Finance Committee

Okay. Our first substantive item this morning is to welcome the finance Minister here to talk about the update on the Welsh Government's 2023-24 in-year financial position. I wonder if you're able to introduce yourself and your officials, please. Diolch.

So, it's Rebecca Evans, Minister for Finance and Local Government, and I'll ask officials to introduce themselves.

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

Bore da, I'm Gawain Evans. I'm finance director.

Bore da. Diolch yn fawr iawn. Thank you very much for coming this morning. We've obviously had your statement on 17 October, following the summer of work that you've been carrying out. I'd like to start with, obviously, the announcement today that inflation is dropping and has dropped by half. You've referenced, obviously, the £900 million that we've been talking about for a while. Does the announcement today make any difference to that, and are you going to be recalculating or when will you be recalculating that difference between the 2020-21 figure and now?

The actual level of inflation is still quite unpredictable from month to month, but I think it's fair to say that the average inflation level across the year 2023-24 is going to be broadly at the level we were expecting back at the start of the year. The exact path of it has perhaps not been as expected, but, roughly speaking, the average level this year is going to be roughly what we thought it was going to be, so I don't think it materially affects that estimate of our budget being worth around £900 million less than we thought it was going to be.

That's broadly in line with what Wales Governance Centre said in their report in December, and it follows the same trajectory of what we've known for a while.

I think it's fair to say that the level of inflation seen in 2023-24 is higher than we were thinking it was going to be two years ago, but, obviously, as we've got closer, it's become a bit clearer as to how high that was going to be. But, yes, it's certainly a lot higher than when we first set the budget.

Thank you. Mike, did you want to come in?

Baseline inflation or consumer price index really doesn't affect you, does it? The two things that affect you are the increase in costs of buildings, et cetera, increased capital costs, and the increased revenue costs of increased wages. Those are the two that really affect you, in the main, or tell me if I'm wrong on that. The fact that butter has gone up by 5p or down by 5p will have a minimal effect on your budget.

General inflation does have some effect, but you're right, certainly on—. A lot of public sector spending is on pay, so that growth in pay costs really does drive a lot of the increase in cost of service provision, but that's not to say general inflation has no effect at all. Obviously, we do procure a lot of goods and services as well in the public sector. Capital, as you've said, is particularly exposed to some of those inflationary pressures, but, yes, general inflation in the economy does have some effect on the cost of delivering public services. But, as you say, pay is the real key driver.

Okay. Thank you. Can you, therefore, explain why a £900 million real-terms inflation cut turned into the announcement that we had of a £409 million increase in funding? Because, obviously, when you net-off the savings and what you found, that's the net position of the statement that you made in October. Is it accurate to say that inflationary pressures have been conflated with the realities of budget quantum, and, because these are really technical terms and not necessarily widely understood by the public, it's created a bit of confusion maybe, at best, but some panic as well in some sectors?

I think that we've been really at pains to be transparent with the public. So, I know that there have been some questions in the Chamber as to why we would make that statement in the summer about the fact that we did see this large gap within our budget because of the impact of inflation and then why we would take this action so early on in the financial year to try and address that, and I think that we've sought to avoid that kind of panic by being open and transparent. We could easily, I think, have just left all of this until the supplementary budget and just tied it all up there, having done the work internally and not communicated it to people. So, I think that's been important.

We were able to provide an additional £425 million to the NHS and £125 million to Transport for Wales in respect of rail, and we were able to do that because not only did we look across our budgets and reprioritise funding there, but we also made some assumptions about what we might need to draw down from the Wales reserve. We've made assumptions about how much additional funding we'll have in consequentials from the UK Government, still unconfirmed, and also have made some assumptions about what we might be able to change from capital to revenue. So, there is a significant degree of risk there—a lot of this is based on assumptions, it's not firmed up yet—so it's important that we recognise that, but also the need to provide that additional funding, particularly for health and rail, given the very severe pressures that they were facing.

So, coming back to what you said there, you could have just done the work and reported it in the supplementary. Another way would be—not to set hares racing in August—would be to do the work over the summer and not create that narrative of doom and gloom and to wait until—. Do the work, look at the underspend to look at the fact that plans weren't meeting where you thought they were going to meet, so there was that under-demand of different things. Would it not have been better, maybe, rather than create that narrative, to wait, do the work and then make the announcement in October? It would be a more positive impact, because, obviously, £425 million to the NHS and £125 million to Transport for Wales is a good news story, and the fact that you've said that it was due to under-utilisation or not using things would—. So, it's not really a cut in other main expenditure groups. So, would that not have been a better way of handling it?

We did debate this at quite some length in terms of what, if anything, should we say when we were kicking off the work in the summer—you know, should we communicate that to people? In the end, we thought we'd err on the side of transparency and do that, partly because, whether or not we said anything, we know that health, for example, was very, very aware of the pressures that it was facing, and so they would have been aware of the gap in funding specifically for health. And we know that there were other concerns elsewhere—so, rail in particular. And I think that just in the interests of transparency, really, we wanted to communicate to people the impact that inflation was having on our budget, bearing in mind that a lot of the public discourse is about inflation, it's about the cost-of-living crisis, and I think that it would be unrealistic to think it wouldn't also impact on Government as well. So, it was really about being as transparent as we could, and also giving reassurance that we recognise there is an issue, but we are working on it.

I'll bring you in in just a second, Peter. But can you see that maybe, with hindsight, a better way of doing it would not have been to create that? Because, in a vacuum, the media fill that vacuum with lots of noise that maybe has meant some people, especially in jobs, thinking, 'Am I going to have a job? Is it going to affect me?', and then that delay in the announcement from 1 August to 17 October—that's a long time for people to be worried about what was happening.

Yes, and it was finely balanced, because we could easily have just got on with the work and not communicated the level of the problem to people, but I think—

Because the problem was out there anyway, wasn't it? It's been out there from December last year—we knew that that was an issue.

Yes. So, I think that—. So, we knew it was an issue, but also people employed by public services also knew it was an issue, so, I think that, on balance, it was important that we could communicate to those people, 'Yes, we recognise the issue. We see it. We are going to take action to try and address this issue.' So, it really was a finely judged decision, and there are good arguments either way, I think.

Okay, thank you. Peter.

Yes, there's an issue sort of sticking with me, Minister, and lots of other people, because you admit you knew that the inflationary pressures were there—the indicators of pressure within the health service and everything were there—way before we set the last budget. Why weren't some of these pressures and inflationary issues built into the budget planning when you set that so that you didn't have to go back and make knee-jerk adjustments to in-year budgets, as we've seen with health? Why wasn't that pre-empted prior to setting the budget? Because a lot of people are saying, 'Well, hang on, this is not long after setting the budget that we're having to do this review.' And small reviews, quite rightly, happen and we know that, but such major, significant changes—I struggle to understand why that couldn't have been pre-empted prior to.

Well, we originally set the plans for this financial year in late 2021 when we were developing the draft budget as part of our three-year spending review. So, in that sense, a lot of the work had been done long before we could have anticipated exactly where we would be now.

I think that, as we went into the financial year, we realised that there would be pressures, but the work that we do through our in-year monitoring, which perhaps I'll ask Gawain to say a bit more about, did flesh out the level of those pressures and then we realised that we do need to take some early action. We could have left it, but we needed to take action early on in the year so that funds hadn't all been committed. Because, if you try and do it later, you find there's very little room to move.

I understand that these things will come to light, and that you would have set your three-year plan back in 2021, but it would have come to light in mid 2022 perhaps that there needed to be a refocus, a change of direction, before the next budget was set. I'm only thinking about my own past experience, when I know what's coming, how I would have had to adjust to pre-empt that.

So, I'll ask Gawain to say a bit more, but what I will say as well is that we're using this in-year exercise now to inform the budget preparations for next year. So, this hasn't been undertaken in isolation and some of this will have to necessarily feed through to next year's budget.

That's helpful, yes.

In terms of the in-year, the way that's changed over the last few years, usually, through the year, certainly going back a number of years, we would have, probably by about the third or fourth month of the financial year, started to collect financial information from the groups. What we've found over the last few years, because things have been changing quite quickly, and although the budget—. So, obviously, the draft budget is before Christmas and then the final budget just after that; we've still been starting much earlier in the year to look at the potential impact. So, we've actually introduced over, certainly, the last three or four years, something we call 'in period zero'—so, even before you get to the end of April in the year, we take a look at what has changed even in those last few months and then provide the information, as we would have done later in the year, to senior officials and to Ministers.

I think that's, as I say, something we changed a few years ago now, but it was really just to reflect the fact that things seemed to be changing so quickly. We felt that need to bring forward the start of our in-year management process to literally the start of the financial year, rather than perhaps June time beforehand.

Okay.

It's worth just adding as well for context that we didn't anticipate, or we couldn't have really, I think, anticipated, the level of NHS pay deals and other pay deals that we would have had to have agreed when we were setting our budget for the year. Those pay deals were well in excess of the assumptions that we'd made and that was, I suppose, one of the real drivers for the gap in the budget.

That's a fair comment.

Finally from me, before I go over to Mike for some questions: with what we've seen from your statement and then the narrative that goes alongside it, we haven't seen the movements within the main expenditure groups that we would have seen if it was a supplementary budget. So, in the interests of transparency, if it was to be transparent, would it not have been a better way to lay a supplementary budget in October and then a further one in February or March as usual, because that would have given that level of transparency as to what was going on?

So, it is the intention to lay the supplementary budget in February as normal, and by then we will have a much better picture of where we are. I mentioned earlier that there are several assumptions that we've made in terms of these plans. Some of those may come to pass; some may prove more positive and others more negative, and so that will change our plans. So, I think what we described in October was very much a snapshot as to where we were, and there will, I think, inevitably, be further changes, so—

So, was there no scope to have a supplementary budget in October?

I think two supplementary budgets a year is probably plenty. I think that that does afford a level of scrutiny that would be appropriate as well.

We've done it once. We've had three supplementary budgets once before, and that was during COVID when we were allocating very, very large amounts of additional funding in year. The key difference between now and February is that, by February, we'll have had the UK supplementary estimates. What a supplementary budget should do is not just the spending side, it's the financing side of the equation as well, and by February we will know exactly where we are in terms of our funding levels for this year. At the moment, as the Minister said, we're making various assumptions about things like consequentials and scope to switch capital to revenue and things like that, and so we probably haven't got enough certainty, really, to do a meaningful supplementary budget at this point. It risks sort of—. You're just kind of sticking a pin in a moving target there, and so it will be a more robust position in February than it would be in October.

And lots of the changes that we tried to make within the MEGs were to look, in the first instance, at those demand-led budgets to see what we could change in that respect, based on the latest up-to-date figures of take-up for various schemes. So, you wouldn't normally table a supplementary budget to recognise that kind of change.

But would you publish the movements, rather than just the net figure within the MEGs, so that we can see where the money is moving to and from and where the demand isn't being—? Well, if the demand isn't there, then we'd be able to understand within the MEG. So, I don't think that's been published, has it? It has just been the net figure, the net movement figure, that has been published, rather than the plus and minus, if you like, to show within the MEGs where the money has changed.

So, we haven't published the detail yet, other than the additional funding that is going to the NHS and to rail, but we will publish further information, particularly an updated strategic integrated impact assessment in due course as well. So, there'll be more detail there.

Okay. Thank you. Mike.

I'm just all for clarity on funding. The additional funding used the reserves of £100 million. Two questions, following on from that: how much do you expect that to leave you with after you've used it; and are you confident that taking money out of reserves doesn't leave you vulnerable to overspends by health boards? I only have to use the words 'Betsi Cadwaladr', which should bring you and most other people in Government out in a cold sweat, because financial control is one of those things they've never been very good at.

So, the amount of money available in the Wales reserve coming into this financial year was £350 million. So, that's the maximum that we're able to carry over from one year to another. Since then, our budget plans include a draw-down of £66 million, which reduces the available balance then to £284 million. So, we've suggested in our plans that we might use an additional £100 million now to address this in-year pressure, so that would leave us with money for unforeseen events that might occur in this financial year, but the health Minister's been very clear with the health boards in respect of her expectations and I wouldn't be expecting, beyond unforeseen events, to be making allocations from the centre.

But the health Minister can have her views and she can give her instructions, but overspends by the health boards have to be covered by the Welsh Government because the health boards are wholly owned subsidiaries of the Welsh Government.

So, the health Minister, as I say, has been really clear in terms of her expectations of the health boards; I have no more additional funding to provide to the health Minister.

But you'd have to—either by borrowing off next year or from any additional reserves—you'd have to cover it.

Do you want to jump in on that? [Inaudible.] So, I'll ask Andrew to say a bit more about how we're working with the NHS organisations through Eluned's team to drive down the deficit within health.

I think it was last week, was it, the health Minister made a statement about exactly how much additional funding is going to each health board for the remainder of the year. And, yes, there's a very highly developed relationship between the Welsh health department and the health boards in terms of their financial management and very active engagement on trying to ensure that health boards remain within the revised budgets that have now been set. There's more than £500 million extra money gone in now this year, so we would expect them to live within those budgets now.

I won't push this very far, but if they don't meet it, then you end up having to cover it. If you look at the accounts of the Welsh Government, the health boards are part of it. I won't push you on that because you're not going to say 'yes' when you know the answer is 'yes'.

The other two questions I've got: you're expecting additional consequentials from the UK Government and you expect a switch from capital to revenue, but how much are each of them and how confident are you that they will actually happen?

So, in terms of consequentials, the only firm figure that we can have confidence in at the moment is the £11.5 million that was there in relation to winter pressures as a consequential from UK Government decisions in that respect. I have had, as you've seen, the opportunity to make some assumptions about additional funding in respect of NHS pay. So, we have had some discussions with the Chief Secretary to the Treasury and nothing he has said has led me to believe that the assumptions that I've made are unrealistic. So, we have had some discussions, they have been in confidence, so I can't really go further than that, but I'm confident with the level of assumption that we've made on that.

On that, I'm assuming—maybe rightly or wrongly, you can put me right—have you already written to the new Chief Secretary to the Treasury to firm up assumptions that you made based on the discussions that you had with their predecessor?

I don't think that that particular point would be necessary at this point, because the assumptions are made based on discussions that the Treasury will have with health in England, so, as I say—

But on the conversations you've had with the Chief Secretary to the Treasury, the outgoing one, what's going to be your process now to engage with the incoming one, I suppose, is my question.

So, I've already written to the incoming Chief Secretary to the Treasury. I sent a letter yesterday setting out our expectations of the UK Government at the spending review—sorry, at the autumn statement on the twenty-second of this month. So, I enclosed a copy of a letter that I'd sent to the Chancellor, so that she's sighted now on Wales's key asks of the UK Government at the autumn statement. Those are around funding for public services, as you can imagine, but then I also go on to talk about fairness in rail and seeking a contribution from the UK Government for coal tips. So, all of those things were in that letter. And I did have an e-mail from the Chief Secretary's office on the day of her appointment saying that she was looking forward to having a discussion on the day of the autumn statement as well. So, I thought that was a positive first step.

Just to come back to the question that I asked—asking too many questions at the time can be disadvantageous. You've got £77 million from consequentials and from capital to revenue. What's the split of those?

Sorry, I don't—

You've got £177 million that you've got there; £100 million is coming out of reserves, which leaves £77 million, which you say is going to come out of consequentials expected from the UK Government and the switch from capital to revenue. How much of each of those to make up the £77 million?

I'm not sure where the £77 million figure is from, but we're expecting, overall—

Well, £177 million take away £100 million gives you £77 million.

No—

Do you recognise the £177 million? You don't recognise the £177 million net funding allocation.

No. Our assumptions are around £100 million from reserves, around £150 million in respect of consequential funding, and then we've asked for a capital to revenue switch of up to £200 million. At the moment, we're including £147 million in our plans.

Okay. We've got those numbers. They differ from something we've had previously, but the current numbers are the most important, so thank you.

It was good to get that pinned down. I'll come to Peter.

Yes, a couple of questions. The capital budget was overprogrammed by £61 million in the first supplementary budget. Has this plan, in year, altered the figure or changed anything around your capital assumptions?

We announced reductions in capital spending limits of £147 million in the statement on 17 October.

So, you've overprogrammed by £61 million. Does that mean then that you're cutting that to be able to switch parts of that, or are you—

Are you carrying that forward?

That's the difference. So, effectively 100 per cent, plus the £61 million, so if you're moving £147 million potentially from capital to revenue, 'How does that mechanism work?' I suppose is what we're asking.

Yes. Does that overprogrammed £61 million stay there?

We do still have a pressure from the overprogramming, but with the capital budget, we are confident that those forecasts will reduce further now in the year. Typically, with the capital budget, we do see more movement than on revenue, where we have certainly greater certainty. Particularly if you look historically over the last quarter of the year, we tend to see the underspends coming there. So, I mentioned earlier that we obviously capture the information monthly to keep monitoring that. In all honesty, this year, we're probably meeting weekly now with finance officials in the different areas, just to make sure that those pressures are being managed. So, as I say, we are confident now that we will see a further reduction in the forecast on the capital budget to offset that, as well as, obviously, the changes that were made—the £147 million.

Okay. Thank you for that. You also mentioned that there would be an addendum to the strategic impact assessment. Will this be provided with the next supplementary budget, and what form is it likely to take?

Yes. That's when we've done it in the past, so during COVID, for example, we provided an addendum to the SIIA, and that was done at the supplementary budget. So, we'll be—. That would be, I think, a sensible point at which to bring it forward.

Okay, great—thanks. Just a quick question, then, on prioritisation and allocation to the departments. It's trying to get under this £425 million figure for NHS and £125 million for Transport for Wales. It would be good to understand: were these allocations based on a calculation of additional need, or was it just because you had a lump of money available—

I wish. [Laughter.]

—and you decided, 'They can have a big bit' and 'They can have a smaller bit'? How did you decide how you were going to allocate?

Again, I might bring Andrew in in a bit to say a bit more about the work that officials do with the NHS and with Transport for Wales, but essentially those figures were based on what the NHS was telling us that it needed, and also Transport for Wales in respect of what it needed. And those two things, I suppose, are driven by different pressures. So, in the NHS particularly, we've talked about pay—that's a big pressure within the NHS—and then also the rising cost of medicines as a result of inflation. Those are the two big areas of spend within health. But then also energy costs are putting a lot of pressure on as well. So, it was a case of listening to organisations as they're monitoring their costs and understanding the pressures.

There's always an opportunity cost here. You could have decided to put £100,000 into transport, and put another £25 million into health, recognising that the problem is more severe in health. What's the determinant to come down to that, because it is weighing one sort of pressure against another sort of pressure, and what's best for the wider public?

So, within Transport for Wales, we felt that £125 million would meet the pressure. And the thing is, if we don't meet the pressure, we're just going to be coming back later on in the year to do a similar kind of exercise again. But, in health, the £425 million doesn't meet the entire pressure. So, as we've discussed, the health Minister's asked the health boards to drive down that deficit, and the health Minister has to make decisions within her own main expenditure group to reprioritise money from programmes to the NHS as well.

But, in terms of some of the discussions, perhaps Andrew can share some insights.

Yes. I think, Minister, you've covered the key points. The net amount of additional funding that has been allocated partially reflects the scope of the relevant ministerial portfolio to absorb pressures itself. Of course, there are pressures across the piece in the Welsh Government, and, in general, our expectation is that those pressures are met from within the budget that's been set overall for that ministerial portfolio. But, in exceptional circumstances, then additional funding will be put in. But, as you will have seen from the statement the health Minister made last week, for example, there's quite a lot of money being reallocated within the health MEG into health [correction: into the NHS]. So, the £425 million that has been put into the MEG—more than that is going into the health service this year, because their requirement for additional funding is over and above that level.

And, similarly, with transport, the pressure on TfW on the rail side is more than £125 million, but there's been some scope to reallocate budget from within the climate change MEG to sort of support that expenditure. So, there's a kind of range of factors that go into that sort of decision about how much can go in centrally, how much is needed, how much is available, how much can be managed within the MEG, and then you kind of get the product at the end of that.

Yes, thank you for that.

Thank you. Jack.

Diolch yn fawr, Cadeirydd. Minister, in response to questions from Peter Fox, you talked about the higher than budgeted public sector pay awards, particularly in the NHS, and I think you used the words that they were your key drivers in terms of completing the work of this financial statement. Can I ask why funding for pay awards is only being provided for the NHS in this final statement, and not, for example, for teachers, who also had pay deals?

So, we were able, as part of this exercise, to protect the revenue support grant, and that was very much part of our consideration in terms of allowing local government to continue delivering the services it can. So, I think that protecting the RSG was an important step in the process, because that was never guaranteed; you can reopen the settlement in the financial year. And the local authority revenue budget and capital forecast for this year, which has been published, shows the budgeted revenue spending for education rising at 7.5 per cent, and social care by 11.2 per cent. So, although there are significant pressures still in those areas, it does show that they are well provided for, I think, within local government's plans, bearing in mind, of course, all the pressures on local government that we're all familiar with.

Thank you for that. On Monday, we held a session, which the Chair was also at, in the Petitions Committee on a petition that heard evidence from school governors and headteachers in both primary and secondary schools. I must say they painted a pretty stark picture of the education sector in general. And their view—. We'll be writing as a committee to this committee, and also the Children, Young People and Education Committee, as they go through the longer process of scrutinising Welsh Government's budget, but the picture they painted was pretty stark and, in essence—I think I'm right, Chair, in saying—if their school budgets weren't increased, there could be some pretty difficult situations going forward. We heard of redundancies and others, and I'm sure more will come to light in due course. What assessment have you made, or the Welsh Government has made, perhaps with the education Minister, in terms of the impact it could have on pupils and teachers, but particularly pupils, if school budgets aren't increased to the levels that they wish to see?

I think it is fair to say that there are going to be difficult decisions made right across the public sector, because we're taking this action in this financial year, but we know that, next year, the pressures are also going to be there and we're not going to be able to do everything that we'd hoped that we could do. We're also very aware that the level of schools' reserves has decreased significantly over this year, because schools are using those reserves to try and keep their plans on track.

So, at the moment, all we can do is, really, press the UK Government to make a positive contribution to public services at the autumn statement, because the facts are really stark in terms of the lack of funding that we have to do everything that we would want to do. And I don't want to paint a rosier picture than is realistic, unfortunately.

If I may, Jack, on that point, you've talked about protecting the RSG, and, obviously, you're the Minister for local government as well as finance. What conversations have you had with the local authority leaders with regards to everything else that goes around that RSG—so, social services and social care is a huge pressure on local government, and education and the others? So, it'd be interesting to understand—. Yes, you've protected the RSG, but what are the knock-ons? Is it something to follow on from that, Mike?

Yes.

If you want to take that question, and then maybe the Minister can answer.

Yes, very much on that. There was a time, when I was involved, that the RSG couldn't be altered in-year without primary legislation, because that was the quid pro quo for local authorities not being able to give a supplementary council tax, which, again, as far as I'm aware, they're not legally allowed to do. Is that still the case, or has that changed?

So, you would have to have a vote in the Senedd to change the RSG within the financial year. That would be the process to do it.

But it wouldn't need primary legislation to do it. Because there's primary legislation, which has that quid pro quo, wasn't there?

Is it still primary?

I don't think it's primary. We'd have to perhaps give you a note on that, but there would definitely need to be a vote in the Senedd on a change to the settlement. The settlement is something that the Senedd votes directly on.

But, at that stage, then, would councils be allowed to set supplementary council tax?

I don't know the answer to that.

Perhaps you could write to us.

With regards to that conversation you've had with local authorities and the pressures, and going on from what Jack was saying, especially around education and other services, especially social care and that sort of element—.

So, in-year, I've had lots of discussions with local government, through a number of forums, but particularly so through the finance sub-group of the partnership council for Wales—that's the main forum in which we talk about the budget and the pressures facing local government. I think that they did recognise, at the start of this financial year, with the 7.9 per cent increase overall, that that was a good settlement and it did put them in the best possible place, notwithstanding a difficult year. So, I think that's been recognised, and I think there was an appreciation that we had protected the RSG in the work.

That said, the pressures you've described—children's services, adult services, housing and homelessness and social care—they all come up as the main pressures that local government are identifying. And that goes into next year as well. So, our officials—and this is with my local government side of the portfolio now—work closely with treasurers to identify the pressures across local government, so working with each treasurer to get a picture of what's happening locally, and then that all that comes back as part of the discussion that we have. Through the finance sub-group, the Welsh Local Government Association provides a paper, which sets out in more detail all of those pressures that they anticipate for the next financial year, and that forms part of our considerations, then, for the budget.

But, of course, the RSG is only part of the picture. We've also got a whole range of specific grants that go to local government. And within those, I'm trying to undertake a piece of work that looks at reducing the administrative burden on local authorities, and potentially doing so by moving more grants into the RSG, or looking at which smaller grants we could combine together to create a larger grant. So, that's work that all colleagues are doing across Government at the moment, looking at every single one of their grants and testing whether it could be moved into the RSG. And I think that level of flexibility would be welcomed by local government as well. So, if we can't provide the money that local government will desperately need, perhaps we can give them more flexibility to use what they have.

And I suppose it boils down then, from this committee's point of view, or from this Senedd's point of view, to that not seeing the movements within the MEGs until later creates that uncertainty as well—what demand-led services within education, or within whatever, the other areas of social care—that we don't see where that money is moved from. Because, obviously, there have been efficiencies within some of those departments, and those have a knock-on effect on services provided by local government. So, it's that element of uncertainty and understanding that would be useful, I think, for us to be able to scrutinise, and for the Senedd to understand the movements and the implications of decisions made by Ministers.

So, on the demand-led programmes, it shouldn't make a difference to the services that people receive—because they are demand led, if the demand is there, we still will have to provide that service. So, for example, the money that has been released in respect of free school meals has been done because we've revised our assumptions. But, should the demand be higher than expected, then we will have to find the money to meet that demand. So, it shouldn't impact on the services people receive. It just means that, as we go through the year, we're able to be more precise in our assumptions and release funding where we think it's a reasonable thing to do.

Jack, did you have a final question?

Yes. Thanks. If I can just tease out one final question on education, from the evidence that we heard on Monday. Obviously, if we had more money from the UK Government, we could give more money to different areas that the Welsh Government saw as priorities. One of the suggestions from, I think it was, the secondary school headteacher in front of us, was perhaps to review the formula that is used when allocating education budgets. They gave the example that a similar sized school to the school he was headteacher at, the lower-end of the scale was £3.1 million, I think he said his school was £3.9 million, another school was £4.9 million. And he talked about that 54 per cent difference in budgets between the different schools, and about trying to bring that closer to perhaps 10 per cent or 15 per cent, I think was the number floated around. I'm not saying I agree with that idea or not, but is there any appetite to look at this?

I think I'd have to take that one to the education Minister, because that would be within his portfolio, I'm afraid.

Perhaps we can do that separately as well, Chair. And just a final question from me, Minister: we've spoken a lot, for obvious reasons, about Transport for Wales, given the announcements in the financial settlement to them—is that funding recurrent, and what action is being taken to ensure that the funding and service provision arrangements are sustainable in the longer term?

So, I'll begin, and then perhaps hand over to Andrew. In terms of recurrent funding, obviously, I can't say anything for future years until we publish the draft budget later on this year. But, certainly, the anticipation of further pressures in the future is certainly there.

I think it's certainly true to say that the funding problem is recurrent, or at least long term, in the sense that the costs of operating the railway are relatively fixed in the short run, and we're not expecting massive increases in the fare box in the next year, two years. So, yes, that pressure continues. There are things that, potentially, could be done to mitigate the cost pressures and improve the revenue position of the rail service, and TfW are clearly looking at all of those kinds of things—timetable optimisation and getting more fare-paying passengers onto the trains. So, clearly, they'll be looking at all of those things, going forward. But, yes, that kind of pressure on the rail service definitely continues into the future.

Okay. I'll leave it there, Chair.

Thank you very much. Well, that brings us to time and we've got the Counsel General coming in now to give us evidence on the financial impacts of the Elections and Elected Bodies (Wales) Bill, so that will be interesting. And I suppose the question that we didn't get round to, so we might write to you about, is there was a £25 million efficiency made in central services and administration: is that going to have an impact on our legislative programme, because I'm assuming that—?

The reductions that we were able to make in that particular budget haven't impacted particularly on the number of staff, for example, in the organisation.

So, with—. If it's demand led, the demand is going up because we've got more and more legislation coming through, but that has had a cut in people, basically, or not being able to recruit people.

No, we haven't had any reductions.

No reductions. Sorry, I misheard.

Sorry. No change in staff numbers. We were able to find savings this year from other elements of the budget.

Okay. Thank you very much. Diolch yn fawr iawn. Obviously, there's a transcript going to be available for you just to check for accuracy afterwards, but diolch yn fawr iawn. Thank you very much for your time. Diolch. We'll just take a short break.

Croeso cynnes yn ôl. Dŷn ni wedi cael newid Gweinidog, so mae hynny'n beth da.

We move on to our third item on the agenda this morning, which is the evidence session on the financial implications of the Elections and Elected Bodies (Wales) Bill. We welcome the Minister and officials. Would you be able to introduce yourself and your colleagues, please?

I'm Mick Antoniw, Counsel General and Minister for the Constitution.

Michael Kay, deputy director for elections.

Mathew Xerri, head of elections policy within Mike's division.

Wonderful, thank you very much. Croeso cynnes to this meeting. We've got an hour or so to go through some questions with you this morning. Obviously, you'll have a transcript of this afterwards to check for accuracy.

I'd like to start by exploring the Welsh Government's approach to preparing the information on the regulatory impact assessment, and how you engage with stakeholders and how cost estimates are presented in the RIA. Can you outline how you approached preparing the cost estimates for the Bill and are you satisfied that, in presenting the RIA, the committee and the Senedd have a full picture of the potential costs associated with this legislative change?

I think the information that's provided is the best information that is available. There are obviously some areas where there are uncertainties as to costing because they relate to things that are going to be done in the future, or things that are work in progress, particularly, for example, with technology. The bodies that obviously are most important that we've been engaging with, of course, are local authorities, the Electoral Commission, the Local Democracy and Boundary Commission for Wales, and also Welsh Government economists, the chief economist and Welsh budget officials. So, it's work in progress, but it's also taking, really, all the expert evidence and all those who have expertise in this area and the potential costings. I'll perhaps go over to Michael, if there's anything further in terms of the way the costings have been put together.

I think just one point I'd add to the Counsel General's overview is that in October last year we published a White Paper on electoral administration and reform, which set out our priorities for reform. That was accompanied with a draft regulatory impact assessment, to set out what our best estimates of cost were at that point, as a way of trying to find out from colleagues, in giving their views on our proposals, what the associated costs would be. So, I think what was published alongside the Bill was effectively the second iteration of an RIA, more focused on the provisions that were in the Bill, but we have been quite public and collaborative in our approach to preparing that RIA, so I think, as the Counsel General says—

Can you clarify what the opportunity costs of the Bill are?

I think there's a total of around £700,000 of the opportunity costs, which would be, obviously, things that Welsh Government would be doing in this space rather than other areas over the 10-year course of the RIA.

And because this Bill has elements of it that are frameworks, so you're going to be looking at coming back with secondary legislation, how have you allocated for the costs involved in secondary legislation in this process? Can you give us a flavour of what you think those might be?

Well, there will be areas of secondary legislation, and of course there will be work in respect of the conduct Order itself. I think each of those sets of regulations, when they come, will have a specific costing that goes with them. At this stage, it's probably not possible to go much further than that on this.

Yes, I agree.

Are they going to be significant or are they going to be—? What sort of order of magnitude—?

They will be within the normal range that there is when we introduce regulations. Regulations, if they have very specific costs that go to them, would have those identified within them.

Right. So, you talked about the White Paper earlier. That covered some of the areas included in the Bill but not all the areas. Are you satisfied that you have adequately engaged with stakeholders on all aspects of the Bill, in particular in terms of the cost of the areas that weren't covered in the consultation?

I'm satisfied, and I think it covers, really, all the substantive areas. Of course, there was a lot of engagement over it and, again, with very specialist bodies that are engaged within these processes as well. In terms of things that have emerged from it, they are only very small details. I'm satisfied that those are really relatively minor elements to it, that all the substantive costs, all the substantive areas, are ones that have been encompassed by the White Paper.

In the RIA, you've outlined a number of benefits that have not been monetised. Are you able to elaborate on what analysis you took to determine the potential quantifiable benefits within those and how you will monitor the delivery of those benefits to ensure that the Bill provides value for money?

Taking that in reverse order, within the Bill, of course, there are provisions in respect of the sort of reporting that normally takes place post elections in terms of the systems that are in place, how that has worked. There's obviously provision in respect of other legislation for review of the legislation and how that has actually worked itself.

In terms of the benefits themselves, these go to the core of what this legislation is about. The legislation is about modernising our electoral system, improving the accessibility of our electoral system through automatic registration, I think, improving the democratic health, that is ensuring that people are on the electoral register, which then facilitates the ability to I think encourage people to participate and to motivate people within the electoral processes. Also it enables, I suppose, adding on to the modernisation—it adds on the use of technology in a way in which I think we've probably not done as much as we could have in the past, but where we're now, through the modernisation process, using all the technological advances to achieve all these objectives of engagement, accessibility and participation.

Of course, there are major challenges that go beyond that. It's one thing to do this, but to get people then to exercise their rights once they are automatically registered, et cetera, is another thing. But also, it's the modernisation of the administration of the electoral system as well, and I think that that bodes well, really, for the future. Those, really, are the benefits, and that's the motivation behind this legislation in the first place.

Thank you very much. There are a lot of interdependencies between this Bill and others, in particular the Senedd Cymru (Members and Elections) Bill, and that Bill needs to gain Royal Assent for some of the work in this Bill to actually make sense and to come together. Can you elaborate a little bit on the potential risks if one Bill doesn't go ahead in its current format? What have you done in the way of looking across your legislative programme and making sure that some of these risks are mitigated?

I think we're very aware—. There are two major electoral reform pieces of legislation, obviously—the one relating to Senedd reform and this, which is to do with the electoral system itself. They're both independent pieces of legislation, so they both stand in their own respect. There are, obviously, crossovers, particularly with regard to the establishment of the electoral management board and so on, and there would be technical changes that would need to be made if one of the Bills failed—there would be certain things there. But the core objectives of the Bill I don't think would be impacted in terms of undermining each of the Bills in their own individual capacity. Anything on that, Michael?

No. I think, as Members will have seen in the preparation of the RIA, we've done a 10-year cycle because of the five, so it captures two local government elections, it captures two Senedd elections, because the Senedd reform Bill, as an example, changes the terms of the Senedd to four years. It's a slightly different cycle, but, ultimately, it's the same number of elections over a 10-year period. So, for financial purposes, not very many interdependencies, and I think the Counsel General has just set out the policy or legal interactions between the two Bills.

Thank you. I'd like to move on to the cost of establishing the electoral management board on a statutory basis. The annual running costs of the EMB are based upon EMB in Scotland. Can you provide further details of how much you have engaged with partners in Scotland to calculate the running costs, and give further details on what those costs will entail? Are there any differences? Obviously, we're in Wales, not in Scotland, so there are differences obviously in demographic and in everything else that goes alongside that.

Our estimate over the 10-year cycle is, for the electoral management board itself, I think £1.4 million, which I suppose works out at around about 140K per annum, and, of course, these are costs that are incorporated within the overall democracy and boundary commission for Wales, which, of course, is funded by the Welsh Government.

In terms of the precise cost and things that may vary and so on, some of these will depend upon the final version of the commission, the structures, the staffing, and so on, but they are very much the best estimates we have been terms of how the board will be created, what it would cost et cetera. Is there any more that we can add on that?

No, I'd say we've worked well with our Scottish Government colleagues, as we did with the UK Government colleagues, in terms of understanding what their approaches are, and we've engaged with the EMB in Scotland also to establish a bit more understanding about what their costs are and have identified. This is, obviously, a different model that we're taking from the one in Scotland, where they've got a statutory committee attached, which is being hosted by Edinburgh city council. But we know that that's something that they're actively thinking about now and they've been consulting on recently. So, yes, we've worked closely and taken account of what their running costs are, but this is a slightly different model and, as the Counsel General said, there are potentially some opportunities from having it hosted by the democracy and boundary commission in terms of the economies of scale that can be made by having one body looking at a few different things in the democratic space.

So, in that case, can you outline if there are any changes in the current funding arrangements for the local democracy and boundary commission to accommodate the establishment and the functions of the electoral management board?

Well, only that the costs of the board itself, the electoral management board, have been assessed, as you've seen within the assessment, and those will be incorporated within the overall costs of the democracy and boundary commission for Wales. So, on the overall estimates for the democracy and boundary commission for Wales, and this is over the 10-year period, basically we're talking about £15 million in respect of the cost to local authorities, which, again, are around about £1.5 million a year, and then £6 million in respect of the democracy and boundary commission for Wales—£6 million, which, again, is about £600,000 per year. And then, within that, with the figures I've mentioned in respect of what we assessed, is the cost of the electoral management board for Wales. So, there are opportunity costs, of course, in terms of the Welsh Government—that is, those who were previously doing some of this work that are now no longer doing it will be released for other opportunities within the Welsh Government.

Okay. And finally from me, you say more accurate costs will be known as the staffing structures of the commission are finalised. Can you outline what those structures may look like and the likely costs of that?

Well, I think it's ultimately going to be up to the commission itself to determine that, but, obviously, there's engagement over that. Michael.

Yes, we've got a working group in place at the moment where we're taking account of the changes in the commission's function. So, it's not just a rebrand, obviously; it's having Senedd boundary responsibility conferred on it, and it's having the responsibilities of the independent remuneration panel conferred on it and the establishment of the new electoral management board. We're working closely with them and different parts of the Welsh Government who are looking at those changes.

We're looking at a staff structure that is quite slim, but a grade 7 equivalent, probably, as the dedicated resource to look after the EMB, and then some support staff who might work between the EMB functions and the independent remuneration panel functions. We're working very closely with them in taking soundings from people like the Electoral Commission as well, and the Association of Electoral Administrators and the Wales Electoral Coordination Board, on how we can make sure that we're supporting the EMB to be operational and effective from day one, given the timescales around the lead-up to the 2026 election.

And with regard to that, then, as this Bill passes through, and you'll be doing a revised RIA, I assume, around Stage 3, will some of that feed into a revised RIA?

That certainly sounds sensible.

I think, as more information comes, if there's information that adds to our understanding of the analysis of the cost and so on, well, that's important and that is available. And there will be, of course, other areas as time goes on as well where additional information is available. So, that will obviously be made available to the Senedd and to the committee, of course.

I think we just probably want to be careful to be clear whether it's a change of cost associated with a legislative change or amendment to the Bill versus something that we just had better information on. But I'm sure that's been done before and we can make sure that we're providing the most helpful information possible.

Thank you very much. Peter.

Thank you, Chair. I'd like to just explore issues around automatic registration and the pilots. I note that the costs regarding changes to the EMS—the electoral management systems—are unknown because of its specialist nature. Could you explain why you can't assess the cost of a specialist area?

I think because it's very much work in progress, but I'll go over to the technical experts on that. Is that you, Michael?

Yes, I can try, and if Mathew's got anything to add in—. So, I think there's quite a lot of variability in what we're looking at here. So, the EMS providers are big databases. Some of them have got data warehousing functions and some of them don't. Some of them, depending on the local authorities that host the pilots, will depend on how much work is needed to integrate the data sources that they've got available to them with the EMS themselves. So, there's just quite a lot of variability in this and, obviously, if we're doing—there are, I think, three different EMS providers operating in Wales—more than one pilot that uses the same EMS provider, then the cost would be different versus if they are using different EMS providers. So, there is just, basically, quite a lot of variability and also quite a lot of commercial confidentiality in this in terms of how much work we think would be required for any one of these days. So, that's why we were reluctant to present a figure that might be misleading. But, ultimately, I think the best estimates we gave is that we wouldn't anticipate this to be as much as the franchise change that was made previously.

So, you've got a picture in your mind, but, for all of those commercial reasons, you have to hold that back a bit. I can see some of that.

Moving on, changes to the automatic voter registration will be introduced through secondary legislation. Can you elaborate as to why there is uncertainty around this and why it hasn’t been costed, and do you have any concerns about the levels of costs involved?

I think the key with the automatic registration is designing the system piloting. I'd say that, as you know, the Bill makes provision for pilots on a broad range from bodies such as the Electoral Commission, from Welsh Ministers and from local government as well, and even jointly. But the only pilot that we will be planning before 2026 is in respect of the automatic registration, and the purpose of that is to show that the system can work or to look at different models of different systems.

What those are going to cost is actually going to depend upon the particular models or the different types of pilot that are actually engaged, who was actually involved and which local authorities might be within that, and that depends on who chooses to come forward to participate with them, and so on. So, it is one of those that, again, is work in progress and it's not really possible to say. We have a broad range of views. We know what happened, for example, when we dealt with changes relating to 16-plus voting, but in this case, et cetera, it's one of those that is impossible to be precise about at this stage and only to really have an assessment. I think there's a lot of pre-marketing work that goes on, of course, in terms of trying to assess some of these, but, again, I'll perhaps defer over to Michael on the detail of this.

I think just one point I'd add is that, obviously, in considering the best design for pilots for automatic voter registration, we're working very closely with local government colleagues. So, I think the design is yet to be settled, because we're trying to do it in collaboration, basically, rather than creating it in Welsh Government headquarters and then sending it out. So, the detail of what those pilots look like will be set out in secondary legislation, to follow this Bill, hopefully.

On those pilots, and you've talked a lot about local authority areas, with boundaries changing and, obviously, counties crossing and having larger constituencies that maybe cross county borders—I can think of some in the south-east that cross those—would that increase the cost, because you'd then have more than one county involved in a pilot, for example, or would you then look to do those pilots within a constituency that's wholly within one local authority?

I think that would depend on the sort of models that are chosen for the pilots themselves. I don't know whether there's been any more work on the detail of what those pilots might amount to.

It certainly is an active consideration about where is an appropriate place to pilot, given the size of the Senedd constituencies expected for 2026.

For example, it's quite easy to do it, I suppose, in Anglesey, because you know exactly where the border is and it's wholly within one local authority, but maybe in Caerphilly it would touch on a number of different constituencies.

Absolutely, and I think that's work to be done. That's the purpose of having the pilots, actually, to get some idea of things—essentially, how automatic registration would work, the sending out of the letters and so on, the responses that come back, the technology that's involved and how that actually works. But, what you want to do with pilots is to basically ensure that you have tested the different systems and worked out what the best system would be for when the actual election itself takes place. So, there will be variability in that, and it's a learning process.

On the pilots, obviously, you've demonstrated it's work in progress, but just to dig a little deeper, what is your ambition for the pilots? What's the scale of the pilots that you would want and is there evidence of similar approaches that you could draw on to get some costings?

I'll bring Michael in in a minute. From my perspective, what we want the pilots to do is to try to simulate how an election might take place within, say, a paired constituency and how the systems actually operate, the extent to which they're successful and what the response is. Because we're talking about, within Wales overall, potentially 400,000 people who might be added to the register. So, you want it to give you a genuine grounding for showing that the system can work and that it will work and, when the election takes place, it will be effective.

The work that has happened previously on things like automatic voter registration has been really interesting as a proof of concept—that it can work and it can be helpful. On a UK level, I think it was last looked at by the UK Government in around 2007, so that's quite a while ago now. I think the Electoral Commission have been looking at data sources, but more to see what interventions you could use in public services to nudge people towards registering to vote, for example. So, there hasn't been much recent work that has happened and that would be applicable in Wales and close enough, in terms of the technological change and so on, for us to be able to identify that as something that would be a helpful example that we could draw an estimate of costs from. From a policy perspective, it's been very helpful, but in terms of costings, not so much.

Okay. So, I can understand that it's not very clear yet what the costings might be. Recognising, then, that these pilots are going to be rolled out by local authorities and the Electoral Commission, and we don't know at the moment what that cost would be, what's going to be factored in, can we assume, though, that you will be providing the funding to support these bodies once they've accrued their costs and present you with a bill?

The first thing is that we'll want to be transparent on this. What these things cost is obviously important, but we have to make sure that the pilots are effective, because our electoral system is of the highest importance—ensuring that it has the confidence et cetera of the population, and also, that it is effective and beneficial. So, we want the pilots, basically, to test the mechanisms for achieving that, and then, eventually, go into a system where, when the election does take place, we have identified flaws, we've identified particular problems et cetera, and we have a system that we are confident will go ahead and will work effectively.

Thanks; that's clearer. I've got a couple of questions, Chair, now, around exploring the costs of introducing the legislative changes. Can you provide an indication of what the funding mechanism is expected to be for the Welsh Government to support local government in enacting the changes described regarding reports on assistance for disabled voters, and are you able to provide any indication of the costs that may arise in secondary legislation?

In terms of disabled voters, of course, there's been quite a bit of work done on that, and, of course, it applies across the UK for Westminster elections as well; so, there's been learning in terms of how that works. There are also issues that are mutual between the systems for UK Government elections and ours in terms of equipment that is available, equipment that is shared, that will be used in one election and the other; so, although there are clear distinctions in terms of the accountability for the administration of Welsh elections as opposed to reserved elections, nevertheless, there are obviously those common features. We're obviously accountable in respect of the funding in terms of the Welsh elections, but there are, of course, those overlaps. And in terms of learning, we're learning from past elections, but also we will learn from imminent elections and so on in terms of how that actually operates. Do you have anything to add, Mike?

As you said, there will be a duty in secondary legislation around making equipment available. I think we would want to consider what equipment is already needed [correction: already available], what is the additional demand, potentially, and what is the most efficient of both parts in terms of the funding mechanism—is it better to do a population-size grant, or is it needs-based bids, or whatever. That's something where we'd want to engage with colleagues and local government to determine the most appropriate mechanism in the future.

From this whole sort of digitisation process, there are opportunities that will emerge, I think, in the future, in terms of the ability to use technology, the location of that technology, the ability to vote in different places and so on. Those are things for the future, but much of this is really something that actually creates the platform to enable that modernisation to take place in elections probably after 2026.

Thank you for that. My last question, then. A cost for an application programme interface to bridge the voter information platform with the electoral management systems has not been calculated. Has there been any indication of potential costs from the EMS providers as to the potential cost to create this capability within the system?

The voter platform, I think, is a very important initiative in terms of information to voters, to citizens within Wales and so on, but on the technical side, again, I'll defer to Michael.

I think there's a bit of consideration needed to what is the most appropriate way of feeding the information through the two platforms. APIs is probably the most likely one, as you describe, but there may be some interest in other ways of populating the elections information platform—for example, direct from a candidate or from an agent. So, there is a bit of that to be considered. We regularly talk to the EMS providers, so we're not fully away from them, but we would want to engage on this in a commercial process again. I think we're also mindful of what work other people might be doing, like Scotland, or the Electoral Commission, or the UK Government, in terms of working with the EMS providers to develop APIs for other purposes, so that there might be opportunity for us to consider it in the round, and if there's a more efficient way of us approaching the technology providers with the same asks from different Governments.

Thank you.

Mike.

On the voter information platform, are you confident that £750,000 to £1 million is now, following the rise in inflation, enough?

Well, it's the best information I have that that is the sort of range, et cetera, but again, in terms of the technicalities of this—.

We did some pre-market engagement in the summer, so quite recently. Obviously, the headline today is that inflation has come down since the summer, so it may be that we're actually—. Well, I don't want to bank that, but obviously it's a very recent assessment, of course, so we are confident that it is reliable.

And within that figure—. I was listening to you give evidence in a different committee, and we talked a little bit about the Welsh language and translation and that sort of thing. Is that factored into that figure, and part of the brief would be to have a bilingual system?

Yes, the provision of a bilingual system is so core that it was part of our pre-market engagement.

And then when it comes to ongoing costs, when it comes to a member of the public standing for elected office, where would the cost be borne then on translation for them? Would that be within the board and within the system, or would it be borne by the individual?

I think, as we said at the other committee, we wouldn't be looking to take the responsibility for translation away from the candidate, because we wouldn't want to take the potential liability if it was mistranslated, or we wouldn't want to get into that kind of dynamic. The regulations would be accompanied by expectations around Welsh language provision. It is to be worked through, but I think my starting assumption would be that it would be appropriate for the candidate to be providing their materials in the two languages of our country.

I think the crux is that it would be, I think, inappropriate for us to take the responsibility for doing the translation—that clearly lies with the candidate, whether it's with their political parties or with them individually. But there are other mechanisms for supporting candidates in broader terms, in terms of accessibility to office, and so on, and I think that's a slightly different issue as well.

Which is what I'm going to talk about now. My view, and it's probably not a majority one, is that the greatest underrepresented group, both in the Senedd and in local government, is working-class people, people from social housing. If the Senedd was representative in that, we'd have 20 Members who were brought up in social housing. I doubt if we've got half a dozen. In terms of local authorities, I've got two wards in Swansea that are 80 per cent social housing or ex-social housing, and they have six councillors between them. Two of them live in social housing or ex-social housing. This is a huge gap between who represents people and the people who are being represented, and that has a huge effect on turnout, et cetera, because it's not people like them they're voting for; it's people different to them.

I agree entirely with that. It's quite interesting, within this Bill, the way we've approached that. Firstly, there are the steps that are taken in terms of information being provided to people. Secondly, there are the steps that are being taken in terms of those with disabilities and the support for people, both in terms of voters and indeed as candidates. But again, I think, it's very interesting. It's a very difficult area to define, how you deal with this. Section 28 of the Bill states that

'Welsh Ministers must make arrangements for the provision of services to promote diversity',

not only in the protected characteristics but also socioeconomic circumstances. I think that is something that is going to tax minds in terms of how you actually address that. What I think is important is that it's actually recognised within the legislation, and at least provides a platform now for beginning to, I think, address those sorts of issues that you're raising. Precisely how, I think, is the really challenging part that I think will be the subject of future discussions. Has there been any sort of further development on that? We're at a stage where this is an objective, but, of course, it's not defined yet.

As you say, Counsel General, it's described in section 28 as

'the desirability of reducing the inequalities of outcome that result from socioeconomic disadvantage'.

We are looking at commissioning research to make sure that there's a fair and consistent way of capturing that and being able to act on it, and being able to target the interventions that are listed in section 28 in relation to that.

A very simple way of doing it, both here and in local government, is to collect the council tax band of the housing lived in by Members here and members of each local authority. That would give you a very rough guide, but council tax banding is probably the best means of identifying relative wealth.

Yes. It probably doesn't apply to other parts of the UK. They could be, for example, in housing in the City of London, which would be all sorts of different bands. But I understand that. I think the important thing is that the desire to reduce inequalities of outcome that result from socioeconomic disadvantage is there, and I think we're now really coming to actually start addressing what we mean by that, and how that might actually be addressed. And, of course, I think the research that's being commissioned is very, very welcome.

Thank you very much. I'm just very pleased to see it in there. As one of the few council estate Members here, with another one in the room as well, we are very much a small minority, and I'd like it to stop being like that.

Moving on to the impact of legislative changes regarding campaign finance, limited cost information has been provided for legislative changes regarding campaign finance. What further engagement and research can you undertake to provide a clearer cost-impact analysis of introducing the proposed changes, and why are you satisfied that this level of information is adequate?

I think the view we take on that is that there's obviously engagement with the Electoral Commission over this, and we've also looked at the UK regulatory impact assessment as well. Those are costs that we—. And, of course, there are issues, and, of course, there'll be a code of practice and so on. But those are things that are already accounted for. So, I think, unless I'm told to the contrary, my understanding of that is that, really, the costs would be negligible, so therefore, there wouldn't be a specific cost assessment of it, because we don't think there is, really, any significant cost that's there. Am I right on this, or—?

You're absolutely right. Part of the conversation earlier was about what was in the White Paper versus—. This is an example of where the White Paper asked quite a broad question about should we be maintaining parity and consistency between the campaign finance regimes for reserved and devolved elections in Wales. We had support for that proposition, and, then, in developing what that actually means in practice, which is the specific measures that are in this Bill, we worked closely with people like the Electoral Commission to reassure us that the costs would be negligible to them, for where they've got new duties on producing codes of practice, for example, and then there's a consistency here with what is in the impact assessment for the equivalent provision in the UK Elections Act 2022.

Moving on, I'll start off with a comment. I actually agree with the transfer of the Independent Remuneration Panel for Wales to the Local Democracy and Boundary Commission for Wales; I think that's a move in the right direction. I have another view on it, which I won't bother you with here today—that we could do away with the remuneration panel and just link it to a grade in local government, for local government. And I've also said, for here, you could just link it to a civil service grade, therefore you would not have any of these problems of people having to come up with views. But that's not for today, unfortunately.

But the RIA states that the panel's £60,000 annual budget would transfer to the commission, and additional costs of £80,000 would be covered by a transfer from the Welsh Government. Are you sure that's going to be enough, and what aren't you doing in the Welsh Government to provide the £80,000?

The £80,000 is in respect of the cost of staffing and so on to service the panel at the moment. I'm very interested in the comments you made; I'm sure they'll be very appreciative of the recommendations you're making to put them out of work in the imminent future. But the fact that it will be there within the commission means that there will be an opportunity to actually look at all those sorts of things, and I think those sorts of recommendations that you're making are things that are well worth putting to the body within its new environment. Currently, the costs are £60,000. The transfer of costs—so, there will be opportunity costs for Welsh Government in respect of the release of those staff that are currently doing those functions that will no longer be for the remuneration panel.

And you're convinced that's sufficient. But, of course, if it was 100 per cent out, it would still be de minimis, wouldn't it?

Yes.

There we are. Thank you. Over to you, Jack.

Diolch, Cadeirydd. Counsel General, looking at the democracy and boundary commission, under the Bill they have scope and the power to charge for goods and services. Can you outline today the scope of that power and also the reasons as to why no costs or income have been associated with it or identified to date?

I think it's mainly a power that's there for the fact that it may want to commission training, for example, and you see that legislation makes very specific that it's training that has to be cost neutral. So, it's not something that can be run or operates that makes a profit or whatever. So, there is no cost impact. It would be a service that's provided that people would pay for, literally the actual, physical cost of the operation itself and so on, and I think it's purely for that purpose—to enable that to happen.

Okay, thanks. So, there would be no income generated from it.

No, no, none at all.

Okay, that's useful to know.

If I can move on to the monitoring and enforcement of undue influence, the RIA notes that the costs are unknown for this due to a lack of data. Perhaps you can elaborate how you've reached that decision and the engagement you've had with the relevant bodies to come to that conclusion.

One of the difficulties is it's almost impossible to work out what the implication of this might be other than, of course, we already have legislative restrictions in terms of issues around undue influence. What I think the legislation does, which also emulates reforms that took place in the UK Elections Act 2022 as well, is to strengthen that. But it's just worth saying we've only had four cases since 2013. None of them resulted in prosecutions. We don't have any anticipation of there being any significant increase. In fact, the purpose of having clear, defined legislation is that it prevents those things actually happening. If there were further cases, well, of course, they would be matters that would be dealt with through the justice system and, of course, we've had engagement with the Ministry of Justice over this, in terms of the justice impact on it, and they're satisfied that they don't think there are any relevant costings there that would concern them.

Thank you, Counsel General. I'll move on to looking at the implementation of the Bill and the costs for implementing the Bill. It's expected that the cost will be met within existing resources. Are you confident that the use of the existing Bill team to implement the Bill is sufficient?

Well, can I say, firstly, I think we have a very expert team? I think this is complicated legislation. It is fundamentally important legislation to be got right. It is important that it has the confidence of citizens and so on. I'm very satisfied that, within the overall assessments and so on, and within the caveats that we have in terms of areas where we can't define costings at the moment, that we've actually encompassed them, that the resources and the capacity are there, not only to deliver the Bill, but all the consequences of it.

Okay, thank you, that's very clear from you, Counsel General.

Just one final question from me, Cadeirydd. The affordability assessment that has been included alongside the RIA, can you elaborate further on the approach to assessing affordability over the appraisal period, and why the decision was taken to include the affordability assessment?

Well, I think the affordability assessment is actually a product of the recommendations from this particular committee. It relates also to value for money and also the building into our costings of inflation as well to try and create more accurate—. But, Michael, did you—?

Actually, this goes to Mathew—

I beg your pardon. Sorry.

That's fine.

Mathew, you get to speak. [Laughter.]

So, yes, this followed the Stage 1 report on the Social Partnership and Public Procurement (Wales) Bill. There was an expectation of including inflation in some way, which is not historically included in the RIA. So, we've now added, within our explanatory memorandum, a separate affordability assessment. The RIA and the affordability assessment are two different things. So, the RIA assesses value for money and looks at the overall costs and benefits of the Bill, but the affordability assessment is a purely financial assessment, looking at cash costs and how affordable that is to public sector organisations. So, our colleagues in the Welsh Treasury and budgeting teams have prepared various guidance on how we should do this, and this is one of the first Bills that has included it. So, the affordability assessment itself doesn't include opportunity costs, but it does factor in inflation, which is a counterpoint to the RIA. So, we've included those two separate assessments there to cover off the different requirements in terms of the information needed.

Thank you. Just a further final question on the points there, perhaps to the Counsel General: this is the first Bill in which the affordability assessment has been used, as we've just heard now, will it be an expectation of future Bills that an affordability assessment will be used, going forward?

Yes.

Diolch yn fawr.

Yes, it's good to see that that is filtering through and making—. You know, we've talked on different occasions about the cost of legislation and understanding the cost, and the anticipated cost and the actual cost when legislation is fulfilled and is on the statute book, so, obviously, anything that we can do to be more accurate in our understanding—

It's a learning curve for all of us, I think, in terms of how we assess these things and the criteria that go into it, so I think it's very useful.

Yes. Excellent. There we are. That comes to the end of our questions today. Thank you very much. It was, as it always is, fascinating to understand or get under the bonnet of some of the figures that we've seen in the RIA on this, and in the implications of this Bill. Thank you very much.

Felly, o dan Reol Sefydlog 17.42, dwi'n argymell ein bod ni'n gwahardd y cyhoedd o weddill y cyfarfod a'r cyfarfod ar 13 Rhagfyr. Diolch yn fawr.