Climate Change, Environment, and Infrastructure Committee

Chair, can I just apologise for that?

I'm very sorry that this has happened. I'm very pleased that the relationship between the officials and the research service is sufficiently robust that that can be challenged and put right. But, clearly, it's not ideal, and I just apologise to the committee.

No, and I appreciate that, and, as I say, it's a matter of taking the learning from what has happened and making sure that we don't find ourselves in a similar position in future. Okay. So, we'll move straight into questions, and I'll kick off, if I may, because the paper—and thank you for the paper as well that you have supplied us—suggests that £150 million is to be reallocated to ease pressures on rail, but the Transport for Wales revenue budget expenditure line shows an uplift of £110.8 million. So, could you clarify how much additional funding is being given for rail services?

Okay. Well, Peter McDonald and I are going to tag-team this morning, so I'll ask him to lead on the detail of that, if that's okay.

That's fine. Thank you, Chair. So, yes, the BEL for the revenue budget has increased by £110 million, and that is the amount of money, on a net basis, that has formally been allocated to TfW, above and beyond what was in the budget. The reason why you've seen that £150 million is because that was the original pressure on rail services that we were presented with. And what happens in the TfW revenue BEL—and it is a complicated BEL, with a lot going on under the surface—is that we look to fund the rail services £150 million, so we give with one hand, and then we take with the other, for a series of reasons, because, for example, we ask efficiencies of TfW, we ask them to look to raise more money on the fare box, there are interactions with income from the Department for Transport. So, there's a series of things that have been netted off below the line, so to speak, which is why you see a discrepancy between those two numbers.

So, it's not £150 million additional funds in their coffers, then, is it? It's £110 million.

So, in terms of the net additional in the coffers, it's the £110 million, because that's the difference in the BEL table. But the number that came into the system was closer to £150 million—there's then a lot of series of things that happens to it, to work out what is the net given.

Okay. So, giving with one hand, taking with the other, and they're left with £110 million.

That's essentially the summary. But what I would say is the financial year has not even begun. There is a lot of uncertainty when it comes to running a railway. We cannot predict, for example, how many people are going to use the railway. Decisions are needed on the levels of rail fares in the future. This is, for the purpose of the railway, a draft budget, and what I want the committee to appreciate is that the pounds and pence will inevitably change, because that is the nature of rail.

Okay. And we'll come on to that, we'll drill down a little bit into that, later on.

So, last year, additional funding to support rail came from within the transport budget lines. But, of course, the draft budget now reallocates funding from across the portfolio, the wider portfolio. So, can you maybe provide us more detail about the prioritisation exercise that you used to decide where those savings could come from? Is that one for the Minister? Yes, that's one for the Minister, I think.

Thank you, Chair. So, we worked with all of the directors, right across the portfolio, to try and discover how we could best minimise the damage, if you like, of the budget settlement. The Welsh Government, as you know, and everyone has said to you, and I'll say it again, is very seriously short of the amount of money that we would like to have had and deserve, all things being equal. I know the Chair's heard this many times, so I won't go into the detail of that. So, in order to minimise the damage of that, we looked right across the portfolio at those things that could be slowed or could have one funding round taken out, rather than things that could be stopped altogether. On rail, it was very difficult to see how we could do anything that stopped them having to have extra money that didn't shut the railway down, which is clearly not an option. So, we discounted the option 'close the railway', obviously. I don't mean to sound facetious, but, clearly, we would have been looking at substantial reduction, if not complete reduction, to some lines if we hadn't been putting some of this money in.

And then we looked across the rest of the portfolio for other budget lines that could be lowered in that way without completely removing the programme, frankly, so that, if better times come, the programme can be ramped back up again. If you stop a programme altogether, it is very difficult to start it up again, whereas if you, for example, take two of the five funding rounds out of a programme, then you've still got a basis on which to ramp back up if more money comes into the main expenditure group, which is always possible, or circumstances change. So, we did an exercise right across the portfolio, searching for BEL lines of that sort to look for, and we also made a series of choices. So, we chose to protect homelessness services. I know this committee doesn't look at that; I've already been in front of the LG—I've forgotten what it's called—Local Government and Housing Committee to talk about the housing protection. So, we've also, if you look at the whole portfolio, which obviously spans a number of services, protected homelessness funding—at flat line; everybody in that section would have liked us to put it up, but we've managed to protect it at flat line. And so Claire Bennett's area and the energy BELs and so on are the ones where you can see the substantial reductions, because they're the ones with repeated funding rounds that could be treated in that way.

Thank you for that. I think a number of people will be quite shocked, or surprised maybe, at what you said in terms of the potential closure of whole services or whole lines in relation to rail, and that that is a realistic prospect. Do you think that the public actually grasp the seriousness of the situation there, and that these services are so close to the brink, effectively?

Could I—?

No, I'm sure they don't. Sorry, Lee. I'll just finish the sentence myself, and go back to you. No, and one of the big issues for us is always a real problem in rail—I'm sure that Lee Waters will be able to elaborate on this—. It is always a real issue for us, isn't it? Because what we want to guard against is having to pay a lot for a railway that isn't fit for purpose, as opposed to a lot for a railway that is fit for purpose. And it's all about the magic of the farebox and what can you do to make sure that we attract as many members of the public back onto the railway as possible, because, frankly, the higher the farebox, the lower the subsidy, the better the railway. So, it's a really difficult and careful analysis for where you can drive efficiencies out of TfW, and where we can make that good across the rest of the MEG, without fundamentally damaging services in any area. So, it's a difficult balance.

There we are. And Deputy Minister.

Yes, I just wanted to add a reflection, really, in terms of the committee's future work, because I think one thing I've really learnt in this role is how profound taking on a railway is to the Welsh Government. It is a huge liability. All of us—well, most of us here—talk with enthusiasm about fully devolving rail to Wales, without really understanding in practice what that means. And there's a degree to which I think we need to be careful what we wish for, because without the funding that comes with it—which I know the McAllister/Williams commission said should come with that, but in practice is highly unlikely to come with it—we are taking on a significant liability. And we've seen that with the Cardiff and Valleys lines that we've had devolved to us to allow the metro to develop; the state of that was not what we expected it to be—so, rail funding not devolved, therefore we had to find funding from our own wherewithal to bring that up to scratch, and now we have that ongoing commitment. We also have, as we've seen through COVID, the unpredictability of services, and, for every time you add an additional service, we're adding an additional subsidy demand, and there's still revenue pressure. We know that revenue funding is very scarce within this MEG and within the Welsh Government.

So, there is a whole series of difficulties, and back to Peter's answer to your question about the way we've managed the rail budget this year and the uncertainty around it, this is as much art as science, and we are constantly having to duck and dive, really, to try and make this work out, plus, of course, we are building a modern metro system on top of running a Victorian railway whilst it still runs. And we're doing it at a time of raging inflation. TfW and the Welsh Government have worked very hard at scrutinising those figures and getting them down, but that's one of the reasons why this budget has been under pressure, both last year and this year, because we're having to find—from within the MEG, largely—the money to fund those ongoing overruns of costs that are happening in all infrastructure projects.

So, the rail element of this MEG and of the Welsh Government as a whole is a bit of a headache, without the funding that we deserve from the UK Government, and I think that is something worthy of further reflection by the committee.

Yes. Okay. Thank you for that. That's really useful. Dean.

Thank you. Can I just add that I've been doing this job for a number of years now, and this is probably the most difficult budget period we've gone through. It's a perfect storm in some ways. We've got the £150 million that is needed for rail, but also the £1.3 billion gap across Welsh Government as well, which we've had to contribute to. I think the issue for this MEG in particular is the small amount of revenue it has got, which is about 4.8 per cent of the overall total. It's got a large capital total, which does come in handy, but we had to contribute and reprioritise nearly £150 million, as Peter said, towards rail, but also contribute to the wider priorities of Cabinet, which we know are health, education, local government. So, we've had to do both and try and live within that 4.8 per cent, which has meant difficult choices for the Ministers. We put up, as directors, impact assessments and all those choices. So, we've gone into it, but it has been really difficult to deliver this. Thank you.

Yes. Thank you. That's an important context. I'll come to Delyth in a moment. I just want to ask one other question about savings within the department. Clearly, we're aware, having scrutinised other Ministers, that there's an emphasis on reducing bureaucracy and administration costs. Can you tell us a little bit about, in the wider portfolio budget, whether you've managed to realise as much as you would like in that respect?

Shall I—

Yes, please do.

—start off with that? Okay. So, yes, we've done that in a number of ways. This MEG also has Natural Resources Wales in it. So, over a number of years, we've done a full baseline review of NRW's costs, for example, so we now have a unit cost for NRW. We've worked very hard with the leadership of NRW to change both the culture and the structure of the way that they do things. That's a continuing journey—we're not there yet—and this is a very difficult period for NRW too. We've also done, as Lee started to say there, a very similar thing with TfW, where we've got a completely different relationship with them in terms of sharing the pain, if you like, of what we're trying to do. We've driven that right across the whole of the MEG.

Internal to the Welsh Government, we've tried to look very hard at the ratio of revenue to capital. So, just to—. I'll put a lay person's term on it and then we'll ask Dean to say it in financial terms, but, effectively, you can't spend that capital unless you've got people to spend it. So, if you're going to put out the homelessness grant, you need a person whose job it is to do that. If you're going to put out the Local Places for Nature grants, you need a person whose job it is to do that.

So, we've looked very carefully at what the revenue implication of the capital spend in the main expenditure group is, and that’s something we’ve worked very hard on right across. Because we have had instances where we’ve got capital, but we’ve been unable to spend it because we don’t have the people to spend it. The director general and all the directors and myself have worked very hard to try and make sure that the human resource is in the right place to actually get the capital spend out the door, because this MEG, as Dean has said, has a huge capital budget and a very, very tinsy-winsy revenue budget to go with it. So, that’s been a very large part of what we’ve been trying to do, to make that relationship as efficient and effective as we can make it.

Okay, thank you. Thank you for that explanation. I think we'll move on now to Delyth. Diolch.

Diolch. If we go further into detail on TfW, please—well, on rail—it seems like it's a question of chicken and egg in terms of you need there to be increased rail ticket sales. If those rail fares and the revenue you get from that don't go up, what are the contingencies that you have in place to make sure that—? Well, can you give us an assurance that you won't need to be increasing in year in the same way that you had to do in 2023-24?

Peter's got an answer to that.

Sure. So, the coming financial year is different from the previous one. As you say, there was an in-year top-up in 2023-24. Essentially, the top-up for 2024-25 is now being done ahead of the financial year. So, we are ahead on a relative basis in timetable terms.

And these additional amounts of money are needed because of the gap between the costs and the farebox. There’s a fundamental time inconsistency, unfortunately, on rail subsidies, in that you pay upfront and you get your farebox later. So, we are having to pay now for rail services that will come on stream in a year’s time, because you have to buy the rolling stock, which you lease, you pay annually for, and you have to test that, test that, test that, and you pay for it all the while you test it, even though there are no passengers on it. You hire the driver 12 to 18 months beforehand and you train them, train them, train them, and you pay for that driver before a single passenger has got on that service. The service then starts on day one, some people use it on day one, but people are creatures of habit, they need time to change their behaviours, they need time to understand what the service is, so it takes time for that uplift to come.

So, between circa 2023 and 2025-26, this is our difficult gap, and it has come at the worst possible time—to use Dean’s term, the perfect storm—because of the wider Welsh Government budget challenges. If this had happened in a different fiscal environment, we probably wouldn’t be talking about it at such length today. But it has come at a very difficult time. The Welsh Government has made a decision to stick with this investment and see it through, and the early indications are that when the new rolling stock and the new services do come on stream, more people use them. So, the early indications are that where those services have come on stream, passenger numbers are higher, and that is also what the evidence tells us. I can’t stand here and guarantee certain levels of passenger numbers, but the indications are looking good, and despite the fact that there has been, unfortunately, a lot of necessary disruption up and down the Valleys, farebox levels in the Valleys have actually been maintained by more than we thought they might have been.

So, I’m not saying that obviates the need for contingency planning or very careful budget management, but at the moment, in terms of the metaphorical dashboard of indicators, the information or the evidence we see suggests that the more and more of these services we get on stream, we get on line, the passengers will come. And we need to do, and we do do, exceptionally frequent budget management to see whether what we expect is coming through the farebox.

And that's very useful. And I don't think any of us would expect you in any way to be giving us any guarantee with something like this. That would be utterly unreasonable. But you can reassure us, then, or you can give us reassurance, that that contingency planning is taking place in case something unforeseen—not another pandemic, please God, but something like that—could happen that could just disrupt fares entirely again.

Well, in reality, look at the budget situation we're in this year and where we've had to find a significant amount to fill a hole, and we've done that, but it's at the cost of other things. TfW are very conscious that when their projects overrun, or when their projections don't meet, there are costs to other really important things that we care about. So, they are acutely aware of it and we remind them of it frequently. And there's a lot of scrutiny that goes on, but there's a degree to which you can't plan for this; you just have to do your very best to try and manage it.

Okay.

Can I add to that, please, Chair?

Certainly.

Yes. Yes, please.

So, just to say, we ask the head of NRW and the head of TfW to come to our directors meeting quarterly, because we've done this as a collective. So—[Inaudible.]—the director general, myself and the Deputy Minister all sit together and go through the whole budget, so that TfW are acutely aware of the impact of their services on the rest of the MEG, as are NRW, and indeed as are the other directors, who are acutely aware of the impact of their services on those big services. So, I just want to emphasise to the committee how collectively across the MEG we've done this.

And then I just want to reiterate the point I made. If we don't hold our nerve and put this investment in, we will still have to pay for the railway while the farebox descends as people are fed up with the really rubbish services and all the rest of it, and vote with their feet. And you do end up, actually, paying almost exactly the same for a very bad railway as you would end up paying for a good railway. And so, holding your nerve through the tough times is really, really important and it has not been easy to do.

Okay.

Thank you for that, Minister, thank you.

In terms of the comparison with Scotland, I think that the Institute of Fiscal Studies has told the Finance Committee that the recovery of numbers of passengers and fares post pandemic in Wales is broadly comparable with the experience in Scotland. But, the Scottish Government hasn't had to increase subsidies in the same way. Why would you say that is, and is it to do with the KeolisAmey ambitious projections that had been underpinning that bid?

I'll ask Peter to come in as well, but the Scottish Government aren't building a metro, and as Julie said, you have to buy the trains in advance, you have to hire the staff in advance, you have to train them in advance, plus we've got the inflationary cost increases of that. All that has an impact.

Peter and I have been—. Since you've raised it previously in the Senedd, Delyth, I think it's a really interesting challenge to understand why, on the surface, there's a disconnect here, which can be explained.

As the Minister says, the big difference between Wales and Scotland is that we are replacing almost every piece of rolling stock in the country and that comes with a significant cost. So, yes, in terms of farebox recovery, we are roughly mid table despite the disruption up and down the Valleys, which I was referencing before. So, actually, I know it may sound strange, but we're quite happy to be in mid table given how much disruption there's been in terms of the infrastructure.

And also, top-ups are a relative concept because it depends upon when the original budget is set, and Wales and Scotland are in different fiscal cycles. If you think back to when this 2024-25 budget was originally set, it was winter 2021 before we knew the extent of inflation, before we really knew the impact of COVID upon passenger dips and then resultant growth. So, I think a lot has changed since the original 2024-25 budget number was set.

I was looking at the Scottish Government fiscal cycle and they have been updating their numbers on a—. They had a spending review later than we did, essentially.

But, also, the underlying point of your question is that the assumption we had in our budget from day one from the KeolisAmey bid has set the baseline higher than where in reality it is. So, that does then create a notional black hole that we're constantly playing catch-up with, because there are lost years.

Okay. Very briefly, and then we need to move on.

Okay. I'll leave that then. Just finally, then, in December you—. Peter, you were saying earlier that we can't predict how many people are going to use the railway, which is obviously a fact. You had said in December that you had plans to increase capacity over the next three months. Could you update us on that? Or, possibly, if it's something in detail, if you could write to us, because I'm aware of time.

Approximately every 10 days to two weeks a new bit of rolling stock is coming onto the network at the moment. So, we've brought in new stock since we met.

New trains.

New trains. Apologies. And following the committee's scrutiny we've been challenging TfW to tell more of a public story about when and where those trains will be on the network, because as we—. I think we had the same discussion, almost, in this room a month ago. Customers really know, they feel it and they want to be informed, so TfW have been doing some more social media on, 'This type of train is now coming on in here. You'll have these types of trains in three months' time.' And we can share some of that with you, if that would be useful.

Yes. Any information along those lines would be really useful, I think.

Thank you.

Diolch yn fawr. Okay. Huw.

Thank you very much. From one challenging area to another: buses. I always struggle to make sense of these movements about different BEL streams and so on, but we're aware that there has been some quite significant movement, and there's been some consolidation amongst the revenue BELs as well. Can you explain what your decision making was with these changes with the bus service budget, the reasons for them, particularly on the fact that four revenue streams, your paper suggests, have been terminated, and we have a new bus ancillary funding stream as well?

So, this is, essentially, an administrative change. We increasingly realised that we were managing budgets quite flexibly in order to protect the maximum number of bus services, and we felt that the BEL structure should be updated to reflect that. It's a relatively basic administrative streamlining. I think the more interesting underlying point is that it became clear that after COVID the numbers of concessionary travellers were not going to return to the pre-COVID equilibrium. And so, what we have been able to do is to redeploy some of those underspends into core bus services. The very simple internal mantra we have is to spend bus money on bus, because what we're trying to do during this difficult period, as you describe it, is to try and maximise the amount of Government funding we can put towards core bus services, in order to absolutely minimise—

And also, using the crisis to take us towards the new franchising system. So, consolidating those funding lines also helps put us in a better position for the way we manage and the way we engage with operators and local authorities, to try and put that on a different footing.

That's really interesting, that's really interesting. Perhaps I could ask then: the new bus network support grant, how does that fit into this thinking? What's that going to be? Why has that been devised? How does it compliment the other streams? You've consolidated some to futureproof where you're heading, I suspect, with bus refranchising or whatever it will be, re-regulation, the legislation coming through. So, the bus network support grant, how does that tie into this?

This is the latest stage in the journey from COVID bus emergency support, which we began in 2020, to franchising. So, you may recall, we had the bus emergency scheme for a couple of years, and then, in 2023-24, that became the bus transition fund, which was starting to move away from the structure of how we provided the COVID support, but still putting money in. This is the next stage in that evolution. And there's quite a big structural change between the bus transition fund and this new grant, which is that this grant is not demand led in the same way as the bus transition fund.

So, you will recall from your previous scrutiny that, in 2023-24, there's been quite a lot of uncertainty over the level of bus funding, because the structure of the scheme means that the level of funding depends upon how many people are using the buses, and you often don't find that out until about two to three months afterwards. You have this complex period of reconciliation and adjustments have to be made. From 2024-25, the new grant, which, essentially, has the same policy purpose as the previous one, is designed in a different way, whereby we give a fixed level of grant to local authorities, working very closely with them on the allocation between the different regions, and they go out and directly contract for services. And that is all done within a fixed envelope and that reduces considerably the amount of uncertainty within the bus budget. And the purpose of the grant—the underlying purpose of the grant—is to procure socially necessary services that would not otherwise be commercial.

And, again, that's in preparation for franchising.

That's interesting, because it sounded to me then as though that was the legacy of the past conventions of subsidising unprofitable parts of the network for social purposes, but it's not; it's anticipating what might come.

Well, previously, of course, local authorities, who still have a legal obligation to assess and provide for socially necessary services, even though they look to us to actually do it for them, had a role in that, and the reality of austerity means that they're not able to do that and some have chosen not to do it and some have been forced into a position where they can no longer do it. And so, we've got in in a very messy way in trying to compensate for that, and this is about trying to put this on a more stable, strategic, planned footing, again in preparation for franchising, where we make an assessment of what are—. And that's the regional scrums process we went through that you may remember us talking about, where we sit down with local authorities and Transport for Wales—TfW are there to assist and provide the analytical capacity—and, when allowed by the law, the bus companies as well, to try and say, 'Well, where is the core bus network?'. In a sense, we've got the minimum core bus network at the minute and we've safeguarded that, and then how do we commission that and how do we fund that? And that's what this new system is about.

So, we've decided, with local authorities, that these are the minimum bus routes that we need and we will commission those with the companies, and there's a price and they will deliver for it. Again, that's moving us onto a different footing, whereas before we were entirely at the whim of passenger behaviour or the reports from bus companies of how much they could claim, and, you know, there were always grey areas there. So, I think this is a far more efficient and more strategic approach. And as we've seen from some of the work that TfW have been doing in Gwynedd, where they've been planning networks ahead of franchising, you can actually get 40 per cent more services for your money, because you are not in the vagaries of negotiation with bus companies three months in arrears. Then, we saw that during the scrum process in the emergency when we were facing cliff-edge cuts, and we actually ended up delivering a roughly similar network for less money. So, it's proving, I think, the merits of franchising, and the current system, as well as not serving the passenger, is actually really inefficient financially.

Just so that I'm clear—just one final question, Chair—on the specifics of the use of the bus network support grant, is that to be used by local authorities within their negotiations, going forward, as part of the core, or is it complementary to the core network that's provided?

That is about ensuring that the core can continue.

It's about ensuring that the core can continue. Okay. Good. So, there shouldn't be unrealistic anticipation that this could actually extend beyond the core; this is to maintain what we've currently seen laid out, described as the core.

Yes, and we hope it'll bring more stability, but, of course, there are always variables that we don't control. So, inflation is still—. If we said, 'Here's a fixed sum, you deliver your bus services', there's a degree of uncertainty there still. But the indications for the next round are quite encouraging so far, in that the tendering process, based on our earlier reports, is showing that we're actually able to get more than we thought we could. So, we don't feel alarmed about the year ahead in the way that we did this time last year.

Great.

Okay. Thank you for that. I'll bring Janet in now, and then we'll move on to Jenny in a moment. Janet first.

Thank you, Chair. Good morning, Lee and everybody. Can you reassure us that this year's bus budgets will not be subject to unforeseen changes so that the 2023-24 bus funding uncertainty isn't repeated?

I think I've just answered that, Janet, to be fair.

Oh, thank you. It's been suggested that 10 per cent of bus routes were lost during 2023. Have you assessed the impact of the 2024-25 draft budget allocations on bus service levels, given inflation and a broadly flat revenue budget?

Peter, do you want to answer that?

So, very similar to what you said a moment ago, Deputy Minister, yes, it is a flat cash total—to use the lingo—but indications are that the procurement process, the tendering process, is not delivering the same rate of inflationary increases we've seen in previous years, which is suggesting to us that bus cost inflation is plateauing, which means that we can't guarantee that there won't be fewer services, but the level of risk we're running compared to last year feels considerably less, and we think we are providing this grant in a more efficient way that gets more bang for our buck. So, I haven't got a percentage figure, but I don't think we're in the same world that we were in in 2023-24.

That's reassuring to hear. Thank you.

And I'd agree with that—

Yes, okay. Thank you very much. Very briefly, then, Dean, and then we'll move on to Jenny.

Thank you. Just linking into the earlier questions about efficiency and savings, this gives assurance to the bus companies, to local authorities, reducing that administrative burden as well. So, I think that there are win-wins across the board here.

Yes. Okay. Great, thank you. Jenny.

I want to talk about transport poverty, because, obviously, it's entirely relevant to the earlier conversation you were having with Huw. Sustrans says that young people and those in rural areas are the ones who are suffering most from transport poverty. TfW tells us that only 13 per cent of Welsh households don't have access to a car, and that includes 25 per cent of bus users having a disability or long-term illness. Presumably, they are not able to drive. But we know that lack of car ownership rises to 50 per cent in some areas that I represent. So, how have you managed to address your limited budget for buses to try and ensure that everybody can get to either work or places where they can buy fresh food?

The figure of 13 per cent access to a car is a tricky one, isn't it, because, on the surface, that seems like a good thing. It's relatively low that people are not denied the freedom of movement a car provides, but, actually, the reverse is true. The fact that only 13 per cent of people are without a car means the rest are forcing themselves to be able to afford a car in order to access key services, whereas if they had a real choice, a good public transport system that was easy to use and was affordable, we could afford for that figure to be a lot higher. So, I think we should just be aware of that, that relatively few having no access to a car is not a good thing from a social justice point of view, and giving people a real choice of modes so that they don't feel that they have to buy a car they would struggle to afford would be a better position to be in.

And then that goes to the choices that we have before us. Our long-term and medium-term direction is very clear—we have to achieve modal shift in order to meet our climate targets. That means 10 per cent fewer car journeys and far more public transport journeys. But, in order to get there, we obviously have to recalibrate the way that we spend our money, and that's what the roads review was about. It was about freeing up money both for road maintenance and also for public transport. But, in the short term, given the twin problems of farebox revenue falling because of COVID and passenger behaviour and rising cost inflation, we are in a tight spot with the choices we make. As we've already rehearsed, we've taken the decision to preserve investment in the railway because we know that, in time, that will help us to get to our modal shift targets in urban areas, because that will deliver significant extra public transport use. But, in the short term, it does mean us having to constrain the amount of money that we've got available to spend on buses, which, from a social justice point of view, are a far better investment.

Now, because we've got a fragmented, commercialised, privatised bus system, we don't have the strategic levers to control bus in the way that we will once we have franchising. So, it's a variable that is very hard to deal with. Even if we were to pour a pile of extra revenue funding, which we don't have, into buses, because the system is so inefficient, we wouldn't get a very strong return for that. That's why we need to plug the leaks and go for a franchise planned system. In practice, we are facing a trade-off, and—this is true of transport policy across the UK, by the way—we are preserving rail services that generally benefit more middle-class people, and we are not expanding the bus service, which benefits people on lower incomes and people who have transport poverty, through disabilities or young people who don't have the ability to drive. I think there's a profound and fundamental structural problem across the UK in which we treat rail versus bus. The truth is we need both, and that's why, from TfW, we are creating this idea of a guiding mind system where we'll be able to have a properly integrated transport system where we can plan bus and rail to join up. At the moment, we can't do that. If a bus operator wants to run a service that runs in with a train timetable, it can. But if they don't want to, we can’t force them to, and that means there is a disconnect from a passenger point of view for using. So, we want to get to a point where both rail and bus complement each other, work in tandem. That does mean, in the short term, putting that money into rail to get that system there. It also means, in the short term, planning to get a planned franchise bus network, but, in the meantime, there is a gap, and I would much—. If I had completely free rein, Jenny, I would much rather put extra money into bus and active travel than rail, from a social justice point of view, but the system is not designed like that, and that is why we are redesigning the system.

Okay, so you’re between a rock and a hard place in how effectively you can use the bus network support grant because of what you’ve just described. So, when are we going to be able—? What is the timetable for legislation to enable us to take control of the bus network?

Well, legislation isn’t the big barrier. We’ll introduce legislation this year. We’ll be publishing next month, I believe, a route-map of how we bridge from where we are to where we need to get to on franchising. It’s not a quick journey because it’s extremely complicated. We are undertaking a root-and-branch change of the way we do buses. It’ll be profound in its effect, but it will also be pretty fundamental in the redesign of the current system, and we need to make sure we do it well, and so we need to do it in a steady, measured way, in stages. So, it’s probably going to take seven years or more before a fully franchised system is up and running is the truth of it, frustratingly, and we’ll be happy—. Once you see the document, you’ll understand the steps that are required for that, and, obviously, with the rail system, we are seeing benefits and changes all the time in urban areas.

We’ve dealt with rail; you’ve answered all the questions on rail. If legislation isn’t the biggest barrier, it’s this planning—

The two need to work in tandem.

It’s the finances and the planning.

Yes. It’s rewiring the system, so we need to get local authorities to work on a regional basis to share their powers, to work with TfW. We need to gear up TfW—that was established as a rail procurement body—to be able to manage bus well, and the whole crisis we’ve gone through has speeded up their maturity on that significantly. So, we’re in a good place, I think, on that. I met yesterday with Andrew Morgan and with James Price, as I do every six weeks, because we now need to make sure we see, as the bus Bill and the White Paper set out, this guiding mind, where we have a tripartite partnership between local authorities, TfW and the Welsh Government. We’ve put Welsh local government on the board of TfW and we’ve put the Welsh Government on the board of TfW. We now meet, as I say, regularly and genuinely make co-decisions on transport.

So, there’s that whole culture change, there’s the whole rewiring of the system, and then there’s the dealing with the providers—the private sector. There’s also the upgrading of the fleet. So, there are lots of moving, complex parts here to get this right. So, this isn’t a swift journey, but, once we’ve done it, I think it’ll be a step change.

Okay, thank you.

Is the budget sufficient, really, to actually progress this important social justice—

None of the budgets are sufficient; we’ve got a £1.2 million shortfall. It’s the best that we can do.

I’ve now got Huw wanting to come in, and Joyce, and I know Janet wants to come in and maybe Jenny as well.

Sorry, it was a long answer.

No, it’s all right, but everybody wants to come in as well now, and I am now mindful that we’re struggling with time, so brief—

Chair, I’d also like to add a couple of sentences.

Okay. Well, given that you are the Minister, I think we will allow you. But let’s hear some of the other questions first, and then maybe you can pick up on a few of them. Huw.

Yes. It may have been a long answer, but it was an intriguing answer as well, and the Minister is a deep thinker on these transport issues, and I don’t say that in a flattering or condescending way—you genuinely think quite deeply on it. But I’m interested in the budget implications of the structures that we’re setting up. So, with TfW in terms of rail at the moment, it’s essentially a wholly owned Welsh Government company.

Yes.

So, there’s a direct relationship as well.

Yes.

It’s just set aside, but it’s a direct relationship. It’s open book.

Yes.

The situation you’ve described in terms of using the budget now, where you have TfW’s guiding mind over bus transportation linked to rail, linked to others, but there are local authorities, the Welsh Government, and then the private operators.

Yes.

Just throwing this at you, as a deep thinker: we often talk about Transport for London as the exemplar who have retained control of the whole thing themselves under the Mayor of London. We will still, in seven years, have a slightly fragmented system. There’ll be a guiding mind and there’ll be partnership working, and so on. Is that the most effective use of budgets, to have some operators and maybe some social enterprises, whatever? Is that the best way to make use of a budget?

Well, I think Julie and Peter would like to come in on that because that's a far-reaching question, but what we'll have is a planned system, and so we will know the basis on which we are letting the contracts. We will have strict conditions in terms of what will have to be met by that and then we will have a functioning relationship with local authorities and Welsh Government, with TfW as the servicer of that, to make decisions that have local accountability, but also have scale. So, is it going to be perfect? Of course not, there are risks with it—

And we don't start from a blank sheet.

No, and there are risks with it—it creates all sorts of other pressures that we are conscious of, but it's a better system than we've got now, but I'm sure Julie would like to add to that.

Very briefly, then, Minister, yes, please.

Yes, I'd just like to make the point that I was also going to make, so, Huw, this is a complex set of other issues running across the landscape as well. So, for example, the corporate joint committees have to put into place their strategic transport and their strategic planning arrangements. Part of that is to ensure that we have both the infrastructure and the transport plans locally to be able to make this work. So, we've been working on this for a very long time to make sure that the planned system, the infrastructure system and the bus system all come together at the same time. And I think that Transport for London is an interesting model, isn't it, but it is, of course, all in an urban environment. We have a very different set of circumstances across Wales, where one-size-fits-all is almost certainly never going to work.

We also have an existing landscape of people who need to retain jobs and productivity and localism, and all that kind of stuff, right across Wales. So, we've been working on this for a very long time; it isn't just about the buses, it is about that better infrastructure. I think the committee is probably going to want to talk about active travel at some point as well. So, it's about that better infrastructure right across Wales, which all of this complements.

And the last thing I wanted to just say is that it is about the integrated transport—we haven't said that too much today either. But a lot of what we've done in the past is we've put perverse incentives into the system, so bus operators are incentivised to keep their passengers on the bus for as long as possible if they're concessionary fare holders, because the Welsh Government pays for that—they're not incentivised to take them to the local train station, get them onto the train, which is more effective, because then they lose the passenger. That is a perverse incentive in the system, and there are many others.

So, it's about getting the system right so that it is the most effective and efficient, and, actually, frankly, the easiest to use. I don't know which one of us coined the phrase, probably Lee, about making the easy choice the best choice from the point of view of the budget and the climate at the same time. So, these are all a set of integrated things that we've been working on right across the Government for a very long time.

Thank you, Minister. Okay, very briefly, I'll take a question from Joyce and Janet, and then we'll have to move on.

Very briefly, you're talking about integrating all the different systems and plans, but a lot of local authorities at the moment are putting together their local development plans, and part of the local development plan, of course, will be building. I'm just wondering about the conversations you're having in that area, especially when you're talking about—which we are—poverty of access to transport and out-of-town developments with no transport systems attached to them and whether you're thinking about 106 in a different way.

Well, I'm sure Julie will want to say something about this, but briefly from me, we have put in the funding this year: we've made a small amount of money available to local authorities to work on a regional basis to develop their regional transport plans, but that is conditioned on working alongside the development of their strategic housing plans. So, the money is to do both in tandem so that we do have that alignment. But I'm sure Julie will want to add.

Yes, so just very briefly, then, Chair, Joyce, local authorities are working on their refreshed LDPs. We do have full LDP coverage across Wales, which is extraordinary, really. We've worked for that for a long time. We're now encouraging local authorities to look at their LDP in the light of the strategic regional plan that they need to put in place, so that the infrastructure is there for the developers to be able to see so that when you're negotiating your 106, you know what the infrastructure for the region looks like and what you might be asked to contribute to.

If you look at 'Planning Policy Wales', as the whole committee will know, we already have both the plan for communities and the plan for regional growth already put into those documents. The LDPs will reflect that. And, Joyce, we absolutely are working with each individual council on their LDP. We're also encouraging that regional planning so that you don't have ridiculous nonsenses of a development—invisible force fields at the edge of an authority area and no transport coming from the obvious other side. That's what the regional plans are for, and, as Lee has just said, we've put a small amount of money into that to incentivise it. It's essential for those regional plans to be put into place for this to work, as you know, and what you just discussed there about the capacity of the 106 negotiations and so on is also assisted by the regionalisation of some of that. So, we've been working, again, very hard on this. I guess, Chair, what I'd like to get across to the committee is that you can't look at bus or train in isolation like that, you have to look at it as part of the regional planning system and the infrastructure system; it's all part of a greater whole.

Yes. Okay. Thank you. That's an important point. Janet, did you want come in on this area of questioning?

Transport poverty? Yes. Now, Welsh Government research has found that 41 per cent of 16 to 24-year-olds consider transport the No. 1 barrier to getting a new course, training or job. How have you worked, Minister—? Oh, and good morning. I'm sorry you've got COVID; I believe it's a nasty one. How have you worked across Government to address this impact on skills, employment and the economy? And do you view this as a transport problem or a cross-Government issue to be addressed by education and economic policy budgets as well as transport?

Very briefly, then, Janet. Obviously, we have to work right across the Government on this, so both Lee and myself have met with both the economy Minister and the education Minister, for example, to make sure that the learner travel stuff and the travel-to-work groups are included as part of these regional scrums that Lee's already mentioned. And this is part of the 'guiding mind' point, where you have to have the infrastructure mapped out in your area so that you can look at what these routes are for people to travel to work and make sure that we do have the minimum transport links necessary. This isn't just about roads, obviously, it is absolutely about getting services in place to be able to utilise it, and that's very much what Lee and Peter were talking about earlier in terms of minimum bus and the route to franchising.

Thank you.

Thank you. Okay. Jenny.

I'd like to see this as a hub-and-spoke problem, because, particularly in rural areas, you're clearly not going to have a bus passing everybody's doorstep. So, I just wondered what use you're going to make of electric bikes to enable secondary school children to get to school where the distance is greater or the hills are steeper than would make that possible? And, you know, I think this is in the context of the capability and capacity of a local authority to deliver on active travel, where, clearly, enabling people to be actively travelling to school has to be one of the key ways in which we make that modal shift.

James Price is telling us that local government is coming forward with schemes at pace and quality we've not seen before, but I haven't seen it reflected in the way that secondary school children are still struggling to get to school unless it's on the school transport that's very, very expensive to run.

Okay. Well, this is a really complex problem, clearly. It's got a huge cultural dimension, which we won't touch upon, but needs to be acknowledged. The issue of rural transport barriers is a really important one. Next month we are going to be launching a discussion document that challenges the assumption that you can't do sustainable transport or modal shift in a rural setting, which is the commonsense view of many, particularly in local authorities in rural areas, saying, 'We need the car and this agenda is just an urban one'. And that's bunkum, frankly. Even in rural areas, most people live in towns or near to towns, and there are plenty of examples from across Europe of where, in deep rural areas with even greater population sparsity than we have, you have a functioning, good-quality public transport system. So, that's hopefully there to challenge the thinking as the rural authorities develop their regional transport plans. And, by the way, every local authority in Wales has large numbers of rural areas, so this applies to everyone, not just in mid Wales.

I think electric bikes is a game changer for modal shift in rural areas, and we know—and the example will be quoted in the paper—of the hub-and-spoke model, as you mentioned, where, a certain distance out from a town, you have quality, segregated, shared-use routes, which we want to ally with electric bike use, and which opens that up as a realistic prospect for far more people. I myself have an electric bike and it's really opened my eyes to the potential it has for getting people who would never consider getting on a normal bike as being for them and making it an attractive option for them.

With great poignancy, the cuts to the revenue budgets this year that we've had to make have meant that a lot of the work that we were hoping to expand on electric bike use has not been possible to do, which pains me deeply, because we've been working hard on this for a number of years. So, a scheme that came out of a conversation Julie and I had with somebody from Townhill in Swansea some years ago now about—we have very hilly communities where people can't afford a car but an electric bike would be helpful for them to get to work. And from that we've developed, with Sustrans, the E-Move project, which has been piloting in particularly hilly areas that have high levels of poverty—a free loan of an electric bike, and it's been very successful. We simply don't have the money to expand the pilot as we intended to. Now, it's one of those schemes where, as Julie mentioned earlier, we're hoping to keep the pilot light on, and the learning is there, and we want to try and find other ways to keep that going in future years. Also, we've been doing a lot of work preparing for an interest-free loan for people to buy an electric bike, which again I think would have been very helpful, but again we've been unable to take that forward this year, because of the constraint to the revenue budget and the choices we've had to make, which is very, very frustrating.

But you're not the only game in town. What about the community funds that have been generated from windfarms in areas that are quite hilly, for obvious reasons? What is being done to ensure that people who are in that beneficial area are using that money to build on what—

Very, very briefly, Minister, because we need to move on.

We did a pilot of that from the Valleys taskforce in upper Brynaman and lower Brynaman, working with the community transport provider. We're just about to launch a community electric car club network around Wales, and that has the potential to involve electric bikes as well. So, I think we're making the baby steps, but because of the budget squeeze we've had to pull back on some things that we really should be accelerating at pace—we just can't.

Okay, thank you. I can see other Members wanting to come in, but I'm afraid we're going to have to draw a line under this particular area of policy, because we've spent nearly an hour on transport, giving it a good airing, and rightly so, but there are very many other important areas that we need to cover and if we don't move on we won't. But I do propose that we take a very short five-minute break, and when we come back we'll move on to look at some of those other areas. So, we'll just pause a moment whilst we go into private session.