National Assembly for Wales

Welcome to the Equality, Local Government and Communities Committee. The first item on our agenda today is introductions, apologies, substitutions and declarations of interest. There's one apology from Caroline Jones, and Mandy Jones is substituting for her this morning. Leanne Wood isn't yet with us, but we expect Leanne to join us shortly. Are there any declarations of interest? No.

We will move on to item 2, which is a preparatory evidence session on local government budgets ahead of this committee's scrutiny work on the draft Welsh Government budget. I'm very pleased to welcome here today Michael Trickey from the Wales Centre for Public Policy, Emma Taylor-Collins from the Wales Centre for Public Policy, Cian Sion from the Wales Governance Centre, and Guto Ifan from the Wales Governance Centre. Welcome to you all. Thanks for joining the committee this morning.

Perhaps I might begin with the first question, which is on the local government settlement, and, really, the extent to which an 18.9 per cent reduction in Welsh Government grant support for local government in Wales between 2009-10 and 2017-18 has been manageable for local authorities. What would be your general comments on that?

John, can I just say that I'm also connected with the Wales Governance Centre, so I'm, in a sense, wearing both hats? By and large, the governance centre team—Cian and Guto—will be doing the more numerical stuff, and Emma's going to talk about some qualitative research that she's done with chief executives and others in local government. So, there are two slightly different angles on this.

I suppose the good news is that we haven't had the kind of collapse or meltdowns in local government in Wales that we've seen in one or two local authorities in England. So, in a sense, the system has survived the shocks, but it's not been without cost, and maybe Cian and Guto could just talk about the numbers and then Emma could talk about one or two of the other aspects.

Yes, sure.

So, I do think that the decision made by the Welsh Government not to impose a formal cap on council tax increases has meant that local authorities have been able to rapidly increase council tax to offset some of those cuts in Welsh Government grants. So, the value of Welsh Government grants has fallen by £1 billion in real terms since 2009. Council tax has increased by £300 million and business rates by £50 million, so that leaves a hole of around £650 million in real terms, and that's, of course, before taking into account the growth in population over the period.

In terms of how manageable it's been, I think the main story in terms of what councils are spending the money on is the fact that social services and education now take up a much larger share of their budgets. So, back in 2009, it was around two thirds of their budgets—those two areas were around two thirds of their spending—and now it's around three quarters, so it's definitely been a case of cutting back in other areas of spending and managing the cuts through implementing cuts to other areas.

So, to the extent that local authorities have been able to manage the fall in Welsh Government grants whilst retaining the same level of provision, I think the truth is they probably haven't—they've had to make cuts elsewhere.

I would just add, our research was conducted about 18 months ago, so just bear that in mind when you're thinking about the findings, but lots of the early changes—. We asked councils to look back over the last five years and how they'd approached austerity, and lots of those initial responses were things that didn't really impact the public. So, they were the, kind of, back-office changes that were being done, which affected the councils internally, and we can talk about their reactions to those, but in terms of what that looks like to the public, a lot of that was, sort of, done in a back office. 

So, are we talking there about job losses, but not what would be termed front-line staff?

Yes. I mean, we didn't get into the specifics of the job losses, but maybe Cian and Guto can get to those. There were mixed views and, again, this does change depending on when you're talking about. So, we asked about looking back over the last five years and in the early days, and, actually, there was some acceptance from the councils that we spoke to that probably some of those job losses were necessary, that actually there were, for example, huge management teams that probably weren't necessary, but now they've got to the point—and this is the focus of our report—where those cuts have been done and the staff that are there are the ones that they need to keep going in order to maintain council services.

I see.

We need to be careful about the staffing issue, because, actually, the cuts—. Our greatest staffing cuts have affected front-line services, but it mostly seems to have been in the unprotected service areas. So, the constant theme about all this is that by and large—by and large—social services and education are broadly protected, but all the other services, culture, leisure, amenities, economic development and so on, are all taking quite a big hit. And that's reflected in staffing reductions as well, isn't it, Cian?

Yes. So, when you look at the spending cuts as well, across departments, you see departments that have seen the largest cuts: 60 per cent real-terms cuts over the decade in planning and economic development, a 40 per cent cut in libraries, culture, sports and recreation, and 30 per cent in transport. And, I think, if you look at the staffing costs as well, the reduction in staffing costs reflects the dispersion of the savings—the cuts in expenditure. So, it's those services that have been hit hardest.

Sure, yes. Huw, you'd like to come in at this point. 

Yes, thank you. That's really helpful because it certainly reflects my direct personal experience as an Assembly Member, where I'm saying to people now, 'Don't expect the phone to be answered in the planning department or the highways department, or whatever, because what they previously had with half a dozen people, they're now down to two people', and I work across two local authorities.

But, actually, this is my question: the generalised picture that you're talking about with overall protection of social services and education, or enhancement of that through Government grants and so on, but, actually, with the other services facing a gradual deterioration in funding and then in provision of service, has that varied at all between local authorities? Have you found that there are local authorities that have not actually suffered behind the scenes, or is this now a universal picture in Wales?

I think it is a pretty universal picture across the local authorities and I think it's a similar picture in terms of how the local authorities have responded. There were some local authorities that resisted big council tax increases for a while, but I think it has been pretty much across the board and even more pronounced in some areas. I think it is quite a similar pattern across the local authorities; I think that's the best way to say it. 

There's interesting historical development, and I think my take is that in the very first years of austerity there were some authorities that felt this was just a short-term blip and you'd salami-slice the budget and you'd get through it and then you'd get business as usual back again. Other authorities, I think, took what you might call a more strategic approach—or were perceived to take a more strategic approach—to the challenge and recognised that this might have been for the longer term, and were more prepared to make, I think, some more difficult decisions early on.

Perhaps it's unfair a little bit, but would you be able to highlight a couple of those local authorities who moved early, took the hard but strategic decisions to reconfigure services? Maybe, if you like, the classic public thing of, 'Why can't you cut out those middle managers? Why can't you get rid of that bureaucracy in the middle?' But actually, the ones who did move early, can you cite a couple of examples of those who did do that?

It's not something I can do from our research. It was all anonymous, so really we can't name individual councils. But our research backs up what Michael said about some councils, for example—and this, I think, was happening until relatively recently—seeing budgets being set before corporate plans had been agreed, which, in a lot of cases, was out of their control because of the nature of the cycle, but it actually meant that they weren't able to make sure that their corporate plan was aligned with their budget. So, yes, I couldn't name individual councils.

All right, Huw?

Yes. The only other thing, Chair, that strikes me is the fact that, as you were saying, this is 18 months ago. I think we could be safe to assume that things haven't improved, haven't got easier.

I think it's worth noting, Chair, that the report we published looks at the trends up to 2017-18. We produced a short briefing note because the outturn data for 2018-19 came out two weeks ago. So, we produced a short briefing note, which will be going live on the Wales Governance Centre this week, and so, some of the figures I'll be citing today go up to 2018-19.

Yes. Well, that would be very useful for the committee to have a look at, I'm sure. Mandy, do you want to come in at this stage?

Yes. I'd like to talk to you about how local authorities are actually able to continue investing in social services, despite the reduced funding. What I'm worried about— if you can answer these questions—is: why are the charges in social services so much? And also, looking at the background, why are so many children being taken into care, and has a survey been done on the background to that problem?

And also, at this moment in time, the Welsh Government are introducing the smacking ban, which is going to possibly put more children in short-term emergency care. Are you taking any of that into account for a future possible increase, as well, for the spending in social services?

I don't think these are really matters that are within our budget scrutiny.

Oh, right. Okay. I just wanted background.

That's ranging rather widely.

We could talk about social services funding, if that would be helpful.

Yes, please. Sorry about that.

So, as you say, social services, it's the one area of council spending that's grown in real terms, and Cian can give the latest numbers, broadly. But within that budget, there's a very distinct pattern that, by and large, spending on older people in social services has more or less remained flat since the older people's population has been rising. Actually, what that means is if you looked at the spend per head, it's actually been falling.

You're quite right, the area of pressure and growth has been in children's services, and that's obviously linked to the numbers going into care. And there is some—and this is purely anecdotal evidence—we've been told by a couple of chief executives that, in fact, what they are tending to do is when pressures on the children's services budget grow, they tend to move money across from other areas of the social services budget in order to be able to finance the demand they're facing. As to whether these are good practices in terms of looking after children, that's really beyond our knowledge and experience. But there has been this very definite pressure on children's services budgets pretty much across all local authorities, as far as we can see.

Can I just bring Leanne in, at this point? Leanne.

I understand that the pressures on the budget come largely from the increasing numbers of children taken into the looked-after system, but would you say—? Can you give us any idea, or a sense, of how much of that budget would go to private providers? I'm conscious of the fact that there's a profit motive being introduced into children's services that wasn't there before. So, somewhere, that's money that's in the system that wasn't there before. So, can you give us a sense of how much of that provision is private and how much is local-authority provided?

We can't. We haven't done any proper analysis of that.

Is that figure easy to come by, do you think, or is that difficult?

If I can jump in here. We're doing some work at the moment at the Wales Centre for Public Policy around looked-after children, so a series of projects looking at numbers of looked-after children in fostering—private, council provided and residential as well. So, we don't have anything out at the moment, but we're hoping to in the next few months. It's not something we can talk about now.

Watch this space, then, is it? Okay. Great. Thanks.

 Mark.

Can I just say, on that point, rather than simply assessing the percentages in each sector, will you also be looking at what works well on a sector-blind basis to establish the best interventions, whether that's private, third sector, or public?

We're doing an international evidence review. It's actually about commissioning, broadly, so we're looking at international practices in commissioning and with that will come a kind of, 'And here's what Wales might consider in terms of what it can learn from other countries.' But, again, that work is all in progress at the moment, so it's not something I can talk about yet.

So, that'll be sector blind, so people can see what works as opposed to who does it.

Yes. Like I say, there's limited detail I can give. It's a project we've commissioned the Institute of Public Care at Oxford Brookes University to do for us, so I couldn't talk about the detail.

Could I just ask before we move on—? We've talked about the relative protection for social services and education and you've usefully provided a table that shows how well or otherwise local authority services have fared over that period of time. And some of them, as you've said, libraries, culture, heritage, sport and recreation, for example, have suffered very considerable reductions. Are you able to say anything in terms of the impact of that? We hear about local authorities innovating and hopefully providing, thinking of new models of operation and co-location. And I guess there's been some transference to others to deliver on their behalf and so on. Are you able to tell us much about that picture? You know, to what extent does that happen? To what extent have services really suffered as a result of the reduction in funding?

We had a few examples of this in our research, so we've grouped it under retrenchment approaches to austerity, and the main finding related to that is about the way that the relationship between local government and the citizens or community groups in that area has changed. So, the idea that more responsibility is expected of the local community versus the council, when the council is no longer able to provide services particularly related to those areas that we've talked about. So, we heard lots about green spaces and how local communities have taken on maintenance of green space where the council is no longer able to provide that. And, in some cases, we heard one example of a council leader who talked about how he put it to the citizens to say, 'Do you want us to spend this money on maintaining this park, or would you like us to spend it on social services?' It's a nice story, but the result was that the park gets looked after by the local community.

So, we heard a few examples of that, but also challenges where you don't have that capacity in the local community, where you need to build up that capacity, and that's a difficult thing as well and not something that councils are necessarily equipped to do. We also heard about things like asset transfer. Again, that's a lot easier where you've got businesses and people in the local community able to take on expensive assets. And where that's not possible, the council is faced with the choice of either having to close that down or find the money from somewhere else to keep it going.

Sure. Huw?

I absolutely recognise what you're saying, and I see it in the two local authorities in my area, but also neighbouring authorities I have a close relationship with. Some of the ones that took the early strategic decisions you were talking about to switch investment did exactly—it's not my own two local authorities, but it's a neighbouring one. It took that early decision to move very rapidly towards community asset transfer and, indeed, put that option in front of people. But, it wasn't the fact of those services that were then protected by the CAT process and taken on successfully, it was actually the ones that fell over the edge; it was for the playing fields, the green spaces and the playgrounds that no community came forward, or town council or sports group, whatever, to take on, and those are now fields. And I don't mean playing fields, they're meadows, they're going back to the wild. Now, some people might say that's a wonderful thing, but what possibly doesn't come through, then, in your analysis—I'd be interested if you had any feedback—is those lost assets, frankly, that have been there since we rolled out the Victorian park system, which are now being simply lost.

It's not something we covered in our interviews, but I think that says something about—. We spoke only to chief executives, directors of finance and council leaders. I think if we'd spoken to people in the community, if we'd spoken to some of those smaller community groups, I think you'd have got some of that, but it's not something we've covered in this research.

It's an interesting issue there, Chair, with things that are now lost to the system, they're going to be written out, it's like doomsday book, they're going, they're being—. Anyway, sorry. Could I ask something beyond—?

Mandy, did you want to come in on this point, or no?

I've lost my line now.

You're okay. 

It may come back.

You did, Mark, did you?

After Huw.

Yes, sure.

Go on, Mark.

Go on, Mark.

In this context, you mentioned asset transfer, for example. In north-east Wales, looking at leisure services, for example, Wrexham saw Plas Madoc go into a community-owned model, but the rest of Wrexham went to a private sector provider, who initially put in massive upfront investment, so the physical improvement was significant. Flintshire set up its own social enterprise, et cetera. Again, are you or will you be doing any work to see how these different models compare and work, and what delivers the best outcome for people?

It's not something we're looking at, no.

Others have been doing some work around this, I think, and I think the audit office have done a couple of studies around what's been happening to leisure provision, but it's not our area of research. But, apart from that, we recognise that a number of different models have emerged, either community mutual interest companies, or straight contracting out to the private sector, and one or two staying in-house. But I think, in the leisure services, that's relatively small. But we haven't looked at the merits of each of those delivery models.

Or the financial viability— 

Yes.

Mandy.

That will come in a much more specialised study than we've been able to do.

Yes. Listening to your answers, can you tell me just how you do do your research and on what width and scale, please?

Well, the fiscal research—we look at the local authority's spending and income as a whole, and we might identify—. And this is based on data largely reported by local authorities under a formal reporting system that they do. Once could see—. As Cian was just saying, we've just received the most recent data. So, within that data, it's possible to identify individual authorities and practices and what they do, but we tend to focus on the aggregate position for local government as a whole, rather than go through each individual authority, identifying their particular patterns. It would be possible to do that, because the data is reported by each individual local authority, but we tend not to do that.

It links through our work when we're looking at public spending as a whole in Wales, and Welsh Government spending and non-devolved spending and so on. So, it forms a part of that pattern of looking at Wales as a whole. So, as a team, we're not a specialist local government analytical team, but we just pick up the overall position for local government and the key issues coming out of that, and we talked about, for instance, the issue about social care that you raise.

Emma's work involved a whole range of interviews with individual local authorities, their chief executives, their treasurers—a number of stakeholders involved. But the work was set up and commissioned to look at local government as a whole, rather than to identify individual local authorities. So, we've tended not to identify individual local authorities, but rather look at the position as a whole.

Don't you think, if you did actually look at the individual authorities, that you'd be able to see that A, B, C are doing that kind of thing, like Huw said before, and that authority's doing that, and that authority's doing that, you know, and see which complements and which ones don't work and then come to a whole conclusion?

It could be done; it's just it's not what we've been commissioned to do.

No. And, as you say, other players are also conducting research and doing work on those matters within Wales. Huw, school funding.

Yes, that's what I'd like to move on to. In terms of social services, children's services, children in care, there's been an attempt by Welsh Government, reflected by local government pressure as well, to say, 'This is a priority,' and money's been found one way or the other, year by year, quarters, to put more money into the system. Education—different—it has been squeezed. There's been an attempt to try and catch up, but it has not been reflected in the same way that massive doses of money have been found in—. Now, what's the impact of that that you're finding in your research? First of all, what's happening? Where's the money going? What's happening with education spending? And, secondly, what are the impacts, looking forward?

I think overall, from 2009 to 2017, education spending as a whole fell by around 5.5 per cent or something like that. I think other research suggests that one of the reasons why per-pupil spending hasn't fallen as much in Wales compared to England, or hasn't fallen as much as that 5.5 per cent, is the fact that the pupil population has actually stayed flat in Wales whereas it's been increasing in England. I think, going forward, there are some interesting demographic changes on the horizon, with more pupils now going into secondary school, so that might be where the pressure is over the next few years.

It's worth noting as well, looking at the school reserves data, there's been quite a sharp drop in secondary schools' reserves over the period. They're now actually in deficit across Wales, by minus £1 million. That was true at the end of the last financial year as well, so I think, if you look at the entirety of schools' reserves, 96 per cent of them are held by primary schools, so, obviously, that's, I think, a key issue going forward. That would suggest that secondary schools have been drawing down from their reserves to meet their operational costs over the past few years, and that the settlement hasn't been sufficient for them to maintain the operations.

Should we be worried by schools going into reserves? Because there is an argument that, in times of austerity, there is a proportion that you can dig into in reserves that doesn't jeopardise that bedrock of financial stability. Should we be worried?

I think that's a fair point to make. Obviously, when it's in deficit, that's another issue altogether. And the other thing I would say is the wider economic and political context is perhaps even more uncertain now than it was back in 2009-10. So, there's as much money today to have that bulk—yes, those reserves there. So I wouldn't say that the current situation is sustainable with regard to secondary school reserves.

Are you able to tell us anything in terms of the job situation and job losses?

So, it's a pattern that needs a bit more investigation, I think, but broadly we've seen a reduction in the number of full-time equivalent teaching staff but a dramatic increase in the number of teaching classroom assistants. So, there's been a kind of—it looks as though there's been quite a significant rebalancing of the education workforce. If you add up the number of teaching assistants and classroom teachers, if you aggregate them together, then the pupil-teacher ratio has fallen. There were about 15 pupils per member of classroom staff in 2005-06 and, on the latest data we have, it looks as though that 15 has fallen to 12. So, it's not just a question of the total numbers; it's what been happening within those total numbers that's been quite significant, I think.

I think it's worth noting as well that the primary teaching workforce is now double the size of the secondary teaching workforce, and, obviously, as Guto was mentioning, the future demographic trends might require us to look at that and maybe increase the secondary workforce going forwards.

I see. So, that's been a trend, has it?

Yes, and it largely reflects demographic trends in Wales. The primary cohort has been growing quicker in the past years.

Okay. One further question from me before I bring others in. I know a number of committee members would like to come in at this point. Are you able to tell us anything in terms of this debate as to whether the funding that local authorities get for education is fully or sufficiently passed on to reach school budgets?

So, we can say that the central education spending by local authorities, and that includes spending on schools and central services, has fallen by a steeper amount than the schools funding figure, which suggests that some of the steeper cuts have been made in those central services. I can't give you any specific numbers, I'm afraid, right now, but—

That would be the general picture, yes. Okay. Who wanted to come in? Dawn, and then Mark, I think.

It was just on the point about school funding, because we've actually got a debate this afternoon, as you're probably aware. Because I also sit on the Children, Young People and Education Committee, and we've just done quite an extensive inquiry into school funding. So, I think the starting point is that I think everybody accepts the quantum's not enough. So, that's the starting point. One of the things that the committee was looking at is how schools are funded. So, we know that education money is no longer ring-fenced in the way that it was, and I think the inquiry seemed to indicate there was a correlation between a reduction in school funding and the removal of the ring fence, because, once you put that money into the revenue support grant, then it gives that local authority the flexibility to shift their money around. So, I wonder if you've picked that up as an issue. 

The other issue that we picked up was the complexity of the way in which schools are funded. It's not at all transparent. There is education funding, there is school funding, there are the indicator-based assessments, there is the various per-head-of-pupil funding. We also saw that those authorities with the highest education spending don't necessarily get the best outcomes in terms of educational attainment and all of that kind of—. Really, did you pick all of that up, or were you just looking at the mechanisms of funding? Were you looking at all at how local authorities address the way in which they fund education, because they do have a huge amount of flexibility in which to do that?

So, we didn't look at the decisions that individual local authorities did. Pretty much, we didn't really look beyond the headline education—

Just the headline stuff.

Yes.

And did you also pick up the—you mentioned about secondary school funding, but the reasons why primary schools' reserves are increasing? So, we've got the deficits in secondary schools, but actually an increase in reserves in primary schools. Did you pick that up and pick up the reasons why that might be?

Well, each individual would have their own—each individual school would have their own reserves, so there can't be movement from one to the other; that makes sense, obviously. But I think the overall amount of school reserves at the moment is around £50 million, which is not a huge sum across Wales.

Yes—[Inaudible.]

Yes.

Yes. So, I suppose what I'm asking, really, is: if we accept as a given that there isn't enough money in the system, did you find anything in the research that you did that would indicate that there is a better way of funding schools than the way that it's currently being funded?

No, that was beyond the remit of our work here.

Okay. Sorry, that was a very long and convoluted way of getting around to that point. I do apologise, sorry. 

Okay. Mark. 

In terms of the numbers of classroom staff—and you note the difference between classroom assistants and qualified teachers—is there any evidence in relation to the movement in agency staff working in classrooms? Has that gone up and does it have a cost impact? And, in terms of the last point you were making about delegated budgets, it's a number of years since a Welsh Government education Minister—I think it was Leighton, if I remember—set a target of 85 per cent and then 90 per cent of local authority school budgets to be delegated to schools. Have you done any work to establish what the impact of that has been—has it manifested in reality, or not?

You've done some work on the percentage allocation of delegation to schools, haven't you, Cian? Isn't there a note somewhere? Sorry, I'll have to check the notes. 

Not that I can recall, no.

And, in terms of the agency staff, we haven't looked at those numbers, either. 

I don't think the data is available. 

I don't think it's recorded, so—. We were working off the data that's published on the StatsWales website, and I think that comes from the staff annual census—of school staff. That records the full-time equivalent number of teachers, classroom assistants by sector and also by school, I believe. So, that's the data we were working on. 

Okay. Well, if there's anything more you can provide us with—

I've seen a figure somewhere—I'll let you have it.

You can come back to us with that. Sure, okay. Leanne.

Thank you. I'm interested in outcomes and the most effective way we can spend the money to get the best bang for the buck, basically. So, I'm wondering what correlation, if any, you've found between poverty levels, cuts and austerity, and lower attainment. I'm thinking of things like barriers to people in education, like period poverty, poor housing, damp conditions meaning kids can't get to school, hunger—some families qualify for school meals, but there are many working poor who don't. And does that impact, in your view, on the Programme for International Student Assessment results, for example, because I think that's an area that's not really been talked about in terms of the discussion around PISA? And do you have any insights from the research that you've done that could suggest a way that we can ensure that the outcomes for kids in the most deprived communities are improved from where they are now?

There are people—. There is research done on this area, but it's not research that we've done, and I'd be very reluctant to paraphrase other people's research into spending and outcomes.

Sure.

Yes. I was just going to say, Michael, that we're dealing more with the broad areas of local government finance—

I'm just trying to get a sense of whether or not Government is doing enough to compensate those poorest areas for the things that I've talked about that stop them getting to school. 

But that's not work that you've done in this exercise.

No. We're not education specialists in that sense. 

Fair enough. 

Okay. If we move on, then—Dawn, local government response. 

You picked up earlier the point about back-room services and staff being the main area that local authorities have targeted, really, in terms of their response to austerity. But, of course, what we also know is, once you start cutting back on services, that directly impacts on front-line services. I also think—. Being, in a previous life, a trade union officer that represented a lot of those back-room services, I used to get really cheesed off when people used to say, 'Cut the back-room staff, because what we need is front-line staff', but, actually, all you do then is make sure that the front-line staff are doing admin instead of doing the other things that they used to do. But what other kinds of responses have you seen to this? Can you say, because I know a couple of times you said that you can't dissect this information authority by authority, but in general terms, can you tell us whether larger authorities have had greater resilience around how they've managed this in some of the smaller authorities, or is the picture pretty consistent regardless of the size of the authority?

On your last point, we haven't cut the data that way. We could do, but we haven't looked at it in that way yet. In terms of other changes, I don't want to give the impression that those back-office changes are easy or straightforward in terms of the impact that that has, not only on the existing workforce, but on those who are no longer working there and also on the local economy. So, we heard from councils concerned that the job losses in the council would have an impact on the local economy, compounded by other effects of austerity, particularly when they're the largest employer in the area. But also, we heard some examples of transformation programmes that were happening that go beyond the 'Can we cut x number of jobs in human resources?', for example.

And so, there was an example from one council that talked about setting up an internal transformation team that would work with staff across all departments to identify ways that they could become more efficient, change the way that they work, and that council said that they thought they'd saved £12 million over five years with that approach and, importantly, that the staff were involved in that process. So, it wasn't a case of going to a department and saying, 'We want you to cut 5 per cent of your staff.' It was a case of working with the staff to identify how they could, as a council, respond to austerity together, I suppose. So, I think there are some of those really big examples of things that will be put in that back-office category but actually are really significant changes that are happening.

Yes, and—. Sorry, go on, Michael. 

I'm just trying to think about your point about smaller councils being more vulnerable. So, I don't think we've got anything that precisely says that, but what we have noticed is that there's been quite a shift in the relationship between Government grant and local income across different kinds of authorities. So, again, just talking a little bit about the shift in pattern—the issue being that the more dependent an authority is on Government grant, the more vulnerable it is to changes in Government grant, and that has tended to impact mostly on some of the more deprived authorities.

Yes, so we have found that one of the—[Inaudible.]—has been a shift away, obviously, from Welsh Government grants, and that's been more pronounced in some areas than others. It's been more pronounced in local authorities with fewer deprived areas. So, you've got Monmouthshire now, which is much less reliant on Government grants compared to Caerphilly or Blaenau Gwent, say. So, any future decision on changing Welsh Government grants—that's going to have a relatively greater impact on the budget of those more deprived local authorities than the least deprived. So, I don't know if that's helpful. 

Yes, it is. It helps to understand, because I certainly know—. I've got two local authorities that cover my constituency, and one of those has had the second-highest level of Government settlements and is probably in the most dire position financially of any authority in Wales, I would suggest. So, there clearly isn't a direct correlation between the amount of funding direct from Government and how the council can cope with that. If the council is in, as I can see it, an area with multiple deprivation indices, and has a huge call on things like social services in those areas, then they are not best equipped to be able to respond to it, are they, in the current funding arrangements?

When looking at the cut in spending, we found that there hasn't been that much of a difference between local authorities. It's more the fact that Monmouthshire can rely more heavily on council tax increases, because they've got a stronger council tax base to draw from, whereas in Blaenau Gwent, where 85 per cent of the properties are in bands A or B, you're limited in how much you can raise. Obviously, the standard spending assessment—the formula used to allocate the rate support grant—takes into account different measures of deprivation.

And the other thing is you get some perversity, or apparent perversity, in the system, inevitably. So, the highest band D council tax rate is Blaenau Gwent.

Yes. And, of course, one of the—no, I won't go there because that's a whole different area, and it's probably something you didn't look at. But how much did you establish—? Reading your report, you were talking about a number of authorities now have had to start dipping into reserves. We talked about schools, but in terms of authorities—and there are one or two authorities, certainly one in my area, that is absolutely at the point where they can't dip into reserves any further without it becoming quite dangerous. So, what is the extent of that particular problem at the moment?

So, if we're talking about usable, unearmarked reserves—so the ones that local authorities can draw on or put more money in to fund council expenditure without restrictions—the picture across Wales is that there hasn't been much of a change in those levels since 2009. However, I recognise that there are differences between local authorities and how they've made use of that facility. So, for instance, Pembrokeshire hasn't made any drawdowns or hasn't made any payments into the reserve since 2009, whereas, for instance, Rhondda Cynon Taf drew down £30 million last year. Incidentally, they've paid more in than they've drawn down over the course of the 10 years. But you've got some local authorities that are in a different position, where they've drawn down more than they've paid in. And I think, if you look at reserves as a proportion of gross revenue, it does range between 4 per cent and, I want to say, 12 per cent across Wales, depending on the local authority. I think, obviously, the Wales Audit Office—they audit the accounts of local governments each year, and they're the ones responsible for deciding whether they have prudent levels of reserves available.

I understand that. 

Overall, the level of unearmarked reserves that are available to be used at discretion—. I know it always attracts a very considerable amount of interest, but, actually, the overall level of unearmarked reserves is, we think, relatively low—it's about £200 million across all local government.

Okay. One of the other things you highlighted in your report was the preventative spend that the local authorities have. And one of the things that we have heard directly from local authorities themselves, in terms of the argument about balancing, or rebalancing funding between the NHS and local authorities, for instance, is that the local authorities, if they had a greater level of funding, could do more around preventative spend, to take pressures off the local authority. I guess that's the long-term objective—it can't happen overnight—but was that something that you were picking up from the local authorities that you were speaking to—that that was something that they wanted to do?

Yes, we found that in our research, and we did find some interesting examples of preventative spend, mainly around social care. So, for example, one local authority said they'd invested—and I think they'd taken this money from their reserves—in a psychologist to work with mothers who had had multiple children taken into care. And the aim was partly to—overall, better outcomes for the child and for the family, but also to reduce the number of children in the authority who had gone into care. But the challenge, as you've kind of alluded to, is that that money is found now, but often the outcomes aren't felt until much later, and that that was therefore very difficult to justify, when you've got an immediate need. So, I think it's promising that we found examples of this sort of preventative spend.

There's another one—not in social care—a council that had commissioned a management consultancy to draw up some proposals for them around using behavioural-insight techniques, in terms of getting people to pay their council tax on time. So, simplifying letters, particular phrases that they would use in their letters, which they hoped then would reduce the number of calls that the council was getting about council tax letters, but also encourage people to pay more quickly. So, there were some interesting examples of—. And that one probably had a shorter term impact as well.

Okay.

Dawn, just before you go on—Mark, on this point.

Yes, on this point. Your report suggests that local authority preventative spend benefits the NHS more than social care, but there are a number of models I'm aware of where, for relatively small relative or marginal sums, you get a massive multiplier, reducing pressure on statutory services. For example, a couple of weeks ago, I was at Conwy's older people's day. Their independent living team is shared between the local authority and the transfer housing association, and it's all about unlocking the assets and strength-based development in the community, and it's working—people are a lot happier, having better, healthier lives, taking pressure off social care, as well as the NHS. Last Friday, I met Betsi Cadwaladr University Health Board, together with a local authority representative for Flintshire, and volunteers, on their I CAN early intervention mental health programme, which is going to be taking pressure off hospitals and social care. In Wrexham, we've got the community care collaborative hub, which brings all agencies together, all recognising that, for actually relatively tiny sums, you can get a massive multiplier, which can have a short, medium and long-term beneficial impact on statutory services. Do your results consider that?

Yes. And you're right—there's a particular council that talked about how their preventative interventions around delayed transfers of care were going to save the health board money, but probably wouldn't save them money, or at least not money that they could identify. But, alongside that, we did also hear examples of—. Another council talked about a joint post with a local health board, sharing both senior and more junior posts, and that that was designed to benefit both the health board and the council. So, yes, we certainly heard examples of that sort of collaborative work going on, which was seen to be beneficial for the council and for others.

In both senses, generally, there are lots of these kinds of projects and initiatives across Wales, and certainly a lot more than there were 10 years ago. I suppose the question is, really, whether the move from individual projects to something that is more universal, and more common across all of Wales is the big challenge. And maybe the regional partnership boards between the NHS and the local authorities have a particular role, and maybe they are developing a role there. It's not something that we've investigated in any detail. But that has been a shift in thinking about the benefits of preventative or early intervention work, and I think there's no question that the awareness of that has been significantly heightened over the last four or five years. It's translating that into something that has a strategic impact that is a big challenge.

Yes, okay. Dawn.

Yes, my final question, Chair, is just around the prospects for further job losses across local government. Is that something that local authorities have indicated to you that they expect, that they anticipate? And if they do, how do they feel that they're going to cope with that? Are we going to get to a point where we will lose so many jobs that services are becoming unsustainable? I think we're probably almost at that point, which is the point of the report, isn't it, 'At the Tipping Point'? We're quite possibly almost there now. But what are the local authorities saying about the future prospects for that, do they think?

It's not something that we asked about in terms of future projections, but on your point, they talked about having reached the tipping point, so, particularly with the cuts that had been made that we've grouped under those efficiency savings, which would include the workforce, they said, 'We've run out of road here; there's nowhere else we can go unless we move on to cutting services', which is the change that will have the greatest impact on the public.

On the outlook for job losses, the overall outlook for funding is something that we cover in our report and we've updated some of that analysis to reflect some of the recent spending commitments of the UK Government and, obviously, the outlook over the next three or four years depends on a whole range of scenarios based on what happens with the UK Government policy, and obviously what happens to the UK economy and the public finances.

I think, generally, it's a much better outlook for public finances than it was a couple of years ago, this year and for 2020-21. So, obviously, the extra around £600 million increase in the Welsh budget next year should enable the Welsh Government to invest more in its priorities outside of the NHS next year. I think local authorities probably will be expecting some real-terms increase in funding for next year. I guess the problem is then, after that, there is no certainty that that funding increase will be maintained, and obviously it depends on what happens and a whole range of different scenarios.

We're just picking up a complication in all of this linked to the UK Government's treatment in relation to business rates that might have a negative impact for Wales and Scotland, but we'll be doing a briefing further on this at the end of November, when we do analysis on the Welsh and UK budgets. So, although it looks as though there is good news from the Chancellor's recent spending round announcements, we're just getting a sense it might not be quite as good as the headlines at the time suggested, but we're just trying to get a clear understanding of what's going on here, just as a slight warning.

Yes, well, the devil is often in the detail when it comes to announcements around spending and budgets and so on, isn't it, that's for sure? We touched on council tax already, Mandy, but did you have some sort of points?

Yes. I personally live in a very, very rural area, near these small tiny shops two miles either side of me. I'm really worried about the council tax increases in rural areas to replace the shortfalls of funding for services and that. Do you actually think—? Because us in rural areas, we've got to be totally independent, yes? We've got no other choice but to be independent and we've got zero services, and the rest of the services—what are there—are being cut, like bus services and that. And we have to wait four hours for bus services and things. Do you think this is sustainable before people say, 'Enough is enough', and do you think this is really an appropriate way of funding your local services?

I know that there are some aspects of the question that you probably can't answer, but those that you can, please do.

That there's been a major shift in the way local government in Wales has been funded is absolutely right, and Cian can quote the most recent statistics. I think there is a serious question about how much further council tax can be—a large rise. We'll be doing some work just checking the impact on disposable household incomes in Wales. But clearly council tax is taking up a larger proportion of people's budgets than it did 10 years ago. It's been a very significant shift in Wales. So, the question about the future sustainability, I think, is absolutely right. What you do about that is a pretty big challenge.

There's obviously a long discussion that's been going on about arguments for local income tax as a different way, because that more reflects people's incomes and ability to pay than council tax, which is to some extent a regressive form of taxation. The more significant local taxation becomes in the equation, the more that question will get raised. We will be doing some work later on this year and next year, trying to look at modelling the impacts of these various approaches on household budgets. But I think you're right, the question is certainly there about the future sustainability of council tax in its current form.

I think one thing that's worth mentioning is that council tax revenue raised in Wales on a per-person basis, back two decades ago, it was around 80 per cent of the UK level, it's now pretty much converged with the UK average. The issue we have in Wales is obviously that gross disposable household income is only around 80 per cent of the UK average. So, essentially, what that means is that people in Wales are seeing more of their pay packets going towards paying this council tax than across the border. The flip side of the coin is that local services have been relatively better protected compared to some councils in England, but that has meant that council tax has had to rise much more quickly on this side of the border.

In the final chapter of our report, you look at the outlook and some of the decisions facing the Welsh Government and local authorities, and I think there's almost a trilemma of if you want to protect the services outside of social services and education whilst increasing social services spending and protecting education, then I think council tax obviously comes into the equation, and increasing council tax will have to be an option, unless there's more money coming from the Welsh Government or the Welsh Government uses its income tax powers. That might be a more progressive way of raising income taxes. Or you go back to Michael's point around reforming council tax, how it's levied, because it is quite regressive on household incomes and relative to property values as well. So, the higher the dwelling is worth the lower per cent average tax rates that you pay in council tax. So, I think it goes back to the point around—and maybe that's a longer term prospect, but it's definitely something that should be considered—whether changing the way that council tax raises revenues will make it more sustainable to raise revenue from that source.

Have you ever looked back at the old rates system compared to the council tax system?

Or the poll tax, no.

Right, okay. I had to ask, sorry.

One thing that's puzzling us at the moment, and it may be something that you've already looked at, I don't know, but we just noticed the other day that spending on the council tax reduction scheme has actually remained surprisingly flat—this is central Government, Welsh Government spending—which, given the fact that council tax has risen significantly, is surprising to us.

Is there a lack of knowledge about the scheme, though, more than anything else? People don't know about it, perhaps, to claim it.

Yes, there may be an issue about the council tax reduction scheme take-up and so on that we might pick up as we take the work forward. But there's something that's counterintuitive about this.

Okay, Leanne.

Yes, thank you. Clearly, from what you've said, the council tax situation isn't sustainable for there to be continued cuts to local authority budgets and for councils to compensate for that by increasing council tax levels. It's not going to be able to keep happening in that way, but there are potential ways of local authorities raising income through innovative fundraising methods. I understand that authorities in England have more powers, and lack of competence is often cited as one of the problems in terms of financial innovation. Is there anything you can say to us about that? What kind of powers would we need to have in order to be as innovative as, say, Preston is? 

I can't talk to that part of your question but, in terms of examples of income flows that councils are using, charging for services came up a lot, not particularly innovative, but when we talked about income streams, bringing in income. We did hear some examples, and we've talked a bit about them already, of arm's-length companies being set up. So, one council provided—. They set up a leisure company to provide leisure services to that council but was also then able to raise money by providing services to other clients as well. I would say on that that the transaction costs of setting something like that up and of that kind of income generation are also worth noting. That does require some initial resource in order to do that.

Is there help available for that kind of thing? 

It's not something I can comment on. 

Are people supported to do it? Or are they just left to get on with it themselves? 

We actually have a scheme in our gym in Wrexham, and it's aimed at bringing younger people in, well, bringing ordinary people in, sorry, not young or old. Bringing them in, helping them with exercise at a reduced rate and things like that, and actually trying to tackle on the outside of it mental health and all the other aspects of things like that, which I think is really, really good. And they're working with the council to bring these people in—these specialists—to help out. Have you looked at stuff like that as well?

I think that we heard examples of—and it's similar to that—hubs, which you'll be familiar with. The one-stop-shop-type hubs in communities, which would save money, because you're rationalising staff and buildings, but would bring library services into the same places where people can access other council services. There was an interesting comment from one of the interviewees who talked about it being a bit of 'loneliness centre', so that people who might not have contact with other people and may not otherwise be involved in their community would come to this centre and in being able to do all of those things—visit their library, speak to the council about services—that would have wider impacts on well-being as well.

One of the things that we've noticed is that the level of income generated by local authorities in Wales has not changed in total by very much over the last few years.

I think it's worth noting that the legal basis for setting charges by local authorities is quite complex. So, for some services they're prohibited from charging more than the cost of provision. So, for instance, for taxi licensing, building control fees, in some cases the Welsh Government sets the—. They've got national prescribed eligibility criteria, so, for instance, for home to school transport and social care charging, and then there are some areas where charging is prohibited, for instance, lending books from a library. And, of course, when you're cutting back on the number of libraries, sports and recreational facilities, it means that there is less scope for charging users in some areas. That probably explains why there hasn't been a shift towards—.

That hasn't been the case in England then, has it? 

I can't comment on England, I'm afraid, we've only looked at Wales, but—. 

From the information I've got here, England has got powers that they were given—. Local authorities in England were given powers in 2011 that we don't have here, and I'm just trying to get an understanding of is that what you're referring to or is that something else.

No, you're right, they were given powers and I don't think they've been reflected here. But we haven't done an analysis of what impact—what differential impact—that's had on funding in England compared to Wales. By and large, funnily enough, the chief executives and leaders we talked to didn't particularly raise this as an issue, which may reflect your comment about a lack of confidence, or it just may be that it's not, for some reason, surfaced highly on their radar.

The one exception to this is the debate about local retention of business rates. A number of local authorities have mentioned this in the past, with the idea being that if they could retain a higher percentage of business rates, then that, in a sense, would incentivise their commercial activities and their economic development activities—that certainly has surfaced. I think there is an arrangement with one of the city regions now about retention, but I don't think there's a national policy on this. I think that might have just been a one-off, but it's something we continue to keep an eye on.

We know, I think, the Welsh Government is considering a general power of competence for local authorities in Wales in looking at its forthcoming legislation on local authorities.

I wonder if you can tell us a bit about unsupported borrowing. There's been a big increase in unsupported borrowing that local authorities have taken out, mostly financed by the public works board.

And I've got a subsequent question about pension funds. Are local authorities able to use pension funds to invest in the same way as they could use unsupported borrowing?

On the first point on unsupported borrowing, yes, the amount has nearly tripled in the last decade, but that's mainly replacing the value of the capital grants that have been lost over that decade. I think it's worth noting as well that we've had historically low interest rates in the last couple of years, so it's been quite easy to find affordable projects to borrow to build.

It may be an obvious point, but it's worth noting that, obviously, local authorities are not borrowing to fund their day-to-day expenditure, they're borrowing to fund capital projects, so they're going to have an asset at the end of that.

But that will have an impact on their future revenue spending.

Yes, so the interest and principal repayments will come out of their revenue budgets. If I may draw your attention to one thing, the Public Works Loan Board have increased their interest rate by one percentage point earlier this month, so it's now 2.8 per cent instead of 1.8 per cent. That will have a knock-on impact on borrowing costs going forward, and I think there's a question of whether local authorities are going to decide, given this increased interest rate, whether projects are still affordable, so that's probably something to look out for, I'd say.

There are examples of pension funds doing local investment.

In Wales?

I was involved in one myself many years ago. The challenge is about the duty of trustees to protect and get the best value for the assets that they're investing. I think the potential is there, but it's not an open door. Trustees are legally obliged to ensure that they're getting the best return they can for the money, but some authorities—one or two in England, I know—have done some investments through pension funds, but we haven't investigated the use of pension funds at all. In a sense, the current debate about pension fund viability anyway complicates the discussion, because there's so much concern about the long-term resilience of existing pension arrangements.

Yes, okay. Thank you, Chair.

In terms of that unsupported borrowing, we all know that interest rates can go up and down, and can sometimes go up quite substantially over a fairly short period of time. Do you discern any worries there in terms of the extent to which that borrowing has increased?

Yes, I should note that the interest rates on the Public Works Loan Board loans—they're only for new loans taken out. If there are loans with—. I don't know whether local authorities do take out loans with variable interest rates, but they do have earmarked reserves. And within those earmarked reserves they will usually have a contingency to account for a future rise in the interest rates. I couldn't make any comment about the levels of reserves that are there.

Okay, that's fine. We'll move on, then, looking to the future, and Mark Isherwood.

Sorry, can I start with a supplementary on the last one and then I'll come straight to—?

Certainly, yes.

Reference was made by Leanne Wood to the 2011 Act—I think it was the Localism Act, I presume.

That's what it was.

My understanding was that it incorporated or gave delegated powers to Welsh Ministers to implement the same or bits of it, and they implemented bits of it but chose not to implement other bits of it, which is why, perhaps, local authority officers may not wish to venture into the politics of this. But might this be something worth examining to see whether the impact of this has been neutral, advantageous or disadvantageous by comparison with authorities across the border, which have had these freedoms but may not have used them?

It's not something that we have considered doing. One of the things that's getting increasingly difficult is comparisons across the border because the regimes are now diverging really quite a bit between local government in Wales and local government in England. Bizarrely, it's easier to do comparisons with Scotland than it is with England, where—. So, it would be possible, I think, to do that kind of study, but I think it would be quite a significant piece of work. We keep fairly close contact with our opposite numbers in the Institute for Fiscal Studies, who major on local government in England; it's something we could talk to them about, but even as I talk, I can see a number of issues that would have to be sorted out methodologically before we could get something that really was adding value in the way that you're talking about.

This is interesting—Monmouthshire was referenced a few times in your evidence earlier. Also, they were implementing different ways of working even before the financial crash because they were one of the lowest per capita funded local authorities. When I went to the launch of the Co-production Network for Wales there, the head of social services spoke and she began her speech by saying, 'We used to tell people what they can have. We now ask them what they want to achieve', and not only has that, they said, improved staff morale and the well-being of their residents, but also saved them money in the process. So, it's turning it around into a positive, driven initially by financial need.

But moving on to the future, as you say, why, in your WCPP report, do you state that decisions by Welsh Ministers to provide late grants to the settlement has

'Helped create a mindset within the sector that the Welsh Government will continue to find additional funding'?

That's what we heard from some of the local authorities that we talked to in terms of—. I mean, there's a few things related to grant funding. So, the late addition of grants into the system—there was a recognition that, of course, the extra money was welcome and that they were clear that what they weren't saying was that they'd rather not have had that extra funding, but that it made it difficult for them to plan long term and plan strategically. So, it comes back to those points we were talking about earlier about strategically looking at the budget and looking at priorities. So, that was one of the challenges that councils talked about in term of late additions of grants into the system.

And looking to the future, what difference—? Would multi-year settlements produce more consistency, enabling better planning for the future?

That's what most local authorities told us. So, we did our interviews just after the 2018-19 settlement had been announced, and, generally, although councils said it was better than expected, they mostly all said that longer term settlements would help them to plan ahead. It comes back to that point about being able to be strategic, and also, about making budget-setting more efficient, saving resource and reducing the amount of resource that they put into 'what if' planning.

And what is the cost of short-termism?

Well, that's something we didn't ask the councils and I don't have a figure there, but what they said to us was that they found it difficult to do some of that longer term planning, the preventative spend that we talked about and the wider challenges around not having very long to write a budget for the next year, and only having three months to do that and how they would find that easier if they had longer.

One of the problems here is that we haven't had a three-year or five-year spending review for some years now and the UK Government budget cycle over the last couple of years has become an annual planning cycle rather than—. I think the last major spending review was in 2015. There was supposed to have been one this year, but, obviously, the politics at Westminster kind of overtook that. But the issue is that these are all about changes at the margin, but it's those changes at the margin that really make the difference between whether you can do the kind of investment that Emma was talking about or not. So, although I think there's been a very strong view from local government that they would welcome three-year settlements, as we look at the numbers, it just doesn't seem feasible, unless the spending policy across the UK settles down to a more consistent pattern. But I don't know—Guto?

If you go back to provisional plans in terms of 2019-20 that the Welsh Government had back two years ago, I think, since then, the picture has changed quite dramatically; it's about £800 million more in funding. So, I think providing a multi-year settlement two years ago for 2019-20 would've been on a totally different basis to the place where we actually ended up. And going forward now, over the next three years, the UK Government has made commitments on NHS spending, has made commitments on education spending in England, but I think what matters in the end for the Welsh Government is overall spending decisions and the aggregate. And some of those positive Barnett consequentials arising from those commitments may be offset by spending cuts in other areas, and we don't really know how those are funded. So, I think the basis for planning beyond 2020 for the Welsh Government is quite difficult, I think it's fair to say.

Okay. Can I just bring Huw in at this point? Huw.

It's simply whether or not you've picked up anything in your research, including the qualitative research or your discussions with chief executives and others, about not the issue of multi-annual settlements, which is clearly the only way you can deliver strategic, big-ticket number planning, but, actually, clarity, or the lack of clarity, currently, around annual budgeting and iterations. Because having now been poacher turned gamekeeper, one of the difficulties we had in our discussions with local authorities is local authorities would see an announcement from UK Government saying, 'Wonderful news—this is what we're doing', and we would say, 'Hold on. This might be three months or more before we understand the detail of it', to find that it wasn't quite what it said, so we didn't even have clarity on announcements. Now, I get this, having engaged with Treasury over the years as well. Treasury say something and it's spun and Labour Governments did the same. But we're now in a situation where you cannot unpick the details of an announcement until maybe two or three months down the line and give clarity to local government people who are understandably saying, 'Give us the money.' So, I'm just wondering whether you are picking that up, because from a ministerial point of view, we just have people saying to us, 'They told us, now give it to us', and we'd say, 'We're not quite sure we've got it yet', and then we'd have to—which comes back to this grant funding issue. Often, we're in the situation where grant funding, then, was used to fill a gap that we didn't think was there.

It's not something we've heard from our interviewees, no.

One of the difficulties with every budget round that we have is trying to piece together where the consequentials have come from. The Treasury have started publishing block grant transparency data for the last two years. But they don't come out until late December—it's the Friday before Christmas that they usually publish these transparency data, which is a bit too late to analyse the final budget of the Welsh Government. But, yes, greater clarity on the consequentials and what that means for the Welsh budget and what that could mean for the local authority—so yes, it should be there; it should be something that's done by the Treasury.

My point, Chair, because I know you can't answer all these questions, but, frequently, the individual grant funding, which leads to councils to expect that Welsh Government will step in and fill the gap stems from gaps being identified that we didn't think would be there, and then you get into this culture of, added to the multi-annual settlements, annual settlements that don't have clarity and the Welsh Government goes, 'Okay, we'll try and find something down the back of the sofa.' Sorry, it's not a question. I don't think we have a way to resolve this, short of saying, 'Let's get back to multi-annuals then.'

Yes, there was certainly sympathy among our interviewees. So, while they were saying, 'Multi-year settlements are what we want', they were also saying, 'We understand that's difficult for the Welsh Government to do, and we understand that there are difficulties around these things that we're asking for. But this is what would help us.'

Yes. Yes.

Okay, back to Mark.

Thank you. You state in your report that changing the grant system had required trust from both sides. In that context, how and where and why would changing the grant support system help local authorities deliver services?

So, I'll give an example of—. It kind of gets to the points we were just talking about. One council gave the example of, I think it was, the ethnic minority achievement grant, which they said that Welsh Government had said had been moved into the settlement, but they couldn't find it in there. So, it also comes back to the transparency point, I think. And that that was then—that was really difficult for them, because that happened and they weren't expecting it and they weren't able to find that money from the settlement. There was another councillor who said that they felt that when grants got moved into the main settlement they didn't think they got moved in 100 per cent, so, again, there was less than they had expected.

In terms of the point about trust, I think this comes back to the point about hypothecated grants versus money in the settlement; lots of councils said to us they would prefer to be asked to deliver outcomes rather than be told how to get there. What that meant was that they said that that would save them money in the first run, but that would also give them greater freedom in making decisions informed by their local context, which they felt would result in better outcomes for their community.

So, there was one authority who told us that they'd planned to establish a family support service to try to link up support for families across different services in the council, and they said that they couldn't have done that using grants, because they needed flexibility of funding in order to do it. So, I think that's what gets at that point about trust—that local government told us that they wanted Welsh Government to trust them to achieve outcomes, rather than—. I think one interviewee talked about being micromanaged.

And how would you—? I can understand exactly where that's coming from, and I've heard elected members saying that, because officers tend to like to know exactly what they've got to do and then do it. But how would that reconcile itself with local accountability and local democracy, where the principle is—in theory at least—that the electorate will hold their elected members to account at the next election if they don't deliver the local services that local people want?

It's a fair challenge, and, again, I think that our findings reflect the fact that we spoke to the councils, the directors of finance and the chief execs and the leaders, and we didn't speak to the public, and we didn't speak to others. So, we've only got one side of this argument. But I think that's a reasonable point.

And, earlier on, I think, we heard that your work interviewed, as you said, chief executives, treasurers and so on, but you also mentioned—I think Mr Trickey mentioned—other stakeholders. Who were or what were these other stakeholders?

So, we interviewed Solace, rather than as from a council's perspective, as speaking on behalf of the chief executives. We had one interviewee from Welsh Government, but I wouldn't say it was—given that's only one interview out of 35, we weren't able to draw conclusions on Welsh Government's perspective on some of these issues, but it was helpful to provide us with some context.

So, was there any residents engagement or third sector engagement or private sector engagement?

No. No.

Okay, thank you. My final suggested question: what are the implications for local government service spending of the likely future growth of NHS spending, which you've already referenced, and what could the health services learn from local government in response to tight budgets, or vice versa?

I guess, on the general point—because the NHS, obviously, is at half of the Welsh budget now, so any spending decisions or increases to the NHS spending do have an impact on the rest of the budget. So, I think from the latest calculations that we've made—so, that £595 million of extra consequentials for next year that the Welsh Government has, if it increases NHS spending in line with the percentage increase in England, the real-terms percentage increase in England, at around 3.3 per cent, that would leave around £155 million for local authority services, which is around 1.2 per cent growth in real terms, if local authority budgets grow in line with the rest of the Welsh Government budget. Obviously, on top of that, you can have council tax increases, but, in the context of increasing demand on social care services and trying to protect education services, the outlook is still pretty tight for local authority budgets. 

What can the NHS learn from local government? Well, of course, local authorities will tell you that they could learn a lot from local government. But it seems—. The fundamental—. One of the things you notice when talking to public service organisations is that they tend to operate very much within their own world. So, if you talk to NHS staff and finance directors, which I occasionally have done in various projects, you do have a sense that they tend to look within the NHS, rather than looking outside and beyond at the experience of other organisations within the broader area of public services. There is something about getting better at crossing those boundaries that I think is important. And, in a way, a lot of the discussion about joint working between the NHS and local government is focusing on that. But it doesn't seem to happen naturally and organically. You seem to have to force the discussion in some way, encourage, incentivise the discussion in some way. So, I'm sure that there is something to be done about making the connections and the learning more effective between those two sectors, because I'm not sure that they take advantage of that very much at the moment. I'm sure there's more to be done. 

How can we bring the third sector into this—

And the third sector.

—that would bring in a wide range of bodies providing different levels of care in the community—prevention, early intervention, but also palliative care, people with progressive neurological conditions, and much more besides? And some of them report good models, but many of them still state that they are peripheralised, and, whereas they're asked to fill in cracks, they're not being asked how they can help the NHS or local authorities deliver better. That's not universal, but it's a repeated refrain. What, if anything, have you picked up on this, and how might we be better addressing it?

It could be that—. There's a discussion, isn't there, about participatory budgeting as a fresh approach. It's very early stages, but that might provide one route into getting a more rounded approach to how resources are allocated and a connection with better outcomes, which you were talking about earlier. Participatory budgeting has been advocated as being one route into this. There is some interest in it in Wales. It'll be just very interesting to see how that develops.  

Okay. Thank you. Thank you all very much. Thank you all for coming in to give evidence to the committee today. You will be sent a transcript to check for factual accuracy. Diolch yn fawr.

Okay. Our next item, then, is item 3, papers to note. We have three papers. The first is correspondence from the Minister for Economy and Transport in response to our letter on the blue badge scheme, which, of course, we debated in Plenary the other week. Paper 2 is a report from Cymorth Cymru entitled 'Assertive Outreach: Principles for Wales', and that's circulated following the Minister's attendance for scrutiny on our work on rough-sleeping last week. And the third paper is correspondence from the Chair of the Children, Young People and Education Committee in relation to children's rights in Wales. Is committee happy to note all three? Okay. Thank you very much. 

Item 4, then, is a motion under Standing Order 17.42 to resolve to exclude the public from the remainder of the meeting. Is committee content so to do? Okay. We will move into private session.