Local Government and Housing Committee

Good morning. I'm Judith Cole. I'm the deputy director for local government funding policy and sustainability.

Bore da. Good morning. I'm Reg Kilpatrick. I'm director of local government and planning.

Okay. Thank you all for coming in. Perhaps I might begin, then, with some initial questions on the broad impact of the provisional local government settlement. Firstly, in terms of the programme for government, Cabinet Secretary, I wonder if you might outline for committee how the provisional local government settlement for the forthcoming financial year reflects Welsh Government's priorities for local government, as set out in that programme for government. And perhaps you might outline any action taken to seek new ways to address any future funding gaps that might emerge.

Diolch, Cadeirydd. First of all, I'd like to add my voice to the condolences to Siân Gwenllian as well. And also, before I say anything else, I just want to put on record that my husband works as a contractor, currently undertaking work on behalf of the Welsh Local Government Association.

Okay, thank you for that.

Diolch. In terms of the question, absolutely, local government are key delivery partners for Welsh Government, helping us to deliver on Welsh Government's priorities, and also those things in our programme for government. Also, each of my Cabinet colleagues obviously have a strong interest in local government, and have strong, productive relationships with local government in their particular portfolio areas. I think those relationships have really become strengthened, and they have really delivered over the last four years.

As you'll know, and the committee will know, we have our strategic partnership agreement that we signed with local government earlier this year, and that's the first of its kind in Wales. It is a significant step forward in codifying our roles, responsibilities and how we can work together effectively to deliver on the shared ambitions that we all have, particularly in education, social care, transport, housing and the economy. And as you'll know, social care, transport, education, particularly additional learning needs, are real priorities for local government as well and where some of the pressures are. So, that settlement I think supports local authorities to deliver on our shared ambition. Obviously, I would've liked to be able to provide local government with multi-year settlements—that is something I very much would like to see and I would've wanted to do. I know that would help local authorities to be able to plan better and make longer term decisions and give them confidence as well. But this is part of enabling those funding gaps that authorities have identified. So, there's some progress, good relationships that have been built on, but, obviously, unfortunately, we've not been able to give a multi-year settlement.

In terms of any future funding gaps, Cabinet Secretary, and possibly exploring new ways of dealing with those should they emerge, is that something that you've taken forward?

Well, in terms of the future funding gaps, obviously, as you'll know, we have our unhypothecated revenue support grant, which contributes to providing and improving services, but where there are new areas of work or specific programmes that need to be developed or implemented, they are also supported through specific grant lines, which, in the other part of my portfolio, for example housing, that is obviously through there. But again, as a principle, we work closely with local government and will continue to do so, just to strengthen that autonomy and the effectiveness, but I do recognise that there are real pressures on local government budgets. We're always working with them to seek new ways to address any funding gaps, and our finance sub-group provides that forum, really, where we can discuss ideas and leadership with local government as well. I know that the Cabinet Secretary for finance, for example, is looking at different ways to make sure that we fund services in a more sustainable way, such as the visitor levy. So, you'll also know that we are consulting on some additional flexibilities as well, and I'm happy to go into more depth, at any point, on that as well.

Okay. If we turn to inequalities and the unhypothecated elements of the provisional local government settlement, how are those elements assessed for their potential impact on inequalities, particularly given the cost-of-living pressures that we're all familiar with?

Yes, absolutely. I know that it's very much very real to people. You'll know that there is an overall strategic impact assessment for the Welsh budget, which you'll have considered. This takes that high-level approach using overall data for Wales. We know that local authorities deliver many key services for people with protected characteristics and those who are economically disadvantaged, and that's obviously why local authorities are one of our key partners. But as you'll know, beyond that, every local authority considers its own budget proposals in terms of equality impacts and also the Well-being of Future Generations (Wales) Act 2015. Also, our strategic partnership agreement does enable that clear framework for where responsibility lies, and I think that's very much at a local level where that has its most effective place where assessments can be done and where decisions are taken on the detailed use of that unhypothecated funding, for example. And I think councils do have a tried-and-tested approach, really, on how they consult with their communities.

Okay, Cabinet Secretary. In terms of the Welsh Government's Welsh language strategy, how does the provisional budget that you've decided upon reflect the Welsh language strategy's requirements of local authorities in terms of the standards, and also the duty of local authorities to promote the language in their areas? Are you confident that they'll be able to fulfil those requirements on the basis of the provisional local government settlement?

Yes, absolutely. We committed to a thriving Welsh language in our strategic partnership agreement with local government. Our strategic impact assessments for the Welsh budget do assess the impact on the Welsh language as well. There are specific investments within the budget of the Cabinet Secretary for Finance and Welsh Language as well, just to support and maintain the language in everyday life and for people to expand their skills in that area. Local authorities also assess the budget and the Welsh language and the implications of their decisions on budget and policies. As you'll know, they'll have perhaps different impacts in different areas of Wales, perhaps where the language has been more strong over time, but also those areas where we're looking to encourage and support the Welsh language, to grow the Welsh language. Just to say, there's a specific provision within the Cymraeg 2050 budget expenditure line to support local authorities with implementing the duties, although the implementation itself is a matter for local authorities.

Okay. Similarly, Cabinet Secretary, in terms of the nature and climate emergency and the aspiration for Wales to be net zero by 2050, the programme for government commits Welsh Government to embedding the necessary strategy and policies to achieve those objectives. How would you say that the provisional settlement enables local authorities to be part of that? Is there anything in particular you would point towards in terms of the budget?

Diolch, Cadeirydd. Because there is a nature emergency, that is something that is intended to be embedded in everything we do as well, and the flexibility of that unhypothecated settlement is an important element for local government. Again, as part of our strategic partnership agreement with local authorities, we did set out our commitment to the sustainable management of nature resources, including taking action to address our climate and nature emergencies. Just to give an example, it includes a collaborative approach to help address increasing demand on natural resources, while meeting the challenges of creating jobs, housing and infrastructure. It supports councils in their effort to contribute to the overall goal of a net zero public sector by 2030. The all-Wales target of achieving net zero by 2050 will require combined work with industry, communities and the energy sector. We also have the circular economy. In terms of the budget, there's also specific funding provided to the local nature partnerships within each local authority to co-ordinate and deliver local action on the ground. It's not within my budget, but I understand that it amounts to over £1 million of funding annually across Wales. That includes development and delivery of local nature recovery action plans. That is just an example there of where we are working within the budget to prioritise that.

Okay. Diolch yn fawr, Cabinet Secretary. We'll move on to Cefin Campbell.

Diolch, Cadeirydd. My two questions are around the budget approach. The first one is about whether you think the draft budget reflects the challenges facing local authorities. We know the current 2.7 per cent average is below, obviously, what local authorities want, which is about 4 per cent. In terms of reviewing the efficiency and fairness of the current funding formula and addressing the disparity, is there an opportunity to address this before the final budget is presented?

Diolch, Cefin. Good to see you this morning. In terms of the focus on how we got to this position, obviously, I've been really determined, as a priority, to protect jobs and front-line services. That's something that I've heard from local government, when I speak to them regularly, as well, and I have been really determined to recognise that. I do share my commitment to local government with Cabinet colleagues, most of whom rely on council services to deliver for people and communities—just to say that. And I know that local authorities are under and have been under a lot of pressure.

Just in terms of the figures that you said, as you've mentioned, we have provided—. Local authorities will receive £6.4 billion from the Welsh Government in core revenue and non-domestic rates funding to spend on those key services, and, as you say, that equates to an average increase of 2.7 per cent, or £169 million on a like-for-like basis. We have provided £134 million in the settlement baseline to cover additional funding, provided in-year for employers' national insurance contributions, teachers' pay and other pay pressures, and that adjusted increase to the settlement is therefore 4.9 per cent. There is that additional funding, but, like I say, I do want to emphasise the pressure that local authorities have been under for a number of years, and I'd also like to say that this part of the draft budget is, really, at the start of the process rather than the end. I hope and I'd like to see a lot of change between now and the final budget in January.

In terms of the funding formula that you mentioned, I know this is something that does come up in the short time that I've been in this position, but also the time that I've been in this Senedd. It is a complex system. There's a lot of work that goes on. I think Judith is the guru on the funding formula and can tell you everything there is to know about that. But we do work with local authorities, and this is something that, as you'll know, has lots of different data sets within it—thousands of data sets. It is very complex. Eighty per cent of them are done annually—. Over 80 per cent are updated annually, so we have that good amount of up-to-date data, and we have agreed a programme of work to assess and update data inputs and associated weightings. The data's always driven, and the funding formula, as you'll know, really, is driven by population levels, deprivation and sparsity. Judith might be able to talk to you a little bit more about the work that's going on with the funding formula.

Good morning. I must not go on too long, mustn't I, but there has been quite a lot of reflection that some of the data in the system is quite old, because we haven't updated it for successive censuses. That work is now under way. It is not throw everything out in the air and start again, but it is very much looking at updating the data we have, checking whether those data indicators are still the right ones, because things have moved on, then rebalancing the weightings by checking the regression again, to see whether those are still indicative of a relative need to spend, of things that drive an authority's need to spend. It's not straightforward, and because different parts of the formula might have different effects, the intention is to work through all of this and then apply it in one go, so that you don't have too much churn between local authority settlements. If that means that there is quite a lot of change, then there will be options for Ministers then to agree with local government how you might transition that change, rather than making one big churn. But we thought that that would be a preferable approach to changing it year on year, as we update each chunk of the settlement.

If I can just come in on that. That exercise is actually happening now, is it? You're avoiding a major churn, but you are looking at tweaking some of the data sets that you have.

Yes. My colleagues who actually do the work would flinch at 'tweaking', because it's going to be quite a lot of effort. In some things, we have the data, so it's quite straightforward. We have data on schools, for example. That's provided every year at a school level in a section 52 report—easy. Social services data is not collected on the same granular level, so we're going to have to explore what we can get, whether we have to go out for a separate collection, or whether in fact there is a data set that we could use. So, it's not entirely straightforward, which is why we're starting at the school end and then starting the work on social services to come in behind it.

Yes. Okay.

Reg, just come in on the finance sub-group.

[Inaudible.]—from Reg.

Okay, it's just to give you a little bit more context. Judith and the Cabinet Secretary have described, if you like, the mechanical work on the formula and the very detailed statistical analyses that underpin it. It's worth saying that this doesn't happen in a vacuum. It happens in a very well established partnership framework with local government, and there are two key groups there, one of which is the distribution sub-group that does this really technical work. But that, again, doesn't do it in a vacuum. It prepares an annual work plan and proposals for the finance sub-group, which is chaired by the Cabinet Secretary and consists of local authority leaders and key officials. And it's that group that takes the plans from the distribution sub-group and tests those to make sure that those plans are adequate for developing the formula and reviewing it as we go forward. And that signs off a work programme, which then feeds back into the work that Judith and the team do. Again, that work is very closely completed with the Society of Welsh Treasurers and colleagues from the WLGA. I've said this before in this forum, that it is a really good example of the sort of partnership working that we strive for so much across the Cabinet Secretary's portfolio.

I was a member of the distribution sub-group 20 years ago and we made a change on highways. It went from 52 per cent population and 48 per cent road lengths to 50 per cent population and 50 per cent road lengths, which didn't appear to have been a very major change, but it moved millions of pounds out of Newport, Cardiff and Swansea, and moved them into Pembrokeshire, Powys and Gwynedd. So, just a minor change, which doesn’t look as if you’re making much of a change, can have serious effects on some authorities and be great winners for others.

Yes, absolutely, Mike. I completely agree, and I feel like I'm surrounded by people who have an in-depth knowledge of the funding formula as well, and those changes. As Judith has said, there is a lot of work that's going on at the moment, and I think there have been some examples, maybe, that we could give where that does exist, doesn’t it, where there is a small change that we have seen in the past that does have an impact. I think that's why doing this work in the round, starting at that end and then coming on to it in the whole—. It is a really complex system, and I think sometimes people have focused on some of the out-of-date data, which we are trying to update. But, as I said, over 80 per cent of that data that's used is updated annually. Reg has outlined as well the groups that you well know, Mike, exist.

I don't know, Judith, if you want to say anything more about Mike's point, on some examples lately.

As well as the roads one you cite, which is even further away than I remember, we also did, in my tenure here, a change to the social services one, where we increased the weighting given to rurality, effectively sparsity and dispersion. And that, as you say, made a significant change. It directed it towards the larger, more rural authorities, and social care is a big spending block, so it was a noticeable impact. But I guess what's important about that is that it got done through the agreement with local government. So, DSG looked at it and then the finance sub-group signed it off, and it's an example of how local government can look at this without necessarily being narrowly focused on its own local authority. That's quite a difficult thing to ask them to do, but they do do it.

All right. Cefin.

Thank you. I was going to ask about the rurality aspect, but you've covered that, so that's in the mix as a factor. So, just to finish off on my first question, sorry—to kind of extend it a little bit—there is some wriggle room as well before the final budget is passed, because the Cabinet Secretary for finance did say that there is a more ambitious budget to be agreed. So, in terms of that disparity that I mentioned in my original question, I guess you'll be fighting for more money out of that £380 million unallocated funding for local government.

Diolch, Cefin. Absolutely, I've continuously had that discussion, as I said, and all my Cabinet colleagues recognise the importance of local government because of the impacts in their own portfolio as well. I completely agree with the Cabinet Secretary for finance, as I think there is potential for that more ambitious budget. I really think, ass I said, that this is the start of the process rather than the end. I think there really are parts for everybody within the Senedd to play. I know there will be discussions ongoing with the Cabinet Secretary for finance, as I said, about his door being open. I think there's a role for all parties to play within this time now between the draft budget and the one that is the final budget. I would hope and like to think that all parties have local government as well, because of the importance to all parts of delivery, really at the forefront of minds. I'll be playing my part, and I hope others will be as well.

Just to say, in terms of the evidence that we've had from the Welsh Local Government Association and the exercise that they've been doing on the draft budget, I just think it is important to note as well that the package includes £2.4 billion in specific grants to councils to support specific services. There's estimated funding of over £1.3 billion in specific revenue grants and over £1.08 billion in capital grants. There has been that extra funding there, but, again, I really recognise what the WLGA have said and, when I speak to local authorities across Wales, just the pressure that they are under, particularly around social care, education and additional learning needs, and school transport is of particular concern to them.

Okay. My second question is about the national insurance shortfall for local authorities. Has the Government made an assessment of what percentage is expected to be passed on to local authorities and what impact this will have on their services, and what is being considered by the Welsh Government to mitigate the worst effects of this shortfall?

Diolch, Cefin. We've passed on all the funding provided by the UK Government to meet the additional employer national insurance contributions costs for 2025-26, and we've also provided an extra £36 million from reserves to close the gap. That funding has been baselined into the 2026-27 local government settlement.

But there's still a gap.

As I say, that's something that we've baselined in, where we actually provided extra from our reserves to try to close that gap last year. So, it's baselined into this year, but, obviously, that is a decision in terms of national insurance that was made by the UK Government, and we're dealing with that here. So, we have put some more funding in, but I do acknowledge that there is a difference from a UK Government decision.

Obviously, there's a concern amongst local government about that gap and how that will impact services. Have you got an understanding of how that might play out?

Certainly, when the announcement was made, the Cabinet Secretary for finance, obviously, had been leading on the discussions with UK Government around that, and that's why we recognised it with the money that was put in from reserves. That is a decision that was made by the UK Government on the national insurance, so we have tried to do what we can within that, recognising that it is a UK Government decision.

Okay. Just in terms of where we are at the moment, the overall increase, as things stand, is 2.7 per cent, isn't it? We heard from some local authorities at least that 4 per cent might give them a reasonable chance of providing the services they wish to provide. There's £380 million unallocated within the general Welsh Government budget. To get to the 4 per cent, what are we talking about? Is that £80-something million additional to get up to 4 per cent?

We're all looking at Judith. Sorry, Judith.

I've gone blank. It's not far out—I'll double-check.

Do you think it's realistic, Cabinet Secretary, to get an additional £80-something million out of that £380 million?

It's something I obviously want to see. These discussions that are going on with the Cabinet Secretary for Finance, with others in this place—I think that's where those discussions are going to be had. I hope that everyone recognises the importance of local government in this place. Local government has set out clearly their asks, and I think that that, in terms of what I would hope would be agreed at the end, would include some—. I would like to see extra; I would say that, wouldn't I—I'm sure local government would. But those will be the discussions with the finance Cabinet Secretary, and others, to make sure that we do get our budget through. That is the most important thing we want to do. So, I would ask everyone who's having those discussions with the Cabinet Secretary for finance to do so.

Could I just come in on that? As the Cabinet Secretary says, there is definitely a Senedd issue, but it might help the committee to give you a flavour of what else is going on. The Cabinet Secretary is in pretty much constant contact with local government leaders—they meet very regularly. Clearly, for the last few weeks, the budget, the settlement has been a key issue in those discussions. The Cabinet Secretary met local government leaders this week, with the finance Minister. I think the issue here is all Cabinet Ministers have a very important interest in a good non-hypothecated settlement for local government, given that expenditure supports pretty much everybody's activity. The Government and Ministers have a very open-door policy on communicating with leaders, to understand the detail of the spending pressures in local government. We find that the WLGA assessment—which I think, Chair, you referred to—is a really key document in Judith and my preparations for the budget and the arguments that we would want to put to Cabinet and to our Treasury colleagues. So, there is a lot of discussion between Ministers and local government. I think we have a very good understanding of the pressures, and it's fair to say that the leaders are not backwards in coming forwards with being clear about what the pressures are.

Absolutely.

Okay. Diolch yn fawr. Peter.

Good morning. On a similar theme, the WLGA made it pretty clear that, over the next three years, they're going to face £1.6 billion-worth of pressures. The reality is that £169 million this year, I expect, actually, if it's worked out, is a real-terms cut. I don't know. It may be a cash increase, but, probably, it's a real-terms cut in the context of that pressure they're facing. Cabinet Secretary, do you believe this settlement is mitigating some of those risks? I suspect you've been looking, or your officials have been looking, at individual council risk registers and how fragile they are at the moment. Do you think this goes—? Or is it just touching the sides?

Like I said, I'm very much in those discussions with leaders. As Reg said, I meet them regularly. We talk, so I get an idea of what's happening. But it's not just me; officials have really, as you'll know, Peter, close contacts with section 151 officers, and others, and treasurers more generally. We are very much in touch with all local authorities on an individual basis as well as as a collective. Again, I do understand the pressures that local authorities are facing at the moment, but also the longer-term pressures for local authorities. I do want to see extra funding going into the sector in the final budget.

I think the other point to note is we are consulting on additional flexibilities of the budgeting and accounting frameworks that would potentially assist local authorities in the assumptions they must make in planning their budgets. That consultation is ongoing. We are working on the aim that the budget will be reached by 20 January, but, obviously, we know that if that's not the case, then there's not enough time to work through that process of anything else in terms of flexibility. That is why we're consulting at the moment, and just putting those preparations in place just in case, and exploring those potential flexibilities. That was also following the discussions that we'd had with local authorities and Judith had with treasurers and others, just to make sure we were trying to cover all avenues in terms of what might help.

The proposed options are intended to be an additional tool for local authorities in making their decisions on services, budgets and council tax within their short- and medium-term financial planning. The changes aim to give extra flexibility to section 151 officers and the officer responsible for ensuring the proper administration of the local authority's financial affairs. I don't know if you want to say anything more about the consultation, Judith, or the discussions that you've had.

I'm happy to. As the Cabinet Secretary said, we made sure that we had those discussions in advance of putting out the consultation, so that we could understand the section 151 officers' perspective. There will also be the leaders' perspective, and those things will come together in their responses to the consultation. But as the Cabinet Secretary said, this takes a little while, so we had to get it in place now, and it's part of that risk mitigation for local authorities. That risk mitigation has been, if you like, a number of things that the Cabinet Secretary's referred to. In the context of this year's budget, which was a 2 per cent rollover, local government got a slightly higher rollover because of the impact of non-domestic rates. We've also baselined a number of things, and then we've also got the option for those accounting changes. All of these things are put in now, when more political discussions carry on about where the final budget ends up.

And we've obviously got a funding floor as well that's helping 10 local authorities, so no local authority will receive less than 2.3 per cent, which I think is important.

I think we'll come on to that a bit later, but I know that will be welcome. But we're clearly in a challenging situation, the local government family is in a challenging situation. How is the sector going to respond to these massive shifts and massive increases of pressures, of demographic changes and things like that? Last year, much was lauded about an extra £1.6 billion coming into the Welsh Government. Actually, that's a time to pump-prime, to drive efficiencies, changes and different things like that. Have we squandered the opportunity to change how we respond to the challenges, recognising £1.6 billion going forward?

As well as finance going into support, what other ways can the Government work with authorities to change how they do things, how we do things? We've heard from leaders who have been frustrated where they think they have ways forward, through regulation and different things, but when they suggest to try and do these changes, they come up against a brick wall: 'We can't do that because the regulations don't allow'. Is there enough innovative thinking between your Government and the local government family about how you shift the dial? Because we can't keep having this conversation every year.

Yes, absolutely. As I say, I feel I'm very much amongst experts in this field in terms of local government as well. But since being in post, it's been really interesting. Even under significant pressure within local authorities, I've seen a lot of innovation and examples of where they've transformed services, and I think that's been a huge credit to those local authorities and local authority officers, and the leadership as well, to push forward on that transformation and innovation.

One of the things I'd cite would be the Welsh Local Government Association improvement grant and the work that Torfaen and Blaenau Gwent local authorities are doing at the moment. You'll know about the federated model that they've been driving forward. I think that's been really interesting, and I'm keen to make sure that's shared across the local government family, to see and to use those examples where that has worked well.

When you're talking about the local government family as well, you'll know that we've made some changes recently with our corporate joint committees, making sure they are brought into the local government family a bit closer. We have been working with them, giving them some more tools, to make sure that that is in place as well.

In terms of our commitment on reducing the administrative burden on local authorities, that work has been going on. I think that has been something that local authorities have really welcomed, to see the streamlining of grants and not getting tied up in some of the bureaucracy, or feeling that they are hitting that wall. I think Reg touched on the fact that more money is provided through that revenue support grant through those non-hypothecated grants. That gives local authorities more flexibility to meet the local needs of the population.

Several grants have been consolidated. This year, the focus has been on local and regional transport grants. That covers the active travel fund, safe routes in communities, local transport funds, the resilient roads fund, ultra-low-emissions vehicle transformations. There's a number going into one single fund to help deliver those regional transport plans. I think there are things that are happening that will actually make a difference. We've also been discussing with CJCs and local authorities about greater collaboration at that regional level, including our live consultation on the local growth fund.

There's a lot there. Absolutely, there's more to do and more for us all to learn. I think the appetite is there. But I've seen some really good examples.

This is not a question, but a statement. I won't ask you to agree with it, because you've got collective Cabinet responsibility, but applying the consumer price index to local authority increasing costs is less useful than plucking a number out of the air, and certainly less useful than taking the increases made in France and Germany.

The question I've got, though, is this: we've got four very difficult areas and they affect different local authorities differently. Homelessness is very strong, mainly in the big cities. You've got elderly care, which does affect some of the more northerly areas because they have higher older populations. You've got special needs education, which affects everybody, and children's services. There's huge pressures on each one of those, and the cost of a holiday does not actually bring any information towards it whatsoever, or the cost of a new car, which CPI includes.

What I'm asking is will you be making the point to the Cabinet Secretary that applying CPI is not of any use to the needs of local authorities, explaining the difficulties you've got in those four areas? Most of the other areas can probably cope, but those four areas cannot cope, and I don't think anybody wants to see local authorities falling over.

I think the other unfortunate thing is the Cabinet Secretary saying there was £380 million unallocated. Both health and local government need that £380 million; how it's shared between them is a matter for you as a Cabinet to bring forward. But the fact that there's £380 million to spend on pet projects is not helpful.

Thanks, Mike. Like you say, there are significant pressures, particularly in housing and homelessness, but also, as you say, the older population. Some of the things that local authorities tell me are around the pressure in social care in particular, and that is really challenging. Again, additional learning needs, that's significant for local authorities, but also school transport has become a real pressure that local authorities have been telling me about as well. So, there are those pressures, and, as you say, they affect everybody to some extent, but some more than others, and I think that's why the unhypothecated part of the RSG is really important as well, so that local authorities can develop that.

In terms of the £380 million, obviously, local government will be, I'm sure, making the case again for further allocations in their response to the draft budget, as will I. And as I said, I'm really keen and confident that all my Cabinet colleagues have a real interest in the local government settlement as well, because of the levers that local government has. But, again, I just want to put on record that the aim and the ambition is that that money is spent, and that is what I would want to see. But I'm sure, again, at this moment, in terms of the actual numbers in the Senedd, we need support to get a budget through, and that's going to be the most important thing for local government, to get a budget set. And I think that's what the Cabinet Secretary for finance is very focused on, and I'm sure other parties will be playing their part within that as well.

Could I ask you, Cabinet Secretary: to what extent would it be useful to have a specific figure for inflation within local government's responsibilities and service delivery? Because I guess emerging pressures is one thing, isn't it, and that has to be assessed, and you have that constant dialogue with local authorities, but in terms of what is a real-terms increase or not, you'd need that specific figure, really, wouldn't you, for inflation as it affects local authorities?

I don't know if Reg wants to—

Could I try answering that? I think we get a good idea of the inflationary pressures from the work that the WLGA does, and that work relies on questionnaires and discussions with all of the 22 authorities, and will therefore pick up some of those service-specific inflationary pressures that your colleague was just talking about now. And so that gives us a very good idea. I would have to think very carefully, and obviously we would need to take some further advice about whether it would be possible to calculate a series of inflationary measures, because the inflationary measure for transport may be different to the inflationary measure for social care, depending on the components of each service. Then you begin to get into a very complex set of data collections and data assessments. And while that might have some academic value, I think we would need to do further work to test whether that would have a practical value in terms of our budgeting, when actually we've got the work that the WLGA does, which is based on real finance people looking at real budgets and real pressures.

Okay, thank you for that. Peter, are you content?

Yes. Just one more point, really. We recognise there is a need for change, and we talked about innovation. Well, clearly, an enabler for innovation is to advance the digital agenda, probably embracing artificial intelligence as well, and different things like that. So, where in this budget does that digital drive, that ambition for digital change—where does that feature in this budget?

Yes, absolutely, Peter, and I'm keen to see digital as a key point of delivering services. I think that funding is not the only means of driving forward that ambition. So, my role, I think, is to facilitate, to accelerate that digital change. But the improvement and support BEL sets out £2.85 million to fund sector-led improvements, and the sector-led improvement board is led by the WLGA, and that provides local government with the leadership on how best to use that money in bringing in data, digital and transformation improvements across local government. I think that there’s an ambition from local authorities on this. I’ve heard directly from them about their ambition. There’s a sector-led improvement board, which is chaired by Councillor Dimitri Batrouni, and they have developed a medium-term plan to drive that improvement in a joined-up way.

Will this budget, though, meet that ambition?

As I said, I don’t think that funding is all to it, but we have put that money towards it. Just to note that local government are contributing their own moneys as well towards this, so I think that just shows their acknowledgement of how important this is for them as well. And that’s top-sliced through the RSG to the sector-led improvement board’s programme, and that’s £200,000 in 2024-25. Again, I think that shows the ambition. The WLGA, as you’ll know, Peter, I’m sure, also hosts a local government chief digital officer, Lindsey Phillips, and she provides that key leadership role as well.

But I think it is really important, and I think it’s about smarter ways of working as well. I think we’re keen to see that, but it’s not just the funding as one bit. And on the other option, you mentioned AI, and I think that is something that local government acknowledges as well, and they're looking at how they can drive that forward, because they are using some AI as well. I think it’s Magic Notes, things like that, that they’re trying to take up. But I think there’s a lot more there, and I think Councillor Dimitri Batrouni is keen to lead that as well.

Thank you.

Okay. Thank you. Thanks, Peter. Joel James.

Thank you, Chair, and thanks ever so much for coming in this morning to give evidence. I just want to touch upon, really, what Mike was touching upon as well, actually, about preventative services, about social care. I just wanted to get an idea about how this provisional settlement helps local authorities to do their preventative services, really.

Yes, absolutely. Thank you, Joel. And prevention is key, as you know, to good public services. We know that it improves people’s lives. We know all the benefits of prevention, and that it’s part of the Well-being of Future Generations (Wales) Act 2015 as well, which applies to all of the public sector.

I think the settlement, as unhypothecated, can be used by local authorities as they choose, to fit in with those local circumstances, as I said. I think that’s important because, again, whilst we’ve talked about some of the challenges that all local authorities face, there are different levels within that. And I think prevention means different things in different services, and in different circumstances.

So, I think it’s about how you plan to reduce, for example, your hedge and verge cutting to support biodiversity and reduce costs, or invest in community support volunteers to tackle early social needs. So, there is a lot—obviously very much focused on prevention—within that framework, but I think that unhypothecated part of the grant is really important for local authorities.

In the evidence we’ve taken, especially from the WLGA, they’ve said that it seems that the Welsh Government is signed up to the preventative agenda, but that it's not necessarily matched with the funding. Indeed, some local authorities have even said that, actually, they feel that it’s actively being cut. Is that something you recognise?

I think local authorities have to make really difficult choices. I very much understand that and appreciate that. I don’t think it’s as straightforward to suggest that they’re making choices by cutting services or preventing demand. I think, as I say, I’ve seen some really, really good examples of the transformation of services since I’ve been in post, and that innovation. Some of the prevention is funded, in whole or part, through specific grants, from not just me, but my colleagues, for example, on the transformation of waste services across Wales, or work that develops a regional and national fostering and adoption service across Wales. But I think some of it’s how local authorities develop that community effort. So, there is a range of examples as well of successful community and third sector partnerships, which local authorities have been working well on recently, just in terms of taking over facilities, for example.

With that in mind, then, obviously when I go out to meet a lot of these third sector organisations, they are saying, 'We're getting more and more put on us to fill in the gaps, but we're not getting the funding either to support that.' So, is that something that you recognise as well?

Like I said, I know that, again, within the third sector, who play a hugely important role as well—. I know that this comes under my Cabinet colleague for social justice’s portfolio, that of Jane Hutt, but I certainly recognise that and I know that local authorities and third sector organisations work probably more closely than they've ever done before. But I was speaking to some of the leaders earlier this week, and I think there are some really good examples, say, of those partnerships between local government and third sector organisations. I was keen to have some of those examples as well. And I think maybe if you were interested, I would be happy to ask those local authorities to perhaps send them to the committee as well, or through me to you, just so that you can see some of those really good examples of delivery.

But like I said, it's not to say that I do not, because I do very much recognise the challenges on local authorities. They've been really at the forefront. They always are at the forefront, aren't they, right on the front line, really. And I just think that it's been a hugely pressurised time for them, not just elected members, but officers as well, who put in a huge amount of work. And so we have been able to put additional funding in. This is additional funding from last year to this year. It's going to take time, but local authorities continue to do an incredibly important role and are very much valued for the work that they do.

I agree with you there. The work that the local authority does and those who work for them often go above and beyond, especially, as you say, with the limited resources that they have. You mentioned there at the start the future generations Act and the important role that that's playing, but I know that, in a recent Audit Wales report, it basically said that that's not having the impact that it was intended to. And if I go in here now, it says,

'Accelerating progress under the Act starts with prioritising prevention. Without a more systematic shift towards prevention, budgets will be exhausted, and outcomes will likely be worse.'

Is that something that you recognise? I keep asking that same question. Is that something that you recognise, because a lot of people, especially on the well-being of future generations Act, they say, 'What's the point of it? What's it doing?' And the Auditor General for Wales is saying the same thing, really, that it's not really having the impact that it should be.

Yes, I do recognise what the auditor general is saying. As I said right at the start, I would like to set multi-year settlements for local government. Unfortunately, I haven’t been able to do that this year. But I think it comes back to what we were saying around the importance of understanding what we mean by preventative spending and preventative budgets. It's really important that local authorities have that flexibility within unhypothecated grants to really plan and work within their own responsibilities and the ways that they're able to deliver for their communities by having that broader approach to prevention. Again, leaders really made that important point to me on Monday when I met them about those unhypothecated grants, having that flexibility, and they stressed to me that when additional funding went into the settlement, it went to areas of priority, for example, directly into school budgets. And, again, that's something that I've asked for; where those good examples exist, I've asked for local authorities to share that. Again, I'm very happy to share that with you as a committee.

Perfect. One final question if I can, Chair. Obviously, we've briefly talked about the auditor general and, again, the importance of prevention. One of their recommendations was to embed prevention within provisional budgets, within everything that the Welsh Government does, I suppose, but that's been rejected by the Welsh Government. Why is that, because according to the evidence that the auditor general gave to the Finance Committee a couple of days ago—apologies for this term—it was almost like an oven-ready recommendation that they believed that the Welsh Government would have adopted without issue, and so they were quite disappointed with that?

I think, really, it goes back to what we were saying about prevention meaning different things in different places. I think, again, that hypothecating funding would reduce the ability of institutions to manage their own budgets, and I think that that is something that we need to be aware of. And that, again, would potentially prevent any of that innovation that we've talked about this morning. So, it is really difficult to isolate funding for prevention, again, in a way that's effective and fair. So, that's something that I'd say in response, really—that, at the moment, that unhypothecated budget, as I said, leaders have told me clearly, is really important for them to have that flexibility.

Thank you, Joel.

I am going to ask this question in Welsh. Mike Hedges referred to homelessness earlier on. Could you give us an idea of how much money you are intending to give to the charities that support people who are homeless, and also how much you are intending to put into homelessness services? And how do you get that balance between supporting homelessness and building homes on the other hand? Could you give us an overall idea of how you see that picture in your mind?

Diolch, Cefin. Perhaps I could write to you fully on that one. Last week was the first part of my committee appearance on homelessness and housing, more generally, but I am very happy to write to you and copy the committee in specifically on that, Cefin, if that's suitable for you.

Yes. Okay.

Okay. Diolch yn fawr. Thank you, Cefin. Lesley Griffiths.

Thanks very much, Chair. Good morning. We've referred to data, so I just want to ask some questions around data. For me, data accuracy is really important when you are setting a budget. If you are going to make those evidence-based decisions, that data has to be accurate. And I think it is also important for public confidence and trust in the transparency that goes into setting these budgets.

You mentioned, Cabinet Secretary, that 80 per cent of data is updated annually, so I am interested to know about the other 20 per cent, and how you base your decisions on allocation when you haven't got the most up-to-date data. Does that 20 per cent—this is a question for you, Judith—fall into the review that you discussed? And, again, why is this review being undertaken now? Why has it been so long? I remember the WLGA telling us a long time ago—probably when I was in your seat, Cabinet Secretary—that they weren't very happy with the way that out-of-date data was used in setting budgets.

Diolch, Lesley. As I say, I sit in the seat of many who have gone before me here and the expertise here. Yes, absolutely, it feels like there is such an amount of work that is going on, and has been for a while. I think making sure that there has been an extra resource going into this has been very good—and he does have a name, our extra resource. It's been really important to help Judith in terms of this work as well, because, as you rightly say, it is complex and it has been going on for a while in how we use the rest of the 20 per cent. I'll ask Judith to comment, and who, as you know, could wax lyrical about the funding formula all day.

Prepare to be bored. Yes, absolutely, the 20 per cent of data that is not updated annually is part of the review. Some data will never be able to be updated annually, because we only get it in ways that come out periodically, such as the census. So, of the data that we're updating, a chunk of it relates to older censuses, and that is in particular the sparsity and dispersion-type data—the geographical ones.

Why have we not done it before? You are right that parts of the local government family will have been calling for this to have been done for many years. Equally, because of the timing of the censuses, when we had the 2011 census, it was in a period where budgets were quite severely constrained, and there was less appetite then to create the churn that a change of that data would have caused. So, once you've stepped off that treadmill, you have to get back on it, and now we're getting back on it and reflecting on the fact that we now want to catch up all of those periods where we haven't done it. But in the interim, the world has changed in other ways as well. More services are delivered electronically, and more services are delivered in different ways. So, waste, for example, would be very different now to how it was when we did the formula back in 2011.

So, we have a whole pile of work that we want to do, which is both making sure that the data we use is the most up-to-date available and that it is the right set of data. And as the Cabinet Secretary says, we have found some additional staff resource to put into it, and that is going to make a big difference because we can take it forward, whilst also every year updating the data that we update annually, and that takes some effort as well.

I think that's worth remembering, isn't it, that it's not just the bits, like the 20 per cent; it's the rest of it that has to be updated every year. So, there's a lot of work that goes into this.

So, are you happy that the data you've used for this budget that we're scrutinising now is based on what local authorities' needs will be and, obviously, future needs as well?

I think the data that we're using, as I say, is updated annually for over 80 per cent of it, so we have to be confident in that way. Again, you will have heard over many years, I'm sure, as I have, that there are always calls around the funding formula review. Again, it's really important to remember that the funding formula is very intricate. It is agreed with local government, and any changes to that, as Reg has said, has to go through those groups. So, we listen to—. That's very much local government led, how the funding formula exists. I don't know if Reg wants to add anything to that.

I was just going to say that, from my point of view, we have the best available data that we can, and Judith has described the work that goes into updating where we can, updating where we can periodically. But there will always be more work to do, and there will always be refinements to the formula that will demand more data, as some data becomes less relevant than it was before. I think school meals is something where we're slightly struggling; if everyone gets free school meals in primary school, what indicator do you use for deprivation in that case? But I think, as always, when we reach this point of the settlement, we are confident that we have the best available data to make the allocations, and I think that's agreed through the DSG and the FSG process.

So, on the formula, I think you're right—you hear calls for the formula to be reviewed. I appreciate it is a decision. Well, it's both, isn't it? It's Welsh Government and local government.

Yes.

Do you think the formula should be reviewed?

I think that, again, we have a formula that is agreed through local governments and with us. If that is something that local government want, they would have to come to that and then agree what the funding formula would look like. This is the agreed formula that we have, and this is what we work towards while everybody's looking at the data for that extra 20 per cent.

I think it is really intricate, and it's not simple. Like Mike described, as well, earlier, one type of movement here moves something over there. The reality is there are always people going to be at one part of it, then another. Again, the main things for the funding formula are population levels, deprivation and sparsity. They are the levers at the moment, the key indicators, but there have been times with different authorities at different points in the table. This year, we have really looked to protect those who are at the lower end of the scale. As I said, no local authority in Wales will receive less than 2.3 per cent because of the funding floor, which will help 10 local authorities. That's a commitment we've put in, and I just feel that, while I realise these are challenging times, the reality of any funding formula and the complexity that exists within it mean that there's always going to be somebody who thinks that they could be higher than somebody else, perhaps. I don't know if Reg—

I think I'd just rehearse two points that have been made earlier on. A review of the funding formula will, inevitably, mean churn, and it will mean authorities' allocations around the RSG going up or down. It's a zero-sum game, so, if it goes up for somebody, it goes down for somebody else. So, I can see that the idea about finding consensus around moving towards a review may not be easy, but I think my concern, looking ahead, is we have a process that some may say should move quicker. We would probably argue that moving more quickly might create more turbulence and more instability for local government funding at a time when we understand that some authorities' financial positions are quite finely balanced. Do we really want to be doing something much more major at this point that could exacerbate some of that challenge?

You mentioned we've got a funding floor this year. We had a funding floor last year, which I appreciate was part of the budget agreement. But you've decided to have a funding floor this next financial year. Does that not lend you to think that if we've got a funding floor for so many local authorities that the formula should be reviewed?

You're right that we had a funding floor last year through a budget agreement, and some of that was the roll-over for this year as well. We've looked at the funding floor this year and very much recognised that there are local authorities who are on that lower end. Again, you don't know what will come out next year, but these things can change, can't they? I remember, when I first came into post in 2016, there was lots of pressure from my own local authority at the time, again, and the Chair's, around where my city was at the time. It doesn't mean that you're always up or you're down. Each year, something changes.

Again, the main indicators are population levels, deprivation and sparsity, and I think those seem to be really the right things. But, obviously, every year it is important to look back and see where everybody is, and look at what we can do. Nobody wants to see local authorities struggling, and I think making sure there's that fairness within the system is really important. I'm sorry, Judith, I didn't see you.

Sorry, I'm trying not to—. I guess the first point is it's quite important to recognise that 20 per cent of the data doesn't necessarily mean 20 per cent of the money. Actually, that 20 per cent of the data doesn't drive 20 per cent of the money. It drives quite a smaller percentage, because so much of it is driven by those three large measures.

The second is a slightly more semantic point, which is that I think I am doing a review of the local authority formula, to be absolutely honest with you, given the level of looking that we're doing. It's not just about updating, but seeing whether it's the right data. But, as I said, we're not throwing it all up in the air and going to look for a completely different system.

I did have a third point, and it's completely leaked.

It's because you know so much about the funding formula, isn't it, and you get asked about that.

This is always a problem. My final point is about the floor. The reason there are 10 authorities on the floor is because the increase is so low in quantum. When the quantum increase is bigger, you get fewer authorities, by and large, on the floor, depending on where you choose to set the floor, obviously. But those authorities who do worse now would do better proportionately if there was a larger quantum. That is just because of the way in which we take account of both needs and ability to raise council tax. So, this year, in particular, with a budget that is being set at the level it's set and to protect, then a 2.3 per cent floor was a choice, but it also means that more authorities are in that lower band than would normally be expected.

I think we have heard that. It's the quantum of the funding that's the problem, not the—

Yes, absolutely.

Okay. Thank you.

All right, Lesley. Peter.

Thanks. The other thing, and Lesley alluded to it—and I know, Judith, you've given an answer—is that it's the first time I can ever remember a funding floor being given to half the local government family. And I heard what you said, but I've been an advocate that we need to have a deeper, start-again look at the formula. I know that's such a massive piece of work, and I know that the distribution sub-group have been looking at it regularly. I remember those conversations as well. I still feel that there's a deeper need to, perhaps like Mike said earlier, tweak certain bits. We've seen it with sparsity in the past, where sparsity had been put in for a couple of years and it had a dramatic effect on how authorities acted. But I have a real concern that the quantum needs to be bigger, but within that quantum, it's how the cake is carved. It still can't be right where we are seeing some authorities remain resilient—very resilient, actually—and others that are always at the suffering end and are getting more and more vulnerable. And they were very vulnerable before COVID, and COVID buffered things a little bit and took the focus off it, but it's coming back again now, and it's looking really unsustainable for the future of certain authorities.

Now, how is the Government going to balance that situation where we need all to be sustainable, all to be resilient, yet the current system seems to be allowing some to fall over unless they have a floor to keep them going? So, there's something fundamentally wrong with the whole package, otherwise we will not have a sustainable local government family in the future, and that really worries me.

Thank you, Peter. I know that it is so important and it does always worry me; I don't want people to think that it doesn't keep me up at night, and I'm sure, Judith and Reg as well. I know that that sustainability and the pressures that local authorities have been facing—. Just to say, there's no evidence to suggest that any authority with particular geographical or social characteristics is being disadvantaged through the funding formula. But I think, again, it is really important that we bring up to date the data and the work that's going on with Judith and the team. Again, in terms of the resilience and that sustainability of local authorities, I know that it keeps every leader up at night, I'm sure, but there are ways that we are working with local government to make sure—. We're working closely with local government, whether it's in a leader and Cabinet Secretary role or also with Judith and the team, with the 151 officers and the treasurers to be in close contact and to develop any sort of protocol, for example—. Sorry, I can see that you want to come back in, Peter.

No, no. I didn't want to stop you there, Cabinet Secretary, really. But I recognise that there is a lot of work going on and I think that that is welcome and it needs to be accelerated, because there are real anxieties for certain authorities.

Yes.

But going back to the floor, some £14 million now has been introduced to local government to enable that. Where has that money come from? Is that new money, or is it circulated?

No, it's from the central reserve.

So, it's new money.

Yes, so it isn't—

And that's baselined now—will that be baselined?

I think that's a difficult question to answer this year, because that will be a new Government and a new decision, so it is a decision every year as to whether it is, but in previous years it has been.

Right, yes. So, it won't go into the settlement, then.

So, yes, it is new money, which I think is, again, an important recognition of the fact that we are trying to support local authorities this year, because of where we are with the budget and those local authorities that are at that lower end.

The other thing I was going to suggest—I was just thinking that I know that, Cadeirydd, you've had a briefing previously on the local government funding formula, and, again, we're surrounded by experts here who know a lot about it, but I wondered if it would be useful if Judith and the team—. They'd be happy to do a technical briefing on some of the work that's going on to update the formula that you might be interested in, if you wanted to take that up at some point.

Yes, I think so, Cabinet Secretary. Yes, I'm sure.

There's a lot going on there that might be useful.

Yes, it would be. I think the committee would be very interested in that, yes. Mike Hedges.

Yes. Some points following on from what we've been talking about—they're very brief—why won't you publish a standard spending assessment calculation for each authority? I know it would be a substantial amount of information, but you must have it somewhere, because you've created those standard spending assessments. So, why don't you publish it?

[Inaudible.]

There is, actually—there we go. Sorry.

So, this is a point we've discussed before, isn't it? I know we've had some correspondence with you.

Are we going to criticise it again as well or just—? [Laughter.]

From our perspective, at a technical level, we do. It is possible for you to work out, for every single line, for every single authority, how the SSA is calculated. To express it in a different way would, we think, require a tome like this.

It's what you've got, though?

Not in that way. I couldn't push a button and print it. I could say to you, 'We publish all of the data, and the data is in a programme that could create it.' But it is published—as in the SSA is published for every single local authority.

But it's just the SSA, it's not how you got there. I can't go and look, for Swansea Council, what its standard spending assessment is for education, can I, or education transport? I can look at what the standard spending assessment is.

So, what you're looking for is the standard spending assessment by block of the formula.

And the calculation of that block.

So, as we have set out before, it is quite a long-winded thing. But we could, if we don't, and I thought we did, publish the SSA by block as well. And probably the reason—

You do, but not by calculation of that block. If Peredur was in here now, he'd say, 'That's what you always say. Show your workings. Show how you get there. Don't just give me a number. Show me how you've got that number.' I used to teach, and one of the things I always used to say was, 'I need to see the workings.'

Perhaps we could write to you again, Mike, on that. Let's take that back.

Fine. Just a couple of capital questions. You've got a general capital of £234.6 million. That does not include support for twenty-first century schools, which is now called something else, does it?

No, it doesn't.

No, there you go.

It's free capital for local authorities.

Yes.

Something that proves what's wrong with the way we are funded here is that local authorities can be given extra money, they can borrow to do roads, but we can't borrow to do roads. I think that really is a silly position to be in. But are you going to keep on doing that, because it seems the cheapest way of doing it, rather than using private finance initiative by a new name, called the mutual investment model—actually using local authorities' ability to borrow cheaply, rather than actually borrowing expensively?

Sorry, Reg, do you want to—?

The local government borrowing initiative is exactly that approach.

Yes, but it does show how ludicrous the Welsh Government settlement is.

Yes, absolutely.

The last question from me, cross-Government discussion—. We keep on bringing legislation in, and there are some people who say we bring too much legislation in, and others who say we don't bring enough in, but legislation comes at a cost. We work out the cost to local authorities. How do we ensure they are directly funded for it? Or do we just say, 'It's in the settlement'?

Thanks, Mike. Obviously, I've got two pieces of legislation coming forward myself. There are obviously collective Cabinet responsibilities that myself and my colleagues take seriously. When I led the strategic partnership agreement, alongside the WLGA and leaders, which we all signed in June, we did confirm our shared commitment to full and early engagement when developing policy and legislation, which I think is really important. The agreement also articulates the commitment of the full Cabinet to fully assessing the financial implications of any new legislation. Where new responsibilities do come with additional costs, it may not always be about seeking extra money, but about identifying funding that could be redirected from elsewhere to have the maximum impact. Beyond that, we've committed that any responsibility would be funded. Again, during Cabinet discussions on funding for public services, I've repeatedly made the case for prioritisation of fair funding for local government services, so that they can continue and be effective.

I've got five minutes left; I won't waste them. We were talking about the formula earlier, but there are some things we don't change very often, do we, if at all? Parks: the amount of parkland that exists within local authority areas, which they have to look after and maintain; or the amount of road verges they look after. Those change very little.

That is true, yes.

And to the best of my recollection, we don't use that particular indicator in the formula, but we do use road length, and that does change and we do update that.

Which is what you've been through, Mike.

But the road length itself varies very little and, quite often, it's less important roads that tend to actually be added to the system. So, you might have, in an estate, a road taking in 12 houses off an estate, but you won't have an A-something or other, will you, on a new road? Thank you.

Okay.

Like I said, we're very happy to do that briefing on the—. And I know, Mike, you're very, I'm sure, welcome to attend that briefing with the work that Judith's doing.

And I would like to say, the Cabinet Secretary is very kind, but it is my team who do most of this work, let's be honest.

Could I just ask as well, Cabinet Secretary, in terms of the local government borrowing initiative that Mike asked about, as Mike said, if we're restricted as a Welsh Government in—? Not 'us', sorry. If the Welsh Government is restricted in terms of borrowing, and this is one useful way of getting around that, perhaps, are you looking at other schemes that might support local government to borrow—schemes that might work in a similar way, which would get around some of the restrictions that apply to Welsh Government's borrowing ability?

I understand that, and I think that has been an example where it's working really well. Speaking to local authorities, they are very happy to do that. Obviously, it gives them that resource to pay, and they have to borrow that over the 20 years. But at the moment, there's no intention to develop any new schemes around that.

Apart from twenty-first century schools.

That exists already, yes. But there are no new ones at the moment that—

No. Peter.

That was a really good initiative to enable the acceleration of pipework works and things, and it's so simple and easy to do. There must be variations that could be—match funding revenue to borrow, and ways that lots of capital projects—. Just using that bit of innovation, that little tool there, even if it's split and it's a shared endeavour, could really accelerate capital spend.

I think that's something that all Cabinet Secretaries within their portfolios need to explore with local authorities. That again was a really good example, and I know that Ken Skates works with local authorities to bring that on board. But it's absolutely something that all Cabinet Secretaries should look at as well.

Could I just ask the last question, from me anyway, Cabinet Secretary? We've only got a minute and a half anyway. In terms of capital costs, the WLGA told us that, in terms of capital spend, their costs have remained at inflated levels, whereas capital funding has not. I guess we're all familiar with the inflation that we've seen in terms of building work, construction work, infrastructure projects, both in terms of labour and materials. Is that something that you recognise as a real pressure on local authorities in terms of capital spend?

Just to say, the £234.6 million of capital funding is made up of a £115.2 million of general and hypothecated capital grant, £88.8 million of supported borrowing and £30.6 million pounds for decarbonisation of the local government estate. I think that inflation at its height was putting extreme pressure on those capital budgets, and we've seen that across all portfolios. It's now baked in, even with the inflation level dropping.

We have been able to uplift capital budgets across the board by 2 per cent, and it's for my Cabinet colleagues across portfolios to decide how they apply that. But local authorities will be benefiting from that uplift. So, the draft settlement sets out over £1 billion in capital grants. Again, for the general capital grant, I've applied the 2 per cent uplift to the unhypothecated general capital grant and that decarb grant, and the supported borrowing remains the same. So, we've supported local authorities with that additional general capital over this term and that general grant has increased by 29 per cent, or £89 million, in 2021-22.

Okay, Cabinet Secretary, thank you very much. And thank you to your officials as well, Judith and Reg, for coming in to give evidence to the committee this morning. It is appreciated. You will be sent a transcript to check for factual accuracy. Diolch yn fawr.

Diolch, Cadeirydd. And like I said, we'll be in touch around those other points as well.

Diolch.

Diolch.