National Assembly for Wales

Welcome, everyone, to this meeting of the Local Government and Housing Committee. The first item on our agenda today is introductions, apologies, substitutions and declarations of interest. We've received apologies from Laura Anne Jones and Lesley Griffiths. Carolyn Thomas is with us, substituting for Lesley Griffiths. Lee Waters, another committee member, has recused himself from items 2 and 7 on our agenda today in the light of his work with the Welsh Government's affordable housing taskforce, given that items 2 and 7 relate to housing. This meeting is being held in hybrid format. Aside from adaptations relating to conducting proceedings in that way, all other Standing Order requirements remain in place. The public items of this meeting are being broadcast live on Senedd.tv. A record of proceedings will be published as usual. The meeting is bilingual, and simultaneous translation is available. Are there any declarations of interest from committee members? No.

We will move on, then, to item 2, which is scrutiny of the Welsh Government's draft budget with regard to housing. I'm very pleased to welcome here today to give evidence to the committee Jayne Bryant MS, the Cabinet Secretary for Housing and Local Government. Jayne, do you want to introduce your officials, or would you like them to introduce themselves, for the record?

Diolch, Cadeirydd. And, yes, perhaps my officials could introduce themselves.

Bore da. Good morning. Emma Williams, director of housing and regeneration.

Stuart Fitzgerald, deputy director, more homes division.

Bore da. Good morning. Jamie Powell, deputy director of finance at local government and housing.

Okay. Bore da. Thanks very much for coming in to give evidence to committee this morning. Perhaps I might begin with some general questions. Firstly, on the overall anticipated impact of the draft budget, what do you see, Cabinet Secretary, as the main impacts on people's lives as a result of your proposals with regard to housing in the draft budget?

Diolch, Cadeirydd, and thank you to the committee for this opportunity. First of all, just to say I think this is a really positive budget, with a clear focus on housing supply and, importantly, prevention as well. After hearing from colleagues over a number of years how difficult budget setting has been over the last few years, it's really good that we're able to set a positive budget in this way. Investment will support the drive to end homelessness in Wales, recognising that, to do so, we must increase that supply, alongside providing the right support and prevention services, which is really important. To protect and rebuild services, early intervention really is the most effective way, and cost-effective way, of preventing homelessness and the importance of the impact on people as well. So, investment in prevention and support through the housing support grant will have a positive impact on vulnerable individuals and households as we move into this important year around the implementation of our homelessness Bill, which will be brought before the Senedd this year.

So, perhaps I could just reflect on the wider pressures. We've put investment in the independent living programme, which does reflect the significant increase of need in adaptations of properties. We've seen that very well—and I'm sure Members have, through their own postbag—and, particularly, more complex adaptations needed. So, we know that adaptations are really key in prevention, investment to support independent living, to improve the health and well-being of older people, disabled adults and children. So, we've put an additional £5.5 million of capital and £1.255 million of revenue in recognition of that significant increase in the number of adaptations needed, and the complexity.

Okay. Thank you for that, Cabinet Secretary. So, at the moment then, with regard to the draft budget, housing and regeneration get 4.9 per cent of the overall budget. I'm sure you'd like to see more resource going into housing and regeneration, as the Cabinet Secretary with responsibility. We know that there are huge challenges in housing: obviously, we're just not building enough houses for any tenure, really, and perhaps particularly with regard to social housing for rent. Housing is so important, as we know, to people's health and well-being and just about every aspect of life. So, would you say, Cabinet Secretary, there's a strong case for more than 4.9 per cent of the overall Welsh Government budget to be allocated for housing and regeneration?

Diolch, Cadeirydd, and, obviously, I wouldn't disagree with you; I'd always also like to see a higher proportion of budgets allocated to housing and regeneration. But there really is that balance, and, even within my own portfolio, having housing and local government and responsibilities such as fire and rescue services as well, you know, it is a real balance. But I do appreciate that all departments have been able to have a real-terms uplift to every department in the Government. So, we have to remember that within the overall financial climate that we have been in over the last few years as well. We know that one budget isn't going to solve all the pressures that housing faces in particular as well.

In terms of capital expenditure, I know that the Cabinet Secretary for finance has had to make some really difficult decisions; we know that. We know that investment in more affordable housing is up against things such as education, health, local government. But, for me, housing supply has increased significantly over this term of the Senedd, and we must be mindful that we align our budgets with the sector's ability to spend that money. So, I think that's a really important aspect of it as well.

Okay. Yes.

Sorry, Emma—yes.

Could I also add that there is also the interrelationship between different budgets? So, we know, for example, from Cardiff University research back in 2020, that investment through the housing support grant has a knock-on benefit and a saving to other public services; I think it's around £1.40 of saving to public services generally for every £1 put into housing support grant, and over £5 when you look at the savings on mental health services. So, that interrelationship is really important and I'm sure would have been a key factor in the finance Minister's thinking.

Yes. Thanks for that. Cabinet Secretary, we'll come on to many of the matters that you've mentioned in further questions from committee members, but, just for now, if we deal with homelessness and the impact of the budget, the draft budget, in terms of homelessness, would you see the numbers of people in temporary accommodation starting to decrease as a result of the draft budget? Will the draft budget be sufficient for us to see that happening, do you think?

You know, I think our investments are making a real difference, and we shouldn't lose sight of the numbers that are helped each month. We do know that there are still too many people in temporary accommodation, but, when we are looking at those temporary accommodation figures, I think it doesn't really show the movement within the system, and that people are being moved on to permanent homes as well as that. So, I think it is the sheer volume that we are finding. But while it's too early to draw any firm conclusions in terms of trends in the number of people in temporary accommodation, I just want to alert the committee that there are some positive signs that, perhaps, might be worth mentioning. So, for the number of dependent children in temporary accommodation, it's been decreasing over recent months. The numbers have remained below 3,000 for the last five months of published homelessness statistics. Now, that's still too many, and it's early to draw too much from that, but it is a welcome trend.

Also, the number of dependent children in bed and breakfast, and hotels, was 41 per cent lower in September 2024 than in the same period in the previous year, so that's 555 compared with 941 the previous September. So, I think, again, whilst there are still too many, we have to recognise some of those statistics. As I said in my opening, in answer to the question you initially put, Cadeirydd, prevention is really important, and we do have to try to strike that balance between the money that's going into prevention that we know really, really helps, and the situation when we're right at that sharp end. But we know how important prevention is. It's the right thing to do. We’ve prioritised additional prevention funding in the housing support grant. We've got additional capital funding to support the creation of more homes through the £81 million across our social housing grant and our transitional accommodation capital programme.

Okay. In terms of your work with local authorities and homelessness, Cabinet Secretary, have you done any work, perhaps, jointly with local authorities, in terms of the shortfalls between the amounts that local authorities are spending on meeting their duties, their statutory homelessness duties, and the amounts they receive from the Welsh Government and the Department of Work and Pensions? Is there recognition of the amount of shortfall, and is there anything more that the Welsh Government might do to cover those shortfalls?

Yes, and we’re absolutely aware of the pressures on local authorities and it's certainly something that comes across when I speak to local authority leaders and chief executives across Wales, and I'm sure Members here also pick that up. But it is important to recognise the funding we've provided through the grant for temporary accommodation is in addition to funding already in the revenue support grant for local authorities to meet their statutory responsibilities.

Within the draft budget, we've transferred £21.32 million from the homelessness support and prevention budget expenditure line to the revenue support grant. That's to make sure of local authority funding of temporary accommodation and reflects funding that supports delivery of statutory duties within the RSG. So, our focus is on prevention and a move on funding to reduce that demand on temporary accommodation. Obviously, to assist with the cost of temporary accommodation, we would like to see the UK Government break the current benefit rates for temporary accommodation. They're currently set at the January 2011 levels of local housing allowance. That is very much out of date, and I will certainly continue to call for the UK Government to uprate all LHA rates on an annual basis.

Siân, yes.

Diolch, Siân. Absolutely, on an official-to-official basis, those discussions happen and, and when opportunities arise that I'm able to raise that, I do so and I will continue to do so, because I think this is something that would really make a difference. I don't know if officials want to say anything particularly about any discussions at the moment.

Thank you. Diolch. It's a regular feature of correspondence between Ministers. Obviously, the portfolio lead sits with the Minister for social justice, but there are regular joint letters to the UK Government, and, indeed, you recently made a commitment to write again, jointly with Jane Hutt, and jointly signed by the Welsh Local Government Association. So, this is a regular feature of correspondence, and in the regular round of inter-ministerial meetings, which are just getting back up and running, it is a frequent agenda item. I can’t give you the date for the last time it was raised in an IMG, but I can have a look, if you like.

I’ll just add that that was something that actually did come up last week in the meeting that I had with local authority housing cabinet members. And, as Emma has said, that’s something that, from that, I’ve suggested that we did write again, with Jane Hutt, to make sure that's there. So, it is raised when we can put it on the agenda, and we are trying to do that across the Government rather than just within my portfolio.

Carolyn.

I just want to raise that it’s a historic issue, isn’t it—  

Yes. 

—going back to the previous Government as well, who didn't put it—. It wasn't put up every year. 

No. 

I think it hadn't been put up for three or four years, and then, suddenly, it increased slightly. So, I guess there’s an awful lot of catching up to be done to bring it in line with what’s needed now.

As I said, it’s currently set at January 2011 levels, so if you think where we are now, and, obviously, that hasn’t reflected the inflationary costs of temporary accommodation either.     

Thank you for the clarification. 

Just one further question from me on homelessness, Cabinet Secretary, just staying with the issues around the UK Government and local authorities, local authorities are finding that their temporary accommodation budgets are very strained, partly because of the early release of prisoners and also the speeding up of the processing of asylum claims. Arguably, both those things are quite welcome, by the way, but it is putting increased pressure on those temporary accommodation budgets. I just wonder whether you recognise that, and do you think the Home Office should be recognising that and perhaps providing funding to help deal with those pressures?

Yes. Diolch, Cadeirydd. And, as you alluded to there, there are a range of pressures, due to a range of factors; it’s not just one group of people, or one particular area. So, I think the biggest factor we still have to recognise is that cost-of-living crisis, which is the primary factor. But in terms of working with UK Government departments, early information is really important to local authorities. That’s something that I pick up when I speak with them directly, and particularly some of the learning that came out of the earlier prisoner release scheme. I think that information was really welcome, and the joint working with the Home Office and local authorities, and the Welsh Government were able to really communicate effectively, which really did help that. And I think that timely information-sharing, as I say, is really crucial.

In terms of asylum, the Home Office is currently running that pilot until June 2025, to increase the move-on period for asylum seekers from 28 days to 56 days. Obviously, this is going to be important in making sure that people who are applying to seek homelessness assistance, who are asylum seekers, are at an earlier stage to prevent homelessness, and that’s obviously going to help local authorities plan. The Home Office has confirmed that there will be additional funding to assist local authorities deemed to be most impacted by increased asylum decisions over the next six months. I understand that amounts are yet to be confirmed, so we will be looking at that, and I’m sure local authorities will be looking closely at that.

But, again, just to go back to the last question, really, I think one of the biggest things that, actually, the UK Government could do to help in this area would be around the LHA rate, which has not been updated for many years now.

Oka. Thank you, Cabinet Secretary. Siân Gwenllian.

Diolch, Siân. Thank you. As you say, the housing support grant is something that is absolutely crucial. When we speak to the third sector, as well, we hear how important this is. So, I'm really pleased that we've been able to find some extra money this year to put into that, which is a £21 million housing support grant uplift. So, I'm really, really pleased that's been able to give people notice and we were able to do that in the draft budget. So, I do recognise the anxiety of the sector particularly around that. It is our key homelessness prevention grant, and it does support a range of people to live independently, to sustain tenancies, and that is really crucial. 

The investment is intended to support commissioners to pay the sector the real living wage, and that is absolutely crucial if we're to have a workforce that is resilient. It's incredible work that housing support workers do—I'm sure we've all seen it—but the majority of the HSG pays for staff costs. So, it's going to help to build that capacity within the system. They've been under pressure for a long time. But, it's also to recognise the complexity of need as well. I think that we'll have spend plans back from local authorities, I believe, on 14 February, and that will give us more detail about the focus of individual areas based on local need.  

Thanks, Siân. Obviously, again, it's a balance of what I'm able to do within the portfolio, but I think that what's really important is that we've been able to put that money in this year. We want to see that money going to the workforce. That's what the money's intended to be for—the paying of the real living wage.

But it's not enough. It's a first step.

Yes, and I think, again, with the whole budget, this is, again, a first step after many, many years. Last year, I know that it wasn't until later on—I think it was at the budget stage—that my predecessor was able to put £13 million into that. But, we've been able to do this at this stage, which I think has helped to give the sector a little bit more certainty. I don't know if there's anything to add.

Thank you, Cabinet Secretary. There are complexities within the services supported through the housing support grant. Some are direct services delivered through local authorities. Many are commissioned services delivered through third sector partners. And there is uncertainty for both groups there in relation to the national insurance increases, which is subject to separate consideration and discussion. We work very closely at an official level, and the Cabinet Secretary also has very close links with Cymorth Cymru, who represent the third sector partners working in housing support grant services, and we'll be working very closely with them as they work through what the impacts of the real living wage, national insurance and commissioned services are. So, as the Cabinet Secretary says, those spend plans, when we get them back in February, will be really important in terms of helping us to see what the impact is on the sector. But, overall, as the Cabinet Secretary says, it's really positive that we've been able to put a priority on the housing support grant this year and increase their budget at this point in time, rather than at final budget. 

'there are now significant concerns about the impact of the increase in National Insurance contributions. This poses an additional huge risk to the sustainability of high-quality services, which could leave local government without the tools they need to prevent and alleviate homelessness.'

None of the £21 million is for the increased national insurance contribution. We've been explicit about that. This is something that's not devolved. We do recognise, as you have, and I've heard directly from both Llamau and Cymorth as well, and others, around the challenges. We do recognise that the third sector commissioned by the public sector are very concerned about the impact of the changes. That also comes up in my discussions with local authority leaders as well. You'll know that the Cabinet Secretary for finance has written to the Chief Secretary to the Treasury, setting out concerns regarding both the anticipated allocation of funding and the additional cost for employers of contracted services that deliver on behalf of the public sector, including housing services. So, we have got that trail of communication on that. I'm sure that these arguments are also being made across the UK as well.

Diolch, Siân. Yes, and I think that's part of what is that ongoing dialogue. We keep talking—Cabinet colleagues—across UK Government, but also with our colleagues across the sector. There are well over 40,000 voluntary organisations operating in Wales today, many of those are supporting those people who are facing the most disadvantage in our society. Obviously, Welsh Government can't provide direct financial help to every organisation, but our infrastructure is there to support them all.

So, at the moment, there's no hope that there's any funding, extra funding, going to come through Welsh Government. Your hopes are that you'll be able to convince the Treasury that third sector organisations should be exempt from national insurance. Is that the kind of thinking?

I mean, I think we look at it as part of this ongoing dialogue. There are those discussions happening, but, as I say, this is an area where it isn't devolved and we have been clear that we've been able to find the £21 million within our budget for the purpose that we have set out, which is for the support services to pay the real living wage. Emma, do you want to come in?

Yes, just to add. I think, as you've said, there are two strands of work, if you like: there's the work with UK Government Treasury in terms of how much additional funding will come from UK Government, and then there is work with the wider third sector partners to assess the impact. I think both of those will come together in a further conversation in the not-too-distant future.

Okay. Peter.

Yes, it's very clear, and, notwithstanding what you're trying to do in helping with the living wage, it's just a fact that the third sector are going to be under huge pressure if this element of national insurance isn't addressed, so your aspirations for what we can do with housing support grant and the services they provide are going to be massively diminished, so I think it is fair to say, we can all agree, that the national insurance hike is really going to affect the delivery to people we want to help most. I know I can't draw you, perhaps, on that, but it's a fact, though, isn't it? It doesn't matter what the reason is.

I'd just say that the Cabinet Secretary has made it clear, though, that there are ongoing discussions at the moment. We're not sure, I believe, what funding is going to come through or how much for public sector workers and how much there will be there that may be passported on to third sector organisations as well. There are ongoing conversations, which is what they're saying. So, you know—. This is what the Treasury were saying. I'm so relieved that there is extra money for public services this year. Thank goodness for that. We are able to help put money into budgets, which has been sorely needed after all the cuts. National insurance, yes, it is a pressure, but we still do not know yet how much is coming from the Treasury, so it's a bit of surmising at the moment, isn't it? And I know it's tricky because people have got to set budgets, but, you know, just in balance—.

Chair, I'm not trying to make political points on this. It's trying to ascertain the facts as they are at the moment. Without the clarity on national insurance, the facts are that our aspirations won't be achieved until those negotiations perhaps deliver. 

And obviously, the UK Government have confirmed that devolved Governments will be provided with additional funding to help mitigate the cost of increased employers' national insurance contributions, so that is over and above the funding allocated in the autumn budget. So, they've confirmed that they'll use the ONS definition of public service employee for this purpose, so, like I said, Welsh Treasury are working with counterparts as well in the UK Government, but I very much understand the committee's area of questioning on this.

Okay, thank you very much. And Carolyn Thomas.

Okay. Just moving on to housing supply, Welsh Government has got the target of 20,000 new low-carbon social homes for rent. As of March 2024, there were 8,933 homes delivered against the target, and, given the additional capital for social house building in this draft budget, how optimistic are you that the target will be achieved? We've been hearing about the increased costs of building and getting materials et cetera, but it was the target set, wasn't it, so how do you think we're going to achieve this?

Diolch, Carolyn. And absolutely, we know that, when it was set, it was a really challenging and ambitious and stretching target, which I think is what you should have from targets, and we really do know the importance of acquiring, building, more homes in this area as well.

Just to say there's been—. Since that target was set, before 2021, it was—. We hadn't had lots of pressures that we have had, such as the war in Ukraine and Brexit, lots of things like that as well, and we came out through COVID. So, there have been real challenges, and I believe that it costs nearly twice as much in grant funding now to build a property than it did then. So, I think there is that challenge around the inflationary pressures as well.

Could I just ask on that, because it intrigues me that—perhaps 'intrigues' is the wrong word, but concerns me, maybe, that—over four years, we're seeing a doubling, really, in costs. So, presumably, the price of a new-build house hasn't doubled over four years, because not many people would be buying them if that was the case. So, how do you square those two things?

It's a very complicated picture and I'm sure Stuart will want to come in on this in a moment.  There are a whole host of factors, but, as the Cabinet Secretary alludes to, the price of some of the materials costs rose significantly—some of them have stabilised, some of them have dropped off slightly since—the supply-chain issues, particularly through COVID. We've seen the sector itself and its capacity squeezed, contractors with a lot of downtime through COVID perhaps didn't come back as strongly, so there is more demand for their services, so they can charge more. A whole host of really quite complicated issues, and I think the market builders would also say that times are hard and that they are feeling the pressure of these cost increases. It is something that we test very vigorously in terms of making sure that we're not overpaying in terms of grant, but it is a complicated picture. Stu, you're probably more expert on this.

Yes, I think so, and you can see some of that through the level of market sectors starts actually going down, if not levelling off a little bit. We'd love to see those market starts increase, because, clearly, we get a fair amount of homes through our section 106 deals as well locally. But costs from the contractor markets, as well as a real limitation on the number of contractors we have in Wales, have really exacerbated those costs as well over time.

Perhaps—. Sorry, I was going to come back to Carolyn.

On what you said there, have we seen—? What's the difference in land supply costs and things now? Have we seen quite an increase for development land or—?

Land supply costs are relatively stable at the moment, is my understanding, but it will vary from area to area and depending on whether the land is in an LDP, has outline, et cetera. So, again, a complicated picture, but it's one of the more stable elements.

Okay. Good, thank you.

I was just going to come back to you—

Sorry, Cabinet Secretary, please carry on.

No, not at all. No, no, that's absolutely fine. I was just going to finish off just to say, as well, about the importance of—. We do have a strong pipeline there, which I think is really important to deliver more homes this Government term and the next. So, I think, you know—. I know we're focused on the date, and that is really important, but we know we need to build more homes and we've got to look beyond that as well to make sure we have that pipeline. Some of the work that we've been doing and officials have been doing to make sure that that pipeline is strong, I think is, hopefully, paying some dividends there. But we are going to do everything we can within the budgets available, and I'm committed to leveraging as much resource as possible to deliver those much-needed homes across Wales. Sorry—Emma and Stuart.

I think you make a really important point there that there is a long lead time. So, at the start of this Government term, we saw a quite significant uplift in the amount of investment going to social housing grant. That takes time to feed through to completed homes. I think, Cabinet Secretary, you've spoken previously about that we wouldn't ever have expected the target to have been delivered in five equal chunks over the period of the Senedd term, but what you are seeing is a really positive, healthy pipeline. We are seeing some increases in terms of delivery that, when you look at them through the lens of everything that's happened with COVID, with the war in Ukraine, the supply chain, et cetera, is actually an incredibly positive response from the sector in terms of their resilience and their determination to help us deliver.

Stuart, I think, wanted to—.

Just two important points from me, really, about this particular budget announcement is the retention of the level of social housing grant budget. So, we've had really high levels. The sector really welcome that, it enables them to plan, and, Emma's right, a capital programme ramps up over time with the amount of budget that is available. So, keeping that at a level so that the sector can be confident in that is really helpful. The other thing is being able to give an early indication that there will be transitional accommodation capital funding programme investment. So, the earlier we can do that in the year, the longer that local authorities, registered social landlords, have to plan, the more properties we can acquire and bring through in that year. So, two really positive and important points, I think, at this stage.

Thank you. Carolyn, just before you—

That leads me on to TACP, then.

Just before you go on, Peter, I think, wanted to come in.

Yes. It's a really interesting area, and as a past council leader, we've seen LDPs put in place but not deliver for about five years after or more, and I wonder how much forward planning we should be doing. I know that strategic planning is looked at by corporate joint committees and things like that, moving forward, but there needs to be a long-term plan to identify where we're going to put more affordable housing, going forward, and that may mean looking at things that have been quite untenable, like creating new settlements and creating space for housing. But also, how do you get around the issue, on viability grounds, that developers end up reneging on their expectations on the delivery of affordable housing? We see it too often, when a site is ready, we think we've got a deal and then we've got a massive reduction in the affordable housing allocation. Have you got plans to somehow militate against that?

Yes. I think, you know, you're absolutely right about how we need to think about the future and how we're planning housing developments and how local authorities plan, and on a regional basis as well. Because, I think, with our ambitions in terms of the economy, where Wales goes in the future and where are people going to live, it is really important that those plans are there and that people have their voices heard through that process as well.

Obviously, the section 106 point, as you'll know, is very important as well, because for local authorities, that's absolutely crucial, isn't it, in terms of how we can make sure that developments aren't rowed back on or that social housing isn't rowed back on. I think there are some really good examples of where local authorities and planning have tried to ensure that social housing is built through that and that developers don't take that step back. I don't know if there are any particular examples.

I was just going to mention, in the planning area, in the new LDP process, there are viability assessments that need to be done on land for land to be included in the LDP, is my understanding, and land holders are held to that, to a level of affordable housing. So, there is some check and balance being built into the system there, which I'm quite hopeful for.

Yes. My experience has been that, when we get to planning application time and developers are coming forward with a 30 per cent target, and then when it comes to granting them planning, they'll hold back and hold out and argue and we've seen figures come in at 9 per cent, and things like that. And I've seen that too often, and we need to try and stop that.

Yes. We've got our exemplar sites, haven't we, as well, which I don't know if there's anything in particular—

Absolutely. I think they will be really good test cases, if you like, to prove to the system that you can deliver the very highest quality housing on a completely 50:50 mixed-site basis. And because the exemplar sites are on public sector-owned land, we can use other levers to ensure that delivery on those sites is exactly as we want. But I think there is benefit beyond just those sites. I mean, we have thousands of homes in the pipeline in the longer term on sites that are actually owned by the public sector and by Welsh Government. But there is also significant learning that we can take from those in order to challenge the wider market sector to come with us on the journey.

Yes. Thank you.

Okay, thank you. Carolyn.

[Inaudible.]—allocated for the development of brownfield sites? There was a part previously, I believe.

So, there is some funding to help remediate sites where there are what we call 'abnormals'. There's support available where there's contamination on sites and things like that, so there are various different avenues for support.

Good. I'm just going to ask you some questions regarding the transitional accommodation capital programme grant. I know it's been really welcomed by local authorities to build up housing stock that they had transferred out previously. There doesn't seem to be a specific allocation in the social housing grant. So, have you actually determined how much will be spent on TACP from the SHG?

Thank you, Carolyn. The additional funding is going to be used across both social housing grant, SHG programme and the TACP programme to deliver as many homes as we possibly can towards our 20,000 social homes target. I'm obviously prioritising TACP with that additional funding, just to enable an early announcement to the sector for them to bring forward as many homes as possible to meet the housing need. I think that early indication was really important to them to be able to get their plans in. The approach, I think, enables us to deliver that investment in our SHG programme, giving continued confidence to the sector. So, I think that’s where we’re prioritising the TACP with that additional funding.

Is it a multi-year settlement, so that they know? Are you able to give that confidence to the sector?

No. Unfortunately, the problem we have at the moment is we hope that we will have multi-year settlements, I think that’s the indication in future, and that’s obviously what we would then pass on as well. Sorry, Emma.

It is worth reflecting, Cabinet Secretary, that although we have annualised budgets, or certainly this year we have a one-year budget, the SHG programme in particular runs on a rolling programme. So, the planning assumption, if you like, is that the funding tap doesn’t suddenly turn off because otherwise we wouldn’t be able to deliver in-year. TACP is a little bit different, in that it focuses on more rapid delivery homes and it has worked on an annual basis. But as the Cabinet Secretary says, the fact is that we’re announcing now that the TACP programme is open for the next financial year. And we have, over the last couple of years, run TACP on the basis of inviting bids and projects far beyond the money that’s actually on the table in the budget in the first instance, so that we have a pipeline of deliverable projects, if we’re able to identify additional funding that can be redirected in that direction.

And maybe Stuart might want to say something about the pipeline of TACP as well.

Yes. It remains strong, actually, as you've said, Cabinet Secretary. The balance of investing in the long term through new builds against bringing forward homes quickly through acquisitions, and then we've got the target as well, is something we need to strike. It's quite a fluid picture, that capital programme, particularly those short-term homes, but every year we've been out for TACP bids it's generally been oversubscribed by double, essentially. For example, last year, the Cabinet Secretary agreed to an indicative value of £100 million and we had around £200 million-worth of investment opportunities. That’s really healthy and enables us, should more money become available during the year, to make those short-term investments. So, I’m expecting a similar response into next year. I’m hoping for that.

There is a concern about the standard and getting it up to standard. Are you looking at changing the standard? And I’m not sure whether some of it could be interpretation as well by RSLs and concern about whether they can get up to the standard, so they might focus all the money on new builds as well. I know it’s a really tricky balance, isn’t it? Going back, one of the biggest issues was the size of the rooms, to meet that standard as well.

Thank you, Carolyn. This is something I have heard as well and I’ve been discussing. You will have seen my response, I presume, to the committee’s recommendation around developing a separate standard for acquisitions. Just to reiterate, for us, we think it’s important that we use public sector funding to invest in good-quality homes at the outset, so reducing that overall investment in the longer term. I think, for us, we do not see that compromising on those standards is an option. But just to say, we have been clear, however, that with acquisitions, which do play a really important role in delivering our much-needed homes, those much-needed affordable homes more quickly than we can with new builds, we do allow that flexibility in terms of when a home is required to meet the WHQS. So, pragmatism is applied through TACP, just to make sure you are aware of that. When I have spoken to people and the people tell me that this is an issue, I have asked to see particular examples where they think that hasn't matched up to what we believe is that pragmatism. Stuart, I don't know if you want to add.

On the positive side, we have a strong pipeline of acquisitions and homes coming through that are standards compliant. That said, there are a couple of issues we need to follow up on with the sector, and we're doing that with Community Housing Cymru now, and we've been discussing it on the affordable homes taskforce as well, which has been really helpful, around absolute clarity on that room size. So, we've added some flexibility in that the smallest room can be used for younger people—we're just making sure there's really clear understanding of that—and also that there is flexibility to buy homes to that minimum standard we've asked for, to use them and then sell them, if they really can't be brought up to that clear standard of WHQS. So, I think there's a job to do around that communications piece, and we're definitely doing that, but, as I said to start with, we've got a really strong pipeline of standards-compliant properties coming through, which is great news.

I think that is important, isn't it, that we are responding when people tell us things? Sometimes, when we're talking about flexibility, it's that communication and understanding how—. Because we all want to see more homes, but we can't compromise on what we're investing public money in in terms of standards. But there is that time to bring it up, and, as Stuart says, the option to sell at a later date. So, there are options available, and I think, as Stuart says, we're looking at how we can communicate that to local authorities and RSLs in a way that's effective.

Thank you.

Okay. Thank you. Peter.

Thank you, Chair. I just wanted to ask you a quick question on the leasing scheme. We know you've put an additional £2 million into that. I just wondered if you could give us a little bit more detail on what your intended purpose is for the additional money.

Okay. Thank you, Peter, and I'm glad you mentioned Leasing Scheme Wales, because I think it's a really good project. It started now—. When was it? It started about a year ago, or a year and a half ago.

I think slightly longer than that—

Oh, there you go, but it's taken a while—

—but it had the hiatus of—

COVID.

—COVID, yes.

And I think it's taken a long time to see some progress, building into the system, but we are seeing more coming on all the time. Discussions are taking place with local authorities through workshop events this month and next month, just to try to bring more on board, and just to agree how this additional funding should be allocated to measures that will further support the roll-out of the scheme next financial year. That's to encourage more sign-up, to secure shorter timescales, because I think that's been a bit of a challenge as well. We are having those discussions.

And just to say as well that proposed measures include looking at legal support, marketing and communication, staff resourcing and additional options around grant support. Those areas have already been identified through ongoing evaluation of Leasing Scheme Wales by Alma Economics. So, we are trying to move with things, but we do understand—. I think it's a really important scheme, to be honest, and I would like to see it used across Wales. I think most local authorities now are—

Yes, we're up to 19 local authorities now engaged, and, as you say, ramping up.

Yes, but you're not expecting any of this £2 million to be helping them to come on board, because that was already in the settlement.

Yes.

So, with the leasing scheme, each local authority that joins the scheme has a target, and what we find is that the first few homes that they bring on board, as the Cabinet Secretary says, take time, and then it starts to ramp up. We've got a communications campaign out at the moment, trying to encourage more landlords. So, the additional money reflects how we see the whole scheme growing, and to ensure that there's enough budget there to meet the grant needs and the support for landlords coming on board. But I think we're up to about 360 homes now fully in the scheme, and a pipeline of around 160, so up to the 500 level, which is really promising.

And some authorities, because they've all been at different stages—. I think it's important, as we said at the start, that it does take a bit of time, and people understanding and that communication. But we are seeing now, with those local authorities that have been doing it for a while, that there are more properties coming on board. And actually, just to say, I did see on my own Instagram profile the advert for Leasing Scheme Wales, so I'm sure others will have seen that as well. I think it's just trying to get that message out, isn't it? Because it is a really important tool, and it was something that I was keen to discuss with local authorities on my visits around Wales to just make sure that they're aware of what is available.

Thank you for that. Just moving on to market housing, I'm just wondering why, after an additional £25 million of annual capital had been allocated to the empty homes grant, there hasn't been a decrease in the number of empty homes over the last three years. Have you got any analysis of that?

Data on empty homes from council tax administration records are based on dwellings that are empty for six months or more, and the latest statistics for 2024-25 show that there are 22,634 chargeable empty properties—so, empty properties for more than six months in Wales—and that's down from 25,701 in 2021-22. So there's been a decrease there, again, of those properties over six months.

The empty homes grant is providing grants up to £25,000 to home owners and prospective home owners of properties empty for 12 months or more to remove those significant hazards from their properties, to make them safe to live in and to improve the energy efficiency. So it's just a bit of a discrepancy between the numbers for properties over six months and over 12 months.

So the empty homes grant, then, we're saying is actually working. It is encouraging people into the system.

This is focused on the 12 months or more. The data we have is for six months or more. Obviously, our target is the longer term ones. So just to confirm to the committee, there have been 974 valid applications for the scheme to date, as well as 169 properties completed, as of just before Christmas. And they've been brought back to use as homes, with work to bring a number of other homes well in progress and due for completion this year.

We are currently reviewing the scheme. We're looking at what barriers, and particularly immediate barriers, there are to the uptake of the scheme, and I would say I'm really disappointed that not all local authorities are using the scheme. I think that's part of why I'm keen that we have a review of this. Because this is something that affects all communities. We don't want to see these properties empty long term. We need to make sure that what we do have is actually doing what we want. So it's a bit of understanding why all local authorities aren't actually taking it up at the moment, exploring those immediate barriers. This is just one of the many other things that we have in place to try to focus on empty homes. I don't know if, Emma, you want to say anything specific about the wider package that we have.

It is a very complicated landscape, as the Cabinet Secretary says. We all want to see every single one of these homes—. Empty homes grants target a particular market, if you like, of people who can identify an empty property that they're able to secure. It becomes even more complicated, though, if you've got an empty property where you perhaps can't identify the owner. And then there is support available, although, again, we're looking to make sure that that support is the right support, and able to have the impact that it needs to in terms of enforcement on those properties, which of course sits with local authorities, but we know is a difficult and blunt tool to use. But we are seeing a little bit more use of enforcement powers. So I think there's definitely a case here for an equal amount of carrot and stick in order to make sure that we're bringing those properties forward, but a whole host of different offers are available.

One of the things I'm keen to do is I'm intending to start some regional round-tables with local authority housing leads, cabinet members. This is an area where I'd be really interested in seeing where there are pockets of good practice within local authorities. I know we do try as much as we can to share that, but I think some focus on specifics in areas that are a bit tough to unlock, or where others are doing something well—. It would be good to explore that more with local authorities. So, I'm looking forward to doing that.

That's great—a good initiative. Just looking at Help to Buy—Wales, I just wondered what your views are, Cabinet Secretary, around the direction of travel for Help to Buy—Wales. A quarter of purchases in the scheme aren't first-time buyers, as we understand. Does Help to Buy—Wales need to be more targeted at meeting housing need?

I think Help to Buy—Wales is an important tool in supporting home ownership and driving up housing supply. Since its launch—in 2014, believe it or not—Help to Buy—Wales supported more than 14,000 households to purchase a home, with 50 developers and small and medium-sized enterprises registered to the scheme. This is something that we've carried on here in Wales. It has supported people into home ownership in very challenging economic conditions. Just at the end of last year, on 16 December, I did announce that that scheme will be extended for a further 18 months. During that extension, we're going to work with stakeholders to consider some of the recommendations around recent research about homebuyers' needs and the place of Help to Buy—Wales that was published in 2024. I want to see people who want to buy their own home have the opportunity to buy their own home. Over 10 years, Help to Buy—Wales has supported 11,090 first-time buyers to purchase a home, which is 77 per cent of purchases being first-time buyers. The proportion of the first-time buyers has increased in recent years; so, 84 per cent of purchases since April 2022 have been first-time buyers. So, we have seen a bit of an increase there as well. I think it's important to see that this has been a really important tool to help support home ownership in Wales. But we are looking at what comes after, so this gives us a bit of chance to reflect on the scheme over the last few years.

Could I just ask, Peter, a second, what is the upper limit on properties that are included in the scheme?

It's £300,000.

So, we could have some people buying £300,000 properties who are not first-time buyers, and they would be getting help under this scheme.

That's possible. Of course, £300,000 goes less far in some areas than in other areas, and that's been one of the challenges when we've reviewed criteria around Help to Buy—where do you set that upper limit, because it is very different in different parts of the market.

Again, this gives us that opportunity to reflect on some of the learning that we have and just look at what the future will actually entail for Help to Buy. I think it is important to extend it. We know it has been really helping people. It provides an interest-free loan of up to 20 per cent of the property's purchase price. We know that some people have been able to buy that who are—. A good proportion of those people are first-time buyers. And, obviously, that helps the whole system, really.

It's surprising the upper limit is relatively high, recognising that most first-time buyers would struggle to sustain a £300,000 house once they're in it—council tax and everything. I'm surprised we're not setting at a—. Or there has to be proof that they've looked at other alternatives, which were perhaps cheaper.

There are affordability measures. I don't know if there's anything specific Emma could add to that.

I guess that every buyer is individual, but the assessment of affordability and what that individual buyer can manage is part of the application process. So, there are all the usual safeguards that you would expect with any responsible lender in ensuring that people are not putting themselves into a difficult position.

Thank you. Just a couple of questions left from me, on a really important area, around building safety. I was wondering when the Welsh Government is hoping to identify the cost implications of supporting implementation of the new building safety legislation. Does the Government anticipate any changes between the draft and final budgets for 2025-26?

Thank you, Peter. You're absolutely right, this is an important area. Obviously, we have this Bill coming this year as well, so there's a lot of work going on at the moment. Officials have been engaging with key partners in this area to ensure implementation of the new regime is effective and delivers on our ambitions and expectations in terms of the safety of multi-occupied buildings and their ongoing management. We're prioritising early implementation planning, and that gives me confidence that we fully understand and respond to the cost implications for legislation.

We've commissioned an independent economic analysis from Adroit Economics to develop a really clear picture of the costs and benefits of the reforms that are intended by the Bill. This will feed in to the regulatory impact assessment prior to finalising the regulatory impact assessment. We've also begun to share Adroit's analysis on costs with local authorities, just to test that assumption. So, I think there are lots of measures in place at the moment.

As well as the robust economic analysis we've commissioned Adroit to undertake, we've established an implementation work stream to support the implementation planning, and, obviously, as you'd imagine, local authority partners are really key in this area. We've also established a joint inspection team, which is hosted by the WLGA, and that team is working closely with authorities, fire safety and rescue, to bring additional capacity to inspections and to develop a clearer picture on the existing risk profile.

We've got eight building control trainees as well, so we're trying to make sure that we're putting more investment there as well, so that we can build that capacity. But in response to the last point of your question, no changes to budgets in respect of implementation of the legislation are planned between draft and final budget.

Thank you for that. And the final one from me: looking more closely at building safety remediation and the costs relating to that, the funding for remediation works is unchanged from the baseline budget, despite the number of properties in the building safety programme having risen last year from 350 to nearer 450 in December. Does the Cabinet Secretary expect the number will continue to rise, and how will the additional costs be managed?

Thanks, Peter. This is a really important area of work that's going on. Officials have been working really hard on this area, just to put that on the record as well. We've got 433 buildings in our remediation programme. Our expression of interest process remains open, so we do expect more buildings to enter the programme. However, at this stage, we do not expect that number to increase significantly. We've obviously had a lot of engagement in this just to understand the numbers within the programme. Since the programme was first initiated, trying to get understanding of what that profile would look like has taken time, and I think we're in a better position now to really understand the amount of buildings and the amount of work that's needed.

It's also just worth saying that more buildings captured doesn't necessarily mean more additional funding from the Welsh Government. More than a third of buildings within the programme—that's 151—are being remediated by developers and covered by contracts between developers and the Government. So, there is that bit of difference. But it is important that we are in a better stage to understand the spend each year that will be required. That doesn't take away from the fact that I want to see remediation progress as quickly as possible. Budget issues have had no negative impact on delivery, but there are lots of external factors as well. So, again, this Government is committed to continuing to support remediation and to progress remediation at a pace that is unequivocal. So, I'm keen to put that on the record.

Okay, Peter. Siân Gwenllian.

Diolch, Siân. The focus on our decarb funding over the period to 2030 will be on improving energy efficiency in our social homes, preparing for new carbon heating systems, and installing them where possible. We've agreed to continue the optimised retrofit programme in minor amendments for up to a further two years. I don’t know if you have the—

Thank you, Siân. I haven't got the figure in front of me, but, Emma—

Seventy-two million pounds will go into ORP. So, ORP is rolling forward into next year on a similar basis to this year. Alongside that, there is support for landlords who are undertaking stock assessments in relation to the Welsh housing quality standard. Those stock assessments will be particularly important in terms of helping us to work with the sector to shape not just the journey to decarbonisation, but also how we shape the future funding that supports that, because there are a number of funding elements within the decarbonisation capital budget, as you allude to there. So, ORP continues for a further year on a very similar basis to now, with that work alongside, and then a dovetailing of work through ORP, WHQS, looking more holistically at how we decarbonise and improve our stock.

Eighteen million pounds.

Eighteen million?

Yes.

So, £3 million are going on green homes.

And then I think the remaining £2 million covers a range of smaller projects and supports evaluations and things like that. But your main elements are £72 million on ORP, £18 million going to support WHQS work, £3 million going to the Development Bank of Wales for the green homes initiative, which is supporting private sector, so taking us in a slightly different direction, and then there's a small amount of funding that supports decarbonisation elements of Leasing Scheme Wales.

There is a 7 per cent increase in—[Inaudible.] No.

No, it's a separate line. I've got the line here; it's tiny—I need to peer with my glasses, I'm afraid. So, the Warm Homes line is increasing from £35 million up to £37.5 million. And that's focused on a slightly different cohort of homes, in terms of specifically tackling fuel poverty, but also with that net-zero and green thrust as well.

Okay—

Sorry. Yes, Jamie. 

Just to clarify, there’s a separate budget expenditure line for Warm Homes, which is 0950, and that sits within homes and places. So, that does sit within the Cabinet Secretary’s portfolio.

Just to add, there is an overlap, of course, because fuel poverty sits in a different portfolio. So, there are very close links, but I think that’s where the slight confusion lies over whether this element is within the Cabinet Secretary’s budget.

Okay, fine. Maybe we can have a note on that, just to explain—

Yes, that's fine. 

—how much comes from the social justice pot of money as well, so that we understand.

Yes, that's fine, we can make sure you can get a note on that.

Diolch, Siân. Our initial estimate of the cost of upgrading privately rented homes to energy performance certificate C is approximately £1.3 billion to £1.6 billion. But just to caveat, really, that that is based on incomplete data, and we’re working with the sector to understand the challenges of meeting the proposed new minimum energy efficiency standards. As with owner-occupier homes, it’s not appropriate for Government to cover the costs of upgrading all privately rented homes. Having the ability to cover costs to rent increases isn’t as feasible here in Wales as in some regions in England. I think, we're not—. We’re assessing costs of energy efficiency and transformation to low-carbon heat across all tenures, and considering how to best deploy that funding available to us.

Low-income tenants in private rented homes and those in receipt of means-tested benefits may be eligible for free energy efficiency measures through our Nest scheme, or through ECO4. And anyone who’s in a cold, damp property should contact their landlord to seek agreement to explore those schemes. As I mentioned yesterday, our Nest advice service can support any householders on different schemes available and the eligibility criteria that apply.

I don’t know if there’s anything Emma wants to say about the green homes scheme and how that’s helping.

Thank you. So, yes, the green homes scheme has been subject to a pilot this year, and, as we’ve just mentioned, has been awarded additional funding to continue into next year. That offers good-value loans for home owners to be able to engage and reduce the carbon footprint of their homes. So, that’s on the owner-occupier side. There is also some funding available, an additional grant, if landlords are entering into Leasing Scheme Wales, focused specifically on improving the carbon footprint of those homes and the affordable warmth elements.

That’s another angle to push Leasing Scheme Wales, sometimes, with people as well.

Diolch, Siân, and, yes, some important questions there. I’m really pleased that we’ve been able to announce an increase of £5.5 million to the capital element of the rapid response adaptations programme. That represents a 28.2 per cent increase in the current baseline, which is £19.5 million. And the proposed increase to the revenue element of the programme is £1.2 million and will represent an increase of 23.5 per cent. As I mentioned earlier, this is intended to help deliver more adaptations across Wales and fund an increase to adaptations that are particularly complex as well.

I think when we're talking about changing the focus or remit, we do not currently plan to change the remit of the programme, but, obviously, the position is kept under review. I think we have to balance the investment that we're able to make with making sure that we don't dilute services that are currently being delivered as well. So, as I said, there's an increase in that complexity of adaptations, but we have no plans to change the remit of the programme.

Okay, Siân. Peter. 

Just on that, and we welcome more money to adaptations, it's something that's so important, and an area of that, which I don't know has helped to drive some of your thinking about that, is the need for rapid response for motor neurone disease sufferers, because I know previous Ministers have been quite concerned that local authorities haven't been able to accelerate emergency adaptations, recognising the issue with those suffering with MND. Would your expectation be that local authorities with additional moneys need to prioritise, through this rapid response, things like MND? 

Absolutely, and just personally I've seen how an adaptation in a social home had helped my aunt who had motor neurone disease, and I know how important that was for her to have that for my cousin who lived with her. So, I know how important it is to have something like that done in a rapid way. So, I think these adaptations absolutely would—. You know, I would like to see MND sufferers—making sure that they have those adaptations as quickly as possible, as with other particular life-limiting illnesses as well. 

Thank you. 

Okay, Peter. Well, thank you very much, Cabinet Secretary, and thank you to your officials for coming in to give evidence to committee. You will be sent a transcript to check for factual accuracy in the usual way. Thank you very much, and thank you, Emma, Stuart and Jamie. Diolch yn fawr. 

Diolch, Cadeirydd.

Committee will break briefly until 10.35 a.m. 

Croeso nôl. Welcome back to committee, Cabinet Secretary, with a different set of officials this time. We've reached item 3 on our agenda today, continuing scrutiny of the Welsh Government's draft budget, but this time with regard to the local government aspect of the Cabinet Secretary's responsibilities. Welcome back, then, Cabinet Secretary, and also to your officials: Reg Kilpatrick, director of local government, and Judith Cole, deputy director for local government finance policy and sustainability. Perhaps I might begin with some initial questions, firstly with regard to the programme for government. How does the provisional local government settlement for the forthcoming financial year reflect the Welsh Government's priorities for the sector as set out in that programme for government? And perhaps you could set out whether or not the Welsh Government has considered new ways to address any future funding gaps that have been identified.

Diolch, Cadeirydd, and long time no see to the committee. [Laughter.] Yes, the draft budget does provide a significant investment into local government, although I do recognise the ongoing challenges that local authorities face. I hear and speak directly to local authority leaders, and I've certainly heard about the challenges that they have faced and that they continue to face. The provisional settlement for 2025-26 sets out core funding of £6.1 billion of revenue and non-domestic rates to spend on delivering key services. So, this equates to an increase of an average of 4.3 per cent, or £253 million on a like-for-like basis, compared to the current year. We've, obviously, provided over £134 million in the settlement baseline to cover additional funding provided in-year for teachers' pay, pensions and other pay pressures. So, I think that's important to put on record. As an adjusted comparison, that's an increase to the settlement of an average of 7.2 per cent—so, notably better than the like-for-like increase suggests. But, as I say, that's not to suggest that local authorities will find it easy. I certainly know that they are still having to make some very difficult decisions because of the pressures. Something that has come up consistently with me and, I'm sure, all colleagues here, is the pressures they face particularly around social care and education, specifically around additional learning needs. 

So, just to say that, after we've had 14 years of constrained public finance, it can't be turned around in just one year; it is going to take time to recover. Just to say also that, within my budget, there are specific funds to support corporate improvement. There's over £3 million to the Welsh Local Government Association for sector-led improvement in digital services to support councils to improve, and we're working with local government to strengthen the contribution that joint working and regional working can make.

And just in terms of considering new ways to address any future funding gaps, could you expand on that, please?

Yes, I think, as I said, there's the allocation around how local authorities can work together. I mentioned that we've got over £3 million for the WLGA for that sector-led improvement in digital services, and we're working with them in terms of joint and regional working—how that can make a difference. I don't know if there's anything Reg would also like to add.

Thank you, Cabinet Secretary. I think the local government financial regime in Wales is pretty well established and pretty familiar to everyone on the committee—it revolves around the revenue support grant, non-domestic rates and council tax. So, authorities have some ways, already, of raising additional income. They will also have the opportunity to raise income from fees and charges, and the auditor general did some work on that some years ago.

So, I think our concern around the fees and charges is that, while it is an alternative and an additional way of raising income, I think councils are acutely aware of the impact that raising additional income may have on some of those service users, who may not be wealthy enough to pay for them, or will actually constrain some of the ability to access those services. So, I think while there may be an opportunity through fees and charges, that is quite a finely balanced opportunity for councils and, ultimately, that needs to be for them to pick up and to deal with through their own budgeting and approval processes.

Okay. Could I ask you about any assessment you've done, Cabinet Secretary, on the unhypothecated elements of the provisional settlement and to what extent they would help reduce inequalities, particularly given the cost-of-living context that communities face? How confident can we be that, in terms of those unhypothecated elements, they will make a contribution to tackling inequality in Wales?

Yes, diolch, Cadeirydd, and thank you for that important question. As you know, our Welsh Government budget documentation does set out our high-level strategic impact assessment. That reflects the contribution that local government makes to universal services, and also those that are more closely tied to specific inequalities. There are also specific grants to local government, which more closely align to specific services to support specific groups.

In terms of core funding for local government, it's key that local government assess the decisions that they take on the use of unhypothecated funding on a range of factors, including the impact on inequalities through their impact assessments, and this would also include things such as gender, age and other protected characteristics. Local authorities are obviously governed by the Well-being of Future Generations (Wales) Act 2015, and the five ways of working and the well-being goals.

And just to say it's also probably worth noting that the funding formula used to distribute the funding is based on three main areas of need, and those are population, sparsity and deprivation, and the deprivation factors included in that will, obviously, reflect economic inequality factors.

Okay. Thank you for that, Cabinet Secretary.  Moving on again, to general themes, really, and assessments that you may have made, in terms of the Welsh language, again, what assessment would have been made of the potential impact of spending allocations on the Welsh language and particularly regarding the requirement on local authorities to comply with Welsh language standards and their duty to promote the language in their own particular areas?

Again, it's for local authorities to assess their decisions as to the impact on the Welsh language. As you say, they are governed by the Welsh language standards that they need to follow. I know that local authorities will work closely with the Welsh Language Commissioner to improve areas where they can share good practice, and learning as well. And local authorities are of course responsible for Welsh language education, and I know that that's something that is developing as well.

Okay. Thanks for that. Finally from me, again sticking with the broader themes, across the Welsh Government there's an aim to tackle the nature emergency, so how does the provisional local government settlement take account of the need to do that—the biodiversity and nature emergency—and how does it reflect the objective for Wales to be net zero by 2050?

Diolch. Absolutely, I think local authorities are both key to and very much committed to these critical policies. I think most, if not all, local authorities have declared nature and climate emergencies, and they all would have action plans if they have done so. The unhypothecated nature of the local government revenue settlement is important because it allows each local authority to consider the issue as part of their ongoing service delivery, not separately, so general increases in revenue and capital are important to support their ability to build in decarbonisation or improved biodiversity into each of the services.

We have worked with local government specifically to support them in this. We've got a programme of delivery through the WLGA, which my budget funds—that's £0.3 million per year that supports the development of sharing expertise and builds capacity, and the partnership council oversees this work, which is driven by working groups led by senior local government officers. It focuses on the four key areas of climate change and adaptation, land use planning, transport procurement, and buildings. We've got some really good examples within local authorities, and perhaps Reg could give more specifics on those. One is the low-carbon heat grant, which provides funding to local authorities to upgrade buildings within their estate from fossil fuel heating to low-carbon heating systems, and we do actively share lessons learnt across all 22 local authorities where there are projects, and I think that Reg could perhaps touch on a couple of examples.

Yes, sure. Thank you, Cabinet Secretary. It might help if I just describe how the Welsh Government tries to work with local government to do exactly what the Cabinet Secretary has just said, and there's a group that is funded by us, but chaired by the WLGA, which brings together chief executives from across local government with the specific remit around decarbonising the local government estate and the local government activities. That covers four main areas, particularly buildings at the moment, but also—. I think Judith might have to remind me of the other three. But, essentially, this is actually a really powerful group that's delivered some very significant projects. Joint procurement of electric vehicles may sound like a fairly straightforward thing, but, actually, across the 14 local authorities who had to be brought together, developing that procurement, developing the contract meant that local authorities in Wales were able to buy vehicles more cheaply, and actually to access those vehicles much more quickly than they would have done if they were making a number of smaller purchases directly from the manufacturer. And again, those vehicles will deliver, I think, a significant saving in carbon dioxide. And that group is now looking at buildings and how to decarbonise the estate, and that will link into the additional £10 million that is included with the capital grants this year that will enable local authorities to bid for and secure funding to, as I say, decarbonise their estate.

I think there might be some examples that we can also share, videos that we might have if the committee's interested, just on good practice.

Okay, thank you very much. Carolyn.

And what about the biodiversity and nature emergencies?

Like I said, I think there's—

By decarbonisation, but—.

Yes, so, absolutely, we said most, if not all local authorities have declared that as an emergency and will all have their plans in place as well. But I think there are some good examples where, like I said, the videos might be useful to share with the committee, but I don't know if the group's touched on that in the same way.

Shall I just come back on the biodiversity question? I think the answer, from our perspective, is that these are really important issues that local authorities have identified for themselves, as the Cabinet Secretary said, by declaring their own nature emergency. We would expect those to be dealt with as part of normal policy development and service delivery, rather than us adding additional funding in for specific grants from this portfolio to do those things. We would, as I say, expect normal policy delivery and consultation with the public to deal with that. There will be other parts of Welsh Government that issue specific grants to local authorities. I'm afraid I can't quote what they are—

Such as the Local Places for Nature—

That's right, yes.

—which will go into local authorities and provide support for direct policy interventions or direct service delivery. But they wouldn't come from us, they would be in addition to the RSG. 

It's just, in my experience, local government might talk about decarbonisation, and senior officials, but trying to get them to accept that there's a nature emergency and to incorporate that in all they do, whether it's planning, building and everything else, to support their more junior officers has been a bit of a hard win for me, so I just want to make sure that it's there, embedded in local government, as well as—. I'm on the Climate Change, Environment and Infrastructure committee, and there is funding for Local Places for Nature through that portfolio that helps. Without that money, though, local authorities would not be able to afford to employ biodiversity officers, and so they made a plea that that money wasn't cut. It's been reduced slightly this year, and so I'm concerned about the viability of having those biodiversity officers. And I just know, like I said, we need to have it higher up as well, that buy-in to the nature emergency, if that's something you could bear in mind.

And I think, just when I'm speaking to—. Perhaps there's a way we can provide you, the committee, with some of the—. All the local authorities have declared—. I haven't seen that myself, so I'd be interested as well. But I think there are also opportunities, in that I meet one to one with local authority leaders, as well as meeting them as a group, and I'm very happy to raise that as well. 

Thank you.

I've seen in my own area how important having a biodiversity officer is. It has made a difference to some of the really good examples that have happened. So, I know that those officers do really important work to raise the profile and to support local communities as well, and the local authority, with particular projects around the nature emergency. 

I should have declared earlier on that I've been working on a project called It's for Them, working with local authorities regarding managing grass verges and amenity grass for nature, on behalf of Welsh Government, that portfolio. I should have declared that earlier, but I just wanted to raise the importance of buy-in from senior officers as well. Thank you.

Okay, Carolyn. That's on the record now, anyway. Peter.

Yes, just quickly, do the BREEAM standards still apply, or have you updated those for something that fits in to the aspirations for further carbon reduction and meeting the targets? I'm probably out of the loop a little bit on that now.

Judith.

So, that's a nice interesting, technical question. Thank you. 

That's why I looked at Judith.

BREEAM standards are still there. If you look at the twenty-first century learning programme, there is a push to make new schools, and indeed major retrofits, net zero by operation and construction—

I see.

—which I don't believe is quite the same language as BREEAM. But you are taking me far outside my comfort zone—

No, no, that's okay. I know that when building twenty-first century schools, BREEAM was a significant driver to reach targets, and I'm conscious that targets have moved on and expectations are greater and perhaps a new set of criteria comes alongside funding requirements and things now, but, yes.

Perhaps we can provide the committee with a note on that, if that would be helpful.

Yes. I think it might be interesting.

Yes, that would be very good.

And from a biodiversity perspective, one way we could have helped was to have had a food Bill and local food plans to cut down the carbon footprint. [Laughter.] But that's a different story.

Yes, but we certainly need to do a lot on local food and food generally. There's a lot of progress that needs to be made, isn't there? Siân Gwenllian.

Diolch, Siân. Really important questions within that. Again, just to say that this is a UK Government decision around national insurance; it's not devolved. The UK Government has confirmed that it will provide funding to public sector employers to cover the increased costs of NI contributions. It's also confirmed to Welsh Government that we will be provided with our share of that funding to support the costs to the devolved public sector, and that funding will be over and above the money that came to Wales from the 30 October UK budget. We expect to receive the additional funding in late spring. We have not yet had confirmation of how much additional funding Wales will receive to support the additional costs to devolved public sector employers. We are continuing to work with the UK Government, Treasury and Treasury officials to clarify the details of that level of support. I don't know if anyone can say a little bit more about the officials' conversations—I'll bring Reg in in a second—but—

So, the figure of £109 million—

Yes.

—it's not confirmed.

So, if I may—

Yes. Sorry, Judith.

That's the estimate that we have of the cost of the NI change. So, it's not money we're providing, it's the estimate of the cost. We need to be clear about that, because that sets the ability of us and local authorities to plan, when you understand the scale.

So, the £109 million is based on figures that you've had back from the councils—

Yes.

Yes.

—showing how much the increase is going to—. So, there's absolutely no talk of UK Government providing that £109 million, which is a little bit of a—. I think the Welsh Local Government Association, we heard, were under the impression that this money was going to come and that it was £109 million. So, you're saying today that that is not the picture.

No, I wouldn't do that; I would never get out of the building alive. [Laughter.] So, as the Cabinet Secretary said, UK Government has said that funding will come to Welsh Government to fund the costs. The discussions are still ongoing about what that actual sum is. Welsh Government and the Cabinet Secretary have said that when we get the money, we will give it out to the public sector bodies.

Absolutely. I think that's a really important point, as well, how that's distributed, and perhaps Judith will say a bit more about the funding distribution group and the finance group and how that’ll be formulated, because I think it is important that what money we do have is allocated in the fairest way, isn’t it?

It is. It’s a good point. We haven’t made a decision on that yet, we haven’t had the formal consultations through distribution sub-group and the finance sub-group yet. We’ve had informal discussions with local authority finance directors to make sure that we can think about different options. There are clearly options to just use the standard local government funding formula, because that takes account of the different pressures, but equally there might be other aspects that we ought to think about, because some local authorities will have more of their services provided by directly employed staff and others will have more provided by externally employed staff. So, we’re very much aware of that.

In England, they have just announced that they’re going to do it by reference to an individual local authority’s share of the overall revenue expenditure, so it’s just in proportion to how much you spend. That might be an option in Wales as well, but we need to model it through. We haven’t modelled it until we’ve had more clarity on the number, the actual amount we’re getting, but we could. And, as soon as we get perhaps breathing space, we might do it on a range of numbers just so that we and local government can get a sense of the implications.

And I think that’s an important point, those discussions being had with local government and within those forums. It’s important to model and make sure that we get it right.

So, the planning assumptions is what I'm after.

Just to say, it's late spring. It's one of these terms isn't it, 'late spring', but I do understand and we are obviously—. You know, this is a decision that’s not within us at the moment, for us to do that. But, as I said, the number that we’re working off in terms of that £109 million is that data from local government. I do understand that local government would be very eager, completely, to understand the position. All I can say is, once we know, we will share that. I don’t know if Reg wants to follow on.

I’ve nothing to add, really. I think we are entirely dependent on the negotiations between the Cabinet Secretary for finance and the UK Treasury, and those negotiations are ongoing.

I would push back and say that you can make assumptions based on the £109 million, and the modelling.

I would say that we have probably a reasonable set of assumptions, which is the £109 million, and that would enable councils to at least begin thinking about what their budgets might look like. The reality of the allocation from Treasury has yet to be determined.

Thank you, Siân. This is something that comes up in my conversations with local authorities as well. The UK Government has said it will use the ONS definition of public sector, and we certainly recognise organisations and businesses commissioned by public sector to provide services, and third sector organisations, are understandably concerned about the impact of the changes to employer national insurance contributions. Just as an aside, the UK Government analysis does show that more than half of employers with NI contribution liabilities will either see no change or will gain overall in 2025. But I would say that the third sector in Wales does provide crucial services to communities and people in most need of support. We've committed to a three-year funding agreement for the third sector, but I very much understand the concerns of the third sector.

All right, Siân? Oh, Peter, sorry. Peter.

Thanks. Just on that theme, we heard very clearly from Wrexham, I think, last week, how about 80 per cent of their domiciliary care is purchased from outside, and, ultimately, whilst their costs might be covered, they will end up picking up the cost of the supplier, and it will come back through. So, have we got a case here that, actually, if national insurance isn't fully covered for direct employees and those associated businesses, we're going to end up taking away all of the cash increase that this new budget, this better budget, is going to give to service that one element? That looks like the reality of things unless we see the money coming down the corridor.

Yes, I'd just say that I understand that Wrexham gave that evidence and the concern that they would have in that, but just to say as well that the conversations are ongoing at official level with the Cabinet Secretary for finance here and his Treasury officials. Reg.

I was just going to say, for the assurance of Members, this is an issue that the Cabinet Secretary for finance is extremely aware of, and forms part of those ongoing discussions with Treasury. We do have a clear perspective from the UK Government, but that hasn't prevented the Cabinet Secretary for finance raising very directly some of those additional issues. So, we do know.

And I think, as an example, when Wrexham have raised that with the committee, and when it's raised with me, I'm really keen not to sit on that evidence as well, and to share that with the Cabinet Secretary for finance, because I think that just having some of the examples is helpful in his discussions, I'm sure, with UK Government officials as well. So, I think that would be helpful, and I'm very happy to share that with him as well.

Okay. Carolyn.

Regarding local authority pressures and resilience, the WLGA told the committee that funding pressures are a dynamic and changing situation, that the financial challenges are an accumulation of 14 years of austerity and cuts and inflationary pressures, but also that, despite a better than expected uplift, challenges not only persist but are increasing, particularly in relation to homelessness and children's care. So, could I ask you how do you believe the provisional local government settlement might mitigate the impact of those pressures on local services?

Diolch, Carolyn. I think the WLGA have been really clear and effective in setting out the pressures they're facing. I'd just like to put on record my thanks to them, and to all local authority leaders, for the discussions that we've had through the process as well, and I know that officials have had through the finance sub-group and the regular meetings that we have. I think it's really important that that conversation happens, so I do understand the pressures that they face. 

When we look back, we've had increases over the last few years of an average of 9.4 per cent in 2022-23, 7.9 per cent of 2023-24, and 3.3 per cent last year, and obviously in normal circumstances they would be seen as really good settlements, but we've seen significant pressures over the last few years, following on challenges through Brexit, inflationary pressures, COVID—we know there are a lot of pressures that have been faced over the last few years. And as I said, I know the particular pressure points local authorities face over social care and education, but particularly additional learning needs, and, I would say, homelessness as well. We can't do everything in this budget that we would like to. One budget isn't going to change everything. They say one swallow doesn't make a summer, and there certainly is that, but it is a better start. I think the work that local authorities are still doing on transforming services is really important, and we've seen some of that language coming through consultations that local authorities are having, setting their own budgets at the moment. But they are still going to have to make some really difficult decisions whilst they are looking at how they can also transform services in the future. I'd also like to perhaps put on record that the draft settlement package also includes additional funding outside the settlement in the form of an estimated funding of almost £1.1 billion in specific revenue grants and over £1 billion capital grants in 2025-26. So that's in addition to, obviously, our specific RSG.

Have they got an indicative budget of those extra grants? Have they had that, or when will they know when that funding will be coming through? 

Judith, on this one.

That's provided in the settlement information that goes out to every local authority at a Wales level. So, most of them will have a pretty good idea of what likely share of most of those grants they will get. 

Okay. That just helps with their planning this year. 

It does.

Yes, absolutely.

I am concerned that, because of the in-year struggle of funding, a lot have used their reserves up, and when, according to the formula, some get more funding year upon year and some get less, at the lower end, each year, it feels like the resilience isn't there, because each year some might get more and others get less. So, you look at the reserves and it varies quite a lot now. I think one authority's got reserves of £6 million, another £250 million. So, if they need to use funding to borrow for capital projects such as highway maintenance, that pot isn't there for the authority. If they haven't got that capital, those reserves or the funding available to borrow, how can we help them? And are you looking at having a funding floor, because so many are on that level, a really low level now, no reserves left? I know a lot used the reserves last year to help them through, and they were talking about bankruptcy and issuing section 114 notices, so—.

So, yes, there's a lot within that, Carolyn.

I know.

No, absolutely. So, just to say, in terms of the reserves, you are right that we are seeing a decrease in the number of usable reserves. That's a decrease of usable reserves of around £170 million in the previous year. So, the biggest falls are in school reserves and earmarked reserves. I don't know if Judith wants to go into any more about reserves, but obviously some of the reserves are classified as usable and are capital and therefore can't be spent on revenue, but obviously what you've described is revenue, capital releasing revenue. Others are school reserves or housing revenue accounts.

So, just to say there's no link that we've found between those with a higher level of settlement increase and the level of usable reserves, on that point. And in terms of the position that you mentioned on the funding floor, again, this is something that I've heard from local authority leaders across Wales, and there is quite a difference within the formula, isn't there? We say that there's an average of 4.3 per cent. Obviously, there are people above it and people quite a way below that. So, a funding floor is usually considered in any year at the change in allocation, but I think, given the range of increases, the Government is open to considering providing an additional funding floor at the final budget. So, it is something we are considering, something that I'm very mindful of, but, obviously, we're in this situation at the moment where we are looking at that but nothing can be confirmed at the moment.  

Carolyn, could I—

Sorry, I haven't answered—

—just bring Peter in in a moment and then perhaps—

I was just going to ask about the shift in the table.

Yes, I was going to—.

So, we've heard there's been a shift in the table of how much they received previously, so that uplift might not be as much as was expected. 

So, I think there was a very minor change, wasn't there, and I don't know if Judith wants to just mention how there was a minor—. I think it's quite a minor change. 

It is.

It hasn't really changed a huge amount in the table, particularly, but Judith—

Could I just bring Peter in quickly on the back of that point? Peter. 

Yes, and thanks for raising it, Carolyn, because one of the—. I'll just touch on that point first before we move on. Whilst we recognise the actual amount of money that is flowing through to authorities may not change through this adjustment, there clearly has been a misinterpretation of the level of increases for authorities. So, we know that the actual figures now demonstrate that, for instance, Monmouthshire, still at the bottom of the 22, has reduced in real terms from 2.8 per cent to 2.6 per cent; 2.6 per cent is the real position, whereas 2.8 per cent was consulted on. So, it actually widens the gap, the real gap, between Newport at 5.6 per cent and Monmouth at 2.6 per cent, which actually strengthens the need to reconsider that floor, because it actually gives the true position. I really do encourage the Cabinet Secretary and the Cabinet Secretary for finance to really consider that, because that's quite a significant difference, which has just altered a little bit. Now, that may be in real terms, in cash terms—. Well, we know that the money's the same, but it actually demonstrates—. It gives a better perspective of the breadth of difference that needs to be adjusted, and I think that can only happen through a floor. 

But it also identifies another worrying trend around the funding formula and how—. It would be a question I would have come on to later about, actually: should we be reviewing this? Are some of the things in the formula now slightly out of date? Do they need relooking at regarding sparsity, rurality and things like that, where we can suddenly see a bit more of a levelling up, so that reserves situation doesn't continue where we see some authorities reducing their quality of service and the level of reserves, whilst others manage to maintain quality services and increase reserves? There's something fundamentally wrong with a system that enables that to go on, and a key part of that must be something to do with the funding formula, many of us would suggest. 

Another point, and then I'll shut up, about reserves, and I know I've spoken to all of you in the past or past lives about reserves, because I think the Government—. Whilst at the moment the usable reserves probably stand at somewhere near £2 billion across the whole of the local government family, we know that has reduced a little bit; as we said, £100-and-something million could overlap a couple of years. That doesn't disguise the fact that there is a lot of usable reserves there, a lot of reserves that are identified for, quite rightly, specific earmarks, are earmarked. But I know that one thing I've encouraged Cabinet Ministers in the past to do is to make some assessment of earmarked reserves to check that they are being utilised. Otherwise, that money should be mobilised in a different way, and perhaps revenue support grants altered to recognise that some have more fat than others, even it is for a short-term period. 

Sorry, a few things there, Chair, but clarity on the need for a floor, which has been demonstrated as even more important, and some look at those earmarked levels of reserves and reviewing the formula. 

Just before we come back to you and your officials, Cabinet Secretary, Siân Gwenllian. 

Diolch. Cabinet Secretary.

Diolch. Thank you. Obviously, there's a range of questions here, but they're all touching on the same themes, really, aren't they? Just again to say on record here in committee, given the range of the increases this year in the funding formula and the allocation, I and my Cabinet colleagues are open to considering providing additional floor funding at the final budget. So, I have heard what people have said, and I'm very much aware of that. The other point I wanted to make was in regard to Peter's point: it is really important that we recognise that it's good practice for local authorities to regularly review earmarked reserves, to release any or repurpose any that are no longer required. I think that is something that we need to recognise. It's good practice for local authorities to do that.

I'll bring Reg and Judith back in, because I'm sure both Reg and Judith have probably heard the funding formula discussion more times than I have, and many more times than all of us here have. But I do understand how complex the funding formula is. I know this committee in the past has had sessions around the complexity of the funding formula and presentations. I think the key point is that the funding formula continues to be kept under review, on an annual basis, by the distribution sub-group. It is important that that is remembered. The fundamental principle of the formula is that funding is distributed according to relative need, and the largest drivers of service expenditure are population levels, deprivation levels and sparsity. I will perhaps bring in Judith first on the formula, and then I'll come back to Reg more generally.

Thank you. The Cabinet Secretary is right—we review it each year. But I think it's also important to stress that, with the census 2021 data coming out, and not the concern but the rightful challenge, because we do want to get the formula right, as right as it can be—perfection is probably impossible—. So, we are doing work through the DSG and the finance sub-group to review, in particular, the deprivation and sparsity, and to check the weightings that we use for those things in each formula. The trouble is, we have to do that for each block of the formula separately, and it is not straightforward or quick, not least because you then have to break it down to quite small geographical units in order to be able to assess the sparsity element.

We've done some work. We used the nursery and primary school block as the starting point, because you have that data at a small geographical level being collected anyway, so it's not a burden. We've done that work. On the basis of that, it did shift resources around. What we're conscious of, though, is that, when you apply that to all the other different blocks, they may shift resources around in a different way entirely. So, the finance sub-group agreed that it would be preferable to apply all the changes in one go, and that means we have to do all the work before we can see the whole impact. That work is under way. As I said, it's not as quick to do as you might hope, and it's not as fast, I know, as local government want, and we're trying to accelerate progress on that, including getting some additional statistical expertise in the team, to try and move it on a bit faster.

Are we confident that, if that froze up, it may be needed? Because it looks like there is some tweaking that can be done. Are we confident that the forum would commission that work to go ahead? Because, obviously, it's done in partnership with the Government and leaders, and some leaders—. You know, I've said this many times, turkeys don't vote for Christmas.

I don't know if that's a nasty question to ask.

I think it's important that we do the work with local government, and I think that this is an area that is complex. Even when we're talking about older populations, we've got to recognise there are differences within that as well, because some might need—. In, perhaps, certain areas, in deprived areas, you might have people needing social care at an early age because of health inequalities, but you might find that those people might have a stronger family network around them. Whereas you might find older people moving into some of our very beautiful parts of Wales who perhaps need care at a later age—you know, perhaps more complex, they perhaps have the means to pay, sometimes, but they don't have that support network around them. So, there is some complexity, even when we are talking about things like older age. And there are, within that, in the depths and the weeds of this whole formula, ways to try to consider different factors, to make sure that the care needs of people are met within that formula. But it is complex. I know it's not the first time everybody's spoken about it; I'm sure it won't be the last time. I do very much recognise the way the population is changing within Wales as well, and I think we have to be cognisant of that.

It's good the work is going on.

Yes, absolutely. Judith's very much at the heart of that and goes to many meetings around it.

And if I may, I would note that, actually, local government in this area has been, in the past, very open to making those changes, even when they were to the detriment of individual authorities. Another reason for doing it all in one go is that you can then phase the impact in order to make it manageable, and it will be a different impact in a year with more money than less.

As a past leader of a group and the council, I always struggled with that willingness among certain groups. We couldn't quite get consensus, hence we didn't accelerate this too far.

So, we will see what transpires in due course, Peter.

Could I just bring Reg back in on the more general points? I think you wanted to come in on those.

Thank you, Cabinet Secretary. I would just remind all Members that, of course, the formula just distributes a sum. So, the bigger the sum that we have, the better for everybody, and the higher the increase at the lower end of the scale, as well as the upper end of the scale. So, we are constrained by that as a starting point. I suppose the second issue about the formula is it is relative. So, while the populations, for example, in one authority may be going up, if they are going up faster in another authority, then the formula will be taking into account the additional growth, if you see what I mean. And then the last point is that the formula isn't static. More than 80 per cent of the data that drive that formula are updated every year. We accept that some data aren't updated—and Judith and local government are working on that—but it is a constantly changing and evolving formula. Personally, having seen quite a lot of examples of collaborative working between the Welsh Government and local government, I think this is a really good and sustained piece of activity, although I really do understand that the outcome of that may not be great for everybody.

I remember one year, Reg, when an extra element was put in for sparsity for a couple of years, and it made a dramatic effect and made it a lot fairer, just with that one little tweak around sparsity. So, there are many things that can happen.

Like I say, I'm sure that discussion within the group will continue. Sorry, Chair, Carolyn had a question at the end of that, just around the section 114 notices, and I think perhaps it's important to respond to that. Just to say that local authorities are obviously keeping their budgets under constant review and, as I've said throughout, I do recognise how challenging it has been and continues to be for local authorities. No local authority in Wales has had a section 114 notice and, obviously, that's in stark contrast to the position in England. And no council will be actively planning to issue a section 114 notice. There are very serious implications to that. And just to say that my officials have met with the WLGA and Audit Wales as a group to bring together a protocol on financial resilience that sets out responsibilities and support available. Because, obviously, what we would want to do in Wales is to make sure we're having the conversations very much in advance of any difficulties that local authorities are facing, because we do have that good relationship. But that work on the protocol is under way, and that's continuing. I don't know if you want to mention anything about the protocol or the work you're doing on that, or that it's been—

We have got limited time, I'm afraid, Cabinet Secretary.

Oh, sorry. The work is ongoing, anyway, Cadeirydd.

Perhaps if you want to add anything, including it in a note to the committee would be good.

I'm sure there would be a way to note that when the protocol with local government is complete.

Okay, thanks very much. We haven't got a great deal of time left, Carolyn. Is there anything else you wanted to raise?

It's just a concern regarding workforce as well. They've lost 40 per cent, haven't they, since 2010, so resilience of the workforce was an issue that we wanted to raise with you, going forward.

I completely understand that. Staff costs are a high proportion of the total costs for local authorities. Many authorities are managing vacancies as a way of managing budgets. We have provided £52.3 million in 2024-25 as additional funding to support pressures, especially those driven by the higher than expected pay rise, and this funding then is baselined into the 2025-26 settlement. I think you may have all seen that other table then. So, that's additional funding to meet the higher than expected teacher pay agreement and the impact of the superannuation contributions adjusted for past experience pension costs. Again, as I say, they're both baselined into that 2025-26 settlement, included before the average 4.3 per cent. But we absolutely know that authorities are—. This is something that they raise, and the work around how local authorities work together, I think, is important. There are some really good examples around Wales where local authorities are doing that. And, obviously, there's potential around our corporate joint committees as well.

It's been raised about best practice and working together, but also, do you have conversations regarding health as well? Because there's a battle of budgets all the time, isn't there, regarding transfers to social care. It was raised that even for exercise referral schemes, funding hasn't increased in three years via local authorities, which help keep leisure centres open.

I think there's always a challenge, isn't there, when you're looking at budgets, and how the different pressures affect. As I was able to say in the earlier session today around the increase to adaptations grants, which I think is really important, I've been very keen to put some investment in to it, because that really does have a knock-on effect in terms of health, doesn't it? I think it's recognising the impacts of different budgets as well. I very much understand the pressures within local authorities, but I think, where there are opportunities to work together, I'm really keen to help showcase some of those as well.

Okay, thank you.

If we move on to Lee Waters, Cabinet Secretary. I think we have some questions in terms of that joint working and longer and medium-term planning. 

We had quite an interesting exchange with the WLGA last week, and one of the striking answers was on, realistically, their ability to plan for the medium to long term. And the response from Councillor Jane Gebbie was, 'We are plucking them out of the air and reading the tea leaves.' I thought that was a commendably frank response. What are your reflections on, given the constraints and the limits to the information that you all have, how the medium to longer term projections and planning you're doing have any real meaning? And what can you do to make some attempt to bring some purpose to them?

to make some attempt to bring some purpose to them?

Yes, absolutely, and, obviously, we heard the reflections as well, and it’s very stark. You’ll understand that we’ve given as much stability as we can within what we’re able to do, based on the stability that we have as a Government, and I’m very aware of that. I think it’s positive that the UK Government want to move to multi-year settlements, which will be obviously important for us, but the knock-on effect will be that we’ll able to provide that to local authorities as well, because I do recognise that it’s important that we have that longer term certainty. And I know that’s only going to be an extra three years, but I think that it’s a better situation than we have had, and it gives us something to build on.

I think, again, those conversations and that engagement is really important with local authority leaders and Cabinet colleagues as well. And we also have those regional structures that are available as well, such as the corporate joint committees. And I think that’s going to be a way of sharing that capability, and I think it’s really going to be important in the future to look through CJCs and what they can actually achieve.

But all those were known to Jane Gebbie last week, and she still says that they’re reading the tea leaves, so that doesn’t really engage with the question.

Yes, I think, as I said, it’s very difficult to answer—

It is difficult. Well, that’s the premise of the question—it is difficult.

It is, yes.

So, given that it’s difficult, do we just simply say, ‘Well, we can’t do it’, or are there some no-regrets measures we can do with local authorities to have at least some basis for planning?

I think there’s hope that there will be that basis for planning in future years. So, I can say that. And I do recognise the challenge for them. But, again, we’re working with what can we do, and how Welsh Government works within our constraints is the same as local authorities have to do as well. And, as I say, I recognise the challenge that Councillor Gebbie is saying about reading the tea leaves, and that’s been incredibly difficult for local authorities, but we’re only able to offer what we can.

No, I understand that. I wonder if, at official level, there are things that you’re thinking about in this space, given all the limitations the Minister rightly identifies.

I think we are equally as frustrated as local government that we have not had any degree of financial forward-look that we can work with. I think the best answer I can give you is that it is very difficult. We have tried working with the WLGA to sort of look at some scenarios, but, actually, the risk to us, the risk to local government, is to set out or agree on a set of assumptions on which to plan, because you need assumptions on which to plan. And if you’re recruiting staff or retaining staff, or you’re making investments where you’re putting money into reserves, and those assumptions turn out not to be right, decisions by the UK Treasury—and we’ve seen some quite significantly different decisions by the UK Treasury over the last few years—will change our financial envelope, and change that very quickly.

But given most of the pressures that they have described, certainly in terms of overspend coming from social care and education, is there at least work on demographic trends that you can do, in terms of the assumptions of the pressures? I accept, in terms of income, that you’ve got no visibility.

Sorry, I was thinking about financial planning. But I think, in terms of service planning, I’m pretty confident, although—

That is part of financial planning, isn't it? Cost pressures are. 

Yes, it is, but our colleagues in the policy departments—so, in social care, and certainly in education—will be working with local government to assess those demand pressures, to think about policies, and how they might be met and managed in the future. I don’t have direct contact with those—I talk to colleagues, obviously—but that work is going on in other parts of Welsh Government with local authorities.

Isn’t part of the problem, in terms of part of the planning being about pooling services, working on prevention, securing economies of scale, and given that you have essentially taken away as much hypothecation as you can to give greater flexibility to local authorities to spend the RSG as they like, that you can’t then have much say on them spending things on specific things like prevention, for example?

Well—

You’ve given away your levers to plan.

Well, I think that, in terms of having that unhypothecated funding, it gives that flexibility to local authorities to respond to the needs of their population. As you say, there will be different pressures, perhaps, or similar pressures but to different extents in different areas, and I think that that is something that local authorities have made clear to us, around how they're able to design services. But there isn't really a clear line between statutory and non-statutory functions, is there? And I think when we're talking about services and what people—

Well, there is. One's statutory and one's non-statutory. There's quite a clear line.

No, but in terms of what people expect. If somebody has a particular care issue, there's a difference between what they can expect. We need to deal with that person's issue. And I think that we just have to be very clear that it is a difficult balance to strike. But this is something that local authorities have asked. We are working—

Sure. I understand that, but the point I'm trying to make is that you have, therefore—in that trade-off, you have given up the levers you have to ensure any strategic thinking. [Interruption.] Peter Fox is saying that that's subsidiarity, yes, it is, but if we're looking at longer term planning—. So, for example, the WLGA have said to us that they can only fund work on prevention if there's specific funding for prevention, but any specific funding for prevention would have come within the settlement, which you've now given up because you've said that there's not going to be hypothecation. So, you can't have it both ways. So, that's the problem. As you described at the beginning, you have very little visibility about the income coming in, you've just said that your ability to plan demographic trends isn't joined up because you said you weren't talking to your colleagues about it, and in terms of those pots that you had to get collaboration, or get long-term planning or get prevention work, you've surrendered quite a lot of them in the name of flexibility. So, I understand the trade-off, but you have surrendered quite a bit in your ability to have some resilience in the sector, haven't you?

We still give out £1.1 billion in hypothecated grants. So, that's a sixth of the money that we provide to local government. So, there are still quite a lot of those policy levers, those financial levers that are present in each of the policy areas. I think that the discussion that you raise about hypothecating or not is a constant discussion that we've been having with local government, and we continue to have it because we have a piece of work about reducing the administrative burden, which is focused on finding the right balance between ministerial grants and local government flexibility. And I think that we are in a position at the moment where local government, including the WLGA—principally the WLGA—is making a very powerful case for increasing the amount of unhypothecated money that we give out to local government. Their argument is that they can actually plan better for that money, they can combine that money, and they can use it more flexibly over a number of things, and I would argue including prevention, which is an integral part of service delivery, rather than a separate identifiable thing.

Except that their evidence to us is that, without targeted resources earmarked for prevention, they're unlikely to achieve the radical step-change required. So, they're saying—they're facing both ways here, aren't they? So, it's a genuine dilemma, I understand the trade-off, my question is—. The reality is that they are facing short-term pressures and they're in an impossible bind. You, not least under the Well-being of Future Generations (Wales) Act 2015, have a responsibility to think beyond the short term, and given that you have surrendered quite a lot of levers, I'm wondering what is left for you. What is left in that toolkit for you to ensure that there is a more strategic approach for the medium to longer term? I've not heard an answer to that.

I think Reg has said about the grants that go out in addition to that, and I think that that does give us that lever as well. We're also in conversations with local government. They tell us some of the pressures. We've got something here from the WLGA, but it's about how we can work together, isn't it, through these difficult times in terms of the financial challenges that we've had over a number of years now. You know, I think—

I understand that, but it doesn't answer the question.

No, but I'm not quite sure what you want from that question, then, in terms of what you could suggest that would improve that, apart from taking—

Well, I think my suggestion is, if we are serious about preventative work and collaboration, there do need to be dedicated streams of work for that and the NHS needs to be both carrot and stick to encourage local authorities to do that. My question is: what are those?

Well, like I say, I think there's nothing really much to add now onto that, because we do understand that—we hear from local authorities what they think works best for them, and how they can respond to those needs of their population. Those discussions go on, and absolutely they have responsibilities under the well-being of future generations Act as well, and that goes back into impact assessments as well.

If it would help, I'm fairly confident that there are pieces of work going on across other parts of Welsh Government that are doing exactly what you would say: engaging with local government, trying to map service demand, trying to develop policy solutions and trying to work out the costs of implementing those. And we can provide the committee with some examples of them. I think your point about how is all of that brought together in a single vision for the public sector or for local government as a whole is a good one, and that is something we probably need to focus on a bit more. And actually, I'm very optimistic that a three-year settlement, for the first time in many years, will provide us with the opportunity to do that.

Okay. Thank you.

Okay, thank you very much. And finally, Peter, although we may have covered some—

Yes, I think we've covered an awful lot in an earlier session, but perhaps just to explore on capital, if we may, and our ability for borrowing and the like. I just wonder, Cabinet Secretary, if you could expand on the allocation of the £200 million in general capital funding and whether the increase is sufficient, bearing in mind that the core capital funding has not kept up with inflation. And we were only talking in an earlier session about the cost of housing and different things, and that applies to, obviously, local government infrastructures as well, so I don't know if you have any views on that.

Thank you, Peter. Yes, general capital funding is increasing by £20 million to £200 million to support the inflationary cost pressures and to give more flexibility to authorities in financing smaller capital projects, refurbishment schemes and schemes such as the important disabled facilities grants. I know we've had to decrease capital funding a few years ago, but we have reinstated and increased that level of unhypothecated grant over the past few years just to try to give that bit of extra flexibility and to respond to those inflationary cost pressures as well.

The general capital grant is just one element of the capital funding that local authorities have to fund capital projects. Alongside the provisional settlement, we announced, as I said, £1 billion of specific grants. Authorities are also able to borrow within their prudential limits, and they will be balancing their investment needs with the revenue implications of borrowing.

Also, we're able to increase the funding to enable authorities to respond to our joint prioritisation of decarbonisation through the low-carbon heat grant—£30 million. And, again, we've had some really excellent examples where this funding could be used as stand-alone projects or as part of wider capital programmes, and perhaps that is something else we can share with the committee—some of those examples.

Yes, thanks for that. If we go back to that stark reality between those who have got and those who haven't got, obviously revenue to service prudential borrowing is going to be difficult. And I don't know what your assessment is on the current levels. Is that going to enable a postcode lottery of improvement in capital infrastructure—roads and things? Now, I know that the Cabinet Secretary for finance has talked about underwriting £5 million-worth of revenue to service borrowing, which is about £60 million borrowing, I suppose, a year. I don't know if that's for 25 years—I'm assuming it probably is. And that's a good thing, but then there are questions around that: how will that be allocated? Will that be allocated on a needs base, like Powys, which has got an awful lot more roads and pavements than perhaps somewhere else, and do they get a fair crack of the whip, or is it going to be allocated or distributed on a formula-type basis? So, yes, some thoughts on the resilience for councils to actually use their borrowing power, which is a massive tool for them, and how are we going to allocate that £5 million.

Yes, just to say, I think this is something that has been welcomed by local authorities and I think it'll help them to finance around £60 million of capital funding, particularly on highways management and fixing our roads. Reg or Judith will tell you about how that will be distributed.

So, I fear I will not tell you, because we haven't decided yet, and this is currently being regarded as a transport portfolio issue. But when we've done it in the past, we have done it through the local government capital formula, and as you say, that therefore takes account of the fact that Powys has a very different set of metrics than Rhondda Cynon Taf or Torfaen.

So, it's that mix of all councils have got a fair crack at the whip of addressing their relative need. That's quite important.

And perhaps that's something we can follow up with the Cabinet Secretary about how that will be distributed, just to confirm with you as well.

One last point, Chair, if I could, and that was just—. We've heard that some councils are talking about retaining NDR rates, or a bigger portion of NDR rates, and especially those around city and growth deal areas. I wonder what your perspective might be on that, recognising the consequential effect on those poorer councils that might not be able to generate NDR.

So, rates retention is currently only applicable to the Swansea bay growth deal, as no other city or growth deals requested rates retention as part of their economic growth plan—just to make sure that's clear. So, the rates retention arrangement agreed with Swansea bay growth deal only applies to a small number of defined projects. Reg, do you want to—.

Yes. Retaining NDR is quite a new thing for Wales. I think it's much more common in England. Our current approach does restrict the ability to retain NDR to a particular set of circumstances; that would be the growth deals, and I think there are some issues for investment zones and maybe free ports as well.

The conditions about retaining those rates are that they have to be new and they have to be the direct result of the investment in the projects, so the agreed projects between the growth deal or the investment zone and Welsh Government. We have an income to local government of well over £1 billion of non-domestic rates every year, so it's a very significant amount of income. So far, the Swansea deal, which the Cabinet Secretary has talked about, involves retaining about £286,000. So, at the current stage, and I think for the foreseeable future, for the immediate term, the cash amounts that will be retained by these deals or these arrangements are likely to be very small in comparison to the overall budget, and as a consequence, the impact on those authorities that aren't able to generate their own non-domestic rates, which therefore benefit from the pooling arrangement, is likely to be marginal, if they notice it at all.

Yes, and it's not that Swansea bay is indicating a wider shift to adopt this more often. If an authority or an investment area or an authority had a great idea for expansion, you're not looking to roll this out. This is—

Well, it is a facility that would be available to the growth deals, the investment zones and, I think, free ports, but only in a specific set of circumstances, and as a result of an agreed set of projects that will generate new—particularly, yes—new non-domestic rates.

They have to be outcomes and outputs that trade off.

Yes, it would all be part of a wider process.

Thank you.

Siân.