National Assembly for Wales

Good morning and welcome to the Economy, Trade and Rural Affairs Committee, our last meeting before the Christmas break. This is the beginning of our inquiry into local growth funds and the announcement the UK Government and Welsh Government have made on these particular schemes. Before we go into the evidence session and introduction of witnesses, I will ask Members to declare any interests. No declarations of interest. No apologies; all Members are present. Therefore I'll just go through some housekeeping rules. There are translation facilities because it's a bilingual meeting. If you're in the committee room, the headsets provide the translation. The microphones work automatically, so there's no need to press any buttons for that.

I welcome our visitors today, who are giving evidence on this as panel 1. I'll ask you to introduce yourselves first of all for the record, please. I'll start with Professor Morgan, to introduce yourself and the position you hold in your organisation, and then I'll move to our visitors on the screen, with you, Paul, first and then Meirion second. Professor Morgan, could you introduce yourself first of all for the record?

Thank you, Chair. I'm Kevin Morgan. I'm a professor of governance and development in the School of Geography and Planning at Cardiff University.

Good morning, everyone. I'm vice-chancellor of Swansea University. 

Good morning, everybody. Meirion Thomas. I'm the director for Wales for the Industrial Communities Alliance. 

Thank you all very much. Obviously, we know the local growth funds are going to be a funding stream that's going to come into play in Wales for regeneration purposes over a three-year period. The UK Government and the Welsh Government are going to co-author the scheme that's going to come forward. I'll start with you, Professor Morgan. Do you think from what you've heard so far that the scheme outlined is fit for purpose?

No.

Could you enlarge on that, please?

I hope the committee will look at this problem in the round rather than simply focusing forensically on this one scheme. In Wales, we've got one of the biggest developmental problems anywhere in western Europe—take the Valleys, for example. And we're about to approach what I'd call the anniversary from hell, which is a century of relative economic decline. For that, we need a big vision to think about development—not just growth, but development in the round. We need some serious firepower, and we need some multi-annual thinking.

One of the many problems—and I'm sure, Chair, you'll hear this from a lot of people today—with this scheme is that we're talking about annual budgets, yet one of the principles behind the scheme according to the Welsh Government's consultation process is to promote multi-annual planning—to promote multi-annual visions on the basis of a scheme that's been cut back and has been annualised. We can't think about development on a 12-month basis. That's just one of the many shortcomings that I'm sure we'll talk about today. 

Thank you. Professor Boyle, what's your view on the scheme as outlined by the two Governments? Do you think it's fit for purpose? 

I think there's a lot that we'll have to assess as we go forwards. We're obviously pleased that there are some funds that have come in to support regional growth and development, although I absolutely agree with some of the concerns that have just been raised. If we're thinking about economic growth and productivity resulting from the sorts of investments that are being planned, that really has to be a medium to long-term strategy. So, I do agree that there is a risk here that it may end up being short-term funding on relatively short-term projects that will not have the duration or length of ability to really make a difference to the Welsh economy.

I think there are some signs here that we may want to go on and talk about later in this session. We've obviously had a period of structural funds that were much more long term—a bigger vision for how we address economic productivity in those parts of Europe that required additional support. We moved to the shared prosperity fund, which was a very different approach. This feels like it's coming somewhere between the two, from what seems to have been announced from the Welsh Government.

I do agree we've got to think about how do we make these funds deliver for the economy in a way that is going to actually make a difference in the long run, and that's one of the areas that we would be really interested in thinking about in a bit more detail. And I think we also need to know more detail about what the expectations are around the governance of the delivery. But again, you may want to come back to that later in the session.

Thank you. Mr Thomas, the same question to you. Do you think that the scheme outlined as we know so far is fit for purpose and is going to achieve its aims?

I have to echo, Mr Chairman, the comments from both Kevin and Paul. The scheme that we currently have before us promised a great deal more than this about 12 to 18 months ago, but it's been hollowed out quite considerably. We really should have been much further forward on the planning for both the strategic objectives and the implementation side of this by now. The programme is due to start in just over three months' time, and we are nowhere near ready to really do that.

I think as the other two contributors have said, we won't have the big vision, we won't have the transformative projects that we really need to have, and we certainly won't have the capability of having anything like a long-term programme for investment. We can see that's a problem that's happening across the UK at the moment. The alliance has members in south Wales in particular, which I will be able to talk about, but we also have lots of members across the old industrial communities of the north of England and into Scotland. This problem of short-termism, the stop-start of funding, has blighted us now since the decision to leave the EU and not replace EU funding with something comparable.

Thank you. That's a pretty negative start to a programme that is supposed to deliver a lot. I hear exactly what all three of you are saying—the short-termism is the underlying feature that I think all three witnesses have touched on. I appreciate, in the short time we've got, we're not going to design a scheme in this committee room today—if we were, then we'd most probably all be in the private sector charging a fortune for consultancy. But if you were able to put a salient point forward this morning, in the time available to you, that could improve what we know the Government are going to bring forward with the local growth fund, starting with you, Professor Morgan, what would you like to leave as the thought that could impact on this scheme's introduction in a little over three months' time?

That's a very good question, Chair. In a word, I'd say integration—to think about development as being a recipe with many ingredients, as it were. The local growth fund is one ingredient. It's not unimportant; I don't want to be a doom and gloom merchant here—it's not unimportant. But if it's to be consequential—and this is what we're really looking for here: impactful projects, programmes that are consequential in terms of their impact—we've got to think about how we leverage and connect this local growth fund with other programmes.

For example, we've been working on inclusive innovation in different city regions around the UK, and one of the keys to success is the way in which a project is knitted together, integrated with, connected to other projects. Let's take, in Wales, how do we link the local growth fund, for example, with the investment zone? How do we link that with the local innovation partnerships fund, for example, and how do we link it with city deals? Looking at that integration, to try to get a bigger bang for our buck, that is the way to have consequential impact, as Paul and Meirion have said as well, over a longer term horizon, so that we can begin to see and build impact. The key to it all is partnership working between stakeholders who have the capacity to do what they're supposed to do. I would say that would be it, in a nutshell, Chair.

Okay. Just before I come to you, Professor Boyle, Alun had a supplementary.

Yes. What does that actually mean, though? 'Partnership working between stakeholders.' Ministers have been making that particular speech for 25 years, and neither you nor I have seen any consequence of those speeches. Is it not true, I put it to you, that the reason we're in the position we're in is not because of a lack of partnership working between stakeholders, which happens, but because we don't have an ability to deliver at scale?

No, we don't have a capacity to deliver at scale, but I would say, no, I don't think we should pooh-pooh the idea of partnership working. I can give examples, granular examples, of the lack of partnership working in Wales around these projects.

Okay. Give us a couple of examples.

Well, I'll give you one example. I hope the committee—. Among other things, I hope the committee can solve what I would call one of the developmental mysteries of development in Wales. Why is it, for example, that the northern Valleys initiative budget can't be spent? In one of the poorest areas, as I said, in western Europe, you have a budget committed to regenerating the northern Valleys, and it can't be spent.

The Tech Valleys.

And that, Chair, I hope your committee will resolve, because that is a major conundrum, it seems to me. We've all got our take on it, and the answer—. I mention that, Alun, because of the lack of partnership working, the fact that Welsh Government couldn't put money together on the table with Cardiff capital region, so that they are both putting in money—having skin in the game, if you will—and they can't do that. Welsh Government and Cardiff capital region can't put their budgets together over a long-term horizon to regenerate the northern Valleys. That's an example, in my mind, of the lack of partnership working.

Well, it's an example of a failure of leadership.

Okay. I'm conscious we've got a pressure point on time with this, and we've got a lot of ground to cover, but it's a valid point. It's something we brought up in the budget scrutiny, I think, where I think there's £60 million still to spend of the £100 million that was allocated to the Tech Valleys. I think I'm correct in saying that, and the Member for Blaenau Gwent hasn't shouted me down—

No, you're absolutely right; you're absolutely right.

—so I must be right.

Professor Boyle, the same question to you that I put to Professor Morgan: if you had a point that you'd want to leave with this committee, would you agree with the point that Professor Morgan made, that the salient point is the point about partnership working and making sure that we deliver? Or is there something else that you need to put on the table?

I would certainly agree that the partnership piece is important. I think, across the UK, and in Wales, certainly, there have been a lot of initiatives that are very well-meaning. Money has been put aside to try and drive innovation and growth, but there are a lot of those initiatives that aren't necessarily joined up. So, I think that's a really important point. This initiative won't solve that problem, but what we've got to make sure is, as we go forward, we are more joined up and we do make investments in areas that will, as we said in the previous question, actually work into the longer term.

I think we need to make sure that the system also allows for cross-cutting initiatives that don't necessarily happen to fall in a particular arbitrary political geography. I can give you a very good example of that. Moneys have arrived in Cardiff capital region, which is fantastic, under the local innovation partnerships fund. One part of the investment we might imagine there might be in the semiconductor area. We will wait and see if that occurs. But, of course, the semiconductor region doesn’t just sit in the Cardiff capital area. Semiconductors, as a theme, is across the whole of south Wales. So, we've got to be very careful to use the right geography when we're thinking about investment and research and innovation, as one example.

And also, another small point, we've got to think really carefully about the governance here. If we think back to the structural funds, we had a system in place through the Welsh European Funding Office, and we can all debate how well that worked, but, frankly—and I came to that relatively late—in my mind, it actually worked really quite well. It was a well-structured organisational approach to how do we make sure those investments that are being made are actually into the long term. We can all look back to the cliff edge of the end of structural funds with great dismay, but we did have a system in place.

The shared prosperity fund's changed that to being a much more locally administered approach and, obviously, some will argue there are benefits to that as well, but it didn't allow for the larger scale projects as much as we'd seen previously, and it didn't allow for very easy collaboration across those geographies.

This system, at the moment, I think, sounds a little bit in between, that the Welsh Government are going to have some oversight of this, but also that they may be governed through the corporate joint committees. That needs a lot more clarity in what is a relatively short amount of time before this scheme is going to be up and running. So, that's an area that I do think we need a much better understanding of how it's going to work, particularly if you look in the detail. There's a lot of emphasis on regional research, innovation and skills, which I personally think is a good thing, but we've got to make sure that the CJCs are well informed about the opportunities that exist to actually make a difference in those areas. It's not necessarily what CJCs were set up to do, so they're going to really need to bring in people who really do understand that and can help them shape programmes that will make a difference going forward.

Thank you. Mr Thomas.

Thank you very much, Mr Chairman. I suppose more money would be great, but since we're talking about the difficulties of actually working out what this pot of money is supposed to be about, that's unlikely, and it's unlikely given the budget situation. But at least what I would say is, 'Give us the funding method, the funding programme that can be delivered in the timescale involved here.' 

Our members in the local authorities in south Wales, and I'm sure in the rest of Wales as well, are working very, very hard at the moment because they've been given deadlines to get investment plans for April 2026 all the way through to 2029 in place, really, I think, by tomorrow. All the way through, the goalposts have been shifting. In the UK Government budget statement last year, there seemed to be a breakthrough, in that there was going to be a 10-year capital funding horizon for projects like the local growth fund and other things like that, but that's not been delivered. Now, the local growth fund in England, for the combined authorities there, has a four-year capital horizon. In Wales, it's three years. It's inexplicable why there's a difference. Nobody has explained that. No explanation at all around that difference between Wales and England in that respect.

But I think the other key point is that that split between capital and revenue spend, which is expected now for the next three years, is entirely impractical to put into place. It's been revised in favour of capital spend, in the three-year period, as opposed to revenue spend. The arrangement that was in place for the shared prosperity fund, and has been operating and everybody's got used to that, was roughly 70 per cent revenue spending, 30 per cent capital spending. That has been completely turned around the other way and there are tremendous consequences to that.

It's great for local growth if you can get those capital projects in place, because those are the long-term investments that you want underpinning. However, you cannot expect local authorities or anybody else—the private sector, whoever—to put in place capital projects in the timescales that are required without considerable investment in capacity and the time to be able to do that. And so, next year, what's being called in the consultation 'the transition year', has the hallmarks of something that will stumble on through 2026, and the committee may well be there in 12 months' time, saying, 'Well, why didn't that transition year work?' Well, we can tell you why that didn't work. There was no time, no planning, the goalposts moved, and there's no capacity.

Okay, thank you very much. Luke.

Diolch, Gadeirydd. I should declare an interest that I chair the cross-party group on industrial communities, so I work closely with Meirion and the Industrial Communities Alliance.

As critical as the evidence we've had so far has been, it's completely fair and I've agreed with much if not everything that's been said. I mean, this lack of long-term thinking is going to be problematic. The lack of capacity is going to be problematic. And the fact that we're in a position right now where, as Professor Morgan has highlighted, the funds available for the Valleys have not been spent in the way they should have been spent is astonishing. It's an absolutely ridiculous position to be in.

Just thinking around the delivery approach to the local growth fund, then, what I'd be interested in hearing from the panel is: as currently set out, does that local growth fund allow organisations to be able to put forward and then deliver successful projects? From my viewpoint, again, that lack of long-term thinking, that lack of strategic approach to this, is really going to be a barrier for some of those organisations, so I'd be very interested just to see what the panel thinks about that. If I could start with Professor Morgan.

Yes. It's an excellent question, and it comes back, I guess, to two things: on the one hand, institutional capacity at every level—the local level, the emerging regional level, and then the national level in Wales—and it also raises issues about how well those levels collaborate, co-operate, and how they're integrated, to go back to a point I tried to make at the outset. It's the integration, it seems to me, that is the real secret of consequential projects, whereby stakeholders with calibre work in relationships with their partners—going back to Alun's point—at different levels. The quality of those relationships, that is what is the most important thing of all, it seems to me. The money is important, and we've been obsessed by budgets and debates about the quantum of the funds—that's important—but the really key factor, to my mind, is the quality of the relationships through which that money is deployed. That's fundamental.

As to your question about whether the different organisations have got the capacity, I would say we've got capacity shortcomings at each of those levels. Let's remember: all delivery at the end of the day—all delivery—is local, whether it's been sanctioned by the national, by the UK, by the national in Wales, or indeed by the region, the new regions, as it were. It's all locally delivered and the people who are delivering it have been denuded of capacity for the past 15 years, through austerity budgeting and whatever, and much of that capacity has been hollowed out. They began to rebuild capacity under the shared prosperity fund, as Meirion said, because it was weighted towards revenue and it enabled them to hire people with skill sets to begin to deliver these policies. But now, I fear, with the reversal of the 70:30 split, these people are already being served with redundancy notices. And that's one of the tragedies in Wales. We've been doing this for 100 years, but we don't seem to have learned the lessons and built up expertise and learned from previous programmes. And if we lose these people now, we're losing all that learning capacity, so there's no institutional memory left. So, while money is important, the institutional capacity to deploy it is more important. Sorry, that was a rather long-winded answer to a very good question.

No, no, I think it's really important. As you rightly pointed out, the structural side of this is often overlooked, and now we're in a position where we're seeing that change of the 70:30 split, and there are real, real concerns around actually what that means for the capacity element, rebuilding it over the years, and potentially seeing that now disappear. Can I come to Meirion on that same question, around whether the local growth fund is going to be able to allow organisations to put forward those projects and deliver those projects?

Well, I've already made comment around the difficulty—near impossibility—of getting really transformative capital-funded projects under way and producing results in a three-year period. That's just not likely to happen to any significant extent. There will, of course, be projects that are, as they call it, shovel ready. I know from people I talk to in local authorities across south Wales—. I know that, in Bridgend, for instance, the local authority there has quite a number of property and site investments that they could get under way relatively quickly, if only they could get the match funding or they could get the go-ahead et cetera. Because there also is, I think as Kevin Morgan alluded to there, an assumption still within our funding mechanisms that we need always, when you're doing property development programmes, to get a financial return on our investment. And, of course, the whole basis of economic development is really that the public sector takes the risks out of investment sites, takes the risks out of building, takes the risks out of putting infrastructure in place, in order to allow the private sector to come in and make a return on the investment, but also put, obviously, their investment in.

If we only look for financial return, then we're never going to get investment into the northern Valleys. We have to completely turn our assumptions around our return-on-investment calculations into an economic development return on investment, because, when the public sector puts money into property sites in the south Wales Valleys, the private sector may well make the first level of return out of it in financial return, because they build the property and they let it, they get tenants in et cetera, but the public purse makes a much larger return on investment if companies come in, fill those factories, employ people out of the local workforce, provide them with skills, provide them with certainty, allow them to pay their mortgages in their communities, allow them to go to the local shops et cetera. So, you get a much greater economic development return. Unfortunately, though, it doesn't easily appear on a balance sheet, and that is a barrier that we have that is in the local growth fund, it was in the shared prosperity fund, and it was, to some extent, in the later stages of the way in which we operated the European funding in Wales, but the European funding was always predicated on the economic development growth objective.

Professor Boyle. 

Yes, I would reiterate one or two of the points that have been made already, in particular that this balance between capital and revenue is very, very challenging. We all know that, if we look to various programmes, city deals and others, with the best will in the world, to get capital projects up and running in a short time is very, very challenging. So, we are very conscious, from our sector, that trying to solve the problems that we have here with a fund that is so focused on capital investment is going to be difficult; we're going to have to come up with imaginative ways to do that.

If I go back to some of the stated aims of the project, and it's no surprise that I'll talk about the research, innovation and skills parts of those aims, thinking imaginatively about how we're going to come up with projects that can invest capital to help, for example, deliver the 400,000 or so extra graduates we're going to need by 2035, which will drive economic growth in Wales, is going to need some really careful thought. I think that there are ways that we can do that. When we start thinking about capital, you're supposed to think about not only buildings and that type of capital, but there are also equipment-related opportunities, and certainly in universities we can spend that sort of money rather quickly, compared to building new facilities. So, there are ways to use capital. We can think of ways to introduce new programmes that we believe will attract and drive skills growth, but it's going to require some really careful thinking. And I mentioned earlier how the governance will work. One of the things I think would be helpful in this is to have more clarity, perhaps, from Welsh Government, maybe in a framework approach, which would explain what proportion of these funds are expected to be delivering, for example, in research, innovation or skills, and indeed some of the other things that they may wish to be supporting through this fund.

I think, without more clarity around that, it's going to be quite hard on the ground to deliver the return that the Welsh Government is hoping to see from this without more clarity about exactly what areas are we going to invest in. I can think of really imaginative areas for us in the semiconductor space. With a bit of capital investment, we can start driving some more skills programmes, I think, in that space. But it is going to require really careful thought. To do that in three months' time is impossible. To do it over a year or two or three, we might be able to achieve.

All of these programmes are going to need really, really careful thought, and it's back to the original point: we're talking about this basically at the start of the programme, not at a point two or three years ahead of it, or even 18 months ahead of it, when we could plan a little bit better to make sure we were ready to really deliver.

So, I suppose, sticking with this thread, then, around the strategic objectives set out within the growth fund—just for the record, the three broad themes: support for business, skills and employment, support for growth, which Professor Boyle has alluded to there, and enabling growth infrastructure—which one of those, then, should be the priority in this fund? Which are the things that really need to be focused on?

I'm sympathetic to what Professor Boyle has highlighted there, as, being the chair of the cross-party group on apprenticeships and skills, that's going to be a really important part of this fund, in my view, but I'd be really interested to understand from both Meirion and Professor Morgan, where, really, the focus should be, and, actually, with what Professor Boyle has suggested there, around Government being more clear about what percentages of the fund should be delivering on what objectives, if there's a view on that as well. Professor Morgan.

Very quickly, I would say that the programme is being set up to fail if we expect it to be truly impactful and consequential in the timeline that we've just been talking about. The timeline is comical, quite frankly, given the aims and objectives. And I would say that, if we wanted to make a real, tangible impact in this short period of time, my emphasis would be on having a real blitz on sites and premises. Because, if you think about sites and premises, they're well let, showing that the demand is there, but they cannot be delivered, as Meirion said earlier on, through simply recyclable finance, which we call 'evergreen funding'—we're not giving grants, we're doing loans so that we recycle the money. That's all well and good in areas of Wales where the market works. It's almost—. I would say, it's impossible in the northern Valleys, because of the viability gap. The viability gap explains, by the way, Chair, why that budget is not being spent. Only non-recoverable grants will kick-start that multiplier effect that Meirion mentioned earlier, and that's the way to make a tangible impact: by creating sites and premises that are let as starter units or whatever.

And the second big splash, if you like, is the point that you've made, Luke—apprenticeships. This is the key way to really begin to engage not just young people not in education, employment or training throughout Wales, but also young people more generally. It was disappointing, Chair, if I might say so, to see that, among your stakeholders who have been invited to give evidence—. You've rightly invited HE, but there's no FE representative, and further education is one of the most important institutions in Wales if we're serious about inclusive growth.

Yes, I agree. Meirion, and then I'll hand back to the Chair.

Yes, thank you, Luke. I think the alliance nationally—but particularly here in Wales, with the work that we've done on our recent report, 'Next Steps for the Valleys', which spelled out in stark terms both the issues facing our communities and also the opportunities that could be taken—we have a mantra, really, about more jobs, better jobs and closer to home, and we think that the local growth fund, to get the best effect out of it in the time available, should be targeted almost entirely on trying to achieve that particular set of objectives: more jobs, better jobs, closer to home. That takes into account, certainly, some capital investment. There's a big demand across the south Wales Valleys in some of the larger towns—in Aberdare, for instance, in Merthyr Tydfil, Neath, Port Talbot—for small starter units. I mentioned Bridgend earlier. There are companies, there are businesses, who want to move into better quality premises, larger premises, and they can't find them in the south Wales Valleys.

So, there's a market demand there that could be met. Prices and rentals et cetera, would have to be negotiated, but they could move ahead with some of those. It would also allow the local growth fund to focus very much on providing support for the more innovative businesses, for doing work in town centres around more managed workspaces, around more innovation centre type activities that we see in other places, including in some parts of the south Wales Valleys, but we don't see enough of. It would certainly allow the strategic objective of supporting people into jobs and gaining skills as a way of really lifting the floor for communities, and people in our communities in the south Wales Valleys in particular. I do know, Mr Chairman, that those sorts of conditions, those sorts of needs, occur and happen in other parts of Wales as well. So, this is not solely a Valleys one; I can talk about the south Wales Valleys with a much greater degree of knowledge, however.

Thank you. Jenny.

Thank you. Britain at large has a short-termist approach to industrial development, and this just seems to be adding layers to that. What's the impact of this reduction in funding compared with the previous iteration, the shared prosperity fund, which, obviously, is a great deal less than the European funds? What strategies can we use to mitigate that, beyond what we've already discussed around the need for better partnership? We seem to be in danger of constantly just chasing the latest good idea, or not so good idea. Meirion, shall I start with you, and then go to Paul?

Yes, thank you very much. As I mentioned in the answer to one of the earlier questions, it'd be great to have more funding, but the die is cast, really, as far as that is concerned. So, it's how we manage the funding that we've got within the current programme that we should probably focus on, and, certainly, the alliance members in local authorities are really much more focused on.

I think there are, essentially, two things that we need to be just very careful about. First of all, the Welsh Government plan, strategy, for this involves quite a degree of potential top-slicing of funding. It may be that Paul Boyle will strongly disagree with that, but these national initiatives of what's regarded as significance, they're not spelled out, as far as I could see, clearly within the consultation document that's out at the moment, but they surely involve things like Business Wales, they involve things like support for research and innovation investments et cetera, trade development. These things are all important, but if a local growth fund is to have any meaning at all, then it should be really focused on the local rather than the national. So, there seems to have been, if I can say, a budgetary sleight of hand here to slip nationally significant, transformative projects—which I fully support, I have to say, and our members will fully support—into something that was meant for local growth. And it will take away money from the projects on the ground, however it's sliced up between revenue and capital—there will be less of it than there otherwise would've been.

Okay. It's a mess. Paul Boyle.

Well, I'd actually agree with quite a number of the points that have been made earlier. And even though I guess I'm here to represent higher education, I absolutely agree that there's a very firm place for apprenticeships, and, of course, we can have apprenticeships at different levels—certainly we're involved in more of the higher level apprenticeships. But apprenticeships is absolutely the right approach in certain areas and I think we have had challenges in Wales about the thematic areas in which apprenticeships have been possible. We certainly know that we've lost potential apprentices over the border because it's easier to get apprenticeships in different areas that we can't, at the moment, manage in Wales. So, that's an area I would agree.

Going back to your more general point, I think we've got to be really careful about how we position what's required in Wales, going forward. So, I think there is an element—and this is no surprise given the way that the funding works—of having to do our best with whatever funds arrive into Wales to help with these areas. So, the shared prosperity fund, frankly, I think was delivered with a particular political context from the Westminster Government. It was a particular type of fund as a result of that, and Wales, of course, adapted to that and did its best to try and make the most of that fund. This is another example where the fund is coming in in a slightly different way with perhaps slightly different principles behind it and Wales is adapting itself to that.

One of the best things, in my view, about the EU structural funds—there were two things in particular. One is that it was really clear what they were defined for—they were defined to drive economic growth in the regions that needed it most and they were committed to this into the long term, and that long-term approach really made it possible to develop projects that were going to deliver and projects that were sensible. Some of them were actually quite national in scale, in the sense that they were very ambitious projects but they were delivered in a local region. So, if I think about what our university does, we have a massive impact in our local region. We spin out more companies from our universities in Wales than from anywhere else. Thousands of companies have spun out of our universities, and many of those we're desperate to try and keep, but, of course, the challenge is to make sure those spin-out companies not only stay in Wales but they scale up. I think we've done a great job of spinning out in Wales. We've done perhaps not as good a job of scaling up some of those spin-out companies beyond their initial starting point. But even so, there's a real success story there. We spin out, for example, in Wales more student-led spin-out companies than the rest of the UK, proportionately. So, we've got some real successes to build on.

And I do agree with the point that, on the one hand, we have to drive local, regional economic growth, but some of the ways of doing that are actually national in delivery, in a sense. So, again, I use the example of semiconductors—this has a massive local economic impact in south Wales, along the whole of the south Wales corridor, and in many of the other industries that support semiconductors, but it's actually an internationally, or even globally, important industry and cluster. So, I think there are things that can really drive local growth at the same time as being of national or even international importance. And getting our strengths lined up is really, really important.

My final point would be, and I suppose what I'm hinting at, is that we really need to have clarity in Wales about what are the skills, the research, the innovation we want to really invest in, and have a stronger voice so that when there is an opportunity to discuss with the UK Government, if that's where the funds are going to come from, or perhaps even, who knows, in the future, whether it might be European funds, and some of us might be pleased to see that again—so that we've got real clarity around what we want to invest in. It isn't possible to invest in absolutely everything—what would our priorities be? And I think that type of conversation, trying to drive the agenda rather than just always responding to the funding that happens to arrive is something that's very difficult to deliver, to be honest, but I think it would do us no harm to give some more thought to that.

Thank you. So, Kevin Morgan, what are we going to do to mitigate this salami slicing? Rebecca Evans has already told us in an earlier session that she's minded to argue strongly for more revenue than capital. Is that going to make it easier to spend the money effectively?

I think rebalancing the split will make it more flexible and will help to spend it more effectively, because, as we've said, capital spending in this truncated timeline is mission impossible. But I would just say two things in response to your question. No. 1, the budget is important, I'm not belittling that, but it's the way the budget is spent and deployed that concerns me most. And going back to Paul Boyle's point, this was one of the major advantages of the structural funds. It was based on four golden principles, as we say in development circles. It was based on concentration, additionality, partnership and multi-annual programming. Those are principles that are gold-plated around the world in terms of effective ways to spend money. And when budgets shrink, going back to your point, Jenny—when budgets shrink, there's a tendency for all the stakeholders to cannibalise each other, in a sense pitting the local—. I don't say Meirion and Paul have been doing this, but they legitimately represent different stakeholders, the local and the national. And instead of juxtaposing them and setting them against each other, we need to recognise that development is a multilevel endeavour. We need both national programmes, like universities, investing in research, development, innovation, but we also need apprenticeships, and these things sometimes lend themselves to national, others to local delivery, and we need a judicious balance between these things. 

So, yes, what do we do about the budget? Well, we ask our politicians to make the case, not to uncritically accept this shrinking budget, because we're in danger of each programme becoming inferior to its predecessor. The shared prosperity fund was an inferior version, and by the way, Chair, I've tried to document these things, and I could send the committee a short summary if it's of interest to you, in terms of comparing these things. The shared prosperity fund was inferior to the European regional development fund, and now I fear the local growth fund will be inferior to the shared prosperity fund. Those are the big pictures that I'm concerned about, rather than focusing simply on the quantum.

Thank you for that. So, Meirion, you've been particularly critical of the proposed shift away from revenue-based, mainly shared prosperity to capital, and I think we've all rehearsed the arguments around loss of skills that have been built up during particular programmes. What can we do to not just get—? I mean, we have to assume that the Cabinet Secretary will deliver on this more revenue, but we've still got to stay focused. How are we going to be able to deliver for the people in the poorest communities without getting involved in these turf wars? 

Yes, good point. I very much share your hope that the Cabinet Secretary will get greater flexibility in that. There's no logical reason. The English combined authorities have been told that they have a much more balanced split between revenue and capital spending for the next period. No explanation, as far as I can see, as to why that should be the case and why Wales should be penalised in this respect. So, let's hope that that is the case. Once I think we're past that argument, then I do think that coming back to the point that both Paul and Kevin have made about the way in which programming needs to take place is absolutely critical. So, rather than just say we've got one year where all local authorities, all projects, whether it's through the regional CJC set-up or not, have a certain percentage that they have to achieve, which is capital or revenue, there needs to be flexibility around that. In some places, there will be projects that are ready to go that are capital; in which case, get them going as soon as possible. Give them the permission to go ahead with those projects as soon as possible. And if that means that that particular region, if it's going to be done on a regional basis, which we assume it is, the various budget allocations down from Welsh Government—. If that is the case, then it does mean that, within the region, there's a certain amount of management that can go on in matching that programme.

Fine, thank you. Shorter answers, I think, from everybody.

Yes. Could I just check, off all three witnesses—? You've all alluded to the fact that the English combined authorities have a greater emphasis on revenue as opposed to capital. I can't believe someone sat in Whitehall and thought, 'Do you know what? Just to cheese off the Welsh, we'll turn it around and give them a different allocation, we will.' Is it the case that, basically, no lobbying was done, and the English combined authorities went in early and made this point that all three of you have made, that you have to have the ability to build capacity through revenue by having teams in place to build up the bids, and then the capital can be spent more effectively? Would that be a reasonable position to take, or you have no knowledge on that, so you can't comment? Professor Morgan.

I honestly don't know the answer as to why that difference is between Wales and England, Chair, but I would suspect that one possible answer is exactly the one that you've just given, that the Manchesters and Liverpools have been more agile and nimbler about engaging with Whitehall. We have to remember, devolution is totally different in the sense that it's two players, in terms of the relationship in England, I mean—Manchester with Whitehall. It's a threesome, isn't it, in Wales, and it's more difficult to navigate, I would suggest.

Why is it a threesome?

Because we are dealing with London, Cardiff and the CJCs.

Can I ask my final question, because I think we're running out of time here? If we were living in China, a three-year capital project would be a no-brainer. What sort of support does the infrastructure Act, which is now live, give to enable us to turn capital projects around quicker? I'm not suggesting we build rubbish for the sake of it, because that is not a cost-effective way of dealing with it, but is it that we are not nimble enough to deliver things we know we need? Meirion, shall I start with you, and then I'll come to Paul and Kevin?

Yes. Thank you. The technicalities of this, I have to admit, are slightly beyond me. That's not my forte at all. But I could offer to get some responses from some of our local authority members, who have raised this question with the alliance, and perhaps respond to you separately.

Okay. Professor Boyle.

Again, obviously there's a lot being said in Wales but also in the UK as a whole about the planning system and whether or not our planning system delays capital projects more than you will see in some other countries, so that will be part of the explanation—

Okay, but we've now got a system with the infrastructure Act where it has to be turned around within 12 months. Obviously, you've got to do the work to say this is something that's worth supporting.

Yes, I think that's right, and we'll have to wait and see whether that does make the ultimate difference. I did mention earlier that we shouldn't always think about capital investment as purely building infrastructure. There are equipment-related elements to this, which can be turned around much more quickly, and can also have a real impact on economic growth and regional productivity. So, I think we can be imaginative about some of those things as well.

Thank you. Kevin.

Well, certainly, Wales is not Shenzhen. Shenzhen is the world-famous place for delivering high-quality infrastructure in a short period of time, and I'm sure you wouldn't be recommending a more authoritarian form of behaviour from Welsh Government, Jenny. But it is a big debate around the world, why we're such a laggard in the UK in terms of delivering infrastructure projects.

Okay, thank you. Just as a point of reference, I saw a story the other day that in China they built a major railway station in nine hours, and it was quite impressive to see by anyone's stretch of the imagination. Sam Kurtz.

Thank you, Chair. I am conscious of time, so maybe, Chair, we could get some of these answered by written correspondence following this meeting. But my one question to the panel would be this: in terms of the balance between national, local and regional, and you've touched on this in different answers to different colleagues of mine, is that balance anywhere near right at the moment? Professor Morgan, you're in the room, so I'll start with you. Is that balance on how it's divvied up between national, regional and local anywhere near where it needs to be?

No. That's the short answer. By 'national', presumably you mean Wales. 

I mean UK, Wales and then local.

We're just coming to the end of a UKRI-funded project looking at inclusive innovation in British city regions, and this has been one of the key themes emerging: that inter-governmental relationships between London, Cardiff, and then within Wales, between the Welsh Government and the subnational level—remember there are two, the four regions and then the local authority members, which Meirion represents—those relationships, in my view, are currently not fit for purpose.

I want to bring the other witnesses in because time is beating us on this. 

Meirion, Paul, whoever wants to jump in on that. 

If I may, Chair. In terms of the local growth fund and the likely allocation of funding between national at a Welsh level, regional at the CJC, and local, we don't really know at the moment. There is, I understand, a promise of some indicative figures coming out within the next couple of days. So, in a week's time, there may be some figures on the table at least for the CJC levels, that's the four regions in Wales. But we don't know, and that's part of the problem. It's really at the heart of the issue. There's very little time left for planning this. Of course, the announcement of the budget was delayed this year, so that was consequential on other decisions. So, it's not entirely in the hands of the Welsh Government, I have to say, in that respect. 

If I could just quickly follow up. I agree with that. I don't think we really know what the balance is, even though we're right on the cusp of this programme beginning. But also I would say very strongly that I don't think the balance is right across the UK. We saw with the structural funds from the European funding system that the money was put into those parts of the UK that really did need the investment, more so than other areas. That benefited Wales, and, indeed, some other parts of the UK. That investment, that focused strategy, changed with the UK shared prosperity fund, where the moneys were smoothed much more across the UK as a whole. My view is that the system that the Europeans were able to put in place—of course, not based on local or national politics, but based on a European political decision—was a better decision because it was really trying to focus those areas that required the funds more than other areas. And I think what we've seen with the UK Government's approach to it is to smooth that out a little bit. So, personally, I don't think that balance is where it should be. 

Thank you. On the other two questions, we'll share those in writing. 

Okay. Hannah.

I'll endeavour to condense my line of questioning as well, because I'm conscious of time. I was going to look at the lessons that have been learned from previous regional funding streams. I think, Professor Morgan, you said that we don't seem to have learned lessons from those previous programmes. I know that we've touched on some of the challenges and things that should have been done differently. I guess my question to all of the witnesses is are there any things that are positive and negative lessons from previous funding streams that we haven't been able to touch on this morning that you think the committee should consider. Professor Morgan, I'll come to you because you're in the room. I'm looking at you, sorry.

The short answer, without caveats, I would say, is that we haven't learned the lessons from previous programmes. We haven't learned the merits of structural funds. There were shortcomings with the structural funds—they were bureaucratic, the Welsh European Funding Office was risk-averse, and so on and so forth—but there were a lot of good principles in the structural funds, as Paul Boyle alluded to earlier, that we could and still should adhere to. I haven't seen an evaluation of the shared prosperity fund, and I look forward to hearing about that, but we really need to learn the lessons. And given the timescales that all stakeholders are obliged to operate under, there's almost no time for reflection, and that can't be the right thing.

Paul, I'll come to you next, if that's okay.

There are two things. I agree with the point that was just made, but on a positive, again, the structural funds allowed for long-term investments, involving the right collaborations wherever they were, and that was really valuable. The long-term nature of that funding gave the opportunity to really start building projects that might have started as research projects, but grew skills around them. They became much more rounded projects.

I would say that the lesson we should really learn is that, of course, we saw a cliff edge at the end of those projects. When the decision was taken to leave Europe, those funds disappeared overnight. In my institution, we lost hundreds of jobs—hundreds of jobs disappeared. So, we had projects up and running, delivering what we need in Wales, suddenly brought to an end, simply because the funding stream ran out. This long-term ability to back what we think is going to work has to be at least one of the lessons that we should be able to learn from EU structural funds, I think.

Thanks. And Meirion.

I agree. We learnt positive lessons from EU funding: long-term commitment, the programme approach, et cetera. The shared prosperity fund in Wales was actually managed by the local authorities themselves. Although the funding came directly to individual authorities, they set up by their own choice collaborative arrangements, mostly at the regional level, at the CJC level, to ensure that they minimised duplication, enhanced collaborative delivery and got the monitoring and reporting in a way that was fit for purpose. The EU approach, of course—certainly in the way it was delivered by WEFO—was overly bureaucratic. There was a real problem there, which has caused EU funding schemes to be denigrated in Wales, whereas in other places, they're not.

At the moment, local authorities are concerned about a repeat of bureaucratic overload if the Welsh Government keeps itself in the centre of the management and delivery of local growth funding. The local authorities have been grouped together in CJCs. They operate currently in different ways around different parts of Wales, but they were set up specifically by the Welsh Government to improve collaboration and coherence. And quite frankly, whether the CJCs are doing exactly what the Welsh Government expect them to do, or want them to do, is almost neither here nor there. The delivery and management of the local growth fund should at least be devolved down to the CJCs and they should decide how projects are handled at the individual local authority level. If you don't do that with the CJCs, why bother having the CJCs in the first place?

Thank you. Because Alun has indicated he's happy with all the answers he's heard, I'll just put this final point. One of our next witnesses is moving buildings at the moment, because a fire alarm has gone off in the building he's in, so we've got a bit of time. We've talked about where has Wales been in the design of this scheme. But Wales in a Westminster context should be at an advantage, because there's this thing called the Wales Office, and you would have thought that they could have been there on point putting Wales's case. Am I naive in thinking that that case just hasn't been put and that Wales has been presented with a scheme and, 'This is what you're going to get on with'? I'll ask that to each witness to conclude this session. Kevin.

That's an excellent question, Chair. I honestly don't know what the Wales Office has been doing in terms of acting as an ambassador for Wales in Whitehall. Unfortunately, they were the only body that we were unable to interview. They couldn't find the time to engage in our UKRI inclusive innovation project, which I deeply regret. It was the only interview that we failed to secure. I honestly don't know what their role has been in this, but the effect of it has been exactly as you say: it looks as though Wales has been given a fait accompli, whereas the English regions have engaged more and have proved themselves to be more effectual.

Thank you. Paul.

I can't easily comment on how we've ended up with a system that does appear to be slightly different in Wales to elsewhere, but I would agree with the points that have been made earlier. It will almost certainly be because the regions and the different areas within England will be spending most of their time talking to the UK Government, and doing their best to lobby on their behalf.

We inevitably, within Wales, because of the nature of devolution, have, in a sense, two levels of conversation going on. That's not necessarily a bad thing, but it does mean, I think, that the lesson we've got to learn is we really need to be very joined-up from a Wales point of view—we know what our strengths are, we know what we need, and we're positioning that early in the debate.

Even if we don't know there's a fund to come down the track, constant repetition of what we want to see invested in Wales, I think, has to be the way forward. And that's easy to say. I absolutely understand in political reality that's not always easy to deliver. But I do believe, in the devolved context, it's particularly important that we are good at making it clear what we think our real areas of need and of strength are, so that when opportunities come along, we can really lobby hard to make sure that those opportunities allow us to deliver the areas that we best need to deliver.

Meirion, you have the last word in this session.

Thanks very much. Finally, I'll hopefully provide a little bit of an indication from working with the alliance across the UK, and particularly in respect of the situation in Scotland, where, obviously, they also have a Scotland Office comparative to the Wales Office, and they also have a Scottish Government, as we know. Although the quantum of funding is much, much less in Scotland because of the old European funding regime, which was much more beneficial for Wales than it was in Scotland, the pot of money isn't as large, my understanding from my colleagues in Scotland is that, essentially, the Scottish Government has stepped to one side with the local growth fund in Scotland, and has basically told the Scotland Office in Westminster that they can deal directly with the local authorities because the Scottish Government wants nothing to do with the scheme.

Thank you, that's a very helpful insight. Gentlemen, thank you for your attendance this morning. A record will be sent to all three of you for you to have a look at. If you see any issues, please raise them with the clerking team. Otherwise, that will form the official record of your evidence to the committee this morning. But once again, I thank you and I wish you a very happy Christmas, and look forward to meeting you in the new year. We'll now move into private session.

Good morning and welcome back to the second panel for discussion on the local growth fund that the Welsh Government and UK Government have announced, which will be taking the place of the shared prosperity fund. We have two council leaders presenting in this particular panel session. I'll ask you both to introduce yourselves and the various positions that you hold in your organisation, for the record, and then we'll go into questions. So, could I start with you, Councillor Stewart, please? Could you introduce yourself for the record, please?

Thank you, Chair. Councillor Rob Stewart, leader of Swansea Council, but also chair of the Swansea bay corporate joint committee.

I'm Councillor Jake Berriman, leader of Powys County Council and this year's chair of the mid Wales corporate joint committee.

Thank you, gentlemen. The local growth deal is coming in in April, do you think it is fit for purpose and will it meet the needs that your areas and your organisations have identified for it? Councillor Stewart.

Thank you, Chair. Look, we certainly welcome the ongoing commitment in terms of the share of the local growth fund. I think Wales is getting 22 per cent of the entire fund, so that is obviously welcomed by us in terms of that continued commitment to channelling these post-Brexit funds into areas of most need, and I think that's something that we should continue to support and welcome. Obviously, since Brexit took place, the amount of money that's available has reduced from successive UK Governments, but again, we are grateful for the large share, as I said, in terms of the proposed allocations.

We do have some concerns in terms of the proposed change in terms of the revenue/capital split within that allocation. Primarily, we had around 75 per cent of the previous funding in revenue and 25 per cent in capital, and the new fund appears to be around 30 per cent in revenue and 70 per cent in capital, so that does prove somewhat challenging in terms of the programmes that are supported from the previous fund, as we move into the local growth fund. So, that is something that we're in active discussions with both Welsh and UK Governments about, and we have noted that in England the mayoral combined authorities and the allocations there are more around the 60:40 split, which of course would be something that we would want to seek parity on. I know ourselves and Welsh Government, from a local government and Welsh Government perspective, have raised that issue and are in negotiations with the UK Government about that. So, from our perspective, we'd obviously like to see more money flowing as part of the local growth funds, and we'd like to see that balance between revenue and capital addressed as quickly as possible.

The final thing, obviously, as we go into the new funds in terms of the structures and how the funding is allocated, we've been very successful in managing the funds through the local arrangements that have been in place, which are underpinning the regional arrangements, and again we see those arrangements as the best ones, because this is a local growth fund, and our view is that the more locally it could be managed the better. But we do understand if you do it entirely at a local level you do lose some of the regional strategic advantages that can come. So, making sure that our funds continue to come with as much local control as possible is something that we would definitely support.

Thank you. Councillor Berriman.

Thank you very much. I haven't got much to add to that oversight there, but firstly it has to be said that the local growth fund only partly replaces the UK shared prosperity fund, with less funding, and it decreases the revenue, as has been said there. I think this will have major implications on councils in terms of their ability to support key services at a local level and on their capacity, skill sets and expertise in delivering key interventions of benefit to local communities throughout Wales.

Following the ‘not a penny less’ principle, this doesn't feel like parity to us at the moment, either with where we are now or with authorities, as has been said, across the border. Add to this the funding gap that appears to be emerging with the distribution of the Pride in Place funding and it is difficult to see how there is parity, and that this is going to meet the ongoing needs of the rural areas that I represent in particular.

Thank you. Just one final point from me: obviously, this local growth fund is coming in in April. One would assume there'd been dialogue, with the organisations that you represent being critical partners. Can you confirm that you were consulted on and had the ability to input into the original announcement over the structure of the funding model that came forward? Councillor Stewart.

Chair, there obviously were conversations, but again, I think we would have preferred more detailed conversations earlier in the process in order to have fed in more of our learnings in terms of what's happened since the SPF funds were set up. Obviously, we have given a significant amount of information to both Welsh and UK Governments in terms of how those funds have been successfully managed locally and the impacts that they've had. So, we were very keen as we moved into a new round of funding to make sure that we took the best of what we've been able to do with the SPF and ensure that those learnings were built into the process. So, yes, there were conversations. We would have liked more, obviously, and I think we would have certainly liked to have been able to perhaps shape and iron out some of the challenges that the transition year that we're moving into now will obviously provide to us, because we want to continue with the momentum. We don't want to have any impact in terms of the potential risks to the revenue programmes, and again, I think having more discussions and more detail earlier in the process would have been beneficial.

Councillor Berriman.

[Inaudible.]—about the level and timing of engagement, and the communication in respect of the development and design of the new funding programmes, obviously. But that's where we are. We were looking for greater involvement, and we do think that input from councils is crucial in providing a democratic mandate and a key participative role in delivering local and regional place-based funding programmes and initiatives like this. There's an opportunity here, isn't there, for top-down to meet bottom-up to ensure effective design and delivery, and I don't think it's too late for that, but we have been late—. We feel we've been a bit late to the show.

Okay. Sorry, Councillor Berriman, your mike didn't kick in for the first 10 or 15 seconds of your contribution there. Could you just confirm what you did say, because it was quite critical to, obviously, the context?

Yes. Just at the start there, I was just saying that local authorities have expressed concerns about the level and timing of engagement and communication in the development and design of the new funding programme. You probably got it after that, did you?

Yes, that's fine. Thank you. That's helpful for the record. Thank you. Luke.

Diolch, Gadeirydd. We've alluded to that revenue/capital split within the local growth fund, and in the previous session, Professor Kevin Morgan raised concerns around the potential loss of expertise and capacity because of the way in which the growth fund has been split. So, in terms of your views on that revenue/capital split, I can imagine there's a lot of agreement with what we heard in the previous panel. What I'd like to just get out of you two today is the actual impacts that you see this will have, not just on actually being able to successfully deliver some of the projects, but also the impacts on your organisations, on the staff that are there ultimately delivering some of these projects. Perhaps I can start with Councillor Rob Stewart.

Thank you for that. Look, we've been really clear that we want to see the transition from the current funding to the new local growth fund be as seamless as possible, and for us to have time to reorganise how we do what we do at a local level, with a way that doesn't have negative impacts for our communities or for the people who are employed in the programmes. One of the challenges with the split that's been proposed in terms of revenue/capital is that we've got, across Wales, over 2,000 people employed on programmes that are supported through the current SPF programme, through the revenue that's provided. And obviously, as that gets converted to capital, unless there are some flexibilities within that, which I know ourselves and Welsh Government have asked UK Government to permit, then there could be some significant impacts. So, that's what we've been working to mitigate, and again, I think it came as a surprise to all of us to see some greater flexibility in England than we've seen in Wales and the other devolved nations. So, that is something that we're pushing for parity on, because they do underpin employability programmes, programmes that help people into work and help us to bring forward people with skills into the workforce. That's just one example of where, potentially, there could be impacts. But I know all local authorities and regions will be looking at how they can move around some of their resources and reorganise to try and mitigate that as much as possible. But it would be really helpful if we were able to see some further flexibilities from UK Government in terms of how this money can be deployed.

So, discussions have been ongoing, then. How advanced have they been, and where has the Wales Office been in those discussions as well? I mean, in the previous session, again, Professor Kevin Morgan said he isn't sure where the Wales Office has been in this whole process.

So, definitely, there have been discussions with the Wales Office. There's been a tripartite meeting between UK Government, Welsh Government and local government. So, this has been raised and been discussed. Obviously, there have been exchanges of letters as well on this issue, where we've raised the concern from a WLGA perspective. So, again, a letter has gone recently from myself, as the spokesperson for WLGA, highlighting our concerns and asking for us to be consistent with the approach in England. And those discussions are ongoing.

Would you hazard a guess as to why we're still behind on getting that parity with the English authorities?

Well, it's not that we're behind, it's just that what we appear to be able to see now that we've got the detail of the budget allocations is that, clearly, there is a different mix in the combined mayoral authorities in England than there appears to be for the devolved nations, and that's something that wasn't visible up until recently. We had been making progress already, which has been locked in, in terms of moving from a 25:75 per cent capital/revenue split to a 70:30. Obviously, it looks like the combined authorities and areas in England have a 60:40 split, which isn't what we currently have on offer in Wales, and that is the part now that we're focused on in discussions. 

Councillor Berriman.

I've not much to say to that, but obviously any improvement on where we are at the moment will help to prevent some of the jobs that are, crucially, funded at the moment from dissolving away and we may not see them back. We've used the existing funding as an opportunity to drive forward not only employability programmes but things like our approach to net zero—[Interruption.] Sorry, are you hearing me all right?

Yes, no trouble. Keep going.

Yes. Sorry. And finding nature-based solutions to various things. So, this funding has propped up a range of job opportunities to support local economies, based on the needs that those economies and communities uniquely face. And it really is just, I suppose, the lack of detail and the lack of clarity, and the fact that we're racing headlong towards April 2026, and obviously the more certainty we can have the soonest will help both provide comfort to those people and security in terms of how we apportion our funding, going forward.

And finally, very briefly, are you confident that the funding within the local growth fund will allow projects to deliver on the strategic objectives that have been set out within the local growth fund?

If I can just come to that, obviously, in terms of the strategic objectives, we broadly agree them but don't agree them in full. Certainly, we see an opportunity for, as I said before, bottom-up, locally based objectives that are based on local intelligence and needs and the fact that we operate as local authorities within our communities and, collectively, within our regions. To some extent, I would say that it's this local level that is not as transparent or is potentially missing within the overall objectives as we see them at the moment. We do need the detail, and how the funding arrives, when it arrives, how it is processed—things I'm pretty sure that are set out in Councillor Rob’s letter already—are going to be crucial for us.

Good. Anything to add, Councillor Stewart?

No, I think that Councillor Berriman has covered it nicely there. 

Thank you. Jenny.

Clearly, this money doesn't meet the 'not a penny less' criteria. I just wanted to focus on the purpose of the structural funds, which was—. The overarching objective was to bring deprived communities up to the level of the average for Europe. So, how are we going to ensure that this lesser money is going to be focusing on those most deprived areas within our communities and that that is indeed going to deliver on productivity and bringing more people into the workplace and better jobs? How do we do that when we've got less money?

Councillor Berriman first. 

Okay. Thank you very much for that. Obviously, it isn't only about productivity, and we have to take the needs of our individual areas, and they are quite distinct and different right across Wales. And just to have that as a single marker really does disadvantage rural areas, where we are heavily reliant on the foundational economy and may have difficulty getting the added value that you might have in terms of productivity out of some of the more manufacturing-based centres—not to say that we wouldn't try. But the European structural funds were directed at impoverished parts of Wales previously that were deeply rural areas, and, as such, what we would argue is that we need to respond to the needs of our poor regions quite differently and distinctly. I referred to Pride in Place earlier, and, really, I can't see how it was a rural-proofed policy, because it hugely disadvantages rural areas. And I do think that we've got to be cautious about using single drivers there, but, of course, we have the shared aspirations to do this, both within our regions and across regions, and we might welcome too the distinction between national, regional, local and, of course, for us in Powys in particular, cross-border, because there are some really good opportunities to have inter-regional work and international work as well.

Okay. Councillor Stewart, is there anything you want to say about this, because, clearly, you have better-defined poorer communities up the Valleys in your region?

Yes, absolutely. Look, the reality is, when you've got less money, it is always more challenging, isn't it? We've just got to be clear that, whilst there were lots of commitments made at the time of the Brexit decision and discussion, they haven't been held to, and the situation is that this is not a direct replacement for structural funds. We know that the current Government have invested through many channels, specifically in—if I talk about my region—the investments going into Port Talbot and around the steelworks there; there are multiple streams of funding going in. So, this fund is not an apples and apples comparison for what the structural funds were before.

But I absolutely hold to the commitments that were made by the previous Government at the time, which is that we should not be a penny worse off, that there should be a Brexit benefit—and all of those things that were promised simply haven't materialised. And we are now seeing less money than we previously would have received under European funding. And of course, part of that is because the previous Government, in its iteration, where it went to shared prosperity, changed the criteria, changed the factors around need, so that money flowed elsewhere and away from areas of greatest need. As you quite rightly referenced, we've got a number of lower super-output areas—areas of deprivation and poverty—that the European funds were there to help improve and to grow.

To be more positive on it, I think, during the SPF period over the last few years, despite not having the criteria until late in the day, and having a condensed period of delivery for us to get those projects going and to get the money out the door, I think the reality is that we've been able to evidence significantly how well that money has been used and what impact it's had on our communities. And in terms of administration costs, for instance, the local management and the regional management of these funds is only 4 per cent—and I think previously, with Europe, it was around 20 per cent in terms of the administration burden—so, more money has reached projects and has had a significant impact.

But if you're asking me the question, 'Do I think we should have a higher level of funding?' certainly the levels—

I've never met anybody who doesn't say 'yes', so don't bother about that.

No, absolutely. We should be, and I'd go further than even 'not a penny less'. My mantra, and local government colleagues have heard me say it a number of times, is that we should be looking at uprating what we used to get from Europe to the level—. Because, obviously, inflation has had a significant impact on the value of that cash in real terms, so we should be looking for more, not less.

Okay. So, sticking with you, Councillor Stewart, we are where we are, this is the money we've got, but the consultation document indicates a huge breadth of options, which enables people to, really, translate it into what they actually want. So, what do you think the strategic objectives for this funding—which, unfortunately, seems to be limited to three years—what do you think are the high-level strategic objectives that we should be going for?

Yes, absolutely. Look, I'm quite wedded to what we've been doing in the last three years, because I can see the evidence base and the impact of what it provided to local businesses, local communities. And I think, whilst the current scheme did have challenges, as I said, because the previous UK Government were very late and slow in coming out with the criteria around how the programme would work, which condensed the time frame, the delivery through the regions and on to the local authorities to have that ultra-local approach has proven very effective. I would continue to invest in communities to build skills, to allow people to get the skills they need to move out of poverty into work and, hopefully, to get a career and a salary that they need without having to move away from the community that they live in—so, targeting into those pockets of growth that can really drive economic growth at a very ultra-local level.

But the part that was missing, which I think we do need to find the balance for, is that, inevitably, the condensed time frame led to people being more tactical and a little less strategic, because of the limited time frame for delivery. So, you had to make sure that you got projects out the door that could deliver in a shorter time frame. I think that's one of the challenges for all of us with this three-year period now. We'd have liked a longer period for the local growth fund, so you do have the opportunity then to do more strategic projects and to make sure you give people the confidence to come forward, to put themselves forward for employment in those programmes and projects, but also for people to come up with the ideas that can have that real strategic change for communities. So—

Okay, we don't disagree on that, Councillor Stewart, but we are where we are. Where would decarbonisation fit within your region's strategies, with one in four living in fuel poverty, and fossil fuels continuing to be eye-wateringly linked to global gas prices?

So, look, I can give you some examples from my region. Obviously, you can't look at this fund, as I said before, in isolation. We've been very successful, as other regions have, in knitting together various funds to make more impact. Within the corporate joint committee, we've now moved the Swansea bay city deal into that structure. So, the economic strand will bring together strands like the local growth fund and the city deal, and, within the specific example you've given there around fuel poverty, clearly, we've got commitments at both local level and regional level on net zero, on net zero by 2030. We've got a programme of decarbonising homes, of making sure that we support home owners to help reduce their energy bills. We're building modular, high-energy-efficient homes that give people energy bills of a few hundred pounds a year, not a few thousand pounds a year. So, we are already taking the steps to do that, and, obviously, this fund gives us the opportunity to continue to do more of that.

Okay. So, they would be your top two, would they, building skills and decarbonisation?

Yes, I think employability, for me, is one of the top things. Decarbonisation—I don't think it's necessarily the main focus of this fund, because there are other funds that we are already using to do that, but this fund will play its part.

Thank you. Councillor Berriman, what do you think the strategic objectives should be, based on your experience of mid Wales?

Of course, the decarbonisation agenda is really important to us in relation to this particular fund. I'm not seeing a direct link through to the local area energy plans that have been provided. So, work locally has been done to indicate what our transition to net zero looks like. We have a regional energy strategy that is adopted within the mid Wales region and there are a number of projects that we're already putting together through different funding, as Councillor Rob has said there. Therefore, whilst I think stronger links can be shown across from this fund to that, that's going to be really important.

Of course, skills are vitally important for each of the regions, and we want to see an investment, in particular, in some of those high-level tech manufacturing skills through the programmes that we are developing at the moment within Newtown and other places. So, it's the agri-tech sector for us that are coming through the Growing Mid Wales programme, but also there are some interesting cross-border opportunities that we wish to explore, and, of course, we shouldn't forget some of the inter-regional projects that we already have for the Welsh language, for instance, with the Arfor project, and we're not clear how that might get funding going forward through this.

So, what I think is that, yes, we can see what those overarching priorities are, but there still should be a clear opportunity for each of the four economic regions to work amongst themselves to reflect the differences they have and bring different approaches to each of the regions, sharing that with the stakeholders that they have locally. So, I wouldn't want to think that there's no flexibility going forward, because I think it's imperative that we do respond and adapt and retain that flexibility in delivering through both our local authorities and the regional arrangements that we choose to utilise.

Okay, so—

I'd like to make a bit of progress because we're going to be beaten on time otherwise, and there will be other questions that we might have to follow up in writing if that's all right with you, gentlemen. Sam.

Thank you very much, Chair. Looking at the delivery of this, how content are you that the right balance has been struck between local, regional and national delivery? We'll start with Councillor Berriman.

At the moment, I don't think there is sufficient evidence of the bottom-up approach that I talked about there. And I think that that does need to be strengthened as we go forward, and particularly the role, as I've indicated there, of local authorities having precedence within their areas. They are the democratically elected representative bodies for their areas, and obviously, each of those have their own economic development plans, their local development plans et cetera. And they're very clear about what those needs are. They knit them together at a regional level, and that's absolutely fine. But that's the way that that should operate, where we add value at each level.

But I think nationally, there will be opportunities as well, as I indicated there, with cross-border work. We've got the Marches Forward Partnership. We've got the inter-regional work that I just talked about a moment ago, and there may be projects, as, for instance, we develop the Royal Welsh Show site, and actually, there should be match funding and collaborative discussions at a Welsh national Government level around how we can add value to that. So, at each layer, I think we need to be adding value, not duplicating or simply supporting because it exists already. I think we need to show greater flexibility.

Thank you. Councillor Stewart.

My answer's simple. It's a local growth fund. It should be managed as much as possible from a local perspective. I think, within the regions, we've built mature relationships between the local authorities on those regional footprints. If the money comes through a regional structure, but then has some local control over it and local opportunities to make sure that it's targeted appropriately, I think it's not beyond our wit to do that effectively. That's what we've done for the last few years. So, I'm more relaxed on the local regional bit, because I think each of the local authorities plays a really important part in managing those regional structures, but I think it's the point here, it's a local growth fund, it needs to be managed at the local, regional level, but in a framework of national context—I think that's the point. It's making sure that we do have those strategic opportunities there to exploit.

Fab. And I believe this has been touched on already, but could you just give your views on the transition year that's been proposed? Councillor Stewart.

What we didn't want was to move to a new set of funding arrangements and find a cliff-edge approaching that was difficult to manage. So, the transition year—what we've been asking for for some time is clarity as early as possible in terms of the funding mix, in terms of the quantum. We're due to get, I believe, a letter of comfort from Welsh Government today in terms of that quantum and the allocations. We've been in discussions, as I've said, around making sure that the transition year gives us an opportunity to make sure that we can manage those allocations as effectively as possible to avoid impacts or negative impacts to the programme as we go through that change. So, that's what everybody's working to achieve, I think, at both local, regional, Welsh Government and national Government level—to make sure that that is as successful as possible. I think, clearly, the one thing that's remaining is those flexibilities around the revenue/capital split, making sure that we have the flexibility that appears to be on offer to the English mayoral combined authorities.

Thank you. Councillor Berriman.

Not really much to add there. Obviously, sight of the proposed funding agreement as soon as possible, and some clarity about the numbers themselves, either for the regions or as percentage breakdowns to local authority areas, would be really helpful as we plan the transition into 2026. 

Thank you very much. Thank you, Chair. 

Hannah.

Thanks, Chair. I was wondering if you could speak to lessons learned or perhaps not learned from previous incarnations of regional development funding. Perhaps if I go to you, Councillor Stewart, first and just ask you if you have any reflections on both the negative and the positive lessons that can be perhaps learned from, say, the shared prosperity fund and also EU structural funds, and how that can shape, perhaps, the local growth fund, to learn from that as well?

Yes, absolutely. Thanks. I think, look, if I start with the European funds, I think whilst obviously they were a bigger fund, and Wales did better as part of the European arrangements than we've done post Brexit, I think often there was a disconnect, which fed in clearly to some of the debates that were had during the Brexit debate, between local communities and the moneys that were coming from the European Union through the Welsh Government to schemes that did have a significant impact and benefit for communities across Wales. But I think, obviously, it wasn't as visible in terms of how that impact was taking place and how the funding was coming through. That's been one of the benefits, I think, of the shared prosperity era, which is we've had that more visible link as to the local direction of funds into local priorities. And I think that has been an advantage, even though the quantum of money, as I said, was reduced by the previous Government when they changed the criteria around the allocations.

What we lost as well as part of that was—. As I said, because the shared prosperity fund and this current fund are over a short three-year window, you lose the ability to be more strategic on some of those bigger programmes, then. That's one of the things where we could take learning into the current programme from the previous structural funds: having a longer time frame to deliver allows you to be more strategic, but retaining that local control, local knowledge and local targeting would give you, then, potentially the best of both worlds. So, those would be my reflections.

Thanks. And Councillor Berriman.

I don't think I've got anything to add constructively to that. I think that's covered the European funding in particular, which I would have drawn upon, in particular with the local growth fund not meeting the needs of rural areas in a way that that perhaps did. So, bearing in mind we're short of time, I'll leave it there. 

Thanks for that. And just one final question from me, then. Do you have any reflections on how effectively the shared prosperity fund operated? And are there any examples of good practice from the projects that you are able to share with the committee? It might be something the committee wishes to follow up in correspondence too.

Yes, Chair, if you'd like me to come in on that one, I'm more than happy to share the information we provided to both Governments in terms of how effective we believe the management of the shared prosperity fund over the last few years has been. I think the biggest challenge for us during that period was the fact that, whilst the quantum was announced early on, the details of how the funds would operate, how the structure would be set up et cetera—all of that was a lengthy process, and then curtailed the period of time that we had to deploy the funds. So, again, we're more than happy to share what the impacts have been, and we think that those are very positive. But it was impacted, I think, in terms of the fact that the fund did take a long time to get set up and get going.

Okay. Alun.

I'd be very interested, Rob, in seeing that document, actually, because we haven't had any real evaluation of the shared prosperity fund, and there was, of course, as you've alluded to, very little in the sense of objectives set for it before the money was actually spent. Objectives seemed to be set after the money was spent, and I think that was a profound weakness in understanding what the purpose of the fund was rather than simply to go out and do relatively minor projects. So, I'm interested, therefore, with these new funds being made available—how would you look towards ensuring that we have very clear objectives set before we start to do the work, and then how would you monitor that and how would you evaluate it?

Well, I'd start from the evidence base. As I said, we've got, certainly in my region, a really good basis of data that says, 'Look, this is what we invested, this is how we invested it, this is the impact it's had, these are the jobs created, this is the economic benefit of it.' So, at a regional level, we can certainly do that, and hopefully that will help inform the choices we make going forward. So, at a very high level from me, I'd be saying, 'Well, look, that's clearly worked—let's continue to do more of that.' If there is stuff in there, as there always is in any programme, that hasn't been as effective as you'd like, then we look at how we can improve upon that. I think, again, just talking at that high strategic level, clearly having more time to work up more strategic programmes would be a benefit. Having a larger quantum of money to deploy would be helpful. And having an ability to align our programmes with what Welsh Government are doing at a national level and what UK Government are doing on a national level will be of benefit to all. All of those things are sensible to do, I think, which would be lessons learned from what happened with SPF.

Sorry, can I come back on that? What I saw in SPF was actually repeating the mistakes, not learning the lessons of previous funding rounds. If you look at Objective 1, for example, back nearly 20 years ago now, you had the lessons learned from the evaluations of the Objective 1 funding round. That was then hardwired into the following round of structural funds, and those lessons were then dumped, if you like, forgotten, when SPF was introduced, and we went right back then to the beginning of Objective 1, in a very similar sort of structure and governance and objectives, and what we'd learned through evaluation of Objective 1 was that that didn't actually deliver on the longer term objectives. So, I'm a bit concerned that we're going around in circles here, that what we're actually doing is getting these slugs of money, spending them, looking at what has been achieved through spending a lot of them, reporting on what's been achieved, but not actually looking at what the impact is on society and the economy. And I fear that we're going back into this circle at the moment.

I don't entirely agree with that, certainly not from my understanding of what's happened in my region. Now, you may have other evidence from elsewhere that I'm not sighted on, but certainly when we evaluate it, both at regional and local level, we think there's a really strong evidence base there of how we have contributed to growth, how we have contributed to tackling some of the challenges that we see in our communities. But some of these things won't become entirely clear, because they're generational changes, aren't they? You have that ability to try and use the structural funds, which is what one of the aims of the structural funds was, to deal with those areas of deprivation and to bring those areas up to a level of prosperity, of growth, of opportunity. So, you won't see some of those impacts, certainly not over the two and a bit years that we had for SPF. But what I can show you and what we can provide is to say, 'Look, these are the impacts in terms of creating jobs, in creating opportunities, in creating the ability for local businesses, for local people, to obtain employment, for us to support people with the skills agenda'—those sorts of evidence bases to say, 'Look, that has happened and it's happened faster and to a greater degree than we'd seen previously.'

Okay. I would be interested in seeing that, and if you could send that to the committee, Rob, I think we'd be very grateful. 

Councillor Berriman, would you like to come in on the points that Alun Davies has been making? 

Yes. Thank you very much. I think, as a sector, local authorities have been a really trusted delivery partner. We've reacted very quickly. I think we've learned from—. You talked earlier about the high admin costs of some of the earlier European funding. What we do now with 4 per cent admin is highly efficient and effective. We turn things around in a way that is based on clear evidence that we've gathered at a local and regional level. There are some really good examples that have come out of it. I don't know whether they're all in Rob's paper, or we can add them through a further call. In terms of some of the funding, the longer the term over which you can do it, the longer the term you can change things structurally.

Just in terms of the foundational economy—so agriculture, forestry et cetera—across rural mid Wales, for instance, a lot of the emphasis has been on supporting farmers to diversify, to use what they have locally to innovate into manufacturing, tourism, et cetera, to add value to what we already have in a way that will sustain the rural economy, the rural way of life, and therefore the Welsh language. It's difficult sometimes just to say, 'That's had no effect'. Actually, we probably need to better evidence what that effect is. I'm really happy to ensure that we contribute to that by getting the measures for monitoring absolutely right. 

I'd be grateful for that. Just for clarity, Jake, I wasn't particularly worried about the admin criticism; I didn't think that that was especially fair in some of those earlier reports. But in terms of measuring these things, it would be useful if the two of you could provide us with this information, because I'm anxious not simply to measure activity, which is what we've largely done, but actually to measure the impact of that activity. But I'll leave it at that. 

Thank you. Thank you, gentlemen, for giving us your evidence this morning. There are a few questions that we would like to follow up in writing, if that's acceptable to you, and we look forward to getting the responses. A record of your evidence will be sent to you as a reflection of the evidence that we've received from you this morning. If there are any anomalies, please inform the clerking team, but that will otherwise form the official record of the evidence that you have given. Thank you very much and merry Christmas to you and your families. 

I appreciate it, Chair. Merry Christmas to you all. Thank you very much. 

We'll now move into private session while we change the room around ready for panel 3. Thank you. 

Welcome back. We're back into panel 3 of our evidence gathering for our inquiry on the local growth fund announced by the UK Government and the Welsh Government. We have three witnesses before us for the final session of today. Thank you for coming in and thank you for joining us on Zoom. First of all, before we go into questions, I'll ask you to introduce yourselves, and then we'll go into the questions. I'll begin by inviting Josh to introduce himself and the organisation he represents, and then Brian, and then we'll go to the screen.

Bore da, bawb. I'm Josh Miles. I am the head of Wales for the Federation of Small Businesses.

I'm Brian Hughes. I am founder of a business called Regeneras, which I founded back in 2014, 2016—around that time. I'm a former university lecturer in the school of design in Bristol, and I'm a Welshman from Gorseinon.

Thank you, Brian. Lowri.

My name is Lowri Owain, manager of Cadwyn Clwyd. We're a third-sector organisation based up here in north-east Wales. We span back to the previous century delivering community initiatives such as LEADER and, more recently, the shared prosperity fund. Diolch.

Given what we know about the local growth fund, are you in agreement with the objectives that have been set, or do you believe that it needs a reboot in the limited time available before its introduction in April next year? I'll begin with you, Josh, and then I'll go to Brian and Lowri. 

The local growth fund structure that's proposed I think is a good one. It's good progress in a lot of ways from a strategic perspective. I think there are a couple of challenges. One is, which I'm sure we'll get on to, the amount of funding and the number of priorities within it. There are quite a lot of priorities in there, which means that deciding how to spread that funding across those priorities is going to be a real challenge, particularly when you look at the strategic themes. Each one within those has four or five practical actions within them. So, if we were to make changes, I think it would be to try and prioritise a little firmer within it on some of the actions included.

As a direction of travel, I think it's right. I think all plans get altered when you're in action, so to speak. That's inevitable as you start to move down the track and so on. But in general terms, we believe that it is the right direction. I think, as you move forward and that becomes more matured, if you like, then you start to look at it in more detail, more granular, and see what is the best way forward and how it can best be achieved. It's a chunk of money, but it's a very small sum of money, given the scale of what's needed. I think one of the things that one needs to do is to look at how that money can be multiplied, leveraged, if you like, using the terminologies of the financial markets, so that it can become double, triple, four times what is coming in—it just becomes your deposit, which you can then leverage and make it work and gain more traction with it.

I agree broadly with the four priorities provided within the local growth fund proposals. It does place a strong emphasis on boosting productivity, which is welcome. However, as a third-sector organisation, we do feel there needs to be a balanced approach with local delivery and local economic development, community-led economic development, and, in particular, the issue of revenue funding in terms of capacity building on the local level.

Also of concern is the rural aspect, generally, of the programme. I'll briefly refer to the economic review undertaken as part of the LGF. The Welsh index of multiple deprivation data clearly indicates that rural Wales is within the most deprived 10 per cent in relation to access to services, and I feel the proposed approach doesn't give sufficient focus to tackling rural issues such as access to services. The WIMD data certainly underlines a need for intervention to tackle rural development and rural poverty in the context of transport, access to services and barriers to employment, et cetera.

Given the importance of this scheme for developing regeneration in communities going forward, it's going to be the main driver of Welsh Government regeneration in schemes with the money that's available, and so it's important that discussions were held with organisations prior to its announcement. Can you give the committee an idea of the level of communications that you might have had with either the UK Government or the Welsh Government in helping inform and develop the scheme before its announcement? Because we've heard this morning from other witnesses that they didn't seem to have much involvement at all. Josh, you first, and then we'll go the same way.

I'm quite new in role so I may miss things that happened before I took up the role. I've been in place for two and a bit, three months. But our main route into this discussion has been a colleague of mine who sits on the regional investment steering group, I think, or one of those groups, which is great from our perspective, it's fantastic to be involved, but I think that's the extent of it. I think on the bigger question of how you engage businesses beyond just organisations like us, a little less has been done there, and maybe it's something to do as we look at the delivery model rolling out in the future.

Nothing at all, unfortunately. The first I really engaged with it was when I looked it up on the internet and downloaded some of the documentation. So, no direct involvement in shaping it. I'd like to think that we could help shape it now, thanks to Jenny, who I met on the train coming from London—it was a bit like a Brief Encounter moment. [Laughter.]

We do believe that we have now a great deal of expertise because of the work we've been doing in America, which has been our main focus, particularly working with the the Indian tribes in South Dakota. So, most of our activities have been in south-western America, et cetera, looking at the reservations. That has taught us a great deal, because these are really deprived communities, people in places like Pine Ridge, et cetera.

What was interesting when we got involved with the tribes, first of all the Sioux, then the Navajo and so on and so forth, is how similar it was to Wales. It doesn't sound very similar to Wales, but it's exactly the same. The same issues, exactly the same issues. Isolated communities. So, we started working with with the Sioux nation and looking at ways in which we could enable those communities, isolated communities, right at the end of the grid, to find a way to create economic regeneration.

Subsequently, we've been working in the rust belt at South Bend, Indiana. Americans always have great names for places. This is the rust belt, and American industry is pretty brutal in terms of, 'We're not making any money, we're leaving', and—

I'm sure the experience will come out in questioning. We're just trying to elicit a taste of what engagement the Welsh Government and the UK Government had. I think from your initial answer, very little to non-existent.

Very little, yes, if anything at all.

Thank you very much. Lowri.

Again, I think it's been limited from our perspective as well. We've attended a Welsh Government LGF regional consultation workshop online, and, obviously, we'll be responding in writing by the close of play tomorrow in terms of the online consultation. But we also recognise the need to ensure that you have things in place by April, so it's a balanced approach, isn't it, to the consultation requirements, but also that we hit the ground running in April.

Final point, and I'll go to Brian first and then go to Josh, then Lowri. We know that the quantum of money is going to be less with this particular scheme, in particular money drives activity, not necessarily drives outcomes, because obviously you need the management of the scheme to do that and you need to have the priorities right at its start. But what level of impact, in your experience—and it was interesting listening, Brian, to your experience in America—will the reduction in the quantum of money have on the achievements that we all want to see, which are more prosperous communities and more sustainable communities here in Wales? Brian.

I think the money is one thing; it's how you apply it. It's all about how you use the money and if you use it as intelligently as possible and get the maximum benefit out of the funding, and you create schemes in which others want to invest. I'm a great believer in community involvement and enabling the people to participate. There's an awful lot of, it's called 'impact investment', I don't really like the term, but there are an awful lot of institutional funds stacked up with nowhere to go because there aren't the schemes there for them to invest in, and that has been a problem. So, I don't think it is—. It limits your beginnings, but it doesn't limit the outcome, if you're creative with what you do with it and you set very clear objectives as to what you want to do. Clarity is everything, particularly for the investment classes, if you like.

Okay, thank you, Brian. Just a 'yes' or 'no' answer, if I may, before I come to you, Josh. Do you think there's clarity in the outcomes that are listed here that the two Governments have set?

I think it's a policy document. By its very nature, it is going to be broad based, so I think it needs tightening up, and there has to be an operational side to the money: what are you going to do with it, how are you going to do it, how do you achieve, through the application of the funds, the things that you want, which are community productivity, community growth, et cetera, jobs, all the good things that are in the paper?

Thank you. Josh.

I think, around this table, we've probably got 25 to 30 years of looking at regional funding and seeing what the overall impact has been. We've been through Objective 1 in the past, we've had the shared prosperity fund, the European social fund, European regional development fund and this is the latest episode in a long chain of policy discussions. We've always had the debate about how much impact has it really had. For a lot of those programmes, productivity was at the top of the tree when you looked at what the strategic objectives were, and if we're being completely honest with ourselves and we look at Welsh productivity today, our labour productivity is still bottom of the UK league, our overall gross value added or productivity levels are pretty much where they were 25 to 30 years ago. So, on that measure, we haven't quite achieved success yet and having less money is not going to make that any more likely, I think.

The main thing from that—and we can get on to this in a minute—is that we learn the lessons from that and we think about, 'Well, what is it through that journey, through the tide coming in and out on different policies, that we can take that can really add value?' And I think we've got a lot to say on that, haven't we? We've seen what that experience has been like and some of that is captured in the draft strategy. But let's be under no illusion: this isn't the policy lever that's going to change Wales's economic fortunes; it's a supplement, not the answer on its own.

Thank you. Lowri.

Yes. I think it's going to have an impact in terms of delivery, less funding, bearing in mind that the EU funding elements didn't cover just the structural funds, it was the rural development plan and the community initiatives as well. So, the lack of funding in comparison to what we had previously will definitely have an impact.

Also of concern in terms of the funding levels are the proposed structures, that we potentially have four or five stakeholders before the money trickles down to businesses and grass roots and community groups. We have the UK Government, Welsh Government, the proposed corporate joint committees and local authorities, so there is a concern there that there could be a potential management cost that is taken out of the fund, and therefore less fund in terms of local delivery, and less funds trickling directly to businesses and communities.

Thanks, Lowri. Jenny.

Thank you. To some extent, the policy document is a bit like motherhood and apple pie, but with only three years funding, there's got to be some focus on what do we want to do and how are we going to achieve it, given that we don't seem to be able to have much influence on the framework. The first panel was talking about learning from the past, what worked, what didn't work, and not losing the expertise built up in the last iteration, which is a danger here. So, shall I start with Josh? And then I'll come to Brian. 

Yes, I think the expertise point is a really important one. In the transition from European funding to SPF, there was definitely a drop-off in the people, the staff that were doing this in different organisations, and then that's needed to be ramped back up. I think the main lesson from that is one of scale. So, we moved—. We've been through this cycle a couple of times, actually, haven't we, when you think about it. We've gone from a very local scale in the first tranche of European funding many years ago. We ended up having a much more strategic regional focus by the end of that programme in the late 2015s, whatever that period was. We went to SPF and we've gone back to local again, and now we've got a strategy that's looking a bit more strategically, nationally and regionally.

So, there's a really important lesson there, but the key thing is we keep longevity and we're really focusing on narrower interventions, I think, rather than, as you say, motherhood and apple pie. I can give you an example. From our perspective, we would put the competitive business bit at the top of the priorities, and the other ones should feed into that, by and large. If you think about supporting businesses, there's a bit in the document around start-ups. We already have policies focused around that through Business Wales, through the development bank. We need to make sure we're not reinventing the wheel with this money, and we're putting it into the existing policy landscape we've got, so that we're adding value rather than duplicating, I think.

So, we're also in danger of not doing any better in terms of cracking that productivity and the inequalities overarching objective. So, if we just do more of the same, it won't necessarily lead to different outcomes, will it? 

I think that's a fair point, yes, and another question in this is evaluation. What's the evaluation we've got on what worked on SPF? As far as I understand it, there isn't a Wales-wide evaluation of SPF programmes that tells us what worked and what didn't, and that's a major issue, and one we can address in this next tranche of funding. I can't remember the figure off the top of my head, but business support, I think, returns something like £18 in productivity for every £1 invested. Double-check those figures because it's off the top of my head, but we know it works, so sometimes more of the things that work is a good thing, but we've got to be judicious, I think. 

Okay. Brian, thank you for your paper, which obviously has a very fresh look at what we could do. So, how do you think this might fit into this straitjacket of three-year funding?

We've got to make a start, and as soon as possible, to maximise the time available. As I said earlier, we have now a lot of experience of working with communities, isolated communities, et cetera. We're working with a community here in Wales at the moment. I can't mention their name because we haven't tied anything up with them yet. But what we do as a company is essentially create the framework, the infrastructure for business to have an advantage. If you can give a business a head start—cheap energy, low-cost energy, low-cost accommodation, et cetera—then you're giving them a head start.

Also, finding businesses that have the potential to succeed. We're very focused, for example, on food production, because it's non-negotiable. You have to have food. And that was very much the thrust of what we were doing and still are doing in the US, linked interestingly with edge computing for AI, which is a relatively new development. But it's creating a plan. There has to be a business plan. What can you do with the money? You've seen the document, which is obviously written from a regionalist perspective of what we could contribute to isolated communities, et cetera. And not just in former industrial south Wales, the Welsh Valleys, et cetera, but bringing opportunity into rural communities. The point that was made by Lowri fell on very receptive ears, because they are communities and they do get forgotten about, because they live in nice places, but these are communities that struggle with all of the services that we kind of take for granted. So, I think that there has to be a cohesive approach, and you've got to use that money quickly and to its best advantage, because it's easy to fritter it away. 

Okay. So, when I asked the leader of Swansea about decarbonisation, he instantly started talking about the decarbonisation of homes. That's absolutely fine, we need to do that, but the point is how on earth do we actually see the bigger picture, which is that, the current system, the national does hugely well out of, as well as the distribution companies of energy, but the money doesn't stay in Wales though. So, how are you going to convince some of the key players, which obviously are going to be leaders of local authorities, that they need to have a much more strategic approach to all of this?

In the conversations we've had thus far, whether that is in South Dakota or here in Wales, or New Zealand—we're working with a group in Rakaia—if you've got a compelling proposition, people are not stupid, they'll accept it. They'll say, 'Okay, that makes sense. You can produce energy here at scale and it's at a lower cost than we can import it from the grid.' That gives you, as a business, an edge. It gives you the ability to start up quickly, not having to wait for the grid to reinforce itself with how many billions were announced recently, et cetera. Because the big problem with renewables is that you can't get access to the grid, you can't get a connection point. Our position is that we don't need it, we don't want it. It's a bit like, in rugby terms, the referee saying, 'Use it or lose it.' So, we make it, we use it, we don't have transmission losses, we use it at that location for the benefit of the people living there.

Housing can be decarbonised. The simple way to do that would be to mandate that every roof in Wales has solar panels on it, and it's provided free of charge and paid for through the meter. So, there are ways of doing that. Houses actually don't produce that much in carbon emissions, homes, particularly if they're well insulated. The problem is industry, commercial offices like this, with air conditioning; these produce lots of carbon emissions.

Okay, but this building is going to be taking heat from what used to be called Celsa, or is it the—

Has that happened? It's 7 Steel now. 

But they haven't got the money to expand that heat network into the local community in Butetown. So, all of this money that you say is sitting around looking for good projects, how are we going to—

You can probably see that we did a project for Celsa Steel, which is now 7 Steel, it's owned by a Czech company, I believe, and that was looking at capturing their waste heat. It was interesting, when we were consulting with them, their energy bill was £7 million a month, and during the energy spike it went to £12 million a month, and they know that 50 per cent of that energy goes straight up in the air in the form of heat. So, we looked at their process. And when I was a student, many years ago, I worked for a company called Duport Steel in Llanelli, and the most terrifying months of my life were spent in that location. I was aware of the fact that the steel production process produces 15 per cent slag, which they tip into a slag pit. Again, I had to dig them out when they were cooler. That's 15 per cent of the energy that's just being tipped away; it goes into a slag pit at 1,500 degrees centigrade. So, we looked at that and we said, 'We can capture that. We can capture that relatively simply. We can carry it away into an energy box on the site, and we can then store that in a sand battery'—sand batteries give you five months of long-duration storage without any losses, et cetera—and then we can use that energy for something. The—

So, just coming back, because we've got the local growth fund, it's a three-year project, and local authorities look like they're planning to continue with what they're already doing. How are we going to change, if you like, the—

I think you've got to change the narrative. You've got to say, 'What are you going to use the money for? What's the best use of it?' Taking the heat from Celsa, 7 Steel et cetera, the problem with all—. Let's regard it as geothermal. So, you've got to bring the heat somewhere, you've got to dig up roads et cetera. Retrofitting buildings with that kind of heat is expensive—this is extremely expensive. If you start afresh, a new build, then you build it in, it's designed into the system, then you can capitalise it. Because there's a lot of geothermal energy underneath Cardiff that's been known about for some time, but it's been in the news recently. But it's the retrofitting that kills it, because you're retrofitting homes.

Okay. Interesting conversation, but we need to move on. So, Lowri, what do you think ought to be the priorities for north-east Wales in terms of the local growth fund, because, obviously, it's pretty broad. What do you think are the things that north-east Wales are going to put forward as core, as key? 

In terms of the four priorities, I think they're pretty well covered in terms of the types of projects that we would look to develop. To answer your question from a third sector perspective, the types of projects that we would be looking to develop are community-led projects. [Interruption.] Sorry, excuse me. We've worked on the— 

Chair—?

Community-led projects.

Okay, community-led. Sorry, I hadn't—. Yes. Okay, go ahead.

We worked on the SPF in Flintshire and Wrexham, helping community groups to access the funding for community services, community buildings, community enterprises, and the wraparound support that we've provided has been invaluable to get those projects off the ground. In Denbighshire, we've delivered, under the SPF, a business support programme, and the types of projects that we have delivered under that project and the types of projects that we see there's a requirement for going forward, are, essentially, small-scale business grants and also collaboration between businesses, so, businesses are coming together to work on joint projects. 

Shall I just interrupt? Obviously, you're welcome to send us some written information about the specifics, because I've not heard of your excellent grass-roots activities before. If you were pitching for the local growth fund, what would successful delivery look like, if you were successful? 

It's having that grass-roots, wraparound support. The point has been made by previous speakers in terms of the lack of revenue element. I think it's important that we have sufficient revenue to enable projects to be developed. But Brian I think—if I've got your name right—covered previously, in terms of the energy sector, certainly on the community level, that there is a requirement or there is a need for the developmental aspects of those projects. Cadwyn Clwyd has developed the initial aspects of the Bonwm hydro project in Corwen, and also the Corwen hydro project. What we've found in those types of projects is that there a need for that risk element, so that initial development work. Finding the capital to actually implement them hasn't been problematic as such, but it's just doing that initial development work, taking the risk away from communities through that feasibility work, enabling them to get to the point where they are in a position to implement the capital elements of their projects. So, I think there's a requirement for a lot of hand-holding to help community groups through the process, but that also applies to the business sector as well. Some of your speakers referred to community-led local developments earlier as well, and I think that's such a catalyst to get community groups energised and to think of projects. How can they change their own situation for the benefit of their own local economy and social benefit as well? So, I think it comes down to empowerment. So, in terms of the revenue element, that's vital, and there should be a progression then to capital delivery.

Thank you. So, very briefly, what does successful delivery look like? Both from Josh and—.

Yes, I want to come back on some of that discussion as well, because I think, look, we're talking about productivity here. We had a long discussion; we've got a member council with a group of members, and they were like, 'Everyone's talking about productivity, but what does that mean for us?' And we ended up with the term 'real-world productivity’' and they were like, 'It's simple: you get more out of it and you put less in’, and it's as simple as that. And that can mean lots of different things to lots of different businesses. I think, with this, that's where our starting point needs to be. If this is about improving productivity, we need to find those opportunities, and we need to fund those, and the organisations themselves are going to know where those opportunities are. We've just had a really concrete example from Brian in a steel context, where there's a productivity gain from capturing heat. But you can ask every business, or a lot of businesses in Wales, and they’ll say, 'If I could do this, it would make me more productive.' So, the delivery mechanism has to be outward looking and trusting the organisations, be they businesses, social enterprises or whatever else, to say how they think productivity could be improved.

If we go down a route of having fund absorption, and it's given to the local authorities and they think, 'We'd like to decarbonise houses'—a really important issue, something we need to do—is that answering the productivity question? Are we missing an opportunity?

Well, it is, because of less sick people.

Okay, I want to move on to Alun's set of questions now, because, as usual, that clock doesn't stop going, it doesn’t. Alun.

Yes, in terms of where we are now, is the business support provided through a fund and adding value to existing support, or do you think that we need to actually change the way in which we are delivering support to businesses?

Do you want me to go first?

Yes. Sorry, I’m looking at you, so—.

Yes. Look, the economic geography of Wales is a bit of a mess, isn't it, if we're being completely honest. We've got local authorities doing lots of things, we've got city deals, we've got CJCs—sometimes they aren't the same thing, although that's the direction they're going—we've got Welsh Government having nationally backed programmes, and we've got UK Government doing stuff as well. It's complicated, and the businesses on the other end of it don't really know where to go for what, or don't really care, to be honest. So, I think the proposed plan here is a step in the right direction, or could be, in that at least it's setting out clearly who does what, and there is scope there for national-led interventions around brands we know work: Business Wales, the development bank, those kinds of things. But the proof of the pudding is going to be in the eating. If we end up saying to CJCs, 'Here's a chunk of money', and they go off and set up their own business support service, again we're just going to be duplicating something that already exists. So, I think the onus has to be on Welsh Government to be really clear and say, 'Use the mechanisms we've got. By all means tailor it or add to it or do something different to reflect your local area as a CJC, but please don't reinvent the wheel.'

Okay. So, you'd be—. I'm trying to take this forward a bit, Joshua. I don't disagree with your analysis, by the way. I think describing it as a mess is probably very generous. But how would you, therefore, look at what a better system would look like? Because I think it is easy to criticise what we're seeing at the moment; I think that's the easy part of it. So what? So what would the opportunity of these new funds, then, provide us with in order to create a more coherent and streamlined system?

Again, the devil's in the detail, isn't it? It's hard to do, so it's a good question. Let's take Business Wales and business support as an example, right? If start-ups are a priority, and we think they should be, we've already got that start-up service that exists. So, you might say to CJCs, 'Here's the baseline contract. This is what exists in your area. What is it you want to do on top of that? And we will contract that in via Business Wales.' That could be a really practical way of doing it. They could come up with their own strategic priorities, add resource to that scheme and then we could see it delivered. That might look different in different areas. You give them the contractual space to do that. I think that's the model that you probably would have to have if you wanted to have national models of delivery but with regional variation within it.

Okay. What about—?

Could I just return to the witnesses in the room? I'm anxious that not only do you establish these funds in a way that is in line with what we seek to achieve, but that we set very clear ambitions and very clear targets for these funds, and we do that in advance, rather than simply just count what we've already done, which I think has been one of the issues we've had in previous funding rounds. So, how would a review seek to establish very clear targets, very clear accountability and very clear means of evaluation of the value for money to the taxpayer, as opposed to in terms of the impacts that the funding is having in the community or in the economy? Do you want to—?

Everything we do is place based, so we look at the place in great detail. I was talking to Josh when we were waiting in the pen that's outside. 

It's a very nice pen.

I was saying this before we came in—

We've got to live in these pens, you know. [Laughter.]

—we were herded in et cetera. It's all about the community, it's all about the place, it's all about what can we do. We've spent the last six years developing our AI capability, which allows us to look at anywhere on the planet, almost, and extract meaningful data that we can then use as part of our strategy: what are we going to build, why are we going to build it, what's the need, what's the output in terms of the product? Jobs are everything. If you haven't got jobs, you haven't got wage packets, you can't rent your home, you can't do anything, you're stuck, there are no tax revenues that come from it, so jobs are everything.

So, I think you can take a very soft approach, and we know, don't we, that all of the business support and so on, with a few exceptions, I would say, has been wasted money. It's just a complete waste of money. If you were in business—

Say that again. Sorry, say that again, what do you mean by that?

If you're in business, you know your business, you don't need to have a consultant come in to tell you how to run your business. You might give a different perspective, but for me it was always a complete and utter waste of time, and I would say that's similar for my contemporaries.

So, you've also got to look at what's the quality of the advice that's being given. Meeting a university lecturer—I used to run a university department—and him telling me, 'Well, what you should be doing, Brian, to make your business—'. He's got no experience in business. So, it's an empty shell. So, you can put the conch to your ear and hear noise, but it's meaningless.

And I'm sure Lowri's done a great job, but—

Can I stop you there? I think there are a lot of management consultancy companies that have become very rich over the years, doing exactly that, so that might be contested, but my question was different, though, and that was: how would you establish value for money? We can have a conversation about the value of management consultancies over lunch, but how would you establish value for money for the taxpayer for the management of these funds?

Well, first of all you've got to decide how you're going to apply the funds, what you're going to do with them. Is it going to be soft or hard? We just talked about the soft one. So, you say, ‘Well, we're going to build a business, and we're going to build a business here, and these are the reasons for building the business here, because we've done a feasibility study’, and I echo Lowri's comments about, if you're in business and you're trying to get a development project off the ground, there's the gap of death, as we call it, where you have to fund all of that feasibility study, not knowing if it can go ahead because you're controlled by planning. And so it's very speculative. You have to create a business opportunity that people can buy into. If you've done your homework, then you can measure it. How many people have we employed? What is the profitability of the business? What has been its impact locally? How many people do we need to train to run the business? And so on and so forth.

I'm looking around because we are running out of time. 

I'm going to have to move it on, I think, because I think the evidence that you've given, Brian, is very strong. Your point about consultancy is very, very well made, and I have a lot of sympathy with the points that you've made. [Interruption.] Yes, exactly, I agree. Sam.

Turning to Brian and Joshua here in the room, and this transition from SPF to the local growth fund, are you, in the sectors you're representing, content with the clarity of this direction, what that transition means, what April means in terms of that? Josh, I can see you nodding there. Is there enough clarity, or is there a little bit of, 'Fingers crossed, actually, in the new year, we might start hearing things'?

I think that there's enough clarity on the intent in the policy and the direction. This is about moving things to a much more regional basis than they were with SPF, and we think that that's the right direction of travel. It's also about having national programmes within that, and again we think that that's the right direction of travel. The devil is always in the detail. They're going to have a year of transition, by the sound of it, but ultimately there's a balance to be had between maintaining the expertise we've got at the moment and moving to something new. We have to move to something new if we want it to do something better than what was happening previously. So, it seems reasonable to me. 

Okay. And that's what FSB members are saying as well—

Look, FSB members are not the people who are going to be absorbing this funding directly, they're going to be the recipients of the programme or people delivering it. 

And they've had an opportunity to feed through to the FSB what they would like to see from this?

They wouldn't think about it in those terms, would they? So, the whole business, from our perspective, they don't really want to know about what this fund looks like, because they're going to be accessing business support services in their area and want those business support services to work. So, from our perspective, you don't want a dip in service as things go, but hopefully new things will be added as you move on.

But then that private sector voice is important in that discussion, is it not?

It's absolutely crucial, yes, it is, and as we move to a regional model of delivery, it's incumbent on the CJCs to set out how they're going to bring that private sector voice into the discussion. It's not there at the moment, for sure, but it needs to be there. 

Okay. That's helpful. Brian, anything to add on that?

I think that Josh has said it all, really. The direction of travel is correct. We would certainly support that. I'm in the private sector. Our role is the building of infrastructure that enables others to benefit and to move on. So, we're very clear about what our role is in terms of how we can create more productivity, more jobs et cetera, through cheap energy, net zero et cetera, which enables businesses that would be tenants, if you like, within the facility to have an economic edge.

So, the direction of travel is there and you're content that that's the right direction to go in, this more regional basis. In terms of April and that transition that we've been talking about, is April okay as a date?

As long as it's not 1 April. [Laughter.] Yes, I would say. It's a date, you work to a date. It could always be the night before.

So, you wouldn't like a longer lag, you wouldn't like a shorter lag. 

There's always a degree of inertia with any organisation and policy et cetera. You've got to live with that, and it's up to the individuals operating it to reach it on time. 

Josh wants to come in. 

Yes. Let's look at what didn't work with SPF, because I think this is illustrative. If you take a programme like Multiply, Multiply is fascinating on so many levels and the evaluation of that was going to be really important from a Wales perspective. There was lots of money put into that programme in Wales, far more than anywhere else in the UK. Local authorities in Wales got the money very late in the day—I think it was November or December-time—and they had to spend it by the end of the financial year. That is a crazy way to do a transition. Nobody spends money well when they've got five months to get it out of the door. It bent all of Welsh Government's existing adult learning budgets out of shape and ended up creating all sorts of weird types of stuff being delivered. Granted, some of it was great, some of it was experimentation and some of it will come back as useful learning, but that's not how you do a transition. How you do a transition is that you say, 'This is where we're going. We accept that we need a year in between where local authorities are still going to be in the driving seat, but they need to be working towards this regional perspective. We're going to set clear targets', as was mentioned earlier on, 'and be very clear about the evaluation methodology on it', and then you drive forward with it, I think.

Okay, thank you. Thank you, Chair.

Luke.

Diolch, Cadeirydd. I'm conscious of time, but what I would be interested in just exploring in this brief amount of time we have is how the funding is allocated geographically, taking into account some of the challenges that differ between urban and rural areas, and ultimately then the different priorities that are going to be in those areas as well. So, my question, really, is: how would you see the funds being used to tackle some of those geographical area priorities and issues that are across Wales?

Do you want me to go first, yes?

Yes.

So, ultimately, if we're saying it needs a regional footprint, we have to back those regional bodies to have strategic oversight of what they do and dictate that spending on a regional basis. That means we need to move away from thinking, 'There's this much for this local authority, there's this much for this local authority', and that way, we end up with all these little different small projects; it has to have scale, and it has to be strategic. We've created this tier of government around CJCs; this is one of the few instances where we're giving them a budget to do something, so let's let them do it on a regional level and hold them to account for that, I think.

As to how you divvy it up between the regions, I'm sure there are all sorts of different formulas you could use that would create all sets of winners and losers, so I haven't got a perfect answer for you on that. But if productivity is the driving measure that we're talking about, that has to be one of the key things in it, I think, as was the case a couple of programmes ago when we had the GVA discussions.

Brian.

I'm echoing what was said, really. If you're going to apply funds, apply it where you can get the best return economically: economically means the jobs; it means the output. Just sort of looking across Wales and saying, 'Well, we've got this much money, we're just going to divide it by the number of authorities': complete and utter waste of time. Identify where the money would be best used, and then put it there and put it for a purpose. It has to have a purpose and it has to have clarity of purpose, because if you haven't got that, it's all disappeared within 12 months.

And the funds become incredibly small by that—

You have to have scale.

Yes, scale is the important part.

It's the most important part. 

Thank you. Hannah.

Diolch, Cadeirydd. I'm conscious I'm almost on minus time now.

Well, we can go on forever now. [Laughter.]

I'm sure our witnesses don't want that. [Laughter.] I was going to touch on what I've done in the previous sessions around lessons learned, both positive and negative, from previous incarnations of regional development. I think you've probably touched on some of them in your previous answers already. But are there any things that you think we should be aware of that you haven't had the opportunity to mention, and how do you think that should influence perhaps the local growth fund to improve it? I'm just going to pick on you first, Josh.

Yes, okay. So, the points have already been made around feast and famine, about funds stopping and starting, and the issues that causes. Three years, it's medium term, but longer term would be better, wouldn't it, in as much as we can do it. The point about evaluation is a really critical one.

The budget split: we haven't talked about the capital/revenue split. So, it's actually pretty small on the revenue side, which means it's going to do different things to what previous funds did. And when you look at those four priorities and you think about how you spend capital, you end up going much more towards things like infrastructure, green investments, green energy and transition. So, maybe let's be honest about that, and again, rather than trying to do lots of different things, focus in on doing a couple of things really well, with good targets and a good evidence base behind it, I think. But we've got loads of experience. We've been doing this for years. We should know what works by now and we should have that evaluation base to build on.

Brian.

Can I just answer to Lowri? I completely agree with the rural communities issue. When I say, 'Get the best economic return', I believe those economic returns can come in those disadvantaged rural communities as well. But it is about focus, it's about saying, ‘This is the pot of money. Where are we going to apply it, and what's the best return?’ And you want the return to be social, economic and environmental. Those three things are linked together. But, ultimately, if a business doesn't make money, it folds. And you can't keep on supporting businesses with public money forever and a day. You can't. It has to stand on its own two legs. And that's really how I think the money should be focused: a reasonable number of projects that give the best return. I'll take the word ‘economic’ out of it for a moment, but give the best return across those three headings.

Thanks. Lowri, are there any further examples of good practice that you want to highlight before we finish this morning that you think should be supported through the new local growth fund? 

I think in terms of good practice from the previous fund, in terms of its structure and management, there was a good mix of both capital and revenue. That needs to continue. Obviously the revenue issue has been highlighted many times this morning. The SPF also provided 100 per cent funding, and given we've got three years to deliver this programme, it's still not a long period in terms of project delivery. Having to find match funding at the local level can delay projects and can also sometimes skew projects away from the original priority, because sometimes you have to be flexible and skew projects towards the requirements of match funding. So, having that 100 per cent funding would help enormously, but naturally, we would, as organisations, seek to lever in additional funding to complement the local growth fund.

Very briefly as well, I think one thing that hasn't been touched on this morning is the proposal to deliver the local growth fund through the current structures in year 1 and through the CJCs in years 2 and 3. I think it's vital that we don't end up with two mini programmes, so we lose the benefits of that seamless three-year programming period. I think that's been highlighted as well in terms of how SPF has been delivered, especially the last 12 months, where there's been a very concise and short delivery window. So, not to carve it up into two mini programmes under the local growth fund. Diolch.

Diolch.

Thank you, Hannah. Thank you, witnesses, for your evidence this morning/the afternoon now. We've gone past 12 o'clock. It will greatly inform, obviously, our deliberations when we're forming our conclusions around the local growth fund. Brian, thank you for dropping the papers in—

No problem.

—which have been particularly helpful, and obviously an insight into your workings. A Record of Proceedings will be sent to all three of you to confirm that the evidence given is recorded correctly. If there are no problems with that, that will form the official record of the evidence that you've given us. If you have concerns, please speak to the clerking team. But, with that, thank you very much. 

You're welcome. Thank you. 

Thank you, diolch yn fawr. 

Diolch yn fawr.

Could I invite colleagues to note the papers to note, please? 

I thought the one from Rent Smart Wales was very interesting in terms of identifying that the enforcement arrangements in the Housing (Wales) Act 2014 didn't really have any levers of enforcement, which we may want to reflect on in the visitor levy Bill.

That debate is actually the first week back we have, then. Our report has been taken on that. Any other points out of papers to note that anyone wants to raise? Okay.

Could I invite a Member to propose, or I'll propose and ask for a seconder, to go into private session?

Agreed.

Agreed.

I haven't got to read a specific note now, have I, Rob?

No.

No. That's all right. We'll go into private session.