Y Pwyllgor Cyllid
Aelodau'r Pwyllgor a oedd yn bresennol
Committee Members in Attendance
|Alun Davies MS|
|Llyr Gruffydd MS||Cadeirydd y Pwyllgor|
|Mike Hedges MS|
|Nick Ramsay MS|
|Rhianon Passmore MS|
|Sian Gwenllian MS|
Y rhai eraill a oedd yn bresennol
Others in Attendance
|Adrian Crompton||Archwilydd Cyffredinol Cymru, Archwilio Cymru|
|Auditor General for Wales, Audit Wales|
|Andrew Jeffreys||Cyfarwyddwr y Trysorlys, Llywodraeth Cymru|
|Director, Treasury, Welsh Government|
|Lindsay Foyster||Cadeirydd, Archwilio Cymru|
|Chair, Audit Wales|
|Matthew Denham-Jones||Dirprwy Gyfarwyddwr yr Is-Adran Rheolaeth Ariannol, Llywodraeth Cymru|
|Deputy Director Financial Controls, Welsh Government|
|Nicola Evans||Pennaeth Cyllid, Archwilio Cymru|
|Head of Finance, Audit Wales|
|Rebecca Evans MS||Y Gweinidog Cyllid a’r Trefnydd|
|Minister for Finance and Trefnydd|
Swyddogion y Senedd a oedd yn bresennol
Senedd Officials in Attendance
|Georgina Owen||Ail Glerc|
|Leanne Hatcher||Ail Glerc|
|Mike Lewis||Dirprwy Glerc|
Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.
The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.
Cyfarfu'r pwyllgor drwy gynhadledd fideo.
Dechreuodd y cyfarfod am 14:31.
The committee met by video-conference.
The meeting began at 14:31.
Croeso i bawb i gyfarfod Pwyllgor Cyllid Senedd Cymru, ac, yn unol â Rheol Sefydlog 34.19, dwi wedi penderfynu gwahardd y cyhoedd o gyfarfod y pwyllgor yma er mwyn diogelu iechyd y cyhoedd. Yn unol â Rheol Sefydlog 34.21, cafodd hysbysiad o'r penderfyniad hwn ei gynnwys yn agenda y cyfarfod yma. Mae'r cyfarfod, wrth gwrs, yn cael ei ddarlledu'n fyw ar Senedd.tv, ac mi fydd yna gofnod o'r trafodion yn cael ei gyhoeddi yn y ffordd arferol. Ar wahân i'r addasiad gweithdrefnol sy'n ymwneud â chynnal trafodion o bell, mae holl ofynion eraill y Rheolau Sefydlog ar gyfer pwyllgorau yn parhau yn eu lle. Gaf i felly ofyn a oes gan Aelodau unrhyw fuddiannau i'w datgan? Nac oes. Iawn. Dŷn ni ddim wedi derbyn ymddiheuriadau yn fwy na'r ffaith y bydd Rhianon Passmore yn hwyr yn ymuno â ni, felly mi ddaw hi atom ni unwaith y bydd hi'n gallu gwneud hynny. Gaf i nodi hefyd, ar gyfer y cofnod, os byddaf i am unrhyw reswm yn colli cysylltiad â'r pwyllgor, fod y pwyllgor wedi cytuno'n flaenorol, yn unol â Rheol Sefydlog 17.22, y bydd Siân Gwenllian yn cadeirio dros dro wrth i mi geisio ailymuno? Gaf i hefyd nodi, wrth gwrs, bod Mark Reckless bellach wedi gadael y pwyllgor? Dwi am ddiolch iddo fe am y cyfraniad mae e wedi'i wneud i waith y pwyllgor yma yn ystod y cyfnod y mae e wedi bod yn aelod ohono.
Welcome, everyone, to this meeting of the Finance Committee at the Senedd, and, in accordance with Standing Order 34.19, I have determined that the public are excluded from the committee's meeting in order to protect public health. In accordance with Standing Order 34.21, notice of this decision was included in the agenda for this meeting. This meeting is being broadcast live on Senedd.tv, and a record of the proceedings will be published as usual. Aside from the procedural adaptation relating to conducting proceedings remotely, all other Standing Order requirements for committees remain in place. Could I ask, therefore, whether Members have any interests to declare? No. We haven't had any apologies, other than the fact that Rhianon Passmore will be late, so she will be joining us when she's free. Could I also note for the record that if, for any reason, I lose connection, the committee has previously agreed, in accordance with Standing Order 17.22, that Siân Gwenllian will temporarily chair while I try to rejoin? Could I also note that Mark Reckless has now left the committee? I want to thank him for the contribution that he's made to the work of the committee during his period as a member of it.
Awn ni ymlaen, felly, at yr eitem nesaf ar yr agenda, sef cyfres o bapurau i'w nodi, a gaf i ofyn i Aelodau nodi'r papur cyntaf, sy'n llythyr gan y Gweinidog Tai a Llywodraeth Leol ynglŷn â'r Bil Llywodraeth Leol ac Etholiadau (Cymru)? Yr ail bapur yw'r llythyr gan Gadeirydd y Pwyllgor Cydraddoldeb, Llywodraeth Leol a Chymunedau at Archwilio Cymru ar y Bil Llywodraeth Leol ac Etholiadau (Cymru). Y trydydd papur i'w nodi yw llythyr gan Gadeirydd y Pwyllgor Deddfwriaeth, Cyfiawnder a'r Cyfansoddiad at y Llywydd ynglŷn â chraffu ar reoliadau COVID-19. A'r pedwerydd papur i'w nodi yw llythyr gan Ombwdsmon Gwasanaethau Cyhoeddus Cymru at y Gweinidog Iechyd a Gwasanaethau Cymdeithasol ynglŷn â data cwynion y gwasanaeth iechyd gwladol. Ac mae yna set o gofnodion hefyd o'n cyfarfod ni a gynhaliwyd ar 12 Hydref. Dwi'n cymryd bod pawb yn hapus i nodi'r rheini? Ie. Iawn. Ocê.
We'll move on, therefore, to the next item, which is the papers to note, and could I ask the Members to note the first paper, which is a letter from the Minister for Housing and Local Government on the Local Government and Elections (Wales) Bill? The second paper is a letter from the Chair of the Equality, Local Government and Communities Committee to Audit Wales on the Local Government and Elections (Wales) Bill. And the third paper is a letter from the Chair of the Legislation, Justice and Constitution Committee to the Llywydd on scrutiny of COVID-19 regulations. And the fourth paper is a letter from the Public Services Ombudsman for Wales to the Minister for Health and Social Services on NHS complaints data. There is also a set of minutes of the meeting that was held on 12 October. I take it that everyone's happy to note those. Yes. Fine. Okay.
Ymlaen â ni, felly, at y drydedd eitem, lle y byddwn ni yn craffu ar yr amcangyfrif ar gyfer 2021-22 ac adroddiad interim Swyddfa Archwilio Cymru. Mae'n bleser gen i groesawu y tystion atom ni y prynhawn yma. Croeso i Adrian Crompton, wrth gwrs, Archwilydd Cyffredinol Cymru. Croeso arbennig i Lindsay Foyster, wrth gwrs, sy'n ymuno â ni am y tro cyntaf yn ei rôl fel cadeirydd Swyddfa Archwilio Cymru—felly, croeso, Lindsay—a chroeso hefyd, wrth gwrs, i Nicola Evans, sydd yn bennaeth cyllid gyda Archwilio Cymru. Mi awn ni'n syth mewn i gwestiynau, os ydy hynny yn iawn gyda chi. Mae gennym ni ryw awr wedi'i chlustnodi ar gyfer y sesiwn yma, felly dwi'n siŵr y cawn ni ddigon o amser i fynd ar ôl pob math o bethau yn ystod yr awr yna, ond gwnaf i gychwyn jest i ofyn sut y mae'r amcangyfrif sydd ger ein bronnau ni nawr yn adlewyrchu impact y pandemig, wrth gwrs. Byddai hi'n od iawn petai pethau ddim yn wahanol, efallai, ond efallai y gallwch chi ymhelaethu ychydig ynglŷn â sut mae e yn wahanol, efallai, i amcangyfrifon dŷn ni wedi eu derbyn yn y gorffennol. Pwy sydd eisiau cychwyn?
We move on, therefore, to the third item, where we will be scrutinising the estimate for 2021-22 and the interim report of the Wales Audit Office. It's my pleasure to welcome the witnesses to us this afternoon. Welcome to Adrian Crompton, the Auditor General for Wales, and a special welcome to Lindsay Foyster, who is joining us for the first time in her role as chair of the Wales Audit Office—so, a warm welcome to you, Lindsay—and I also welcome Nicola Evans, who is head of finance with Audit Wales. We'll go straight into questions, if that's okay with you. We have about an hour earmarked for this session, so I'm sure we'll have enough time to pursue all kinds of issues during that hour, and I'll start by just asking how the estimate before us takes into account the impact of the pandemic, of course. It would be strange if things weren't different, but maybe you could expand on how it is perhaps different to the estimates that we've received in the past. Who wants to start?
Shall I kick off?
Yes, go on.
Well, in a number of ways, I guess, Chair. Firstly, presentationally. We've taken on board feedback from you in previous years to simplify the estimate itself and to present it in two parts. But the impact of the pandemic has fundamentally altered the way that we've operated in this year, and so our estimate for next year, to a degree, reflects some of the lessons that we've learnt during that time, and also the changing nature of the programme of audit work that I want to undertake next year.
Self-evidently, during these last six or eight months, we have been undertaking all of our work remotely. So, we have not been travelling or engaging on site directly with our audited bodies as we would have done previously, and we anticipate some of that continuing into the future, with a fundamentally different operating model for us. In terms of the shape of our audit programme, we have revisited that top to bottom in our value-for-money programmes locally at individual public bodies, but also as part of our national studies programme as well. And so, again, looking forward to next year, the estimate is based upon the assumptions I'm making about the shape and nature of our audit programme.
We've put it together, though, very mindful of two things. On the one hand, there are huge flows of public money going through the system at the moment and, with that, associated risk and an understandable increased appetite for risk within the public service, and the need for novel and innovative practice across the public sector. So, if ever there is a need for high-quality public audit, I would say it is right now and into next year. But in putting the estimate together, we've sought to balance that against the reality of the state of the public finances and the need for us to operate as an organisation in a prudent and an efficient way. So, it's an exercise in trying to balance those two competing pressures.
So, are you expecting to be undertaking the same amount of audit and other work?
In the spring of next year, we will start to plan in detail specific audit programmes in individual parts of the public service, and it's only when we get into that period when we'll really be able to put some flesh on the bones. As I said, I think it's safe to assume that there is new and different audit work that it is important for us to undertake next year, but the degree to which that is additional to what we would otherwise do, or simply replaces it, I'm not yet in a position to say.
To give you a flavour, though, of what is happening elsewhere, I had an exchange with my counterpart in New Zealand a few months ago, and he's just published his equivalent document for the coming year. He has signalled to the public service there that he is anticipating that some of the audits that he undertakes in the public service in New Zealand will take up to 40 per cent longer, with a commensurate increase in cost. Now, I don't anticipate that we'll be seeing the same order of magnitude here, but I think it does give you a flavour for the fact that, where there is greater risk, there is an important need for public audit.
Okay, we'll be moving into specific areas, of course, in a moment as we go along, but I was just wanting to ask Lindsay, as well, given that you've been in the role for—you'll probably tell me—a few weeks now, how you have been able to influence the estimate for next year and how it meets your objectives as chair.
Well, firstly, I'd like to say that, given that this is my first appearance before Finance Committee since being appointed as the chair of the Wales audit office board, I'd just like to take the opportunity to start off by saying 'thank you' for recommending my appointment to the Senedd, and I very much look forward to working with you all and building a good working relationship with the committee.
In answer to the question, you'll be aware that I was first appointed by Finance Committee as a non-executive member of the Wales audit office board back in 2015, and since then I've held a number of roles, including as chair of the remuneration HR committee, and for the last year I've been the senior independent director. So, a clear benefit of my appointment as chair, especially during such uncertain and difficult times, is that I literally hit the ground running. It feels quite fast at times, and I've been fully involved at board level in both shaping and finalising the estimate, as well as being fully informed about the organisational response to the COVID pandemic.
I think, with regard to the estimate, as part of our usual planning cycle, in July the board hosted a workshop with Audit Wales directors to consider our funding model for the coming year and to start preparing the estimate. Since then, the board has had three further opportunities to shape the estimate, and at our board meeting in September, as chair elect at that point, I then led that discussion. The board agreed an approach that took into account the wider context, including the impact of the pandemic on the public purse, going forward, and, as Adrian has said, on increased demand for quality audit through such turbulent times.
It's also my view that the estimate will enable us to do all the things we want to achieve. However, I'm also very clear that this is a prudent budget. It's going to be tight, and although I'm confident that we can make this work, it will not be easy by any means. I feel it's really important at this point to pay tribute to the remarkable endeavour, resilience and hard work of all the staff at Audit Wales. We know as a board that the staff are our key resource in achieving the delivery of the programme of work that's set out by the auditor general, and it's vitally important, as it has been throughout the COVID crisis, that we continue to look after their well-being. I think it's important to add that the board have been kept fully briefed on Audit Wales's COVID response, with regular briefings at board meetings and discussions with Adrian, as well as being sighted of his weekly updates to staff. As the senior independent director, I supported the chair in the early days of the pandemic in considering the governance role of the board and the effective arrangements for the board to operate during this time. In particular, the board held an additional meeting in early May solely focused on the immediate organisational response to COVID and its impact on Audit Wales. We scrutinised the measures put into place to identify and address COVID-specific risk to both operational delivery and our own effective operations in supporting our staff through lockdown and beyond. We've endorsed the approach taken, which I think we'll look at a little bit later, around being fully supportive of the self/family work approach that we've adopted around staff welfare at Audit Wales. We continue to receive those regular updates and had a full discussion at the July board on the current state of play across the key governance areas of strategic risk and both financial and performance management. Looking forward, we're going to continue with that approach with a quarter 2 review at our November board, which will include a blank-sheet review of strategic risk.
Finally, I've also attended the monthly all-staff webinars throughout the pandemic and, as the new chair, I will be hosting the next one later this week. So, I hope that gives you a flavour.
It does indeed, and I'm sure we as committee members would support and align ourselves with the comments you made about the wonderful efforts of the staff and the wider team at Audit Wales in this difficult time, of course.
Okay, so, just moving on, then, to look at savings and efficiencies, a lot of the work that's currently being done by private sector firms has been brought in-house, hasn't it? And I was just wondering how much additional internal resource is required to cover that, because I note that staff costs are increasing by almost £1 million, so I presume that's mainly reflective of that shift, or largely of that shift.
About half of that figure is a direct consequence of the decision to bring the work in-house. That £0.5 million reflects a need bring in additional Audit Wales staff to undertake the work that previously would have been contracted out. The remainder are more general staff cost pressures in the system—so, pay increments and the like.
Okay, fine. Right, Alun Davies, then.
Thank you very much. I'm grateful for that. Auditor general, you did in answer to an earlier question describe the savings that you've made in terms of travel and subsistence over the current period, and you suggested that was down to the impact of the coronavirus, and we understand that. Now, my first question is: is that what drives the whole of that saving, or are there other elements to it as well? I'd be interested if you could just confirm that. But my bigger, wider point was that, in your second answer to the Chair, you said that that was driving a change to the shape and nature of the audit programme, going forward, and then you described the increased appetite for risk in the public sector and the rest of it. Now, I agree with that analysis, by the way, and I've got no issue with that at all, but I'm interested as to what that actually means, because every time I listen to a Welsh Government Minister talking about working from home, I'm thinking, 'Yes, that's okay, but—.' And I'm just a little bit worried sometimes that we're rushing in this direction without necessarily considering all the consequences of that. So, I'd be interested to understand in a bit more detail what you meant by the changing shape and nature of the audit programme, and how you will continue to deliver the audit programme with the increased appetite for risk, and how you will do that in a way that still achieves the sustainable, I presume, savings that you've outlined.
Okay, so your specific question in relation to savings pertains to the savings target that we've set for next year, yes? So, we have a savings target there of £400,000, which is on top of further savings that we need to derive, of around £900,000, which will come just from the management of staff vacancies and staff turnover. So, that additional £400,000 will be tough for us to meet. It won't come simply from reductions in travel and subsistence. Our working assumption is that we will be travelling much less next year, even if we return to some more normal ways of working. Our working planning assumption is around 50 per cent of what we have done in the past. So, to meet that savings target, we need to squeeze efficiencies and savings out of the system more generally, just as we always do. The way we will go about that will be that, in the spring of next year, all of our budget holders will be asked to review their non-pay budgets to identify any potential for savings. We continuously reassess the skill mix that we need to apply to each of our audits to make sure that we're doing that as efficiently as possible, and you'll be familiar with our increasing use of technology and data analytics, which regularly identify some concrete efficiencies. Often, those are quite marginal in nature, but cumulatively they enable us to take some slightly different decisions over staffing that then do contribute to those savings targets. So, it's possible for us to do, but it's getting increasingly tough for us to do. Eighty per cent of our costs are staff costs, and so there is a limit to how much squeeze we can apply to the organisation.
To the second part of your question, this year we have revisited the whole of our value-for-money programmes that we applied locally to individual public bodies and our national studies programme that you'll be more familiar with through the Public Accounts Committee and other committees of the Senedd. Locally, we have reshaped all of those so that they are now focused on the issues that are of most relevance and priority to our partners elsewhere in public service. So, for instance, we are doing a lot of work with local government and the health service at the moment around recovery planning. We have a piece of work in train around test, trace and protect, which we hope to be able to report on within the next month or so, so that it informs in real time the arrangements that the public service is making. And I guess that touches on the most fundamental change that we're trying to deliver this year and going forward, which is for our audit work to be far more present and immediate in its focus.
Some of the feedback I got in the very early days in this job was that our work took too long to deliver, and so its relevance was diminished by the time we came to report. So, you'll have seen, in our interim report, a kind of extreme example of that through our COVID learning project, which is not traditional audit work at all. This is relying on our network of staff in every part of the public service in Wales and the relationships that we have through them to hoover up information about the novel and innovative practice that is taking place in Wales, to analyse that ourselves and then to play it back in close to real time to our colleagues across the public service. No other audit institution that I'm aware of is attempting anything like that, but I think it's an extremely valuable and important contribution for us to make. In terms of our—
Sorry. I agree with you. I'm just concerned about your ability to deliver that and to deliver that learning if you're not out and about. Because I'm quite happy sitting here in Tredegar with a cup of tea here and a biscuit barrel the other side of the camera, but I'm not learning how Blaenau Gwent is coping, am I? And there's always a value to being hands on, out and about, understanding how people are living.
You're absolutely right. There are a lot of benefits for us as an organisation, for the whole of the public service, from operating in this way, and we've discovered over the last eight months that we can deliver a lot of our work effectively remotely. But we are missing out on some significant things. The ability to look face to face and look someone in the eye, as it were, is important in audit work, and we're unable to do that in the usual way at the moment.
As an organisation, also, I'm very conscious that some things are just better done when teams can be together physically in the same space—if they're planning, scoping projects and so on. And for us, in particular, as an organisation, out of our 270 staff we have 60 of them who are graduate trainees and apprentices—so, young, relatively inexperienced staff who need and deserve a lot of guidance and support from their line mangers and colleagues—and we're unable to deliver that in quite the same way in this environment.
So, you're absolutely right; we are missing out as an organisation on some important things that I'd like to get back as soon as possible. In terms of our audit work, we can do a lot remotely. But you're absolutely right; there are some things that we will do better and the quality of our work will be better as and when we are able to be physically on site again.
Diolch, Alun. Siân Gwenllian.
Thank you, Alun. Siân Gwenllian.
Diolch, Gadeirydd. Ydych chi'n dal i ystyried newid y ffordd rydych chi'n rhedeg y swyddogaeth gyflogres? A ydych chi'n dal i ystyried ei roi ar gontract allanol, yntau a ydy'r sefyllfa COVID wedi newid hynny?
Thank you, Chair. Are you still considering changing the way in which you run the payroll function? Are you still considering outsourcing it or has the COVID situation changed that?
I'll ask Nicola to respond to that, if I may.
We've actually already outsourced our payroll, back in 2014. Our current contract, that we procured at that time, comes to an end next year. So, currently we're going through another procurement. It'll still be outsourced, but we think we've identified scope for even further efficiencies by outsourcing it in a slightly different way. So, yes, it will be done.
Iawn, diolch yn fawr am egluro hynny. Felly, gobeithio bydd yna fwy o arbedion yn dod yn sgil y newid pellach yma sydd yn digwydd rŵan.
O safbwynt y gwaith sy'n cael ei ariannu gan ffioedd, mae'r amcangyfrif yn egluro bod £180,000 wedi cael ei newid o waith a ariennir gan ffioedd i waith a ariennir gan gronfa gyfunol Cymru ac wedi darparu adnoddau i wneud gwaith ffeithluniau a gwaith sy'n cael ei wneud ar gyfer y Pwyllgor Cyfrifon Cyhoeddus. A fedrwch chi amlinellu beth fydd yn cael ei ddefnyddio yn 2021-22?
Fine, thank you very much for explaining that. So, I hope there will be more savings that will emanate from that further change happening now.
In terms of the work that's being funded from fees, the estimate explains that £180,000 has been switched from work funded from fees to work funded from the Wales consolidated fund and has provided resource for infographics work and work being undertaken for the Public Accounts Committee. Could you outline what it will be used for in 2021-22?
I'll take that, Siân. The answer would be: hopefully, more of the same. We first requested this shift in the balance of funding a year ago, so we've benefited from that in this financial year. As you say, we have delivered a number of key products: one that has provided, I hope, much greater insight and clarity around the state of the NHS accounts and financial position, and another suite of products aimed at local government—so, web-based infographics and more data around the position for individual local authorities and also the wider sector. And in the next week or so I hope that Nick and his committee will receive a commentary piece from us to shape and inform the PAC scrutiny of the Welsh Government's accounts in particular. So, all of those steps reflect what I want this money to be used for, which is to surface far more of the intelligence and insight that we can gain from our audit-of-accounts work, rather than the value-for-money studies that, perhaps, gain more attention at the moment. Because hidden within the audit of the accounts of every part of the public sector is a wealth of information about organisational health and governance, financial positions—all sorts of stuff. So, that additional money is giving us a little bit of capacity, as I say, to surface some more of that, to inform public debate and your ability, as Members of the Senedd, to hold the Welsh Government and other parts of the public service to account.
Sut ydyn ni'n gwybod bod hyn yn cyfleu gwerth am arian i'r cyhoedd—y gwaith creu'r ffeithluniau yma? Ydych chi'n monitro effaith y gwaith yma?
How do we know that this represents value for money for the public—this infographics work? Are you monitoring the impact of that work?
Yes. We're getting a lot of feedback, based on the website hits and so on, that suggests these are being used. We've had very positive feedback from those who are charged with governance within those individual parts of the public service who themselves have found it of value—so, audit committees and the like are making use of this to increase their own understanding of the financial health of different parts of the public service. I certainly believe that there is very definitely value for money to be derived from this, because I am privileged to have a line of sight on all of the work that sits beneath our accounts work. It is there to provide you with assurance that public money is being well used and well managed. But we can go way further than simply saying, 'This set of accounts has been signed off with a clean bill of health', because, as I say, in every set of accounts, there is a story to be told about the governance and performance of every single part of the public service. Unless you are a trained accountant with time and inclination to delve into the accounts to see what that means, you need something like this for it to be drawn to your attention, I would suggest.
Dwi'n siŵr bod hynny'n wir. I'r rhai ohonom ni sy'n lleygwyr yn y maes yma, mae unrhyw beth sydd yn ein helpu ni i ddeall yn well yn werth am arian
Eich tîm dadansoddeg data chi—mae yna newidiadau o ran lle mae'r gyllideb ar gyfer hwn yn mynd i fod yn gorwedd o fewn yr amcangyfrif. Wnewch chi egluro pam eich bod chi eisiau creu'r newid yma ac a fydd yna arbedion yn gallu digwydd yn sgil hynny?
I'm sure that that's true. For some of us who are lay people in this area, anything that helps us to better understand these issues is value for money.
Your data analytics team—there are changes in terms of where the budget for this is going to lie within the estimate. Could you explain why you want to make this change and will there be savings as a result?
If I take the first part of the answer to this, Nic, and maybe if you could explain the nitty-gritty of how it will be funded in future. The data analytics project has been funded directly from moneys that you've endorsed within the consolidated fund for the last three years. That was very much a pilot exercise to test the art of the possible to see what we could do. The board considered the review of the first three years earlier this year and concluded that absolutely it was the right direction of travel for us as an organisation, and in saying that, we're exactly in the same position as the other public audit institutions elsewhere in the UK and around the world, and the private firms themselves are investing huge sums in this form of technology as well.
It will drive some efficiencies for us when we're able to access large volumes of data directly from our audited bodies, in particular around our audit-of-accounts work. You'll see in the estimate that our current estimate is that we believe that could be in the order of 5 to 10 per cent of the audit fees that we charge. Exactly when we'll be able to crystallise that, though, I'm unable to say. It depends not only on us and what we do, but also on the ability of our colleagues in individual audited bodies to provide us with that access and that data.
So, there will be some concrete efficiencies flowing from DA, I'm sure, but it's not all about driving savings. It's also—and perhaps more importantly—about improving the quality and robustness of the work that we're able to do. So, rather than making specific samples on particular forms of transactions, we will have access to the entire ledger and data set that a local authority or a health board will operate upon. So, the quality of the work that we're able to undertake will increase, and the assurance levels, therefore, that we'll be able to provide will improve as well, and it also will enable us to analyse and communicate findings from that audit work, I hope, in a far more engaging way than we've been able to do in the past. But, Nic, perhaps you could say something about specifically how we anticipate the work will be funded in future years.
The board considered a business case back in the summer looking at the current make-up of the data analytics team and the specialist software that they use and agreed that, going forward, we would pass just under 70 per cent of those costs on through our fees as an overhead on our fee rates, with the balance being met as a contribution from the consolidated fund. That's based on our overall spending split of about 38 per cent consolidated fund and 62 per cent coming from fees.
Okay. Thank you.
Diolch yn fawr iawn. Ymlaen â ni, felly, at Mike Hedges.
Thank you very much. We move on, therefore, to Mike Hedges.
Diolch, Gadeirydd. My first question is: have you conducted a cost-benefit analysis of the projects outlined in your change programme, and where will I also find that in public sector organisations, saying that the change is actually benefiting them?
Okay. I'll start, certainly, with explaining about the change programme and our cost-benefit analysis. So, we have the change programme, which brings together a number of existing change initiatives under one centrally co-ordinated approach to support the delivery of Audit Wales's strategic ambitions. Indeed, all change projects are subject to approval by the change programme board, which was established earlier this year, and as part of this process, they require a robust business case, which must include a cost-benefit analysis in order for resources to be allocated. And in addition to that, significant projects that require investment of more than £250,000 also require the Wales Audit Office board approval, where a business case would also be considered at the board.
We've been very keen as the board to improve our approach to change management, particularly as this was identified as an area for improvement within previous staff survey results, recognising that we need that coherent approach for implementation across Audit Wales, together with improving the pace of change. In driving improvements to the governance of change initiatives, a standardised approval framework has been introduced, ensuring that the strategic viability, resourcing and the costs and benefits are re-evaluated at key decision-making points throughout the life cycle of the project, so not just at the point of approving the business case. The board does have a clear line of sight of assurance in this area through our comprehensive assurance and risk management framework, which we felt has been really important, and, through the audit and risk committee seeking specific assurance on internal control and risk management, two internal audit reports had been commissioned in that area, and we have a second one that's going to report in early 2021.
The committee has considered in more detail as well the monitoring and reporting arrangements for each of the change projects, and there's more work to be undertaken to ensure that those are proportionate to the size of the project, but also the complexity and the inherent risk, and we are pleased to note the positive outcomes from this approach in terms of savings and efficiencies, and I know that's something that's important to us all. The change programme provides that holistic view across Audit Wales, bringing greater visibility of the total investment and commitment of the resource to driving change. Through the co-ordinated change programme approach, we're delivering more effective use of our resources as part of our Smarter, Leaner, Better value-for-money framework, and clearly that's something that we would want to be able to quantify, but it ties into our efficiencies and savings area of work.
I don't know if Adrian or Nicky want to add something more specific around how we're understanding the benefits.
Just to say I completely agree with the premise, I think, of Mike's question that any programme of change and any individual project is only as good as the benefits you realise from it at the end, and so part of the rationale and the drive for us to put in place a more robust and coherent approach to change management is to ensure that we do exactly that, and so projects have to articulate a business case upfront, self-evidently, but also we follow that through to completion and assure ourselves that the benefits that we anticipated are actually delivered in the end.
Okay, thank you for that. Can I just perhaps come back to two points on it? Cost-benefit analyses are very interesting. Every private finance initiative scheme that ever went through passed a cost-benefit analysis, however it got through it, so I have a rather jaundiced view about that. But who's going to get the benefit of the savings?
Who's going to get the benefit of the savings that we derive through—?
Are you going to ask for less money from local authorities and other people you audit, or are you going to ask for less money centrally?
Well, the cumulative effect of these things are reflected in the estimate that we've put before you today, which, in cash terms, effectively is flat compared with this year. We haven't yet published our draft fee scheme but you'll have seen from our estimate that our intention there is to maintain our fee rates at exactly the same level as this year. So, the cumulative effect of steps that we have taken this year and in previous years are reflected in our ability to put forward what I think is a very prudent budget for next year, both in terms of fees and in terms of our draw on the consolidated fund.
Okay. Thank you. Can I look at the ICT expenditure? If I'm right, you requested £150,000 capital for the ICT strategy. Is this going to be £150,000 a year in future years, or is it a one-off? If it's a one-off, why can't it be funded over a number of years, and why is leasing not considered?
So, key drivers within our ICT capital programme: No. 1, a reflection of the continuation of the strategy that we've been on in recent years, which is, in a nutshell, to enable our staff to work as flexibly as possible and to reduce our reliance on directly hosted services and move to cloud-based services wherever possible. Our experience over the last six, eight months I think has both shown the wisdom of that approach in previous years but has also accelerated us further down that path. So, some of what is reflected there is a continuous ongoing need that any organisation will have to keep its ICT infrastructure up to date and replaced year on year, to some degree. We also have a couple of significant IT-based projects that will be coming to a head next year and beyond. So, we are in the process of delivering an entirely new system as a platform on which we deliver our audit of accounts work that will require some significant investment in terms of developing our SharePoint platform and support around that. Nic, I don't know whether there's anything further you can add in terms of our more general approach to ICT financing.
No, only that we've got a strategy whereby we replace equipment on a rolling programme. So, each year, parts of our equipment—our laptops, monitors—are replaced on a rolling basis over a period of time.
So, just to clarify, you decided not to lease, and that £150,000 is exactly the same £150,000 that was in last year.
It was slightly less last year; I think it was £120,000 last year. It's increased for next year, just reflecting increased cost but also the increased technology that we're acquiring for where we've got more people working at home.
And you did consider leasing, and didn't think it was the most cost-effective way.
All the evidence that we have is that it's more effective to purchase our own equipment.
Okay. Thank you.
There we are. Okay. Thank you, Mike. We move on to Nick Ramsay.
Diolch, Cadeirydd. Good to see you, Adrian, and your team. The estimate outlines three specific reasons why Audit Wales may need to change this budget. This includes the volume of work associated with the pandemic. Is there work planned for estimate 2021-22 that could be cancelled and resources reprioritised?
Would you like me to take that one, Adrian? Sorry.
You kick off, Nic, yes. Thanks.
I always think you're talking to me when you say 'Nic'. I realise it's—[Laughter.]
It's all right.
The most—. As Adrian explained earlier, we've allowed within our fees income estimates for next year an increase over the current year. What we don't know at the moment is how much extra work we will potentially need to do. So, the biggest reason we would be looking to change the estimate next year is if we find out that we've actually got to do a lot more fee-earning work. So, we wouldn't be looking necessarily for additional money from the consolidated fund, but we'd want to increase our fee income estimates to allow us to identify the resources to deliver that additional work. It's very hard to say currently, because we don't know what sort of additional audit work we're going to need to do in response to COVID.
So, it would come from the fee side of it, rather than from the portion—was it 30-something per cent you said comes from the consolidated fund?
Yes, rather than the 30—. So, we would look to increase our—. Potentially—. At the moment, we don't think it's likely, but, if necessary, then, yes, we would want to increase our fee income in order to allow us to spend the resources to deliver that fee-earning work.
Okay. This year you've been unable to include a draft fee scheme alongside the estimate. Can you outline why and when you intend to consult relevant bodies and publish a scheme?
Of course, yes. I'll take that one. I think you may be aware that, in order to lay a draft fee scheme, we have a legal requirement to consult on fees for local government bodies prior to those being included in the fee scheme, and we would have had to have done that over the summer. Clearly, at that time, we did not want to overburden public bodies, and the board considered that that wasn't really a priority, either for ourselves or for public bodies at that point, and, whilst we have to lay a fee scheme annually, we can be flexible about when we do this. Therefore, given the pandemic, the board agreed to carry out the consultation later in the year, which meant it would be after the Finance Committee had considered the estimate. But, of course, once the consultation has been completed, we will lay our fee scheme for Finance Committee consideration early in 2021. It is just worth noting, as Adrian said earlier, that, as set out in the estimate, we anticipate that this will be on the basis of no increase in either our fee rates or our fee scales.
And you've budgeted an increase in audit fees of £646,000 alongside a decrease of £109,000 for European Union agricultural funds audit and £80,000 in grant certification fees. Can you outline the areas this work relates to, and whether there are any issues in terms of the resources available to you to deliver the work?
This is related to the point that I made earlier, which is that we've anticipated that we will have more fee-earning work next year. That's partly catching up, particularly on some performance work that has been delayed from the current financial year, it's partly some new audited bodies that are currently on stream, and it's allowing some flexibility for additional fee-earning work for COVID-related funding.
The EU agricultural funds—our original modelling suggested that that would come to an end in the current financial year, but we've now been given notice that it's going to continue for another three years, but actually on a slightly lower level. And similarly, our grant certification work—a lot of the Welsh Government grant certification work has generally been reducing over recent years.
So, those figures that I quoted, relating, for instance, to the EU agriculture funds audit, are they still correct or are you saying that, actually, because of that three-year extension, the figures there are going to be not quite as much as predicted?
The figures that are in the estimate are now correct.
So, those are correct.
It's the—. If you look, the previous year was about £750,000, which we're doing this year, and it's reducing to around £600,000 going forward.
Okay, thanks. Diolch.
Thank you, both Nicks. Right, Mike Hedges next.
If there's one thing that has overshadowed everything everybody's done this year, it's been the pandemic. It's likely to overshadow everything you do up until the end of this financial year. Two questions on the pandemic. Conducting audits remotely—doesn't that save money, and do you have access to the computer storage of the people you're auditing, i.e. can you actually examine the income and the expenditure and where things are allocated within the computerised storage of accounts?
So, does it save money? Well, we've undoubtedly saved money in the first part of this year by travelling less, so our previous operational model would have had our audit staff to a large part physically located on the premises of our audited bodies. We've just not done any of that on-site work this year. What we have discovered, though, in doing certainly our accounts work remotely, is that we can do it, but generally speaking it takes longer and is a little less efficient, certainly this first year, than it otherwise would have been.
In terms of the second part of your question, Mike, about direct access, I touched on this when we spoke earlier about data analytics. That's kind of our ambition for the longer term. During the pandemic, we worked really closely with the NHS in particular. They were fantastic in securing direct access for our staff to the financial systems on which all parts of the NHS operate. Unfortunately, we've not been able to do the same in local government and elsewhere, in part because they use myriad different systems. The NHS is all on the same core system. So, in local government and elsewhere, by and large, we're having to rely on alternative ways of secure file transfer on specific files and questions that we would pose, rather than having direct access to the whole systems. Longer term, as I say, I would love to get to the position where we are in that position to be able to access entire financial ledgers and so on to undertake our audit work.
Thank you. I go back far enough, to when the ledgers used to actually be that and you'd spread them out and they'd cover my desk. We have made substantial progress in things being held centrally. Although they might be using different systems, can you not access them in ASCII format?
I have no idea, Mike. I'm technically completely out of my depth the second you say that, but I am confident that our IT team and those in all of our audited bodies are doing everything they can to give us the sort of access that we require. But in terms of how the systems talk to one another, I'm afraid I have no technical grasp whatsoever.
Perhaps I should earn my living doing so—I have a tendency to get technical every now and again. ASCII is 'American standard code for information interchange' and every character that exists on a computer is made up of a number of noughts and ones. I mean, 65, for example, gives you a capital 'A' and 90 gives you a capital 'Z'. Forty-eight to 57 give you the numbers nought to nine. So, we know that. So, although it might be held doing clever things in the way they do it, I was just wondering if perhaps you could ask your technical team why they can't just access it in ASCII format. There may be good reasons why they can't, but I was just asking could you ask them.
I would be very happy to, Mike, and if the committee would find it helpful, we can drop you a line on their response to that.
Thank you very much.
Are you content, Mike, or did you want to ask anything else?
As we've got nine minutes left—[Laughter.]
I've got a question I wanted to ask as well when Mike—
I know you've got a question. I'll just be a minute.
The risk to audit fee because of the pandemic—. You've highlighted the risk to audit fee. How big a risk do you think it is?
To audit fees?
Yes. I've got here:
'The Interim Report notes additional costs and cost savings associated with the pandemic as well as risks to audit fee income.'
Ah, right. There is a risk to our fee income undoubtedly, because if we're unable to undertake our work, then we can't charge fees, so it's a risk to us that we can't, on the one hand, derive the fee income that we require to operate. As Nicola said, also, there's a potential risk in the opposite direction—if we are actually able and it's necessary for us to undertake even more audit work in order to gain the necessary assurance to meet my statutory duties, then there is a risk that we have to return to the committee to ask for a supplementary budget to allow us to do that.
Okay, thank you.
Okay. In the five minutes that we have left, then, I'll come back to where we very nearly started, when Lindsay was talking about the maxim that you have of 'self, family, work' in that order. I haven't seen the banner—there'll be a virtual banner somewhere with it painted on. I'm just wondering, really, how the management of the Wales audit office is ensuring that that can actually be a reality for staff and how you've enhanced the monitoring of staff well-being as a result of the circumstances in which we find ourselves.
It's not our new logo, but it is a maxim that I've used from the very start of the lockdown and I guess that's where these kinds of things start—with the tone that is set at the top of the organisation. So, I communicate on a weekly basis with the organisation, either in writing or through short videos, to keep everybody up to speed on what's happening and also to try to reinforce exactly this theme—that this is tough for everybody, not as auditors, but just as human beings, and I am determined that, as an organisation, we look after people's emotional and mental well-being first and foremost throughout this. Our mantra of that is reinforced and echoed by all of my senior staff and through our leadership and management structures, with regular cascades and communications, and so on. In practical terms, we have put in place a code on people's time sheets that they can charge their time to, if, for whatever reason, they're simply unable to work in the way that they normally would. So, when the kids were at home and couldn't go to school, or if they have caring responsibilities, or, for whatever reason, they find that they need to put themselves or their families before work, that is okay. Now, a lot of people across the organisation have made some use of that facility, but, overwhelmingly, we have been more than reimbursed by the discretionary effort that people put in to continue to work on our behalf.
We've been undertaking fortnightly pulse surveys with the staff, as well, to take a temperature check on the organisation to see how people are feeling. By and large, I think what I'm seeing is an organisation that recognises and appreciates the position that we've adopted. But it is very tough for people; for some people, it's really difficult to work in this environment for a long period of time, and for the bulk of us, it's more the general environment that people find difficult rather than the additional pressures that we place on them through our work demands. But I hope you'll have seen from the interim report that this is an organisation that I believe has absolutely stepped up during the pandemic and has delivered fantastic things for us all. But I keep saying to the team that I want us to come out of this not only having survived it, but, actually, having grown and, if anything, in a better place than when we went into it. And, in some ways, paradoxically, I feel better connected to the organisation now than I did a year ago. And from what I'm seeing and hearing from a lot of colleagues, I think that goes for a lot of us as well. But I've been supported in all of that by Lindsay and the board members, who have certainly reinforced and echoed that more general approach.
Yes, if I could just add there that it feels that the board's been very active in its support of the approach, and that's been enabled by the fact we have been kept fully informed. I personally have worked for over 30 years in mental health in the third sector in Wales, and so you can imagine that staff well-being's been at the fore of my thinking, and particularly so through this pandemic. I and other board numbers have engaged, where we can, and it's been about making those all-important human connections in the virtual work space. I think it would be all too easy for the board to end up feeling very remote, and one of the things that I'm taking on in my first few weeks and months in the new role is to try and make as many connections into staff teams and talking to directors and managers around the organisation, in that kind of just human catch-up and making connections, making contact. So, yes, the board fully endorses the approach that's been taken, and I can't say it enough in praising the staff and the leadership team for their hard work and resilience that they've shown in adapting to these new ways of working and enabling Audit Wales to deliver its programme of work through these difficult and uncertain times.
Wel, dwi'n meddwl bod hwnna'n nodyn addas iawn inni dynnu'r sesiwn yma i'w derfyn. Gaf i felly ddiolch i'r tri ohonoch chi am ddod atom ni y prynhawn yma, yn enwedig Lindsay, wrth gwrs, am y tro cyntaf fel cadeirydd? Ac rŷn ni'n edrych ymlaen i gael eich cwmni chi ar adegau dros gyfnod eich cadeiryddiaeth. Diolch yn fawr. Mi fyddwn ni, wrth gwrs, yn ystyried y dystiolaeth yma ochr yn ochr â'r dystiolaeth dŷn ni wedi'i derbyn ychydig wythnosau yn ôl, ac mi fyddwch chi'n derbyn copi o'r trawsgrifiad i'w wirio ar gyfer cywirdeb. Ac, wrth gwrs, fe fydd yna gyfle, os oes yna gamddehongli neu gamglywed wedi bod, i gywiro y trawsgrifiad hwnnw fel sydd ei angen. Felly, diolch o galon i'r tri ohonoch chi.
Mi fydd y pwyllgor nawr yn torri am 10 munud ac yn ailymgynnull am 15:40 er mwyn clywed tystiolaeth gan y Gweinidog cyllid ar yr ail gyllideb atodol. Diolch yn fawr iawn.
Well, I think that's a very appropriate note on which to draw this session to a close. So, I thank all three of you for joining us this afternoon, particularly Lindsay for the first time as chair, and we're looking forward to having your company over the course of your chairship. So, thank you very much. Of course, we'll be considering this evidence alongside the evidence that we've received some weeks ago. You will receive a copy of the transcript to check, and, of course, there will be an opportunity, if there's any misinterpretation, to correct that transcript as required. So, I thank you all.
The committee will now have a short break for 10 minutes and we'll reconvene at 15:40 to hear evidence from the finance Minister on the second supplementary budget. Thank you very much.
Gohiriwyd y cyfarfod rhwng 15:29 ac 15:41.
The meeting adjourned between 15:29 and 15:41.
Croeso nôl, felly, i Bwyllgor Cyllid Senedd Cymru, a dwi'n falch i groesawu atom ni y Gweinidog Cyllid a'r Trefnydd, Rebecca Evans, ar gyfer sesiwn dystiolaeth ar ail gyllideb atodol Llywodraeth Cymru ar gyfer 2020-21. Yn ymuno â hi mae Andrew Jeffreys, sy'n gyfarwyddwr y Trysorlys, a Matthew Denham-Jones, dirprwy gyfarwyddwr yr is-adran rheolaeth ariannol. Croeso cynnes i'r tri ohonoch chi atom ni. Gwnaf i gychwyn gyda fy nghwestiwn i, os caf i, ar y dechrau fan hyn. Wrth gwrs, fyddai Llywodraeth Cymru ddim fel arfer yn cyhoeddi cyllideb atodol, neu'r ail gyllideb atodol tan fis Chwefror. Mae rhywun yn deall ein bod ni mewn cyfnod digynsail. Efallai y gallwch chi, Weinidog, sôn ychydig ynglŷn â beth ŷch chi'n gobeithio ei gyflawni drwy gyhoeddi'r gyllideb atodol hon ar hyn o bryd.
Welcome back, then, to the Finance Committee at the Senedd, and I'm very pleased to welcome the Minister for Finance and Trefnydd, Rebecca Evans, for an evidence session on the second supplementary budget for 2020-21. Joining her are Andrew Jeffreys, who's a director of the Treasury, and Matthew Denham-Jones, deputy director of the financial controls division. A warm welcome to the three of you. I'll start with my first question, if I may, at the outset. Of course, the Welsh Government wouldn't publish a second supplementary budget until February. We understand that we're in an unprecedented period. So, Minister, could you please outline what you hope to achieve by publishing this supplementary budget at this time?
Thank you, Chair. So, due to the absolutely exceptional circumstances of this financial year as a result of the coronavirus pandemic, I published this interim supplementary budget to provide an update on the amounts that we've allocated from reserves, and also changes to the resources available to the Welsh Government that have taken place over the last four months. This supplementary budget increases the overall Welsh resources by £2.5 billion, and that's a further 11 per cent increase on the position that we set out in the first supplementary budget, just over five months ago. Since the final budget was approved in March 2020, the resources have increased by more than 22 per cent—£4.6 billion.
So, really, the focus of this particular interim or second supplementary budget is to ensure that our financial position is as transparent as it possibly can be. It pulls together many of the announcements that have been made since I published the first supplementary budget, and it's done that, really, to ensure that the Senedd is fully up to date and content with the funding decisions that have been made, and, also, we're the only part of the UK to have done this so far, and I think that does speak to the importance that we put on transparency. But alongside that, the approval of this supplementary budget motion would also authorise the revised spending plans of the Welsh Government and, of course, then the cash required from the Welsh consolidated fund. So, there's quite a practical, important reason for bringing this forward at this time as well.
Indeed. The supplementary budget notes that £1.6 billion of additional funding has come in respect of the UK Government's guarantees. You referred to the initial £1.2 billion announcement as a far cry from what was needed. Of course, you've had an additional £400 million since then, so maybe you could tell us how much funding the Welsh Government feels it requires.
I think there are two parts to this, the first being how much Welsh Government needs to respond to the crisis itself, and then how much money the Welsh Government needs, moving forward, in terms of the reconstruction and recovery of society and of the economy as well.
On the first, I think that what we've seen just in recent weeks is a really salutary reminder of the fact that we don't yet know the full path of the virus and the pressures that it will place on Welsh Government and its budget in the months and years ahead, and to respond to the crisis, obviously we need to be responding to the health crisis and the economic crisis, so it's very hard to put an actual figure on that. But I think, certainly, when we look at the way in which the economic resilience fund has been responded to, and the level of need out there by business, I think it's fair to say that we could easily use a large amount of additional funding from the UK Government to respond to the crisis end of things.
And then, when we look ahead to the recovery and the reconstruction, I think it's important that we certainly do not go back to the situation that we had before, with year upon year of austerity. That certainly isn't the right approach, and we should be looking to invest in public services and invest in jobs and job creation to enable us to be in the best possible position for a recovery. So, it's very hard to put a figure on it, but suffice to say that Welsh Government can make use of large amounts of additional funding, both for the immediate crisis and the recovery.
Okay. Alun, you indicated you want to come in.
Thank you very much, Chair. Minister, I completely concur with your analysis, both in terms of support for people and businesses at the moment and in terms of the recovery. I find it bewildering, therefore, that the Welsh Government doesn't use all the tools at its own disposal, because if we're saying we have the ambition that you began to sketch out there, and which I agree with, and we have an ambition for Wales in terms of build back better and the rest of it, and what we say is we're going to deliver it with Tory tax rates, and we're going to allow the Tories to determine how we use the tools that we control here in Wales—I just don't understand how you can match those two things. I can understand where you're coming from in terms of the past, but these are, as you said yourself, unprecedented times. We need to invest in our people and in our economy, and surely any socialist Government would look at the tools available to it in order to expand its own resources and not simply look across the border.
So, in response to that, I would say that there are several tools that we have. One, of course, is tax-raising powers, but others are those that relate to the management of Welsh Government budgets and resources. So, the tools that we would like to be able to use better are our Wales reserve, for example. We've been increasing the Wales reserve in order to allow us to draw down additional funding when it's needed, but, of course, the rules that surround that mean that we can't draw down as much, perhaps, as we would want to. Equally, other tools that we have would be around borrowing, and, again, we're limited in how much we are able to borrow.
I know Alun Davies and I have debated potential tax rises on a number of occasions, but I would suggest that now we're in the deepest recession in living memory, perhaps it isn't the time to be increasing taxes, particularly when we look at what we could raise. Even if we just increased 1p on the tax here in Wales, which we could do, that would bring in only £200 million, and when you look at that against the level of resource that we need to respond to the crisis, it is quite a small contribution. We would be looking, I think, to increased finance from the UK Government in terms of our guarantee, which we have established with them. So, I do appreciate what Alun says, but we've made the commitment, of course, not to increase Welsh rates of income tax over the course of this Senedd term, and I think that it's important that we keep to that promise.
Although nobody would have foreseen a global pandemic, I'm sure, Minister. Rhianon and Nick have both indicated, so I'll allow you to come in—Rhianon first.
Thank you. It's just really to find out if there was any rationale from the Treasury in regard to the request to be able to draw down further from the Welsh reserves. Is there anything that you can flesh out around that? Because obviously that would have been very useful, and particularly ever more so in a devolved Wales, that we are able to utilise our reserves fully.
We have had numerous discussions with the Chief Secretary to the Treasury about using the tools that we have better, and having access to more of the Wales reserve. That request was declined on the basis that we have established the guarantee with the UK Government in terms of additional funding. So, from their perspective, that wasn't needed at this time. And perhaps at this point in the financial year, that's reasonable, but as we move towards the end of the financial year, I think it's really important that we retain larger flexibility to draw down more if we need to, but also potentially to carry more over into the next financial year, because clearly we don't know where we're going to be in the spring, and managing the budget is quite difficult in the sense that you're planning for a wide range of scenarios, and I think that it would help us a great deal if we were able to plan on that basis, with the confidence that we could carry more over to next year without having to find ourselves in a position that nobody wants to be in in terms of returning money to the Treasury. I can see Andrew Jeffreys indicating.
Yes, Andrew wants to come in on this and then we'll move on to Nick.
It's probably worth also mentioning the fact that we still don't know our budget for next year. We're, I think, six weeks away, roughly, from publishing the draft budget for next year, and that uncertainty about the level of funding available next year exacerbates the challenges the Minister is talking about in terms of where we're aiming to land this year. If we had greater clarity about what the budget was next year, that would give us a bit of a reference point for some decisions that may be needed this year. So, the combination of those two uncertainties makes the position particularly complex.
Okay, thank you. The volume wasn't great, Andrew, so maybe you could speak up or find an alternative means of amplifying your voice. Nick.
Diolch, Cadeirydd. In fact, Andrew Jeffreys just made an interesting point there in that we're about to start this draft budget process and, as he said, we don't know what the settlement is going to be for next year. So, what I was going to ask the Minister, just to go back to your comments originally, Minister, was I right in thinking that you said that there's been a 22 per cent uplift in the budget? And I think you used the figure of £4.6 billion. Was I right in those figures?
Yes, that's correct.
So, is that the quantum? Given that we're moving into next year's budget shortly, is that the overall uplift that's been given to the Welsh Government for the pandemic over the last few months?
Yes, so that relates to funding specifically for the pandemic. And that raises a really important point in terms of how this funding is accounted for and dealt with as we look for the discussions for the next financial year, and to what extent we will just be looking at what we would consider to be the normal budget, or to what extent the Treasury is going to factor in issues relating to COVID within those discussions as well. So, that's something that we're trying to bottom out with the Treasury at the moment.
Because I suppose a problem, well, an issue for the Welsh Government would be, depending on what happens with the pandemic, but hopefully next year we'll see figures decline eventually, I suppose you've had quite an uplift this year, so there's potential in the future that, without that pandemic funding, you could actually be seeing a dip in future budgets. Is that a concern? Is that a valid concern?
It's impossible to say at the moment. Based on what we know from what the Chancellor has said previously, it's very difficult and the range of scenarios that we're planning on at the moment are so wide that it's almost useless. In the last meeting I had with the Chief Secretary to the Treasury, I did say we need to start narrowing down the scenarios that we're potentially planning for, because we could be looking at parts of Government where we'd be looking for cuts, for savings, or we could be looking to allocate some additional funding. So, at the moment, it's a very grey area. But 25 November will be an important date, when we find out our budget for next year.
Okay. We'll move into some specific areas, then, if we may, and I'll just start with health and social services, because the budget sets out £800 million for a stabilisation package for personal protective equipment, for the seasonal flu campaign, to provide health boards with sufficient capacity, including through field hospitals. That's—£800 million is quite a big global figure, isn't it? Can you give us a finer breakdown or some sort of more meaningful breakdown of how that will be allocated and used?
Yes. So, that £800 million stabilisation package is to help the Welsh NHS respond to the ongoing impacts of COVID-19 and also to help it ensure that it enters the winter period in the best shape that it possibly can. And, of course, it takes the additional funding that the NHS has received as a result of the pandemic to £1.3 billion. So, as you say, these are really significant sums.
In terms of what the funding will do, it will support the organisations in a range of ways. For example, we're working actively with the health service to better understand the requirements for PPE. That's really important work that is going on at the moment, and we need to ensure that we have a reliable supply of PPE for primary care providers, as well as those in hospitals and social services and so on. So, that's an ongoing piece of work at the moment to better understand what might need to be allocated there. We're allocating £371 million to health boards to help them develop their winter plans, including additional capacity, and we've also set aside £30 million to support the transformation of the urgent and emergency health and care system. And in addition I've mentioned the cost of PPE, but, of course, we've allocated over £11 million for further investment in rolling out the flu vaccine programme, which will be the largest programme that we've ever rolled out in relation to that as well.
In terms of the specific funding, as the picture becomes clearer, in terms of the discussions that we're having with the health boards, I'd be happy to ask the health Minister to provide a more detailed breakdown as we do come to a conclusion on those discussions about PPE and so on.
We'd be grateful for that, thank you, Minister. I think Mike now wants to pick up on some health questions as well.
Diolch, Cadeirydd. Well, just to put it into context, in the first supplementary budget you noted £288 million had been allocated to NHS organisations—that's almost equivalent to a 1.5p increase in income tax. So, I think that puts that into context. I'm sure you'll agree with that. The question I've got is are you and the Treasury agreeing on how much money we're having? Because last time we discussed this, we had the Treasury coming up with one figure and you coming up with a different figure. Are you now in agreement on that? And if you are, have you got a plan—and I'm not asking you to give it to us at the moment—of how you're going to feed money into the health service between now and March?
Yes, we are agreed on the funding that will be coming to Welsh Government and which has been allocated, and that's on the basis of the guarantee. So, the most recent addition to that funding was for £400 million, which was on top of the funding that we had before. What we don't have is clarity right across in terms of the transparency as to what that relates to in terms of UK Government spend, and that's one of the difficulties that we have. We monitor closely UK Government spend through the various departments and additional funding provided to various UK Government departments to try and get a proper handle on where we are within that guarantee. But there are things that we have yet to find additional funding for in the UK Government, for example field hospitals. Presumably that would be a very large item of expenditure for the UK Government, but we haven't yet seen where that comes from. So, there are some anomalies there that we're trying to work through, but we are agreed in terms of the overall sum of money that is coming to Welsh Government as a result of decisions made thus far. And I do expect some further clarity in the coming days about any additional funding that might come, further to the announcements that have been made by the UK Government in relation to the one-month firebreak across the border, or one-month lockdown, whichever they're calling it.
Unsurprisingly, local health boards are forecasting significant deficits by the end of the year. It's my understanding—please correct me if I'm wrong—that the Welsh Government cannot run a deficit budget. The health boards can, but the Welsh Government, as a whole, cannot. Is there sufficient money within the Welsh Government to ensure that the Welsh Government can meet its commitments by 31 March?
One of the reasons why we're bringing forward this interim supplementary budget is to enable us to make sure that we have access to the cash that we need to meet our commitments. In terms of the health boards, the Welsh Government confirmed funding arrangements for the NHS organisations for the remainder of the year in the quarter 3 and 4 operating framework, and that was published on 24 September. So, as a consequence, the only deficits now being forecast by NHS organisations are being reported by Betsi Cadwaladr, Hywel Dda and Swansea Bay health boards, and they're in relation to their pre-COVID planned positions. And I'm not sure, maybe Matt or Andrew would want to elaborate a little bit on that particular point.
No, no takers? Oh, go on then, Andrew. We can't hear you at all now. I think you'll have to unplug and revert to your previous—. There we are.
Can you hear me?
Okay, I'll speak loudly. So, yes, I think the latest position is that any deficits that were being reported that relate to coronavirus pressures have now been covered in the funding the health boards have been allocated for the remainder of this year. So, the only deficits that are being reported are the deficits that they were reporting earlier in the year, which relate to their, I suppose, business-as-usual activities, and those will be handled in the normal way.
Matthew wants to come in as well, sorry, Mike. There we are.
Just to elaborate on the normal way. The committee will be aware that, in prior years, a couple of health boards have run deficits and reported deficits at the end of a financial year, which are then covered off from resources that we've allocated to that main expenditure group and that the health Minister holds back to offset any deficit. So, that's really part of the ongoing plan to manage the NHS finances and also is part of the three-year regime that they have to break even over that period. But, yes, those are the only deficits, which relate to that underlying activity, that are currently being reported, to my knowledge.
Thank you. It's always amazed me—perhaps not others—that we have two reserves. We have the health reserve, which is held by the health Minister, and the general reserve, which is held by the finance Minister, and the health reserve is substantially larger. That just surprises me; it might not surprise anybody else. The question I'd really have on this is: taking everything into account, are you confident that we will have enough money, which has been allocated to the Welsh Government, no matter where it's coming from, in order to meet all the requirements of health during this year?
I think that depends, in large part, on what happens with the virus and what additional pressure it puts on the existing health service, and to what extent we're able to do more. So, we could meet a level of need, but, actually, I know that we're all really ambitious in terms of ensuring that business as usual—so, non-COVID work—also takes place in the NHS. So, inevitably, if there was more to invest, we could invest more in that area. But I think that we're working really closely with the NHS organisations to understand their positions and their pressures in order to meet those and put in a strong priority on meeting the health needs, and that's all about good sharing of information. I think that officials within finance in Welsh Government work very closely with officials elsewhere to ensure that we understand the existing situation and also the pressures that are coming down the line, and we can account for them and earmark funding if we need to.
Andrew has indicated he'd like to add something, but I'll have to ask you to be brief if possible.
If only just to reiterate that the funding allocated to health boards is kind of in line with what their forecast spend is for this year. Who knows what's coming up over the next few months, but as far as we're able to, we're covering the costs that they're expecting to incur.
Okay. Thank you.
Thank you, Mike. Diolch yn fawr. Siân Gwenllian.
Diolch, Cadeirydd. Gaf i jest mynd yn ôl at gwestiynau ynglŷn â phrofi, olrhain a diogelu? Mae yna £45 miliwn ar gyfer olrhain cysylltiadau yn y gyllideb. Beth fydd hynny'n ei gyflawni, a sut bydd y cyllid yn cael ei ddyrannu i fyrddau iechyd ac awdurdodau lleol? A hefyd, fedrwch chi jest sôn wrthym ni am yr elfen ddiogelu? Ydy honno'n cael ei hadlewyrchu yn y gyllideb yma—yr arian sy'n cael ei roi ar gyfer yr elfen benodol yna o'r strategaeth profi, olrhain a diogelu?
Thank you, Chair. Could I just return to the questions about test, trace and protect? There's £45 million for contact tracing in the budget. What will that deliver, and how will the funding be allocated to health boards and local authorities? And could you also talk about the element of safeguarding or shielding? Is that reflected in this budget—the money that's given for that specific element of test, trace and protect?
Thank you. So, in terms of test, trace and protect, you'll remember that in the previous supplementary budget there was £57 million attached to the test element of that, but what we have now in this second supplementary budget is £45 million available in this financial year to health boards and local authorities to cover the workforce costs of the tracing element of it. And in terms of what we expect for that, it's sufficient to support a total contact tracing workforce of up to 1,800 people, with capacity to investigate over 1,000 new positive cases every day. So, that's what we expect as a result of that, and I think that we can all recognise that, to date, it's performed very well, with 94 per cent of new positive cases being reached and 94 per cent of their close contacts being reached. Even in the past few weeks when the system's been under a lot of pressure, it's still held up very well, I think, in terms of being able to successfully contact and trace those individuals.
So, that's what the funding there is aimed to do, and then the additional funding for shielding people or people who are particularly adversely affected—so that's the kind of 'protect' end of things—well, the budget has £1 million set aside from within the local authority hardship fund for that. Now, I think we need to keep a close eye on that to reflect on whether or not that's sufficient. We expect some more information to be available through the October claims, which will be received in mid November, and that will give us a better picture as to what's been happening over the past few weeks, and then if we need to revisit that, we can, but there's room within that local authority hardship fund for further assistance to be provided for that 'protect' end of things, should it be necessary.
Jest o ran eglurder, felly, ydy'r diogelu yma'n cynnwys pobl sydd yn hunan-ynysu a'r arian ychwanegol ar gyfer hynny?
Just in terms of clarity, does the 'protect' element include people who are self-isolating and the additional funding for that?
No, that's separate funding, if we're referring to the £500 payment for those people who have been asked to self-isolate and are losing income as a result of that; that's separate. And I think I'm right in saying that will be reflected in the third supplementary budget rather than in this one because of the timescales involved.
Iawn. A jest, Cadeirydd, os gallaf i ofyn un mater arall o ran y profi: felly does yna ddim dyraniad ychwanegol ar gyfer ehangu profi drwy'r ochr gyhoeddus yn y gyllideb hon.
Okay. And, Chair, if I may ask on one further issue in terms of the testing: there is no additional allocation for expanding testing through the public side in this budget.
No, and that's because we had the £57 million allocated for testing in the first supplementary budget, and I think that that's holding up well in terms of meeting at least the financial cost of the process thus far. Andrew or Matthew will tell me if we know different, but that's my understanding, that the £57 million is adequate to meet the needs thus far.
Felly, mae hynny'n awgrymu nad ydych chi ddim yn symud i ffwrdd oddi wrth y gyfundrefn Lighthouse a'ch bod chi'n mynd i fod yn neilltuo'r arian ar gyfer yr hyn roeddech chi'n bwriadu ei wneud o'r cychwyn, er efallai nad ydy'r gyfundrefn Lighthouse ddim yn gweithio. Buaswn i wedi disgwyl gweld ychydig o newid yn y dyraniadau yn fan hyn oherwydd bod yna bwysau ychwanegol i symud tuag at wasanaeth cyhoeddus ar gyfer y profi.
So, that suggests that you're not moving away from the Lighthouse regime and that you're going to be earmarking the funding for what you intended to do from the outset even though, perhaps, the Lighthouse regime is not working. I would have expected to have seen some change in the allocations here because there's additional pressure to move towards a public service for this testing.
We wouldn't see that in this supplementary budget in any case because the funding for testing was allocated in the first supplementary budget. But can I, if the Chair's content, ask the health Minister to send committee a note on this because it's more of a policy rather than a finance question, and I want to make sure that you get the correct information?
Diolch yn fawr iawn. Cwestiwn ynglŷn â dad-gomisiynu'r ysbytai maes: fydd y costau yma'n cael eu talu allan o'r £166 miliwn sy'n cael ei ddyrannu yn y gyllideb atodol gyntaf?
Thank you very much. A question about the decommissioning of the field hospitals: will the costs be met from the £166 million that's allocated in the first supplementary budget?
Yes. It's the intention that that funding will come from there.
Ac o ran agor ysbyty athrofaol y Faenor yn gynnar, ai Llywodraeth Cymru fydd yn talu'r costau ychwanegol o ran adnoddau a chyfalaf?
And in terms of the opening of the Grange university hospital, the early opening, is it the Welsh Government who will be paying the additional costs in terms of resource and capital?
Welsh Government paid the additional capital cost in relation to that, and, in terms of the revenue funding, that came through the additional funding that we provided to the health board. So, both have been paid for through the Welsh Government.
Iawn. Diolch am yr eglurder yna ar gyfer y record. Mae'r gyllideb yma yn dyrannu dros £300 miliwn yn fwy i'r gronfa caledi awdurdodau lleol, ac mae hyn yn cynnwys £264 miliwn ar gyfer costau ychwanegol a cholli incwm. Beth yn union ydych chi'n ei olygu efo hwnna? Sut fydd yr arian yma yn cael ei ddefnyddio?
Thank you for that clarity for the record. This budget allocates more than £300 million more to the local authority hardship fund, and that includes £264 million for additional costs and loss of income. What exactly do you mean by that, and how will that funding be used?
So, as you say, £264.2 million has been allocated for the remainder of the year, and that's to meet the ongoing need for additional support in response to the pandemic on the part of local authorities. It covers additional costs, loss of income and the general financial position of local authorities, but what it doesn't do is cover the cost for council tax collection rates or the council tax reduction scheme. In the first quarter of the year, I did provide local authorities with some additional funding in respect of council tax collection rates and I've just agreed a further amount of funding for the next part of the year as well.
The funding has boosted the overall support to local authorities now to £0.5 billion, and that works on a claims basis. So, it's monthly for additional costs and quarterly for loss of income. I know officials are working very closely with the Welsh Local Government Association and local authorities themselves to understand the additional financial pressures that they're facing.
Ac yn olaf gen i, cwestiwn ynglŷn â chronfeydd wrth gefn yr awdurdodau lleol: ydych chi yn disgwyl i awdurdodau lleol fynd i mewn i'r cronfeydd hynny, er bod yna rai efo llawer iawn mwy na'i gilydd yn y cronfeydd wrth gefn?
And finally from me, a question about reserves held by local authorities: do you expect local authorities to use those reserves, even though some have much more than others in their reserves?
I think the reserves will be a factor that local authorities are considering in some of the decisions that they're taking. So, even though the hardship funding has been provided to support all local authorities in terms of additional costs and loss of income, we haven't specified that there should be a contribution from local authorities, but I think it's inevitable that they will also be looking to their own reserves to support them in some of the decisions that they're making locally. So, examples might be where local authorities have made decisions such as free parking, for example, they'll have considered their overall financial position in being able to offer that and the level of support that they're able to provide from reserves in order to deliver on that. And where local authorities, for example, haven't been able to realise their planned efficiencies or cost reductions this year, again, I think that they'll be looking to their own reserves to bridge that gap as well. So, even though we haven't specified that local authorities must make a contribution to the hardship fund, or to access funding from the hardship fund, they'll inevitably, I think, be decisions that they're making locally, which relate to their own reserves.
So, that's a decision that they will make, and not one that you will sort of try and influence.
Yes, that's for local authorities to manage their own reserves. I think it would be strange if local authorities came out of a national crisis with larger reserves than when they went into it, but there are difficult decisions, I know, locally, for local authorities as well, and many will be looking to their own resources to support them.
Okay. Thank you. We'll move on to Rhianon Passmore.
Thank you, Chair. We've already touched upon this question, but if we can get a little bit more detail. So, you've noted that some allocations reflect the actual costs arising for local authorities, so is this the case for the entire £306.6 million allocated to the hardship fund in this budget, or will parts of the fund be distributed on a different basis?
No, the whole of the fund is allocated on the basis of actual costs, and there's quite a rigorous process that local authorities go through, then, in terms of being able to claim from that fund as well, in order to be absolutely fair to each and every local authority.
Okay, thank you. So, moving on to the economy and transport MEG, the majority of the funding within that relates to public transport, with over £200 million allocated, as you know, to support bus and train services. What proportion of operators have access to Welsh Government funding, and how is it being allocated?
In terms of rail, the funding is in line with the emergency measures agreement, where Welsh Government's taken on cost risk from the rail services delivery partner, KeolisAmey, which of course is trading as Transport for Wales Rail Services. That support is effectively Welsh Government meeting the cost of operations, less any income streams being realised. And, of course, income streams have been decimated as a result of the pandemic. And then for bus support, the funding's available to all operators of scheduled bus services in Wales, and that's allocated through local authorities, based on local need and local requirements. For example, they'll take into account the need for school bus services and so on.
So, in regard, then, to the criticality in particular of bus services, but also rail—so, moving forward, how sustainable are these services, and is the Welsh Government decision regarding the rail franchise primarily based on financial considerations?
There's great concern, I think, about ensuring that, in future, we have sustainable models for both bus and rail, and that, I think, is driven in part—certainly in large part—by that social justice importance of having good functioning public transport systems. Ken Skates will be making a statement tomorrow, I believe, to the Senedd on rail transport, so he'll be able to provide a greater level of detail there. But, as I say, lots of discussion is going on with operators at the moment, and others, to ensure that we do support models that are fit for purpose and sustainable moving forward, especially given the fact that I think public transport will face quite a significant period of difficulty ahead. We need to ensure that people become more confident in terms of using public transport again, and that we better understand the different patterns of public transport use that will result as we move out of the crisis as well. But there's, as I say, a great deal of work going on to try and ensure that we have sustainable models, and inevitably I think that our support for public transport services financially will continue to be very significant in the years ahead.
Thank you for that. The budget shows £39.7 million of funding being reallocated from the economic resilience fund. Can you explain, then, why this money is available, and why it's being redirected at this time, given the pressures on business?
The funding that has been allocated from the economic resilience fund was specifically focused on measures that support the stabilisation of the employment market and supporting Wales to tackle the rise in unemployment and deepening economic inequality, while supporting the economy to build back better, as it were. There's a real focus within there on supporting better outcomes for people who will be most impacted by the coronavirus. There are particular actions in there, for example, to support disabled people, the black, Asian and minority ethnic community, women, people who have got low skills and are on low wages, and also lots of new work to support and incentivise employers to take on apprentices and young people. So, I think that the funding there was very much in line with what we're trying to achieve through the economic resilience fund, but it pulled together a different kind of package to tackle the issues from a different angle.
Okay, thank you.
Thank you very much. We move on to Nick Ramsay.
Diolch. Minister, in answer to—I think it was—Mick Hedges earlier, you spoke about an agreement having been reached with the UK Government on exactly how much resource has been coming to Wales, and you also spoke about how the Welsh Government's fiscal approach was more transparent than other areas of the UK. Has transparency regarding funding and policy making between the UK Government and the devolved nations improved since you highlighted your frustrations with communication at the ministerial level with the committee back in May?
I think engagement with the UK Government has improved in terms of the frequency of our finance Minister quadrilaterals, and so on. So, you know, I want to recognise that improvement. But, in terms of transparency, I can't say that there's been improvement there, because of the difficulties that we've had in terms of reconciling the guarantee funding with what's happened across the border, so we can understand how close we are to the top of that, or that guarantee, at all times. Now, I understand the Chief Secretary intends to provide a greater level of clarity within the next two weeks on that, and I think that will be very helpful in terms of allowing us to better plan for the rest of the financial year. So, I would say, politely, that transparency is mixed, but often poor, unfortunately.
So, we're looking a couple of weeks ahead, aren't we, to that date later in November and the budget decisions. As different approaches are taken, increasingly now, to controlling the pandemic across the UK, what's your assessment of the impact that's going to have on funding for Wales? For instance, how will funding deals and support for employees for English cities or regions be fed through the fiscal framework so that we get support here?
Again, I hope that this would come through the guarantee that we've received from the UK Government, but with it should come that level of transparency. As I say, I think we're expecting some further information from the Chief Secretary in respect of the most recent announcements across the border very shortly, and as always, Chair, I'm happy to keep the committee updated on any additional funding or news that we receive there as well.
Andrew wants to add something.
Thank you. Almost by definition, the guarantee kind of solves one problem but creates a new one, in the sense that the guarantee is designed to give us a degree of funding certainty ahead of decisions being made in England that generate consequentials, but it very immediately begs the question, 'How is this guarantee made up?' And whenever an announcement is made after the guarantee is issued, then the question is asked: 'Is that included within the guarantee or is that on top of the guarantee?' I think the Treasury, to be fair to them, have tried to help us by providing a bit more certainty going forward, because it's a real problem if you're always chasing after announcements made in England and catching up your funding after the fact, as it were. But by providing that forward certainty, you create this new problem of providing transparency about where that certainty has come from. So, they haven't quite resolved that yet, but as the Minister said, we would expect to have more information in the next couple of weeks, which will hopefully help present a clearer picture.
When do you expect to get the money, as opposed to further information?
Already, we've got the £4.4 billion, which is in our budget that you're considering now. New funding on top of that—we would hope to hear something about that in the next couple of weeks.
Okay, thank you.
It's worth adding, just very quickly as well, that this problem in terms of the guarantee is a better problem than the one we had previously when we were waiting for individual announcements from the UK Government and then trying to respond or to better understand our financial position then. So, in the sense that we've negotiated the guarantee, it is a much improved situation, otherwise we would never have been able to give the health service and local authorities that kind of certainty that we've been able to give. So, it's a better problem than the previous problem, but there's still some improvement to make.
Okay, thank you. Back to you, Nick.
Just for the layperson here, I'm trying to get my head around how this guarantee works. So, the guarantee is better than before because you've got a guarantee of funding, but you've then got to look at it afterwards to see what individual funding streams are making it up. Is that right?
Yes, and then when new announcements are made, the question is have we breached the top of that guarantee, so are we now eligible for further consequentials from the latest announcements, or are we still within the guarantee, so not eligible for additional consequentials.
So, as Andrew said, it's solved one problem, but it's potentially created all sorts of other complex ones. Okay.
A final question from me, then, Chair. On the subject of flexibility, what led the Treasury, do you think, to refuse your requests for greater flexibilities around annual borrowing limits and access to the Welsh reserve in 2020-21, and what different approach are you taking to try to agree flexibilities from here on regarding the use of the reserve?
It was the fact that we now have that guarantee that I think led the Treasury not to agree our previous request for flexibility. As I mentioned earlier, that's kind of understandable earlier on in the financial year, but actually, as we move towards the end, we do need a greater level of flexibility to be able to manage our budget over financial years, especially given the extraordinary times that we're in at the moment. So, I don't think that what we're asking for is difficult or controversial, but it would help us a great deal in terms of managing our budget, because we have to land our budget on a tiny, tiny postage stamp every year, and that in itself is a feat, but doing it in a year like this, when we don't actually know what's next for the path of the virus, and so on, is particularly difficult. And that's before, of course, we factor Brexit into the situation as well, which puts another level of complexity and uncertainty in there.
Very, very finally and quickly, are you still seeking to be able to switch capital and revenue? Are you still in discussions on that, or has that fallen by the wayside?
Well, that's not necessary now, because that was one of the key flexibilities that we were after early on, before we were able to negotiate the guarantee. So, the kinds of flexibilities that we're more interested in now are enhanced access to the reserve for both revenue and capital, the ability to carry more over in the reserve at the end of the financial year if needed, and also the ability to draw more down from the Wales reserve than the annual limit this year, should the response to the pandemic require us to do that. So, those are the things that we're more interested in now, because the guarantee has actually given us that kind of certainty. So, we don't have to look to the capital-revenue switch. But, as I say, we still require flexibility, just not the one we necessarily wanted earlier on.
Rhianon wanted to pick up on this as well. You need to unmute yourself, Rhianon. There we are.
With regard to the funding guarantee, obviously, that's a concern, because we just don't know if we're going to be without because of it. But basically, around certainty and clarity around forward planning and the constant call for three-year plans from those across Wales—I mean, without an autumn budget and a comprehensive spending review, what sight is there on anything around the shared prosperity fund, if I may, just very briefly, Chair?
We've had next to no engagement, it's fair to say, in terms of the shared prosperity fund, and we know very little as to what the plans might be. And, of course, we're just facing a spending review of one year this year—so, one year revenue and one year capital in the spending review—which makes it impossible, I think, for us to be able to give partners and stakeholders that kind of certainty over a number of years, which I know they would like to have, but unfortunately, it's just not possible for us to do so. I think that that compares not well with the situation across the border. So, the UK Government has said that it plans to give health and schools and, obviously, on the capital side, infrastructure investments a kind of longer profile for spend. But unfortunately, we're not able to do that because of the one-year nature of our settlement.
Okay, thank you. We move on to Alun Davies.
Thank you very much. I understand that the unallocated resource at the moment stands at around £1.6 billion. Is that correct?
Yes, that's correct.
Have you begun the work of beginning to allocate any of that yet? I'm especially concerned about what happened last week with the economic funding during the firebreak being suspended after 24 hours. I think there are a lot of businesses that are significantly concerned about that and I think, as Members, we're very concerned about that. We were encouraging people to apply and after 24 hours it closed, and I don't understand what happened there. At the same time, are you beginning to look at the allocation of funding on—I'm saying 'a longer term basis', but in this time we're in, it's a case of meaning months rather than years—in terms of post-COVID billback?
When I say that £1.6 billion is unallocated, it's unallocated for the purposes of reflecting the second supplementary budget. But actually, since then, a number of decisions have been taken that impact on our current position. So, for example, of the £1.6 billion unallocated, £924 million is held in the reserve created for the pandemic response, and of that, we have now committed £240 million, including funding for the firebreak, and that relates to some of those announcements relating to support for business. But as Alun Davies says, the incredible response to that has shown the level of need that there is out there for business.
We've also set aside £228 million for other revenue costs outside of the current plan—so, in-year pressures and things that are demand led, which are managed on an in-year basis as well. So, that funding is there. And also we have made further allocations. For example, I mentioned a small allocation in respect of council tax reduction scheme, for example, the additional funding relating to the £500 payment for people who are required to self-isolate, and a series of other smaller announcements as well. Our capital reserves within the £1.6 billion total—
Sorry, before you go on to capital, can we just deal with revenue? You're going to confuse me—all these numbers. We had £1.6 billion and then £924 million was taken out of that for dealing with the pandemic, yes?
Yes, but it's not all been allocated. Yes, that's in the pandemic reserve.
Right, that's the point I'm trying to get to. So, £240 million of the £924 million was allocated to deal with firebreak issues and around that. So, that leaves something like £700 million still outstanding. What is it that you're planning to use that £700 million for?
Well, I've earmarked a significant amount of that for—. Were we to find ourselves in a situation of having another firebreak early in the year, I've made sure that I've earmarked up to £300 million so we could do a similar thing again to support businesses, if we needed to do that. So, that's a particular chunk. And then there are some potentially significant allocations that might also need to be made in respect of some of the discussions that we're having with local authorities as well, but they haven't yet been concluded.
But that's nearly £400 million. Now that's—. I know you described them as being significant, but they are pretty chunky pieces of money, and I would have anticipated that you would have had a clearer idea of how you would be spending this at this point. Do you, for example, intend to provide additional funding for business support at this point?
Well, as I say, I've earmarked significant amounts of funding for various things, but until I've had the discussions with colleagues and until colleagues have signed off funding and so on—. I don't necessarily want to say too much before having had those discussions with colleagues. But I can see Andrew—
But you need to answer our questions as well. So, you are having conversations with colleagues about additional support for businesses.
I'm always having discussions with Ken Skates in terms of what support business might need, but I'm not in a position today, Chair, to make any further announcements or commitments beyond what I've said already.
Right. I think Andrew wants to come in as well.
Thank you. Yes. It is a very exceptional year, and one of the trickiest judgments is how much contingency it makes sense to hold at this point. We're only halfway—just over halfway—through the financial year. As the Minister mentioned, we're holding an amount specifically now for a potential second lockdown, where business support of a similar order to what's been offered in this lockdown may be required, but you would need to make assumptions about how many further lockdowns there might be, how long those lockdowns might—the duration of them. All of these are really, really difficult to—. Well, you can't forecast, you're making assumptions, and there's a high degree of contingency that's needed to give you the flexibility to respond to events. So, we're obviously holding a fair bit more unallocated, uncommitted, at this point in the year than you would expect in anything like a normal year.
I appreciate that; I understand the pressures. But you must understand as well that scrutiny means a level of transparency, and you need to say that and say it on the record so that we can hold you to account for those matters as well. So, what I'm trying to find is where is the shape of this £1.6 billion, and it would be easier if you said that, you know, 'We are simply holding £400 million. We've put it in the bank and we're just going to leave it there for two months and wait until we need to take a decision on it.' I'd be happy with that. What I'm less happy about is when we hear equivocation about where funds are going and where decisions are being made, because I think that level of scrutiny and transparency is important. So, we've got the £700 million for the pandemic, £240 million is being spent on the—. Sorry, £240 million leaves us with £700 million, £300 million is being allocated for another potential firebreak, which is fine, and that leaves us with £400 million. Are you allocating that in any way at all at present?
So, I would make the point that the whole point of us introducing this second supplementary budget is about transparency, and what we're scrutinising today is the second supplementary budget and the decisions that have been taken and the allocations that have been made. So, we will have the opportunity in the third supplementary budget to scrutinise the decisions that are taken with the remaining funding from the COVID reserve, and also from the unallocated reserves as well that sit beyond the COVID reserve. So, I'm not in a position to outline detailed plans at the moment, other than to say that we're having ongoing discussions with colleagues about what various sectors might need.
We understand, for example, when we're looking at local authorities and the support that they need, based on the information that is coming back, that the funding that we have allocated to take them through to the end of the financial year has been sufficient thus far, based on the projections that were made at the time. But then now we've got the firebreak to add into this as well, so, as the monthly returns come back, we'll be able to better understand that going forward.
Also, the £800 million that we've provided to the health service was based on their projections of what they would need, and, again, we understand that that's been sufficient thus far, but, as I say, those discussions are constantly ongoing to monitor the situation to explore whether additional funding needs to be allocated to those particular areas.
So, to return to my original question, the £400 million that has been allocated to deal with the pandemic is unallocated within that overall budget heading, for our concern.
Yes, there's a significant amount of funding that is, as yet, unallocated within the COVID reserve.
But it will be to deal with the pandemic.
So, the most recent £400 million as part of the guarantee, yes, that goes—all of the funding related to the guarantee goes straight into the COVID reserve.
Okay. So, that dealt with the £924 million. So, the additional, then, £600 million of this unallocated funding, is that—? Where would you anticipate that heading towards? Have you made any decisions on that yet?
So, the £400 million is part of the unallocated reserve thus far and, as I said, that is currently standing at nine hundred and—did I say twenty four—?
It's the difference between the £924 million and £1.6 billion that I'm looking at now. We've already discussed that £900 million, and I'm content with what we've done there. So, what about the other £600-odd million that isn't a part of the money that's been allocated for the pandemic?
So, there's a significant amount of funding that still sits in the COVID-19 reserve that hasn't yet been allocated, some of which is earmarked. So, I've suggested, as an example, the additional potential £300 million—up to £300 million—if we were to find ourselves in the situation of a further lockdown. But, as I say, there is still a significant amount that is as yet unallocated, but will be allocated as we move through the year based on what we understand the need is—whether that's business, local authorities, health or any of the other areas of Government that we need to find funding for.
Andrew, did you want to add something?
It'd probably be worth adding that some of that £1.6 billion is capital and financial transactions capital also, much of which was allocated in the announcement of some of the recovery priorities a few weeks ago—of that £320 million announcement a few weeks ago. So, a lot of the capital reserves have already now been allocated.
So, that £300-old million—£320 million consists of capital, yes, funds?
So, it's—. So, just to be clear, this is the funding for the COVID-19 recovery package that was recently announced.
Within the £1.6 billion, yes?
Yes. So, of that, £148.8 million is general capital and £84 million is financial transactions capital.
So, that's been allocated to post-COVID recovery. Do you know how you intend spending that yet?
Yes. So, some examples were announced when we announced the package, so that includes funding for social housing, for example, and for some greening initiatives and so forth. But most of those announcements have yet to be made because they'll be made by the portfolio Ministers, and they'll be made in the coming weeks. I'm really keen, of course, because it's capital particularly, that we get these announcements out as early as we can, and we've had some good discussions with local authorities this morning who were reflecting on the need that they have to have as much certainty in terms of the terms and conditions attached to that funding as soon as possible, so that they can get moving and get that funding making a difference on the ground as quickly as possible. But, as I say, there'll be several announcements very shortly from colleagues on that capital, and some on the revenue side, I should say, as well.
Just in case it helps further, the explanatory note that we published alongside the budget has a breakdown of that £1.6 billion unallocated resources, and, just in case it hasn't been mentioned yet, there's £151 million of that that is actually non-cash reserves as well.
Okay, that's useful.
Okay. Thank you for that. So, I'm just wondering if we've got to £1.6 billion yet. We do have, of course, the disaster of Brexit coming over the horizon as well. Now, it's likely, whatever you think—. I don't think anybody's suggesting that this is going to be a good experience, so I think we're looking at degrees of bad and impacts. There are two questions that are screaming at me, frankly. One I wouldn't expect you to answer this afternoon, which is the impact on tax take and the impact on tax base issues around that—but I'd be interested if you've anything to say on that. But, secondly, and perhaps more importantly for today, do you have any element of this £1.6 billion that you're considering using to relieve pressures caused by the Brexit agenda for the year?
So, in terms of the tax base issues, one area of particular concern to us is around non-domestic rates and the impact that COVID has had on non-domestic rates both this year, but also potential impacts in future years as well. So, there's a quite in-depth piece of work going on with local government to better understand the impacts of COVID on the non-domestic rates tax base, let alone, of course, the impact that Brexit might also have on that as well. So, as I say, that piece of work is currently ongoing.
In terms of European transition, of course we had the £50 million European transition fund, which was allocated to support businesses, public services and other partner organisations to prepare for the impact of EU exit. But alongside that we've also recently written to the Chancellor setting out our asks in terms of EU matters. So, for example, we need to have more engagement with the UK Government on the future of European funding, and what happens in terms of the shared prosperity fund and so on—big questions about farm funding—