Pwyllgor yr Economi, Masnach a Materion Gwledig

Economy, Trade, and Rural Affairs Committee

04/05/2023

Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

Hefin David
Luke Fletcher
Paul Davies Cadeirydd y Pwyllgor
Committee Chair
Samuel Kurtz
Sarah Murphy
Vikki Howells

Y rhai eraill a oedd yn bresennol

Others in Attendance

Adam Hawksbee Onward UK
Onward UK
Dyfrig Siencyn Cyngor Gwynedd
Gwynedd Council
James Gibson-Watt Cyngor Sir Powys
Powys County Council
Joe Rossiter Sefydliad Materion Cymreig
Institute of Welsh Affairs
Mark Norris Cyngor Bwrdeistref Sirol Rhondda Cynon Taf
Rhondda Cynon Taf County Borough Council
Professor Steve Fothergill Prifysgol Sheffield Hallam
Sheffield Hallam University
Rob Stewart Cyngor Abertawe
Swansea Council

Swyddogion y Senedd a oedd yn bresennol

Senedd Officials in Attendance

Evan Jones Dirprwy Glerc
Deputy Clerk
Gareth David Thomas Ymchwilydd
Researcher
Robert Donovan Clerc
Clerk

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 yn y Senedd a thrwy gynhadledd fideo.

Dechreuodd y cyfarfod am 09:30.

The committee met in the Senedd and by video-conference.

The meeting began at 09:30.

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

Croeso i bawb i'r cyfarfod hwn o Bwyllgor yr Economi, Masnach a Materion Gwledig. Mae'n hyfryd i fod nôl yn cadeirio'r pwyllgor, ac a gaf i ddiolch i bawb am eu negeseuon caredig yn ystod fy absenoldeb? Gaf i hefyd ddiolch i Vikki Howells am gadeirio'r pwyllgor cyntaf yn ystod fy absenoldeb, ac wedyn i Darren Millar am gadeirio’r pwyllgor dros dro yn ystod gweddill y tymor diwethaf? Dwi ddim wedi derbyn unrhyw ymddiheuriadau am heddiw, ond oes yna unrhyw fuddiannau hoffai Aelodau eu datgan o gwbl? Nac oes. 

Welcome, everyone, to this meeting of the  Economy, Trade and Rural Affairs Committee. It's wonderful to be back chairing the committee, and may I thank everyone for their kind words during my absence? May I also thank Vikki Howells for chairing the first committee meeting during my absence, and also to Darren Millar for chairing the committee temporarily during the remainder of last term? I haven't received any apologies for absence today, but are there any declarations of interest that Members would like to make at all? I see that there are none.

2. Papurau i'w nodi
2. Papers to note

Symudwn ni ymlaen, felly, i eitem 2, sef papurau i'w nodi. Mae yna nifer o bapurau i'w nodi heddiw. Byddwch chi'n falch o glywed nad wyf fi'n mynd i fynd trwy bob papur, ond a oes yna unrhyw faterion yn codi o'r papurau yma o gwbl? Na.

So, we'll move on to item 2 on our agenda, which is papers to notes. There are a number of papers to note there. You'll be pleased to hear that I'm not going to go through every single paper, but are there any issues arising from these papers at all? No.

3. Cyllid datblygu rhanbarthol ar ôl gadael yr UE: Academyddion a melinau trafod
3. Post-EU regional development funding: Academics and think tanks

Symudwn ni ymlaen, felly, i eitem 3 ar ein hagenda, a dyma'r sesiwn dystiolaeth lafar gyntaf ar gyfer ein hymchwiliad i gyllid datblygu rhanbarthol ar ôl gadael yr Undeb Ewropeaidd, sy'n cymryd tystiolaeth gan academyddion a melinau trafod. Gaf i groesawu'r tystion i'n sesiwn ni heddiw? Cyn inni symud yn syth i gwestiynau, gaf i ofyn iddyn nhw gyflwyno eu hunain i'r record, ac efallai gallaf ddechrau gyda Steve Fothergill?

We'll move on, therefore, to item 3 on our agenda today, and this is the first oral evidence session for our inquiry into post-EU regional development funding, which is taking evidence today from academics and think tanks. May I welcome the witnesses to our session today? Before we turn to questions, may I ask witnesses to introduce themselves for the record, and perhaps we can start with Steve Fothergill?

Professor Steve Fothergill 09:31:43

Thank you, Chair, and I'll speak in English, I'm afraid. I'm Steve Fothergill. I'm a professor of regional economic development at Sheffield Hallam University. But, also, I should add that, in this context, I have other relevant roles as well in that I'm also national director of the Industrial Communities Alliance, which is the association of local authorities in Britain's older industrial areas, including a clean sweep of the local authorities in the Valleys, I might say. And I also act as secretary of the all-party parliamentary group on the UK shared prosperity fund in the Westminster Parliament.

I'm Joe Rossiter. I'm the policy and external affairs manager at the Institute of Welsh Affairs.

Good morning. Adam Hawkesbee. Sorry I can't be there with you in person. I'm deputy director of a think tank called Onward. We do research on a range of topics, but most pertinent to today on levelling up and on how you can support areas that are left behind and have untapped potential. I was also previously head of policy at the West Midlands Combined Authority, where I was responsible for administering a range of the funds we're talking about today, and the community renewal fund particularly.

Well, thank you very much indeed for those introductions, and perhaps I can just kick off this session with just a general question: do you think that the UK Government is meeting its commitment to replace EU funds received by Wales through the shared prosperity fund, and can you explain your views on that? Perhaps I can start with Steve Fothergill.

Professor Steve Fothergill 09:33:27

Right, I thought this question might be coming. It's actually a slightly long-winded answer, I'm afraid, on this one. I'm aware that the Welsh economy Minister has been saying that Wales has been shortchanged, but I'm also aware that the UK Government says it's fully replacing the EU funds. So, there are two very different views there. Now, the truth is that both are correct, because they're talking about rather different things. Let's take the UK Government position first. Where the UK Government is absolutely correct is that, by the time that you get to financial year 2024-25, which is when all of the legacy EU funding has dropped out of the frame.—. I mean, we're still spending large amounts of EU funding at the moment; we can do up to the end of 2023, at the end of this year. By the time you get to the next financial year, the amount that the UK Government is putting into the shared prosperity fund does pretty much match what the EU funds were previously worth, with a tweak for inflation.

Now, the annual figure there that the UK Government is putting in in 2024-25, across the UK as a whole, is £1.5 billion a year. And I have to confess that that was a figure that I planted with the Treasury back in 2019. I did the calculations of what would be necessary to replace the European regional development fund and the European social fund. And I came up with that figure: £1.5 billion a year. That was the figure that was set in 2021 in the spending review. Because of the inflation that's happened just recently, of course, which none of us at that point in time anticipated, in real terms even £1.5 billion is a little bit of a reduction now. But when the figure was set, it did appear to be replacing the European funding in full. So, we've got a situation at present, and until the end of this year, where there's still a lot of European money being spent, but it's falling away. The SPF is ramping up, and the SPF does get to the level, in real terms, of roughly what the European funds originally were.

So, in that sense, the UK Government's correct. But the Welsh economy Minister is also correct. Because if we had stayed in the European Union, then, at this stage, we would have had a financial commitment that is a great deal more than the financial commitment that has come from the UK Government. The UK Government has put £2.6 billion on the table for the UK as a whole for three financial years—as I say, ramping up to the £1.5 billion in the final financial year. If we had stayed as an EU member, then we probably, in the UK as a whole, would have had an allocation of around about £10.5 billion, over a seven-year period. So, we'd be in a position now to begin to commit money that would be getting spent, not just in the next financial year, but right the way through to 2027.

It's a very odd situation to be in, to say that both parties are right in all of this, but they are, because they're looking at rather different things. One's looking at actual spending in financial years, and, in that sense, the UK Government is correct; the Welsh Government is looking at financial commitments, which is a different measure, and Vaughan Gething is correct on that front.

09:35

So, it's all to do with timing, then, in your view?

Professor Steve Fothergill 09:37:33

It is. Yes, it's to do with timing, and also including the duration of the funds. The three-year UK SPF—at the moment, all the money's got to be spent by the end of March 2025—falls a long way short of a seven-year EU spending round, which would have run from 2021 to December 2027. And with the EU funding, there is the facility to roll on expenditure beyond the end of the period, so you've got to commit all your money by the end of, 2027 it would have been, but you would have been still spending money right up to the end of the present decade—just as, at the moment, we're actually spending very large sums of European money that were committed in the 2014 to 2020 spending round. The actual spending tends to be backloaded. We've been spending more European money, on an annual basis, since we left the European Union than we were in the immediately preceding years. Now, all of that's a rather complex answer, but I hope you can grasp the difference between spending and commitments.

Yes. Well, I wouldn't dispute what you're saying in regards to the quantum of the funding, but, really, the fact that it's disputed, not only by Welsh Government, but also other devolved Governments—the Scottish Government, the Northern Irish Government—who are also having issue with the amount of funding that they're receiving, kind of shows one of the fundamental problems with the way that the SPF and the levelling-up fund have been rolled out to date. There's a lack of collaboration and a lack of a clear, agreed level of funding that both areas of Government can agree on. That's one of the key problems, really, and illustrative of the rest of the roll-out.

I think Steve's answer is very comprehensive. I think that the key thing to pull out on timing is that we are now approaching rapidly the point when that spending period will end, and the really important thing is to make sure that there is the largest possible window for the next round of funding. But I imagine we'll talk in a moment about the design of future funds.

Yes. And to what extent have the levelling-up fund and the shared prosperity fund allocated funding to areas most in need of levelling up? What impacts do you think the approach taken by the UK Government has had on authorities in different parts of Wales? Who'd like to start on that?

09:40
Professor Steve Fothergill 09:40:15

I can kick off again if it's helpful. In terms of the share of the UK shared prosperity fund coming to Wales, it's pretty much identical to the share of the old European ERDF and ESF funding that came to Wales, and that is a very substantial share. It's not far short of a quarter of all of the shared prosperity fund.

On a per capita basis, Wales does very, very well out of the shared prosperity fund compared to just about everywhere else in the UK, I've got to say. That's in some respects quite an achievement, because the great fear was that in the transition from European funding to UK funding that Wales might lose out, not just in absolute terms but also in terms of its share of funding. That's because the UK Government took the deliberate decision to replicate the former distribution of EU funding between the four nations of the UK.

Now, in detail, when you drill down within Wales it's more complex, because the old allocation of European money within Wales was to two blocks, west Wales and the Valleys, which got loads and loads of money as one of Europe's less developed regions, and then east Wales, which was rather less generously funded. Now it's a rather more complex picture down at the local authority level, I've got to say.

Regarding the levelling-up fund, down at the level of local authorities once again it's been a little bit of a pattern of hit and miss, not just in Wales, but also across the rest of the UK. If you look at the figures that the UK Government has produced, on balance, yes, Wales has still done rather better out of the levelling-up fund so far than some of the more prosperous parts of the country, but not as strongly as has been the case with the shared prosperity fund. On a per capita basis, Wales has got 20 times as much from the shared prosperity fund as south-east England, and frankly that's how it should be, but it's not been quite as skewed on the levelling-up fund.

So, we've seen 19 out of 22 local authorities in Wales designated in the highest priority category when it comes to the levelling-up fund, which again, like you're saying, Steve, is very similar to European structural investment and the ERDF as well. But then the delivery of it is far more piecemeal because it doesn't designate money on a regional basis, it does it on a local authority basis. For example, with the first round of the levelling-up fund, 11 successful projects out of a total 45 that were applied for means there's a more piecemeal approach when it comes to regional economic development, I would say. So, yes, Wales does well; it's important also that whilst it's good that Wales receives a disproportionate amount, and more per head than the rest of the UK, it's not a badge of honour that Wales's economy is ailing to some extent, and we really need to see interventions that mean that Wales is less dependent on funding coming from outside, really.

Yes, I think those are the right points in terms of where funding has been allocated. Let me just give three quick reasons why I think the design of the funds might impede the ability to get them to those neighbourhoods and those areas that are struggling the most. So, one is on timing. The fact that there were short timescales for the levelling-up fund meant that it was those areas that already had the most capacity and had developed the strongest bids that were able to get them. So, that sort of rush in order to get something submitted doesn't allow for greater time for those areas that might have a higher level of need.

The second is the degree of assurance and some of the bureaucracy around the funds, I think, actually replicated some of the unhelpful bureaucracy that there was around European Union funding. Anyone who's worked within an ERDF fund will know the labyrinthine amount of forms that you need to fill in and outputs that you need to set out in advance. So, replicating that again means that areas without that existing capacity might struggle to access the funds. 

And the third is scale. So, I think doing it either at a regional or a local authority scale means that you might hide wards or neighbourhoods that have high levels of poverty but might be in more affluent areas. We saw that at Onward with some of our work in Barry—disguised in a relatively more prosperous local authority, but having real significant problems at a ward, neighbourhood and town level. So, a few reasons there why the design might have meant that you haven't targeted funds in a way you might want to.

09:45

Thanks for that. And, Steve Fothergill, in your paper, you've said that there is a significant flaw in the UK Government's approach to including deprivation in its funding calculations for the shared prosperity fund, which has diverted funding from larger to smaller authorities. I think you just touched upon it a little bit earlier. Could you just provide us with more details and explain the scale of that impact to us, please?

Professor Steve Fothergill 09:45:47

Yes, I'll do my best. That particular analysis is not mine; it's a piece of analysis done by the Institute for Fiscal Studies. But I've crawled over it, and it's sound, let me say. The basic problem is that, when there was pressure from here in Wales to include the indices of deprivation as one of the drivers for the local allocation of the shared prosperity fund, what the UK Government did was apply or introduce the indices into the formula in a very inept way. It weighted local authorities according to their ranking on the indices of deprivation. So, if you were the poorest, you got more money than if you were the most prosperous local authority. That's fine, but only up to a point, because the local authorities vary a great deal in size. So, because they took no account of how many people were in each of these authorities, you get a situation where—. Let's say you had a very, very small authority that was the poorest in Wales—I suspect it was Blaenau Gwent or Merthyr Tydfil; I can't remember the exact details—with a small population of 60,000 or thereabouts. Not very far behind are authorities like Caerphilly, Rhondda Cynon Taf, et cetera, and Neath Port Talbot, but they're much bigger in population and actually have more deprived people within them. They're boroughs of 200,000 or thereabouts. There was no adjustment in there for how many deprived people for the size of the population. I think it would have been much better done by looking, for example, not at the ranking of local authorities from best to worst, but at the absolute numbers of population in the most deprived, say, 20 per cent of wards in Wales in each local authority, and then you would have not got this bias towards the very smallest authorities.

The calculations that the Institute for Fiscal Studies have done do indicate that this has led to a net shift of funding to the small deprived authorities. I think Blaenau and Merthyr are the big winners. The losers: Neath Port Talbot, RCT. Cardiff, I think, has also lost out. It's a few millions that have gone, perhaps, where it ought not to have gone with a better formula. I think this does not reflect well on London-based civil servants, actually. I think it's simply inept in the way that they've gone about this.

Okay. Thanks for that. I'll now bring in Vikki Howells. Vikki.

Thank you, Chair, and good morning to our witnesses. I've got a set of questions around the design of the fund, and, with the fullness of the answers you've already given, there may be some areas that have already been touched on. So, firstly, I would be interested if our witnesses could set out what they see as the key differences between structural funds and the shared prosperity fund. What are the implications of these for the success of the shared prosperity fund?

Well, one of them is, obviously, a diminished role for Welsh Government within the roll-out of where the funds are going. We think that is one of the key weaknesses. It kind of undermines the way that it's rolled out in Wales and what it looks like. Again, there's some of the stuff we've spoken about, around it [Correction: 'the levelling-up fund'] going—rather than ESI, which went to, broadly, regions, and ERDF, which was targeted at those most deprived regions within Wales and across Europe, as well—down to local authority level. Importantly, one of the mechanisms is that it's a competitive fund; it pits local authorities against each other in the interests of trying to get funds for developing their communities. We would argue that that's not the best way of administering regional economic development funding, and that, actually, it should be part of wider, larger scale strategy across a region. And, as part of some of the work that we've done in terms of talking to local authorities, which I'm sure you'll hear about later when you receive their evidence, it actually means that local authorities are less open about what their funds look like and what the future direction of what their communities look like. We think that that is not a particularly promising state of affairs, really, when you're talking about how a number of these projects cross council lines.

One of the fundamental things that we've seen with the levelling-up fund is that, actually, many of the bids that have been approved are within devolved competency; they might be active travel, or infrastructure, for example. And many of these activities you would consider, 10 or 15 years ago, to be the day-to-day activities of what local government are meant to be spending their money on. Ten years on from austerity, it's repackaged and rebadged, with local authorities not able to have that access to not only capital to invest in infrastructure, but also resource, in terms of having people with expertise in delivering infrastructure projects, and, now, that money has been taken out and rebadged as a competitive bid for funding, essentially, which we think doesn't serve the best interests of Wales, really.

When you look at Wales's budget overall, most of the funding that Welsh Government have available to them when they talk about economic development, which is within devolved competency, is all predisposed to service delivery, whether that's healthcare, whether that's public services more widely, and that, actually, the EU funding was a real big top-up that enabled Welsh Government to do transformative economic projects, because it was able to deliver that on an all-Wales basis. It helped to establish Wales as an economic region in and of itself within wider Europe. So, you had projects that worked on a pan-Wales basis, whether that was higher education, or whether that was infrastructure spend that crossed council lines. Each of those aren't going to be delivered under the levelling-up or shared prosperity fund [Correction: 'under the levelling-up fund'], because it's down at local council level. So, that's a broad picture. 

09:50

Chair, can I just come back in with another quick supplementary to Joe?   

I'm interested in what you said there, Joe, about local authorities being perhaps less open about their plans. I think you were alluding there not just to the shared prosperity fund, but to the levelling-up fund, if I was reading you correctly. What would you say is the reason behind that behaviour that you've outlined? Is it because local authorities feel they need to guard their bids for the levelling-up fund, because of the competitive nature? Or would perhaps that lack of transparency be because they find it difficult to forward plan because of the more narrow window for both funds? 

Good question. A bit of both, essentially. We did this piece of work as a precursor to the levelling-up fund—so as this agenda was in its infancy, but it has continued on throughout, as we've seen. And it was a round-table that was behind closed doors. But, then, the IWA took what local authorities were able to say, so it was a very transparent opinion from local authority leaders, and, yes, it's exactly that—they're in competition. This is how the fund [Correction: 'the levelling-up fund'] works. They're in competition for funding from a pot and that is just the very nature of how the fund is set up. So, yes, that's exactly right.

Also, with the capacity of regions as well, it's important to state that not all local authorities in Wales have the same capacity to develop bids, as we've seen from previous evidence. It's not a level playing field, because not all local authorities have the same capacity, whether that's people, whether that's money, in order to develop these funds. So, what you get is—you're going to get delivery of projects that are shovel-ready and ready to go, rather than, maybe, some of those longer term projects that truly could be transformational, really. So, yes, that's what I would say.  

Professor Steve Fothergill 09:54:26

Okay. Could I just clarify this issue of what's competitive and what isn't for the benefit of Members here? The shared prosperity fund was not allocated to areas through a competitive mechanism. It was entirely allocated by formula. It's the levelling-up fund that's been allocated by competitive bidding. And, also, I don't think you should see the levelling-up fund as one of the successors to EU funding. If you actually ask the question, 'Where has this levelling-up fund money come from?', actually, you can trace it back to a fund that used to exist in England called the local growth fund. Now, that fund was only allocated in England, and this is in a previous spending round, but the Welsh Government would have got a Barnett consequential for that fund. So, what actually the levelling-up fund is is a UK Government allocation through competitive bidding of money that would have come through the Barnett formula to the Welsh Government.

09:55

And on this specific issue, Luke Fletcher, you just want to come in with a supplementary on this.

Yes. Diolch, Cadeirydd. I understand that I'm just skipping ahead, actually, to a set of questions that I had. I think there's an opportunity just to maybe build on one of those questions now, given the conversation we're having. I mean, I'm really interested, Joe, and Steve as well, around what your assessment—and to be a clear on it—would have been of how effective structural funds were in terms of transforming the Welsh economy, and actually, do you think that the shared prosperity fund is actually going to have any noticeable different impact? I don't know who wants to pick that up.

I'm happy to pick it up.

Professor Steve Fothergill 09:56:27

I'll have a go at it as well in a minute. [Laughter.]

Yes. I would say: was it the job of European structural and investment funds to completely transform Wales's economy? Arguably not, so I think that's kind of a separate issue. I think, with regard to the different shape, they're very different in that under levelling-up and shared prosperity, Welsh Government can't deliver projects that are all-Wales, and we've really seen the impact of that. You've got the Wales Council for Voluntary Action talking about how—actually, there are a number of charities and volunteer organisations that are really dependent, by the very nature of some of their projects, they deliver really change in communities across Wales, on European funding, and that's gone. It'll [Correction: 'The levelling-up fund will'] go to local authority level, which is a completely different picture; it's for different things. And I think that comes back to what I said around what we laid out in our 'Fiscal Firepower' report—that, really, Wales doesn't have a huge amount of wiggle room in order to develop transformative projects. ESI enabled them to do that, which is not the case with the levelling-up or shared prosperity funds, because Welsh Government don't have a say [Correction: 'as big a say'].

And you've touched on the capacity issue around local authorities, would you say that there is also an issue in terms of the projects themselves not being joined up and that there is no sort of joined-up thinking around the funding itself and what it actually goes into?

Well, I think it's an interesting one in that it zooms in people's—. In many ways, it's counter to some of the direction of travel of where Welsh Government are going in terms of whether it's city growth deals, whether it's corporate joint committees, there's an idea of trying to make decision making beyond the local 22 local authorities in Wales and actually raising it to a regional level, in a way that is very similar to the way the ESI and ERDF were delivered.FootnoteLink Actually, this [Correction: 'the levelling-up fund'] brings us back down to local authority level, and there's a further discord around what Welsh Government are trying to do and what is practice here in Wales, as we're moving on, and what local authorities are able to deliver. So, in that way, it kind of muddies the waters in what is able to be delivered, and if it was delivered on a regional level, you might get an active travel infrastructure, for example, that goes all the way across a region and connects a whole region. Here, you won't.

Professor Steve Fothergill 09:58:36

Yes. I've often heard it said—not least here in Wales—that all of the European funds can't have made that much difference, because if you go back 30 years ago or 40 years ago when Wales first started receiving substantial European money, Wales, or the poorest parts of Wales like the Valleys, were still lagging behind a long way and really, if you look at the statistics, they're still lagging behind. And so, some people reach the conclusion, 'Oh, no positive impact'. I've got to say, I don't share that view. I think you need to bear in mind the extraordinarily difficult circumstances that some of the poorest areas of Wales have faced, or certainly did face as a result of de-industrialisation in the 1970s, 1980s and 1990s—all that job destruction and the complete erosion and disappearance of their original economic base. And it's quite plausible to argue that the fact that we've perhaps managed to stop things getting any worse is actually a tribute to the contribution, amongst other things—I mean, it's not exclusively European money, but amongst other things—that some substantial European money has made over the years. Quite how big a contribution—. We'd have to establish what economists call, a 'counterfactual'—what would have happened in the absence of—and that's always very, very difficult.

But I've got to say, as you or I go around some of the places that have received European money, just the evidence to my eyes and, I'm sure your eyes, is that quite a lot has changed over the last twenty or thirty years. And when you look at the badging on some of the things that have happened, you'll often find that European flag—it's been European money that's been the trigger. It was always, always going to be difficult territory, particularly to regenerate the Valleys, I think. I've argued many times that, amongst all the former mining areas of Britain, the Welsh Valleys probably have offered the biggest single challenge and it's been a lot easier—although by no means totally easy—to achieve regeneration in Yorkshire and the Midlands than it has in the Valleys.

10:00

Thanks, Chair. Just one final, quick follow-up. So, the WLGA—the Welsh Local Government Association—has suggested that the post-EU funds have a lighter touch approach to monitoring than structural funds did, which allows them to concentrate more on delivery. I'm interested as to what extent our witnesses would agree with this view and for some brief thoughts on how that would affect the ability of partners to deliver those funds.

Yes, I would agree with that view. I think it's very important here, as with previous questions, to distinguish between the levelling-up fund and the shared prosperity fund. So, moving the levelling-up fund to one side, on the shared prosperity fund, I think the direction of travel in terms of how it's administered is the right one: so, no requirement for match funding, less specificity required about particular projects and programmes and instead moving to these broader investment portfolios that have a range of different outcomes. So, I do think this will be easier to administer than the historic funds. Of course, there'll need to be political accountability around how some of these funds are used at the local authority level. But I think there is still further to go on stripping out some of that administration and bureaucracy and not trying to manage these programmes through administrative processes instead by having proper political accountability—accountability down to communities and a focus on outcome as opposed to input.

What was the question again? Apologies.

Just about the fact that the WLGA has suggested that the funds have a lighter touch approach to monitoring than the structural funds and whether you would agree with that and whether you think it's a good thing.

Yes, well, this is one of the things that came up in the round-table that I discussed earlier, that, having a longer period of being able to plan a project all the way through to delivery—a seven-year time cycle, which was the case with some of the European funds—was to the benefit of engaging with, whether that's businesses, whether that's with local communities. It underpins one of the ways that—. Well, it's underpinned by the Well-being of Future Generations (Wales) Act 2015—of involving communities in the development of the future of what their communities look like. But also, yes, that the monitoring as well, post EU funding, was really quite robust and helped to really dig down and see, 'Did this allocation of EU funding have the intended impact? If not, why not?' And we think that's really important in regards to how it shapes what comes next. We really need to have that robust analysis framework, because it enables greater benefit to Welsh Government and local government in terms of what the shape of funding, going forward, is beyond the bids. So, the benefit of the bid is not just, 'We've built a leisure centre; here it is'; it's saying, 'What did this achieve afterwards?', and it means a better use of money going forward, as well. 

Professor Steve Fothergill 10:04:08

Yes. Look, I think it's a case here of one step forward, two steps back, actually. I think it is probably true that the requirements on evaluation and monitoring and so on are less onerous than used to be the case with EU funding, but there's also a downside to the way that the funds have been structured and organised. Two big downsides spring to mind. One is that, by pushing it down to local authorities—although that's often been welcome down at the local authority level, I've got to say—pushing it down to local authorities means that it's very, very difficult for organisations and institutions that operate across local authority level, it's been very difficult for them to find a way into accessing the funds. And I know that that's creating quite a crisis in the university sector here in south Wales in particular. 

Another big downside of the way that the funds have been organised and structured is simply the duration, because if you really can only commit at the moment to spending that has to end by March 2025, you can't, as Joe has been saying, engage in that sort of transformational work. You can't undertake a lot of the big capital projects that take a long while to come to fruition. That's automatically ruled out. So, one step forward, two back, I'm afraid.

10:05

Diolch, Gadeirydd. I think we might have inadvertently touched on a lot of this in previous answers, but when we think about the UK Government's missions around levelling up, to what extent does post-EU funding actually meet any of those missions as set out? Will it be able to meet those missions?

Professor Steve Fothergill 10:06:09

It's a part of the jigsaw, isn't it? There are several legs to the overall levelling-up strategy of the UK Government, of which, actually, the replacement of the European funding through the shared prosperity fund is an important leg. It's not the totality of the overall levelling-up strategy of the UK Government. Some of the UK Government strategies have of course strayed into Wales. Others haven't. Quite a lot goes on in England that doesn't actually happen in Wales—additional funding streams that local authorities have had to bid for.

What worries me in all of this, and I tried to convey this in the written evidence that I've submitted to the committee, is the direction of travel in Westminster on all of this. It is quite clear that the UK Government has got the bit between the teeth about simplifying all of these different funding streams. In a number of documents over the last year, they've said, 'We will publish plans to streamline all our levelling-up moneys.' The big question then is where does the UK shared prosperity fund fit into all of this. Should we all roll over and accept that, beyond the end of 2025, rather than having a shared prosperity fund, a levelling-up fund, a towns fund, a community renewal fund, a high streets fund and things that go on in England, it will just be one super big fund? Are we happy with that or not?

In my written evidence to the committee, you will see that I've said that it would be a mistake for the UK shared prosperity fund to be subsumed into all of these other funds. That's not to say there aren't a lot of merits in streamlining and simplification. There clearly are, and the local authorities I've worked with strongly welcome simplification and streamlining, because they've engaged in so much of a bidding process for so many multiple funds with overlapping objectives that they see it's nonsensical. And the civil servants, frankly, have got to the point where they see it as nonsensical. These are the civil servants in Westminster. But the shared prosperity fund—should it go in with everything else? There's a big issue there. I certainly would like to lay down a marker that it probably ought to remain separate, and in particular, I think, Wales might lose out badly if it was simply subsumed into all the other levelling-up funding streams.

Sorry, that strayed a bit perhaps from your question, but I do see that as the central issue moving forward. We have to recognise that what's in place in now is water under the bridge—everything through to March 2025. We probably can't change it very much now. It's done and dusted.

In terms of simplifying all the funds and bringing them all together, in your opinion, then, it would be a mistake. Is that purely because Wales might miss out?

Professor Steve Fothergill 10:09:33

I think, and I know the local authorities I work with think, there's a lot of merit in streamlining the funding. But having given serious consideration to where the shared prosperity fund should sit in all of this, I think the considered conclusion—. I've been talking to local authority officers right the way across Britain on all of this. The view is that, actually, it would be better to keep the shared prosperity fund separate. There are a number of reasons, not least because that would clearly honour the commitment to replace European funding. It would also keep a strong geographical focus on the less prosperous areas. Because unlike the shared prosperity fund, which really is targeted at the poorest areas—that's how Wales gets so much—some of these other funds are really quite liberally spread, across England in particular. I think you would get that dilution if everything was just put into one big bundle.

10:10

There's just one thing I'd add on. 

On inter-governmental relations, there's nothing that's inherently—. Levelling up is something that devolved Governments across the UK want to achieve; there's nothing inherently UK Government about that. That's why we're calling for the Welsh Government to have a more formal role in the roll-out of what it looks like. Everyone wants to level up, don't they? 

Just very quickly, to reinforce Steve's point, I think the shared prosperity fund or any post-EU funding should only be seen as a portion of any levelling-up mission. Ultimately, what you would want, to the point on whether you should integrate the shared prosperity fund into other funding, is as much unring-fenced funding held as locally as possible, and then, on top of that, a redistributed mechanism to ensure that places that are falling behind don't fall further behind. Whether that redistributed mechanism is primarily the shared prosperity fund is an open question, but I think that you need a balance between those two things, and we don't want too many directed funds that come from the centre. 

Thank you, Luke. Before I bring in Sarah Murphy, Sam, you just want to come in very, very briefly. 

Just a quick point on Steve's discussion point there. Has there been any indication by the UK Government, in terms of their streamlining, that they are looking at putting the SPF in with all other, or is this just a possibility? Has there been an indication that that is the direction of travel? Because I know you mentioned streamlining could be beneficial, but the SPF should sit adjacent to it. 

Professor Steve Fothergill 10:11:59

There's nothing formally published at the moment on this. There is the intention to streamline levelling-up funding in general. I would expect a document to be produced this side of the summer break by Government, setting out the broad direction of travel, but that won't necessarily specify exactly which funds should be rolled into this all-singing, all-dancing superfund. 

So, there's a likelihood that some of those smaller funds could be streamlined, while the SPF remains. 

Professor Steve Fothergill 10:12:33

I've been trying to open up discussion with the civil servants in the Treasury and in the department for levelling up to see where they're coming from on this issue about where does the shared prosperity fund sit on all of this. Of course, civil servants, being cautious, have to say, 'Well, this is going to be decided at the highest level by my Ministers, and, frankly, at this point in time, my Ministers are saying they haven't really got their heads around this.' But I do sense that the lead civil servants themselves recognise that there is some logic in trying to keep the shared prosperity fund separate, but that doesn't mean to say that it's a done deal by any means. 

I think Adam indicated that he wanted to jump in. 

The signal of policy intent that I would keep an eye on in an English context is the 'trailblazer' devolution deals that have just been agreed with greater Manchester and the west midlands. While I appreciate it's a very different context, I think their mechanism for simplifying funding is to lump everything together into these single mayoral settlements. So, it would be important to emphasise, in any discussion with Westminster and Whitehall civil servants, why your situation will be different from that, because that will probably be their template to how funding simplification will occur. 

Thank you very much. I'll now bring in Sarah Murphy. 

Thank you. Good morning. Thank you, all, for being here today. I'm going to drill down a little bit into the timescales for the funds, which we've already touched on a bit. In evidence to the Welsh Affairs Committee last year, local authority leaders highlighted the challenges of the relatively small timescales to submit the regional investment plans for the shared prosperity fund. They specifically argued that the timescales put in place by the UK Government are too tight. They gave the example that, in south-east Wales, the lead authority must report on behalf of 10 local authorities, and the Welsh Local Government Association states that insufficient time has been given to do this.

Based on what you've all seen—. Adam, it would be really interesting to know—. I read through your evidence about Barry, for example, which is actually quite sad, reading it now, because, obviously, a lot of that was based on the momentum and the pride and the anticipation that they had for hopefully getting the levelling-up funding in the Vale of Glamorgan, which they didn't. I was just wondering, from your discussions, what implications have these timescales had for the ability of the local authorities to prepare and deliver on their plans for local economic development?

10:15
Professor Steve Fothergill 10:15:07

There's a serious problem here of the timescale. I think I mentioned it earlier, and Joe’s mentioned it. It takes a long time to work up the bigger, transformative projects. Certainly, if you're on about capital projects, my goodness, you'll have to go through planning permissions, evaluations of this that and the other, then put things out to contract. You can't deliver big things in two or two and a bit years. So, there is a real problem with the timescale.

The obstacle to solving this problem is the Treasury. It's certainly true that, in London, the department for levelling up, or at least their officials, recognise that they're getting poor quality results on the ground because of the very short timescale of the shared prosperity fund. I think, at some levels in the Treasury, that's also recognised, I've got to say. But the Treasury is wedded to certain rules. They like to control how much is spent in each financial year, and they don't like to commit money beyond the end of spending review periods, which are typically three years, or at the very, very most four years. The present one is a three-year one, running until March 2025. We'd expect a new spending review probably at the back end of next year. We've got to break down that mindset in the Treasury. They've got to understand that if they really want value for money, they've got to start being more flexible in terms of the duration of the spending programmes that they run.

There are certain things that do roll on beyond spending review periods in Government. Something like HS2 clearly is doing that, and defence procurement is another thing that rolls on beyond spending review periods. They need to accept that if you're serious about regional and local economic development, you also need to do this same thing. I've been talking to civil servants to see if we can find a compromise way forward here on this whereby, for example, capital expenditure might be allowed to run on longer than revenue-based expenditure. But it's all rather inconclusive at the moment, and what I keep hearing from the officials I talk to is, 'Oh my goodness, this is attacking central tenets of the way that they in Treasury operate.'

I'd broadly reflect what I said before, in that our round-tables with both business and local authorities spoke to how that is really having a pinch. Ultimately, a shorter window results in poorer bids, really, and poorer outcomes for local economies. It also exacerbates what I was saying before about it not being a level playing field. It can be pretty devastating if you're a local authority and you've put a lot of your already stripped potential and person power into a bid, and then you don't get it. That is going to be quite devastating, because it's a resource you've not used anywhere else. It just exacerbates that non-level playing field, really.

Thank you. And Adam, I suppose, as I mentioned, you know maybe a bit about this, about what happened with Barry.

Yes, absolutely. I agree with the points that have been made that the really short time process doesn't allow people to get their plans together. It also doesn't reflect how messy and iterative it sometimes is to develop really good projects—that if you need to write the finished article on a bid in one go, then what you're not able to do is get partners onboard slowly. And actually what we saw in Barry was a process that had gone over about 20 or 30 years from the beginning of the regeneration of the waterfront and the enlightened self-interest of some of the private landowners there, with the community coming up alongside. And I think what was a real shame with the fact that the Vale of Glamorgan didn't secure the funding from the levelling up fund was that was a great example of a project that sat atop a much broader foundation of community development and regeneration that's occurred. And my hope, with a lot of these bids that have been put forward—the more positive bids—is that there are ways to secure private funding and financing for some of these projects. I think it would be a real shame, even for things like investment zones where a range of local authorities put together bids, if that work is wasted as opposed to being picked up by others and supported by public authorities and private organisations to try and secure funding via other means.

Joe, you'd like to come back on this, very briefly.

Yes, building on what you just said there in terms of the business round-table that we had behind closed doors. They basically told us that they had no idea how to engage in this agenda. They didn't know where the money was coming from, they didn't know how they could get involved, they didn't know they could supplement projects with private funding, which has been a pivotal part of successful projects in the past. So, yes, it's not really worked in the interests of private equity [Correction: 'the private sector'].

10:20

Thank you, Joe, and, also, did this come through in your round-table as well? There were some local authorities—my local authority being one of them, Bridgend—that weren't aware that they would only, really, get one accepted; they were led to believe, 'Put in as many as you think are good ideas', and so they worked on three, and only one was accepted. As Steve was saying earlier, the time and energy that went into that, the community being involved in it—was that something that came across as well?

Yes, exactly right, and, like I said, the pinched timescales really don't allow much space for you to go and listen to what a community wants their community to look like, and that really should be at the heart of any levelling-up agenda, you would think, but the timescales don't enable it.

Absolutely. Thank you very much. So, we've looked at the operational, which is one aspect, which has been challenging with the timescales, and we've also heard about how it can hinder the ability to deliver those transformative projects, and Joe, in IWA written evidence, you gave the example of the all-Wales activities, like Business Wales, and support for jobseekers, all-Wales programmes such as Jobs Growth Wales—those are the kinds of projects, then, that aren't getting that funding. So, for us as a committee, what would you recommend that we ask, I suppose? How do you think that this can be addressed, specifically looking at the timescales, although I know that it is all interwoven? But what do you think would work? What do you think could make this better?

Well, we've seen on the successful free-port bids the way that the UK Government and Welsh Government have worked together really, really well in order to deliver projects that speak to both UK Government goals and Welsh Government goals and deliver funding to communities that need it. So, I think having some sort of co-ordinating body that has representatives of Welsh Government, local authorities, and UK Government to administer that funding as well as in addition to all those other practices that would come out of that, such as expanding the time frame from which you're able to put bids together, would be a really crucial way of ensuring that there's engagement on what those bids look like.

Obviously, the way that this is being delivered at the moment, you're not going to see those all-Wales funds, so there's got to be some sort of mechanism that will enable Welsh Government, or UK Government, to be able to support some of those, because they're really vital interventions, and, like Steve said, you're looking at a cliff edge for some of this activity at the end of the year. After that, we're going to start seeing the real impact of it, because EU funding hasn't run out for some of those projects, particularly higher education, as an example. So, that is one of the key things that I would highlight, that there needs to be better collaboration around the creation of projects, and also speaking to what the Welsh Government's and regions' agendas are—like I said before about having these conglomerates of either city growth deals or CJCs, they're mechanisms that aren't being used. They've got a lot of money; they could be real, key delivery partners in regional economic growth strategies, I would say. So, those two things are really key. And also that money should flow through Welsh Government. I think there's a key argument to be made that Welsh Government should be having more of a role in the roll-out of these funds. 

Absolutely. Thank you very much. Anybody else who would like to add to that?

Just quickly, I think one of the ways—. If you do have to accept the Treasury mindset that Steve alluded to—I don't think we do, but let's say we have to work within it for the moment—one of the things you can do is change the way you build capacity in local areas to develop these bids. So, at the moment, the way we do it is spend a lot of money on consultants, who often recycle the same data and ideas for a range of different areas—it's hugely expensive, and I don't think gives much value—and the point at which the UK Government might come in is after a bid has been unsuccessful, where they might offer some kind of feedback that's often not particularly helpful. Let's actually invest in the underlying capabilities that mean that areas can develop really good bids: the data analytic capacity of local authorities; the ways that they need to develop good projects; community engagement—that doesn't mean hiring a new officer in a public authority, it means investing in community and civil society organisations that do that really important knitting work from which good ideas emerge. So, I think a more enlightened approach to capability building could help manage some of those timescales.

Okay. Thank you, Sarah. I'll now bring in Sam Kurtz—Sam.

Diolch yn fawr, Cadeirydd. Steve, you mentioned the point that some local authorities are quite excited by the opportunity of working directly with Whitehall civil servants on developing bids and having that relationship, and that was a conscious decision by UK Government to force through that relationship rather than include Welsh Government. What's been the specific impact of that relationship with local authorities, Welsh local authorities, and UK Government, for the first time, really, in their lifetimes? 

Professor Steve Fothergill 10:24:56

I don't think that relationship has been in place long enough for me to form a judgment on the impact, or to get feedback. I think, probably, the local authorities in question are still coming to terms with how this is all working. You used the word that local authorities are 'excited' about this. I think that might be going a little bit far and I don't think—

10:25
Professor Steve Fothergill 10:25:22

—I actually used that word. But I'm aware, here in Wales, and indeed in Scotland, where similar circumstances prevail, that, at times, the local authorities I work with have felt that, under the old way of doing things, things were a little bit too centralised within the two devolved nations, that the Welsh Government, and, indeed, the Scottish Government, were perhaps a little bit too dominant in deciding how, in that case, European funding, originally, was going to be spent. Now, that's not to say that they wanted to move from one extreme to the other, which is actually what has happened. Because there's no question that cutting out the Welsh Government—and I think it is fair to say that the Welsh Government has been cut out, and the Scottish Government has been cut out—has its downsides as well. As I mentioned earlier, it doesn't provide mechanisms for those cross-internal-border organisations to engage very well. It also rather turns its back on and doesn't integrate what's done locally very well with the things that the Welsh Government is already doing. The Welsh Government is a big player here in the local economy; you would expect it to be involved in a major way somehow in framing what's happening in terms of the SPF or, indeed, as it did with the European funds. It's a question of balance, really, and I think it's probably for this committee to make a judgment as to has the balance swung too far in the other direction, but please be aware that there is an alternative view to the Welsh Government view.

Yes. And so just on that, then, if there were to be future schemes, should there be Welsh Government involvement, from your perspective?

Professor Steve Fothergill 10:27:28

I think it just makes common sense to have the Welsh Government more involved than has been the case in the development of the UK shared prosperity fund in particular. Yes. It just makes sense, because the Welsh Government is such a big player. Now, how that would work in detail, I don't know; that's to be fleshed out here in Wales. But some sort of central/local compromise is probably what's required.

In England, of course, you never did have anything above the local authorities—well, the European money was managed at a sub-regional scale. It wasn't right down at local-authority level, but you didn't have elected regional assemblies overseeing what was going on in the north-east or in Yorkshire. So, you've gone to a situation now in Wales that is much more akin to what used to happen in England—not quite the same. But it's wrong, it's clearly wrong, to bypass the Welsh Government and ignore what it can offer in all of this.

Joe, in your response to Sarah previously, you mentioned the free ports as an example of that, so I assume, from that, you would echo Steve's that Welsh Government involvement is a necessity going forward?

Yes, and I think that is an example. Whether you think they're the right policy intervention or not, the engagement between the two Governments has been to the positive of those projects. We'll wait and see what comes out in the wash over what they deliver or not, but that engagement has been really, really positive. And I think having that kind of unifying economic strategy for Wales, at both levels, is a positive thing, and, if they're both speaking the same language, then it's Wales that benefits.

Okay, thank you. Adam, moving to you—the impact of not including Welsh Government, and would you suggest to UK Government that they should include Welsh Government, going forward, in future SPF rounds?

Yes. I think that central/local compromise is absolutely essential and there is clearly a role that Welsh Government can play. I think the really important thing with the shared prosperity fund, and the range of different areas that it looks at, is that elements of it will be more appropriate for different scales. So, interventions on skills are probably going to be at the area of a functional economic geography, which might be above a particular local authority. If it's on a more community regeneration or revitalisation element, that might be hyperlocal, even below the level of the local authority. But there are a range of organisations that need to play a role at the neighbourhood, town, local authority, Wales level, and therefore all of those organisations should play a role. Where the final decisions should sit on funding—I think there is a case for that to be at the local authority level, but there absolutely needs to be more involvement of the Welsh Government.

10:30

Fab, thank you. So, would you say that that needs to be on just the shared prosperity fund or across the other funds that are available, the levelling-up fund? Or is it a case that, because SPF is, as we discussed earlier, the relevant successor to EU structural funds, that that should have that relationship, but things like the levelling-up fund could be directly administered between Whitehall and local authorities in Wales?

So, my advice would be to focus squarely on the shared prosperity fund as the mechanism that I believe will be the main post-EU redistributive economic development focused fund. I doubt there will be something like the levelling-up fund created again by a future Government. I think there have been so many challenges with the way that it’s been implemented. As Steve said, I think we’ll go back to something that’s more like a local growth fund. Ideally, that would be one, not two funds. So, I would focus on the shared prosperity fund for now.

Helpful—thank you, Adam. And just finally, to Joe, you've said that you have serious concerns about the approach taken by the UK Government in relation to what the funds will mean for accountability and scrutiny by Parliaments. I'm just wondering if you could set out those concerns, and how they could be resolved in the next round. 

Well, I think it muddies the waters of where accountability is. You’ve got lots of structures doing lots of different things and it’s less clear on who’s delivering what, and then who you’re voting for. Essentially, Welsh Government have within devolved capability economic development, but this is one of the key mechanisms for enabling economic development and they’re out of the picture. So, if a project was to fail and its basis was about regional economic development, then you could argue that it’s you as Senedd Members who might get the flak for that in your local area, when, actually, you’ve not really had much of a say on where that money is, because those decisions were made at local authority level. That is further complicated by the city growth deals and more regional decision making. It gets a bit murky around who has power over what. And you’ve seen with some of these funds—. I’ll come back to active travel, just because that’s where my background before this was, but active travel infrastructure is meant to be delivered by Welsh Government, but these plans are being delivered by local government and being funded by UK Government, and Welsh Government aren’t having any say on that, really. So, who are you voting for based on that? So, I think it’s just a bit of a murky situation, really, and more engagement would be positive. 

So, to resolve that, you would suggest that Welsh Government have an active and legitimate role.

Yes, and I think having a more clear and open dialogue with Welsh Government is positive. Communicating in a joint voice, as is sometimes the way, with the free ports announcements, is positive. You’ve seen that with what we were talking about before around the arguments around whether the UK Government’s 'not a penny less' of funding has been upheld. We don’t know, because two of them, two levels of government, are saying very different things, when really they should be saying the same thing, because it’s really transparent and they’re involved in that process of where money goes, so that there aren’t those arguments around what it looks like based on politics, essentially, rather than focusing on delivery. 

Thank you, Sam. I was going to bring in Hefin David, but I think all of the areas have been covered—unless, Hefin, you've got any questions you'd like to ask?

No, all I'd like to say is the quality of the evidence has kind of negated my questions, because it's been a superb session as far as I can see. So, I'm just going to say 'thank you'.

There we are, Hefin. Thank you very much indeed. Time has beaten us as well, so our session has come to an end. So, can I, on behalf of the committee, thank you for giving up your time this morning? Your evidence will be very useful to us in our inquiry. A copy of today's transcript will be sent to you in due course. If there are any issues with that, then please let us know, but, once again, thank you very much indeed for being with us today.

We'll now take a short break to prepare for the next session. 

Gohiriwyd y cyfarfod rhwng 10:34 a 10:45.

The meeting adjourned between 10:34 and 10:45.

10:45
4. Cyllid datblygu rhanbarthol ar ôl gadael yr UE: Awdurdodau lleol
4. Post-EU regional development funding: Local Authorities

Croeso nôl i gyfarfod Pwyllgor yr Economi, Masnach a Materion Gwledig. Symudwn ymlaen yn awr i eitem 4 ar ein hagenda. Dyma’r ail sesiwn dystiolaeth lafar ar gyfer ein hymchwiliad i gyllid datblygu rhanbarthol ar ôl gadael yr Undeb Ewropeaidd. Yn y sesiwn yma, byddwn yn cymryd tystiolaeth gan awdurdodau lleol. A gaf i groesawu’r tystion i’n sesiwn ni? Cyn ein bod ni yn symud yn syth i gwestiynau, a gaf i ofyn iddyn nhw gyflwyno eu hunain i’r record. Efallai y gallaf ddechrau gyda Dyfrig Siencyn. 

Welcome back to this meeting of the Economy, Trade, and Rural Affairs Committee. We will move on now to item 4 on our agenda. This is the second oral evidence session for our inquiry into post-EU regional development funding. In this session, we will be taking evidence from local authorities. May I welcome the witnesses to our session. Before we turn to questions from Members, may I ask the witnesses to introduce themselves for the record? Perhaps I can start with Dyfrig Siencyn.

Bore da. Y Cynghorydd Dyfrig Siencyn, arweinydd Cyngor Gwynedd.

Good morning. Councillor Dyfrig Siencyn, leader of Gwynedd Council. 

Diolch yn fawr. Mark Norris.

Thank you very much. Mark Norris.

Good morning. I am Councillor Mark Norris, cabinet member for development and prosperity in RCT council.

Good morning. Rob Stewart, leader of Swansea, but I also chair the south-west Wales city deal joint committee, and I'm the deputy leader of the Welsh Local Government Association.

Good morning. Thank you. James Gibson-Watt. I'm the leader of Powys County Council.

Thank you very much indeed for those introductions, and perhaps I can just kick off this session by asking first of all a general question. Do you think that the UK Government is meeting its commitment to replace EU funds received by Wales through the shared prosperity fund, and can you explain the reasons behind your view?

Efallai y gallaf ddechrau gyda Dyfrig Siencyn.

Perhaps I can start with Dyfrig Siencyn.

Ie, wel, mae'n gwestiwn sy'n cael ei ofyn yn gyffredin, ac mae’r ateb yn glir: na, dydy’r arian sydd yn dod o Lywodraeth Westminster ar hyn o bryd ddim yn cyfateb i’r hyn y byddem ni wedi ei gael gan gronfeydd Ewropeaidd. Dwi’n credu ein bod ni—maddeuwch imi, ond dydw i ddim yn gwybod yr union ffigurau—rywbeth fel £350 miliwn y flwyddyn yn brin. Mae yna wahaniaeth barn sylweddol rhyngom ni a Westminster ynglŷn â sut y maen nhw’n cyfrifo’r arian yna, ac mae Llywodraeth Cymru a llywodraeth leol yn gytûn nad ydym ni’n derbyn yr arian sydd wedi’i addo i ni. Diolch.

Well, it's a question that's asked in general, and the answer is clear: no, the funding that is coming from the Westminster Government at the moment does not match what we would have had from European funds. I think that we are—forgive me, I don't know the exact figures—something like £350 million a year short. There is a big difference of opinion between us and Westminster about how they are calculating that funding, and the Welsh Government and local government are in agreement that we are not receiving the funding that has been promised to us. Thank you.

Diolch. James Gibson-Watt.

Thanks. James Gibson-Watt.

Yes, I know that this has been an argument. I guess it's how you calculate it, and whether the UK Government was justified in including the tail end of European structural funds in Wales's total or not is a moot point. I'm actually more concerned about, not so much the quantum, which is clearly an arguable point—and I would tend to view that probably Wales has been short-changed on this—but I'm more concerned about the way that the funding now is being allocated. The lack of targeting, I think, is more of an issue than the actual quantum. But again, it's an arguable point, and I understand both sides of the argument. But, yes, I would tend to agree with Dyfrig. I think that we are probably receiving less, but as I said, I am more concerned about the way that it is being allocated.

My answer is consistent with my colleagues. The answer would be 'no'. The rationale for that is that, if you look at the shared prosperity fund, where the formula has been amended from that which we used to see under EU funds, my local authority loses £4.1 million a year, but the region loses overall. If you look at the total quantum coming to Wales, that is less than we would have expected under EU funds. And the allocation, so far after the decision to leave the European Union, for funding to still be associated with Europe and not direct, in comparison, from the UK Government, means that we are losing out. 

Underneath that, of course, there is no direct allocation for rural within that, which there used to be in the EU funds. So, there are a number of real issues sitting under it, as Councillor Gibson-Watt said, in terms of how the money is then allocated, and some of the machinery and processes. But, just in terms of, 'Are we getting the same as we got under European funds? Are we getting a fair share?' the answer has to be 'no'.

10:50

Just to make it a full house, really, I agree that the answer has to be 'no'. At the moment, UK Government is obviously saying that the tail end of the EU funding makes it up to the equivalent of what we were receiving before, but I don't think that is the case and, obviously, Welsh Government said that there is a shortfall of over £1 billion overall. The other issue that worries me a little is, even if the money was equal to what we were getting from the EU funds, then the changes made to the formula for allocation have meant that the most-in-need areas or the more deprived areas, which obviously in the past were west Wales and the Valleys, lose out overall anyway, because the funding allocation now has been dispersed more widely across Wales. So, that's the other thing that worries me.

Thank you for that. And on that point, to what extent do you think the levelling-up fund and the shared prosperity fund have allocated funding to areas most in need of levelling up? And, in your view, what impacts has the approach taken by the UK Government had on authorities in different parts of Wales? Who'd like to start on that? Mark?

Myself, is it?

Okay. Well, as I said, the change that was made to the formula means that areas that previously didn't have funding now get funding, so obviously it comes from those areas that were previously targeted as the places of need. I know the indices of multiple deprivation were not initially going to be put into the formula at all, but were, late on in the process, brought in, but not in the same way that they were used in the past. So, it still means that those places—. For instance, in RCT we have 17 of the top-100 areas of multiple deprivation—lower super output areas—and our allocation is going to be lower than it was previously. So, obviously, that is a big change.   

If I could come in just to add to that point.

I think, for me, the difficulty is similar to what Councillor Norris has outlined. We were given the prospect of a shared prosperity fund within the levelling-up agenda, and, also, we've got obviously the levelling-up fund. Now, I'd assumed, perhaps naively, that that would mean more money coming to areas of deprivation or areas of need, but, actually, our discussions with UK Government officials, backed by UK Government Ministers, saw that formula changed to reduce the need element within it, and, as Councillor Norris has said, that meant money then going to areas of less need. It is a real inconsistency in terms of what was promised and what was announced and what is actually happening in the reality of the allocation. And, again, I come back to my own local authority that will have a shared prosperity allocation £4.1 million less than we would have had under the old EU formula, because the need element has been reduced. That is a choice. We could have continued, if the UK Government had wished, with the need formula as it was, but that was not something they chose to do. So, in terms of—. It's not just the overall quantum, but how it's distributed that is really then having, I think, adverse impacts in those areas of deprivation and areas of need.

I'll now bring in James Gibson-Watt, and then Dyfrig Siencyn. James. 

Thank you, Chair. I think that ironically for Powys, because Powys hasn't done well out of recent rounds of structural funding—. It did very well out of earlier rounds and we benefited massively from that, and a lot of important community facilities and so on and a lot of economic development was stimulated on the back of that, particularly through the 1990s. There are some politicians in Powys who would argue that this is actually all a very good thing, because we're getting a bit more money than we would have done under EU funds. But there were some very strong indications coming out of Brussels that if the United Kingdom had remained in the EU, Powys would have actually qualified for whatever follows on from Objective 1 funding because of the state of play, if you like, at the moment, in rural Wales particularly.

This is the other point about the loss of rural development funding, which I think is really—. Money specifically targeted at rural areas is so important to us, and the points the previous speakers have made about the fact that it's now being spread more thinly across Wales, that's fine, but it means that, really, it's limiting at the same time, because it limits the scale of what you can do with individual projects.

If you take, for example, a project that is outside Powys, actually, that will nevertheless benefit my county massively, which is the dualling of the Heads of the Valleys road, that sort of major infrastructure project without the input of European structural funds is not going to happen again. That's it. And maybe a lot of people will welcome that, but I don't. I think there will still be a need for some significant infrastructure projects in Wales in the coming decades if we're going to stimulate the economy and protect our communities. So, I do think there are some serious questions about the allocation, the way the allocation has been made.

The loss of additionality is another issue. There is no additionality condition in the shared prosperity funding. It can be used to substitute for funding that would otherwise just be normal core funding used by public authorities. I think that's a real mistake. I think there should have to be additionality for this sort of project, and that was one of the strengths of European funding, that you had to both match fund it and it had to be additional to what you would otherwise normally be expected to do. That condition did make a huge difference. So, I really have serious concerns.

And then just on my last point, in terms of the quantum, the mid Wales region will get £42.5 million, as I think the table is showing, of shared prosperity funding over three years. Just one project in Ceredigion, run out of the university, attracted more money from European structural funds, through both revenue and capital funding over the years. Now, that just sums up the—[Inaudible.]—in terms of our ability to do things with the shared prosperity funding. It's all very welcome money, I'm not saying we don't want it, and we're doing some really good stuff with it, but I just think there's such a lot of—. It was done in a hurry, and there are so many flaws in the methodology for its allocation that its impact will be not as great as it might have been; let's put it like that.

10:55

Diolch. Dwi'n cytuno â'r sylwadau sydd wedi cael eu gwneud yn barod. Dros y misoedd a'r flwyddyn ddiwethaf yma, dwi wedi bod yn chwilio am ryw ansoddair i ddisgrifio'r ffordd mae Llywodraeth Westminster wedi delio â'r cronfeydd yma, ac mae'n debyg mai 'traed moch' ydy'r disgrifiad priodol yn Gymraeg. Mae'n ymddangos i fi fod yna ddiffyg cynllunio tymor hir. Yn sicr, mae yna ddiffyg dealltwriaeth o'n hanghenion ni yma yng Nghymru, ac mae hi'n enghraifft glir o danseilio ein setliad datganoli ni. Mae yna lawer o wendidau sylweddol yn y ffordd mae'r arian yma wedi cael ei ddosbarthu. A gyda llaw, dwi yn credu bod y cwantwm yn bwysig. Mae £1 biliwn yn gwneud gwahaniaeth mawr, felly gwell inni beidio â chwarae ar hynny.

Ond mae o'n dangos hefyd—. Mi fues i'n ffodus i fod yn rhan o'r trafodaethau gyda Llywodraeth Cymru dro yn ôl, dwy flynedd yn ôl hwyrach, gyda'r Sefydliad ar gyfer Cydweithrediad a Datblygiad Economaidd, pan oedden ni'n trafod cynlluniau buddsoddiad rhanbarthol. Un o'r negeseuon mawr oedd yn dod allan o hwnna oedd yr angen i wahanol haenau o lywodraeth fod yn deall beth oedd eu rôl nhw wrth gynllunio ymlaen ac yn cydgynhyrchu cynlluniau. Rŵan, mae yna gwestiwn a oedd Llywodraeth Cymru yn deall ystyr cydgynhyrchu, ond mae hon yn enghraifft glasurol o ddiffyg cydgynhyrchu ar raddfa fawr, a dwi'n wirioneddol gredu bod yna wersi i’w dysgu. A gyda llaw, tra yn pwysleisio’r agweddau negyddol, mae yna rai agweddau cadarnhaol, a hwyrach y gallaf gael cyfle i sôn am rheini eto, felly. Diolch.

Thank you. I agree with the comments previously made. Over the past months and year, I have been looking for an adjective to describe the way the Westminster Government has dealt with these funds, and 'a dog's dinner' is probably the best way to describe it. It seems that there's a lack of long-term planning. There's a lack of understanding of our needs here in Wales, and it's a clear example of undermining the devolution settlement. There are many significant weaknesses in the way that this funding has been shared. And by the way, I think that the quantum is important: £1 billion makes a big difference, so let's not downplay that.

It also shows—. I was fortunate to be part of discussions with the Welsh Government, two years, perhaps, ago, with the Organisation for Economic Co-operation and Development, when we discussed plans for regional investment. One of the big messages coming out of that was the need for different levels of government to understand what their role was in terms of forward planning and co-producing plans. Now, there's a question as to whether Welsh Government understands the meaning of co-production, but this is a classic example of a lack of co-production at a large scale, and I am truly of the opinion that there are lessons to be learned. And while emphasising the negative impacts, there are some positive impacts, and perhaps I'll be able to talk about them in the future. Thank you.

11:00

Diolch am yr ymateb yna.

Thank you for that response.

I'll now bring in Vikki Howells. Vikki.

Thank you, Chair, and good morning, panel. I've got some questions around how the funds are operating in local areas. And firstly, if I could ask our witnesses to outline the progress that your individual local authorities have made in starting to deliver the shared prosperity fund and the levelling-up fund, and what your plans are for the coming months.

Happy to go first, Chair, if that's okay.

Yes. So, we've made really good progress in that we've agreed the regional governance arrangements, and I think that's true for all areas. We've drawn up and submitted to UK Government the regional investment plan that they required. We've drawn down funding, and signed a memorandum of understanding with the UK Government. We've organised meetings across the four areas with a wide range of partners, and I know that we've already launched a lot of the calls for action in terms of the allocated pots of money within the overall shared prosperity quantum, and those competitive bidding rounds have started.

So, in terms of us doing what is necessary to set this up to get the mechanisms in place, both locally and regionally, I think we can all tell a consistent picture on that in terms of where we are. And, of course, we've got representatives from the lead authorities within the four regions for that.

What I would say is that there are still concerns around the time frames and the information, because as you will know, we got the money and the criteria late from UK Government, so the money came to us late. That has condensed the timescale for which we can then allocate the money. Coupled with that, we didn't have the information in terms of the terms and conditions, or the necessary criteria around that, which meant that we had to proceed at risk in terms of issuing money out to projects, or going towards the calls for action. So, a lot of additional risk has been placed with us.

And I think the overall point I would make on this is that we will continue to do our best to make sure the money is allocated and that the projects are funded so that they can deliver for the communities, but we are now in a condensed time frame, and that means that you then run the risk of projects not being able to fully deliver, given the timescales that are there. We've asked UK Government for further flexibility in that, and we've had some but not all of our requests met, and, of course, when you start late and you have a condensed time frame, you force people into more tactical projects, rather than strategic projects, where perhaps you lose some of the benefits you otherwise would have got.

So, yes, the answer is—and I'm sure my colleagues will say the same—I think a lot of progress has been made on the ground to try and make this work, and to try and get the money out, but we are faced and left with a legacy of a slow start, limited information and a very, very hard end date.

Thanks, Chair. Yes, I've got to concur with Rob Stewart. We've got everything now up and running; we've done all the consultation work with local communities, businesses and the third sector. We've set up the funds ready to be applied to now. But that delay in getting all the information from UK Government has basically shortened the window or time frame from three to two years and a little bit, and to do those strategic projects takes a long time if you want a large change. The benefit, obviously, of the EU funding previously was that it was over seven years with the option of an extra three years, which gave you that time frame that you could make huge change over a regional area. This short time frame makes that very difficult.

A Dyfrig, hoffech chi ddod mewn fan hyn?

And Dyfrig, would you like to come in here?

Ie. Diolch. Dwi'n ategu'r hyn sydd wedi cael ei ddweud. Mae'r amser yn brin, ac mewn difri, 18 mis sydd gennym ni i weithredu, i wario'r arian yma. Bydd rhaid ein bod wedi ei wario fo erbyn diwedd y flwyddyn 2024 er mwyn gallu gwneud ceisiadau erbyn Mawrth 2025. Felly, mae hynna'n cyfyngu'r prosiectau rydyn ni'n gallu rhoi ymlaen, â dweud y gwir. Mae yna gynlluniau teilwng iawn, fel y cyfeiriodd fy nghyfaill i yn fanna. Dydyn ni ddim yn gallu eu gweithredu nhw, oherwydd byddwn ni ddim yn gallu gwario'r arian mewn pryd, ac mae hynny'n gyfyngiad sylweddol iawn, iawn.

O'n safbwynt ni yn y gogledd, rydyn ni'n cydweithio'n dda. Fi sydd yn arwain. Mae yna gryn gyfrifoldeb i gyngor arweiniol. Mae yna risgiau posib sylweddol i'r cyngor sydd yn arwain, hefyd, oherwydd yr ansicrwydd ynglŷn â gwariant yr ail flwyddyn ac rydyn ni'n gorfod derbyn y risg hwnnw. 

Un peth y buaswn i yn licio tynnu sylw ato fo, wrth gwrs, ydy, mae pob un awdurdod lleol yn gwneud ei benderfyniadau unigol ei hun sydd yn ei gwneud hi'n anodd. Mae'n bosib, mewn rhai amgylchiadau, i gael cytundeb i weithredu cynlluniau rhanbarthol, felly, mae hwnna'n wendid yn y drefn, ond mae'n debyg y gellid goresgyn hynny. Ond ar nodyn cadarnhaol, gaf i groesawu'r ffaith bod awdurdodau lleol, am y tro cyntaf ers tro byd, yn cael rhan ganolog wrth ddatblygu ac wrth drefnu gwariant buddsoddi fel hyn yn lleol? Mae angen inni ddysgu'r wers yna i'r dyfodol, pa bynnag drefn sydd gennym ni. Mi fuaswn i'n dymuno i'r drefn fod rhwng Llywodraeth Cymru ac awdurdodau lleol, ond mae'r ffaith ein bod ni rŵan, felly, yn cael bod yn ganolog i'r drefn honno yn beth cadarnhaol iawn, iawn. Wedi'r cyfan, awdurdodau lleol sydd yn deall yr anghenion lleol a'r blaenoriaethau lleol. Diolch.

Yes. Thank you. I'd just like to support what's already been said. Time is running out, and we have about 18 months to spend this money. It will need to be spent by the end of 2024 in order to apply by March 2025. So, that limits the projects that we can put forward, to be honest. There are excellent plans, as my colleague mentioned. We can't implement them, because we won't be able to spend the money in time, so that is a very significant limitation.

In north Wales, we work very well together. I am leading. It is a great responsibility for a lead council. There are also significant potential risks for the council that leads, due to the uncertainty regarding the second year's expenditure and we have to accept that risk.

One thing I would like to draw attention to, of course, is that each local authority makes its own individual decisions, which makes it very difficult, potentially, in some circumstances, to get an agreement to implement regional plans, so, that is a weakness in the system, but I'm sure that can be overcome. But on a positive note, I'd like to welcome the fact that local authorities, for the first time in a while, have a central role in developing and in organising investment expenditure like this at the local level. We need to learn that lesson for the future, whatever system we have in place. I would like that system to be between the Welsh Government and local authorities, but the fact that we are now having a central role in that is a very positive thing. After all, local authorities understand local needs and local priorities. Thank you

11:05

Yes, just to reassure the committee really that, you know, it's just been pointed out that it is regional funding, but it's allocated to individual local authorities, so there's a slight complication there. But, actually, for us, we're relatively lucky, we're just two local authorities, so, we already had a pretty strong regional development plan agreed. We were able, therefore, to align shared prosperity funding with the mid Wales growth deal approach and the strategy that underpins that. So, that was very well received by the UK Government—the fact that we have two local partnerships that were already up and running anyway, which was in Powys—it was called Arwain—which dealt with things like LEADER funding and such from the EU and that just continued. A good cross-section of organisations were involved in that. So, we've got two good partnerships in place in the region to deal with this issue. 

So, the regional priorities were already there. We've run several webinars that have all been very well attended—over 150 attendees at each, as I understand it. Some good activity in the first year, and, as I've pointed out, we're already almost halfway through the programme now, so, time is running short, but we know that it's back-end loaded, so, there is more money to come in tiers 2 and 3. And we've put out a call for projects and we've got some good projects—potentially good projects—submitted. I don't think we'll have any difficulty in using this money quite well. And so, yes, generally positive, subject to the same caveats that I mentioned before about the change of application method.

Thank you, all, for your comments there. In fact, Dyfrig's comments lead me nicely into my second question, on which, I'll start with Mark, if I may. So, Mark, the WLGA and RCT council have been placed on record as welcoming the increased role of local authorities in delivering these post-EU funds, in comparison to the old system of delivering the structural funds. So, could you outline for us what you think the benefits of a local authority-led approach are?

Yes, thanks. As was just said by James, the fact that it comes directly to local government—they are the experts on the local needs and the opportunities within their own areas—so, obviously, they're going to make better decisions than if it was escalated to a higher level.

Although coming to the local areas, I believe, is the right way of allocating the money, as was said earlier, you still have to have work on a regional basis, so you work together. In our case, obviously, it's quite difficult, because there are 10 local authorities. James said there were two in theirs, so it must be a lot easier there. And it takes a lot of time to get agreement, not just on the local plan but on how we can work together on the regional area. Obviously, you have to think about the fact that further education and higher education previously could apply themselves to the European grants, whereas you have to take them into account now for any projects they would like to do on a regional basis and agree them within all the local authorities.

11:10

Thanks, Mark. Just to dig a little deeper there, if I may, with you, would you say that the issues under the old system were around the bureaucracy coming from the Welsh European Funding Office, or having that direction from Welsh Government? And if there were changes to the administration of the funding, moving forward, what kind of role, if any, would you like to see from Welsh Government?

Obviously, in Wales, we all work as one large team, and obviously the regions as well. So, I would welcome more input from Welsh Government in that guiding and working with the regions and with the local authorities themselves. But it also helps to avoid any duplication, because, for instance, we've got the top slice of Multiply, which is taken separately, to bring in help with numeracy. Well, there is a lot of work being done by Welsh Government on literacy and numeracy, so you may be duplicating what they're doing if you don't include them in any work you're doing, going forward. Previously, obviously, with WEFO as you say, everything was more targeted at certain outcomes and the way they would like to see the money spent. It is more flexible in the SPF going forward, which we welcome.

Okay, thanks. Do any of the other councillors have anything they wish to add on that?

Thank you. Just to pick up a point Councillor Mark Norris made about HE and FE, both are sectors that benefited massively from European structural funds, both the European regional development fund and the European social fund, and actually on the ESF issue, I think there needs—. I can never get a very clear answer from anybody about what's happened to ESF funding post Brexit. I have past experience in the FE sector in the particular, and how important ESF funding was to that sector, and I think there is a risk to both HE and FE in the current arrangements.

We're working very closely now as a local authority, and I know Ceredigion is, with our college providers, our FE providers, and with the university in Aberystwyth in particular, and others. But I think we underestimate how important ESF funding was to our learning sector as a whole, and I just wish we could have a bit more clarity about the future for those sectors, from both UK and indeed Welsh Government. Thank you.

Ie, jest i ychwanegu at fy sylwadau cynharaf i, mae gennym ni rŵan, wrth gwrs, fel rhanbarthau, brofiad eithaf sylweddol o gydweithio gyda'n gilydd i ddatblygu prosiectau buddsoddi rhanbarthol, ac, wrth gwrs, mae'r partneriaethau hynny yn cynnwys, nid yn unig yr awdurdodau lleol, ond y sector addysg a'r sector breifat hefyd. A dwi'n meddwl bod rôl y partneriaethau hynny, felly, yn bwysig iawn wrth i ni gynllunio ymlaen i'r dyfodol. Ac, wrth gwrs hefyd, yn ategu'r sylwadau, dwi'n croesawu'r elfen o ryddid sydd gennym ni yn y ffordd newydd yma. Mae yna angen i osgoi biwrocratiaeth gymaint ag y gallwn ni. Diolch.

Yes, just to add to my previous comments, we now have, as regions, quite vast experience of working together to develop investment projects at a regional level, and, of course, those partnerships include not only the local authorities, but also the education and private sectors. So, I think that the role of those partnerships, therefore, is very important as we do forward planning. And, of course, to support the comments made, I welcome the element of freedom that we have in this new approach. We need to avoid bureaucracy as much as we can. Thank you.

11:15

Yes. Look, I won't take up too much time, but just to say, I think we really do welcome the ability to have a bottom-up approach in terms of local control with regional collaboration—definitely an improvement—and it does allow us to focus on those priorities that we, as the local authorities, and working with our third sector partners and others, have more intelligence about in terms of the local knowledge of what our communities need. 

But I'd use the metaphor that this is great plumbing, if you want to use it that way, in terms of putting all the pipework and mechanisms in, but going back to our previous point, if there's only a trickle of water coming through, you can have the best plumbing in the world, but it's still going to not meet your aim. So, it does come back to making sure that you're able to deploy sufficient funds through those mechanisms to make sure you get the change and the impact that you want to see. 

Okay, thank you. And one final question, if I may, Chair, which might slightly overlap with the question I've already asked. So, the WLGA has said that the level of flexibility given to local authorities in managing the post-EU funds is both a blessing and a curse. So, interested to see our councillors' views on that statement.

Yes, so I think, in that respect, we are carrying a lot of risk at the moment. So, that flexibility does manifest itself in a risk in two ways really, one in terms of the points we've made previously about not having all of the information before proceeding to design the processes and then provide the calls to action. So, that was a risk that we carried. But, of course, across many projects, and across the whole economy, we're seeing significant inflationary pressures in terms of the projects that we have. So, whilst people will have bid for both the shared prosperity fund and two levelling-up funds, the quantum of those funds may not be sufficient to deliver all of the aims of the projects that were bid in there, due to the inflationary pressures. 

So, given that you've got a rigid framework with the UK Government, given that you've got a really hard deadline to get this spend to end by, I think it's March 2025, you are then up against the fact that you have a condensed programme, with big financial risks within it, and then risks to your delivery. So, yes, we like the control; yes, we like the ability to shape the programmes, but if that was coupled perhaps with the flexibility that was in previous EU programmes, where you had a longer period of time to deploy the money, to be more strategic with how you scope the programmes, that would be ideal. But, at the moment, we've sort of got a really difficult hand to play, in that things have to be done in a very short period of time, with very limited flexibility.  

Councillor Stewart is 100 per cent right; I completely agree with him. And, I think, just by way of example, some of these projects require planning consent. Now, we all know how long planning consents can take to be achieved, not because there are certain planning authorities who are not up to the job of doing it, but because unexpected things spring up. There are huge regulatory hurdles that have to be leaped over for some of these projects, and, particularly if they involve infrastructure development, then 18 months is about a blink of an eye in a planning process sometimes, and so this is very limiting. So, as well as having to carry the risk—[Inaudible.]—there is a risk also that an awful lot of projects might be looked at as, 'Oh, that's just too difficult; we just won't have time to do it.' 

So, he was absolutely right: the long lead-in periods for EU structural funds, the ability to stretch them over a period of years, and beyond the structural fund period as well, if you like, to get them completed, was really helpful. And I just don't see—. This is not a sustainable model. They're going to have to look at this again and come up with—. You can't go along in three-year chunks like this, in which the first year is wasted almost—not completely, but nearly wasted—so they're effectively two-year programmes. That's not a sustainable model for the longer term. So, yes, it's a start, but it's something that's got to be looked at again. Thank you.

11:20

Un o’r pethau ychwanegol i'r pwyntiau sydd wedi cael eu gwneud ydy ei bod yn debyg mai'r diffyg eglurder ar y monitro ac adrodd yn ôl sydd yn ychwanegu at yr elfen o risg yma. Rydyn ni wedi sôn am y cyfnod byr a, gyda llaw, dwi yn dweud mai 18 mis ydy o, nid dwy flynedd.

Un peth arall sydd yn broblemus ydy cynlluniau cenedlaethol, wrth gwrs, a does yna ddim modd i'r arian yma—. Mae'n anodd iawn, iawn, dywedwn ni, i brosiectau ar lefel cenedlaethol fynd drwy’r broses yma. Diolch.

One of the additional things to the points that have been made is that it's likely to be the lack of clarity about the reporting and monitoring that adds this element of risk. So, we have mentioned the short timescale and, by the way, I'd say that it's 18 months, not two years, that we have.

One other thing that is problematic is the national-level plans, and there's no way for this funding—. It's very, very difficult, I would say, for projects at a national level to go through this process. Thank you.

Diolch.

Thank you.

Thank you, Vikki. I'm conscious of time, so before I bring in Sarah Murphy, can I just ask you to be as succinct as possible in your answers from now on? We've got quite a bit to get through. So, Sarah.

Thank you, Chair, and thank you all for being here this morning. I just wanted to expand a little bit on what you've already touched on about the timescales and how this impacted delivery. So, you've already shared, I think, how it impacted, like plans to deliver, but could you give us some examples of what improvements a longer timescale for preparation could have driven? Were there things that you didn't do because of the timescales of the funds?

Well, again, in terms of shared prosperity, it's a difficult one because, of course, we're the providing authority or the administering authority, not the people who bid. So, I think you would probably have to direct that question to the third sector and others, because it would be them who would have decided to either apply or not. But I think it's inevitable, if you have a condensed time frame, that people are not going to put forward projects that are going to exceed what time you have left to deliver, because they know they're not going to meet the criteria. So, there are bound to be lots and lots of projects out there that didn't meet the criteria and therefore haven't come forward.

Certainly, added to that, a point I would have made in the previous point, but I think it's relevant here, is that when you've got council-led projects, when you've got Welsh Government-led projects, if these are being done in isolation because of the nature of how that fund is set up, you're then not getting the additional benefits, because you could then use that multiplying formula or that additionality to get better benefits for your community and make sure that they're more strategic. So, whether you think devolution was the right thing or not, we have a Welsh Government, they are a devolved Government, they are a funder, and they are a major player in this, and therefore making sure that you have that link across that collaboration and, where you can, you try and align the programmes so you've got the flexibilities in there, because we all want the best for our communities. We all want do deliver as mush as we can with the resources that are available. So, I think it might be a good question to put to the third sector and other bidders about the things they could have brought forward.

Dim ond yn sydyn iawn, jest i ateb y pwynt yna. Un o'r ffactorau sydd gennym ni wrth ystyried pa brosiectau rydym ni'n eu cefnogi ydy eu gallu nhw i wario'r arian yna o fewn y cyfnod. Os nad ydyn nhw, dydyn nhw ddim yn cael symud ymlaen. Ac fel dwi wedi dweud yn barod, mae yna brosiectau teilwng iawn, iawn y byddem ni'n dymuno eu cefnogi, ond dydy o ddim yn ymarferol iddyn nhw wario'r arian ar y pryd. A, gyda llaw, os oes yna ryw ddadl ynglŷn â datganoli, mae'r holl drefn yma yn profi'r pwynt ein bod ni angen mwy o ddatganoli, nid llai.

Just very quickly, to answer that point. One of the factors that we have when considering what projects we do support is their ability to spend that money within the allocated time. If they can't, they won't be able to move forward. And as I've already said, there are excellent projects that we would like to support, but it's not practical for them to spend that money in the time. And, by the way, if there is some kind of argument about devolution, then this whole system proves the point that we need more devolution, not less.

Thank you very much. My last question is that the WLGA has highlighted the uncertainty that organisations face about what will happen to the shared prosperity fund after March 2025. So, can you tell us about the impact this is having on your organisations and partners from what you're already seeing? Councillor Stewart, I can see you nodding there, so I'm going to bring you in again if that's okay.

I'm grateful for the question. Look, it's like any other programme. If you know that you have no certainty after a certain time, then people plan for the basis that that funding will end at that point in time, whereas, as colleagues made the reference earlier, through the EU programmes, there was a much longer timescale and you knew that you could extend, potentially, for a further three years. When you create a cliff edge like that with no confirmation or even indication that the fund will continue past that date, and at what level, then people have to make the assumption that that is a cliff edge and that they fall—. You know what happens then: it drives behaviours like people having to start to wind up their projects, starting to potentially look at redundancy for people involved in them, letting people go, and it becomes something that we can avoid. Because if you have that assurance that, actually, the fund will be there after that point, it will be set at this level, these are the things that you can bid for, this is how long you'll have, potentially, in the next phase, all of that should really be able to be provided by the Government now, to give assurance and then help people plan, because that's what people want: they want certainty, and they want the ability to plan effectively, and hopefully that will drive better projects coming in or more strategic projects coming in.

11:25

Thank you. You referenced, I think—. You asked a question about the impact on organisations of this. One of the things I really welcome about the current scene is that economic development has really become now front and centre of the activities of local government. I'm very, very keen on that, and it's a welcome development, but it carries a cost in terms of the capacity of local government to deliver, because, frankly, these are additional things that we're doing now that officers—it probably wasn't in their job descriptions when they took the jobs, for some of them. That's putting it a bit bluntly, a bit crudely, but I think you see my point.

And then there's the issue of the amount of officer time that's taken up with dealing with these. Whether it be the mid Wales growth deal, whether it be the growth deals or shared prosperity or levelling-up funding, all of this requires an assembly of teams together at local government level working with teams in neighbouring authorities, and the point's been made that, in some regions, that's 10 authorities—that's a huge ask, to get them all working together. I would argue that local government has to be resourced adequately to deal with this, because it's dealing with things that other agencies used to deal with, whether it be the Welsh Government, the Welsh Development Agency in the past, or the Development Board for Rural Wales in my case, many, many years ago. A lot of this work was what they were doing and they had funding specifically for that purpose, and I'm not sure that local government has been adequately supported in that regard. And I think that if this is going to be a long-running thing—and I hope it is, very much so; I very much support this—then that needs to be reflected in funding settlements as we go forward. But, it is an issue of capacity. So, thank you.

Yes, thanks. It was just one, small point that I wanted to bring up, on staffing, and not so much for councils, but for those bodies in the third sector, charities or businesses who are applying for the grants. That short time frame of two years makes it very difficult, firstly, to attract in any staff who are experienced to do those jobs, to make it a worthwhile job to take on, but also to skill up new staff to do those jobs going forward, because once they're skilled up, it's probably coming to the end of the programme. So, there is that problem as well.

Thank you. That's very relevant, you're right, the timescales. Thank you all very much. Thank you, Chair.

Thank you, Sarah. I'll now bring in Luke Fletcher.

Diolch, Cadeirydd. I just wanted to start my line of questioning around some of the operational issues with something, actually, that Dyfrig had picked up on earlier, around the pressures that are on local authorities in terms of meeting deadlines around funding the projects and the inability to carry over some of that funding into the next financial year. The WLGA have been quite clear, haven't they, in terms of the pressure that's been on local authorities around this particular issue. We heard in our previous panel as well that there's definitely a need to address some of this in the future. I'm interested to know, just from your experiences, how flexible the UK Government has been, if at all, around conversations and carrying that spend over, if need be, or if they've even indicated that they might be open to another arrangement—perhaps what was mentioned in our previous panel around capital spend being able to be carried on, for example. I'll start with Dyfrig, since I referenced him right at the start, and we'll take it from there.

11:30

Dwi wedi colli hanner y cwestiwn, mae'n ddrwg gen i; gwnes i rewi yn rhywle yn fanna yn y canol. Ond mae'r gallu i gario arian ymlaen, wrth gwrs, yn bwysig, ac mae'n ymestyn y cyfnod lle rydym ni'n gallu gweithredu prosiectau. Dwi ddim yn siŵr os dwi'n ateb y cwestiwn, mae'n ddrwg gen i. 

Sorry, I missed half the question there; I froze somewhere in the middle. But the ability to carry money over is important and it does extend the period in which we can implement projects. I'm not sure if I'm answering the question. I'm sorry about that.

Na, dim problem. Beth rôn i'n trio gofyn fan hyn yw a oes yna unrhyw awydd o gwbl gyda Llywodraeth Prydain o ran efallai fod yn agored i fod yn fwy flexible o gwmpas beth sy'n digwydd, neu a oes unrhyw flexibility o gwbl? Ydyn nhw jest wedi dweud, yn flat out, 'No'?

No problem. What I was trying to ask here is whether there is any desire in terms of the UK Government to be open to be more flexible, or is there no flexibility at all? Have they just said, flat out, 'No'?

Dwi'n meddwl bod y drafodaeth yn parhau. Hwyrach y gall Rob Stewart gadarnhau hynny yn well na fi. Mae o siŵr o fod yn rhan o drafodaethau gyda Llywodraeth UK. Ond yn sicr, fel dwi'n ei deall hi, mae'r drws yn dal yn agored ac rydym ni'n dal i gnocio arno fo.

I think the discussion is ongoing. Perhaps Rob Stewart could confirm that better than I could, because he's probably part of discussions with the UK Government. But, certainly, as I understand it, the door is still open and we're still knocking on it.

Yes, if you'd like me to come in, to be helpful on this one. Essentially, the position is that whilst there have been, I guess, some reasonably warm words—if you could put it that way—in terms of listening going on by UK Government, there hasn't been a change. So, the end date for this remains March 2025. You can have no current expenditure beyond that date, and your programmes have to be completed and fully delivered by December 2025. We've asked for further flexibility around that. We have had some flexibility within Multiply, but again, that is minimal at the present time, and we want to see further flexibility within Multiply. But, at the moment, whether it's Treasury rules, whether it's intransigence from a policy perspective, we do need to see some sense being applied to this, because you can't work from the position of, 'Well, had we have started three years ago or two years ago, there would be plenty of time to deliver this'. The fact is that the information, the money, the criteria were late coming, but the time frames for delivery have stayed the same. And therefore, the Government has condensed the period, and left us and our partners with little or no time to deliver. Therefore, there has to be sense and pragmatism applied to say, 'Well, okay, you can carry that money forward to retain the original period intended'. It seems a sensible fix to me, and I hope UK Government listen.

Thanks for that, Rob. I saw that James's hand went up briefly. Unless there are any additional things to add—I'm conscious of time, Chair—I'll stick with Rob and Dyfrig for a moment.

I'm trying to also understand the sort of impact that the new funding structures for the shared prosperity fund has had on local and regional organisations, for example universities, in accessing that funding. The reason I want to stay with Rob and Dyfrig is obviously because of Swansea University and Bangor. I'm hoping you might be able to shed some light on that, from your experiences.

You'll know that it's not an apples-for-apples fund. It's not the same as the EU funds it was replacing, and therefore some of the other programmes that have ended, like Horizon et cetera, are not within this. So, it's a different challenge for our university and for our third sector educational funders to tap into that programme. They therefore fall between two stools in that respect. We now have new arrangements. Where they used to bid into a fund, they're now not able to do so in the same way. We've obviously got strong relationships through our city regions, through our corporate joint committees, with our university partners, and that relationship remains strong and functional, but the fact is it isn't a replacement. The UK Government have not done a like-for-like replacement in terms of the EU funds that were there previously, and that means that there are difficulties for universities and further education establishments within the new arrangements. We’re trying to work through as productively and co-operatively as we can in terms of the local arrangements, but we don’t set the criteria—that’s the issue here.

11:35

Diolch. Dwi'n cymryd bod yr un fath o brofiad yng Ngwynedd, Dyfrig.

Thank you. I take it that you've had the same kind of experience in Gwynedd, Dyfrig.

Ie, a jest i bwysleisio, dydy’r cronfeydd a oedd yna i’r colegau—Erasmus, Horizon ac yn y blaen—ddim yno bellach, ac mae’n broblem sylweddol i’n prifysgolion a cholegau ni. Mae Rob yn iawn; mae yna gydweithio agos iawn gennym ni yma—a dwi’n siŵr bod hynny ar draws Cymru, a dweud y gwir—rhwng awdurdodau lleol, y prifysgolion a cholegau addysg bellach yng nghyswllt materion datblygu economaidd. Mae hwnna’n rhywbeth i’w groesawu’n fawr, ond mae’r sector addysg mewn sefyllfa pur anodd, dwi’n tybio, o safbwynt colli’r cronfeydd yma o Ewrop. 

Yes, and just to emphasise, the funds that were available for the universities—Horizon and Erasmus et cetera—are no longer there, and there's a significant problem now for our universities and colleges. Rob is right; there is close co-operation from us here—and I'm sure it's the same across Wales—between local authorities, the universities and the further education colleges in terms of economic development issues, and that's something to be greatly welcomed. But the education sector is in quite a difficult situation in terms of losing out on these funds. 

And James, very, very briefly—because obviously I just want to move on as quickly as possible. 

You cannot emphasise enough the cliff edge that this does represent, particularly for the HE sector. We've had very strong messages from Aberystwyth University in our region about that, and I'm sure the others have from their universities in their regions. They were very, very significant amounts. Some would say they had too much of an advantage in accessing EU funds, but given the importance of learning to the future economic health of the country, I don't agree with that. I think it was terribly important that they had that funding. They're going to miss it very badly, and it will have an impact on their ability to deliver.

Diolch yn fawr, Gadeirydd. Bore da, bob un; good morning, everyone. Firstly, Rhondda Cynon Taf council and the WLGA have said that there are challenges with some aspects of regional delivery of the shared prosperity fund. I was just wondering if you could detail what these are and what discussions you've had with the UK Government to try and resolve them. That would be Mark.

Thank you. To be honest, I’m new to the portfolio, and it’s the leader who’s had the discussions on behalf of RCT and the WLGA, so I couldn’t give you the details on it—

No problem at all, Mark. What we could do, then, is potentially ask for written evidence from the leader on that. Just because we're conscious of time as well, I think that would be the best way forward. But thank you, Mark—I appreciate you're not in a position to answer that.

In terms of the relationships that local authorities have with the UK Government, that was a conscious decision by the UK Government to link up with local authorities to deliver this, and to deliver shared prosperity funding. In terms of that relationship—I know we've touched on this in answering different committee members' questions—is that a positive thing, knowing the local authorities on the ground level, or is there room for strengthening that with the involvement of the Welsh Government? I know this has been touched upon, but I'm hoping for just a succinct, clear answer on that. We'll start with James. 

I think cutting the Welsh Government out of the loop, if you like—sorry to put it crudely—was not a good idea. I understand the politics of this, and it is difficult for all involved, both at Westminster and in Cardiff, but really, it’s so important, especially at a time of such scarce public funds. Let’s be frank: these are difficult times, and they’re going to remain difficult for the foreseeable future, and it’s terribly important that all of the governments—all of the devolved administrations and central Government at Westminster—align as best they can, particularly with economic development. There are bound to be differences—I understand that—but at a strategic level, to cut out the Welsh Government—

Okay. For successor rounds, you would expect the Welsh Government to be involved, or you would suggest that the Welsh Government would have involvement in successor rounds. 

Absolutely. 

I totally agree. As I said earlier, we welcome the fact that the UK Government has chosen to come directly to local government, because they are the experts on the ground, but you also have to involve all areas, whether it be the region or the Welsh Government, because otherwise you're duplicating what may have been done already. As Rob Stewart said, it's the additionality. The Welsh Government could also add funds in alongside the investment that is being put in from the UK Government. It's always a benefit to have all levels working together.

11:40

So, while you appreciate the relationship direct with the UK Government and local authorities, there is a necessity to involve the Welsh Government. Okay, thank you. 

Dyfrig, eich ateb chi, os gwelwch yn dda.

Dyfrig, your response, please.

Wrth gwrs, rydyn ni wedi datblygu perthynas bur dda gyda swyddogion Llywodraeth UK drwy ein cynlluniau twf ni. Mae’n rhaid imi gyfaddef, ar y dechrau, mi oedd y berthynas honno’n un digon, i ddefnyddio’r gair Cymraeg, random. Ond mae hi wedi gwella, a chan fod gennym ni’r cynlluniau yma yn dod yn uniongyrchol o Westminster, mae’n bwysig bod y berthynas honno’n un gref.

Yn bersonol, dydw i ddim yn credu y dylai fod yna rôl o gwbl gan Westminster mewn datblygu economaidd yng Nghymru, ac y dylai fod yr holl waith yma’n cael ei wneud gan Lywodraeth Cymru. Dyna yw fy marn i. Felly, mi gawn ni weld beth ddaw o hynny. Ond, yn y cyfamser, mae’n bwysig ein bod ni’n cynnal perthynas weithio dda gyda swyddogion Llywodraeth UK. 

Of course, we have developed a relationship that is quite good with UK Government officials through our growth plans. I have to concede that, at the outset, that relationship was, to use the Welsh word, rather random. But it has improved, and as we do have these plans coming directly from Westminster, it's important that that relationship is strong.

Personally, I don't think that there should be a role at all for Westminster in economic development in Wales, and that all of this work should be done by the Welsh Government. That's my opinion, so we will see what comes of that. But in the meantime, it's important that we do have a working relationship with UK Government officials that is a good one.

Diolch yn fawr, Dyfrig.

Thank you very much, Dyfrig.

Finally, Rob: your thoughts on this.

I was just going to make the point that, actually, we have had good relationships with the UK Government that predate the introduction of the levelling-up and shared prosperity funds. Of course, city regions were set up between councils in Wales, regions and the UK Government and the Welsh Government. I think that the model that that provided, where you have got both Governments as joint partners with local government, working on a regional basis, is a good one, and one that should have been retained for these arrangements. I would say that, if the UK Government really, really wants to invest directly in Wales—and I wouldn't complain if it wanted to award more money—HS2 provides a great opportunity where £6 billion can come over the border into Wales, and I am sure that we would all receive it very, very happily.

It's £5 billion for HS2 and £1 billion for Northern Powerhouse Rail, but yes, I appreciate—

Well, I'll take £5 billion if it's available.

Yes, I appreciate the point. Finally, just coming back to the point that I think was made by Mark, in terms of experts on the ground, which I think is how you described local authorities, is there a role for the third