Finance Committee

So, fe wnawn ni symud ymlaen.

We'll move on to the third item, our first substantive item of the morning, which is the evidence session No. 5. We have three of our witnesses with us and we're expecting one more online when he's able to get to us. So, we'll start, and, hopefully, Andrew Morgan from Rhondda Cynon Taf will join us in due course. But, if I start in the room, if I could ask you both to introduce yourselves and your roles within that organisation. So, let's start with Lis, please.

Diolch. Bore da. Councillor Lis Burnett. In my daytime role I'm the leader of the Vale of Glamorgan Council. I'm also a presiding member of the Welsh Local Government Association and a member of the finance sub-committee.

Ffantastig. Croeso cynnes. Anthony.

Bore da. Anthony Hunt, leader of Torfaen council, and I'm also the finance and workforce spokesperson for the WLGA.

Ffantastig.

Then if we go online—.

Os wnawn ni fynd at Nia.

Helo, Nia Jeffreys, arweinydd Cyngor Gwynedd a llefarydd y gymdeithas llywodraeth leol ar social justice—cyfiawnder cymdeithasol, sori.

Diolch yn fawr i ti, Nia.

And welcome, Andrew, you've managed to link up, so that's good. Could you introduce yourself please, Andrew?

Hi, thank you. I'm Councillor Andrew Morgan, leader of Rhondda Cynon Taf, and I'm also the leader of the Welsh Local Government Association.

Fantastic. Great to see everybody here. We've got a lot to get through in an hour, so brevity would be appreciated. To start off with, I'd like to understand the funding available to local authorities in Wales in 2025-26 and the provision of the local government settlement and look at that. In your evidence you estimate that local authorities are facing a financial pressure of £559 million next year. The provisional settlement provides for an increase of £253 million. What does that mean in real terms in terms of how you're planning and what it means for local authorities across Wales? Maybe we'll start with Andrew or Anthony, depending on—. Shall we start with Andrew? Yes, we'll start with Andrew. There we are.

Thank you. Yes, while we are grateful for the uplift, which obviously is a positive compared to what we were fearing the worst of, in terms of a budget settlement that could be as low as 0 per cent or a 1 per cent rise, clearly, the figures show that it only meets around half of the actual demand in the coming 12 months, which means there is going to be significant pressure on local authorities. And unfortunately, at a time when we will see council tax then going up, we will see a number of local authorities having to make a reduction in services. And to say, this is on a backdrop of continuous high demand, in particular in social care. We are seeing continued growth and complexity both in children and adult social care support needed, and that is an extreme budget pressure. There isn't probably a local authority in Wales in the current financial year that isn't overspending on its social care budget, and that is obviously factoring through into our budget planning for next year. Then, when it comes to council tax, most local authorities, I'm aware, are in the range of probably 5 per cent or upwards for budget planning, at least at this stage. We are acutely aware of the pressure on residents in terms of the cost of living, so it is a real dilemma for local authorities in how we manage to protect the statutory services, trying to provide those additional services—the non statutory—that the residents do ultimately still value and rely on, at a time then of not hiking council tax to an excessive level. So, the next 12 months are going to be a challenge, no doubt.

Anthony, did you want to come in, from a finance aspect, with your—?

Yes, it’s just about describing that balanced picture. It’s still going to be difficult for councils to address those pressures—as you say, £559 million of pressures—in the system, but, at the same time, because of this budget, the order of magnitude of that challenge is different. There will be schools that retain staff, there will be services that can be maintained, because of the better than expected settlement. A cash flatline or even 1 per cent cash—the impacts of that, I think, would have been unthinkable. I think we would have had massive service cuts across Wales. We would have had a lot of redundancies in councils across Wales. Hopefully, now we can deliver something a lot better than that, but it's still a challenge.

Lis, there's obviously a range within that settlement across Wales, and the formula and things like that. So, from your experience in your council, and talking to other leaders, what are those challenges, then? You talked about social services, but those other challenges as well.

I can give you one example. We have worked very hard in terms of hospital discharges. I think we're probably one of the best in Wales now; we can actually get a care package sorted out for people to go home within approximately three days. That has been of great benefit to the health board, but it basically means we're £10 million overspent in our social care. When we're going forward in budget now, our social care standard spending assessment is 10 per cent above SSA in order to continue with that level of service. And I think that, sometimes, when we talk about local government or councils, it becomes this generic name. What we should be talking about is, 'We are the education of our children, we are the care support for our vulnerable elderly', and so on and so forth. So, we need to look at what that means on the ground to our residents in terms of the services that we provide. And if the money isn't there—. I was talking to Anthony earlier about that there's been some fabulous work in terms of renewing education infrastructure across Wales in the last decade—I don't think that's happened anywhere else in the UK—but we're having to be very, very careful in terms of how we rationalise spend in terms of education, revenue funding for education, because the demands, and the complexity of demand, have gone up exponentially, particularly since the pandemic. So, those are the two areas of overspend, but I don't think that you can then walk away from the impact that has on every other service, if you're putting so much money into those two areas.

Nia, oes gen ti rywbeth i ddweud ynglŷn â beth mae hyn yn mynd i fod yn effaith ar wasanaethau yn dy gyngor di, ac o siarad efo arweinwyr eraill hefyd?

Dwi'n ategu geiriau'r Cynghorydd Morgan a'r Cynghorydd Burnett yn fanna, a dweud y gwir. Dwi'n meddwl ei bod hi'n sefyllfa debyg. Mae'n rhaid inni jest cofio bod yr arian yma wedi dod, ond mae ar ôl cyfnod hir iawn, iawn o lymder yn llywodraeth leol. Dwi'n gwybod, er enghraifft, fod Cyngor Gwynedd wedi torri £74 miliwn dros y degawd diwethaf a bod hyn yn chwarter cyllideb refeniw.

Roeddech chi'n gofyn am dermau byw, yr effaith ar bobl—mae'r arbedion effeithlonrwydd wedi cael eu gwneud eisoes. Rydym ni mewn sefyllfa lle rydym ni'n edrych ar wir doriadau, ac mae hynny'n golygu stopio gwneud pethau, stopio gwneud gwasanaethau mae pobl yn dibynnu arnyn nhw.

Jest i roi ochr arall i'r geiniog yn sydyn iawn, rydym ni’n edrych ar—a dwi’n gwybod bod cynghorau eraill yn y gogledd yma yn edrych ar—dreth gyngor o 8 y cant a 9 y cant. Wel, mae hynny’n andros o anodd i’n trigolion ni. Rydym ni’n gwybod bod treth gyngor yn un o’r trethi mwyaf regressive ac annheg, mewn ffordd. Felly, rydym ni’n gwybod dydy’r argyfwng costau byw ddim yn drosodd. Rydym ni wedi cael y cyfnod oer iawn yma, ac mae’r pris gwresogi yn codi. Rydym ni’n gwybod dydy'r sefyllfa efo chwyddiant ddim wedi’i datrys, ac yn dal i fod. Felly, mae gorfod rhoi’r bwrdwn yna ar deuluoedd, o gael codiad yn y dreth gyngor o 8 y cant, 9 y cant, yn rhywbeth anodd iawn i’w wneud pan fo teuluoedd yn stryglo yn barod. Felly, jest i ategu beth mae pobl eraill wedi’i ddweud, does yna ddim dewisiadau hawdd yn wynebu llywodraeth leol ar hyn o bryd.

Okay. Thank you very much for that.

This is directed, maybe, at Anthony now. I was reading the letter that Jayne Bryant sent to local authorities at the time of announcing the revenue support grant, and then a letter going back from yourselves as the WLGA talking about—. In that, she was talking about that she would consider a floor in the funding. Now the range, I believe—and correct me if I'm wrong—the range is from 2.6 per cent to 5.6 per cent in the range of what different councils are getting because of the RSG, and I don't think, in this hour, we've got time to go into the intricacies of that formula, and the pros and cons of that formula. But it was interesting that she put in that letter the consideration of a floor, and happy to discuss further, and, in the letter going back, again making note of that. What further discussions have you had, or where would you like that floor to sit? What would feel right in maybe moving those councils at the bottom end closer to more of what you were expecting as an average? Anthony, did you want to start or—?

I certainly think there is a strong argument for a floor. I don't say that because of the impact on Torfaen, because Torfaen wouldn't be affected by a floor, because we were just above the average. But I think, in terms of the impact on those councils at the bottom of the distribution formula, a separately funded floor, funded from outside the settlement, I think would be a way of avoiding unwanted consequences in some of those councils. I think a floor of around 4 per cent, for example, would help those councils at the bottom end without impacting the councils at the other end of the formula, because you have to remember there are councils like Newport, for example, who are at the top end of the formula. Well, they've got extra children to educate, extra people to serve within their councils, so they've not had a windfall. But, at the same time, there is, I think, a specific issue with some of the councils towards the lower end of the distribution this year, and I think there would be a positive impact of a floor, I would say, of 4 per cent.

Have you done any work around how much a floor at, say, 4 per cent would cost, how much a floor at 5 per cent would cost, 6 per cent would cost?

I think the figure we have is a floor at 4 per cent would cost about £13 million. Obviously, that's for Welsh Government to decide.

Of course. And any idea what it would be—? Because the further up that floor goes, the more councils get. Do you know roughly what a 5 per cent floor would cost?

The average settlement is 4.3 per cent, so I think there's a separate argument about the level.

So, if you got everybody to 4.3 per cent.

I'm not sure. I've not got a figure for 4.3 per cent.

Okay. That's fine. That's fine. Mike, did you want to come in on this?

Well, the percentage increase, all that tells you is population change, doesn't it? That's what it reflects. The absolute amount, however, and, as Lis knows—you get the second smallest absolute amount of revenue support grant; Monmouthshire gets the least—and we spend all our time talking about percentages; you can't spend percentages, you can spend money. Should we talk more about the absolute amount? Blaenau Gwent gets approximately twice as much per head as Monmouthshire, for example. Now, that's due to Monmouthshire's ability to raise money via council tax and other charges, but, if we're going to put in a floor, should we put a floor not on percentages but on absolute amounts?

If I could just come back on that—.

Of course, Lis, yes.

Yes, our uplift was 3.4 per cent, so we are towards the bottom. I know what we'd get for every percentage if we worked it out. [Laughter.] But, as you said, we also are one of the lowest funded—

Second lowest.

Second lowest, yes, but in terms of education, the lowest funded by a long way currently. I know that there is actually an appetite to be looking at the funding formula. It is very complex. I know we looked at our own education formula and cut it down to 20 criteria. But even then, there are always winners and losers. So, it's something that we've got to look at very carefully, but I think that there is opportunity, and there's a view about looking at the funding formula, looking at the data that the formula is based on, and looking to a greater degree of equity amongst funding. As I said, if you look at being the lowest funded in terms of education and then wanting to support education, so putting £4 million in above the education standard spending assessment, out of a budget that has already had one of the lowest uplifts, it proves very difficult. So, these are the discussions that we've been having.

Anthony, you indicated.

Yes, I think there are two separate arguments here and we need to take care not to conflate them. One is about the immediacy of the need for a floor. The other one is about the formula. The trouble when you get into the latter is that all 22 authorities will find some way why they should be more advantaged than they are by the formula. No-one is ever going to be happy with it. Valleys authorities—we talked about Blaenau Gwent—will talk about the impact on service demand of deprivation and their inability to raise money through council tax. Cities will talk about the people they have coming in to work in them. Barry Island with its popularity at the moment—the pressures that that puts on Lis's council. We can all talk about issues that uniquely disadvantage us. Rural authorities can talk about the cost of providing services across large areas. But I think the floor is a distinct argument to that. I think it prevents unwanted severe implications of that range, and I think it's a good thing.

Okay, thank you very much. Just looking at the tables that were published by the Cabinet Secretary when making the announcement, it looks as if the Welsh Government has updated those tables that sit behind the provision of local government since their original publication in December. Are you aware of that and do you know why it happened?

I know there's been a push to try and update some of the data because, shall we say, it's not desirable to be using too old data when you've got newer data, of course. But any flux in figures obviously impacts different councils in different ways, and I know some councils have gained through that, other councils have lost. But I think that something the WLGA does agree on is the need to try, where possible, to use the most up-to-date data.

Okay, thank you. And finally from me, before I come to Sam, your capital funding will increase from £180 million to £200 million, alongside which there will be an additional £10 million of funding for decarbonisation—a total of £30 million. What does this additional capital enable local authorities to do? Andrew, did you want to come in on that?

Okay, happy to. It is a positive step, certainly. One of the things we've said for a number of years is that local authorities are struggling with capital, in particular, for infrastructure, where there's transport. Things like bridges—a number of local authorities have said about the pressure around maintaining bridges, and, of course, it isn't something that maybe you'd think about spending money on, but, of course, if we don't spend money on maintaining bridges or, in some cases, repairing them at the end of life, it has a substantial impact on communities when you close a bridge. We've got the twenty-first century schools programme or the community schools programme, which is fantastic, but, of course, local authorities again have to put match funding in. So, any additional capital helps us to put our match funding back into the programme.

But overall, we know, from our previous reviews, that we do need more capital investment. There are a lot of infrastructure and assets owned by local authorities that are old and need investment and need upgrading. So, any additional funding we welcome, and we also welcome the suggestion around the local government borrowing initiative funding for highways investment. That is something we've lobbied on for the last few years. And, again, that is an invest to save, because, if you can invest more money in resurfacing roads and reducing potholes, it does ultimately mean we'll pay out fewer insurance claims, which lag, then, about two or three years behind the curve. So, as backlog of maintenance grows, within two to three years, you'd normally see a lag then, where insurance claims start to grow as well.

Ocê, diolch. Nia, oeddet ti eisiau dod i mewn ar hwnna, neu mae'n bosib na wnes i ddod atat ti efo'r llawr chwaith, yn gynharach. So, dwi ddim yn gwybod a oes gen ti jest rywbeth byr yn y fan honno, ac fe wnaf i symud at Sam wedyn.

Diolch yn fawr iawn am y cyfle. I ategu beth roedd y Cynghorydd Morgan yn ei ddweud yn y fan honno, dwi'n meddwl, fod diffyg yn y pres refeniw, a hefyd bod asedau'n dirywio dros amser, sy'n ychwanegu mwy o gost wedyn. So, ia, mae'r toriadau mewn cyfalaf yn bendant wedi cael effaith. Ond diolch am y cyfle, Gadeirydd, jest i ategu o Wynedd fy llais at alwad cymdeithas y cynghorwyr am y llawr. Mae o'n hollol essential i ni yma yng Ngwynedd, fel un o'r rhai ar y gwaelod. Dwi'n cytuno efo'r pwyntiau am y fformiwla—maen nhw'n ddau beth ar wahân. Ond dwi jest yn teimlo na fuaswn i'n gwneud cyfiawnder efo ardaloedd gwledig os na fuaswn i'n dweud bod yna gost ychwanegol o ddelifro gwasanaethau mewn ardaloedd gwledig. Ond, ia, jest eisiau ategu ac ychwanegu fy llais i hefyd at yr alwad am lawr; mae o'n hollol angenrheidiol ar gyfer y flwyddyn yma. Diolch.

Diolch yn fawr.

I'll go to Sam Rowlands for some questions. Diolch, Sam.

Thank you, Chair. Good morning, everybody. We really appreciate you having time with us today, especially as this is a really busy time of year for you all. I just want to quickly touch on the point Nia raised earlier about the potential rise in council tax—I think Nia mentioned around 8 per cent, 9 per cent, potentially, up in Gwynedd. Perhaps a comment first of all on whether that's going to be a likely increase across most councils in Wales, or what the range is likely to be in council tax rises. And then perhaps a comment also on the level of impact of policy direction from Welsh Government legislative change from this place, and the impact that has on your budgets, and how much funding comes along to meet that policy direction from Welsh Government, and whether there could be an accusation of Welsh Government abdicating their responsibility of ensuring that funding comes along with policy or legislative change, and whether political pressure has perhaps been put on you as council leaders in particular to deal with those issues rather than Welsh Government providing the funding necessary to deliver the things that you've been asked to deliver. That comes out in the wash as council tax increases, I guess. So, I'm happy to take any comments on that.

Maybe Andrew, from a WLGA standpoint, and maybe from Rhondda Cynon Taf as well.

I have to say I do support those comments from Sam, and it is something that we've been discussing with Welsh Government. We're also discussing about formalising some of the arrangements between WLGA and Welsh Government and Ministers—very similar to the Sue Essex agreement that was in place a number of years ago, where, in effect, if new policy was put in place by Welsh Government, then it didn't have a detrimental effect on local government unless the funding was there. There are a number of times where there has been funding that comes with a new policy, but we will argue sometimes that we do not think that the funding fully covers the policy area, and where it is laudable and where we do support it, what we're asking for in future is that costings for new policy implementation is jointly assessed between local government and Welsh Government civil service, so that we are clear that, when Welsh Government and when Members of the Senedd vote on a policy, the funding is correct, we know what the costs are in advance, and that that doesn't become a burden on local authorities. That is something we are looking to take forward, and I hope we'll formalise this year.

Lis.

I think one thing, which is a little bit nuanced here, in terms of pilot projects et cetera that are going forward, new initiatives, the way forward that Andrew is suggesting is broadly agreed by all of us. There's one other area that has come up for discussion. Say if you've got education, and there are a number of new initiatives that have come out—and new initiatives broadly go along the same lines, the same direction of travel as most of the other education things—there is a question as to whether or not we should just make sure that the core funding is flexible enough, that it includes those, and then there are, I suppose, guiding principles of, 'These are the things we would be expecting schools to be doing or to be provided during education', because that could then be included in inspections and feedback and those sorts of things, rather than having a completely separate tranche of measures and evaluation for one small area of work. Welsh Government are very much trying to simplify the admin tasks on both schools and on local government, and that's one way that that could work.

Can I just quickly comment on that point? It's a really important point, because one of the risks, obviously, is when new policy comes in, there's a level of ring-fenced funding for a moment to help deliver that over a phased period, for example, and then apparently it lands in the aggregate external finance at some point in future—it's not always that clear. But Welsh Government have been talking about streamlining this for years, haven't they? Do you think they're taking it seriously and is it actually making a difference at the moment, or is it just still talk?

I mean, for me—Anthony will have a view as well—actually, yes, it is, as it moves forwards. Because when you actually have a new initiative and you're piloting something, there is a temptation, even if it's not working, to keep it going. So, it actually does work, if you've got a brand-new initiative, to keep it as a separate ring-fenced pot of money. Once you've tested that out and once you've seen if it works, and if it's going into AEF, then you can put your guiding principles alongside it. But, as I said, if you don't have some sort of checks and balances at the start, then it's very difficult to say, 'Actually, that's not working, we're going to do something else.'

Okay, thanks. Can I just get a comment on perhaps the average expectation of council tax rises?

I mean, no councillor takes a decision on council tax lightly, and it's always a trade-off between policy objectives, either of ourselves or, as you say, of Welsh Government—you know, a policy objective to raise recycling, for example, that comes with a cost to councils attached to it, but it's something that I think we'd all welcome in principle. So, it's always a balancing act between the burden you place, as has been mentioned, on residents from council tax, and the policy objectives that you hold to try and maintain those vital local services. I think it's clear to say two things: (1) that council tax will be significantly lower than it would've been had there been a flat cash settlement this year. I think in that case, councils would've been plunged into a crisis point where they had no choice but to raise council tax well above the figures being discussed this morning. The second thing is that there is still pressure on councils that will need to be partly filled through council tax, and I think you will see that variation similar to last year's.

Yes. I've got Nia who wants to come in, but I'll bring Mike in and then I'll bring Nia in after that.

You could also increase fees and charges.

Indeed.

But with all these things, I think we need to remember that there's a limit to what you bring in. One per cent council tax in Torfaen raises about £400,000. Our budget is over £200 million, so it's not going to be something that will solve every problem that we have, and we need to remember that.

Before I come to Nia, just a point that I think Andrew Morgan made there, or it might have been yourself, Sam: one thing that this committee, when looking at regulatory impact assessments for Bills, sees is how much it's going to cost Government, but then not necessarily what it's going to cost down the line for local government. I can see Anthony smiling at me there, but it's something that we've long advocated for, 'Well, what is that cost?' And always the defence that comes back from Cabinet Secretaries or Ministers is that it would be too early to say, but, obviously, I'm sure if they asked you, you'd probably have a very good idea of how much it would cost.

It's like if you buy anything, isn't it, from a washing machine to a car, you want to try and work out the whole lifetime cost to everyone of it, rather than just the list price that might be in the shop. I think we need to make sure we do that with policies, to work out, in the round, whether it's value for money. This is not a new thing. I remember working in Government—I age myself here—16 or 17 years ago, and a policy initiative that I tried to stop happening, because it would have saved one Government department money and cost other Government departments and local government and the third sector much more money, to try and stop that narrow view of value for money, and get a wider one about the whole cost of something.

It's good to have that comment, because it helps, not necessarily with the budget now, but especially with policy development and legislation. But I'll come to Nia now.

Nia, oes gen ti—? Wyt ti eisiau ymateb i gwestiwn Sam?

Dau beth dwi'n meddwl sy'n berthnasol i'r ddau beth roedd Sam yn eu codi. Mae penderfyniadau yn San Steffan hefyd, wrth gwrs, yn effeithio arnom ni mewn llywodraeth leol ac mae o’n gyfle da efo'r dreth gyngor hefyd i godi’r pwynt am yswiriant gwladol. Dwi'n gwybod bod y penderfyniad yna, ac efallai ei fod o’n unintended consequence, yn sgil-effaith doedd neb wedi ei ragweld, ond, er enghraifft, yng Ngwynedd, mae'r gostyngiad yna yn mynd i gostio £4.5 miliwn i ni. A phan rydyn ni'n meddwl wedyn am y trydydd sector rydyn ni'n gweithio’n agos efo ar gyfer lot o'r gwaith costau byw, lot o'r gwaith cefnogi pobl, mae hynny'n mynd i gostio £1 miliwn ychwanegol i'r trydydd sector. Felly, mae yna sgil-effeithiau o benderfyniadau sy'n cael eu gwneud y tu allan i lywodraeth leol, y tu allan i Senedd Cymru, ac yn San Steffan, sydd wedyn yn effeithio ar lefel y dreth gyngor ac ar ein gallu ni yma mewn llywodraeth leol. So, roeddwn i jest yn falch o'r cyfle i wneud y pwynt yna am yswiriant gwladol a pha mor anodd ydy o i ni fedru cynllunio. Dwi'n gwybod bod Mark Drakeford yn pwyso am eglurhad hefyd ar y pwynt yma, a dwi yn falch o hynny, ond mae yna sgil-effeithiau o'r penderfyniad yna, yn bendant i ni mewn llywodraeth leol, sydd jest yn ychwanegu at yr ansicrwydd.

Dwi'n gwybod ein bod ni'n mynd i ddod yn ôl at yswiriant gwladol later on hefyd, ond diolch am y pwyntiau hynny. Sam.

Thank you, Chair. And the point that Nia’s raised, of course, that £1 million you described in Gwynedd is then a 2 per cent hit on council tax, probably—the equivalent of—which then you have to stand up in the chamber and try and justify, which I think is the point I'm trying to make around this, that the political pressure on you as council leaders is sometimes perhaps unfairly put on you, with decisions made elsewhere. That's another discussion for another time, I guess.

The next line of questioning is around the sustainability of councils in Wales. We have in recent years seen a risk, perhaps, or a threat of section 114 reports from a couple of councils. Could you provide an overview of what that risk is like at the moment? Are we likely to see councils going technically bankrupt in the next financial year, do you think?

Andrew, you're shaking your head there, so do you want to come in on that? Just unmute Andrew for me, please. There we are.

Okay, thanks. I don't think that is on the cards for the coming 12 months. What I would say is that local authorities have the ability, obviously, unfortunately, to cut services and raise council tax, et cetera, to try and stay within our means of our spending. The real truth of it is that any local authority could be a year or two away from a section 114 notice in the event that we don't control spending. I mentioned earlier about social care, and I don't think there's a local authority that's not overspending on social care because of the pressures. The difficulty is that some local authorities have had to cut non-statutory services significantly over the last decade, and if there isn't a lot more of those services left to cut, then that's where we get into the real difficulty, where statutory services could start to fail.

So, I certainly don’t think there will be any risk of 114 notices in the coming year, but that is not to say that there isn't a risk there in the medium to long term, certainly, and that's why, for those local authorities at the bottom of the funding table, we are suggesting that there needs to be a floor. We've maintained our position that there should be a floor for a number of years. I think Anthony mentioned it's between £11 million and £13 million that's needed for a floor of around 4 per cent, and we think that that should be the minimum to help local authorities this year.

Thanks. And just on the point of sustainability, Audit Wales have said that local government is financially unsustainable over the medium term. Do you have a response on that? And do you think that that's an accurate reflection of the situation facing councils in Wales, being financially unsustainable?

The difficulty is that, because we only get one-year financial settlements, we don't know what's facing us. So, for us to genuinely understand and plan ahead, we really do need to have a minimum three-year funding settlement. So, if the comprehensive spending review goes ahead now later this spring, I know we've been pressing and working with Welsh Government around having a three-year revenue, and potentially the suggestion from the UK Government is that there'll be a five-year capital allocation, that would allow us to plan in a more sustained way, so that we are not just responding every 12 months to what our budget settlement is.

I do appreciate that, when there have been projections on spending in the past—. The first year that I became council leader, for example, we were projected to have a 2 per cent rise and we ended up having almost a 4 per cent cut. Now, that is really unhelpful when it comes to planning. But if we have figures that are going to be maintained and stuck to, it does allow local government to be more sustainable because we can plan over the medium term rather than, as I say, having to make 12-monthly decisions on trying to react quickly to—. We have a statutory duty to consult and go through our budget setting now by the end of February. The Welsh Government comes out with a provisional settlement in December. That only gives us 10 or 12 weeks to line up all of our ducks in terms of making our budgets add up. That's what's not sustainable, I would suggest.

Anthony wanted to come in on this point.

Yes, a few things there. One, I think that, on multi-year settlements, I completely echo Andrew's statement there. It should be the hallmark of sensible governance to give us multi-year settlements, so that we can plan over a longer time period. Secondly, of course, Audit Wales said that it's financially unsustainable unless action is taken, both by us as councils and by those who we work with, and I think that we would say that we will be taking action, as we have done over the last 15 years. I think local government's got a great track record, I think the best track record in the public sector, of managing difficult financial situations. And thirdly, auditors are auditors. Every year, it's implied to us that our reserves are too high by some in the media, for example, and auditors say that they're too low. Auditors are, by their nature, very cautious. That's their job. They have to look at these things in the long run. But there is a route-map to sustainability for the services, but that does involve work, both within councils and outside, to reform services, to transform services, to make them more efficient and effective, and to manage demand, and also to plot that more sustainable future in terms of multi-year settlements.

Lis, briefly, and then we'll need to move on slightly.

Diolch. It was only a very brief comment. It says here about Audit Wales saying—. Audit Wales did the individual assessments of each council in terms of their financial sustainability and Anthony, I think, got the gold star on those reports, but they've recently, in the last couple of weeks, done the overarching report, and the message is that, actually, in the short to medium term there is sustainability. The issue is the medium to long term, which is where the two and three-year funding settlements come into play. So, I wouldn't want anyone to be misled that local government isn't sustainable in the medium term. In the short to medium term, Audit Wales has come out and said, 'Yes, it's okay.'

Thank you. Fair comments. Just briefly, then, you described earlier on in our time together some of the potential impacts of this funding settlement, that there may be some service changes or cuts to posts. Perhaps you could describe what that might look like for councils across Wales, to give a flavour as to some of the types of services that we may see being cut with the financial pressures that you're having to grapple with. That would be appreciated.

Andrew, do you want to comment on that?

Yes. I just would say that, over the next couple of years, the planning for our finances is going to be extremely challenging. The whole local government set-up in terms of us trying to continually make savings to deliver services is becoming more difficult and, from a public perspective, it is increasingly difficult to be able to explain to the public that we've put council tax up while still reducing services. The engagement we have with Welsh Government around the budget setting, while it is positive, is challenging for us. And I just think that the whole process over the next couple of years—I hope that we get to a position where we are not just on this 12-monthly cycle and that we can try and plan over the medium term, because that's one of the biggest problems facing us.

Great. I'm going to move on if I may, and so, I'll go now to Rhianon Passmore to move to some of the next questions. Rhianon.

Diolch, Cadeirydd. I'm going to talk in terms of the financial pressures for 2024-25 and 2025-26 around staff pay. There are a number of transfers into the settlement, as you know, for pay-related purposes. So, in terms of your roles, are you satisfied with the level of funding that has been provided for pay? And to what extent is that a risk going into 2025-26, obviously, in terms of the support for the public sector with increased costs around employer national insurance not yet being confirmed?

Nia, roeddet ti'n sôn am hwn yn gynharach o ran yswiriant gwladol. Wyt ti eisiau jest cychwyn ar hwnna, ac wedyn fe af at y lleill?

Yes, and it's just an opportunity for me to thank the local government workforce, because we complain about all these difficulties, but they are the people on the front line who have to deliver services to people, despite all the cuts that are ongoing. So, I think that all our thanks as the Welsh Local Government Association and as society as a whole to local government workers are worth expressing. So, I'd like to thank them under these difficult circumstances. And they deserve, as Rhianon was saying, fair pay for that work, so that's very important. And it goes back to Councillor Morgan's point again about the multi-year settlement, because it's very difficult to forward plan under the circumstances as they currently are.

From the planning point of view and understanding with national insurance and when those payments are coming and that sort of thing, any comments around that? Anthony.

We've received assurance that we will be given money towards the cost of the national insurance rise for our directly employed staff. Of course, that national insurance rise is one of the reasons why there's more money now for public service organisations. I think we need to be a bit careful not to welcome the funding, but complain about where it's come from—it needs to come from somewhere. So, we've been assured that we will get that money and that is built into our budget assumptions.

On pay, we very much welcome the additional money that Welsh Government gave for teachers' pay and National Joint Council for Local Government Services' pay in-year for 2024-25. That did make a big difference to help our budgets not to be destabilised in-year, and that will help going forward because that's now been baselined and that's something that's very welcome too, because one-off money for pay causes a problem in the future, because if it's not baselined, then it just creates a ripple further up the line, so we welcome that. Of course, we don't know what the pay settlement is going to be for next year yet. The unions are shortly due to make their pay claim and that will be negotiated, but I hope that we can move forward in the same vein in which we worked on that this year to try and do that.

I very much agree with Nia's point, and Lis's point from earlier, about public services being the sum total of the efforts of our staff and also, this isn't about local government funding, this is about funding for vital local services. So, I think, after a decade and a half of real-terms pay cuts for local government workers, I do have sympathy with their cause for greater pay, but of course, that has to be affordable.

Rhianon, did you—?

Indeed, talking around the—. How are you planning, then, for the medium and long term, preparing potentially for worse funding settlements in the future?

Andrew.

Yes, thanks. It's a good question. I think every local authority is doing this and has been doing it for some time, but one of the areas, in particular, we've been focusing on is about how do we avoid some of the demand in the future, social care in particular. So, there’s a lot more support now about how we keep people in their own homes and putting more and more investment in new technology, new adaptions et cetera to support people. It’s cheaper to support people in their own homes, but it’s also a better outcome and the overwhelming majority of people are saying they want to be supported in their own home. When you look at our resilient families programmes, a number of local authorities are doing a lot more interventions early to support families to keep them out of the statutory children’s social care sector and to support and provide that kind of wraparound support to families, because, as I mentioned earlier, some of the children care costs to local authorities really are eye-watering. We’re talking tens of thousands of pounds per week per child in some cases for specialist placements. So, it’s that sort of area in particular where—. If you consider that education and social care are now taking around 70 per cent of all local government budget, if we tinker around with the other 30 per cent, we can make some savings and keep doing things differently there, perhaps, but in those two big areas of budget spend, social care and education, we have to look at how we spend the money in that area to maximise the outcomes and to make sure we get the absolute value for funding, because, as we go forward, no doubt more and more of our budget will be going to those two key areas of spend.

Just on that, and thinking through some of the decisions especially around NI and the potential impact on third sector that support you and then provide services for you that are arm’s length, so aren’t guaranteed to get any funding settlement, could you comment maybe on the risk that if they can’t afford to keep providing you with the services through those contracts, handing those contracts back, or whatever that might look like, is there a risk then in the longer term that it will put even more pressure on your own internal budgets, having to carry those services out because they’re statutory, but you can’t necessarily get somebody else to do it, maybe. Just the impact of the unintended consequence of that NI part. Lis, did you want to come in on that?

I think you can say that, on the face of it, there is. In reality, for any provider, it would come through a cost pressure for a local authority, but I think the relationships that we have with our third sector providers are such that we have open and very frank conversations about the pressures that we face, and it’s almost like an open-book conversation. So, I’m fairly confident that we will move forward and have those conversations in terms of how services continue, and it’s a bit like talking to care providers as well, isn’t it? If you don’t have that level of trust, if you don’t have that level of openness and honesty, then we probably wouldn’t be running successful services now. It’s one of those things that we just have to manage.

Have there been any conversations with the Welsh Government now to try and talk through what that NI increase impact is on those service providers beyond local government. I see Andrew, I think, nodding there. Does the Cabinet Secretary have an understanding of what she needs to provide you with for you to be able to provide those potential contracts?

I think it’s a fair question. So, for example, in Rhondda Cynon Taf, we’re expecting third sector and other providers who provide various services to RCT to need around £3 million in additional support. So, we are factoring into our budget that that is NI money that we will not be getting if those services don’t sit directly with RCT in-house. So, we have factored in around £3 million in additional costs. Part of the conversation that has been had with the Welsh Government is to understand the impact on different local authorities. So, for example, a number of local authorities have their leisure services or their waste collections and other services in the private sector, or are seconded and have staff working through various companies. In those cases, potentially, if they don’t get any NI support, that comes as an additional burden to those local authority budgets.

I think Anthony’s point is correct earlier, mind. I have to say that, while there is an additional £3 million burden in effect on RCT if we uplift and fund those providers to us, I would rather find £3 million to fund that and welcome the in excess of £20 million of additional funding we’ve had as a budget. It is a difficult one, but it’s swings and roundabouts, and my view clearly at present is we very much welcome the additional funding, and if the NI money can go further, then, certainly, we would welcome that Welsh Government—. Our biggest concern, I suppose, is if NI money is Barnettised from the UK Government to Wales, because the bigger public sector in Wales than in England, potentially we won't get the full amount of NI money that is needed, and that's something in the conversations that are ongoing.

I suppose the next step on that, then, is if it's Barnettised and then if it's put through the revenue support grant formula rather than what's needed in different councils because of the different make-up and decisions being made on local government. So, there are two steps to that. There's an issue around the impact, because of it potentially being Barnettised, and then there's the impact of the formula and whether or not the money will get to where it needs to be. So, possibly, some conversations need to be had as to how that works.

Could I just make the point that we've been assured that the money will flow, so, therefore, we can add something into our budgets? My understanding is the Welsh Government is not going to rush. First of all, they are waiting on the UK Government to passport that money on, but then they wouldn't immediately rush to say how it's coming out. My understanding is that they are reviewing the impact on local authorities and how, maybe, a funding formula is needed. We would welcome that. I would rather see the money coming a little bit later in the financial year but the right formula being used to give it to the local authorities based on their costs and their needs, rather than them maybe just putting it through the RSG. So, that is something that is ongoing, I understand, in the background.

Okay. Thanks for that. I'll come back to Rhianon for one more question, then I'll have to go to Mike Hedges.

Diolch. Moving back, then, to social care, you project an overspend in 2024-25 of £106 million and estimate pressures of £224 million before 2025-26. To what extent are you able to protect social services spending within those budgets and will you be able to maintain social service levels, going forward, given those pressures that you predict?

Lis, you talked about this earlier. I don't know if you wanted to come in on that first.

When we talk about how we're going to manage with budget pressures, we take a differentiated approach where we might look at transformation of services, we might look at rationalising services, we might look at fees and charges. There's always a whole range of things that we can do, and social care is one where we actually do that, and I think that that is playing out for most local authorities.

There is a bit of a challenge, because the preventative agenda is very important. How, by taking a preventative approach, can we maintain the independence and dignity of individuals in their homes, but, at the same time, reduce the level of service that they need? One thing that we're currently exploring is using our community resource team when people come out of hospital to support them for an interim period, so they've got physios, care staff and district nursing staff, and whatever, to actually see if there's a degree of reablement that means that, by the time the care package is set, it's actually a reduced package and they don't need such a level of support. There are things like that. It's things like working with St John Ambulance on a fall service and how we get people out—how do they go out and deal with our telecare services to not have people lying on the floor for hours waiting for an ambulance and that sort of thing. So, there are things we can do on that, and those are the transformation changes, but then we have to look at fees and charges and we also have to say, 'Well, how can we shave things off the edges as well?' It's a whole different approach.

Speaking from that experience there, that's good. How well does good practice move across from localised, very good practice in certain areas? How do you share that best practice across the local government family?

You're probably seeing it by us all being here today. We actually are in very close communication, very often, whether it be leaders, whether it be social care leads, and also our directors talk—I think you've got mine coming in shortly—so, there is this level of conversation. Directors have actually worked on an initiative to do with back-room support for social care—

So, that work is ongoing.

There is lots of stuff going on, yes.

Good, good. I know that Anthony wants to come in, and Sam wanted to. Actually, Sam, do you want to come in with a quick question and we'll have to then look at—? And Mike's been waiting patiently as well, but there we are.

So patiently. [Laughter.]

Thanks, Chair. Just on this point on social care pressures, clearly you've got to get the balance right between presenting a case and being able to sustain it and deliver it and do all the right things for it, but do you think it's been understood properly the significance of the pressures that councils are under in delivering social care across Wales? I mean, the amount of estimated pressure next year, at an additional £224 million, is a huge amount. And, you have more constraints than a health board might have, for example, in terms of how you have to balance your budget at the end of the year. Do you think that's been properly understood by either the people around this table or the Welsh Government—that, actually, the pressures are huge and, actually, if anything's going to cause a massive issue across Wales over the next few years, it's the social care pressures?

Anthony.

I think, to be fair to Welsh Government, they have, in the last few years, recognised the need to look at the health sector as opposed to just the health service. I do think we need a national discussion on a Welsh and UK basis about the sustainability of social care, for older people, for vulnerable adults, for children. Some of those costs that Andrew mentioned for children's placements, for example, are just unsustainable and unfathomable, both in terms of their costs and, I think, sometimes, in terms of the outcomes for those young people and their families. But we're not sitting still in the meantime; we need to continue to invest in those community services, the preventative services, the early intervention services, the things that keep people out of those high-cost services and also improve outcomes for individuals as well. I think it's key that we do both those things. We're busily working, in Torfaen, on those latter issues, trying to improve our community services. That's one reason why lots of what are called discretionary services are the last things I want to consider cutting, because things like play services, things like community services have a real impact on keeping people out of those high-cost services. There also has to be that national honest conversation about how we get to a sustainable position with regard to taking care of people.

Mike Hedges.

Two questions, really, as we're running very short on time. The first one is on education. What are your expectations of pupil numbers for the next 12 months and the next five years, because I've seen figures that show them reducing? Now, that creates two different problems. One is that school budgets are based upon pupil numbers, so if schools start losing numbers, they start having serious problems. Secondly, it's good that the amount of money we spend per pupil is increasing, but won't the education budget be out of sync with the rest of the council budget?

Lis, did you want to—? Yes. Lis, and then I may come to Nia to have a view from north Wales, as well.

In terms of education numbers—I'll leave the others—there is a dip at the moment, but it will come back up. I don't know what was happening five years ago, but there is a dip at primary school level at the moment, but our secondary schools are rammed.

But in five years, they won't be.

No, they'll still be going to primary then.

Or, in seven years, they won't be.

Nia, i sôn am addysg yn y gogledd, neu o Gyngor Gwynedd. Fedrwn ni jest 'unmute-io' Nia, plis? Diolch.

Ie, pwynt tebyg i Lis, dwi'n meddwl. Mae demograffi, a ballu, yn rhywbeth ble rydyn ni'n gorfod edrych ymlaen at y dyfodol, onid ydy? Yn sôn am y pwnc blaenorol, felly, dwi'n cofio, ers talwm, roeddwn i yn yr ysgol ac yn edrych ar y triongl yma o faint o bobl ifanc sydd yna a faint o bobl hŷn sydd yna, ond, yn barod, dwi'n meddwl bod y triongl yna wedi tipio drosodd ac mae cymaint mwy o bobl hŷn yn ein cymdeithas ni a llai o bobl ifanc, a'r angen i gael gofalwyr, a ballu. Felly, mae'r newidiadau demograffig yma yn digwydd rŵan, ac mae'n bwysig ein bod ni'n medru cynllunio yn y tymor canolig a'r tymor hir.

Beth am y pwysau ar ysgolion?

Mae pwysau mawr ar ysgolion, ac fel roeddech chi'n dweud ar y cychwyn ac fel mae Lis wedi dweud, dyma ydy'r realiti yn nhermau sefyllfa ariannol llywodraeth leol, achos dyma ydy'r gwasanaethau rheng flaen y mae pawb yn dibynnu arnynt: ysgolion, llyfrgelloedd, canolfannau hamdden, gofal. Mae o jest yn ei wneud o'n fwy byw pan rydym ni'n sôn am bethau fel hyn, ysgolion ac effaith y gyllideb.

Does anybody else want to come in? Andrew.

On the question around pupil numbers, that is impacting on our schools in terms of staff levels. As has rightly been said, a significant proportion of funding for schools follows the number of children on seats, in effect. Generally in Rhondda Cynon Taf, although it's not every school, I was looking at this last year and this year, and we're probably seeing, as an average figure, a reduction of around 10 children per primary school each year. So, if a school over two years loses 20 children off its roll, that’s in excess of a £70,000 or £80,000 reduction in funding. Therefore, we'll end up losing certainly at least one teacher or teaching assistant. That's what we're seeing as a pattern. This year coming to an end, this financial year, we did see a reduction in teaching staff across RCT, but that was heavily driven by pupil numbers, and I think, looking at the projections and the birth rates coming through, that projection is going to continue, certainly for the next few years.

The point I was making is that, if it was 10 to each school then you could sort your budget out, but it won't be 10 to each school, will it? The very popular schools will just increase in numbers to their standard number, and the less popular schools will end up having more than that 10, which does create local problems.

The question I've got is on the voluntary and third sector. Are you looking to increase the payments to the voluntary and third sector in line with your own percentage increase in budget?

As Lis has said before, we tend to have an open-book relationship with our voluntary and third sector partners. We'll talk to them on a case-by-case basis and look at their pressures.

The other thing with schools, of course, is the one thing I'm concerned about is the increasing needs of ALN and not wanting to have schools losing teaching assistants particularly, who have been helping, especially in primary, with lots of the issues that have been exacerbated by the events of four, five years ago.

I'm afraid we're going to have to bring this session to an end. It's been fascinating as usual. Thank you so much—diolch yn fawr iawn i chi—for making the time to come and see us. I know you're very busy. It was an excellent session from you. Thanks for coming today and being quite candid with us on how things are. As always, it informs our scrutiny and certainly the questions that we'll be able to pass on to Ministers and Cabinet Secretaries to try and get the best possible outcome for local government. Thank you very much. We'll take a short break now.

Can we write on the shared prosperity fund?

The problem we have is whether or not we'll have time, but certainly there were a couple of questions on the shared prosperity fund that we wanted to follow up on. We'll write, but whether or not you'll be able to get it back to us in time is another thing. But we'll certainly write, and we can certainly take that up at a later date. Again, thank you very much.

Diolch yn fawr iawn i chi am yr amser. Fe gymerwn ni doriad byr rŵan.

Croeso nôl. Croeso i'r ail sesiwn y bore yma—sesiwn 6 o'r dystiolaeth.

It's the sixth evidence session on the Welsh Government's draft budget for our committee. We're joined by witnesses from the NHS Confederation and from social services. I'll just do the rounds and ask you to introduce yourselves and where you're from. If we start with Darren, please.

Bore da. Good morning. My name is Darren Hughes. I'm the director of the Welsh NHS Confederation. We represent NHS leaders across Wales.

Bore da. Good morning. My name is Catherine Phillips. I'm the director of finance for Cardiff and Vale University Health Board.

Croeso. Where shall we go next? We'll go to Jane next.

Good morning. I'm Jane Thomas. I'm director of corporate services at Powys County Council. I'm representing the Society of Welsh Treasurers here today.

And Lance as well, please.

I'm Lance Carver. I'm director of social services in the Vale of Glamorgan, but I am here as cadeirydd of the Association of Directors of Social Services Cymru today.

Croeso. Thank you very much for making the time to come and talk to us this morning. The NHS and social services—and services in general—are a major part of the Welsh Government's budget. We're exploring your views on the draft budget and allocations, and how that reflects the First Minister's priorities going forward. The Welsh Government says its spending decisions are aligned with the First Minister's priorities. How do you see this reflected in the allocations in the draft budget, and what are the most significant adjustments or changes that you've seen to reflect those priorities? Maybe if we start with Darren.

Thank you. I think it's fair to say that NHS leaders acknowledge how enormously difficult the financial situation is for the whole of the public sector, not just in Wales, but across the UK. The First Minister's priorities are priorities that NHS leaders share, and many people, but there's a huge challenge out there, a huge amount to be delivered, and the financial settlement is very tight if you factor in the huge increase in demand for health and social care services that we're seeing across Wales, as well as inflationary pressures. The demand leads to you needing more money, you need more people, you need more equipment. So, demand is definitely going the wrong way. So, it does reflect them, but the challenge is enormous.

I completely agree with that. I think the ministerial priorities that have come across in the budget are absolutely what we would all sign up to. However, the real challenge is with demand today. The balance of service need versus our ability to provide it, and provide it in a sustainable way, is the challenge for us.

And then from social services, Lance, what are your thoughts?

Very similar to what Darren has said. I think we recognise very much the prioritisation, but at the same time, there is a significant gap between the funding that has been made available and the funding that's required.

Jane, maybe from the treasurers' point of view, do you have a slightly different view, or a similar view? Because, obviously, you have a broader view, I suppose.

In general, pressures impacting on local authorities are immense. We're talking about figures of more than 7 per cent increases in our costs across all services, and with social services being such a key part of local authority budgets, the pressure that we're seeing there obviously has a huge impact on the council, but then, more generally, that has a wider impact on other services as we look to be able to fund the pressures that we are seeing across our social services. I think social services and schools are probably the two biggest areas of challenge for us.

Last year, we were talking around this time on budgets again, and talking about the interplay between social services and the NHS. Have you seen any difference between last year's approach to the budget and this year in trying to marry up that? Because I think, from memory—and Darren, you'll correct me if I'm wrong—the conversation we had was that social services didn't seem to be getting as much compared to the NHS bigger brother, if you like. So, I'm just wondering if you're seeing any better alignment of those budgets.

In terms of alignment, I think it's fair to say, compared to where we were last year, the demand in social care and the costs for social care are shooting up significantly, and exactly the same in the NHS, and I’ll obviously let Lance in particular speak to the challenges in social care. But I think colleagues in the NHS and colleagues in social care are working harder than ever before to ensure that we are aligned, because health and social care are intrinsically linked. The headlines most often are talking about the challenges in discharging patients from hospitals, but you can't overestimate, and it's incredibly difficult to demonstrate, the hugely important role that social care plays in keeping people well in communities—physically well, mentally well. The health budgets are for delivering health in particular and treating people, but acknowledging the massive challenges in local authorities, the huge number of services they've got to deliver, whilst the proportion of their budget on social care is going up and up and up. So it's hugely challenging, and just to assure colleagues that health and social care staff and officials and chairs of health boards and leaders are working incredibly hard to do the best for those communities. But I can't overstate how challenging things are at the moment.

Is that siloed way of looking at budgets a problem in allowing that money or resource to flow from one to the other?

When it's in two pots of money, the interface between two budgetary responsibilities is going to be challenging. Colleagues in social care have fed back that it's getting more difficult to reach decisions on things like continuing healthcare, on what packages of support are available. When things are as tight as they currently are and there are two separate pots of money, we are going to face those challenges. A colleague from the Health Foundation once described it to me as if a bunch of middle-class people went to the bar they wouldn't be arguing about who was buying the pint and whether they had their round back, but when everybody's really short of money as we are at the moment, every little interaction counts, and I think we're working hard to ensure that shared responsibility for local communities across Wales.

Mike, did you want to come in on this?

Yes. Health is a big budget, et cetera, and it's all centralised, but you've got the split between primary and secondary care, and it's a matter of fact that primary care has had a smaller and smaller percentage of the health budget over the last five years. Primary care is under pressure. Are you as a confederation working with others pushing for primary care to at least be stabilised as a percentage of the Welsh budget? Because it's gone down considerably over the last five years and there are problems with primary care that are feeding into both social services and secondary care.

Catherine, do you want to come in on that?

I can answer from a Cardiff and Vale perspective. We've certainly done some analysis on the work and the amount of resource that we put into primary and community care, and as a result of the pandemic and the increase in resources around secondary care, and particularly around beds and infrastructure, we have seen that it has reduced. It has reduced by about 1 per cent or 2 per cent; it hasn't reduced by the level that you're indicating. I can’t see it from an overall Welsh Government point of view, but I can say that that spend is protected.

The issues that we face in primary care are the amount of money that is in infrastructure and buildings, the pressures that are on primary care to run their services effectively, and also the amount of resource that is occupied by things like medicines for the population. It's a significant portion of the costs that they need to adhere to. We have seen it go down when it should be going up, so that is the gap that we need to be looking at, and strategically we're trying to look at how do we manage that transformation in a post-pandemic environment whilst dealing with the needs of patients and supporting our colleagues in social care and in the communities to deliver care in the most appropriate way, and to deliver on the green and prevention agendas.

What you're saying is it went down by 1 or 2 per cent. Is it 1 or 2 per cent of the total health budget or 1 or 2 per cent of the primary care budget, and how does that compare with the increase in secondary care?

When I'm talking about the percentages, I'm talking about 100 per cent of the money that is spent in Cardiff and Vale health board. For example, I don't know the exact percentages, but it's something like it has gone from 22 per cent to 21 per cent of the money we deploy is now in primary care, and it's a similar number around community care. So to all intents and purposes it's pretty much flat.

Despite increasing costs. I won't take it any further.

But it's of the money we spend, which is increasing with costs. So it's staying proportionate.

Sam, did you want to come in?

Thank you, Chair. I just want to come back to this point around the close working between health and social services, which is good to hear. But perhaps I see it as though you're both playing the same game on the same pitch, but perhaps playing to different rules, and I wonder how much you'd welcome an alignment of some of the rules but understanding the constraints by which, in particular, social care, have to work under compared to health services. And two quick examples spring to mind. The first is around budget setting and adhering to that budget. Of course, local authority colleagues will understand that they're legally obliged to hit a balanced budget at the end of the financial year, otherwise they're in a bad situation. That's a different situation for health and I just wonder how you might reflect on that.

And then, secondly, on the commissioning of services, there's legislation coming down the track that means that social care services will not be able to commission independent sector providers for children's social care. So, again, they're constrained in terms of the ability to manage their finances in an effective way, whereas, rightfully, you can commission Specsavers to support a child with their eye care. So, you're playing the same game, as it were, but you're playing to different rules and financially that has an impact. I wonder what your thoughts are on that comment.

Darren, and maybe then Lance to give the other side of the coin, if you like.

I think there are differences, as you say, about different organisations—the NHS, local government—in their ability to borrow money, how they can recycle capital assets and reinvest in the service. So, there are lots of financial constraints that others around the table are better placed to comment on than I am. In healthcare, you've got most of primary care delivered by private businesses. You cited Specsavers and I'll declare an interest: my wife works for Specsavers up in the Pontypool area. You've got community pharmacies on most high streets in Wales, and 700 plus of those play a huge part in supporting the health and well-being of the local community, and are playing a bigger role now than probably ever before with Choose Pharmacy, the minor ailments service. Dentistry, big struggles there, which we're hugely dependent on.

I think the point I'd like to get across is it's one system, and different bits of the system having to play by different rules isn't helpful, because if there are challenges in primary care or access to dentistry, that has a knock-on then in secondary care, and you can see pressures in social care having a knock-on in health, and pressures in health having—. It's one system, and if one bit of the system is under pressure, it impacts on all other bits. I think we've got to have that whole-system thinking, and it is challenging, but we're committed to working together on it.

Lance, did you want to come in from the social services side?

I suppose, in terms of our integrated care delivery, I think it's as integrated as it can be in the context that you set out of the different rules. Sometimes I hear that integration is the solution. I've got teams where people are working together and managed by each other's organisations, working properly as a team, then having to operate due to separate rules. And some of those rules—. It was interesting how it was portrayed there, but I tend to look at it on an individual recipient basis. So, if you're an older person in hospital and you're coming out, it's really important that you have an assessment that determines whether you will come under the responsibility of the health service and, therefore, have that care free, or whether you would come under the responsibility of social services and have to be charged for that amount. Those kinds of things create real divisions, I suppose, that we have to work with. What I see in terms of our integrated teams is people working with those as really productively as they can, but we can't ignore that that is the legislative context that we're working in.

Again, I think you're right to point out the challenges that the eliminate agenda will bring for us. We're certainly seeing that at the moment in terms of a significant financial challenge. Those things are real and current issues, but I am not picking up, certainly within my area and the vast majority of areas across Wales, that there is, I don't know, conflict and difficulty between the NHS and social care. What I'm seeing is people coming together and working as absolutely closely as they possibly can to deliver the best in that system with those different rules that apply. There may be some exceptions to that, but they're certainly not in my area.

The Welsh NHS Confederation has suggested ring fencing around some budgets, and, Lance, it might be interesting to understand what your take is on that idea of ring-fencing increases in funding for social care. How do you think that might work, or how does that work in practice, I suppose?

I suppose it depends what it is that's being ring-fenced. If you are talking about ring fencing for an authority, that this much of their budget needs to go to social care, I'm not sure that would work. When I look at the budget that my authority has been given, which is a 3.4 per cent increase—so, a real concern—on the basis of a budget of approximately £100 million in social services, our estimation of the national insurance contribution is the best part of £3 million. So, that's most of that gone already, just for something that hasn't even been included. I have demand increase that is astronomical. You'll see, if you look at some of the figures across Wales, that about 1,000 more people are being supported at home across Wales by social care than were last year. That's a significant percentage increase. That's continuing to increase each year. So, that doesn't keep pace with the demand, it doesn't keep pace with the cost, and I haven't even mentioned the real living wage and that implication. So, we've been given an indication that the real living wage is included. I can't see where that is in the 3.4 per cent, if I'm entirely honest. I'm really fortunate—I work for a council that is putting way more than 3.4 per cent into the social services budget, but that is coming at a cost to other council services. But it still doesn't deal with the overall financial challenge. And I think I probably have reached the stage where I believe that the funding for social care is fundamentally broken and that that needs to be resolved either by the Welsh Government or by the UK Government, because I don't think we can continue in the way that we are at the moment.

Darren, you were nodding along to a lot of that. Did you want to comment briefly, before I move on to the next question?

Yes. We're talking in the NHS and in the Welsh NHS Confederation about that sort of focus on prevention and keeping people well. And if you look at the breadth of services that local authorities are expected to deliver, with roles in education, housing, roles in the local economy—. Lance and I speak regularly, and the amount of local authority budgets being eaten up—and it's continuing to grow—by social care is going up incredibly fast. We've seen the report from the Welsh Government's chief scientific officer, looking at where we are now, where we are in 10 years, and Lance and I have had heated conversations about the NHS talking a lot about delayed transfers of care and that sort of cost there. The cost to the public purse of getting things wrong is huge, and, at the moment, because of challenges in the system—and this isn't pointing the finger of blame—I think it's unseen. I was quite shocked, in conversations with Lance and colleagues, at the amount of demand in communities, and it's going on a very, very steep trajectory, and I think that the Welsh Government do need to keep an eye on it.

We've seen a commission announced by the UK Government, and there was talk at the general election time about a royal commission. So, I did a Google search, to see exactly what the terms of the royal commission were, knowing a bit about it, and it's something that the Blair Government did back in 1997—we had Dilnot. We all know what needs to happen, and we all know the way the demand curve is going up. We are dependent in Wales on the settlement from the UK Government to a very large extent, and, politically, I think it's time to get on with it, for the Westminster Government, because, without extra money coming, we're going to really struggle to meet the workforce challenges in social care and to meet that rising demand, and other services that local government provide will suffer and loads of them will lead to poorer health amongst the population. This is a now-or-never moment. The UK Government really need to get on with it, and we do need to have money coming down through the Barnett consequentials to deal with this.

And that's one of the things with Barnett—they have to spend it first before we get any of that money to come to our services. Again, we won't go into that discussion this morning.

A whole new subject.

But, looking at the performance and outcomes that are in health bodies in Wales, the report from Audit Wales on cancer services said that:

'Variations in performance and outcomes persist within and between health bodies in Wales'.

It was quite a hard-hitting report that came out recently—I think it was yesterday it came out, actually.

'The arrangements for the national leadership and oversight of cancer services in Wales need to be clarified and strengthened as a matter of urgency.'

Now, in our report last year, we commented on the absence of strategic thinking around Welsh Government's funding of long-term preventative measures, and, obviously, yesterday, the auditor general said,

'insufficient attention is being placed on prevention of the lifestyle factors that can cause cancer and other major health conditions.'

Has the Welsh Government struck the appropriate balance in this budget between funding preventative and front-line services respectively, in its current approach to prevention? I don't know who wants to go first. Darren.

I'm happy to. My initial thoughts are, at the moment, there's very much a focus on firefighting, that the secondary care sectors are under enormous pressure, social care is under enormous pressure, there's a shortage of capital to invest in some of the bigger projects. On the prevention bit, a lot of it, I think we should remain focused on the Future Generations Commissioner for Wales's principles for ways of working in that long-term event. And on lifestyle, it's really challenging when people are struggling financially and struggling for quality of housing, but the way that people live—. You know, we heard, driving in today, about the effects of obesity on people's health, but there are lots of lifestyle factors that can positively or negatively affect, and the same factors on your likelihood of getting cancer, your likelihood of having cardiac problems, your likelihood of being in employment, which, again, relates to that whole cycle where everything is being linked up. So, we do need a much bigger focus on prevention. There's brilliant work going on, carried out by Public Health Wales, who are a World Health Organization consulting body on these things.

So, have the Government actually got the balance right at the minute, or you'd say, 'No, it needs to change'?

I think it's slightly more nuanced. People say about things that improve people's health that the NHS should be spending on, but I think it's much more societal. I think it's the sort of one Wales public service approach, with the role of local authorities in people's well-being, the quality of their local environment. It's a whole-Government issue; it isn't just a health issue, and I think that's where things are not being focused on, definitely. I probably bang on about this quite a lot with my colleagues. It's about the ability to get good-quality food, access to green spaces—it's a whole-Government, whole-society issue that keeps people well; it isn't just—. The NHS have got a really small part in it and, too often, it's when things have gone wrong that they come in.

Jane, I saw you were nodding to that bit there. So, from a corporate services point of view, and from doing this, what are your views on the question of whether the balance is right and some of the things that you've heard there?

I think, on some of what's been said in terms of the preventative agenda, it's many other local authority services that contribute to that, and I think this links back to any potential ring fencing as well. When budgets are ring-fenced, it ties authorities hands in terms of what they're able to do. And if you look at the preventative agenda, leisure services, youth services, schools, our volunteer partners, third parties, everything, that all contributes very significantly to the preventative agenda. And when budgets are squeezed and the funding that we're receiving is not keeping pace with those increasing costs, inevitably it is those discretionary services that get the most challenge and are likely to suffer the most reduction. So, I think, without that overall funding package being sufficient across the board, you can destabilise a number of those factors outside of social services itself to help contribute, particularly against that preventative agenda.

Thank you for that. From a social services point of view, then, Lance, that's a little bit towards the more preventative aspect rather than the acute, if you like, or firefighting, as Darren explained it there. Any further thoughts on that balance between the two aspects?

I mean, I'm really grateful that things like Flying Start grants and so on have been maintained and protected. I think we would be really struggling without those. But, as Jane said, with the council budgets in the position that they are, they can't avoid looking at areas like leisure, youth services, and so on, and what I am seeing in terms of rising demand for children's services in particular makes me really concerned whether there's a causal link between the reduction in one causing an increase in the other. It's really hard to say that that's definitively what it is, as we've come out of a pandemic and all sorts of other factors have been in play as well. But, certainly, those services are going to be reduced. They're going to have to be. So, it’s not a simple answer to your question, really.

No problem there. Thanks for that, because I think it gets to the crux of the difficulties with this. I'll come to you in just a second there, Darren, because in your briefing for the Senedd's debate on the draft budget, you said,

'The NHS requires clear and more focused priorities, underpinned by a long-term vision for the system.'

Maybe you could unpack that a little bit and respond to what you've just heard as well.

I think very much a related point, really, is that the long-term plan does need to be about reducing demand. It's often underestimated by people, the demand issue, and just as an example, over the Christmas period, the Welsh ambulance service last year got 1,200 red calls, the most serious calls, in a week. This year it had jumped to 1,700, which in terms of a percentage increase in demand is a real 'canary in the mine' moment, really, that we do need to focus on that.

There are things that we need to invest in now, if we're going to have a sustainable and effective service in the future. A really good example is that we've called multiple times for there to be a fully funded, costed NHS workforce plan, which we still don't have in Wales, but that is critical if you look at the time lag to train clinical professionals. We also know that, in areas where waiting lists are most challenged, things like ophthalmic services or orthopaedic services, the age profile of the registered health professional is even older than me, mid 50s plus, who are likely to retire. So, again, this is linked to UK Government, linked to Welsh Government, but we do need a fully funded, costed workforce plan where we're in that firefighting space, not to over use it now, but we do need to be looking to the future.

We've got 'A Healthier Wales', which has very high-level principles, and we've had the update to it. Nobody argues with any of it, but there does need to be much more of a plan. Welsh Government are committed to it—

So, it's a bit more urgency around it, rather than—. It's probably a 'yes' or 'no' question, actually. Has the Welsh Government sent the allocation letter and the NHS planning framework for next year to NHS bodies? And if so, has it set out the headline messages for the funding allocations and the steer of the Welsh Government's related delivery expectations? And has the focus of its expectations changed for 2025-26?

Has that arrived, to start with? And maybe, Catherine, are you able to comment?

Yes, we've received the allocations, we've received the performance framework, we've received the ministerial priorities. So, there is a focus on certain of the 45 priorities that hit the four quadruple aims.

And what's changed?

In terms of there is a focus on cancer delivery at 80 per cent, so the conversation we were just having about prevention. And social service colleagues have talked about the demands today. So, how do we address the demands today while also trying to work on prevention and find funds or resources to do that, individually and collectively together, to make sure that we're improving stuff? And that is the challenge that we've been exploring there. So, a real focus around 80 per cent delivery of cancer services in the timelines, a renewed focus around 104 weeks, which is going to be a challenge, but we do need to treat people and give access to care faster than we have been doing.

Diabetes and obesity and women’s services are also areas that have been focused on or highlighted of those quadruple aims. So, we have got more refinement of everything that we need to do versus the things we need to focus on for next year.

Forgive my ignorance slightly. The letter that comes out, is it tailored per health board, or is it a one to all health boards? It's just for my knowledge, really. Is it a letter to you or is it a letter to everyone?

It's a letter to all health organisations. So, health boards are 50 per cent of those, and there'll be national organisations, but it's very specific about the uplift. Lance has talked about 3.4 per cent; we've got 1.77 per cent, and that's part of the health budget that's coming to us to manage our pressures. So, it's very specific about the money we're getting and what we need to address within those, and productivity is a key feature in that in terms of addressing within the resources we've got.

Thank you very much. I'll come to Mike Hedges now.

Yes. I want to talk about the position of recruitment and retention, which are incredibly important to both health and social services. I'm also aware, if only from Swansea, that there's movement from social services into health as well, because health pays more than social services, which does create a problem. How is recruitment and retention going? And have the salary increases made it easier to recruit and easier to retain?

Would you like me to answer that one?

Please.

So, from a Cardiff and Vale point of view, this is something that we've been working on as a health organisation, but also across our partner organisations, because there's absolutely no benefit to us of resolving our recruitment issues by pushing a vacancy or pressure onto our partner colleagues, because that would just give us service pressures as well, because we won't be able to access those services when we need to. So, aligning pay rates as best we can, recognising that they're different organisations and working to different pay scales, is work that we're constantly working on with our partners.

I can say that our recruitment and retention has improved. We're currently looking at a turnover rate of 9.5 per cent, which is the lowest it's been for some five years. We're using less than 1 per cent on agency. So, we've recruited. We're in a fortuitous position. I don't think that that's reflected across Wales, because I think that there are unique issues in different health boards for different reasons. So, I wouldn't like you to take the Cardiff and Vale view to be the representative view of that across Wales, but I know that all health boards and health organisations are working on this. The point that Darren made about a long-standing workforce plan that looks at changing roles and areas where we've got significant demand, but not necessarily the right workforce to meet that demand in a future form, is going to be really important for us to be able to meet the demands that we get to. Sorry, have I answered all of your points?

Yes. Yes. I'm waiting for social services to respond.

The pay rates in health are generally more generous than social services, and I think that what is probably important to recognise as well is that council pay rates are more generous than those in the private sector, and each of those has an impact. I think that the concern in terms of recruitment and retention is probably best divided up for us in social services between the care workforce and the social work workforce, because I think that they're quite different in terms of the impact. For the care workforce, the new staff are almost all—I think the actual figure is 99 per cent in my region—coming from overseas. And that is a concern, particularly given some of the changes in the visa requirements and so on. So, we are likely to see a problem re-emerge in terms of sufficient availability.

In terms of social workers, I think that the main challenge we've experienced has been within children's social work, where there are significant challenges in terms of being able to work, given that increased demand that we described earlier, and I guess some of the societal changes that have happened over the last dozen years. That has made that job far less desirable, if I'm quite honest. However, I think that what we have seen is some really proactive work from ADSS Cymru, with the support of Social Care Wales, around agency pay rates. And I think gradually we are seeing some positive impacts in that area in terms of filling vacant posts. But it certainly seems to me still very fragile.

Thank you. I think Darren—

Sorry, Darren. Carry on.

Again, thinking of the care workforce, there is inequality in terms of, you could be paying somebody in the NHS more than you would be paying somebody in local authorities to provide roughly that same level of work, which does cause issues that Mike alluded to about people moving between organisations. And that reliance on 99 per cent, I think it was that Lance said, of overseas recruitment is absolutely huge. We've got to pay people at the front line providing care more. We can dodge the bullet on it; staff turnover is incredibly high in that area of the workforce. It's not an issue that's going away.

We've raised it with Welsh Government and the ADSS, in the work that they do, have raised it. We've got to address it. When people can work in a convenience store or, as a colleague pointed out, when their daughter on a summer job was coaching tennis and earning more than a front-line care worker, that's not acceptable. And it's not going away as an issue. Welsh Government and UK Government need to be looking at this. These people provide a critical role in people's well-being on the front line in communities all over Wales, and we need to acknowledge that and pay them appropriately.

Do you want to carry on with the workforce things and then I'll go to Rhianon for the—?

No, I've finished my workforce things, so—.

What about national insurance?

Oh, I didn't know you were speaking about national insurance as part of the workforce. Yes, certainly. On the national insurance increase, you're going to get that covered by the Welsh Government, do you expect? Some of the people who contract to you won't. Two things: will it cause many problems? Isn't that an incentive to improve productivity? I use that word 'productivity' and it's almost as if I'm swearing here, because people don't like the idea of efficiency and productivity. Is that not an incentive for some people to improve productivity? And sometimes, you'll need ICT and other help, but actually if we'd carried on in 1945 as we are now, there'd still be a lot of TB sanatoriums.

It's the challenge with timing, I suppose, with that.

I, like Mike, probably swear too much then, because we do talk about productivity hugely, all of the time. And the employers' national insurance issue, as you said, it's been covered from a headline point of view for people directly employed by the NHS, but as we mentioned earlier, a huge amount of primary care in particular is provided by private businesses. Will there be an uplift in what those private businesses are paid? It isn't covered at the moment. I'll let Lance and Jane from local government answer there.

Also, if you look at the thresholds in national insurance, employers start paying national insurance contributions at £5,000 rather than £9,000, as it was previously, so there's a disproportionate effect on organisations employing people on lower pay. And if we look at the cost of providing care, I see this as a huge issue that is going to come down—. I know that Care Forum Wales and private providers are raising it; local authorities are raising it. There's going to be a huge knock-on effect for front-line services, I think, from the rise in employers' national insurance contributions.

Jane, from a treasurer point of view, managing this—and we know that the money is likely to flow down from Westminster through to Welsh Government to local authorities in particular—is there a challenge in timing and in budgeting and in making sure you have a balanced budget this year, when you're not 100 per cent sure that that money will always cover, and then the challenge of those third sector providers as well maybe? Jane, do you want to just comment briefly on that?

Yes, if I can. If I can touch on the providers to start with. The change in the threshold has a greater impact on those providers, more so than the increase itself, I think, because of the nature of the salaries in that sector, with part-time workers and so on as well. The fact that direct costs for direct council employees is looking to be supported is really good news. But, for us, there is an equal pressure, and I think generally across the public sector, but just in terms of our own authority, we're seeing equal amounts of pressure for direct staff as for those of the provider market. Some of the discussions that we're having are that providers are seeking to look for 10 per cent increases in their contractual costs, and that's down to increases in the real living wage and the impact of national insurance. So, that's a huge ask in terms of the discussions that we’re having with them.

Timing is an issue, when we're setting budgets now and getting those taken through our cabinets and councils. It's very difficult to give a level of assurance around what funding we're going to get and we're being told that we're not likely to have that clarity maybe until May, which is when we're already into that round. So, we're having to include some of those costs in budget allocations when we don't know what that exact level of funding is likely to be, so we are carrying significant risk in some of those budget plans.

If I may, as well, just touching on productivity and efficiency, I think what we've seen across local government settlements that have seen, well, us in Powys take more than £100 million out of our costs over the last few years—. Productivity and efficiency has been one of the key areas that we've looked at to deliver on that without having that impact on front-line services, so transformation across local authorities has definitely been at the front of our agenda, particularly about using technology, artificial intelligence, bots, all of those things; we're using those now across many of our services and looking to improve that year on year.

I think it's fair to say that workforce—I know in our own authority in Powys— is the leanest it's ever been, and that's as a result of the transformation we have done to date, but also in response to the levels of funding that we've received for many, many years that haven't kept up with the costs, and I know we're not unique in that; that is happening across all areas.

So, we are struggling in terms of demand and capacity now, and, of course, in order to be able to fulfil those, it is about the funding regime that accompanies it. So, still a huge level of pressure, but really tackling that productivity and efficiency across the board.

Darren, yes.

I'm just checking my notes now, and just looking at the point on—. I've just reassured colleagues on that sort of productivity; it is a huge focus for the NHS. Like local authorities, we're having to deliver more for less, and Audit Wales did a piece of work last year that showed a clear £210 million savings in 2022-23 in terms of efficiencies. So, it is something we're definitely focusing on, and apologies if people are getting the impression for some reason that the NHS isn't focusing on that; it's critical. Demand is going up, money is staying the same; you've got to be focused on productivity at all levels.

I'll bring Rhianon Passmore in now with some questions around financial pressure. Maybe, reflecting on what Darren and others have said, maybe, in our papers, question 8 might be appropriate to bring in at that point, and then come from there. Rhianon.

Hang on a sec, let's just—. There we are, lovely. Thank you.

I'll move to the comments by the Institute for Fiscal Studies to the committee, then. It didn't detect from the draft budget, the IFS, the necessary sense of urgency, it stated, to tackle performance and productivity issues in Welsh public services that it would have liked to have seen, according to their comments to the committee.

What are your views of the measures included in the draft budget to transform service delivery, and would you—and I'm speaking to our witnesses collectively—have liked to see the Welsh Government do something different with the resources available to improve performance and productivity in the public sector? I don't know who would like to go first on that, Chair.

Catherine's indicated there, so yes.

I'm happy to build on that from the health board allocation point. So, as part of the health board allocations, there are three things that I'd like to focus on that attend to this and Mike's previous question. As part of the health board allocation, we've been given 34 measures of performance and productivity improvement that we're expected to make improvements on, and that's the first time we've seen something at that granular detail and at that volume, so that is helpful, but they are all areas that we would have been working on previously, but that is specified as part of our allocation letter. It also describes that we need to deliver 2 per cent efficiencies. That is not unusual to this year; we were expected to provide 2 per cent efficiencies last year as well, and that's cost improvement, that doesn't include transforming, doing the same for less, or cost avoidance, so that is cash out. And that attends to the £200 million to £300 million that we're generating as cost-releasing savings as a health budget every year, and have been for several years since we've been recovering from the pandemic. So, this is real, and it is delivering.

In addition to that, there is the ministerial advisory group on performance and productivity that's been put together and is looking to report in March. That work is happening right at the moment in order to look at what are the extra areas that we could strengthen and deliver in performance and productivity in health as a matter of priority and over the medium to short and long term. So, I feel like there's been increased focus on this, and that's not to say that, as an organisation, we haven't been focusing on that.

What I would bring to life, and it's the same description for social care as it is for health, I believe, is, when you're dealing with the demands of today, the increased capacity on the demands of today does abate your ability. So, from a practical point of view, those ambulances that Darren was talking about will bring people to an emergency department, they will take beds in the hospital. We have done quite a lot of transformation around our urgent care, and, if people are able to go home quickly, we bring them in quickly, we sort out their needs and we send them home on the same day. So, our same-day urgent care has increased, and, again, that's been part of the Welsh Government's six goals programme to ensure there are services in the community to hold that risk in the community or fast-track those patients through the diagnostics or the services they need to get them home as soon as possible. That doesn't mean that we don't have some very complex patients, as colleagues have understood, and huge demands with our frailer and community populations. So, in spite of all our organisations holding more risk and more patients in the community, the demands on the immediate and very poorly patients do still fill our hospitals and mean that we're running hotter than we ever have done.

Thank you, and it would be useful for that ministerial working group in March to come to this committee in terms of its update to us. Just finally from me, then, to the Welsh NHS Confederation, the Institute for Fiscal Studies has also told this committee that NHS Wales productivity was well down on pre-COVID levels. From your position, what are the main barriers to improving NHS productivity and how are the allocations in the draft budget addressing those issues?

Some of the key barriers are, if you think about the acute sector, in the pressure on there in terms of bed usage, in terms of people arriving at the front door, that time and spare capital and revenue to invest in that change for the future. One of the big areas—. We heard other colleagues asked, 'What would you do if you had x amount of money?' One of the things for productivity that we do need more investment in is digital, that sort of digital infrastructure, and the most commonly talked about is the patient record and sharing information about a patient between primary care and secondary care, between different organisations, between health and social care. We do need that longer term plan. These things don't come cheap, there are huge amounts of capital needed, but, once you've got systems in place, there's also revenue needed to keep them updated, to keep the systems running.

I just think that large-scale investment with us showing improvements already—there's work that's gone on at the Welsh ambulance service, the 111 service, where that access to the headline patient record means that, often, you can give people support from clinicians. We've got clinicians working in the 111 call centre that could call somebody back, give them advice, assure them. But you can only do that if you've got the digital infrastructure there to do it, and I think there's a definite need for more investment in digital, which is going to affect productivity. Hopefully, it will reduce costs, but, more importantly, enable us to provide care in the most appropriate way to patients.

Thank you very much.

I'll bring Mike in on a couple of questions, and then come to Sam, then, to close.

I know we're struggling for time; I'll only ask one question.

Lovely. Thank you.

It's on capital. You've talked about the importance of digital. As somebody who earned my living in it and almost worked in this building in the distant past when Welsh Health Common Services Authority were based here, I'm very much committed to the use of IT. How much of the £500 million plus of capital funding do you expect to be spent on IT as opposed to just being spent on buildings? Have you asked as a confederation that health boards can keep some or all of the receipts they get from releasing land?

It's something that we've raised, and we touched on it earlier in the meeting, the different fiscal rules that local authorities—. Local authority colleagues raised it as well, and it's something—I'll bring Cath in in a minute on it—that is—. At the moment, we do need to be looking at those things that—. If you look at the age of the NHS estate—and they are totally separate points—a third of the NHS estate is over 50 years old; some of it was built, 10 per cent, 15 per cent, before the last war, and colleagues' even older. So, yes, there is a need to transform. And some of the hospital estate is in a really dire situation. Looking at figures that colleagues in NHS Wales Shared Services Partnership have collated, the backlog for maintenance is huge, and, looking at the capital available, in many cases, it's simply not affordable. So, that shortage of capital, if you've got a shortage of capital—. We do need to invest in those things to improve productivity, which we talked about earlier. But having that investment in digital services, digital provision, which enables care to be provided more effectively is going to be critical. And putting a figure on it—. I wouldn't attempt to do that now, but we do need that sustainable, long-term plan for where we want to get to with digital in Wales. And Cath, if you want to say anything about the recycling point—.

And keeping some of the capital, or all of the capital, receipts.

Yes. And rules are different in England, and, again, we can follow up with the committee in writing to explain some of that, because, when you sit down with NHS colleagues in England, their capital rules are quite different. And some of that estate isn't fit for purpose, and, at the moment, if capital—. In many cases, if you sell off a capital asset, particularly buildings or land, the money predominantly comes back into the Welsh Government capital pot. But we'd be keen that permission was given to colleagues to work on some of these things to come up with a plan. We're supporting NHS chief execs at the moment to look at a 10-year capital plan, what's needed to get to where we want to, but also being realistic: 'If x is available, what's the best we can achieve with it?' But it's something that definitely needs looking at, the rules around what we would simply call capital 'recycling', that the money goes into another capital project within the NHS, and also the ability for NHS organisations to invest in some of these capital projects as a group, and good things going on in the Cwm Taf Morgannwg area, which Cath's organisation is a part of, as well.

Great. Anything on that from a social services side, with regard to spending capital? I suppose it mainly comes in through local government, capital into local government and, obviously, as mentioned, the rules are slightly different there. Lance or Jane, any short thoughts before I bring Sam in?

I think we've also been fortunate to be able to access capital money through the regional partnership board, so that's enabling us to build additional accommodation for children and so on. But it does feel very much in response to the required changes set out by Welsh Government.

Okay. Thank you. I'll bring in Sam, then, for some final questions.

Yes, thanks, Chair. I'm grateful for everyone's time this morning. Just on that capital piece, I don't know if you could perhaps share examples of—you mentioned the RPBs just a moment ago, but also examples of—where prudential borrowing through local authorities is helping to support the delivery of both health and social care services together, or is that an area that could be explored a little further? So, going back to the rules, the ability of local authorities to access prudential borrowing could also help support the delivery of health services. I'm not sure if there's any active work at the moment that you could give examples of, or is there any desire to look at that as an avenue in the future at all?

I'm happy to talk—

Actually, Jane, did you want to come in?

Apologies.

You're nodding away there, so, yes, let's—. Jane.

Yes, please. I think, in terms of capital more generally, yes, we have different abilities in local government, but it's important to note that those capital budgets are under strain, with increased costs over many years, together with interest rates being higher than they've been previously and not falling as quickly. There is a lot of pressure, from a capital perspective, on our revenue budgets. So, again, that whole quantum of what we have from a revenue budget does impact on our ability to invest in capital.

In terms of the question specifically about being able to support health, obviously, we are very restricted in terms of what we are allowed to spend our capital allocations on. So, we'd need to be really mindful of the rules around that in terms of supporting health provision, which, obviously—. We can't directly support health, unless, of course, there is a link in terms of social care specifically. I think there are some flexibilities, but I know, locally, capital is a challenge for us, because of that ability to finance it from our ongoing revenue budgets. So, again, it is about that quantum of funding all round that can help and support all of these aspects collectively.

Thanks.

Catherine, did you want to come at it from—?

Well, colleagues have talked about the fundings and the restrictions of fundings, but, from a practical point of view, the public estate that we have across the public sector and how we can use that for the benefit of our communities and our population by coalescing on geographical locations to provide all of those services, the one front door, so that we can optimise our interactions with our communities, is something that we have done across Cardiff and the Vale and will need to continue to do in order to make sure that we’ve got estate that’s fit for purpose and also meets the needs of prevention. Because those are the opportunities where we can look at backlog maintenance and estate as an enabler, as opposed to just the issues that we face today. We have got some good examples of that, and need to do more.

Yes, all right, lovely. Thanks, Chair. Just moving on, then, in terms of the budget announcements by the Cabinet Secretary in the draft budget in December, he told this committee he was satisfied there was adequate funding next year to allow in-roads to be made into waiting lists and waiting times. Do you think that's fair and that the budget is going to allow you to get inroads into waiting lists and waiting times?

I think it’s quite vague—I don’t want to be impolite—but inroads will definitely be made. The rate at which people are being treated on waiting lists is going up and up, but at the front door the demand and people requiring that treatment—. It needs to be—. Inroads will be made, I’d agree with that, but we need this on a sustainable basis; it isn’t just a one-off. I think the Cabinet Secretary, Ministers and politicians in all parties agree that that challenge is huge. The amount of activity and treatment being carried out by the NHS is going up and up, but the funding isn’t. We are getting to that point where it’s really difficult to invest in the future, invest in the workforce, capital in IT infrastructure, in buildings' infrastructure. We’ve talked about the fact that it’s really difficult to do that. But just to reassure, we’re making the most of what we’ve got in terms of the work going on. I’ll bring Cath in, if it’s okay, to just illustrate one of the pieces of work up in Cwm Taf Morgannwg, where local authorities and multiple health boards are sharing that capital to deliver local authority services as well as NHS services. We’ve got to do that in Wales. My take on it is that the estate belongs to all of us as citizens, and we’ve got to make the best use of it, irrespective of the health board, local authority, or any other public body.

Sorry, yes—.

In terms of the challenge for us, clearly, we’ve got a sustainable—. It’s helpful to understand our whole allocation and the challenges that are in front of us. We know, from a Cardiff and Vale point of view, and it will be replicated across Wales, that we need to see 25 per cent more patients next year for those patients who are going to make the cohort of 104 weeks. So, all of the time, as time is moving on, we know our referrals are up on the pre-pandemic level, we know our capacity and our activity is driving up, and we’re looking at productivity measures and how we can do things differently. But the patients who are waiting—there is a big cohort of patients, and we need to work through them in a timely and efficient way. We are going to be in a position at the end of this year where we will have a much smaller number of 104-week waits than we had at the start, but there are still people tipping into that cohort every week after that. It is a big demand challenge, and we need to meet with our emergency pressures whilst also keeping capacity for the planned care. Those two happen in the same facilities, therefore we don’t always have the beds or the facilities to be able to do that, and that’s a real and live challenge, as we’ve discussed, in its component parts.

Okay. Can I just expand on that slightly further, and perhaps I’ll come on to colleagues in social care as well in a moment? I wonder—I don’t know how we can do this as accurately as possible, but how much are we talking about that is purely a financial issue and how much of the proportion of that is systemic structural issues? If you were to proportion that—is it 50:50? Do you think it’s 50 per cent more money and 50 per cent would be systemic? What's the balance like between those two issues? One that springs to mind is describing those long, long two-year waiting lists, 104 weeks—if there were processes in place that allowed you to refer more patients through, in terms of capacity, either in other sectors or in other countries, and you're encouraged to do that, that's a systemic thing, as I say, rather than changing your finances. So, I'm just wondering what's the right balance between a systemic process being an issue, versus just purely finance.

It's really difficult to separate the two, isn't it? It's regularly talked about—commissioning the private sector. There's how fast you commission, and the rate is, obviously, very much constrained by the amount of revenue you've got available. If you want to transform your own services with the capital numbers we're talking about—there's roughly £500 million capital allocation for the Welsh NHS—that doesn't meet the maintenance backlog. So, in terms of big transformation projects—ballpark figures for £500 million to build the Grange hospital. That was then; it would probably be significantly more now if you look at construction inflation. I think we have to be honest about the amount of capital that is available, and we do need that political realism about what is deliverable. We don't need big cathedrals; what we need is the foundations put in right on the systems that we've already got, and it is very much in that prevention space, which affects cancer prevalence, all sorts of issues. It's a whole systemic issue, limited by the amount of revenue available. Obviously, you could treat more people more quickly if you had more money, but the answer is, 'We haven't.' And therefore, if you need to transform services, you can transform services, if you've got more money, and a long-term workforce plan to be able to operate at the maximum effectiveness and efficiency as services are transforming and after they've transformed. It's a really difficult question.

Just on the point of available capital, and it's probably quite a technical question, in the paper to the Health and Social Care Committee, the draft budget says that the £60 million of the £175 million increase in general capital funding for health and social care will need to be directed to support the implications of international financial reporting standard 16, which this committee is well aware of. That's for leases. With £115 million available for investment, does that suggest that £60 million of the £175 million will be a technical adjustment, as opposed to actual capital coming into the system? Catherine, you're nodding at me, so it is.

'Yes' is the answer to that question.

So, it's not real money, it's accounting money, if you like.

It's deemed as a technical adjustment.

So, actually, the heralded £175 million isn't £175 million, it's actually £150 million.

Except for if you didn't have the bandwidth to deal with that technical adjustment, you'd have to find it from somewhere else. That money still has to be found.

Right, okay. Thank you. Sorry to cut across you there.

Thanks, Chair. I'm conscious of time, so perhaps I'll just ask a couple of quick questions.

Yes, of course. We've gone over a little bit, but that's okay.

Apologies. I just want to touch on the issue of grants into social care with colleagues online. There seems to be a lack of clarity, to say the least, about some grant allocations beyond 31 March this year, which is two and a half months away. I'm just wondering if that's been resolved yet, and/or what the impact is for you for budget planning when you're not clear yet on grant allocations for the next financial year.

From my perspective, I'm working on the basis that the grants will be maintained as they are at the moment, and, if they're not, then we will have to deal with that as and when that arises. The position, I suppose, I've set out already means that social services departments across Wales are having to already consider significant savings and reduction plans in order to manage already, and potentially, without grants being agreed, that would deteriorate even further. Where we've got some clarity, that's great.

Okay. I thought Jane was going to speak then as well.

Just to add, in terms of grant funding across the piece, that uncertainty is always difficult to plan with. And I think, as well, when we have grants later in the year as well, although they're welcome, sometimes, again, they're not planned, and, particularly if they're towards the end of the year, it's being mindful then about the difference they can make in such a short period of time, whereas if we knew about them earlier on we could have a much more proactive plan in terms of utilising them.

Just one more thing to add on grant funding: very often, grants will stay at a certain level and are not necessarily increasing at the rate of costs, so that undermines the value, then, that you can get from that grant funding as well. So, just a couple of points from me.

Thank you, Chair.

Thank you very much. We've run a little bit over, but, as always, very interesting to have you here with us and to go through the challenges and the opportunities within the budget. So, thank you for making the time. I know you're particularly busy people. There will be a transcript available for you to check for accuracy, and we'll be in contact if we need any further information. What we'll do now is take a short break for five minutes, just to reset the room. Diolch yn fawr iawn.

Great, we're back now with our evidence session No. 7 on the Welsh Government draft budget, and we've got our next witness from the Bevan Foundation. I'll ask Victoria just to introduce herself. Diolch.

Hello, I'm Victoria Winckler and I'm director of the Bevan Foundation, which is an independent charitable think tank.

Fantastic. Well, thank you very much for making the time to be able to come and discuss the budget with us today. As you'll be well aware, there will be a transcript available for you afterwards to check for accuracy.

I'd like to start by looking at the impacts of the cost-of-living crisis that are reflected in the draft budget, and the Welsh Government's progress in implementing some of our committee's recommendations. You've long been a friend to the committee, coming in and giving us evidence, so it'll be interesting to understand your views and those views over time. Your ‘A snapshot of poverty in autumn 2024’ refers to a stagnation in Welsh living standards. What is your analysis of how cost-of-living pressures and levels of poverty have changed in Wales over the last 12 months?

What that survey showed, and evidence from other organisations, is that the cost-of-living crisis is still with us. It has not gone away. Prices are still going up. It was announced this morning that inflation is 2.5 per cent, but that's still 2.5 per cent up on a year ago, and people's incomes haven't kept pace. So, there are two consequences from that. The first one is that round about half the Welsh population really don't have much money to spare. They just about get by, by being very careful, by having to watch every penny they spend. But a substantial minority do not have enough even for the basics, and they are people who are in what we would call deep poverty, and they are people who are forced to choose between eating and heating. They're the people who are using foodbanks, who are in debt.

What our snapshot survey showed is that we're beginning to see problems stack up. So, whereas the headline numbers of the people who are struggling to afford the basics haven't really changed, what we're seeing behind the scenes is more and more people who are building up debt, and the size of that debt getting bigger. So, far from the cost-of-living crisis being over, as you might think if you look at the media, we actually think it's getting more entrenched into the conditions that people face. And for some groups of people—so, for families, people in social rented housing, disabled people—the challenges are even greater. So, it is not a rosy picture by any means at all.

So, do you think the Welsh Government have sufficiently prioritised that funding to tackle some of those, or alleviate some of those pressures? And what impact do you think that's going to have on supporting people who are experiencing increases in their cost of living?

I think it's a mixed picture, really. I think that in some ways the Welsh Government has taken really positive action. So, maintaining expenditure on the discretionary assistance fund has been absolutely invaluable to people in financial crisis. Things like rolling out free school meals to primary school pupils is also an enormous help to people on low incomes with children. And there's the education maintenance uplift. All those things together have helped ease some of the pressures on some of the people who are hardest hit.

But there are other things where we would have liked to have seen much more rapid progress. The slow progress on building new homes available at affordable rent is really squeezing people who are still waiting for one. We don't have any news on the baby bundle, for example, which would be a big support for families with a new baby. There's talk about geographical targeting, which, I have to say, I think is the wrong approach. There's been talk about that for nearly a year, and we still don't have baby bundles. And there's been no movement on free school meals for secondary school pupils, or on the thresholds for certain benefits.

So, it's a mixed picture. There have been some good interventions and we absolutely welcome that, but there is more that could be done.

You talked about some of those aspects there—. Some of those, like the baby bundle—. That doesn't have a huge cost to it, but the benefit more than outweighs the cost, from what I've read about that and listened to. From your understanding—. It's a limited funding settlement; we don't have all the money that we would want. In those things that you've just mentioned, you've got very costly things like universal free school meals in secondary schools, and then you've got maybe baby bundles, which are at the lower end of cost. How would you rank them in priority if you were in charge of the budget? What would you put first?

I think probably at the top of my list would be a real step up in the availability and cost of social housing, because it not only saves families money but it also gives them security of a roof over their head and a basis on which to live a decent life and move on. You can't do much if you haven't got secure housing. So, I suppose that would be my No. 1 if you're going to really press me.

I think the other thing is some sort of help for families with a nought to four-year-old. Research last year showed that half of children who are in poverty have a sibling who is aged nought to four, and not many of the Welsh Government's interventions, for understandable reasons, actually reach nought to four-year-olds in terms of supporting families, and yet it's a time when incomes fall because mothers are often not working because they're on maternity leave, and where costs can be really quite high, the cost of having a new baby.

So, although the baby bundle is not a panacea by any means, I think it would be really helpful, and it is very disappointing that, after such positive reports from the evaluation, we haven't yet seen that be universal. There might be other mechanisms that you could use to deliver it, but really prioritising those early years groups I think is important.

One of the things that we discussed yesterday, actually, in a statement by the Cabinet Secretary was the Welsh benefits charter. I don't know if you caught that discussion in Plenary yesterday, but there were lots of comments made. What are your views on that attempt to get the charter up and running, to get it done, some of the comments around everybody's buying into it, but not necessarily doing it? So, there's some of that aspect. And those route maps—are they sufficiently supported within the budget to be able to actually do that? And maybe a comment about whether or not it should be on a statutory footing, and what would need to happen to make that happen.

I'm sorry, I missed the debate in Plenary yesterday—I had other commitments. I'm glad that those points were made, because they are very similar to our own views. We welcome the charter as a mechanism for getting the support of the 22 local authorities, but our experience from the various working groups that we participate in is that local authorities are differing in their approach, and the process therefore goes at the speed of the slowest. We recognise that local authorities have many competing priorities, but there comes a point where, if you've signed up politically, then there should be the delivery on the ground as well.

I think we're also concerned that—. The way that the Welsh benefits system will put more money in people's pockets is twofold. First of all, it's by increasing take-up, and local authorities will therefore face bigger bills, and, if you like, they don't have an incentive to roll out the Welsh benefits system because they're going to have to be paying out more in council tax reduction, for example. The other benefit from a Welsh benefits system is from the value of those benefits, and that's why we've argued that there needs to be uprating both of the benefits and of the thresholds. It happens for some of them. Council tax reduction, for example, has been uprated and is uprated every year. But local authorities aren't being reimbursed for the additional costs.

So, I think there's quite a long way to go before even the local authority elements are functioning as the kind of coherent, streamlined system that we would like to see. And there's a step beyond that as well, which is the other Welsh administered benefits, such as EMA, such as Healthy Start, and so on. There needs to be a step up in pace and a prioritisation given to this, across the board.

Thank you very much for that. Has the Wales expert group on the cost-of-living crisis had any engagement with the Welsh Government on the development of the draft budget, to be able to put some of these points to it, and are there any plans for the expert group then to collaborate with the Welsh Government to identify future priorities?

Not that I'm aware of. As far as I am concerned, that group has been wound up. It certainly hasn't met for over a year.

Right. Thanks for that. So, was it useful when it was running?

Well, yes and no. It was very useful for people from several different backgrounds to get together to agree a set of recommendations to put to the Government. So, that was useful. It was also useful to be able to engage with Welsh Ministers on the different priorities. However, the recommendations came just as the Welsh Government announced changes to its budget, and therefore very little in those recommendations was taken forward. In a different climate, at a different time, it might have had a different reception. But it was last year.

So, it was asking for a lot of money, and then the money being cut, I suppose. Or was it asking for changes in where money was being spent?

It was a bit of both. The recommendations—. I'm sorry, it was over a year ago.

Of course, yes.

The recommendations were a mix of what we thought were affordable short-term gains, such as extending the availability of free school meals for secondary school pupils to everyone who received universal credit, not universal, and, for example, helping low-income families with the cost of bus travel. So, there were some quite low-cost, high-impact interventions that we were recommending. There were other things as well that would have been longer term and involve big bucks, like expanding the provision of social housing and various other things. So, it was a mix, and we deliberately pitched them as a mix of things, particularly the things that were deliverable within the next year.

I suppose bringing everybody around the table was the big benefit, to be able to thrash out some of this across organisations and experts.

It was very helpful, and there was a real sense of urgency; there was also a sense of opportunity. We believed, at the time, that the Cabinet was going to take into account at least some of the things that we recommended. I think there's potential for that kind of approach in the future, possibly to be on a standing basis, to make sure that Welsh Ministers hear about what life is like for people on the very lowest incomes.

Thank you very much. I'm now going to pass over to Mike Hedges.

Can I start off with housing? I agree with you entirely that we need much more council housing. I was one of the people who came from a generation who benefited from the provision of good-quality council housing. It's unfortunate that Treasury rules don't treat council housing as an asset, so that when the councils build council housing, they have to build it out of income or out of borrowing, which is limited. If they treated the value of the house against the value of the cost of building it, then that would solve that problem. It's a Treasury problem, unfortunately, and not one the Welsh Government can address. But the question I've got on housing is this: the draft budget reflects an increase of £21 million for the housing support grant, taking it to over £204 million. I'm sure you welcome that increase. How else could the Welsh Government have utilised this resource rather than using the housing support grant?

I'm not sure if this answers your question, but I'll do my best. Yes, we do welcome the housing support grant; it is an invaluable tool for supporting people who need help in the housing market. If that support wasn't provided, I think we would have a much bigger problem with homelessness than we have at the moment. So, I think it is a broadly effective way of providing the support that people need. But it's only part of the solution, because the other part of the solution has to be in housing provision itself. While we have such a severe shortage of social housing, while people who are vulnerable are housed in insecure accommodation and in inappropriate accommodation, then, in a way, they're going to carry on needing the support, and we need to just shift the balance somehow. I can't answer your question on whether the Welsh Government should have taken the resource for the housing support grant from a different place, I'm sorry.

Thank you; that's very helpful. Distribution analysis reports state that the budget provides far greater impact upon the 20 per cent of the population who have the least. What are your thoughts on this analysis, and what populations do you think could have gained more from the draft budget?

The distribution analysis is actually quite interesting, if you like that kind of thing. I think it's really important and really welcome, and it's good to see the Welsh Government do it. But I think we should be clear: the analysis does not show that the most resources go to the poorest 20 per cent; it shows that the most resources go to the second poorest 20 per cent. Given that the population who are in poverty are mainly in the poorest 20 per cent and part of the next fifth, then the resources are not solely focused on people in poverty. So, that's the first thing.

I'd also say that some of the distribution reflects population characteristics. As the analysis says, for example, with education, the reason why there's so relatively low expenditure on the best-off fifth of the population is because they don't have many children. That's just how it works. What it tells us is how many children are distributed across income groups; it doesn't tell us, necessarily, that education spending has been skewed.

And then the third thing I think about the distributional analysis is that it doesn't really tell us if any differences in distribution are sufficient. So, for example, if you look at health, there's about £500 per head difference between spending on the fifth with the lowest income and spending on the fifth with the highest income. Now, what's not clear is is that £500 enough, or should it be £1,000 or £2,000? We don't know, because we're not measuring against the scale of need in those different groups. So, I think, while it's right that overall public spending in the budget does appear to be broadly progressive, I don't think it's enough for the Welsh Government to rest on its laurels. It's not that I'm saying that they do, but there is more to it than that.

And then the last thing I'd say is I think there are some areas of spending where the pattern is very regressive. So, if you look at spending on transport, for example, that favours the richest share of the population, and yet we know that one of the reasons why people on low incomes are unable to take advantage of opportunities is because of the costs and lack of availability of transport. And the same with non-student finance spending on higher education as well—that very much benefits people who are better off. So, it's a useful guide, but there are some quirks underneath it, which I hope I've explained, that I think we'd still need to be mindful of.

Okay. Thank you very much for that. Tell me if I've got this wrong, really, on transport, you're saying we're spending a higher proportion on trains than buses, and the poorer people are the ones who use buses.

Yes.

And on the distribution, sometimes it tells you more about age than it does about relative poverty, and older people tend to be better off, only because they tend to have grown-up children and they tend not to have all the costs associated with a child.

It tells you about demographics, which is partly age, but it's also about family composition as well.

Okay. Thank you. The final question from me: to what extent does the draft budget address your priorities? What would you have liked to have seen in the draft budget, and what would like to take out to fund it?

Ah, well, so what we would have liked to have seen is we would like to have seen much greater expenditure on delivering social housing and accelerating that intervention. We'd also like to see the discretionary assistance fund being protected, which I'm pleased to say is proposed. We would like to have seen both the eligibility criteria and the cash value of different Welsh benefits uprated. And we would like to see—two more—fair, free school meals for all children, so that's secondary pupils and pupils with no recourse to public funds who have low incomes. And finally, we are concerned, on the next phase of Flying Start, there's some uncertainty, and that is reinforced in the budget, as announced. So, we'd like to see that childcare availability rolled out, which we think would be really influential in reducing child poverty rates.

Well, speaking as someone who’s a great fan of Flying Start, I thank you for that, and I think that one of the things this committee could do, and my colleagues agree with me, is try and tease out from the finance Minister exactly what the funding of Flying Start is going to be. I've finished now, yes. Thanks.

Great. You were talking about demographics, and Mike was talking there about the distribution, and you talked a bit about older people, and we've talked about Flying Start, with younger people, and one of the things that the UK Government have done is the announcement on winter fuel payments. Could you comment on whether there is anything in the budget that helps to alleviate some of the pressure that's been created by the universality of winter fuel payments being reduced to older people?

The people hit hardest by the loss of the winter fuel payment are people who are eligible for pension credit but don't claim it, for all kinds of reasons, and people who are just above the pension credit threshold. I think, for pensioners on higher incomes, then the loss of the winter fuel payment is much less of an issue, and there are reasons that could justify it. That is made worse for those groups by the fact that pensioners tend to live in much less energy efficient homes than the rest of the population and are more likely not to have central heating and to be off the gas grid as well. So, we've got a really toxic mix going on there. The Warm Homes programme is, I think, well meant. I think it's better designed than the previous iterations. The problem is the expenditure—the amount that's allocated to it. It is just not enough to improve the insulation in the number of homes on the scale that's needed.

The announcement about the funding for the fuel bank in the current year's budget again is welcome, but I am not sure how effective that would be at reaching older people, because, from what we can tell, it's delivered through crisis organisations, and older people are very unlikely—well, they are less likely, not unlikely—they are less likely to use those crisis organisations, like foodbanks, like the discretionary assistance fund, than the rest of the population. So, how effective that will be at reaching those groups of older people, I'm not sure.

Okay. Thank you for that. Thank you. I'll come over to Sam.

Thank you, Chair. I'm really grateful for your time this morning—it is morning still. I just want to pick up a phrase that I think you used earlier in your contribution, which I absolutely agree with, which is that we need to see more money in people's pockets. I wonder, then, that you must be disappointed that there wasn't a reduction in any sort of tax from the Welsh Government in their budget announcement, such as income tax, which would have been an easy way of getting money back in people's pockets.

Income tax is an interesting one. We are mostly in favour of the Welsh Government using the powers that it has, but income tax cuts tend not to benefit the least well-off because they often have incomes that are below the personal allowance. And, in fact, cuts to income tax tend to benefit better-off people. So, we would not advocate a cut in income tax as a way of supporting people with the lowest incomes. The way to do it is either through some sort of targeted giving out of cash, or some other targeted way of cutting costs. And that's the effective way of reaching people on the lowest incomes.

Would you, then, share the concerns that have been expressed about the implications of the national insurance increase? When we took evidence, I think it was last week, as a committee, it was shared with us, I think it was from the Institute for Fiscal Studies, that the result of the national insurance increase is that people particularly on the lowest wages are going to have a suppressed pay increase. So, you're absolutely right to acknowledge that those people on the lowest wages need to be supported the most, perhaps, but the national insurance increase in employer contributions, the IFS have said, is going to suppress wages for those who are the poorest earning that money. Do you share that concern that the IFS have shared as well?

The IFS view is based on their modelling and makes certain assumptions about employer behaviour, and it may well be that employers manage the increase in their national insurance contributions by not only cutting wages, but also reducing other terms and conditions as well or by raising costs. We don't know yet how employers are going to respond. There have been a lot of noises off of employers saying what they're going to do, but we've yet to see how employers are going to cope, and they might even cut jobs altogether or change the design of jobs. We know, when the minimum wage was first introduced, 20 years ago, there were lots of dire warnings about how that was going to result in job losses, which actually never materialised. So, I would say the jury’s out. The increase in employer national insurance contributions could result in lower wages and job losses, but it could also result in other changes. At the end of the day, employers will say they don’t want it—of course they don’t; they don’t want to pay more tax, do they? But we’ll have to see how that translates into terms and conditions for workers.

Thanks. I'm really grateful for that response. Just a final question on this theme, before I move on: of course, the best way of helping people to get out of poverty and break that cycle is access, and easy access, to well paid jobs, and that access being both in terms of things like transport, but also in terms of skills and, yes, physical access, no matter the situation that they find themselves in. Do you think there's been enough in this budget for next year to encourage and enable businesses to provide those jobs here in Wales so that those people that we all desperately want to see break the poverty cycle, can access those as easily as possible?

So, what the Welsh Government can do to stimulate and support business development and job creation is just one tool in the great suite of things that makes a difference. There’s the bigger UK economy and climate and, indeed, the global economy and climate. And I’m sure I don’t need to tell you that we’re actually living in very uncertain economic times—we don’t know how tariffs are going to play out, we don’t know how businesses are going to respond to changes in taxation. It feels to me more uncertain than we’ve seen for quite a long time. So, I think what the Welsh Government can do is limited. What we would like to see is a greater focus within the Welsh Government’s economic development activity on some of the more disadvantaged places—for example, the Heads of the Valleys and parts of rural Wales.

Okay. Thank you for that. I probably must move on, but I'd be fascinated to discuss this further, perhaps another time, because one lever that they are choosing to use, which will affect those rural areas massively, is the tourism tax and that perhaps is a disincentive to set up businesses in those areas, but that's part of another discussion.

Just moving on to some of the implications around housing, and particularly social housing and the delivery of that in Wales, there is an £81 million allocation for general capital funding for social housing in the budget. I was just wondering what you think the impact of that will be, maybe, on those who need that, and are there other measures that could have been, or should be, used to accelerate the delivery of social housing here in Wales?

Okay. So, the first thing to say is that not all of that social housing grant is used to create straightforwardly social rented homes. Some of it goes on things like Help to Buy and on properties for intermediate rent. And that, alongside the temporary accommodation capital programme, are welcome—I mean, we would not have the programme that we have without them—but we are working on a 10-step plan that would set out how we think that the Welsh Government could accelerate that programme, and that’s partly around stemming the losses from housing stock. We’ve calculated that about one in 20 existing social homes is lost—sorry, one social home is lost for every 20 that is created. So, if we can stop those disposals of the housing stock, that helps to retain a home, even in the short term.

We think there’s more that can be done around acquisitions, and acquisitions not just for short-term use, which is what the temporary accommodation capital project fund covers, but for longer term use so that people who live in them can have a permanent home. We think there then needs to be a look at how all the different and quite complicated factors are affecting the development process—it's not just planning, it's not just land, it's not just the supply chain. There's this quite complex mix of things that would accelerate delivery. I know the Cabinet Secretary's appointed somebody to work with her on the delivery of the 20,000 target, and I'm not sure where that process is, but there are things that could and should be done to speed up delivery.

Thank you. And just in terms of preventative spending on housing as well, things like the independent living programme, and other programmes, and this general theme of prevention, which is certainly gathering some momentum within Government, do you think enough is being invested in preventative measures, in particular on housing, to prevent people from becoming homeless?

I have some sympathy with Welsh Government in terms of trying to balance the need to pay for crisis interventions versus preventative spend, and I can understand that it's the crisis provisions that will always take priority, because sometimes that literally is what saves lives. On the other hand, I think there are more things that can be done to prevent ill health, to prevent evictions, to prevent destitution amongst some groups. The kinds of things vary depending on the service area you're looking at, they vary depending on the group of people you're looking at.

In terms of housing, we would like to see the use of the discretionary housing payment ramped up—that clearly has a cost—and we'd like to see greater protection for tenants who are at risk of eviction in the private rented sector. But ultimately, in our view, all roads come back to the provision of secure affordable decent homes, and for people on low incomes, that is in the social rented sector.

Okay, thank you. And then, just a final couple of points for me about the impact of the budget on children and young people in Wales. One of the biggest expenditure items shifted within this parliamentary term, of course, has been the free schools meals programme, around £260 million in the budget for that, on an annual basis. Do you think that's good value for money?

I do. I think we have, as a society, a responsibility to look after our children and I think giving them a free meal in school has not just short-term benefits, but lasting benefits. Our original argument was for free school meals eligibility to be extended to children whose families receive universal credit, so if the state deems them to have such low income that the state will give them a cash top-up, then the state should also consider offering them a free meal.

But it's gone wider than that, which reduces stigma, it makes administration easier, and it makes having a free meal in school part of a child's learning, part of their development, and not only sets them up for a good day's learning, hopefully, but also helps set them up for life. So, I think, on balance, it's a good deal.

And just recently, it became clear that around 20 per cent of children are now leaving primary school, going to secondary school, who are illiterate, so we have £260 million a year spent on feeding children—some of which, of course, is absolutely needed. Parents, though, could, I'm sure, feed their children. It's probably a fundamental foundation of parenting to feed and house your children. But then we have this issue of 20 per cent of children leaving primary school unable to read. Do you think the balance or focus is right at the moment from Welsh Government, and does this budget reflect that, when, long term, we're going to have a generation or more of people trying to access work and jobs in the future who haven't had the educational outcomes that they need to be able to do that?

I think the proportion of children leaving primary school who are not equipped to go to secondary school is quite concerning, you're absolutely right. I wouldn't necessarily draw a direct link between that and the provision of free school meals. We know that growing up in a low-income family has a huge impact on a child's development and attainment. That difference is there when they start school, and the difference grows as they progress through their school career. So, I would say what you are seeing at that point of leaving primary school is a very real example of the attainment gap between the least well-off and the best well-off. Now, if free school meals help to close that gap, which I think they do, then, actually, free school meals are a good thing and not something that should be withdrawn in favour of other things.

There are questions to be asked about what can be done to close that gap amongst the least well-off children, who are clearly not gaining from whatever's going on in the classroom. But I would say it's not an either/or. I think what the illiteracy, as you say, of children who are leaving primary school is showing us is that we have a problem of deep poverty that's affecting our children's lives.

Thank you for that response. I guess one of the ways in which that deep poverty can be alleviated is well-educated children accessing quality jobs. Unfortunately, schools are having budget cuts where teaching assistants are being removed, but millionaires' children are being fed meals in the canteen. Something doesn't perhaps feel right to me, but I guess that's just my view on this.

And a final comment or question from me is in relation to the other Welsh benefits that directly affect children. I think you've already mentioned the EMA staying at historical levels, not moving in line with inflation. I wonder if you have any thoughts on how much of a priority that should be for the Welsh Government in the future, to consider increasing EMA for older schoolchildren or any other types of benefits that you feel may support children and young people in Wales.

We see the devolved grants and allowances that are means tested as making a big difference to people on low incomes in Wales. In some circumstances, they add up to £4,000 a year to a family's income. So, they really matter, and they're one of the main levers that the Welsh Government has at its disposal to reduce poverty. We think that if you're going to put those devolved grants and allowances on a proper footing, and take them seriously as one of the tools in your toolkit, then you need to uprate them annually, just like the UK social security system uprates its benefits annually, and uprates most eligibility thresholds annually as well.

We did some calculations for 2025-26. Sometimes, the value of that uprating is tiny. The cost to the Welsh Government is correspondingly relatively small, yet cumulatively the impact is big, and if you don't uprate every year by whatever measure you choose—the rate of inflation or some other measure—then you end up in the position that we had with EMA, where it hadn't been uprated for 15 plus years. The consequences then, when you do finally have to do something, are you face a much bigger bill. So, we think the annual uprating is part of both avoiding stacking up problems for yourselves in the future, but also a way of making sure that you're treating your key interventions with the seriousness that they deserve. At the end of the day, the Welsh Government's urged the UK Government to uprate UK social security benefits by inflation; it should do the same for its own.

Thank you. Thanks, Chair.

Thanks, Sam. I've got a few questions just to finish off, and part of the question that I've got we've covered already, because I wanted to have a look at what the draft budget says around gender equality and childcare. Now, we've talked about Flying Start earlier, and, as part of the package around childcare, that's very important, and we certainly take on board your comments on that. But when it comes to the other aspects of gender budgeting and looking at that aspect, £1.2 million of additional funding has been allocated in the draft budget to support the delivery of the violence against women, domestic abuse and sexual violence strategy. What impact will that have on addressing some of that gender inequality in Wales?

It's not an area that the Bevan Foundation has worked on, and I'm not really able to comment in any detail. What we do know is that violence against women and girls is on the increase and that interventions to prevent it and to support victims of domestic violence are costly. And if we don't do something about it, then the impact on people's lives is huge. So, you would need to talk to a domestic violence specialist organisation.

Of course, yes. But from a broader point around gender budgeting and some of the things that Mike was talking about, transport in particular—. Generalising an awful lot, but women and older people, or women in particular, use more buses than trains, so maybe a discussion around how gender budgeting—. Have you done any work around this aspect and have you got any—? Or does it focus more towards childcare and poverty? Maybe if you could just unpack some of that for me, that would be good.

Okay. So, poverty is usually measured at a household level, and it's assumed by statisticians that income is distributed equally within the household. There is a tonne of evidence to say that that does not necessarily happen and that, very often, the women within a household have less. They have less for their hobbies, they will be the ones who skip meals, they have less to get about—it's often a male partner who has the car, for example. And it's often the woman's income that buys the food and pays for childcare. So, we know that actually, whatever the statistics say, the distribution within households is not equal. And looking at the Welsh budget in terms of a gender lens is important. That's why we're concerned, through a gender and poverty lens, about the lack of reference to Flying Start and the regressive profile of transport spending. There are little nuggets, I suppose, little rays of hope, so, for example, the investment or the expenditure on the violence against women strategy is welcome. But against the backcloth of poverty, we know that women tend to be considerably worse off within households than men.

Thank you for that. I know it's not necessarily your area of expertise on that aspect, but I appreciate your thoughts on that. A couple of questions to finish off, more around the budget improvement impact advisory group and how that engages with Welsh Government and the strategic integrated impact assessments for future years. What are your thoughts around those impact assessments, and are they robust enough? Have you got any thoughts on how they could be improved or are they doing the job that they need to be doing?

I think it's difficult because what engagement we have feels quite disconnected from the kinds of issues that we work on. And that is partly down to the budget process itself, which I think is probably inevitably dry, but I think there's then a vicious circle of it not feeling like the engagement makes a lot of difference and therefore there are lower levels of engagement that therefore makes it feel more disconnected. So, I think, as I hinted earlier, there's potential to look at how that budget process and how the impact assessments could be made more relevant to everyday concerns. I don't think that's a particular criticism of the Welsh Government or the processes it has. I think there's an element of budget engagement that is often, as I said, dry and technical, but I think making it less dry and technical is something that the Welsh Government could do.

Okay, thank you. Just looking at something that's close to the heart of this committee, tax and stuff that we look at—and we take a keen interest in tax policy—are there any Welsh taxes that you think need a greater focus on? You had a conversation with Sam just now around income tax, but, those fiscal levers that Government have, where would you like those fiscal levers used? We know that things like council tax are a regressive tax. The decision on that has been pushed to 2028, as opposed to bringing those reforms in this year. So, any comments around taxation?

I think the Welsh Government—we've said before and I'll say again—the Welsh Government could do more to use its fiscal levers and not just allocate the block grant and what we know from the devolved taxes. Council tax is one of the big—. It's a big income raiser but it's also—. It could be used in a very different way. We've argued to—I can't remember what committee it was, sorry, but we presented to—a Senedd committee where we said that there's scope to bring council tax more in line with current property and wealth values; it's an opportunity missed. We've argued for a tax on land, for example, so that the whole system is much more progressive. We've argued for changes in the council tax banding and, really, a wholescale change to the approach.

We also think there's potential around new taxes. We advocated for a tourist tax some time ago and I know not all of the committee, from the questions earlier, would agree with that, but we think, used sensitively and wisely, a tourist tax could help to offset some of the harms that are caused by mass and large-scale tourism and could actually help to grow a sustainable approach to tourism.

We think there may well be other new taxes as well that the Welsh Government could look at and develop. It's not easy—taxation is not just about revenue raising; it can also help to change behaviour. It's not something we've worked on recently but we did a few years ago. But we would like to see the Welsh Government make more use of the fiscal powers it has.

On income tax, we would like to see the Welsh Government have responsibility for setting rates—setting the band, sorry, as well as the rates—so that it has—. It can adjust income tax to match Welsh circumstances.

Okay, thank you very much, and, finally, something that we should have talked about in a previous question, really. It's around the child poverty strategy that was published in 2024. Does this budget go far enough to support that strategy?

Well, the simple answer is 'no'. The child poverty strategy is actually quite light on specific actions, which we've said before, and we think that there could and should be much more done. One of the key ones is around childcare, as you've mentioned, but there's the critical group of nought to fours where we think the Welsh Government needs to be looking at how it supports families on low incomes at that critical point of a child's life—things like the baby bundle or a baby grant we've suggested; things like enhancing the value of Healthy Start vouchers would, again, help households to afford food at a critical time. All these come with a cost—we know that—but we don't think the costs are huge in proportion to the gains that would be made.

Thank you so much for your time. As with all our witnesses this morning, we've run over time, but it's always because there's so much to say. We're very grateful to you for making the time. Obviously, as I mentioned earlier, there will be a transcript available for you to be able to check for accuracy, but thank you so much for your time this morning.

So, under Standing Order 17.42(ix), I propose that we resolve to exclude the public from the remainder of this meeting. Yes? Diolch yn fawr. Diolch yn fawr iawn.