go into private session?

Agreed.

Agreed.

I haven't got to read a specific note now, have I, Rob?

No.

No. That's all right. We'll go into private session.