National Assembly for Wales

Croeso, bawb. I'd like to welcome Members to committee this morning. Item 1, we have apologies from Bethan Sayed this morning, and if there are any declarations of interest, please state them now.

In that case, I move to item 2, and there are a number of papers to note. I won't go through them all, but they're there on the public agenda. Are Members happy to note those papers?

In that case, I move to item 3, and this morning's session is a general scrutiny session with the Minister and Deputy Minister. So, I'd like to welcome the Minister, Ken Skates, back to committee, and I'd like to welcome Lee Waters, the Deputy Minister, back to committee, but his first time as a Minister. The last time he was here he was a Member of the committee, so I'd like to welcome the Deputy Minister to the committee this morning. If I could ask officials to introduce themselves for the public record.

I'm Marcella Maxwell. I'm head of economic action plan implementation.

Morning. I'm Simon Jones, director of economic infrastructure.

Thank you. So, the first set of questions this morning come from Hefin David.

I'd like to direct my questions to the Deputy Minister, on the foundational economy. I know, and you know, when you were a member of this committee you were quite critical of the Welsh Government and the speed and the time it was taking to develop the foundational economy policy. So, as a Minister now, what have you done to speed that up?

Well, we've collectively refocused the approach on the foundational economy to a sort of sector-neutral approach. We've done engagement with the community, the civil society partners who had been sponsoring the idea, and we've set up a sub-group of the ministerial advisory board, chaired by Debbie Green, who is the chief executive of Coastal Housing. And through engagement and listening to them, we are now launching the foundational economy experimental fund, and that's going to be a sector-neutral approach, and the commitments we had to an enabling plan for the different foundational sectors as set out in the economic action plan are now going to be an integrated plan for the whole of the foundational economy.

So, just remind us of the four sectors.

In the economic action plan, we talked about foundational sectors, which were food, retail, tourism and care.

So, the link-up with Coastal Housing, which sector does that fit into, or are you now going beyond those sectors?

Well, as you know, the housing association sector have been one of the key drivers in getting the foundational economy talked about as a concept. They've done some work of their own in Morriston high street. For example, Coastal have been doing—. So, they're very much part of the development of the thinking around the foundational economy.

So, it seems to me that what you're doing is going with what is already happening out there rather than what was planned before you were a Minister. 

Well, it's extending it. So, we're not stopping what was planned before, but we're extending the approach after consultation with the ministerial advisory group.

Are you still sticking with those four sectors or going beyond?

We're sticking with them and we're adding to them.

Right. So, in what way are you adding to them? Because the idea with the four sectors is you had a focus for a limited pot of money. If you go beyond, how are you going to do that?

Well, first of all, we're looking to see if we can increase the pot of money, and we'll be making announcements, I hope, soon on that. But there are, sort of, three elements to the foundational economy that we're talking about. One is an experimental one, and that's really important in a different approach to economic development. We've, sort of, stopped saying that we've got all the answers and accepted we're in such a fast-moving environment that we're going to have to iterate and learn and fail fast. So, the experimental fund is explicitly to try a different approach. Then, the second element is to do something that we've not been very good at, which is spreading and scaling good practice. So, once the experiments start to show promise, we can then mainstream them through the public services boards, and we're going to start with the work around Preston and procurement to start spreading that across Wales. And the third element is supporting the grounded firms. So, as we're doing that, how can we aggregate demand in a way that supports grounded firms and small businesses? 

Okay. It chimes very much with what you said in your WalesOnline interview. You said,

'The exciting thing here is that we are making this up as we go along'.

The problem with that is it's very difficult to pin you down then on timescales, and when these things happen, particularly if they're experimental. So, can you give us some idea of the timescales for when people in my community will start to see something on their street that will be clearly foundational and developed as a result of Welsh Government? 

Okay. So, there are several different strands of this. One of the things we're doing through this portfolio now is bringing different things together. So, for example, the Valleys taskforce, the foundational economy, the Better Jobs Closer to Home campaign are all coming together and we're aligning that with the work that the finance Minister is doing on procurement. So, we're hoping, through the Valleys taskforce, for example, to be able to apply some of these principles within the next few months to your communities. So, that will be a tangible deliverable now, and then we're having some longer term things happening in parallel. That's the experimental approach, and then the work through the public services boards on procurement. So, certainly within the next year to 18 months, we hope to be having things that you'll be able to taste and feel differently.

A year to 18 months? So, we'll see—. What will I see in Caerphilly in a year?

So, on the experimental fund, we'll be launching that soon. It'll be a three-month window where it's open and we're going to be doing it deliberately in co-production, because this is new and we need to make sure we have the right quality of bids coming forward, and we're going to work with the people putting forward bids on that to try and shape them. So, that's going to take a little while—a year, 18 months—before those things are fully up and running, I'd imagine, but if we can get it quicker, great. In terms of your community, as I say, the work I'm hoping to be—. I'm meeting all of the leaders of the Valleys councils through the Valleys taskforce to try and get their sense of what the priorities should be rather than Welsh Government telling them, 'This is what you should be spending and where you should be spending it'—

Well, they have already with the four areas, haven't they?

Well, we've got strategic hubs identified, but I don't want the funding just to be in those strategic hubs. I want it to go beyond that, especially into the northern Valleys. So, one example is looking at what Rhondda Cynon Taf council have been doing in bringing empty homes back into use and allowing other councils to spread and scale that across all of the Valleys taskforce areas, and potentially have some match funding, so we increase the pot even further. So, your council, for example—and I've had a good meeting with them already—would be able to bid into that and add their own money to bring empty homes in the northern Valleys and across the area back into use. 

Okay. So, that goes—. I think what we're detecting, since you've been in post, is a change in direction or perhaps a build-on on what was in the plan previously. 

It's a build-on.

So, with that in mind, is—

I'm going to support Lee in this as well, just to make the point—

Yes, I'm not suggesting that you're been overruled—

No. When I appeared before this committee on my previous occasion, I was questioned by the now Deputy Minister about our approach to the foundational economy and I said that we were going to be taking a broader view. The initial intention with the economic action plan was to focus exclusively on those four components or parts of the wider foundational economy ecosystem, but we determined through discussions with stakeholders and experts that we needed to take a broader view. That's since been built on further with Lee's appointment to the Valleys taskforce, which, as he said, brigades together various interventions. 

So, you are building a good working relationship in the same direction.

Yes.

That's helpful to know. My last question, then, would be: we've talked about practice, and you've got emergent practice that, effectively, is the approach you're taking. When are you going to present the theory behind it? When are you going to present a documented plan as to what you're actually doing, so that we can see written down, 'This is the direction the Government is going in'?

I think that's a fair point. We're going to have a Cabinet discussion about this, I hope, in the coming months, and I will try and articulate, so there's a common understanding of what we mean by it. By its very nature, this is new—we're the first national Government to become a foundational economy Government. At the moment there's a movement of cities and regions across Europe—Barcelona, Manchester and so on—but this is the first time a Government has said at a national scale, 'We're going to adopt these principles.' And so we're iterating—we are developing this.

My concern with iteration is it can go round and round and round.

Or forward. 

Yes, okay. Thanks. 

Thank you, Chair. I've got some follow-up questions on the foundational economy as well for the Deputy Minister, and the first one is about the role of public procurement, which you alluded to just a minute ago. It has long been talked about as being central, really, to the foundational economy vision, and we know in Wales that we've already done some great things around public procurement, but that the capacity to do more is really phenomenal. I'm just wondering whether you can give us some more detail about the role that you expect public procurement to play in supporting local supply chains. Could you put some sort of meat on the bones there, really, for us?

Okay. It's important to say first of all that the foundational economy approach is not just about procurement. Procurement is one of the things we can tangibly point to where we can make a difference, but it needs to go beyond that. So, for example, the local wealth-building work that the Centre for Local Economic Strategies has been doing has got a number of different elements to it. Procurement is just one. 

So, procurement is one, but, as I mentioned earlier, there are three strands—there's the experimental, there's the spreading and scaling through the public services boards, and there are the grounded firms. On that second element—the spreading and scaling with the public services boards—I think we can start with procurement, because that's a tried and tested approach, but I hope it goes way beyond that. So, in terms of directly answering your question, there's been a review that, first of all, Mark Drakeford, when finance Minister, started into the National Procurement Service. Rebecca Evans is now taking that forward, again working with CLES. So, that's work that is live now. There are going to be some pilot projects in eight public services boards on procurement as a result of that work, and learning the lessons from Preston. But you're right—there are issues around capacity and skills and expertise, and getting that right is essential to making this agenda stick.

So, do you share my concerns that we need to invest in training up procurement specialists because we do have a shortage now, and it's been probably two, two-and-a-half years since the last Welsh Government training programme around that ended?

Yes, and this is something the First Minister himself takes a strong personal interest in, and this is a shared agenda across the Government that we're going to be pursuing. 

And are you confident that the work that you would like to be done around public procurement can be done within existing EU rules?

Well, that's the thing about Preston. Preston have done it within EU rules, and when I went to visit them earlier in the autumn, the deputy chief exec said that they were surprised how easy this was. But having that confidence to know how to use EU rules to add the social value, just as 10 years ago Wales led the way on the Can Do toolkit in housing, showing how these things could be done within existing procurement rules—there's an exercise in confidence building and skills building to allow the professionals to operate these rules in a creative way.

Okay. And going back to your point about the foundational economy, moving it forward, it's something that is experimental and not without risk. Now, I've every confidence in you as a Minister in taking forward something on an experimental basis and having the confidence to do that, but obviously you need buy-in from your officials as well, and we know that there's a tendency within the public sector towards risk aversion. How do you intend to try and overcome that?

This is not going to be easy, by any stretch of the imagination, because we're doing something different, and the whole point of the experimental fund is that we're saying explicitly that some of this isn't going to work. But not working is fine so long as you learn the lessons from it, because a failure in that sense is as instructive as a success, so long as you mainstream that learning. That's the bit where I think the whole system—and this is not unique to Wales—has been poor at. We've had good practice and bad practice living cheek by jowl, and the real trick for this public services board element of the foundational economy is how we would mainstream that learning and how we learn from the failure too.

Thank you. My final question is about how we can measure the success of any work in the foundational economy because we know it's very difficult to capture any successes there with conventional economic indicators like GVA, and perhaps for officials and people working on projects as well it frees up their way of thinking if other indicators are looked at, like the sustainable economic welfare, so—

Absolutely. And, of course, we've got the well-being indicators, but when we designed the EAP and put the foundational economy right at its heart, we also said that we wanted international challenge and appraisal. We've already opened up, as you are aware, discussion with the Organisation for Economic Co-operation and Development to get just that, but I'm keen to make sure that Wales is viewed as a pinnacle nation when it comes to driving inclusive growth and purposeful capital. And, for that reason, we'll also be looking at working with other international organisations, such as the World Economic Forum, which I've met with, to ensure that our approach to the foundational economy is indeed reaping rewards.

Joyce wanted to come in quickly.

Just one on procurement, going back to procurement delivering locally. We've had some examples—and Dawnus is the most recent example—of where it's the local firms that often pay the price of the bigger firms going through and trying to pick up the pieces. So, when we are looking at procurement and delivering jobs locally, how are we going to seriously prevent those big crashes that we've just recently gone through from impacting on those local economies and those people who we will be expecting and hoping to pick up the pieces afterwards and putting them perhaps at the forefront of our thinking when we're delivering major contracts?

Okay. Who wants to take that question?

Shall I take that question? First of all, with the EAP, we've got the economic contract in place and, within the economic contract, in order to secure funding through the economy futures fund, you have to be able to demonstrate that you have growth potential—either as a business or through the supply chain. So, we are already beginning the process, through this new way of working, of appraising the strength of the business and the strength of the supply chain that it's either part of or that it generates or contributes to. It's very difficult to stop a major business such as Dawnus from collapsing because of the scale and size of the business. However, what we can do and what we have proven to be very adept at is intervening to support the supply chain through our interventions, such as taskforce interventions—we've done that in a number of locations now in Wales—but also, through the calls to action, we are looking at how we can improve productivity and sustainable growth across businesses. That includes within the supply chains. We've also got the new regional approach to economic development, which is designed to ensure that our officials are directly in touch, communicating with as many businesses across the regions as possible, with account managers now being transferred to those new regional teams. So, our intelligence of what's going on within an industry is improving on a daily basis. Is there anything that you like to add at all, Marcella?

I think that pretty much picks it up, but nobody's mentioned the word 'Brexit' as well. Not that I want to talk about it now, but I think that's another theme that we've been looking at in the context of making companies, businesses, as resilient as possible and working with them closely to try and ward off any risks as a result of Brexit, which has now, I know, reduced a little bit, but hasn't gone away. So, we've still got a programme of work that we're doing around that as well, including looking at the supply chains and looking at the big companies. So, we are looking at it with a holistic approach.

Simon's just reminded me, actually, about the Transport for Wales framework. Simon, do you want to just talk about this, because it's really interesting?

So, the metro work, which is £750 million to £1 billion-worth of work that needs to be delivered—a small element of that will be delivered directly by the operations and delivery partner, KeolisAmey, but the majority of that is going to be delivered through what TfW call the STrIDe framework. I'm sorry I can't remember what 'STrIDe' stands for, but that's a framework that was specifically designed to bring local supply chains into the delivery of this huge investment that we've got in railway infrastructure. So, I guess that's an example of this kind of localisation of procurement in action.

Within the EAP as well, you'll find a section referring to major infrastructure schemes and how we intend to disaggregate some of the major contracts as well to ensure that we avert the risk of one business collapsing and then affecting many smaller businesses in the supply chain, but, equally, to ensure that smaller businesses can take full advantage of our major infrastructure investments.

Thank you. I appreciate that. Jack Sargeant.

Diolch, Chair. Don't worry, I'm going to give the Deputy Minister a break from the foundational economy for now. I'd like to focus on the single biggest challenge facing the globe at the moment, which impacts our future generations, and climate change. Obviously, I welcome the Government's declaring a climate change emergency and welcome the low-carbon plan, which is the first of its kind in Wales. Given the fact that was signed across the Cabinet by all Ministers and Deputy Ministers, could you just enlighten us a bit: what was your department's role in the development of the plan and how you worked across the Government's portfolios?

Yes, absolutely, and I'd agree with everything said about the climate emergency. I was very pleased to be part of the task and finish group that led the work on the development of the plan. There was also a programme board that involved senior officials from across my department, and I think our contribution to the plan is reflected in the fact that almost half of the 100 proposals and actions within the plan relate to my portfolio.

Given that almost half of us—and I think the next major area is Lesley Griffiths's, in energy and rural affairs—. What were the discussions like with other ministerial colleagues from different portfolios—finance and so on?

There were a number of us who were part of the task and finish group. I have to say that it was one of the most rewarding pieces of work I've undertaken on a cross-Government basis. And to produce a plan that—yes, it contains a huge number of proposals and actions, but it addresses, I think, all parts of Government delivery and activity.

Okay, thank you. Moving on, New Zealand yesterday announced a zero emissions Bill, the first of its kind, by 2050—they want to go zero emissions throughout the country by 2050. Within our plan, are the targets sufficiently ambitious for this, specifically in transport, given that, for Welsh Government, transport is the biggest emissions sector that we have hold of? And then, moving into active travel, maybe Lee could pick up on that in his—.

Sure. The targets contained within the plan for the first carbon budget are, of course, based on the UK Committee on Climate Change. We will need to look at the targets for future budgets, and I'm keen, not least because we've now declared a climate emergency, that we intensify the good story, or the good work that's already being undertaken. If we look at transport, we have made huge strides in the last couple of years in ensuring the transport network is one that does not contribute so much in terms of carbon, and, indeed, other emissions. We can look at the franchise agreement, which will see a 25 per cent reduction in carbon to specifically the metro, which will see 100 per cent of the electric sourced from renewable electric generation, and 50 per cent of that will come from within Wales. Added to that, we have the aim of ensuring that all buses and taxis are zero emission by 2028. So, we already have incredibly ambitious targets insofar as transport is concerned.

However, there are other very, very high-emitting areas of activity within the economy that we need to address, and that's why we developed EAP with decarbonisation right at the very heart. That's why it's reflected in the calls to action, in the economic contract. It will be reflected in future challenges as well.

But, in ensuring that we respond responsibly to the climate emergency, I think we need to consider additional and further interventions. It will, potentially, create some difficult questions that we all need to consider. I'll be bringing forward a number of statements in the coming weeks and months that are designed to test our appetite for shifting away from the very careful balance that the EAP has applied to our consideration of business support, and to instead look at whether we need to focus more on supporting decarbonisation. If we do, then it could lead to some difficult decisions. 

Given the fact that we have got these plans and proposals in place—zero emissions taxis by 2028, which I think we all welcome—do you think we need to put these targets into a national transport strategy, linking maybe with active travel, to actually—? You know, how are we going to meet these carbon reductions without a strategy?

You're absolutely right, and, actually, it's incredibly timely as well, because we have work taking place on the Welsh transport strategy at the moment—the first time it's going to be revised since 2008. And the declaration of a climate emergency right at this point couldn't have been more timely, because it will enable us to ensure that the Welsh transport strategy fully responds to that emergency.

If I can come in briefly on the active travel question that you mentioned, because I think one of the significant things of the final version of the low carbon plan is the commitment to modal shift, which will need to develop further in the Wales transport strategy—so, that's getting people out of cars and into more sustainable forms of transport, and active travel is part of that. I've been working with officials carefully over the last few months, looking at the recommendations that this committee made in its report on active travel, and how we can start to change the detail of some of the things that we're doing. We're making an announcement this afternoon of this year's funding on active travel, which is going to be significantly higher than was planned. And then I'm also looking at, as part of that, not just spending it on schemes for this year, but using that money to address the points this committee made around training, around improving consultation in the next round of integrated network maps, and on making sure that the design guidance is properly implemented. So, that report that this committee did has had an impact and we're working through the detail of that now.

Thank you. That brings me on to my final question, Chair. Within the low-carbon plan, the majority of policies and proposals don't have financial information or costings next to them. Now, given the urgency of the task and the challenge that we face, do the Ministers feel that the current budget is adequate to deal with the immediate action and do they think they can deliver it with the current budget as it is, to meet those reduction targets now?

Yes. I think it's really difficult to calculate the cost of meeting the targets, because so much of the work that is contained within the plan relates to actions that might not be deemed first and foremost decarbonisation. So, I'll take two examples, if I may: one is the £5 billion rail franchise that will deliver a 25 per cent reduction in carbon emissions, and the other house building, which will deliver significant benefits in terms of energy efficiency. It's very difficult to quantify how much of the spend on those two huge investments can actually be allocated towards the decarbonisation element.

Okay. Well, just one more, then, Chair. So, how will you, as Ministers, decide which of the proposals within the low-carbon plan will actually go into full policies?

Well, a number of the proposals will be, of course, subject to further discussion, scrutiny, consultation with stakeholders. They'll then be worked up, and that's the usual approach when we take forward proposals and turn them into actions.

Thank you, Chair. That's—.

Thank you, Jack. In terms of the 2028 target that you mentioned, how realistic is that?

I think it is realistic. It's definitely challenging, there's no doubt about that, and two years ago I perhaps would've been more pessimistic than I am today, but there have been some recent successes in terms of drawing down resource that would perhaps suggest that 2028 is a very realistic—

It's eight and a half years away.

It's eight and a half years away, and, in the last year alone, we've seen almost £10 million drawn down by bus companies through the UK ultra-low emissions fund that will see vehicles coming to our roads that I want to see right across Wales. But there is no doubt that we are going to have to work very closely with the sector and with UK Government to ensure that we meet that target. There's also a very important role here for the Development Bank of Wales and I've asked them to look at how they can support the transition to zero emitting buses and taxis and private hire vehicles as well. Simon.

I think this whole area underlines some of the need for some of the actions that are in the White Paper on bus and taxi reform. The unregulated approach at the moment makes it quite difficult for us to engage with bus companies about some of these things, but when you move into a world where you're potentially creating quality partnerships, or franchising, or contracted relationships, then it's actually a lot easier to be able to say, 'I'm going to buy a service off you, but in return you've got to deliver that in a particular way with a particular suite of vehicles'. We don't have powers over vehicle standards in Wales, so we have to find more creative ways of being able to influence those providers to be able to do these things.  

I know we've got some questions on the White Paper later, but, in terms of reaching that target, what financial resource needs to go in there, into that, to meet that target from Government? 

Well, we'll need to consider that as we examine what support the development bank is able to allocate, and as we consider what might be available from UK Government. The UK Government has already offered quite significant funding. We haven't been that successful in Wales in drawing that down until recently. I would—

How much funding is that? 

Well, £9.4 million we've—that three companies have secured in the last year. 

But on top of that, in the taxi space, for instance, the UK Government are offering £7,500 towards the cost of an electric taxi. That offer's been in place for a while, but Wales hasn't really taken that—you know, the Welsh taxi fleet hasn't really taken that offer up. We've got a session next week about electric vehicle charging points. I think there's a circular conversation to be had there as well.   

I'd rather utilise UK Government resource than allocate resource from the Welsh Treasury for this. 

Yes, sure. And how do you prioritise that resource? 

From the Welsh Treasury or from UK? 

From the UK pot. 

Well, as Simon said, it's already there, available. It's not for us to determine how that money is spent once the UK Government has a funding mechanism in place; it's already there. We've not taken it up—when I say 'we', taxi and private hire companies in Wales have not taken full advantage of it to date. So, actually, our role, I think, is in making sure that more businesses are encouraged to utilise that important fund. 

Yes. But, as it stands now, that 2028 target, you think that that will be met. 

I think it's achievable, provided—I'll put a caveat on this—

Will it be met or whether it is achievable? 

—provided the reforms that are contained within the White Paper are taken forward. 

Okay, and, if the reforms aren't taken forward, you think that's—

It will be far more challenging. 

But if they are taken forward, then they're achievable. 

I'm confident, yes. 

And they'll be met.

Yes.

In your view. Yes. Vikki Howells. 

Thank you, Chair. When we're looking at implementing really strong policies around active travel and getting our public transport solutions right, having the correct data at hand in order to map that out is absolutely vital. 

Absolutely. You're right. 

Do you think that there are gaps in the data that we have in that regard, and how are you looking at improving that situation? 

Well, TfW have set up a data analytics unit, and they're currently in the process of purchasing mobile phone data, which will be extremely useful in assessing how, when, where, why people travel. That data will also be made available to local authorities, and I would anticipate as well, provided they are formed, to joint transport authorities so that planning, right down to a local level, can utilise the very best intelligence.    

Can I just—? Briefly, on the active travel point, there are gaps in the active travel information, and I've asked the local authorities to set up a working group on a monitoring and evaluation framework because, for example, when paths are built now there's no requirement that the local authorities to install user counters, for example. So, we're not really building up the rich baseline information we need to measure growth in usage. So, that's a piece of work that we're doing now. 

And, of course, there are about 100 million passenger journeys on our bus network every year. Contained within the White Paper is the proposal for bus companies to share their data with us as well. 

I'm quite relieved to hear your answer there about mobile phone data, Minister, because I wrote to you just recently about the situation in Hirwaun, which, as you know, is on the metro map, and it is not being scaled for being put forward until the next stage of the metro now, and there's a possibility, with over 200 stations—. In the reply that I had to that letter, there was a strong emphasis on collecting local data to look at where the stations would be viable in different locations and, specifically, there was a reference there to looking at people's most local station that they would travel to. But I would say to you on that—and I'm sure that Hirwaun can't just be the only example of this—there are many people who travel to Aberdare actually from Glynneath, and from areas that are closer to Neath station, but they do so because they find it easier to travel down that line, and because that line stops at Cardiff Queen Street, whereas the Neath train doesn't. So, I would hope that you would look at a localised example such as that, and maybe the mobile phone data could assist you to get a truer picture then.

That should give us that sort of picture. I've got similar scenarios in my constituency as well, where people will find it easier to travel from a certain station because it's free parking, for example, or because they know there are going to be parking spaces. It's a very similar picture across Wales.

So part of what Transport for Wales have been tasked with is creating transport models for all of Wales. We do have a transport model for south-east Wales. And one of the base components of these transport models is understanding, in the technical jargon, origin destinations—so, where do people start from, and where do they end up, where do they want to go. So, that would look at the kind of issue that you're talking about there, and plot the routes that people are actually taking, validating that against the mobile phone data, to understand, if they want to get from there to there, how are they doing that at the moment, are there other ways of doing that that could be more effective, using different modes potentially. So the modelling gives us that, and that's why this investment in the analytical unit in Transport for Wales is so important, to be able to give us that level of understanding, all across Wales, to be able to plan interventions in the best possible way, based on evidence.

That's very useful. Thank you.

Joyce Watson.

I'm going to ask about your position on the Williams rail review, and your—I'm going to quote you now—having said that the

'imperfect devolution settlement is the root of many of the problems with our railway.'

So, what are the key issues with that current settlement?

Well, the settlement just doesn't work—we've got to be clear about that. And we know that because the funding settlement that we've seen in recent years has been so poor. If you look at where we have delivered through devolution, as far as rail services are concerned, I think you'll agree that we've done a pretty good job. If you look at the new rail franchise, through devolving responsibility for procuring that, we're going to see a £5 billion investment, £800 million on rolling stock, every train replaced. We're going to see £200 million spent on stations, we're going to have a far more transparent, fairer fare regime developed, a 25 per cent reduction in carbon dioxide emissions, more community transport partnerships. I think, when you look at what we've been able to do through devolution to date, you'll agree that, actually, we've responded better to passenger needs, to community needs. But the settlement doesn't work because we don't have control over the infrastructure, and we don't have any sort of fair funding system in place either for investment in rail infrastructure. So, I've been very clear that we believe that devolution of infrastructure, together with a fair settlement, is desirable for Wales. And I am very pleased that the Williams review has begun. I've already given evidence, we've already had a debate in the Chamber, and there was a majority in favour of the position that the Government outlined. And I think there's potentially a role here for this committee in supporting our position on devolution of responsibility for the infrastructure.

Can I just add a few more bits of specifics on the imperfection of the devolution settlement, which the Minister set out in his statement? So, we've got control over one of the four franchises that operate in Wales—the franchise that requires the greatest amount of subsidy. The franchises that actually take the most money out of Wales, we have no control over, and we get no financial benefit from them. So, if you like, when the rail privatisation was set up, the DfT controlled the flows of funding, so they could offset losses in one franchise by profits in another. That link has been broken now. We don't get the benefits of the premium franchise, like GWR, to be able to plough those profits back into the subsidised franchise of Wales and borders. Separately, we've got poor connectivity from Wales to the rest of the UK. Cardiff is the poorest connected of the UK's 12 core cities to any of its peers, and that's as a result of us not having any influence about the other franchises that operate in Wales. The Minister talked about the fact that when we make investments in Wales, they're successful. The Ebbw vale line, when it was reopened by the Government—the Welsh Government, not the UK Government—was 450 per cent more successful than was forecast by the DfT.

In terms of patronage—450 per cent more people used that than was predicted by the DfT.

So, the DfT's view of the world is predicated on a series of financial models that it takes, and those models tend to skew investment towards the south-east of England, because there’s a greater population, there's greater wealth, and the railways tend to be in a better condition, so that incremental improvements to move the railway forward cost less there because they’ve perhaps already been electrified, whereas we don’t have those benefits, so the costs here are always greater as well. So, we tend to lose out when there’s a discussion in the round about whether we should invest in Clapham Junction station or Cardiff Central station. The money tends to go where the greater population is. And so we’ve systematically lost out on improvement spend.

It has to be said that the Network Rail Wales route has done pretty well in terms of achieving a financial settlement for what they call operation, maintenance and renewal. So, the five-year settlement that it’s just received is pretty generous, actually, this year. But, arguably, the reason it’s generous is that there’s been such underfunding in improvement in that route over recent years. So, there are two different types of money that go into Network Rail. There is improvement money, of which we’ve historically had a pretty low slice of the cake on, and then there’s maintenance and renewals money, which at the moment Wales is doing okay on. But, I think that’s a function of doing poorly on the improvement work.

So, what you’re really saying is this: where we get the biggest return, the biggest profit, which will be from Cardiff and probably from north Wales going into England, the money is also going to England. Not only are the passengers going to England, but the money is going to England, even though it’s actually spent in Wales.

That’s right. So, that’s why the Minister has repeatedly called for Wales to have a say over the other three franchises that operate in Wales. At the moment, the Secretary of State, quite rightly, has a say over the Wales and borders franchise where that operates in England. So, where services on Wales and borders operate in England, the Secretary of State has a say on that, and I think the Minister has been quite clear that he thinks that’s the right thing to happen. That arrangement has not been reciprocated. So, we have no say on the Great Western, the CrossCountry, or the West Coast main line franchises when they operate in Wales.

So, you’ve had words with the Secretary of state for Wales. Is he making the case—because that’s obviously his role, to make the case—as to have some of that money that’s travelling on the train, literally, to England coming back to Wales?

I think, in fairness, that’s probably a question for the Secretary of State for Wales. But what I would say is that I’m very pleased that the Secretary of State for Transport commissioned this review, because I think there’s also the potential for the review recommendations to contribute to the UK industrial strategy's aspiration of ironing out regional inequality and rebalancing the UK economy. And it will do that, I should imagine, by arguing for a different funding formula that would see investment returned to the regions, to the nations of the UK, away from the concentrated south-east.

So, in terms of details that you’re hoping to achieve, that would be one of the achievements that you would hope for. Are there any others that you would like to share with us this morning?

So, I think the devolution of the infrastructure with a fair funding settlement is right up there. A say on the franchises is right up there. And I think the other thing, which looks a little bit less important, but I think is just as crucial, is a say for Wales in the way the regulator operates. So, this is a heavily regulated industry. The regulator and the board of the regulator are all appointed by the Secretary of State for Transport. In a devolved context, that doesn’t seem to make any sense, especially when, in other domains, like Ofcom for instance, Wales does have a say in appointing directors to that regulator. So, there seems to be an inconsistency there.

Okay. Keith Williams has published several evidence papers and made a number of speeches since that review began. Do you agree with any of the messages that have emerged so far?

I think it would be difficult to disagree with anything that has been said so far. Largely, though, what has been said has reflected the evidence that's been provided and the concerns that have been expressed. The review team are yet to reach a position on many of the key issues that have been raised to date. We've been very clear on what we would wish to see the review team conclude. I think it's also important for the review team to consider the social benefits of a fairer devolved rail settlement, because, as Simon mentioned, the Ebbw Vale line—the social benefits of reintroducing that service are enormous, and were not anticipated by the DfT. So, I think it would be very helpful if the review team would just take a look at the wider social benefits, the regeneration opportunities that can be had through rail infrastructure and investment. And we would certainly offer up the Ebbw Vale line and we would offer up the development of the south-east Wales metro as examples of how rail investment can lead to whole-scale regeneration of entire communities.  

Thank you.

David Rowlands.

Carrying on the theme of railways, as the Minister will know, we've taken a great deal of interest in the rail franchise and the network itself. Obviously, the competitive dialogue seems to work very well. It now comes to down to the implementation of what was under the commitments there. So, can you update us on progress in rolling out the contractual commitments for the new franchise? And are there any areas where you're concerned that deadlines may be missed, or changes needed to the commitments?

Well, there were 3,000 commitments contained in the agreement, and significant progress has been made on a large number of commitments. I can perhaps, if you wish, provide a very detailed assessment of the commitments that have been met. They include things like the introduction of new 'passenger time lost' arrangements, deep cleaning of stations. They include the introduction already of delay repay based on 15-minute delays to services. I mentioned before that community rail partnerships have benefited already as well. So, the commitments on that score have been met. I can certainly provide you with extensive detail, and I'll ask TfW to bring that forward. 

I'm sure we'd be happy to have those, but, generally speaking, are you happy that progress is being made?

Yes, I am, and I'd also say that, based on performance figures, I'm very pleased that TfW have been, on a consistent basis, outperforming the previous service operator.

Okay. A little bit more specifically, can we talk about updating rolling stock? We know there have been difficulties with regard to cascaded stock, but could you tell us, first of all, are they coming forward, Simon? And, perhaps, are there orders going in? We know that there's quite a large time lapse between orders going in and the delivery of the new rolling stock. Are there orders going in for new rolling stock as well as these cascaded—?

So, all the orders have been placed for the new rolling stock. So, there's a time to build all of these things—three or so years it takes to build them. But of course, we've also got to build the infrastructure for a lot of these, so we've got to electrify the lines for a lot of these trains to actually be of use. So, we need to build them and electrify the lines.

TfW are also on the case of trying to find measures to help us in the interim, because a whole load of the fleet will not be compliant with the persons of restricted mobility regulations, which come in to force at the end of this year. So, a whole lot of that fleet needs to be taken out of service and a replacement fleet brought in on a temporary basis.

So, we will see over the coming months a range of different vehicles arriving, which will be there for a temporary period, to allow us to be able to add capacity, deal with the PRM regulations and get us to the point where the new rolling stock arrives.

So, will they be under a leased arrangement, is it, so that they can be handed back, basically?

That's right, yes. Some of them are under a short-term arrangement and others will be around for longer. The Minister went up to see the Vivarail team recently—those trains will be coming in in pretty short order, and they will be around for the duration of the franchise. Others will come in and they'll disappear in 2022-23.

I should just say as well that the first new major service introduced as part of the franchise agreement will begin on 20 May. That's the service between Wrexham and Liverpool, using the Halton curve.

Okay, fine. Can we look at the central Valleys lines and the delivery of modernisation on those lines? Has the design work begun on that?

Yes, it has, and we're basing all of the work that we're undertaking at the moment on the transfer of the asset on 20 September. I can certainly ask Simon to give an update on the discussions that have taken place between officials. I'm pleased that the Secretary of State for Transport and the UK Government has given assurance that sufficient officials are available to ensure that that transfer takes place. Simon.

We're in a period of intensive discussions with a whole range of people about this asset transfer at the moment: so, Network Rail, the regulator, the Office of Rail and Road, the Department for Transport, the UK Treasury. All of those parties are involved in discussions with us. A team of officials from Welsh Government and from Transport for Wales were in London only yesterday talking with senior officials in the DfT and the Treasury about this, and with Network Rail. There's a lot to do in a short space of time, so although 20 September sounds like a long time away, actually we need to get this deal done in the next few weeks because of all of the approvals processes. So, at the moment, the officials in the DfT are telling us that we're making good progress and that they feel we're in the right place. We're working with them, we're holding them to account for delivering all the things that we need to get this asset transferred. I think the Minister's keen to make a statement as soon as we know where we are with this in the next few weeks, to tell committee and others how we've progressed with that asset transfer.

So, there's been a great deal of difficulty with the financial arrangements—

It's extremely complicated.

—as to when you take over that asset, what moneys will be available to you to keep that asset or to upgrade it.

That's the basis of the discussions that we're having at the moment: how much of the Network Rail Wales route budget will be allocated to the core Valleys lines—so, how much of that will be carved out and given to us to maintain the core Valleys lines.

Okay, and the last question—

Meanwhile, preliminary designs, as I think Simon has said, have begun. They began in February.

Okay. Last question: when are we likely to see electrification of that? When will that start?

So, the works will start as soon as the asset is transferred. I was talking, just yesterday, with one of the senior members of the team that's doing the design work. As soon as the asset is transferred, our guys can get out on site and start drilling trial pits and all the rest of it—all the kind of stuff that we really, really need to be able to do to complete the design. I think, within the next 12 or 18 months we'll start seeing structures appearing on the core Valleys lines.

Okay. We had an interesting visit to the college at Taff's Well, where they've got a specific and dedicated section there. They'll be heavily involved in this, I would have hoped.

The training facility. Yes.

Okay. Mark Reckless.

I heard an emphasis on Cardiff being the worst connected of all the 12 larger cities in the UK. I mean, surely, with the electrification and when we get a new timetable to benefit from that, that will be good news for Cardiff connectivity, and don't we need to be marketing that from an inward investment viewpoint?

It will be better, but it still won't be as good as we would wish it to be, and we've talked in the past about how we would wish to have some control over services, for example, to Bristol—more services to Bristol to enhance connectivity between the two major cities of the south-east of Wales and the south-west of England. I think you're right though—any improvements to connectivity need to be celebrated and promoted for the purpose of attracting investment and making sure that it's a more desirable place in which to live.

Can I just add to that, if I may? So, as the Minister said, the improvement is good, but, in fact, the electrification of the main line from London to south Wales—it's a good thing—once we're running fully electric trains, the journey times will reduce, but they will only reduce to the level they were in 1977. All we're doing is getting the—. The improvement will bring us back to where we were in 1977. Since then, journey times have gradually got longer and longer and longer. So, there's significant investment required, and the Minister's published a case for investment for the main line between Paddington and Cardiff. Electrification is part of it, but it doesn't deal with the speed restrictions that we have. There is no part of the railway in Wales where trains can run at 125 mph There are speed restrictions from the tunnel through. I think 90 mph is the fastest a train can run in Wales. And that's a result of lack of investment in the track and improving things like the radius of the bends, removing level crossings, a whole range of things that need to take place to improve journey times. And that's why it takes an hour to go the 40 miles from Swansea to Cardiff, and then a further hour to go the 40 or so miles from Cardiff to Bristol. So, we're saying that that railway needs significant investment in order to be able to improve it.

And the same applies to the north Wales main line as well, in fact. There are signals—. All of the signals on the north Wales main line west of Llandudno are mechanically operated, and that's after a significant investment in signal improvement.

And how long has it taken for those strategic outline business cases to be produced after electrification to Swansea was canned? How many years?

So, it's nearly two years to get—

Two years.

So, that means—. We haven't had the strategic outline cases, which is the first stage of a seven-stage investment process that the Department for Transport make us go through. So, at the moment, it doesn't feel like we've got grounds for optimism that any of that work is going to be taken forward. 

Just on the core cities point that you made, that's about interconnectivity between the 12 core cities. So, I think you can get a direct train from Cardiff to places like Bristol and Birmingham and Nottingham, but, in terms of the other 12 core cities, you can actually interconnect directly from many more of them without having to change trains. So, Cardiff is the worst in terms of peer-to-peer connectivity. 

Mark, can I just say—. Very quickly, Hefin, you want to come in on rail—very quickly, if you can. 

Just on the connectivity and some of the promises made in February and March about the Valleys lines, and particularly the Rhymney to Cardiff line and improvements there, can you just update us on whether we're going to see those extra trains and progress being made on that?

Just a very [Inaudible.]

So, yes, there will be rolling stock that will be appearing on those lines that we haven't had previously. And some of that stuff is out in the public domain. It would be worth getting TfW to write to you directly to set out exactly what you can expect there. 

Okay. 

Can I ask about the White Paper, because it was one element of a wider process of reform, particularly in relation to delivery of bus service? What else are you doing in this area?

We are proposing a number of reforms that don't require legislation, and we're also introducing pilot projects that could inform the development of future service provision. I announced very recently four pilots concerning demand-responsive transport. It's something that we've seen in some other parts of the UK—very innovative methods of providing bus services to people on a demand-responsive basis. We're also looking at proposals for reforming the bus network and improvements to bus routes so that we can reduce congestion and make bus travel more desirable, particularly for commuters. And we're looking at how we can resolve the issue—it's an unintended consequence of the concessionary fare scheme—. Actually, I'll go right back to the start of it. One of the problems that we've encountered through the implementation of the concessionary fare scheme is that it's led to bus services being skewed towards those who have the concessionary passes. And that often means more stops and services that are not convenient for fare-paying passengers, particularly commuters. So, we need to examine how we can ensure that the interests of commuters are better served, whilst also ensuring that the concessionary provision is maintained as best as possible. 

Now, some of this does not require legislation, but in order to maximise the benefits of bus travel, we need to introduce legislation and introduce reforms as well in parallel. 

Sorry, just to add, there's another third part to this, which is about next generation ticketing and the back office, so that we end up with a single-ticketing platform for both bus and rail. So, whatever bus company you're using, whichever one of the 80-odd bus companies that we have operating in Wales, they will be able to accept that single-ticketing solution, the same as you can on the railway, which will make it much more convenient. But also—

This is something you've urged us to do over many, many years, I think.

Yes, and then there's the provision of consistent information, as was touched on earlier on, from buses to allow journey planning and timetabling to be more consistent.

Do you plan any change to the bus service registration procedures?

That's not—. Some of that will happen in a de facto way. So, if we move into a franchising world, for example, the bus registration stuff begins to fall away, because, actually, the buses become contracted services, rather than regulated services.

And the concessionary fares proposal to increase the age limit—what's your analysis in terms of how much that will lead to those journeys just not happening as opposed to what proportion of them will become fare-paying journeys?

Simon.

So, the operators have been very keen to tell us over the years that the concessionary fares scheme is not subsidy; it's a substitution of revenue forgone. So, in a sense, the operators can't have it both ways—they can't say that they're going to lose their money and that's going to be problematic. I think, across of all of this lot, though, we need to think about the entire reform agenda. So, the measures that the Minister was just talking about to make the bus network more attractive are all about inducing more passengers to travel. Whilst there might be some cohorts who might be less inclined, because they don't get free travel, actually, if the buses are easier to use because the ticketing's easier and they're faster than travelling by the alternatives, then, actually, that will induce more travel anyway.

It's just we've heard from some partners that enhanced quality partnerships and the other proposals you have are all very well in theory, but, actually, will have little impact given that the key constraint they see is funding.

I'll be considering this over the summer, as we also consider the responses to the consultation, and I think others—local authorities—have talked about the need to consider the funding pressures as well. I think that's a very fair point.

On taxis/private hire vehicles, Minister, do you consider it a problem to have taxis/private hire vehicles picking up across local authority boundaries?

So, this has been perhaps the single biggest concern that been raised during the consultation insofar as taxis and private hire vehicles are concerned. A large number of responses have been received. We'll be considering them very carefully. There were two options that were proposed within the White Paper: option 1, which would see the establishment of a national JTA that would be responsible for the licensing regime; another would see local authorities retain responsibility for that. Broadly speaking, the public have favoured option 1. Local authorities and the operators themselves have supported option 2. We'll be giving very careful consideration to those responses over the coming months.

I would expect quite a high response rate from taxi and private hire vehicle drivers, whose livelihood depends on the service and will prefer more money and more fares to less, but I wonder whether the consumer may benefit from having these—

And that's the tension.

—across local authority boundaries, and you're right to be seeing this as a problem, because the people who've responded to your consultation are disproportionately those providing the service rather than receiving it.

Well, we've had a good number of responses from service users as well, but there's also the question of the quality of service that is provided and the consistency of the application of a licensing regime. What service users tell us is that they wish to have the highest quality provision right across all local authorities on a consistent basis, and particularly with regard to disabled users or people with limited mobility. They want to make sure that, whether they're in Cardiff or Newport, they can expect the same provision and the same treatment.

And some local authorities have said to us that they think it's better that they have the control rather than having the national JTA, and the sensible reason they give is because they need that in order to cap numbers. Why is that in the interests of consumers?

Simon.

Well, I think that's part of the tension that the Minister has just talked about—the operators want to cap numbers because they want to be able to make a living out of this. The more suppliers you have, the less opportunity they feel they have to make a living wage, because supply outstrips demand. But then there's the user perspective, which looks at the opposite direction of that, and I think there's a real problem there for us in terms of trying to navigate a path through this. The other bit is, potentially, if you completely open this out and don't restrict the numbers, it might be that, actually, people decide they're not going to work in a particular area—they're going to go somewhere else. So, when we're asked to provide services for more vulnerable people, when the state needs to be able to call on private-hire operators, those services may not be available. So, I think there are quite a lot of different elements to this that need to be balanced up to be able to provide a path through this.

I'd be interested to know your views on this, actually. I know the consultation has already ended, but if the committee does have a collective position on it, it would be very helpful. 

We will do. We met with stakeholders last week, so we'll [Inaudible.]

Excellent. Okay.

Very quickly, Chair. You mentioned responsive bus services, but we've got a sort of template out there, haven't we, with community buses? Are you going to involve those?

Yes, they are certainly part of our consideration. We don't want to duplicate, we don't want to undermine any existing community transport services, but we do see demand-responsive transport as potentially complementing the services that are already being provided, and that's why we've looked very carefully on a spatial basis at where we introduce the pilots.

Joyce, we're out of time, but very quickly.

Coming back to cross-border taxi services, one of the big issues—and I'm going to be really brief here—is if we don't do something about the situation that's happening in the cities, the real fear is that the Uber-type system will dominate and we won't have any control over working conditions of those drivers, as well as flooding the market.

Last word from the Minister.

Yes, I'd agree—there is a really big threat to the industry there. Obviously, it adds to the tension that we've already identified between passenger interests and the interests of the provider. We also need to consider the potential of the demand-responsive transport network concerning bus services as well, because there will, of course, potentially be, in some parts of Wales, consequences of introducing them, if they are introduced on a permanent basis, on private hire and taxi services.

Absolutely. Thank you.

Right, thank you, Minister, Deputy Minister and officials for your time this morning. Deputy Minister, you're back next week for two sessions, so we've got Minister overload next week as well. Right, thank you very much. We'll take a short break and we'll be back at 10:50.

Welcome back to the Economy, Infrastructure and Skills Committee. I move to item 4 this morning. Our last session for today is in regards to our inquiry on the role of the regional skills partnerships and we're very keen to get the role and views from small business. I'd like to welcome Joshua Miles to our committee this morning, who is the policy manager for the Federation of Small Businesses. The first set of questions this morning comes from Hefin David. 

Hi. In your ‘A Skilful Wales’ report, you say that, where SMEs take up any opportunities for training, it's through the use of private training companies and I imagine that's—if at all—taking up the opportunity for private training. Can you just take us through that argument?

So, one of the reasons we wanted to do the 'A Skilful Wales' report was because there's quite a lot of change in the landscape at the moment, with RSPs being created, the talk around PCET and everything else. So, we felt we needed to get a robust understanding of what the picture looked like for SMEs, how they went about accessing training. One of the questions we asked was the one you've drawn out around, 'Who do you go to to solve your skills problems?' It was worded in that kind of way. I was quite surprised to see that private training providers came out top on that. Most of the conversation we have is around FE, HE, work-based learning, and what you saw was the downward slope, really, from private training providers, work-based learning, FE, then HE having the lowest direct involvement. I think there's probably two reasons for that. The first one is, if you think about the way public funding for education works, if you're in work-based learning, you have a direct link to an employer because you're placing an apprentice with an employer. So, that's quite responsive to employer demand; you have to have an employer lined up to be able to deliver that programme. If you're delivering skills at an FE college, you're delivering to individuals who at some point will enter the labour market. You're not delivering it to individuals who are employed, necessarily, and I think that abstraction gets a little bit further when you get to HE.

So, I think, on one level, what that response shows is that there's a natural higher level of engagement from companies directly to work-based learning and those kinds of providers. Now, with private training specifically, I think it's probably project-related. So, you might get a new bit of machinery in, you might open a new area of your business, and, usually, you'll go to the kind of people who would have provided the machines, provided the training, or you'll go to much more bespoke, niche elements of training that tend to be from the private sector, not from colleges.

And is that also an issue of convenience as well, the fact that they're both just simply there?

Yes. It's bespoke then, isn't it? I mean, it's going to cost you more to do it, so you're going to pay for it yourself. It's a private transaction there, isn't it? So, Government isn't involved. But that would be my hunch on why it looks like that.

So, with that in mind, regional skills partnerships focus on FE and apprenticeships, therefore, they're missing a big opportunity.

So, again, it comes back to the question of the role of RSPs, but, for me, the first thing we wanted to say to them as part of this conversation was, 'Think of it from an SME perspective. Most of their training isn't going to be in these formal areas. So, if you really want to share training and skills with companies in a particular region, you need to look at that much broader picture', and that's not what they're tasked to do at the moment.

No. And that isn't likely to happen at this point in time at all.

I don't think so, no.

So, you'd like to see us as a committee suggest that it should?

I think so. I think—again, we're really discussing the role of RSPs here, but I think we've got an economic action plan that sets economic regions as a priority. For me, it makes sense that you would have skills and employment boards that fit those regions, that look at the range of things in the round and come at it from an economic development perspective: a much longer term horizon, looking at the trends, trying to share provision where it's there, trying to shape supply, and trying to shape the demand as well, to some extent.

Yes. And, with some of those issues in mind, you talked in your submission to the committee about—and I'm trying to read my writing because I made some notes on your consultation—you spoke about poor skills infrastructure, you talked about the lack of resourcing, deficient employer engagement, and the fact that regions were pitched against sectors. Can you just tell us more about how SMEs are impacting on that?

So, I think an individual SME won't see the impact immediately, because there's a degree of abstraction between what the RSP does and the nature of the provision they're accessing.

Which in itself isn't a good thing.

It isn't a good thing, no, and that's part of the problem we've identified. If you had more engagement, then perhaps that link would be closer. But in the long term it's quite significant, because, if RSPs are saying, 'This is what provision looks like,' that provision is then going to be the bits, or—. It's going to lead to the types of individuals that are available in the labour market for SMEs to access. So, we've got that indirect impact that most SMEs won't be aware of, but I think it will have an impact in the long run.

So, the evidence is there; why isn't this scope being considered?

I'm not sure. That's a good question to put to Welsh Government, I suppose. There are quite a few things emerging on the regional economic development footprint. I don't think we've clarified the link between the EAP's articulation of regional economic development, the RSPs and the city deals. There's still an open question there as to how this whole regional picture looks, and I think if we can pull a lot of those things together we could have something much better articulated over a longer term, and that's where I'd like to see this go.

Okay.

Okay. David Rowlands.

Yes. Can we just look at the current Government policy on the skills? They've made it clear that they want a concentration on higher level skills. Do you think that that benefits SMEs or—?

So, I think having an aspiration for higher level skills is a good thing. We obviously want to see higher skill levels in the Welsh economy. It leads to greater productivity and greater wages and lots of other benefits. I think the difficulty is, having an aspiration alone is probably not enough to get us there. What our evidence showed in the 'A Skilful Wales' report was that, actually, a lot of the pinchpoints are emerging at level 2, level 3—technical, trade occupations, administrative and clerical, where lots of businesses are finding it quite hard to recruit there. So, the way I would phrase it is more around progression, because I think there's a case that individuals will want to progress on, out of businesses, potentially, into other businesses and up the skills ladder. That's something we should be supporting for those reasons, but we need the entry points and we need to make sure we're providing the provision at level 2 so that companies aren't left unable to fill positions, I think. The other point with this is there is a question around—. The aspiration for higher level skills focuses on the nature of supply. What we haven't done is foster an aspiration for higher level skills on the demand side. So, how do we get SMEs to start thinking about doing things that require higher level skills? That's really a much bigger conversation about business support and the growth of SMEs in terms of productivity and other things. But, without that side of it, we're not going to create the demand that the supply will then match, if that makes sense.

Yes. So, it has to be progression within an employment situation, is that right, and raising aspiration to have that—

I think so, yes.

—those levels. But, obviously—. The Government are actually talking about withdrawing level 2 provision. Is that going to impact on SMEs?

I think it could do. My understanding of it is that it's going to be withdrawn in certain areas, so not wholesale. I think what I'd really like to see is the RSPs and Welsh Government take a look at this, see where the impact is. We've all heard of areas of level 2 provision that perhaps isn't fit for purpose, that is in areas of the economy that perhaps don't need that kind of provision. That absolutely should be taken out. But where we have these pinchpoints around skilled trade occupations and other areas, I think we should make sure that provision remains.

The retail consortium decided not to be with us this morning, but I think one of their concerns was this business of not concentrating on level 2 or taking it away, as such.

So, I think there's a legitimate question around who pays for what and at what point. One of the things we've seen happen in England, for example, is apprenticeships have been watered down in a lot of areas, and, without pointing fingers at large supermarkets, some of the scare stories you've heard there are of their induction training being reclassed as an apprenticeship so it accesses public funding. Now, we don't want that happening in Wales. We want to keep the quality of the offer, and I think Welsh Government have been pretty robust in this area, in terms of trying to maintain the nature of apprenticeships, the nature of the brand and making sure we don't water it down through its reforms. So, there is a balance to be had here about where appropriate cost lies, but I think, for certain things, for elementary occupations, we're going to need those level 2 entry points.

Regional skills partnerships make recommendations on priority sectors in their regions. With SMEs making up such a large proportion of Welsh businesses, is this approach of sector prioritisation effective or would another approach be more beneficial?

I think we've been quite sceptical of priority sectors in the past with the economic renewal programme as was, because, quite often, it masks what's going on in areas of the economy that are still relevant. I think the EAP has been a really positive shift in this because it started to be a little bit more sector-agnostic and look at issues across the board. Particularly with foundation economy sectors, so things like health and social care—you know, you're going to have to train for those things; they're not going to go away, whether they're priority sectors or not, so they should be included. I think what RSPs do need to do is have a sectoral focus to some extent, because they're going to need that granularity of data if it's going to properly develop provision. But, for me, it's one of changing the language away from priority sectors towards having a much broader detailed sectoral look at things.

Joyce Watson.

Following on from that quite neatly, are there within the Welsh Government apprenticeship programmes gaps and unmet demand that we need to be focusing on?

So, 'A Skilful Wales'—. We are a business organisation representing 10,000 members, but, on this particular survey, we had about 500 responses, which is enough to start breaking down a regional kind of picture, but I was acutely aware that what we can't provide is our own labour market intelligence in this because we don't have the resources and we don't have the data. So, I couldn't tell you where specific gaps are. That's what I'd like to see the RSPs do a lot more of, I think. So, I don't have that analysis that I can give to you that would say, 'Here's where it's going wrong.' That said, I think there is a much bigger appetite for work-based learning among employers than is currently being met. We quite regularly, from our survey data, when we ask about the number of people taking on apprenticeships, see the numbers going up and see a big appetite there. We've always tried to explore the barriers. Some of those have been cost-related in the past, and there are other reasons, but I think on the whole it's quite safe to say that work-based learning is an area that could be expanded and there would be demand for it.

Okay. I think the other one's answered.

Josh, could I ask you about, in terms of city deals and—. They're very much—city deals and larger business are very much focused on reporting and being able to feed into the RSPs, but small businesses don't get that opportunity. Is that something that you would agree with? Is that an issue, if you could you talk to that point?

I think it is an issue, yes. I think there are two things there: city deals, first of all—I think there are varying degrees of integration in terms of the city deals and the RSPs. If you look at south-east Wales, they've progressed their graduate employability scheme quite significantly, because they've got funding from the city deal to do that. So, I think, when funding becomes available, you can see that the RSPs have an appetite to go into new areas, and we've worked quite closely with them on that. In other areas, city deal funding is less apparent. So, whilst it's a key consideration, they're not quite plugged in in the same way. Again, it goes back to the point in response to Hefin's question earlier: I think we need a much tighter alignment of what regional economic development looks like. We have quite a lot of scattered things going on at the moment. The governance is not quite tied down, and it would be nice to pull those things together a bit firmer so that we know who's doing what, where and why.

On that issue around larger employers, I think this is really important. Large employers—Tata, Airbus, those kinds of organisations—have the capacity to send an individual to an RSP to sit on a committee meeting and to articulate what they need. They quite often have direct links to the colleges. They have sufficient numbers where they can pitch in for funding from Welsh Government as well, additional funding, and from the college for that kind of support. They're quite well served, I think. They haven't got a massive issue. Where it starts to fall down is engagement with SMEs. It's a much harder thing to do, and we'd be the first to say that; it's not easy to talk to 250,000 businesses in Wales and get their perspective, but it's the kind of thing we need to do if we're going to get the economy of Wales right. We—

How can that be achieved? How can the voice of small businesses be reflected in RSPs? Particularly—we're a small business economy in Wales, and in rural Wales we particularly are. So, how can that be reflected? What kind of model do we need?

So, we have a role in terms of providing our own helicopter view, if that makes sense. I would like to see a lot more SME involvement in the RSPs themselves, in the way they are constituted. At the moment, it's very public sector-focused, if we're honest—

How does that happen?

How do you mean, sorry?

Well, how does that—? You would like that to happen. What kind of model should change to allow it?

First of all, let's get more small and medium-sized enterprises involved in the committees themselves—that would be a nice starting point. At the moment, it's mostly public sector, one or two large businesses, and representative bodies like us. Below that, some RSPs have cluster groups; that can be effective in terms of more ongoing dialogue in certain sectors. Again, let's make that a priority in terms of getting SMEs involved with that. Some RSPs have gone down the route of surveying SMEs, but this has been patchy. Again, if we're serious about getting the temperature and understanding the nature of skills needs, let's ramp that up and do a much better job of that.

And then, the other bit is: go out and speak to people; get into the networks that are around there, try and have the capacity to have a conversation outside of a committee meeting, if that makes sense. Now, there's no best picture of how to do this—I can think of a couple of examples. The Valleys taskforce, for example, had quite a lot of employer engagement events that were, by and large, SMEs—40, 50 people in a room in different areas of the Valleys. You know, it's that kind of stuff, I think. It's not the silver bullet—there's no model we can take off the shelf that'll solve this problem. It's always going to be hard work, it's always going to be granular, but it's got to be much more proactive and much more outwardly facing, I think.

You talked about how SMEs can feed into the RSPs, but if you're a small business across Wales, what structure is in place now, if you like, for them to—? Without being invited to anything, how can they feed in their views now?

Well, it's quite limited, really, isn't it? They can feed views to us and we feed it back, but, again—

What if they're not members of FSB?

If they're not members of FSB, then, essentially, you can turn up to an RSP meeting and try and be part of a committee, but very few SMEs are ever going to go down that route, I think. It's not going to be attractive for anyone who isn't massively informed and has the time. We've got to look at it as a spectrum of involvement. For some people, it might be turning up to one event that happens in their town so that they can pitch in these ideas. For others, it'll be responding to a survey. For some, it'll be feedback through their institutions. There's going to be a menu of options, really, because different SMEs will be in different places with this.

Okay. Vikki Howells.

Thank you, Chair. I'm interested to know a bit more about your views on how SMEs engage with other public bodies. I know that was something that was referred to in the 'A Skilful Wales' report. Could you tell us a bit more about that finding?

Which aspect particularly?

Well, the use of public sector intermediaries to help them with their training and whether there's any scope to build on that. Essentially, the opposite of Hefin David's first question to you.

I think one of the concerning findings that came out of this for me was that a third of SMEs have a skills plan, have some sort of formal plan for this. That's a really low number. I mean, two thirds have no plan on how they're going to really go about training and skills. Linked to that, only about 20 per cent have a formal training budget, so something that is forward-facing, forward-looking and is a plan for a longer term investment. Again, that's a really low number. I see the role of intermediaries as perhaps addressing some of those issues.

We know from our work, 27 per cent, I think it was, went to Business Wales for advice and the skills gateway in the past was pretty patchy, if I'm honest; it didn't really lead anywhere. We could do something there. We could have a programme that says, 'Okay, we help businesses at the moment with business planning, let's link skills planning into a bit of that.' Let's start to sit down with them and say, 'How do we have a forward plan of skills interventions?' and work out which aspects of the education system they can interact with to do that. If we can get that one third number up then, we start to have much more positive impact on skill levels and other things, I think. It goes back to that shaping the demand side of the conversation. So, that's one way of doing it.

The next set of organisations as intermediaries that were really important were sector and trade bodies—the Construction Industry Training Board for construction, the Association of Chartered Certified Accountants for accounting—those kinds of bodies that, if you're in a very sectoral area with specific needs, you could go to for those skills interventions. Now, they clearly play a very important role and are trusted, so they need to be a key part of the conversation here. I don't see them around the table with RSPs, they're not massively mentioned in the PCET process, so maybe we need to look at firming that involvement up a little bit more, I think.

I couldn't agree with you more, actually. Whenever I visit local businesses, this is an issue that comes to the fore, so I'm glad to see that that's part of your findings too.

Going back to the issue about further education colleges, which I know is one that we've revisited in many different contexts here on the committee, how well do you think that SMEs engage with other bodies like FE colleges? Is there still a problem for the more established and better resourced colleges, from the perspective of SMEs trying to get that foot in the door?

I think it goes back to the point I made earlier that there's almost a declining level of engagement from private companies, work-based learning and the next step down would be FEs and the lower step would probably be HEs. And part of the reason for that is that FEs—they train individuals, they respond to individual demand for courses and they try and match that to employer need, but, ultimately, when an individual leaves an FE college, they go into the labour market and then there's another step between someone taking on that individual in terms of mismatch and everything else. So, it's a little bit difficult, because it's almost like the provision's here and then we've got to hope that the provision then fills the gap, but that doesn't always happen. I think there's a bit of a mismatch.

So, for me, FEs have got a lot of other drivers as well. There are obviously financial incentives, on the way that they get funded, to pursue certain courses. That's been brought up in other sessions. Regional skills partnerships, if they're going to have an impact, need to be looking at the types of courses that are provided, but also the nature of that provision as well. At the moment, by focusing just on FE, we're looking at just one mode of delivery there. One of the recommendations might be RSPs saying, 'Do you know what? We'd be better delivering this through work-based learning', or 'We might be better delivering certain things through degree apprenticeships', for example. So, we really need to see that different method of delivery being thrown into the mix as well, as opposed to just a conversation about FE here, work-based learning here, and HE not even being on the radar, if that makes sense.

And that vision that you set out for us there with the RSPs, do you think that would do some good in boosting the foundational economy on a local level as well? Do they have the capacity to do that?

I think it could do, absolutely. It comes back to the sector's conversation earlier on. Lots of the foundational economy wouldn't have been talked of in a priority sectoral approach. We've got to avoid falling into the trap of assuming that 'foundational economy' means low skills, because it doesn't; there are elements of foundational sectors that are very high skilled indeed, and a lot of them will be well aligned with FE colleges and others. So, yes, I think it could do, it just needs to be reflected in the RSP provision.

The other bit that I think is quite interesting that we haven't mentioned yet is if you look at PCET, if you look at RSPs, it focuses a lot on FE and work-based learning. The conversation often defaults to 16 to 25-year-olds. Most recruitment done by SMEs is not going to be with 16 to 25-year-olds, it's going to be with older people, so we need to inject that conversation about lifelong learning into this as well. How do people in their 40s, 50s transition from one set of skills to another? I don't feel like that's part of the conversation at the moment. In the skills plans, you see some conversations in north Wales about replacement demand and those kinds of things, but that's a massive area of recruitment for SMEs, I think. So, those kinds of issues could be thrown into the mix as well, I think.

So, to sum up, then, what I'm taking from this is that you believe that RSPs should be a lot more flexible and agile. Am I correct in assuming that?

I think so. The problem with it is that a lot of the change in FE provision is going to take a while to bear fruit, isn't it? Because FE colleges invest in certain types of capacity to respond to the pressures they have, which are funding pressures linked to student demand, not necessarily employer demand. So, shifting that dial is going to be quite hard to do and will probably take a long time. We're not going to be able to say that we'll halve a certain course in a year, because there aren't the jobs for it, so we need to go on that transition process, which is why I think a much longer term economic development-focused approach for an RSP over, say, five years, would be a better way to do it than the annual process we've got at the moment.

So, it's got that long-term vision that helps to turn that supertanker around, which is a process that takes time. 

Exactly, yes.

Okay, thank you.

Jack Sargeant.

Thank you, Chair. I'd just like to pick up on one of the first things you said in giving evidence. I was a former apprentice at an SME, so I fully understand the apprenticeship route, and they'd be absolutely distraught if they heard the horror stories coming into Wales, and I think we all have an obligation, really, to make sure that that doesn't happen in Wales.

I'd just like to move on to the architecture, the current skills architecture. Again, we're working in ever-changing, fast-paced industries, especially within the SME market. Even in an apprenticeship, you might start at year 1, and year 5, you're not using the same kit, which is one challenge in itself, but do you think the current skills architecture is responsive enough to meet the demands to keep up the innovation? You just mentioned in the last set of questions the upskilling, which is a particular challenge I see in the next coming years with automation and so on.

I think in answer to that, the short answer is 'no'. I don't think the architecture is right at the moment. We're at a bit of a crossroads. The changes in England have had a massive impact here, there's no doubt about it. We used to have a UK-wide advisory infrastructure that would look at things like sector skills councils and would say, 'These are the sectoral issues, this is how qualifications should look to respond to that.' That doesn't exist any more. Welsh Government's trying to plug that gap with RSPs, with the WAAB—the Wales apprenticeship advisory board, with WESB—the Wales employment and skills board, and with the PCET reforms. But if we're going to do it properly on a Wales level, we're going to have to resource it properly and we're going to have to make sure that there's a good level of employer engagement.

What we've seen in England is a shift towards standards and towards trailblazers in apprenticeships and this notion of employer-led qualification reform. We're a little bit uncomfortable with that, because, quite often, 'employer-led' usually means very large business-led. Someone explained it to me as you could do an apprenticeship with Hilton as a hotel manager, but not be able to work for a different hotel chain, because it's very bespoke to that company. I think we should avoid that kind of bespoke approach, where you have individualised qualifications for individual companies. That's where the frameworks are a good approach, which we've got here, because they're transferable, they're sector-wide. The big problem we're going to have is we're not refreshing those frameworks now that England's pulled out of the system at any serious speed, and we're not getting employer engagement to address that very point you mentioned about things changing from year 1 to 5 in an apprenticeship. So, I think we really need to beef up that architecture there.

Qualifications Wales have got an ongoing review process, so they've done health and social care and construction. They're looking to do other sectors. It's not a quick process, because they're not necessarily tooled up to do that, and they don't look at apprenticeship provision because they don't have a statutory role in that area. So, perhaps they could be the body that delivers this, but it's going to need them having a much bigger responsibility and Welsh Government funding it. Hopefully, that would happen in a collaborative way where you'd have employer engagement, so it wouldn't be necessarily employer-led, but it would be collaborative, and we'd and up with qualifications that are useful across the board.

Just touching on some of the points in there, then, I think you're right in saying, obviously, if we're going to do it properly in Wales, it needs to be properly resourced, but that's still slightly a concern for me, because if we're going to be looking at bringing in businesses that are in England or Scotland, we still need that close relationship. You've said in your evidence that partnerships can't conduct the examinations of the qualifications by the sector skills councils. Now, that clearly could be an issue with quality and relevance to vocational work-based learning qualifications, and without those communication links with England, say, across the border, we could be in a difficult position.

So, there are a couple of things there. First of all, for most of our members, they will trade relatively locally and the cross-border issue probably won't occur. It may do in very border areas, but, by and large, their recruitment will be local, so they will be immersed in the Welsh system, if that makes sense, and won't realise that there's another system operating elsewhere. That said, portability is really important. We need to make sure whatever qualification system we have in Wales is respected and recognised. I don't think this is an impossible thing to do. National occupational standards were the bit that underpinned it previously. Unfortunately, this has happened because England has decided to move away from NOS and now it's become a Scotland and Wales issue. So, solving that problem is not necessarily in our gift, I think.

In qualifications more generally, GCSEs are essentially a different qualification in Wales to what they are in England now. They're not the same thing, yet it hasn't caused a massive issue. In Scotland, you've had SVQs—Scottish vocational qualifications—that have existed for a long time, and it hasn't been a massive problem with individuals with Scottish qualifications trading in England. So, if we're aware of it as an issue and we make sure we have quality that is as good if not better in Wales, and that's what we should be aspiring to, then it should be fine. But that's not to say there isn't a risk there, and I think you're right to identify that risk and for us to keep it in mind when we go through this process of reviewing Welsh qualifications.

Thank you for that. So, looking at the perspective of the training needs of SMEs, then, in getting that to the point where we are at least the same or better, and, hopefully, we can aim to be better—I think you're absolutely right, we should be aiming to be better—what would an effective skills architecture look like and where would the RSPs fit into this?

So, I think the RSPs, as we mentioned earlier, need to have a much broader economic development role. They need to look at skills in the round—the different types of provision, including higher education. They could probably look at employment more as well, and brokerage, those kinds of things. You've seen that to some extent with the graduate scheme in south-east Wales, so I think there's more that could be done in that area. 

I think when we go through the PCET process, there should be a very clear ambition that there will be employer-engaged reform of qualifications. It will be resourced properly and there will be a body that is leading on that role. Probably Qualifications Wales as well, we'd say, would fit nicely at the moment, but it might be something else. It might be the commission itself as PCET happens. We've got the embryonic structures there; they just need to be tasked properly, given that role and given the resources to do it properly, I think. That's where this starts to fall apart. 

Thank you. Thank you, Chair. 

Thank you. Do you think that the regional skills partnerships have sufficient knowledge and understanding of delivering the needs in terms of Welsh language provision?

It's not an issue I'm massively aware of in terms of their individual capacity as regional skills partnerships around Welsh language provision. What I would say is it's clearly going to be a very important element, particularly in health and social care, those kinds of sectors. At the moment, from what I recall, the rates of delivery through the medium of Welsh in work-based learning is quite low, and likewise in further education. I know the Coleg Cymraeg Cenedlaethol started to go into that area. They've had quite a lot of success in HE. So, again, I think if we can get employer engagement in that and let that process happen, hopefully we can start to answer some of those questions. But it is going to be a skill that is more required, particularly as the language standards start to take shape and public services and small and medium-sized enterprises delivering public services are required to deliver services through the medium of Welsh and bilingually. It's going to pinch at some point, so we need to have that provision there. It should also be mainstreamed in lots of things, so health and social care—it's not as if you're going to do a Welsh language qualification. You're going to do health and social care through the medium of Welsh, and that gives you the skills, then, to do the job that you're intended to do, but through the medium of Welsh as well, I think. 

Okay, thank you. Hefin David. 

Should we just get rid of the partnerships?

I mean, you could do. Personally, as FSB, I think if we've got a regional approach to economic development, it makes sense to have a regional employment and skills body. So, I think we should keep them, but we should make them fit for purpose. But at the same time, they're only worth while, particularly for SMEs being involved with them, if you can see where they impact on things. There's lots of discussion of their plans at the moment, but there are almost three actors, aren't there? There are the plans, there's the nature of supply, and the nature of demand. And, at the moment, there's Welsh Government in between the plans and the supply, and we're not clear where the RSP impact directly is on the nature of supply, I think, of skills.

So, what impact, what output, should they have?

I think it needs to be a lot clearer, where you can see: this is what the RSP found; they came up with this evidence; and here are the changes that are resulting from it. I don't think that's happening at the moment to a large extent. We don't see where the plans are then reflected into provision, necessarily. There needs to be a feedback loop there that shows, actually, this is something worth while being involved with, because we're actively shaping provision going forward. 

But if we proceed down the route we're going, there's going to be a real impact on budgets. They're going to have power without that power being properly designed. 

That's the danger, isn't it? This is why we need to get the accountability for the whole regional bit sorted out, I think. We need to see what the regional dimension of EAP looks like in practice, and we need to build the governance around that to make sure it's accountable. It may be that, politically, there's always sign-off from Welsh Government, but if it's transparent and the advice is clear, and you can see whether that advice is being heeded or not, and what the justification is for that, then I think that would show the impact of RSPs. 

We're waiting for the Government to present us with a draft post-compulsory education and training Bill. Do you think RSPs should be incorporated into that statutory process?

I think if we're going to have a PCET body, and we have a regional economic development agenda, it makes sense to have that articulated regionally. My concern is at the moment they're not statutory bodies, they're not massively representative. If we're going to put them into the statutory mix, they need to be properly thought out and tasked. 

Okay. And linked to this post-compulsory training body that exists, which is what you're referring to, is it?

Yes, because if you look at the PCET consultation, again, going back to the architecture point, you've got references to Wales employment and skills board, Wales apprenticeship advisory board and regional skills partnerships. None of those are statutory at the moment. They're all kind of floating committees, if that makes sense. They could be abolished on a whim. It needs to be firmed up, I think, that process. 

Okay. That's some steps down the line, because first of all we've got to work out what they're for, what they're doing. 

Yes.

Okay. Thanks, Chair. 

Okay. Josh, thank you for your time this morning. Is there anything else you would like to add that has not been drawn out through questions?

No, I think we've covered a lot of ground. 

We have covered a lot of ground, yes. You'll get a copy of the transcript. Please look through it and if there's anything that you want to add or you think you need to amend, then please also let us know. But thank you for your time this morning. 

Thank you very much. 

That draws our public meeting to an end this morning.