Y Pwyllgor Llywodraeth Leol a Thai

Local Government and Housing Committee

12/01/2022

Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

Alun Davies MS
Carolyn Thomas MS
Joel James MS
John Griffiths MS Cadeirydd y Pwyllgor
Committee Chair
Mabon ap Gwynfor MS
Sam Rowlands MS

Y rhai eraill a oedd yn bresennol

Others in Attendance

Anthony Hunt Arweinydd y Cyngor, Cyngor Bwrdeistref Sirol Torfaen
Council Leader, Torfaen County Borough Council
Dr Chris Llewelyn Prif Weithredwr, Cymdeithas Llywodraeth Leol Cymru
Chief Executive, Welsh Local Government Association
Judith Cole Dirprwy Gyfarwyddwr, Polisi Cyllid Llywodraeth Leol a Chynaliadwyedd, Llywodraeth Cymru
Deputy Director, Local Government Finance Policy and Sustainability, Welsh Government
Rebecca Evans MS Y Gweinidog Cyllid a Llywodraeth Leol
Minister for Finance and Local Government
Reg Kilpatrick Cyfarwyddwr Cyffredinol, Cydgysylltu Argyfwng COVID-19, Llywodraeth Cymru
Director General, COVID-19 Crisis Co-ordination, Welsh Government
Richard John Arweinydd y Cyngor, Cyngor Sir Mynwy
Council Leader, Monmouthshire County Council

Swyddogion y Senedd a oedd yn bresennol

Senedd Officials in Attendance

Catherine Hunt Ail Glerc
Second Clerk
Chloe Davies Dirprwy Glerc
Deputy Clerk
Manon George Clerc
Clerk
Osian Bowyer Ymchwilydd
Researcher

Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.

The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.

Cyfarfu'r pwyllgor drwy gynhadledd fideo.

Dechreuodd y cyfarfod am 09:01.

The committee met by video-conference.

The meeting began at 09:01.

1. Cyflwyniad, ymddiheuriadau, dirprwyon a datgan buddiannau
1. Introductions, apologies, substitutions and declarations of interest

May I welcome everyone to this meeting of the Local Government and Housing Committee? The first item on our agenda today is introductions, apologies, substitutions and declarations of interest. Let me firstly state that the public items of this meeting are being broadcast live on Senedd.tv, and all participants are joining via video-conference. The meeting is bilingual, and simultaneous translation is available. A Record of Proceedings will be published as usual. Aside from the procedural adaptations relating to conducting proceedings remotely, all Standing Order requirements for committees remain in place. Are there any declarations of interest? Carolyn.

Yes, Chair. I'm a Flintshire councillor, and up until May I was deputy leader at Flintshire and cabinet member for streetscene and transportation. Thank you.

Thank you, Chair. Similar to Carolyn, although I'm not a cabinet member I am a councillor.

Good morning, Mr Chairman. Declaration of interest: I'm still a county councillor in Conwy County Borough Council. Thanks.

Okay. Thank you all very much. If, for any reason, I drop out of proceedings for technological or other reasons, then the committee has agreed that Alun Davies MS will temporarily chair while I attempt to rejoin.

2. Craffu ar Gyllideb Ddrafft Llywodraeth Cymru ar gyfer 2022-23: Sesiwn dystiolaeth 1—Cymdeithas Llywodraeth Leol Cymru (CLlLC)
2. Scrutiny of the Welsh Government Draft Budget 2022-23: Evidence session 1—Welsh Local Government Association (WLGA)

That takes us on to item 2, then, of our agenda today, which is scrutiny of the Welsh Government's draft budget for 2022-23. Our first evidence session is with the Welsh Local Government Association, and I'm very pleased to welcome Councillor Anthony Hunt, who is the leader of Torfaen County Borough Council; Councillor Richard John, leader of Monmouthshire County Council; and Chris Llewelyn, chief executive of Welsh Local Government Association. So, thank you all for coming along to give evidence to the committee today, and perhaps I might begin with some initial questions before we turn to other committee members.

Firstly, I wonder if we could begin with the local government hardship fund, and your views on the decision of Welsh Government not to continue with a discrete COVID fund for 2022-2023. We'd be interested in your general views as to the issues around that and whether it's something that you have concerns around or not. Who would like to begin? Anthony.

I'm happy to begin, John. Thank you, and thanks, everyone, and welcome. Thanks for inviting us to give evidence.

Certainly, the hardship fund has been very useful over the last two years in taking things forward and making sure that we can meet the huge demands that have been caused by the pandemic. And I think it was £661 million in 2021 and £368 million so far this year, which has been vital for us in sustaining services. Obviously, we've got concerns about the hardship fund coming through, but we completely understand the situation that Welsh Government are in, with the uncertainties about the pandemic. We'd hope that, depending on how things progress from here on in, we can work together to continue that spirit of partnership. We do recognise, though, that at some point it has to come to an end, and at some point it's our responsibility as councils to plan for the demand that's going to not just stop all in one go, coming from the pandemic.

09:05

In terms of that demand, Anthony, and the impact of closing the hardship fund, could you say a little bit more about what the impact is likely to be on demand-led services, and particularly the services that are unlikely to return to pre-pandemic levels?

Obviously, we've got big pressures on our services in areas like social care and there are also workforce pressures caused by the pandemic, lots of which are exacerbated by issues with recruitment and retention of staff. All those things are things that we have to plan for, all those things that are made different, depending on what restrictions and what stage, and how the pandemic turns from here on in. I would be a lot more emphatic in my concerns if it was the case that the hardship fund had been withdrawn after a much lower settlement. I'd hope the settlement that's been given this year gives councils the ability to plan going forwards themselves, but that said, we don't know what's coming around the corner in terms of this pandemic. I've given up trying to second-guess what happens next, and I just hope that we can work together, depending on what restrictions are necessary and the impact of that on our operational services beyond March.

Some of the services that have been very much impacted by the pandemic are leisure services, and I guess that they're unlikely to return to those pre-pandemic levels for some time. Some local authorities, of course, have outsourced their leisure services, and leisure trusts are in place. With the ending of the hardship fund, then, the money that might otherwise have gone into that fund will be distributed via the revenue support grant and the funding formula, so in terms of those local authorities that have outsourced and those that haven't, do you see particular difficulties there, depending on the situation within the local authority?

Leisure services are a good example of something that's not just suddenly going to go back to how it was before the pandemic. Our leisure services in Torfaen are run by a not-for-profit trust, for example, and we've got to keep in our mind that they may need support and assistance beyond the end of March, and how we factor that into our budgeting process I think is going to be an important thing, because, as you say, we can't just pretend that everything is going to go back to normal on 1 April. Hopefully, the settlement that we've got gives us the ability to do that, but—and that is the 'but'—if things take a turn for the worse and there are unexpected restrictions, we will want to work with Welsh Government to try and ensure that those services are helped as much as possible.

I see. Okay, thanks for that. Could I also ask about the latest restrictions, the current restrictions, and the public health regulations in place at the moment—the impact on local government of those, including the resource impact of providing COVID business support, given your role in the distribution of that support right across Wales?

I wish I had a magic wand and I could invent more business and financial support staff. I think capacity is one of the issues. We're very grateful for the support that Welsh Government have given and we're working really hard to put that through to businesses in Torfaen; other councils are in their areas too. But there are real capacity issues in areas like revenues and benefits, for example. They're currently dealing with winter fuel payments, isolation payments. You've got a big demand on things like discretionary housing payments throughout the pandemic; you've got the business support side of things as well. Those staff are very hard-working. They've been working throughout the Christmas and new year period trying to get that money out to people as quickly as possible. But it's not the case that you can suddenly just sort of employ 10 more of those staff, even if you've got the money to do so, and they're quite hard to come by. So, that's obviously been difficult, but it's necessary. We welcome the money that the Welsh Government's given us to enable us to do that.

09:10

Okay, Anthony. Is there anything that either Richard or Chris want to add to on those matters, before we move on? Chris.

It's just to add that the way the pandemic has unfolded and developed has been unpredictable, and at almost every turn unexpected things have happened. But I think there's been a maturity in the relationship between local government and the Welsh Government, and that provides reassurance as well. So, with regard to business support, which we just discussed, there are constant discussions with Vaughan Gething, the Minister for Economy, and local authority leaders, so that provides reassurance. And, similarly, with the hardship fund as well, Ministers and leaders—we meet on an almost weekly basis. So, there is that capacity in the system to respond to unexpended and changing circumstances, and I think it's something that reflects very positively on the public sector in Wales. 

Yes, we've heard a number of times about that relationship between Welsh Government and local government during the pandemic, and the regularity of meetings and the use of new technology, and I think it's very, very encouraging. Richard.

I'd absolutely echo that, Chair. I have to say, all credit to the Minister for Finance and Local Government, who I think, throughout all this, has been really approachable and proactive when members of the local government family have had problems. I think the way she's led the relationship since May with local government has been excellent. 

I won't repeat what Anthony or Chris have said, but you're absolutely right in terms of those pressures, particularly in leisure. So, in Monmouthshire, we're one of those local authorities that decided not to move our leisure centres into a trust; we still manage them directly. We felt the business case for that transition wasn't strong enough. So, what we've been trying to do is modernise our leisure centres in-house—renovate them, make them more attractive to people. So, one of our leisure centres we refurbished a couple of years ago and the membership has trebled almost overnight. We want to get to that stage where leisure centres are not a draw on our finances, but they break even. Because we never want to get to a position where we're looking at the bottom line thinking, 'Oh, look, this is costing money, we'd better think about closing that.' And this pandemic has just demonstrated how important opportunities for people to look after their mental and physical health are. We never want to be in that position. Our leisure income had been recovering through the summer into the autumn. Just before the latest wave, we'd recovered to almost 80 per cent of our leisure income, which we thought was fantastic, and, unfortunately, it's taken a hit again with the omicron wave. But it's vital for the future of mental and physical health that those services can recover and we get people back into our leisure centres.

I'd echo what Anthony said about the hardship fund. While it's been a great support for our services, I think it was the right decision to move away from it. We'd all like to think we're moving into a very different stage of the pandemic now, but I think having a more generous settlement gives us greater flexibility to manage whatever is going to be thrown at all of us as public servants over the next 12 months. I think it's the right thing to do.

Okay, Richard. Thank you very much. Thank you all three. We'll move on to Alun Davies and some further questions.

Thank you very much. I'm glad to hear that, Richard. I'm old enough to remember when a settlement of this sort was described as a 'kick in the teeth' by local government, so I'm glad that those days are over.

In terms of where we're going now, it's an exceptionally generous settlement given where we are and given the next two years as well, and I'm interested to understand the conversations that you've been having with Welsh Government prior to this settlement; there will have been a number of conversations, both at official and political level, and I'm interested in whether you've made any commitments to Welsh Government in terms of what local government will be delivering as a consequence of this settlement.

09:15

Yes, happy to begin on that one. Thanks, Alun. Obviously, there are things that are overt within the settlement, such as the real living wage, but, more generally, it is an exceptionally generous settlement; it is a settlement that we welcome very much. I think it's also a settlement that realises the unique position that local services are in as we, hopefully, start to move out of the pandemic phase, and the necessity for those services if Welsh Government are to deliver on their key priorities.

There are a number of pressures coming down the road, both in terms of pay and workforce, in terms of specific areas like social care, which the pandemic has shown up as really being systemically in need of huge repair, and there are specific issues, like the real living wage, that we've agreed to work with Ministers on. The real living wage in the care sector isn't going to be the sum total of what's necessary to turn that area around; we've all got huge problems with fulfilling domiciliary care hours, for example, and that's going to need massive work. So, I think there's an understanding that we're going to work alongside Welsh Government on that, for example. There's also an understanding of the challenges in areas that we've just discussed, like leisure, in trying to move on from a pandemic situation and rebuild and get those services back on an even footing. 

I think there's a general understanding that underpins this that that relationship is, as Chris said, a mature one, and one that revolves around constant discussions. And I guess there's a responsibility for us in that as well in that we do reflect that in how we approach Welsh Government. But with things like the hardship fund, for example, we can't just always throw our hands in the air, we've got to work pragmatically to overcome difficulties and challenges in a way across the two levels of government. So, I think there are some specific things there and also the general spirit of the settlement, which I recognise too.

Yes, absolutely. It is a generous settlement. I think we need to recognise that. My concern would be that the gap between the highest and lowest funded councils has widened again; it's been getting wider year on year for many years now and I think we've reached a stage where the gap is simply too wide. You've got a situation where councils like Monmouthshire receive £1,174 per resident, compared to £1,881 in a neighbouring council—

Yes, indeed. Indeed. And I think that that gap is too wide. Clearly, we recognise that some parts of Wales have a greater ability to raise money through council tax than others. But my council, for instance, if we were funded to the average, which is £1,611 per person, that's an extra £40 million. So, I do think that we need a fair model that is redistributive and recognises that we do need to do more to tackle inequality, but, at the same time, I think that that gap has got too wide. I also don't think that the formula sufficiently recognises the challenge of delivering services in rural areas. In a large rural county like Monmouthshire, for instance, you wouldn't be able to have one tip in the middle of the county, in the same way that cities or some of our Valleys colleagues could. We couldn't amalgamate all our sixth forms and have one college in the middle of the county. We can't have three-form-entry primary schools, which would be far more efficient. So, I don't think that the way we distribute funding to councils sufficiently recognises rurality at the moment and I think that there are some significant challenges there. But I do recognise the generous settlement, and it's very welcome. There are some significant pay and inflationary pressures that will erode most of that, about 70 to 80 per cent of it. The complexity and the nature of the challenges in, particularly, social care and additional learning needs will erode much of the rest.

Here in our local authority, we already pay above the real living wage to our care workers, but, obviously, we do use the independent sector as well. So, there will be discussions there to make sure that the real living wage can be paid there as well. But I think the Welsh Government are right to recognise there is a long-term issue here. And the fact that, as a country, we're still paying people who provide palliative care to some of the most vulnerable people in our country below what we would pay someone to stack shelves in a supermarket or work in a bar—you know, that feels wrong as a country.

09:20

I recognise the commitment of the Welsh Government over a period of time to begin to address that.

I'm grateful to you for that, Richard. You've opened up a whole new range of questions that could take the rest of the morning and the afternoon as well. Chris will remember that there was a change made to the sparsity element of the local government formula some years ago, and you seem to be saying that that hasn't been sufficient, and that's an interesting point of view, of course. In terms of taking this forward, have you or any of your colleagues asked for a review of the local government funding formula—

—formally, not just talking about it? You have, and you've written to Welsh Government asking for that.

We've raised it with the Welsh Government—

Yes, but that's irrelevant. I'm asking you if you've written to the Welsh Government formally asking for that.

In the few months I've been in post, no, I haven't written to the Welsh Government—

You've been in post more than a few months, Richard; you're not new to this job, come on. It's like saying I'm new to being a backbencher. Look, in terms—. So, you haven't done that, so there hasn't been any request to review the formula. And I'm assuming, Anthony, that, from a collective point of view, the leadership of the WLGA has not asked for a review of the formula.

We're in a position of actively discussing it. There is a council tax review group that I sit on, a tax reform group with Rebecca and others, that looks into that. The distribution sub-group work we look into as part of the finance sub-group. If you start talking about shares and slices of the pie as opposed to the pie in collective, as you can imagine, different councils will have different views. I would say that the deprivation element of the formula isn't—

No, and that's the point I'm trying to make. Because there is the distribution sub-group, of course, which considers the formula on an ongoing basis, and there are always amendments being made to the formula in the way that I've just described. So, that process is ongoing. It always has been; I presume it always will be. That's not the point I'm wanting to address, though, because what Richard said was different to that. His issue was that the formula itself was fundamentally broken, essentially, because it gives too much money to poor people—now, that's me going a bit further than Richard, possibly. But there's no request from the WLGA for a fundamental review and reworking of the formula—that's the point I'm trying to get to. And I can see Chris nodding on that, so I assume that an affirmative. Okay, I'm grateful to you for that.

So, in terms of moving this forward, the point that Richard made that I do agree with is that, when I look at the pressures that the WLGA has outlined on different budgets, that adds up very quickly. And I've got no issue with any of the items or the quantum of cash that you've described there, but it gets very close to what you've all described as a very generous settlement. So, it's very easy to draw the picture that this generous settlement is actually taken up with standing still. And when we put the inflationary pressures into it—we know the UK Government's lost control of the economy, so we know that there are going to be significant inflationary pressures as we go through, particularly in the next financial year—it is entirely possible that this, on the face of it, generous settlement actually disappears very, very quickly. Where would you believe, then, that local government would be? Because we know that in the next two years the settlement isn't going to be anything as good as where you are today. Where, Anthony, do you think local government in total, across the face of the country, is going to be in that sort of scenario?

09:25

I think standing still, whilst an achievement in itself, coming out of this pandemic—I think we can do better than that with this settlement. I think we can both address the pressures that are there in the system, both post austerity and post pandemic, and we can address some of the structures. Certainly, I'm looking at how we use this for the long term. Alongside the fact that we've got multi-year settlements for the first time, because Welsh Government's had multi-year settlements for the first time, I think we can aim much higher than just standing still with this settlement. I think we can address some of the issues that I've been frustrated with in my own council, for example, and try and tilt the focus of some of our spending away from acute services into addressing some of the causal factors that add to those pressures, for example, in children's services and in adult services. I think this settlement, alongside the fact that it is a multi-year settlement, gives us the chance, if we think to the long term, if we don't just take the easy options this year, to really address some of those things in the longer term—

Tell me what you mean by that, Anthony. Let's use children's services as an example of that. Tell me what you mean by addressing those fundamentals.

In children services, we're one of the councils—I think the council—with the highest per capita rate of looked-after children, for example. Part of addressing that has to be investing more in the longer term preventative and early intervention services that stop families getting into that position in the first place, and also, in our financial services, how we stop acute financial hardship resulting in the kinds of crises that result in children being taken into care.

I think this settlement and the fact that, for once, we're actually looking at what we can invest in and what gives us the best value, as opposed to just what could we avoid cutting, gives us a chance to invest in those kinds of services. For example, with the discretionary housing payment system, we've put more money into that this year to try and avert housing crisis and stop people getting into large arrears that then result in homelessness crisis that tears families apart and—. I don't want to paint an overly dramatic picture, but that can have huge implications on spending in public services. That's the kind of thing that we can start to do.

We can invest more in mental health services for young people, for example, in community services, in services, I think, where we can get away from the old maxim of us being the solution to everything, and instead work with community groups to try and build community resilience. Those kinds of things require investment to get them off the ground, and I think this kind of settlement can give us the space to try and look at where those best value sorts of interventions are, to try and move us away from this superhero dynamic that we sometimes have in public services, and instead try and work with communities to build up their resilience and their capacity to respond themselves.

Alun, we're going to have to move on, I'm afraid, but perhaps we could ask Chris and Richard, quickly, whether there's anything they'd like to add to what Anthony has said on these matters. 

Could I come in, Chair, please? One of the things we've tried to do over the last 12 months is get a better shared understanding of the pressures that local government faces, so this means engaging more closely with Welsh Government Ministers, but we've also tried to work more closely with the Senedd as an institution. We've organised regional events with Senedd Members, and many of you have participated in those events, where we've set out and discussed the pressures facing local government, and I think those events have been very constructive. I think creating that better shared understanding of the pressures facing local government—. We've touched on them now. Every year we argue in terms of cost pressures, pay and price inflation, the growth in demand that there's actually been in adult services and children services within education as well, and also the development of new policies on the part of the Welsh Government as well. We've done that in this instance, and, in terms of Alun's question about any new commitments, Andrew Morgan wrote to the First Minister and the health Minister and Deputy Minister for Social Services in the autumn setting out what we saw as the pressures facing social services in the coming years, and many are the things that have been mentioned by Anthony and that Alun has referred to, in terms of early intervention, the resilient families programme, the cost of delivering the real living wage in social care, support for unpaid carers. There are a range of developments and initiatives where the costs have been set out, and they've added up to a package, in relation to that particular letter, that came to about £286 million. So, throughout this budgetary process we've tried to create that shared understanding, which I think has got us in a position now of getting what has been described as a very generous settlement.

09:30

I won't repeat what Anthony or Chris have said, but, absolutely, we didn't come into local government to stand still, and I'm sure none of you did either—

We're not in local government, so we want to understand what you're doing. 

Well, in government—in politics. Absolutely. We do need to invest far more in the preventative agenda, and that's not just local government; it needs to be the health service as well, and we do need to make some of those structural long-term changes. We've been in a period of crisis, really, the last two years where we've been firefighting, and we do need to ensure that in this partnership between local government and Welsh Government we do face up to these long-term structural challenges as well, exactly as Anthony was saying—how do we make social care a more attractive profession so that we can provide better care to older and vulnerable people and ensure they've got that dignity and independence in their old age?

Thank you. It's good to see you all. Can I just ask, if all the aims and everything, all the pressures, were hypothecated, the settlement would be a lot less, wouldn't it, so it's that balance, isn't it, whether it's hypothecated or not? I'm asking that to Anthony and to Chris.

My questions are about capital funding. So, to what extent does the capital settlement for 2022-23 provide local government with the resource required to tackle the climate emergency and fulfil capital programmes? I note that this year there is a cut to the capital programme of £50 million, but in the next two years' budget settlement it goes up again to, I think, £200 million capital funding. So, just your thoughts on that, please.

I do regret the cut in capital funding because we're at a point whereby inflationary costs, building costs are going up at a significant rate. We're halfway through band B now. Many councils have made commitments in terms of band B projects that perhaps weren't there in 2017 when we originally envisaged these projects in terms of carbon reduction. So, we're building a new school in Abergavenny. We want that to be one of Wales's first zero-carbon buildings, but that is going to add probably about 10 per cent onto the cost. So, we're seeing at the same point as costs are escalating significantly our ability to invest in capital projects is diminishing. I mentioned leisure centre investment earlier on. That's more important than ever now.

I've also got some concerns about funding for road maintenance as well. I fully accept Welsh Government's position that they took two years ago that the M4 relief road is dead and we're going to be putting a moratorium on road building. I don’t agree with that blanket approach, because I do actually think there are some small-scale road developments that could actually improve air quality in town centres and make it easier for people to use main roads instead of going through towns and villages—things like new junctions and that sort of thing. But I understood that the quid pro quo in that announcement was that we would be spending more money on maintaining the roads we’ve already got. Potholes are far more dangerous to pedestrians and cyclists than they are to motorists, so I’m concerned that there’s no money at all for the resilient roads fund. I understand there's a cut to the local transport fund as well. We have got to maintain the roads we already have. Even if we're encouraging more people to use public transport and more investment in active travel, that road maintenance is really important.

09:35

Thank you. Does anybody else want to add anything? Anthony.

I recognise that maybe this position on capital reflects the less certain and less positive picture that Welsh Government has given itself in terms of capital, but I would just reiterate that appeal, really, to work with us—if and when other capital announcements are made that have direct consequentials, that we work together on things like climate changes and things like flooding, road safety, public transport, 20 mph implementation, road resurfacing, coal-tip remediation. These are all challenges that we both face and we want to see addressed. Let’s just work as pragmatically together as possible, because all those things cost money, as Richard said, as do our ambitions in terms of zero carbon on things like school buildings. Reaching BREEAM excellent and reaching zero carbon is something that’s very easily announced, but, actually, it costs a lot more money to make happen. It’s the right thing to do, but let’s work together to make sure we can do it pragmatically.

In the report we have, discussing reaching carbon zero by 2030, it talks about having unsupported borrowing, perhaps, by local authorities, and the impact of that as well on revenue streams. I was wondering if you could just mention that as well—the pressures on your revenue budget from unsupported borrowing. As a previous cabinet member for streetscene and transportation, I've seen the anguish every year of trying to make the budget stretch to deal with potholes and roads that are deteriorating, and I’ve seen a county surveyor survey about a backlog of over £1.6 billion for highway infrastructure. Carriageways has an £844 million backlog. And then with climate change, the infrastructure, landslides, and bridges as well are getting damaged, aren’t they, with flooding and things like that. I understand the impact of it as well, so it’s something that I would like to raise—the continuation of the money for highways infrastructure. Yes, Anthony.

My appeal on that would be to work with us. I don’t think local government borrowing is the answer for all those things—our treasurers would probably have kittens at the very mention of it—but, at the same time, if there is pushback needed and that we can contribute to the solution there, we’re more than happy to ask those questions of our treasurers and to work pragmatically with Welsh Government in that respect.

Okay, thank you. Regarding free school meals, there's extra money in the budget for free school meals, but I know that some authorities rationalised kitchens over the last 10 years, as we faced the cuts, to try and save money. So, with delivering free school meals to all primary-age children, will that impact then on capital infrastructure? Will kitchens need to have to be rebuilt, basically, to deliver that? Or do you think that local authorities will be able to manage without that capital investment?

Obviously, that will come with a cost both in capital and revenue terms. But I have to say I’m encouraged by the initial discussions that we've had with Welsh Government, which have been very pragmatic and have allowed us—. We’re working with schools to identify where there are going to be the issues, because you’re quite right—in terms of capacity, some schools just haven’t got the physical space or the arrangements. Timetabling and things like that are going to have to be looked at to make sure we can implement that. But I think that in the initial talks, which I've had very positive feedback from, there's a recognition that this can't just be a switch that's pulled.

09:40

In discussions I've had with the Deputy Minister regarding investment in highways—. I think there've been discussions about maybe funding going to corporate joint committees in the future for delivery of highway maintenance, perhaps. Local authorities working together, co-operatives—. Someone said 'co-operatives'. There's talk about a national building company in Wales. Is that something that you think could be expanded to maybe providing maintenance of roads and infrastructure of the highways?

I would be very keen to explore that. We spend a lot of money on highways resurfacing, and I'm sure all other councils do, too. Whether there is some other solution—. We're always faced with two things: obviously, the cost of it, and the fact that we're trying to bail out something with a thimble. I think we've got £20-something million backlog in Torfaen alone, and every resident seems to think that their area is worse, as you would. I probably do too, looking out of my window. The money side is difficult, but also sometimes the capacity. When we've maybe got some capital spend, we're reliant on outside providers to have the ability and awareness to quote for work. Is there some better, co-operative way that councils could band together to get more done for the money, if we've got some certainty moving forward about how much money we might have to spend it? I don't know if Chris and Rich want to come in here.

Okay. Is that all right, Carolyn? We're a bit short of time.

Chair, can I just come in? Ideally, maybe, your local council would like to see more capital available, but I think Anthony made the point that one of the successes of twenty-first century schools, but other areas as well, has been the capacity to use additional capital as and when it becomes available. We know that, sometimes, the UK Government provides additional capital to the Welsh Government unexpectedly. The great success of twenty-first century schools, but other capital initiatives as well, has been because of the close working relationship between local government and the Welsh Government the capacity is there in the system to use that capital quickly, effectively, and efficiently. We've also seen, as to the revenue-funded capital initiatives, both in terms of schools and highways, again, that those schemes have been very effective. The challenge of course is sustaining the revenue streams over the lengthy period of time that those schemes require. There are other challenges where we're in close consultation with the Welsh Government and where there are capital requirements in terms of technical advice note 15, in terms of the impact of phosphates and nitrates on development as well, and those discussions are going ahead. I think authorities would welcome the investment in the circular economy and town centres. And then, in terms of the free school meals, I think everybody welcomes the policy, but it's a case of how do we make this work? The challenges you mention, Carolyn, are there. There's a range of capacity issues as well in terms of the workforce capacity, but there is an eagerness on the part of local government as a whole to make this work, and, as Anthony said, the discussions with the Welsh Government are very positive and very constructive, which doesn't mean that there aren't significant challenges but, at the moment, things are progressing positively.

Okay, thanks very much for that, Chris. We'll have to move on. Sam Rowlands.

Thanks, Chairman. Morning. I hope you're all doing well. I appreciate your attendance this morning at the committee. I've got a couple of questions around council tax. So, first of all, everyone's acknowledged the significant settlement compared to previous years, or more recent years, anyway, so there could be an assumption out there that council tax will have to rise as a result. I know, and I'm sure you do as well, that there are probably going to be council tax rises across all councils in Wales. Could you just explain why that's the case, why you still expect councils to have to raise council tax even with such a significant settlement?

It's not a binary choice, as some will know. Obviously, we will be cognisant of the need to try and keep bills down, especially at this time when people are facing rises in so many other key bills, from food to heating and things like that, because of the general rate of inflation. And we will certainly do all we can to keep council tax rises as low as possible. But it's not a binary choice of whether to raise council tax or not; we'll do all we can. But, coming back to my previous answer to Alun Davies, I really think we need to look to the long term here. It would be very tempting, before an election, for us to throw something at council tax in the view that it would be, in the short term, popular, whereas I'd much rather look to the longer term and how do we put services on a sustainable footing, going forwards, whilst keeping council tax as low as possible. So it's that balance that we'll all be trying to strike across different councils.

09:45

Yes, just to add to that. Anthony's right. I think, certainly for our council, it would be quite irresponsible to try and do something really populist and say, 'Right, we're going to freeze council tax by making some—.' Well, we would have to make quite a significant budget reduction somewhere. And we could do that, it's a choice, but there would be implications for our residents in doing that. And I think that sort of short-term populism would come with a long-term cost. So, we've got to be responsible. But, absolutely, we share that desire to keep council tax as low as we possibly can, recognising that this is going to be a challenging year financially for a lot of families. But, as I mentioned earlier, most of the increase in that settlement will be eroded by inflationary and workforce pressures, additional learning needs and social care complexity, which has increased significantly in the last few years. That will eat up the rest. And, obviously, we're going into a very challenging year with, obviously, the COVID hardship fund disappearing, for justifiable reasons. So, we've got to be responsible. So, it's a very difficult balance, I think, for local authorities to strike. 

Thanks. And thanks for the report you shared with the committee as well. I was looking at paragraph 9, which in our pack is on page 19, and it says there that 

'In response to reduced Welsh Government funding, councils have increased council tax by 35% over and above inflation',

over the last 10 years, basically. And there's a really interesting chart above that as well showing the difference in funding between health and local government. And obviously this is an annual debate that councils have, in terms of their council tax rise, and you get flak every single year from your residents for this. Do you ever feel that you're just getting shafted in terms of responsibility being taken in terms of council tax? Because it's not Welsh Government Ministers standing up every year and having to try to convince their residents that a tax rise is needed, and trying to convince their members of the need to put taxes up every single year; it's you as councillors every single year standing up and getting flak for raising taxes. Do you think that's fair?

It's certainly a deficiency in the council tax system. It's one of the only taxes that you have to raise just to stand still. Other taxes, like income tax, for example, will go up with inflation as wages go up as a consequence, and the inflation comparison is one we get thrown at us each year when, of course, the pressure on our services doesn't really necessarily relate to inflation. I think it's one that will get thrown at us a lot less this year, now that inflation is much higher and hopefully council tax rises will be much lower. But it's a difficulty, as there's a difficulty because of the fact that council tax is not an at-source tax, and therefore people see it much more up and close, because they get a bill for it, as opposed to income tax, which gets taken off before they ever get the money. So, there are many ways in which I think councillors get the flak for rises in a way that national governments are a lot more savvy about.

It's very difficult. It makes it an impossible choice for councillors each year, because we fully get what people say about the pressures on their income, the pressures on their money, and we want to do what we can by them. But, at the same time, we've got a responsibility towards local services to not do something that will put them in dire straits in the future. And that's often quite hard for people to see. So, certainly it's a deficiency of the current local taxation system. What the answer to that is is a lot harder, as you'll know, because no tax is perfect, and it's a lot easier to agree that the current system is imperfect than it is to agree what the alternative should be.

09:50

Can I come in? The difficulty is that these things are inevitably contestable, and there are different views and opinions. I think it is clear there's a lack of understanding generally among the public about how local authorities are funded, and what proportion of the local authority income comes from council tax and how much comes from the revenue support grant. The split at the moment is something like 80:20. And then, I think as well there's a lack of understanding in terms of the cost pressures. I mentioned earlier in terms of the challenges that authorities face with inflationary pressures, paying price inflation—we see energy costs going up at the moment—the growth in demand for local authority services in terms of an ageing population, various demographic changes, and then additional new responsibilities, and they don't necessarily relate to a conventional interpretation of inflation. So, I think that it's a complicated set of equations that don't necessarily enter into the public consciousness.

Do you want to come back, Anthony, before Rich comes in? Yes.

I just wanted to add something very quickly. I think we have to say the public are far more savvy and realistic and switched on than maybe we think they are sometimes, in that whenever we do a consultation on council tax, actually, the majority of people recognise the dilemma that we're in and value the local services, and are prepared to pay a little bit more for them as long as they see that as justifiable and within reason. And secondly, what does frustrate me sometimes is I know the Treasury have certain presumptions in their spending plans, but yet at the same time, national politicians will say, 'Nothing to do with us', when council tax goes up, even when in previous years there was a presumption of council tax going up by 5 per cent in total, including 2 per cent for social care, or by—. I think under the current comprehensive spending review plans, there's a presumption of a 3 per cent rise each year, even within the in-built figures that the Treasury uses. And then, councils will have to take the flak.

Yes, and that's the point I'm trying to make as well. So, Richard, do you want to say something? 

Yes. I think that's a really sound point, Sam, and sometimes it does feel unfair. In Monmouthshire, we do feel sometimes that it's seen a very prosperous county and, 'If you want more money, stick it on the council tax', and that really unfair split in the level at which councils are funded. I think we do need to do more to ensure that the public understand what they're paying for in their council tax. Sometimes, people think they're only paying for street lights and roads, and forget that we're paying for education and social care, and some really quite expensive services for vulnerable people. You pay your council tax not for what benefits you, but what benefits the whole of society, and we've got some really vulnerable children who have some really expensive provision. But we have to do what's right by our most vulnerable people, and that costs. So, I think there's more we can do in terms of explaining that. 

Sometimes, over the years, it's been a bit galling seeing significant increases for the NHS when we have such significant preventative services. I think Welsh Government should be recognising the balance more between the NHS and local government. We all treasure the national health service and the fantastic work that NHS staff do, but it does feel that there isn't the same level of scrutiny and accountability that local authorities face for their services, given that health boards are only accountable to one individual: the Minister. It does feel there's an accountability gap there. Many of our services are really important in protecting people, in ensuring that people don't go into NHS care that, perhaps, they don't necessarily need. There are currently hundreds of people in hospitals who don't need to be there. They should be in care homes or at home with packages of care. That in itself is putting significant pressure on other aspects of the health service. So, I do think we need to better reflect the challenges between the health service and local authorities, and better recognise the role that local authorities play in protecting vulnerable people and actually keeping people out of hospital.

09:55

Thank you, Rich. Can I ask one more quick question, Chair? Is that okay?

If you would, yes, Sam. We're struggling for time, but go on.

I'm really sorry. A quick one on the council tax collection rates. There's quite a range of percentages there, from 97.5 per cent in Neath Port Talbot down to 91 per cent in Blaenau Gwent. I wouldn't have thought demographically that they're vastly different, so is there a reason why there is a general—? I can understand a general reduction in collection rates because of more difficult times, but is there a reason why there's such a gap between councils across Wales? 

We're not sure. It's okay.

I know the average is around 1.6 per cent. There may be some difference in how councils account for in-year collection and out-of-year collected council tax rates. We have been encouraging conversations with the Minister for Finance and Local Government about how we can continue to work together to ensure that that doesn't undermine people's budgets going forwards.

Our collection rate has taken a dip during COVID, but it's not something that keeps us awake at night.

Diolch yn fawr iawn. Gaf i wirio fod yr offer cyfieithu yn gweithio a bod pawb yn fy nghlywed i ac yn deall beth dwi'n ei ddweud? Iawn.

Mae wedi bod yn sgwrs ddifyr iawn. Dwi ddim yn bersonol cweit yn sicr ein bod ni'n gytûn efo'r hyn gychwynnodd Alun Davies efo yn sôn bod yna setliad eithriadol o hael yn fan'ma. Dwi ddim yn gwbl argyhoeddedig, oherwydd mae'n ymddangos i fi fod y Llywodraeth yn rhoi efo un llaw ac yn tynnu efo'r llaw arall, yn enwedig pan fyddwch yn ystyried cyfraddau chwyddiant a chostau byw sy'n cynyddu a'r holl gostau uwch sydd efo ni. Dwi ddim cweit yn siŵr os, mewn gwirionedd, ein bod ni'n mynd i gyrraedd yr hyn sydd ei angen ar awdurdodau lleol i gynnal y gwasanaethau. Felly, o feddwl am y cynnydd yna mewn prisiau a'r risgiau, yn benodol yn meddwl am yr adrannau gwasanaethau oedolion a phlant rydyn ni'n gwybod sydd wedi bod o dan bwysau aruthrol, o ran lefel risg yn y gwasanaethau yna, ydy'r setliad yma'n mynd i'ch helpu chi neu ddim yn mynd i'ch helpu chi i gyrraedd anghenion gwasanaethau oedolion a phlant?

Thank you very much. Can I check that the interpretation equipment is working? Can everyone understand what I'm saying? I see that you can.

It's been a very interesting conversation. I personally am not sure whether I agree with what Alun Davies said at the outset that there was an exceptionally generous settlement here. I'm not convinced of that because it appears to me that the Government is giving with one hand and taking away with the other, especially when you consider the inflation rates, the increased cost of living, and the higher costs that we're all facing. I'm not entirely sure whether we are going to achieve what local authorities need to maintain their services. So, in thinking about that increase in prices and risks, particularly with regard to adult and children's services departments, which we know have been facing huge pressures, in terms of the risk level in those services, is this settlement going to help you or hinder you in meeting the needs of those adult and children's services?

I would say it's a high input, high expectation kind of budget and I don't have any complaints about that. It's a budget that recognises the situation that services are in and the need to fund them properly, and so I don't think personally we can have any complaints. Will it have an impact on those services? I believe it will have a positive impact as compared to previous years or what councils were maybe forecasting ahead of the conversations. But you're right in that there are a huge number of pressures on the services and therefore it's not easy street by any account, but at the same time we have to recognise that it's an extremely welcome settlement that will help us address those huge challenges.

Gaf i ofyn i Richard, o ran yn sir Fynwy, beth mae'r pwysau'n mynd i fod fel o ran gwasanaethau oedolion a phlant a sut fyddwch chi'n ymdopi efo'r rheini yn y dyfodol efo'r setliad yma?

May I ask Richard, in terms of Monmouthshire, what the pressures are going to be like in terms of adult and children's services there and how you will be coping with those services in the future with this settlement?

I think they're certainly generous figures in the budget, but you are right that there are many, many challenges that come along with that in terms of additional policy to deliver, but also those pressures that we mentioned earlier on. In terms of social care, while we already fund the real living wage, ensuring that the independent sector that we use for a significant proportion of our provision, ensuring that that is funded to a level whereby their care workers can be paid the real living wage is a challenge. And even meeting that, which I know is a Welsh Government aspiration, rising to £9.90 across Wales, is still going to leave us with significant workforce challenges because, at the moment, there just aren't enough care workers out there. Recruitment and retention are significant problems we're facing. And increasing the number of—. I suppose that long-term change of making it a more attractive industry is something where local government and Welsh Government need to work together. 

Another challenge for us is the complexity of unregulated placements in children's services. Homelessness is another one. We made a real change during the pandemic, and almost took a zero tolerance approach to homelessness. How do we sustain that? How do we ensure that people are not in unsuitable accommodation and we don't go back to those pre-pandemic days of people being on the streets? There are significant pressures we're facing that, if we work together, we can make a real difference. 

10:00

Diolch yn fawr iawn, Richard. A gaf i ofyn o ran Chris wedyn o ran y trosolwg cenedlaethol yna? Mae Richard wedi cyffwrdd â thipyn o hyn. Mae yna bwysau yn mynd i fod, onid oes, ar awdurdodau lleol o ran y cyflog byw go iawn, ond mae awdurdodau lleol yn allanoli lot o'r gwasanaethau yna, yn enwedig pan fo'n dod at wasanaethau oedolion. Felly, sut mae sicrhau bod pawb sydd yn y sector yna, sy'n cael eu comisiynu gan awdurdodau lleol, yn cael y cyflog byw go iawn, ac yna pa bwysau mae hynna yn mynd i roi yn ychwanegol ar eich cyllidebau chi yn genedlaethol—nid chi, Chris, yn bersonol, ond cyllidebau awdurdodau lleol?

Thank you very much, Richard. May I ask Chris in terms of that national review? Richard has touched on some of this already, but there is going to be pressure, isn't there, on local authorities in terms of the real living wage, but local authorities do outsource a great many of those services, particularly when it comes to adult services. So, how can we ensure that everyone within this sector, commissioned by local authorities, receives the living wage, and what additional pressure is that going to place on your budgets nationally—not you, Chris, personally, but those local authority budgets?

Ie, diolch. Rŷch chi'n—. Mae'r rhain yn bwyntiau dilys iawn. Mae yna heriau yn parhau. Byddwn i am ddweud bod y setliad yn un hael, ond mae'r heriau mae awdurdodau yn eu hwynebu yn rhai sylweddol hefyd. Yn ystod—. Rŷn ni'n cwrdd bron yn wythnosol gyda'r Gweinidogion iechyd a gwasanaethau cymdeithasol. Yn ystod y flwyddyn diwethaf, rŷn ni wedi gosod mas—. Pan oedd yna bwysau ariannol aruthrol yn wynebu awdurdodau, rŷn ni wedi gosod y dystiolaeth gerbron y Gweinidogion. Mae yna grantiau arbennig wedi cael eu cyflwyno yn ystod y flwyddyn o ran y costiau neu'r pwysau ychwanegol sy'n codi yn ystod y gaeaf. Mae yna broblemau o ran y gweithlu. Mae yna brinder yn y gweithlu. Achos y cynnydd yn y galw am wasanaethau awdurdodau lleol mae yna orwariant ar adegau, ac, yn y gorffennol, yn ystod y flwyddyn ddiwethaf, mae'r Gweinidogion wedi edrych yn garedig ar yr achosion yma, wedi cyflwyno arian ychwanegol, sydd wedi cael ei gynnwys yn y setliad craidd eleni. 

So, does dim amau bod yna heriau sylweddol yn parhau. Ond, fel roeddwn i'n sôn yn gynharach, mae'r berthynas rhwng llywodraeth leol a'r Llywodraeth wedi aeddfedu. Rŷn ni'n cwrdd yn rheolaidd gyda Gweinidogion. Pan fo heriau yn amlygu'u hunain, rŷn ni'n gosod y dystiolaeth yna gerbron Gweinidogion, ac, hyd yn hyn, rŷn ni wedi cael ymatebion positif. Ond mae'r pwynt roeddech chi'n ei wneud ynglŷn ag awdurdodau yn allanoli rhai o'u gwasanaethau, mae hynny'n digwydd oherwydd y pwysau ariannol. Felly, mae'n mynd i fod yn dipyn o her, ac mae'r her yna yn mynd i barhau i mewn i'r dyfodol, byddwn i'n amau. Diolch. 

Yes, thank you. These are valid points. There are ongoing challenges. I would say that the settlement is a generous one, but the challenges that local authorities are facing are significant too. We meet on an almost weekly basis with the Ministers for health and social services. Over the past year, we have set out—. When there was financial pressure facing local authorities, we've put that evidence before the Ministers in question. There are specific grants that have been introduced during the year in terms of the costs or the additional pressures that do arise during the winter months. There are problems in terms of the workforce. There is a lack of staff availability within the workforce. Because of the increase in the demand for local authority services there is overspend from time to time, and, over the past year, the Ministers have looked on these issues kindly, they have provided additional funding, which is included in the core settlement this year. 

So, there is no doubt that there are significant challenges continuing. But, as I said earlier, the relationship between local government and the Welsh Government has matured. We do meet regularly with Ministers. So, when there are challenges that come to the fore, we do set out the evidence for the Ministers, and, to date, we have had positive responses to that evidence. But the point that you made in terms of authorities outsourcing some of their services, that happens because of financial pressures. So, it is going to be a challenge, and the challenge is going to continue into the future, I would suspect. 

Diolch yn fawr iawn. Os gaf i, Gadeirydd, fynd ar ôl un cwestiwn arall—a dwi'n gwybod bod pwysau amser—ynglŷn ag un o'r gwasanaethau eraill ddaru Richard gyffwrdd arnynt, sef gwasanaethau digartrefedd? Dŷn ni'n gwybod bod miloedd o blant, er enghraifft, mewn llety dros dro ar hyn o bryd. Mae'r pres sydd wedi cael ei roi yn ystod y ddwy flynedd ddiwethaf wedi mynd i'r afael i raddau helaeth â digartrefedd, ond pres dros dro oedd hwnna. Yn edrych ymlaen, yn symud ymlaen, ydych chi'n mynd i fedru cynnal hynny, a sut bydd yr awdurdodau yn sicrhau nad ydy pobl yn treulio mwy o amser nag sydd ei angen mewn llety dros dro ac yn cael eu trosglwyddo i gartref parhaol, efo'r pwysau a'r wasgfa ariannol fydd arnoch chi? Anthony, dwi'n meddwl, oedd yn rhoi ei law i fyny. Diolch.

Thank you very much. If I may, Chair, just ask one other question? I know that time is against us. But one of the other services that you have touched on—Richard touched on this—is homelessness services. We know that thousands of children, for example, are in temporary accommodation at the moment. The funding given over the past year has got to grips with homelessness to a great extent, but that was temporary funding. Looking forward to the future, are you going to be able to sustain that provision, and how will the authorities ensure that people don't spend more time than they need to in temporary accommodation before being transferred to a permanent home, with these cost pressures that you're facing? I think Anthony put his hand up then. Thank you.

10:05

Thanks. It's a very good question, a very good area to highlight, because it's one of the areas where we actually, as you say, have seen some temporary gains and improvements in the service. And one of the conversations I'm certainly having with my officers is how we can build that in and improve that further, going forward, rather than slip back into what was the situation before—how we can offer better and more flexible accommodation for people, so that we're not relying on the old B&B-type situation where people are put into, and how we have a range of different combinations of solutions to help avoid a homelessness crisis. It's certainly something that we'd want to build into our budget. I believe the settlement gives us the opportunity to have that discussion, certainly, and there are things that we're talking about to see how we can keep that improvement going forward. It's a way that—. We would say the budget is generous, but it doesn't come without expectations on us that perhaps we impose on ourselves to try and improve those services.

Okay. Is that all right? I'm afraid we are right up against it. I know we've run over, but perhaps we could just squeeze in the last questions, from Joel James. Joel.

Thank you, Chair, and thanks, everyone, for coming to today's evidence session. It was just a quick question about, with the current settlement, how futureproofed is it, do you think, in terms of wanting to not just manage current services but to expand on what you're providing? Obviously, you touched upon it briefly in your answers to the other questions, but I'm more talking about how it will help towards digital transformation and then the corporate joint committees. I know from my own council background there's always been talk of, not necessarily formal mergers, but working together collaboratively with neighbouring authorities and everything. Does this budget settlement allow you to be ambitious like that, or is it just managing the current situation as best as you can, if that makes sense? Sorry.

That's great, thanks, Joel. Who would like to answer that? Anthony.

Yes, I believe that we can do that, both in terms of the settlement and in terms of the funding that Welsh Government's given us, and there is £1 million to support the development of CJCs. So, in terms of our regional working, I believe that we can move forward with that and develop that. And in terms of our internal workings as well, we're looking at three categories around digital customer services in communities, and I believe this budget gives us the space to try and properly develop those themes to improve services in the longer term and to improve outcomes too.

Is that all right? Sorry, Chris, did you want to come in?

Yes. Just to say that, at the moment, the Welsh Government is increasing its investment in improvement, support, and for the chief digital officer team. So I think that's very positive. And then, in terms of the CJCs, time will tell, in a sense, where we are. There is the initial funding to deal with the set-up costs. I know the expectation is, because these are services that authorities are currently delivering, then the costs shouldn't increase, but I think, at the moment, it's a case that there is almost now an element of trial and error and we'll see how things unfold over the coming years. But, as I know I've mentioned a few times, we are in close discussion with the Welsh Government and with Ministers as these initiatives unfold.

Yes. On CJCs, I think it's fair to say there are different levels of preparedness across Wales for the transition. Certainly, in south-east Wales, I think the 10 local authorities work really effectively together, and I think we recognise that there are efficiencies that we can secure by working together. There are already a number of areas where local authorities collaborate. We have a number of shared services with our nearest neighbours, Torfaen. There are a number of services that are delivered across the whole of south-east Wales, including SenCom, which is a vital service for deaf and blind children. If we were trying to deliver that on our own, we wouldn't be able to access the same level of expertise that we can by working in partnership with our neighbours. There are a number of other services, like Gwent Music, which are delivered really effectively through collaboration. 

But I think the debate around CJCs needs to move on into what else can be delivered at a regional level. I don't think they should just be a front for taking powers away from local authorities. There's also an important debate to be had about what powers are there that Welsh Government currently exercise that could be delivered more effectively at a regional level. I think there's a debate to be had around business support, strategic planning, where perhaps local authorities working together could have a far more effective oversight of some of those powers than perhaps where they're currently being used.

10:10

It's a two-way street.

Thank you very much. We're way out of time, but just a very quick question from me. Just one item that we haven't dealt with yet, which we wanted to, and that's the national insurance levy for the NHS and the objective to redirect it to social care after three years. We note your written evidence on that and I wonder if you could just expand a little, because, obviously, there is concern that that might not happen after the three-year period, given, as we know, the great needs of the NHS. Could you just very briefly just add a little to your written evidence on that? Anthony.

Yes, very quickly, I'd just recommend the importance of it. We just have to look at the health and social care sectors together and stop putting the acute service apart from the preventative and overall health services. Otherwise, we're just going to continue the range of problems. But, at the same time, it's very difficult to take money after three years from the NHS. That's our concern, certainly. I don't know if Chris or Richard wanted to cover anything there.

Can I come in?

Thanks, Chair. I mentioned earlier in our evidence—we mentioned the importance of the relationship between social care and health and also the importance of investing in preventative services and early intervention. I think we've seen during the COVID pandemic, maybe more so than ever before, that the value of social care is appreciated by the public. And I think the way in which local government has been able to respond to the pandemic crisis has highlighted both the value of local government services to the public at large, but also the close relationship between the Welsh Government and local authorities in terms of Government setting a strategy, but relying on local authorities to deliver services. And our argument has always been that investing in local government social services creates savings further down the line in terms of health. And the earlier upstream that we can put preventative and early intervention services in place, then that leads to a benefit for health in the longer term. So, rather than seeing it as an either/or, we've always argued that investing in social services creates savings for health at a later point.

Okay. Thank you very much for that, Chris. And thanks very much Anthony, Richard and Chris for giving evidence to committee this morning and for staying with us as we've gone over what was the allotted time. Diolch yn fawr.

You will be sent a transcript to check for factual accuracy in the usual way. Diolch yn fawr.

Thank you very much.

3. Cynnig o dan Reol Sefydlog 17.42(ix) i benderfynu gwahardd y cyhoedd o eitemau 4, 7 ac 8 y cyfarfod
3. Motion under Standing Order 17.42(ix) to resolve to exclude the public from items 4, 7 and 8 of the meeting

Cynnig:

bod y pwyllgor yn penderfynu gwahardd y cyhoedd o eitemau 4, 7 ac 8 y cyfarfod yn unol â Rheol Sefydlog 17.42(ix).

Motion:

that the committee resolves to exclude the public from items 4, 7 and 8 of the meeting in accordance with Standing Order 17.42(ix).

Cynigiwyd y cynnig.

Motion moved.

Okay, the next item for the committee then is item 3, which is a motion under Standing Order 17.42 to resolve to exclude the public from items 4, 7 and 8 of this meeting. Is committee content so to do? Okay, thank you very much. We will then move to private session.

Derbyniwyd y cynnig.

Daeth rhan gyhoeddus y cyfarfod i ben am 10:14.

Motion agreed.

The public part of the meeting ended at 10:14.

10:35

Ailymgynullodd y pwyllgor yn gyhoeddus am 10:36.

The committee reconvened in public at 10:36.

5. Craffu ar Gyllideb Ddrafft Llywodraeth Cymru ar gyfer 2022-23: Sesiwn dystiolaeth 2—y Gweinidog Cyllid a Llywodraeth Leol
5. Scrutiny of the Welsh Government Draft Budget 2022-23: Evidence session 2—Minister for Finance and Local Government

We've reached item 5 on our agenda today, scrutiny of the Welsh Government's draft budget for 2022-23, and our second evidence session of the day with the Minister for Finance and Local Government. I'm very pleased to welcome Rebecca Evans MS, Minister for Finance and Local Government, together with her officials, Reg Kilpatrick, director general of COVID crisis co-ordination for Welsh Government, and Judith Cole, deputy director of local government finance policy and sustainability. Welcome, Minister, and welcome to your officials.

Perhaps I might begin with the first question. Minister, we've heard that it's a reasonable settlement for local government for the coming financial year, and we know that Welsh Government has many priorities, as reflected in its programme for government, and local authorities will be required to deliver on many of these priorities in partnership with Welsh Government. Given the generally unhypothecated nature of this settlement, could you tell us whether you are confident that local government will deliver on your priorities to make sure that they are a reality for communities across Wales?

Thank you, Chair, and good morning to you and to the committee. Very early on in the preparations for our budget, we identified health, alongside social services and local government, bearing in mind all of the other services that they provide, as being our key priorities for the budget, and those are also very much reflected, I think, in our programme for government. You referred to a reasonable settlement for local government, but I'd probably go further than that and say it's a very good settlement. I heard Councillor Hunt referring to it as 'exceptionally good' in your session earlier this morning. And I do think it is, because the settlement next year is, like for like, 9.4 per cent higher than in this financial year, and no authority will receive less than an 8.4 per cent increase. I do think that that significantly improved settlement, and the certainty that we're able to provide for the following two years, does give local authorities that strong foundation to deliver on the items within the programme for government that are within their areas of responsibility.

I've been clear in my letter, which accompanied the provisional settlement for local government, what we expect to be delivered through that, and of course social services is a key element of that. We worked very closely with local government to identify the quantum of funding that was needed in local government to support social services and to put them a sustainable footing for the future, and then also work very carefully to identify the sum of money that would be needed to introduce the real living wage for social care workers. You can see that very much, I think, reflected in the settlement. You'll also see additional funding within the settlement to reflect the importance that we put on the tackling poverty agenda, for example, and we expect local authorities to be delivering a lot there.

In terms of specific items within the programme for government, there are some specific items relating to local government that we'll be delivering over the course of the Senedd term and many of them are actually funded separately. The evidence paper, I think, referred to some of those. Seeking to reform council tax to ensure that it's fairer would be one example of that, and reforming local government to reduce the risk of democratic deficit is another example. So, we're looking to ensure that the settlement provides local authorities with a strong foundation to deliver the services that they deliver, whilst also looking at additional funding and separate funding for some of the other items within the programme for Government.

10:40

Minister, in terms of tackling poverty and inequalities, could you say a little bit more about how the allocations for local authorities are assessed in terms of their potential impact on inequalities and economic disadvantage? How will outcomes be measured?

I suppose in terms of preparing the settlement and looking at the RSG in particular, this is viewed at a very high level in the sense that local authorities will receive funding that is based on a number of factors, some of which take into account deprivation. You'll see that reflected, I think, overall in the budget. When it comes to individual authorities, though, they have responsibilities in terms of setting out their own impact assessments of the budget and the policy decisions that they will make using the RSG funding, and of course their other sources of funding as well. And they have responsibilities under the well-being of future generations Act too. I think there are two aspects to this, really: the kind of really high-level approach to the RSG—because bearing in mind, it is unhypothecated, but it does take into account protected characteristics, United Nations rights of the child and the socioeconomic duty—whereas local authorities at that particular level will be undertaking the impact assessments of their own policy choices.

But that said, this is only part of the funding which we provide to local authorities. A significant amount is also provided through grant funding, and that's where you'll see opportunities for Welsh Government to undertake some really important evaluation of the funding of those grants. One example would be the funding that we provided during this financial year to counter the impact of the pandemic on children and young people, and that was through the additional £5 million for interactive play-based initiatives. Those took place over the summer period. Now we've been able to evaluate those, and obviously, I'd be more than happy to share some of the detail of the evaluation. But that's just one example, really, of how we go about evaluating some of our investment through local authorities.

Okay, Minister. It would be good, actually, to have some further perhaps written evidence on those particular streams of funding and how that evaluation and assessment of outcomes is structured and takes place. Thanks for that.

Could you also tell us how the local government settlement will address the Welsh Government's targets to increase the use of the Welsh language and the number of Welsh speakers? Because they are ambitious targets and aims, and obviously the funding is necessary for local government to play its part.

Again, the settlement is unhypothecated, so local authorities will be setting their budgets and using the funding to support the Welsh language in the best way possible for them locally, but we do absolutely recognise the important role that local authorities have to play in increasing the number of Welsh speakers. In 2022-23, we will continue to support local authorities in the preparation of their new 10-year Welsh in education strategic plans, and local authorities will continue to use funding from a number of sources, including the RSG, to implement those plans. There is also funding, of course, through local authorities for the twenty-first century schools capital programme, which as you know has been now renamed the sustainable communities for learning programme, from 1 January of this year, and also the regional consortia school improvement grant within the Welsh language portfolio. There are a number of ways, again, in which we're supporting local authorities in this regard, and those education strategic plans will be absolutely central to the growth of Welsh-medium education across Wales over coming years, which is obviously one of our key drivers, really, in terms of reaching a million Welsh speakers by 2050. I understand that all local authorities have now consulted on their 10-year plans, and they're currently preparing those plans to be submitted to the Minister for Education and Welsh Language by 31 January. I think the intention, then, is for all plans to be considered and then approved and operational by September of this year.

10:45

Okay, Minister. Thanks for that. Perhaps we could turn, now, to COVID-19 and the impact on local government and support from Welsh Government to local government to deal with that. Could you tell us, Minister, what assessment you've undertaken into the long-term impact of COVID-19 on local government services, and then how this particular settlement reflects that assessment?

Yes, certainly. The first thing I really want to do is, obviously, recognise the incredible role that local government has played in our response to COVID. I think the way in which Welsh Government and local government have worked seamlessly has been so important in terms of our response to the needs of communities. I think we can all be really proud of what's been achieved through that collaboration, and I want to thank them for their support. And, obviously, it's an ongoing issue. I'm currently meeting weekly, as part of the weekly reviews, with all local government leaders and chief executives, alongside the police and crime commissioners, in meetings ahead of those reviews so that we can discuss those. Obviously, different meetings go alongside those in respect of particular areas of response, such as social services, for example—again, those are weekly meetings, although mostly led by other colleagues in Government.

In terms of whether we have funded local government appropriately to continue to respond, I think that the good settlement, which is the best that we could provide, does enable local authorities to continue to respond to the pandemic. Interestingly, the Wales Fiscal Analysis work suggests that there will be pressures next year arising from the pandemic, but, actually, they're expected to be less significant than the service pressures. So, that's been an interesting contribution to the debate and to the thinking as well. But I do think that the overall size of the settlement—and I think it corresponds to what you heard from local government leaders earlier on today—does allow them to continue to respond to the pandemic, continue to undertake that recovery work, whilst also being able to expand plans and work elsewhere.

Minister, in terms of the local authority hardship fund and the decision not to continue it, was that a difficult finely balanced decision to make?

I think it would have been a difficult decision to make had the settlement for local government been more challenging. I think that, then, that would have been a more difficult decision to make. But the fact that we don't have any COVID-specific funding from the UK Government for next year or for future years helped in that decision in the sense that UK Government has now subsumed COVID responses and the funding for it into departmental budgets, so there's no special pot of money for COVID for next year. So, the only way realistically I could have created a hardship fund would have been to remove money from the RSG to do so; I don't think there would be anywhere else where I could go to do that. So, on balance, I think that giving local authorities a good settlement is the right way forward, but not to take away anything from how useful the hardship fund has been over the last couple of years. 

Okay. Minister, a final question from me before we turn to other committee members. Local authorities are playing an important role during the pandemic in terms of administering business support and grants and distributing that funding. Could you say anything today in terms of whether additional resource might be made available to local government if further restrictions are introduced during the 2022-23 year? I know it's a bit speculative, but is there anything you could say in terms of what the Welsh Government decision-making process would be if that were to happen?

As part of the multi-year budget, we've employed a new fiscal strategy to try and maximise all of the available funding. So, from 2023-24, the Wales reserve will be used to manage the in-year financial position without holding any unallocated departmental expenditure limit, with any drawdowns then reflected within the appropriate supplementary budget, so that's a different approach to budget management that we're taking over the course of this spending review period. And we're also taking a different approach in respect of capital where we're over-programming, again to maximise the use of every penny. So, in that sense, there isn't a fund or a pot of money that I would go to to provide additional in-year funding. However, when we have asked local authorities to do things that are beyond their normal work—so, the business support grants is one excellent example—then we have provided funding for the grants and for the administration of those grants. So, I think the previous way of dealing with these matters has stood us in good stead.

In terms of whether or not there would be additional funding next year, I suppose this partly depends on where the pandemic takes us and what the UK Government's response is. The UK Government has shown recently that it is willing to find additional funding in these exceptional circumstances—the recent COVID business support funding being one example. I'm also interested that the Chancellor has asked the Office for Budget Responsibility to update their economic and fiscal forecasts for 23 March. Now, I've got a meeting later on today with the Chief Secretary to the Treasury, so I'll be pressing for some more information as to whether or not that means that we can expect a spring statement or a budget around that time, and, clearly, I will have to consider, then, how to deploy any additional funding for next year as a result of that. So, there are still some moving parts in this, although, on the whole, from our perspective with the budget that we have, then that's been allocated, so there isn't significant scope for additional funds at this point.

10:50

Okay, Minister. Thanks very much. That's useful. I'll bring in Alun Davies at this point. Alun.

Thank you very much, and thank you, Minister. I was fascinated by what you said in reply to John's first question. You said, and I wrote it down, that local government is delivering the priorities in the programme for government that are within their responsibilities. That's a fascinating thing to say, because, of course, the programme for government is the Welsh Government's programme for government; it's not local government's programme and there isn't a single local council elected in the country that has a mandate to deliver that programme for government. So, I'm assuming, therefore, that you've had conversations with local government and that the increase—which you've described as 'generous', and most local government leaders said the same thing—is dependent, then, on them delivering the priorities that you have set for them.

What I was trying to describe was in terms of Welsh Government's commitments in our programme for government in areas where local government are delivery partners, so, in that sense, they're responsible, and one example is social services. We work very closely with local government to understand the quantum of funding that they would require to deliver on those responsibilities, including the programme for government commitment for the real living wage, as one example.

So, I'm saying that local government does have areas of responsibility where we, as Welsh Government, have set the agenda and they're our delivery partners for it. I'm not sure I understand the question.

So, 'yes' is what you're saying. Okay. I'm fascinated by that because, of course, local government does have its own democratic mandate, of course, and it would be a matter for local government leaders to determine, or local councils to determine what their own priorities are. But you are saying something somewhat different to that, which I'm very happy with, as it happens—I tend to agree with you. So, therefore, I'm assuming that you've had conversations with the WLGA as the representative body about how they will deliver on your priorities. So, I'd be interested to understand what your expectations are of local government in delivering on your expectations, or Welsh Government's expectations, and how you will hold them to account for doing that.

We meet frequently with local government to have discussions on various areas of interest. I'm going to use social services as an example, because, clearly, it's a key service delivery point for local government. So, my colleagues the Minister for Health and Social Services and the Deputy Minister for Social Services meet weekly, generally speaking, with their counterparts in local government. So, they meet with the leader of local government and they also meet with the spokesperson for social services. And that's where they have discussions about how we can, in partnership, deliver on the priorities, which are shared priorities in many ways. Local government—you won't get any pushback from local government in terms of the real living wage, for example; what you get are partners wanting to work out how quickly we can move together on this agenda, how we can identify any barriers and work together to bring them down. So, I think that it is about partnership working, recognising that Welsh Government has a programme for government, but we rely heavily on partners to deliver that with us.

10:55

Sure, but that happens every year, whether you provide sufficient cash or not. That's just the run-of-the-mill way of working, isn't it, you know? You've had those structures through good times and bad. What I'm interested in is somewhat different, and you didn't answer the question, I'm afraid, Minister, on that, which is how you will hold them to account. Because what you've said—and you've said it twice now—is that you expect local government to deliver on the Welsh Government's priorities and the programme for government. So, how will you hold them to account, what are the objectives that you are setting for local government and what are the targets that you are setting for local government to enable you to understand that they are delivering on your objectives?

Well, I think another example, then, would be teachers' pay and the deal—

No, no, I don't want to—. Sorry, Minister, I don't want to move from this, because you chose the example of social services—and I agree with you, it's a good example to use—and that's fine and that's fair enough. So, I want to understand, in social services: what are the objectives you are setting for local government, how will you know that local government are meeting them, and how will we hold you to account—that, really, is the question I'm asking—on local government's ability to meet the objectives that you've said yourself that you're setting for them?

So, my role is to fund local government appropriately to undertake the role that they are being asked to do in terms of social services. In terms of the specifics of it, I think I would be best off asking my colleague the Minister for social services to provide more detail about the relationship, how that's managed, the ways in which—you know, the specific points along the journey to, for example, the real living wage being determined. Because I know that the Minister has set up a board that includes local authorities, it includes private providers and others within the trade union movement, for example, to advise on that journey towards the real living wage, but I'm afraid I'm not as familiar with the detail of it that I can give a detailed answer on that.

Okay. Okay. The real living wage is an element of that, and I accept that, but the real living wage is quite a good example, actually, because, you know, it's got a number, and you know when it's being delivered. So, it's timetabled and we can identify it and describe it; it's a proper target. But surely the Welsh Government is not providing for whatever generous increase it is without any commitment at all from local government to deliver on one of the key aspects of its responsibilities. I'm only asking for what your objectives are, because as a politician, and we're all politicians here, you're not going to spend hundreds of millions of pounds of taxpayers' money without setting a single objective for what that's going to achieve.

So, local governments are all committed to delivering the real living wage. The question is—

The question is how we get there, and these are the details that are negotiated between the Minister for social services and the sector. So, I'd be more than happy to get a written note, but I'm afraid I'm not involved in those discussions, so I wouldn't be able to do it justice, I'm afraid.

Okay, but there needs—. What I'm asking for is what the objectives are, and you said yourself that local government is delivering on our priorities in the programme for government. So, I think it's a reasonable question to understand what those objectives actually are. But in terms of how we move forward, the WLGA, in their written evidence to this committee, which I'm sure that you'll have been briefed on, outlined what their pressures are, and it's possible to go through that with a fine-toothed comb, and I'm sure your officials have done so at various times, but I'm not going to necessarily challenge that unless you have a reason to do so. But their pressures come very close to what you've actually offered them, so, in many ways, what is on the face of it a very generous settlement is also a standstill settlement—it pays for the pressures that are there in the system, but it doesn't do very much else. Do you accept the WLGA analysis of their pressures, and, if so, do you believe that this settlement provides local government with room for expansion in any way, or does it just enable them, basically, to pay the electricity bill this time next year?

11:00

I think you heard from Councillor Hunt this morning that this does allow local authorities to respond to the pressures that they're facing and it allows them to go further than that. That is the analysis that I would have. I recognise the pressures, of course, but I think that one thing that is different—

Do you accept the pressures there? You said you recognise them: do you accept the numbers provided by the WLGA?

Well, the number provided on social services, for example, was £144 million, and then we included the £36.5 million in respect of the real living wage, so we met in full the pressures identified there—

—with the local government. So, yes, and our officials—probably, I'll ask Judith to say more—talk regularly and in detail about these pressures and how we can consider them as part of the overall settlement. But I think what's different this year is that we've provided three years' funding to local government, and that does allow local government to think differently, to plan differently and to take decisions that can be more cost-effective, and I think that they've recognised that as well. So, that does put them on a stronger footing for the future to make decisions that financially could benefit them as well.

So, you accept the numbers. Do you believe, therefore, that local authorities should be using the room and the space and the time that you've provided them to invest in these services? Have you provided local government with any advice, for example, on council tax levels in this coming year? We've seen a number of local authorities in the press starting debates about, 'We've done well this year, we've got an election coming up in May, perhaps this is an opportunity to not increase the council tax, for example.' I can think of two authorities that have been named in the press who have been saying that in the last couple of weeks. So, what would your view be if local authorities took those decisions?

I genuinely think this is a matter for local authorities—

I think my view is probably not relevant in the sense that—

And this is a matter for local authorities, and it's not something that I want to express a view on, because it is entirely within their gift to decide what to do with council tax, and, obviously, they'll be considering this alongside those pressures that we've discussed. So, it's not for Welsh Government to meet it all; there is a role for local authorities to think about whether council tax should play a part in their response as well. But I'm not going to tell local authorities what I think they should be doing in terms of raising council tax or otherwise.

So, you'd be very content, then, if local government decided they wouldn't use these additional funds to invest in social services or the rest of it, or education, but in providing for an overly low, possibly, council tax settlement a couple of weeks before an election. You'd sit back and be very content with that.

I'm really not going to be drawn into expressing a view on what local authorities decide to do with council tax. I don't think it would be appropriate for me to do so. But can I ask Judith to come in in terms of the discussions that she and the team have been having with treasurers and others?

I hope I'm unmuted. Thank you, Minister.

So, we have long and detailed discussions on what they put into their figures, but they are their figures, so with some of those figures we'll have gone, 'Actually, we don't quite understand the basis on which you've estimated them, and we've done a bit of pushback.' So, a very boring example: the cost of the UK Government's changes to national insurance. The estimate that came in from the WLGA on that was higher than we thought it should be, and that reflected sometimes the timing in which these cases are made and then more detail comes out. So, we will have advised the Minister when she was thinking about the whole quantum that that's a figure that is perhaps a bit rich. Local government will have put in their case on the basis of no increases in council tax. There is a choice for them to make there. And it's also not just about the pressures, but their ambitions. So, sometimes they will have included ambitions in there and it's then up to Ministers when making decisions on the budget how far that can be reflected and how far the money is there to do so. Does that help?

11:05

It tells us more than you could ever believe. Thank you very much, Judith.

So, now I'm going to get sacked, thank you. [Laughter.]

Okay, thank you very much. Minister, just before we move on, on the national insurance levy and its use in Wales for the national health service, in the WLGA's written evidence, their understanding is that after three years that money then becomes available for social care in Wales. Could you clarify whether that is your understanding as well?

So, the budget that we have actually takes us up to the end of the forthcoming three-year period. So, this will be for a future Minister to decide at a future point, but I think the important thing here is the amount of funding received through national insurance contributions and the levy is actually considerably less than that which is spent within these programme areas anyway. So, it's almost a red herring in that sense because we spend so much more in these areas than we receive through the national insurance contributions. And it's worth reflecting on the fact that the funding that we've provided to the NHS, social services and local authorities significantly exceeds any consequentials that we received as a result of the allocations financed by the social levy in England. So, we've allocated more in any case than we would have received. But I suppose things that are for a period beyond the next three years will be for a future Minister, presumably, to look at. 

So, are the WLGA labouring under a misapprehension here, Minister?

I'll check with Judith on this point, but I don't think that they're—. I think the point, really, that this is such a small amount of money in the greater scheme of things is the relevant one here. 

It was a very technical point in the sense that it was the employers' element of the national insurance levy. Sorry, I probably spoke too fast. So, the WLGA case said that there is a cost for all of our staffing, for the employers, for the national insurance levy changes—the additional costs for employers—and that was the figure that they had overestimated in our view. It's not material—that isn't material—in the size of the budget overall, but it was an example I was trying to give of where we have had the discussions that say, 'Can you explain to me where these figures come from? Okay, now we understand where you're coming from.'

That's a separate point, I think, isn't it, to the national insurance levy and its use beyond the three-year period when it would benefit the NHS in Wales?

So, I think again that—. Yes, sorry. Yes, so, that point is that the WLGA has again—. The case they made at the time was based on the information that UK Government was putting out at the time on what the national insurance levy would be used for. In three years' time, we will have another budget, and, since all the levy comes in, I think we tend to regard it simply as something to be discussed again in three years' time.

I see. So, possibly they are perhaps labouring under a misapprehension. Okay. Well, we'll move on. Carolyn Thomas.

Thank you, Chair. Morning, Minister and officers. So, my question is regarding capital funding and borrowing. Could you expand on the changes made to local government capital funding and why it has decreased by £47 million for 2022-23? In the report it mentions councils becoming carbon zero by 2030. It’s very important that we have that capital funding to be able to achieve that. In the earlier session, we discussed the funding needed for the twenty-first century schools programme and the cut in the £20 million grant that they’ve been receiving over the last three years towards highway infrastructure, which was really important and did make inroads into the backlog of infrastructure repairs that have increased over the last 10 years during austerity. So, not having that £20 million funding for highway infrastructure will be a concern. Thank you.

11:10

Thank you. Yes, across several areas, I know there has been some disappointment at the capital funding settlement, and that really is a reflection of the capital settlement that we received from the UK Government. Clearly, our capital funding actually decreases over the course of the spending review period, which is very disappointing, because, as you suggest, capital funding is absolutely crucial in terms of the decarbonisation agenda in particular. The funding that we received is just in no way able to meet the ambitions that we have in the areas of investment for the future.

That said, I did undertake a zero-based capital review as part of this budget. It’s the first time that I’ve done an exercise like that, and we were the only part of the UK to do this as well. It was an opportunity for us to better align our capital spend with our infrastructure investment in the period ahead. That’s a 10-year strategy, and underneath that then sits the three-year infrastructure finance plan, which will be important. And there are elements within there that, whilst not part of the general capital received by local government, will nonetheless be important to local government—so, some significant allocations to deliver, via local authorities, social housing. So, there’s £1 billion there and, for twenty-first century schools, there’s £900 million. So, there are other elements of the budget that will be relating to capital and of interest to local government.

But you’re right that, as a result of the capital funding that we received, for local authorities in 2022-23, it will be set at £150 million, rising to £200 million in 2023-24 and 2024-25. And you’re right that this is a decrease in funding for 2022-23 compared with the current year, and that is with the cessation of the time-limited £20 million public highways refurbishment grant. So, that takes us back, really, to near the historic baselined capital grant level.

There will be decisions taken, obviously, within the climate change portfolio in respect of transport investment in particular, which I know will be considered in the transport committee. Of course, funding for highways—and you will know this inside out—goes through local authorities and, obviously, the funding provided to the trunk road agents for the management and the maintenance of the strategic motorway and trunk road networks. So, there are two sources of funding for this. But I think that it does reflect the focus and priorities within Welsh Government, as taken forward by the colleagues in transport.

The trunk road agencies are still, even this year, quite adequately funded—well funded—and historically they have been, but the percentage of infrastructure managed by them is quite small compared to the amount of infrastructure managed by local authorities. I know it’s important to invest in active travel measures, but, again, the percentage of highways that can have active travel measures added to them is quite minimal, and most cyclists and walkers, bus transport—everybody—need to have no potholes and the infrastructure to be up to standard, and the backlog is £1.6 billion for infrastructure, including pavements though, I must say. The street lighting, roads themselves and highways backlog, after 10 years of austerity, is £888 million. The £20 million, which was £60 million over three years, did make inroads and was invaluable because local authorities do not have enough capital themselves to be able to put a standstill to the deterioration of roads. The impact also of flooding now has been creating further issues with bridges and other infrastructure—grids, drop gullies—all these are adding extra pressure through climate change. I know this is probably the wrong committee for me to raise it; I'm not on the other committee, I'm sorry. But it's just about having to have that funding to be able to continue with it. So, I just wanted to make that point while you're here, because of that knowledge.

Also—

11:15

I was going to say thank you for raising that. I know we've had the opportunity to meet to discuss this particular issue and that you've been making strong representations to other colleagues in Welsh Government on this as well.

Yes, I'll continue to do that. I'm just hoping that there'll be some movement, as this is still a draft budget. I don't know if that's possible within that infrastructure budget, if there could be some movement. So, I'll continue to do that.

There's another question as well, please, just regarding capital. So, there's some expectation that some borrowing could be taking place for local authorities. So, there is some supported—. I'm just trying to understand is Welsh Government providing some funding for the supported borrowing to happen, for local government to be able to borrow. Because there's a big concern about the pressures on revenue if local government continue to borrow for their capital investment. I know, over past years, treasurers within local authorities are really concerned about continuing borrowing for them to be able to achieve their capital expenditure and the impact on their revenue funding. So, there's something here in the budget saying that, for them to be able to achieve what's expected of them, their investment in capital, they should really be expected to do some borrowing themselves.

Again, I'll ask Judith to come in on this, but the level of supported borrowing has been maintained at a consistent level for a number of years, and that does help local authorities to plan those long-term commitments of loan funding. And there's always a balance to be struck in terms of using funding for supported borrowing and unhypothecated funding, which local authorities can use flexibly, or specific grants. And we work really closely with local authorities on large programmes, such as twenty-first century schools and colleges and flooding, as you've described, to optimise delivery. Sometimes it's not just about the availability of funding, but also the capacity of local authorities, and so on, to deliver. But I'll ask Judith to come in on that specific point about supported borrowing.

Thank you, Minister. You're absolutely right. We've maintained the level of supported borrowing, so there is funding that goes through the local government revenue settlement to pay for that level of supported borrowing that is already there, and then if they want to do more borrowing, they can, but that's known as unsupported borrowing, and, again, they will then have to use their broader revenue to pay for that.

Sorry—is it in the RSG settlement, then, as part of that?

So, for the supported capital they've already got, there is an element of the RSG to support this capital, and it's divided up by the formula appropriately.

Okay, thanks, Carolyn. We turn, then, to Sam Rowlands.

Thanks, Chairman, and morning, Minister. I know you don't want to talk about council tax so much, but, I'm sorry, I'll be asking a couple of questions around that. First of all, more of a general question, and then perhaps I'll move on to more specific ones about the budget that's in front of us. You said earlier that it's in their gift, referring to councils, to decide what to do about council tax, and then one of the really interesting charts, I thought, in the pack that we received as a committee showed the decrease in real terms of the funding that councils have received over the last 10 years. So, in real terms, it's a 17 per cent decrease in funding. So, when you say it's in their gift to decide what to do about council tax, whilst receiving that significant decrease in funding over a long period of time, they still have to, either regulatorily or legislatively, deliver certain services. So, I was wondering, do you appreciate the position that puts councillors in? So, whilst technically you're right, it's in their gift, in reality, to continue delivering the services that especially Welsh Government want them to deliver, they do have to increase council tax. Do you think you appreciate that?

11:20

Yes, I do, and I think that council tax is an important part of the funding landscape for local government, partly because of course it gives that very local accountability. And I think that that is important in terms of being able to ensure that individuals have that very local attachment to the council and to the services that they receive. The obvious alternative, I guess, would be just to remove council tax altogether and find out another way of raising that funding, and for Welsh Government to apportion it via a formula. But I don't think then that will have that kind of local accountability attached to it. And I haven't heard any calls for us to do anything like that, unless you're going to tell me otherwise.

Not today, Minister, but good try. But in terms of that accountability, it's a really important point, because you probably heard in discussions earlier I raised the point with the council leaders about it being them every single year having to stand up and talk about taxation and increasing people's taxes. It's not Government Ministers, perhaps, tackling those difficult taxation issues year on year. So I just wonder, in terms of that accountability, whether you have any thoughts on whether that's a fair reflection, actually, through this strategy of reducing funding to councils, those difficult taxation decisions are not being made by Ministers, but being made, actually, by councillors?

I don't think that we can talk about a strategy of reducing funding to councils because clearly, at least over the most recent years and looking ahead to the future, Welsh Government has provided the best possible settlement to local authorities. And I know the last two years have been warmly welcomed, but more so, I think, for the next year. I think all of this, really, speaks to the importance of the agenda that we have to make council tax fairer. And, obviously, we're doing good work already in terms of support for households through the council tax reduction scheme, for example. But the whole agenda that we have now in terms of looking at council tax and what more we can do to make it fairer in terms of potentially significant reforms, we had that discussion in the Senedd on it recently, and I think it is important for moving forward. And there will be lots for us to unpick there, really, in terms of what it means for individual councils, what it means for individual households. So, lots of detailed work for us to do. I know the committee will take a particular interest in it, but I'm keen to work constructively with colleagues across the Senedd on this. 

So, on that point around future council tax implications, to look at the draft budget, which you've obviously published, in the three-year funding to local government generally, compared to what local government say they need, there is a £250 million gap between the £1 billion they say they need versus the £750 million-ish that you've said will be committed. So, for them to be able to plug that gap, that would actually increase council tax by about 20 per cent over three years. So, considering the perhaps, as you describe it, unfairness around council tax today, how do you feel about councils potentially having to increase council tax by 20 per cent because of the lack of funding over the next three years?

I'd just refer to Judith's previous points, really, about the work that the Welsh Government has done to further understand the figures and the refining of those figures then that has been undertaken by the WLGA in the light of more recent data, for example. So, I think that we've worked hard to meet the needs of local government in this settlement, which, as you saw earlier, has been warmly welcomed by colleagues, irrespective of political party as well, I have to say. 

Sorry, so then in terms of the potential of having to increase council tax by 20 per cent, whilst there may be some jiggling around with some numbers—. Well, as you may want to see some of those reduce, I guess local government might come back and say, 'Actually, we've found places where they might be a bit higher', I suspect it'll land there or thereabouts at the end of the three years of the pressures. So, pretend it is where it is. Is a 20 per cent increase in council tax fair for councillors to have to make that decision, do you think?

11:25

So, I haven't heard any councils providing any suggestion of that kind of figure. If local authorities did come forward with that kind of assessment, then I'd be interested to hear it, but I don't think that that's realistically where councils are at the moment. It's certainly not been raised with me as a potential area of concern.

I'm just doing the maths, sorry—the £250 million gap and what that effect is on council tax to try and plug that gap. Granted, another way of dealing with that is just stopping doing some stuff—cutting some services—and that might be something that councils may want to consider as well, I suppose. But I'm just trying to approach this in the light of, I think, your words about council tax being perhaps regressive and seemingly unfair, but at the same time, pushing councils to have to increase that unfairness and that disproportionality. The two don't necessarily match up in my mind.

I think I could understand having this conversation in some previous years when local authorities have received a very poor settlement, but actually, the reality is that local authorities next year are looking at a 9.4 per cent like-for-like increase, which clearly is a generous settlement, an exceptional settlement—however you want to look at it—but it's certainly not of a scale of that kind of level of challenge. And when you look at the way in which council tax has increased in years when local authorities have had a much poorer settlement because of the Welsh Government's overall budget, then local authorities haven't been in this space at that point. I can see Reg has got his hand up. Reg.

Yes, thank you. Can I just note one or two points that may, I hope, be helpful? And I can understand the maths on this, but I think there are probably two things, one of which is the advantage of giving authorities the three-year budget on which to plan, which is something that we all know they've asked us for for some years, and I think we can be really pleased that we've actually been able to deliver that for them this year. That provides a completely different planning horizon for investing in service change, for innovation, for, as you did say, about how you might not stop doing things, but do things better or differently and thereby reduce costs and release savings into other parts of the business. So, I don't think that the maths, as we see it today, necessarily follows that that would be the implication for council tax over the next three years. We also know that authorities have other means of raising income; there are also non-domestic rates that will flow into the equation as well.

So, yes, on the numbers, there is a difference, but I would suggest that our local authorities are really good and have proved themselves over the last 10 years, when we haven't been able to give them the sort of settlements that we'd have liked. They are really good at being able to adjust and to plan and respond to those financial pressures in a really creative way that has generally—as far as I can see, and as far as I think Ministers would agree—protected services, and I've got absolute confidence they will continue to do that.

Thanks for those additional points, and I will agree to a certain extent. In the evidence provided by the WLGA, they do point to cuts to some services of around 40 per cent over this time. So, whilst you're right in that they've had to be creative, and that's fine—I don't have an issue with that—it does come with a consequence, and 30 per cent cuts to trading standards and that sort of stuff as well, which we expect have to ramp up, I suppose, over the coming years again. There is always a consequence, isn't there?

Yes, absolutely, and I think through the COVID period we have seen trading standards playing a really key role in some of the enforcement. As you see, actually, in the grand scheme of things, the budget for trading standards is actually quite small. I'm not belittling the percentage cuts at all but, actually, the scale of some of the funding between services is a material factor when councils are considering their budgets and how they might increase or change council tax. But, yes, I do take the point that some services are sort of funded less now than they were, but equally we have seen some real improvements in efficiency in service delivery, partly through technology, partly through just more efficient and effective provision.

11:30

Just one more quick question, sorry, Chair—unless Rebecca wants to come back in, and then I'll ask my question.