Local Government and Housing Committee

Thank you, Chair. If I can just start, and perhaps I'll hand over to my colleagues. I think it's fair to say that the pressure this financial year and going into the next financial year is on a scale that, certainly in my time of being a councillor, which is since 2004, we've not faced. In terms of double-digit inflation, it's bad enough, but there obviously is the pressure on the pay award, which is agreed across England and Wales, which is considerable this year, but not least as well in terms of energy costs and supply chain costs. If you consider food costs for things like school meals, our care home services and meals on wheels, food costs have gone up anything between 14 and 25 per cent. Our gas and energy costs are predicted for this financial year for local authorities in Wales to go up around 355 per cent for gas, and well over 100 per cent for electric. So, there are some real pressures on local authorities. I know every year we talk about the pressures on local government, whether it's service demand such as social services in particular, but this year I think it is quite exceptional.

Local government is facing a significant overspend this year—in excess of £200 million is the figure that we have collated between the 22 authorities. I think it's fair to say that since devolution, local government has never overspent £200 million in a single financial year. My own authority is set to overspend by around £20 million this year, so we'll be using reserves, and most local authorities are looking to use reserves. And next year, even though we are having a very good settlement from the Welsh Government, and we are grateful for the additional funding that's been passported on, there is going to be significant pressure on local authorities to set a balanced budget. Thank you.

Thank you very much, Andrew. Any other of our witnesses? Anthony.

Thank you, Chair. The pressures are substantial. We estimate £784 million cumulatively to the end of the next financial year. Just in social care, for example, it's £95.2 million of pressures, £32 million from children's residential placements, adult residential placements £12 million, adult domiciliary care £7.5 million. Just to use my own authority as an example, our energy costs are estimated to rise by £4 million, our social care costs by £4 million, and our pay bill by just over £7 million. Those are real pressures that can't just be managed away easily.

Would any other of our witnesses like to add anything to what Andrew or Anthony have said? Llinos.

I think in addition to the cost pressures and inflation is the service demand as well that we're seeing a massive increase in, due to the cost-of-living crisis. So, it's a perfect storm of the demand on services and the cost of delivering the services at the same time.

Yes. Diolch yn fawr. In terms of the experience during the pandemic, where, obviously, local authorities again were under tremendous pressure, how would you compare the current situation with the situation at that time? Who would like to offer a view on that? Christina.

I think that the big difference here is that throughout COVID the Welsh Government helpfully provided us with some short-term funding. And as Llinos has already mentioned, as we're coming out of COVID, there's increased demand, but it's not only increased demand, it's increased complexity of demand. And then when you couple that with the depleted workforce—. Because one of the things that has happened post COVID is that, for a number of reasons, a lot of public servants have decided to leave public service. Coupled with the reduced funding that we are facing, the increased demand and complexity, and a depleted workforce and difficulty in recruiting and retention, I think it's essentially a perfect storm. Thank you.

Thank you very much, Christina. Llinos.

I will be speaking in Welsh; I didn't use the interpretation earlier. It's also important that we note that during COVID, normal services had a period where they weren't necessarily being provided, so we were focused on the COVID crisis. Now, we have a cost-of-living crisis on top of all the other crises hitting society, as well as the financial crisis that we as an authority are facing. But planning expectations continue, and public protection and all the other requirements placed upon us as an authority remain, and we can't cope with all of these crises as well as business as usual and public expectation on local authorities. And much of that, of course, is statutory, for example planning and so on. So, the pressure now is more intense because of that.

Diolch yn fawr, Llinos. Andrew, did you want to come in as well?

Yes, just to add to and support what Christina Harrhy said. Obviously, during the pandemic, we did receive extraordinary amounts of funding, both to support communities and to support services, and certainly end-of-year funding as well, which has obviously helped our balances, carrying forward to this year, which has now helped us in terms of overspends. But the difficulty is of course that that was an exceptional amount of funding, and one-off funding, to deal with the short-term problem. In effect, the pandemic was a short-term hit for things like income, which has largely recovered in lots of areas, though there are some legacy issues there. But going forward now, general revenue, in terms of our revenue budget, is under massive pressure from four key drivers—the inflation, the energy costs, the service demand, and pay pressures. All of them are almost like a perfect storm for public services across the board, and local authorities are no different.

Thank you very much for that. Obviously, the potential impact on services is something that all of us will be very concerned about. Is there anything in particular you would like to say in terms of that potential impact? Is there anything that you'd like to highlight? Andrew.

Every local authority will have to address this, obviously, as part of their budget-setting round and the various consultations they're doing. But even though we've had a relatively good settlement, it has to be said—the average figure is much more positive than was anticipated, with consequentials being passed on—there is a range from the low end, such as authorities like myself and Merthyr, to, I think, Monmouthshire, which is at the higher end this year, and Cardiff. So, there is obviously fluctuation in the formula, but the formula is there because it is driven by demand, such as population, school numbers, and various other drivers, which impact on that.

But turning back to individual councils setting their budgets, there's no getting away from the fact that there will be some tough decisions. There is a balance to be struck between council tax increases at a significant rate, making savings where possible without impacting on services, but, undoubtedly, there will be other cuts to services, or service changes that, I think I'm fair in saying, all 22 local authorities will have to consider to a certain extent. That may be changing things like bin services, it could be cutting or closing some sports facilities; there is a whole raft of things that local authorities are considering, but it is obviously down to those individual authorities to make those tough decisions.

Yes. Okay. Llinos.

I know that you're already aware of this, so I don't want to be—. But this is us making cuts to services that have previously been cut, so the options are very few and far between. And when we've been able to maintain some semblance of service in some areas, it may mean that may have to disappear, and clearly that's a real cause of concern. So it's important to note that we weren't in an ideal starting point. I sometimes fear that we forget about the decades of cuts that we've undertaken already.

Yes. Anthony.

I just wanted to come back to the point that Christina made about workforce—that's a very important one, looking to the medium term. This isn't just a cash issue, this is an issue with more and more people deciding to walk away from public services. They've seen their pay depleted by 20 per cent over the past decade, they're expected to continually do more with less, with fewer staff, and I really feel that we're staring in the face of a recruitment crisis within some key public services. We're seeing it in social care, in domiciliary care, and we're seeing it actually in more areas than I've ever seen before, where we're really struggling to recruit to key posts. And after all, public services are the sum total of the people who work in them, so I think that's an issue that we have to look into as well.

Thanks for that. We will come on to these matters in a little more detail later on. Before I bring in other committee members, could I just ask one further question? I think it was Llinos who mentioned that demand is obviously significant, and so have others of you. We hear reports that Welsh Government, in response to the pressures that hospitals face, and emergency services face, will be encouraging discharges from hospital perhaps without care packages being fully in place at that stage. Is there anything that you'd like to say about that in terms of the potential pressure on local authority services? Andrew.

Yes. I think we've got to put into context that, first of all, we certainly wouldn't support anybody being discharged from hospital into our care, or home, without a care package, if we felt that they were at risk. And I have to say, in fairness, the local authorities and the health boards work together all the time on discharged patients, and we have to risk assess all the time around that—whether somebody can come home, for example, before adaptations are put in, before handrails, et cetera, where they may not need a care package, they may just simply need some additional adaptations to their home. So, it is all about the risk assessing, but I think I'm right in saying, as all council leaders, we certainly would not support any discharge of patients who we thought would be at risk of harm if they did need a care package.

But just to say, local authorities, I have to say, are really bending over backwards to support the health service. Our staff are under more pressure now, I would suggest, than at any time, even during the pandemic. We've got staff who are working back-to-back shifts, who are working overtime, because there is a real crisis in social care. And I have to say that, while we do hear health boards across England and Wales declare critical incidents and stand up their emergency plans, I would have to say that, probably all 22 local authorities, if we declared a critical incident every time our social services were under pressure, we wouldn't have been out of a critical incident for the last three years. So, I do think that, as local authorities, we are under intense pressure, and I welcome the fact that the Welsh Government has recognised that social services have to be funded alongside the health service. There is no point funding the health service unless social services get funding, because they have to work hand in hand. And I have to say, the pandemic has probably driven social care and NHS closer now than at any time previously, but we can carry on improving that relationship. And it is about working smarter and doing things better, but unfortunately, a lot of it does come down to funding. If we are to recruit and retain staff in social care, that means that it has to be funded.

Okay, Andrew. Thank you very much. I think Chris Llewelyn has a hand raised. Chris.

Yes. Thanks, Chair. Just to emphasise how closely local authorities work locally with their health boards, but also at a national level as well. There's incredibly close working between local government, the Welsh Government and the NHS. The leaders present this morning meet fortnightly with the Minister for Health and Social Services and the Deputy Minister for Social Services, so these are issues that authorities take very seriously. But, as has been highlighted already, there are massive workforce challenges for local authorities when it comes to social care and domiciliary care. There are workforce challenges across every aspect of local government service. Costs are increasing, demand is increasing, but in social care in particular, the legacy of long-term austerity, of long-term underfunding in social care is being felt at the moment. And in effect what happens is that the private and other sectors are able to respond in terms of pay pressures relatively quickly; local government and the public sector find it far more difficult to respond. As a consequence, the supply of domiciliary care staff and other social care and community care staff is incredibly difficult, and I don't think anybody should underestimate the challenges that local authorities face within the sector.

Okay, Chris. Thanks very much. Christina.

This is also—. Whilst it's about the local authorities in this space, in terms of provision of social care, we are heavily reliant upon the independent sector as well, and that independent sector is fragmented. And again, it's back to affordability. Just within my own local authority at this moment in time, our independent sector are asking for a 20 per cent increase, and we are only able to provide 10 per cent, because of our own financial situation. And the independent sector are not being unreasonable for the reasons that we've already articulated to you; they are facing them as well. But, if we are unable to bridge that gap financially, again that's going to make that sector even more fragmented and delve us deeper into the problems that we are already facing.

I think, just coming back to domiciliary care and the packages of care question that you asked: the focus at the moment is very much on discharging people from hospital. But what is being missed is that 80 per cent of our demand is in the communities, and we are not able to meet the need within our communities at this moment in time, because the focus is on discharge from hospitals. And without us being able to meet that need within the community, there is more demand that is actually going to hit the front door of A&E in our hospitals. So, it's that vicious circle that we are trying to address at this moment in time. And we are working with health colleagues, because what we need to focus on is reducing the demand and the flow that's coming into the front door of our hospitals, as well as dealing with the back end of the system. Thank you.

Thank you very much. Okay, we'll move on, then, to committee members, and firstly, Sam Rowlands. Sam.

Thank you, Chair, and good morning, everybody. I appreciate your time on this Thursday morning, especially this time of year when it's really busy for you. Just in terms of the AEF—the aggregate external finance—we've seen, as mentioned, the increase in the provisional settlement at 7.9 per cent, and, I think, Andrew, you mentioned earlier that it was probably a little bit better than where conversations probably started at, I guess, a few months ago.

I suppose you've probably commented on my initial question, which was around your assessment of the settlement, but I was wondering now how you're able to plan in the medium term, how you're finding that process, because I guess you are having to deal with such difficult challenges right in front of you today. How are you finding the ability to plan beyond even the next financial year, looking three, five years down the line, in light of the provisional settlement and some of the multi-year indications that you've had as well?

I think having the provisional settlement for three years is something that we've lobbied on. So, obviously, last year, we had last year's settlement this year, and, then, next year. The difficulty we have, though, is that, because it's all based on the UK Government's spending review, the Welsh Government will say that they don't know—[Inaudible.]—the spending review, what their budget's going to look like, and, therefore, they can't give us a rolling three-year settlement.

One of the things that would be really helpful, I think, for public services across the board, is if the UK Government was able to do a rolling three-year settlement. So, every year, they would refresh their base for our public services, and that would allow, then, each year when Welsh Government sets its budget, the public sector, then, would get an indicative two-year allocation for the following two years. So, that would allow us, then, to plan on a multi-year basis. The problem is, on year one of the spending review, it's excellent, we get a three-year settlement, or at least indicative figures, but, of course, on the last year, it's only for that one year, and it's a continuous cycle of not knowing where we're going. And that does lead on, sometimes, potentially, to not good decision making, because we could end up reducing services, or sometimes even consulting on cutting services that we don't then go through with because, lo and behold, then, we get additional funding. So it doesn't make for good spending, and for good public services, to keep working on this cycle. So, I do think a longer term solution is needed.

But, again, we've got other pressures that come out of the blue. I have to say, this morning, I'm fielding lots of calls, unfortunately; we're facing some flooding again because of the severe weather in the Valleys this morning, and, again, no doubt, we'll be redirecting resources. Three years ago this year now—three years in February—we had storm Dennis. We've redirected millions of pounds of our funding in RCT, and I know the Welsh Government's had to do the same. But we've had that, we've then had COVID, we now have the cost-of-living crisis, we've got climate change, for which all local authorities are trying to redirect budgets to transitional fleet, to do other things like rewilding areas and tree planting. So, we have continuous, new problems coming at us, or new priorities, in addition to the day job. So, while we manage all those daily things like managing the roads and collecting the bins, and running the schools, we have all these additional competing demands, which potentially, can skew the figures. But that's why the three-year planning is more important.

I think Anthony—. Yes, Anthony.

Yes, I think Sam asked an important point there about medium-term planning. What I would say is that, obviously, any budget-setting process involves a balance between relieving the immediate pressures and getting to a situation where you've got a balanced budget for the year coming. And, as Andrew and others have said, in this circumstance, you've got a working budget for the current financial year, I'm looking at more medium and longer term pressures, and how you can try and plan ahead. As leaders, we all want to be in that second space; we all want to be planning for the long term; we want to be making sustainable long-term choices rather than just firefighting.

What I'd say is that the better the settlement is, the more it enables us to get into that space and not just in putting out fires all the time. So, it will make a difference to that. It will mean that we can devote more of our attention to making sustainable choices for the long term. What it doesn't do is completely alleviate the pressures that we talked about before. So, the settlement was incredibly welcome.; it was more than we were talking about at the start, and I think it demonstrates that Welsh Government do value the services that we provide. It doesn't make the challenge easy, but it gives us a fighting chance, and as I've said, it gives us a chance to move on to what decisions can we make over four and five years to get the services that we provide in a better shape, rather than just putting out fires all the time.

Thank you very much. Llinos, I think—Llinos?

Diolch. This year, what we have with that medium-term financial plan is having a strategic vision, so we're all trying to put our council plans in place to have that five-year council plan, but then you need to finance that council plan, and that's the challenge that we constantly have. Are we operational or are we strategic, and how are we able to blend both together? Currently, I think we're more operational because of the current financial climate that we're in. We all want to be much more strategic, but to do that, we need that financial security to know that we can deliver that service within five years' time. So, it is a challenge of having that vision but also of managing the day-to-day service and delivering on that day-to-day service. So, the need for that long-term financial security is more than ever, because obviously we need to rebuild public services after this last decade as well. Diolch.

Diolch, Llinos. Sam.

Yes, thank you for those responses. I think they're absolutely fair, and probably something that, at a cross-party level, Chair, as a committee, we can perhaps discuss later as well.

On your revenue support—. On the grants being allocated in your provisional settlement this year, again we're looking at nearly £1.4 billion-worth of grants. I know over recent years, there's been a desire to see a bunch of those grants, and it has, to be fair, at times, happened, moving into the unhypothecated part of the RSG. I was just wondering what your thoughts were at the moment. Is the balance about right? Would you want to see more of those grants move into the unhypothecated element, or are you quite satisfied that the £1.4 billion-ish of grants is about right?

Chris.

Thank you, Chair. Sam knows, with the WLGA, it's always argued for grants to go into the settlement wherever possible, and the reason for that is that we think that because circumstances vary between authorities, authorities need as much flexibility as possible locally in determining how funding is spent, and we think that we add as much value as possible by allowing as much local determination and placing as few restrictions on authorities as is possible. Historically, what we have always argued is that where the specific grant is linked with a policy intention, then it's appropriate to fund that policy direction through a specific grant, but once the policy is embedding and it's clear that it's being delivered, then the funding should go into the settlement, and the argument is that there are costs associated with audit and administration of those grants, and that that funding could go into services. So, we always promote that idea, and inevitably as well, I think, with Governments, there's a middle ground; Governments and Ministers when they're delivering new policies, they want to see the funding that they allocate to those policies delivered directly to those policies. So, there is an ebb and flow to this debate, but I think generally we would like to see as much grant funding as possible. We would still like to see as much as possible going into the settlement.

Okay, Sam.

Yes, thanks. I'm really conscious that time is flying, so I'll just quickly perhaps get a brief response on your assessment of any concerns you might have of the impact of the new non-domestic rating list, which is due to come into force in April, and your ability to collect those new non-domestic rates at all—any concerns there?

Chris, again? Chris.

Yes. It's just the capacity of the Valuation Office Agency and the Valuation Tribunal for Wales if there are increased levels, whether there's the capacity there to deal with that. Inevitably, when changes like this are—. When change is introduced, there is turbulence in the system, and I think we need to see details of the transition. So, I think there may be difficulties. At this stage, it's difficult to assess, I think.

Yes. So, we'll have to wait and see. Okay. Okay, thanks, Sam. Carolyn Thomas.

Thank you, Chair. I just want to ask you questions about capital funding and to what extent do you believe that the £180 million that's been allocated provides you with sufficient funds to implement Welsh Government's commitments to prioritise the most vulnerable and public services whilst continuing to create a stronger, fairer and greener Wales, which are the Welsh Government's priorities, and is enough for you to actually do your basic funding as well? I see there's nothing this year for highways. Last year, some funding was made available; I think it was some underspend from COVID. But I heard, Andrew, you this morning on the radio, on having to deal with flooding, and I know of the impact flooding and climate change has on our highways and the resilience of highways, going forward—the culverts and resurfacing roads is a major issue, isn't it, trying to keep on top of it. So, your views on that, really, please.

Do you want to come in, Andrew?

Yes, thank you. I think the general capital—we welcome the increase in the general capital this year, which has increased back up to previous levels, prior to the current financial year. So, that is welcomed. In terms of some of the specific funding, the Welsh Government has allocated funding for things like flood resilience, and again we welcome the additional funding that has been put into that over the three-year term of the spending review.

Highways in particular, though, that is probably a pressure area for most local authorities, especially when we have wet and cold winters. Unfortunately, all of us, we see the bane of our lives with potholes and roads breaking up. But also, as we get more and more wetter winters—the winters are becoming, unfortunately, intense periods of weather like we're having now—we do suffer with flooding. So, things like the resilient roads funding, which we've had for a number of years—I know that has reduced in recent times—that is still very welcomed by local authorities. The resurfacing capital funding we had in place for three years has now ended. If there could be a possibility of further capital funding for our highways across Wales to see local authorities carrying out substantial resurfacing works, that does actually save us on revenue. It's much more cost-effective to resurface roads and do it in one go properly, if a road is failing, rather than constantly filling potholes over several years.

So, there are some areas to trade off, but of course capital is more challenging and the Welsh Government and Ministers have explained that to us. But we do lobby for additional capital and, if the committee wanted to recommend additional capital, and if the Welsh Government can find additional capital, I'm sure, for all council leaders and officers across Wales, it would be very welcome, because we do have lots of areas—whether it's our schools, our care homes, our children's homes, there is always a demand. And certainly, because of the cost pressures with inflation, some of the costs in terms of new build for schools and renovation works have gone up by 25 per cent to 30 per cent at least. So, there is additional pressure on us, actually, because in effect our spending power with the capital money we have has diminished because of inflation. Thank you.

Okay.

Okay. Anthony.

That's a very important point, I think, that Andrew made at the end there. The return to historic levels of capital is very welcome, but the spending power that we have is really being cut from the other end of the equation, with costs for construction and all sorts of capital works really increasing and putting more pressure on council leaders to find match funding, to find other sources of funding, to top up to meet those increased costs, or, inevitably, you end up doing less with the same amount of money.

And Christina. Christina.

Yes, thank you. Yes, and also the availability of contractors, actually, out in the market now is—[Inaudible.]—with a number of major contractors actually going into administration. So, very much, the contracting market is very much picking and choosing the types of projects that they want to compete for. And a number of projects, certainly within my own authority—and I know it's mirrored across other authorities—we're having to value-engineer them back, because when the prices do come in, they're significantly higher than what we've estimated. And particularly around the twenty-first century schools programme, that's a significant pressure area for us, and, also, in the emerging Welsh housing quality standard phase 2 programme as well, it is an area of concern for us.

But what I'd also like to just add, though, is capital investment is an area that is part of our transformation as local authorities. We're all looking at our building assets and looking at repurposing them, so, wherever we are building new facilities, we are looking at them as multipurpose buildings, so that we're able to offer a wide range of services from fewer buildings, and that is one of the areas that all local authorities are focusing on. As part of the learning from COVID, we know we can work in an agile way and we know that we can reduce our capital stock that we have. Thank you.

Llinos.

Thank you. It's important to note that the capital budget, although it's increased in terms of value, it is worth less to us. That's important to note, and we as a cabinet were informally discussing the capital budget in Anglesey on Tuesday, and our ability to do much with that capital budget is very little. The disabled facilities grants have landed in the capital budget; the day-to-day things in terms of running services—we're even putting £2 million of our capital budget towards maintaining highways—so, the capital budget is very limited compared to what it was years ago, and that means that the transformational plans are getting lower on the list, which means that our public services are weakening and aren't moving into the twenty-first century as they should, because of capital issues. And last year, we in Anglesey put some revenue funding towards the capital budget in order to push some proposals forward that aren't—. So, the capital simply isn't sufficient, and this firefighting will continue.

Carolyn, I think Chris Llewelyn would like to come in as well. Chris.

Yes, just to—. I think most of the points I was going to make have been covered, Chair. I think every one of the contributors has said, in itself, the capital allocation, in other circumstances, authorities would be happy with. But the challenge is—it's been a feature of all this discussion—the inflationary pressures that authorities face and the workforce pressures as well—I think Christina mentioned the difficulty in terms of construction companies—the workforce pressures that authorities face, the increase in material costs, so the purchasing power that authorities have with the capital available has been diminished.

Programmes like twenty-first century schools—the great success of them has been their flexibility and the capacity to adapt to changing circumstances, so what the current circumstances mean is that the current programme will be extended in terms of time period, but, if at some point in the future, more capital is available and circumstances change, then there is the flexibility there to respond as well. But, again, these are very challenging times for local authorities.

Just one more, really, about the resilience of you, going forward, delivering some of these capital projects. I know you said earlier about having planning officers, drainage officers and delivering the active travel fund, even, having highway technical officers as well. So, just is there anything else you want to add on that?

Anybody like to offer anything on that? Andrew.

Yes. It's just worth flagging up, actually, although we do see pressures around, in particular, retention and recruitment in areas such as social services, and everybody probably will know about those problems, we actually have a lot of problems across most other services. I would estimate, probably, in RCT right now, we've got probably between 100 and 200 vacancies across the board. When we tried to recruit recently for a specialist tips team, to have additional resource because of the problems we've had in the Valleys with the weather with coal tips, we've had to go out two and three times in terms of rounds of trying to recruit engineers. There is a real shortage in terms of bridge engineers and highway engineers even for things like active travel routes, which, quite often, are complex in terms of some of the infrastructure that's alongside them. There is a real pressure that local authorities face. Of course, because of the cost-of-living pressures and the cost of inflation, a lot of recruitment is driven by wage salaries, so we are competing with the private sector, and where we can't then recruit directly in-house, we end up having to go to agencies, or we have to go to consultants. To be quite frank about it, the prices that we pay to consultants are sometimes two or even three times the salary if we employed somebody, because that is the mark-up and they know that, unfortunately, because we are in dire need of some of these engineers or highways or other officers, they can name their price, almost. So, we are facing recruitment and retention problems. But that's why my own local authority and a lot of local authorities, in recent years, have introduced either graduate trainee programmes or apprenticeship schemes where we're trying to recruit and build our own staff.

Okay. Thank you.

Did you want to add something, Chris Llewelyn, or is that an old hand, Chris, as it were?

No, I think—

You're happy. Okay, we'll move on then to Joel James. Joel.

Thank you, Chair, and apologies about this morning, it's been an absolute nightmare in terms of the technical issues. I just want to thank everyone for coming today to the meeting, and it's nice to see you again, Councillor Morgan. You're looking good, as they say. I've got some questions on council tax and the council tax reduction scheme, so apologies if they've already been asked or answered. Unfortunately, I was dipping in and out of the meeting because of linking up with the technical officers. I know that, for example, prior to the budget, it was estimated that there was going to be an average increase of a 4 per cent rise for council tax, and I just wanted to know what your thoughts were on the budget now and how it might have impacted that figure, but then, also, how you saw meeting that aspiration, where the Welsh Government has asked you then to take into account any rise against the cost-of-living pressures. Thank you.

Okay. Anthony.

Obviously, council tax setting is always a difficult decision for any councillor of any political shade, because you've got balancing people's costs of living on one hand with the need to retain valuable local services on the other. So, it's not an easy choice in any year, even more so this year, given the cost-of-living crisis and the huge pressures we've talked about—£800 million of pressures aren't going to go away of themselves. Certainly, the better the settlement is, the more space it gives councils to have a lower council tax rise. You've seen in England there seems to be almost a uniform 5 per cent rise across the board because of the pressures on the services there. We've had a Government that's talked to us about the pressures on those services and has tried to meet us halfway, so that puts us in a better position, but it's still a very difficult situation, given the huge pressures that have been described before.

Okay, Anthony—

Thank you.

Joel. Oh, Llinos.

I think it's also important to note that this is the challenge, that we're talking about 4 per cent or 5 per cent, but that's not the same across the board in terms of authorities. I know you're aware of this, but it is important that we always take into account what the value of that is in pounds and pence to these homes, because 5 per cent in Ynys Môn is £1.32 in band D. So, we just need to be aware of that, rather than talking about the percentage, because there are certain areas where it would be only 3 per cent, but the cost will be far greater than 5 per cent in other authorities. So, I think we need to consider the financial value and the impact on the public's pocket. Thank you.

Diolch, Llinos. Chris Llewelyn.

Thank you, Chair. It's just to emphasise the difficult or challenging choices that authorities have to make. In any ordinary year—. In other circumstances, at any point over the last 20 years, a 7.9 per cent average settlement increase would seem incredibly generous, in the same way as the 9.4 per cent of last year and the three year indicative figures. Authorities would have been really delighted with that situation. But, these are unprecedented circumstances. With the global economic pressures coming to bear, we've seen nothing like it for a long period of time and it's been a feature of all of today's discussion. Authorities are in this difficult position. Circumstances vary across Wales, as has been reflected today, but authorities are in this difficult situation of trying to balance, using the—. When inflation is 10.5 per cent or 11.5 per cent, a settlement of 7.9 per cent doesn't plug the gap. They have to look at using their reserves or balances, increasing council tax, and cuts in services. None of these choices are particularly palatable, and they are very difficult for authorities.

As we've heard this morning as well, any cuts in services are taking place against a backdrop of increasing demand for services. We've seen the debate during the last few days with regard to health and some of the lifestyle choices that people make. We know that, in the current climate, we would like to see people lead more active lives, and yet local authorities are faced with the choice of having to cut back on their leisure services, leisure centres, swimming pools and so on. Nobody should be in any doubt that authorities are facing very difficult decisions and, where council tax levels do increase, those decisions aren't taken lightly.

Okay, thanks, Chris. Christina.

Thank you. Just to add to what Chris has just said, I think the challenge that all local authorities are facing is that we are very mindful that we are essentially asking people to pay more but in the knowledge that they're going to receive less. Whichever way we package that, that is a very difficult ask, isn't it? Thank you.

Absolutely. Okay. Diolch yn fawr. Joel.

Thank you, Chair, and thanks ever so much for those responses. I've only really got two questions left, if that's okay, Chair. The first one is about council tax collection rates. I know, during the pandemic, that the Welsh Government provided additional funding for councils in order to help them with their collections, but obviously now that has been withdrawn. I just wanted to know the impact that has had on local authorities and the impact that has had then in terms of the council tax payer, if any.

Then, the second question I want to ask is with regard to the council tax reduction scheme. We've heard from previous evidence sessions about how—well, actually, I've got two questions to ask on this, sorry—not everyone who's eligible for the council tax reduction scheme actually applies for it. I just wanted to know some idea about your thoughts on that and how that could be addressed. But also, the amount that is paid out in the council tax reduction scheme—what's the word I'm looking for—is far more than the amount that councils get in order to fund it. I just wanted to know the impact that is having and how councils plan to address the funding shortfall. Thank you.

Okay, Joel. Anthony.

Do you want me to go first on those? Firstly, on collection, collection is a pressure. We're still getting the figures together, but there has been a pressure on collection rates from the pandemic and now into the cost-of-living crisis, and that's something that we've had to factor in. We reduced our assumed collection rate in our budget two years ago now, I think, to make an assumption of that, so we didn't end up with a hole in our budget. That's a challenge, obviously, because if you reduce the assumed collection rate there's less money in your budget, but councils are doing all they can to ensure collection remains as high as possible.

On the council tax reduction scheme, it is a challenge. It's always been a challenge, as it is with many benefits that don't get claimed by people who are entitled to them. We've invested in our benefits advice team and financial inclusion teams, who help identify people who could be entitled to benefits or people who are going through financial crisis and make sure that they apply so that they can get that money in the door. I know that council revenues and benefits teams across the country have been really going above and beyond in the last two years to get money out to people during the pandemic and now, in this cost-of-living crisis, will be stepping up their efforts to try and make sure that people who are entitled to council tax reduction and entitled to other benefits claim as much as possible, rather than getting caught in a poverty trap.

Okay. Thanks, Anthony. Andrew, did you want to add anything?

I was going to just say that, relatively, the council tax collection rates appear to be holding up probably better than a lot of us would have thought in terms of collection and people being able to pay. I suppose one of the questions that Joel James asked was about the council tax reduction scheme. That is a pressure for local government, because that envelope of funding is capped, and has been for a number of years. So, in effect, in our own local authority, for example, in Rhondda Cynon Taf, we always tell members that if we put up council tax by 1 per cent, we only actually get about 80 per cent of the additional income, because, in effect, almost 20 per cent of the additional income is lost because of the council tax reduction scheme and those who don't pay council tax. So, in effect, we have to pay that element. So, we do lose around 20 per cent every time we put the council tax up. Now, that doesn't sound a huge amount, but if you consider that, if a local authority, say Rhondda Cynon Taf, was to put council tax up by 4 per cent, and we needed 4 per cent extra, we have to actually put the council tax up 5 per cent to get 4 per cent extra income. So, it does have a bearing on it, but it's something that local authorities have had to manage for a number of years because that envelope of funding, as I say, has been capped probably for almost a decade now, I believe.

Thank you, all, very much, and thank you, Joel. We'll move on to Mabon ap Gwynfor. Mabon.

Thank you very much, Chair. Good morning to you all, and thank you for joining us. Could I start—? In framing this debate, you've talked about those core services. We know that there are statutory services that local authorities have to provide, but then you also provide non-statutory services, and, of course, if you had to look to make any cuts, they will be to those non-statutory services. So, what are we really looking at here? Which services are likely to be cut across the board in Wales? We know, for example, that Powys has mentioned closing leisure centres, and so on. So, what will local authorities look like in terms of services following these cuts? Llinos.

What I would say is that what most local authorities are trying to do this year is to try and balance the books by using reserves and making minor cuts and raising council tax in preparation for 2024-25. I think that's when we will see the real cuts kicking in to services. So, what we'll see is local authorities using reserves in order to prepare for that harder cut that's to come, because, as I noted earlier, we're all anticipating that next year will be even worse for us.

What we're looking at is everything, but the challenge for us, as was noted earlier, is that non-statutory services do have an impact on statutory services—so, leisure and health are connected. If we close a leisure centre—and perhaps those that are least profitable are in the most deprived areas, and you could argue that that's where they're most needed, but that's where the costs are highest, and that's clear in areas such as Gwynedd and Anglesey, where child obesity levels are high—that's going to have an impact on health in years to come.

We're also looking at things like economic development. We've seen that local authorities have tried to keep proceeding with proposals and with support for business developments, and so on. In a cost-of-living crisis, ensuring a strong economy is more important than ever, but, again, are we looking at cuts in that area because it's non-statutory?

Public protection is an area that's seen a number of cuts over the past decade, but, during COVID, everyone started to understand the importance of the environmental health team more than ever. We just about managed through the crisis with the goodwill of those teams, but, again, if we make cuts there and see another similar crisis to COVID, then we couldn't cope with that. And that's the one message that comes through from the chief executives and leaders: if we see another COVID, then the resilience isn't within local government to deal with such a crisis again. That's the challenge. So, the simple response to Mabon is that local authorities have to look at absolutely everything and—I know that you're aware of this—as local authorities, we do have to balance the books statutorily. So, it's not a matter of hoping for the best; we have to ensure that our sums do add up and, unfortunately for us, we will have to make some very difficult decisions, perhaps, because we have do have that statutory responsibility to balance our books, unlike some other public bodies.

Diolch.

Anthony.

I think Llinos’s point about health and leisure is a great example of how non-statutory and statutory services are linked. We want to comply with the aims and objectives of the Well-being of Future Generations (Wales) Act 2015, and we can only do that by investing in those early intervention and prevention services that are so key to keeping people out of the acute services. If we’re not careful—. We’ve all seen the graph of the jaws of doom, as it’s called in local government circles, where at a certain point in time we can spend money on nothing other than social care, and if we don’t spend money on those non-statutory services, then we’ll get there ever quicker.

Also, the point about back office pre pandemic has shown itself not really to be as back office as it was. My planning department or environmental health used to wince every time I came into the building, because, by dint of protecting schools and social care, they knew I’d be trying to get another chunk of money out of them for the next budget. The environmental health teams in councils have shown themselves to be invaluable during the pandemic, leading the response, keeping people safe, running the test and tracing scheme that we had in Wales, which didn’t suck up huge amounts of money into the private sector like in England. So, they’re no longer the targets, perhaps, for budgetary savings that they once were—a combination of showing their worth and a decade of cuts to those budgets means they’re a skeleton in many authorities—I would say in most, in fact. So, there are really no easy ways to turn.

The other thing I’d say is the public don’t recognise this distinction between statutory and non-statutory services. Lots of the services the public value most are technically non-statutory services, so we have to keep that in mind as public representatives, too.

Thanks, Anthony. I think Chris Llewelyn and then Christina wanted to come in as well, Mabon. Chris.

Thank you very much, Chair. Just to add to Anthony and Llinos’s points, you raise a very valid point, Mabon—some 80 per cent of the expenditure of local authorities is on statutory services, and 20 per cent on services that are not statutory. But one of the things that we’re historically aware of is that that 20 per cent has suffered numerous cuts over the past decade and more when public funding has been cut, and the irony, of course, as Anthony mentioned, is that we’re aware that the public really appreciate that 20 per cent of non-statutory services—culture, leisure, services that are very visible in our communities. So, it’s quite a challenge for local authorities; statutorily, they do have to restore services such as education and social services, but what they fully understand is that the public do really value that 20 per cent that’s non-statutory but is so very important to normal, everyday life for people in Wales in terms of their health and quality of life, and it makes a great contribution in that regard.

And Christine.

Unfortunately, it’s not as straightforward as statutory versus non-statutory, for the reasons that have been presented. But, if I may say, if you think of the breakdown of our budget, where is the money spent? It’s essentially service provision, front-line service provision, it’s staffing and it’s buildings. As I said earlier, we’re looking, all of us, at reducing our building stock and reducing costs through adopting the agile model. We want to protect our staff, because we recognise we need to reskill our staff in order to protect our services. We have to transform our services, looking at our services through a different lens, collaborating wherever we’re able to. What commercialisation opportunities are there for us? What digitisation, automation processes are available to us? And how do we provide those services as a package in order to maximise efficiencies and effectiveness?

But the challenge we have—I think it was Llinos who mentioned it earlier—is juggling and balancing the day job, because of the demands that we have, which have exceeded what we’ve been dealing with previously, whilst building in capacity to transform, and, again, the need for further financial planning and having certainty around our financial forecasting as well as managing that transformation programme is key. But again, as we've mentioned earlier, the problems that we have in recruiting and retaining staff, and also recognising that when we are recruiting staff, we are looking for different skills. As well as the technical skills where we know we have shortfalls, we are looking at much more innovative skillsets than maybe what we've had previously. And as Andrew mentioned earlier, we are competing with the private sector. They've caught up with us. The benefit packages that we are able to offer as local government have been far exceeded now by the private sector, and cash is key now, and we are unable to respond as quickly as the private sector in that space, unfortunately. Thank you.

Okay. Diolch yn fawr. Mabon.

Thank you very much. I think the message was quite clear in terms of the challenges that you're facing, and hopefully it will enhance our understanding and the public's understanding too. Moving on to adult and children's services, generally speaking in looking at Wales at the moment, how would you categorise the current risk level for the provision in terms of adult and children's services in our local authorities?

Llinos.

Thank you. I think it's important not to bundle it all together. This is the challenge that we face. Pressures in adult services are apparent now because of the change in demography, changes in working conditions, as has been noted, and shortages of staff, and also because of the complexities of the care needs of individuals. That's changing across Wales. So, adult services are in a vulnerable situation for a number of different reasons.

Children's services are also vulnerable. That's related to the impact of COVID and the impact of the cost-of-living crisis on the conditions that families are living in. We've seen a huge increase in domestic violence, in substance abuse, and there's also the cost-of-living crisis that is having an impact on the lives of families that perhaps wouldn't have been on our radar in the past. So, what we're seeing is social issues creating a significant number of enquiries to our services at a time when staffing concerns are very much an issue, as has already been noted.

The reason I'm trying to unbundle this is because the costs vary too. We are aware in children's services that if a child with particularly intensive needs comes into care, that could be £0.5 million in one authority. The costs aren't as great in adult services, but the numbers are greater in adult services. This is a high risk at the moment, but could I also note that social services have been high risk for a number of years, but they haven't been given the attention they deserve until very recently?

The greatest challenge for us as leaders is to ensure that these services are maintained during the crisis that we're currently facing, and that we can—. As Andrew said earlier, we wouldn't be taking individuals out of hospital without the proper care package, just as we wouldn't leave a family out in the community without intervention, because keeping those people safe is crucially important to us. And these are the problems that we face as leaders when we're setting the budget, that we're aware of the risk of removing—. You talked about non-statutory services. We all have non-statutory services in the social services sphere in order to prevent those risks. Those are the mitigations against those risks, but removing those would create greater risk for us.

So, it is a very complex field, and I don't think there's a comprehensive understanding of the complexities, but it will get worse while we—. This year is going to be even more difficult for us in this area, and we have a duty as leaders to ensure that it's given due consideration, but also that the workers in this area are given the respect that they deserve because of the challenges that they are facing from day to day.

Okay. Mabon.

Thank you for that response. That final point brings me to my next question. We've talked about the need to respect the workforce in social care, and, of course, the real living wage will be part of this now. Is that real living wage going to reduce the risk?

Well, if I could come back, and say, 'Well, no'. Because, as has been said already here, the private sector have already overtaken us, quite significantly, and the real living wage hasn't taken into account inflationary costs and the impact that that has on households. And I don't think I'm speaking out of turn—we receive inquiries from workers now who are looking for a third job, just in order to sustain themselves. So, no, it's not adequate, but that's the challenge and that's the discussion we're having with Government, and Ministers are willing to discuss this, in terms of how we move care forward, so that it is an area that is properly funded and remunerated. So, that's the challenge, not only here in Wales, but across the UK, on which we do need to make progress, and also so that young people see that there is a proper salary and a career to be made in that area.

Okay, Mabon?

If I could just ask one further question, please. If I could turn to another, more specific area within local authorities, and that's housing and homelessness particularly. Beyond your budgets, of course, we see that the housing support grant has been cut, or hasn't been increased, so the flat settlement means that it's a real-terms cut. How is that going to impact your provision, and how is this settlement for you as local authorities going to impact your provision in ensuring that the level of homelessness remains low and that we can provide housing to everyone in our communities?

If I could come in there again. So, the cuts in the housing department are challenging, obviously, because you talk about that cut, yet we've seen an increase in demand. Homelessness is already up, never mind people being made homeless, perhaps unable to afford their mortgage or rent, and a shortage of housing in the first place. So, we know that this problem will get worse. And in addition to that, the capital budget, and so on, and our ability to build is impacted. So, our construction costs have gone up, and the business plans that we'd all put in place have had to change because of that, and also what was mentioned earlier in terms of contractors for developments too. So, the situation in housing is very challenging indeed at the moment—the demand is greater, the construction costs are greater, there's a shortage of contractors to undertake that work, as well as internal staff, in terms of planning expertise, and so on, in addition to that financial cut that you've mentioned, for us to be able to service these. It will be a challenge, there are no two ways about that, and that's why we will have to—. And for us who do have housing stock, we're very fortunate that we have the housing revenue account, to be able to look more creatively at that support. And in areas such as Anglesey, we're fortunate to be able to use the second homes and empty homes premium to mitigate the impact on the local community too.

Okay. Diolch, Llinos. Thank you, Mabon. Carolyn Thomas.

Thank you. Earlier, you talked about the re-tendering of contracts and the extra costs now being incurred. I just want to ask about home-to-school transport, which seems to be a particular concern. I know another committee is looking at the Learner Travel (Wales) Measure 2008, and would like to alter it. And also, the impact that might have on Welsh-medium education, and just your thoughts really on that. Are you having particular difficulties with contracting the home-to-school transport?

Andrew.

Can I say that this is something that all local authorities are facing huge pressures on? In my own local authority, we've seen something like a 40 per cent increase in costs. That is quite substantial, and when you consider that Rhondda Cynon Taf—I think I'm right in saying—has the largest, or the most expensive in terms of the numbers, home-to-school programme in Wales, our budget for home-to-school is around £11 million. So, a 40 per cent increase for us has been substantial—it's well over £4 million.

That is driven a lot by costs in terms of recruiting drivers. So, companies are struggling with HGV drivers. Partly because of Brexit and because some of the rules about people coming here to work, we've seen some of the home-to-school drivers being recruited by large companies, and supermarket chains in particular, where they've been giving them as much as £3,000 and £4,000 in golden hellos to go and work for them, to drive their lorries and delivery vehicles. That has meant that, with an ageing population and an ageing workforce, I should say, within home to school—many of them are retired HGV drivers who drive the buses—that is an area that's been really difficult. So, they've had to increase their salaries to retain staff.

Similarly, we've had the cost of fuel, which has been rocketing, they're hit by inflation costs, and home to school is a real pressure for local authorities, not just the financial cost, but actually working with the operators who are doing their best to maintain the services. At the same time, of course, they've been affected by things like COVID and by just general flu, and we have drivers off, so maintaining that daily service, I have to say, is very much juggling. I think that in every home-to-school transport department, or integrated transport department, in local authorities, it's now almost a daily chore for them to make sure that every bus is operating in the way it needs to.

Thank you very much, Andrew. Carolyn.

Okay. So, if the learner travel Measure did change, you would have to try and provide more of a service. That could be an issue for you, because it's difficult providing the current service. Okay. I see you nodding. Thank you. And then, just finally, how challenging will it be for local authorities to contribute towards the target of net zero by 2030, and what could Welsh Government do to facilitate the pace of change required?

Okay. Who would like to provide—? Andrew.

Yes. Thank you, Chair. Can I just say I'm probably going to have to leave the call very shortly because of some of the problems we have today in the county because of the flooding? I need to join a call with emergency services.

No, that's absolutely fine, Andrew. We've only got a few minutes left, anyway. Yes, please carry on.

In terms of climate change and some of the things we're looking at as local authorities, again, it comes at a significant cost. For us to transition most of our fleets over to electric vehicles is something that I think most, if not all, local authorities have commissioned reports on, and have committed to doing part of their fleet. So, my own, in Rhondda Cynon Taf, we're going to commission about 300 or 350, actually, vehicles—the smaller vans and lightweight vehicles—to electric. We're probably not going to be doing the heavy goods, the highways vehicles and the refuse vehicles, because we trialled electric ones in our county and, unfortunately, because of the hills in lots of areas, they just didn't work for us, unfortunately. They didn't have enough power and they went flat before they could complete their days. But longer term, we may look to do hydrogen and work with public sector transport around hydrogen support for bus services and our larger vehicles. But we have to appreciate that this comes at a considerable cost, because electric vehicles are tens of thousands of pounds more expensive. So, if you change a 3.5 tonne cleansing pick-up or highways pick-up over to an electric vehicle, they can be £20,000 to £25,000 more expensive. And of course then we need to make sure that we can charge them. And, unfortunately, some locations in the Valleys—and I know it's the same in other local authority areas—there isn't actually the power in the grid in our localities. So, even though we could put chargers in, we can't, in some cases, charge a full fleet of vehicles, because there just isn't the grid capacity. So, there are lots of things to take into account, not just the cost, but the practicality of some of the net-zero things we want to take forward.

Okay. Thank you very much, Andrew. Okay, Carolyn?

Yes. Thank you. Thanks very much for attending, Andrew. I know how busy you are. Anthony, did you want to come in on that?

Anthony.

Yes, just if I can. It's certainly a necessary challenge and it's a vital one, one that we're up for helping Welsh Government meet and helping our nation meet at the end of the day. But there are inevitable costs in the short term, even if there are sometimes savings in the longer term. An example is school projects—new schools. Of course we'd hope to make a revenue saving if those are net-zero schools, because we look to be, in the longer term, paying less for the heating and lighting costs of those schools. But in the short term, there is a large construction cost to building them to those standards. Vehicles, as Andrew said, again, hopefully there'll be a long-term revenue saving in terms of fuel and maintenance; in the short term, the vehicles are a lot more expensive. In terms of infrastructure, Andrew mentioned the challenges in many of our authority areas. There's also a challenge about skills availability. If we're looking to design more active transport routes, for example, that requires a level of engineering expertise, in many cases, that we are struggling to find. So, all of those are challenges. That doesn't make it any less necessary, but there are certainly costs attached to it in an environment, as you've heard this morning, of significant pressures.

Okay?

Yes.

Okay, thank you. Thank you very much. Thank you, Carolyn.

Okay. Well, let me just thank all our witnesses for this first evidence session today for joining us to answer our questions and state views and concerns. Thank you very much, Andrew, who's had to depart a moment or two ago, Llinos, Christina, Anthony and Chris, and just to say that you will be sent a transcript to check for factual accuracy in the usual way. Diolch yn fawr. Hwyl fawr.