Welsh Affairs Committee transcript: Defence Industry in Wales and Impact of Population Change in Wales - May 1

Members present: Stephen Crabb (Chair); Tonia Antoniazzi; Virginia Crosbie; Ruth Jones; Ben Lake; Robin Millar; Mr Rob Roberts.

Questions 1 - 44

Witnesses

I: Jeremy Miles MS, Cabinet Secretary for Economy, Energy and Welsh Language, Welsh Government; Andrew Slade, DirectorGeneral for Economy, Treasury and Constitution, Welsh Government.

Examination of witnesses

Witnesses: Jeremy Miles and Andrew Slade.

Q1                Chair: Welcome to this Welsh Affairs Committee meeting. We are joined today by the Welsh Government Cabinet Secretaryfor Economy, Energy and Welsh Language, Jeremy Miles. Alongside him is Andrew Slade, who is the Welsh GovernmentDirector General for Economy, Treasury and Constitution.

We are looking at the defence industry in Wales and the impact of population change: two inquiries that have been ongoingfor a few months with this Committee. We are grateful to the Cabinet Secretary from Welsh Government for joining us todayto hopefully give us some insights that will feed into both inquiries.

Minister, could I start the discussion by congratulating you on your appointment? The role of Minister for the Economy of Wales is one with significant levers; it is a job where you can actually get things done. By way of starting the session, can you give us a sense of your top-level priorities and the Jeremy Miles vision for growth and prosperity in Wales?

Jeremy Miles: I recently had occasion to say quite a lot about this before I became Economy Minister. For a long time, I have argued that a healthy and growing economy taking us on the path to a sustainable future is at the heart of what wewant to achieve as a Government and goes to the heart of other challenges we persistently have to address in terms ofhealth inequalities, education inequalities, and so on.

I said recently that there was no route to take us to that more compassionate country that we want to be that does not passthrough the more prosperous country that we need to be, so that sense of prosperity in all parts of Wales. From myperspective, there are three areas I am focused on to make that a reality over time.

First, looking at the support we provide through business support programmes, finance, our skills policy and, more broadly,through the lens of what this policy does to increase productivity—this is a challenge right across the UK, certainly in Wales—bringing that lens to bear on all our current policies, say what more we could do in terms of long-term productivity at a firmlevel and interventions which might have a shorter-term payoff.

Secondly, increasing investment from outside Wales as well as businesses already located in Wales with the recognition thatdedicating increasing sums of public funding to it is not realistic given the state of public finances at the moment. It will beimportant, but it cannot be the main tool we use. It is therefore incumbent on us to make sure all aspects of Governmentwork are focused in that direction, bringing a very can-do focus to those opportunities and making sure Government policy isaligned around that objective, whether that is in terms of education or housing, which we will touch on today, or planningand other policy areas. Having as joined up an approach as we can within Government and between the various layers ofGovernment that exist and have a presence in Wales is critical to that.

Thirdly, redesigning our employability and skills programme so we have a clear sense—on a national basis—of the futureskills needs of the economy. Some very good work is already happening, in particular in the renewable sector but elsewhereas well, so that we can have an economic policy that aligns with the skills policy and the provision of vocational educationand training in a seamless and coherent whole. That would enable us to connect those economic opportunities to the lives ofpeople in all communities in Wales.

Those are my top three priorities.

Q2                Chair: That is very helpful. Wales is one of many regions and countries in Europe and around the world where there is arelative decline in the number of working age people. It always catches my eye when I see initiatives such as the IrishGovernment trying to attract the Irish diaspora, working-age Irish people, to come back to Ireland and be part of theeconomy, or the Government of Western Australia advertising in the British media to attract workers from Britain to move to Western Australia to be part of their economy.

Do you think we have a strong enough offer in Wales—not just in terms of jobs available but quality of life and public service—to be able to say to Welsh people who have left to make their careers elsewhere, “Come back to Wales and be part of asuccess story back home”?

Jeremy Miles: To recognise the context you are putting around it, you are right to say the long-term trends indicate thatWales has an ageing population; people are living longer and having fewer children. As you say, it is a trend that is notunique to Wales, but it will have an impact on demand for public services as much as anything in the medium to long term. Obviously, a decline in the working-age population is very concerning from an economic perspective, so developing a clearidea of what Wales could and should look like in the future is critical. That is why so much of our effort is focused ondeveloping our young people, supporting them into work to counter that larger trend, if I can put it like that.

There is an issue around having a sustainable migration policy, and UK immigration policy has a profound effect on us inWales. It is important for the UK Government to take the needs of Wales into account as well.

On the question of how we present our offer, we can do more in terms of celebrating the successes we already have in oureconomy, and sectors that are often very attractive.

We have recently seen success as a consequence of that long-term investment, particularly in some of our key areas and sectors. Married with the investment we made in broadband, for example, businesses are being set up in key sectors in ruralWales, which we probably would not have seen in the past. We can and should do more to highlight those successes becausethey signal those broader values and attributes that we have as a country, and there is an opportunity for us to do more.

Q3                Chair: During the course of our inquiry into defence supply chains in Wales, we as a Committee have heard some concerns expressed about perhaps a caution on behalf of Welsh Government in not wanting to be seen to be too proactive and positiveabout actively supporting the defence industry. Can you give us a sense of what your posture is going to be on this issue? Doyou recognise the value of the defence industry in Wales, or is it politically potentially quite difficult for you?

Jeremy Miles: The aerospace and defence sectors are inextricably linked with many companies and organisations in Walesinvolved in both sectors, which is even more prevalent the further down the supply chain you go. The success we have hadaround cyber and aerospace is part of that broader landscape where defence is located. We have also had some success in the space sector where we recently discovered that 80% of the global supply of space glass used in satellites and spacevehicles comes from a company in Wales.

There are some stunning successes which create that broader context. We absolutely want to increase our capacity andsuccess in advanced, high-value manufacturing and aerospace interfaces; defence is obviously part of that broader picture.We have a number of prime companies, tier one companies, that effectively support a cluster of smaller, innovative, and quite agile suppliers, which is good for the health of the economy overall and for other sectors.

Q4                Chair: I will start to bring colleagues in from around the table in a moment. While we are on this idea of personal values, can I ask one more question? What was so problematic about the £200,000 donation given to your rival in the leadershipcampaign to become First Minister that made you say you would not have taken it?

Jeremy Miles: I have said all I intend to say in relation to the donations. I am happy to answer questions on the economy,but I am not proposing to answer any further questions on the donations.

Q5                Tonia Antoniazzi: Good morning, Cabinet Secretary and Director General. My question is for the Cabinet Secretary on theeconomy: do you believe the Welsh Government have sufficient power and resources to be able to reshape the direction ofthe Welsh economy, particularly around the support you are going to seek or do seek from UK Government to help achievethese goals?

Jeremy Miles: At least one member of the Committee will be disappointed by this; the reality is that Wales is not anindependent country and the economy of Wales is part of the economy of the United Kingdom. One must describe one'spowers and capacity in that context. We are absolutely part of that macroeconomic framework that we see at play in the UKat the moment. I have a different vision of how that should be, but we are where we are.

It is incumbent on us to try to find the most collaborative way of working, not least in the context of a climate where both public and private budgets everywhere are under pressure. There are good examples where the Welsh and UK Governmentshave been able to work together, evidence of which is in some of the growth deals, and in the freeport policy space more recently, which is positive. You will be unsurprised to hear that there is an incredibly unhelpful relationship in other areassuch as the shared prosperity fund.

In all layers of Government, there is a responsibility to be working in as aligned a way as possible, recognising we havedifferent roles and financial capacities.

Q6                Tonia Antoniazzi: You have mentioned there have been action plans, programmes, and projects to invigorate the Welsheconomy for as long as Wales has enjoyed devolution. What is different now about the Welsh Government's current plans?You have talked about growth deals and different projects, but can you tell us anything different about your current plans?

Jeremy Miles: I outlined my priority areas at the start. The economy is not set in aspic; it is a constantly evolving andchanging entity. You have to constantly think about how your policy responds to those changes and helps to shape them in away that meets our broader objective.

I am—as I am sure many of us are—committed to that just transition to a sustainable future. There is a suite of newinterventions in that space that are bearing fruit. We have a significant opportunity, for example, in the renewable sector, inparticular the floating offshore wind sector. There are some very exciting opportunities there that we must not miss.

The point I was making earlier about having that national picture around the needs of the economy from a skills perspectiveis an evolution and a step beyond where we are now. We have a regional picture at the moment. With a national opportunitylike we have in the renewable sector, it is increasingly clear that we need a national picture alongside it, so there will besome changes in that sense.

As I touched on earlier, that sense of a truly sustainably growing economy being at the heart of the policy objectives wehave, and therefore a cross-Government priority—not, as it were, solely the work of the Economy Department—is a shift andan important way of trying to meet a number of our policy objectives as a Government.

Q7                Tonia Antoniazzi: The floating offshore wind opportunities and renewables are very exciting and part of a UK biggerpicture. How will the Welsh Government ensure that all areas of Wales can experience these opportunities and economicgrowth?

Jeremy Miles: That sector is a good example; all parts of Wales can benefit from developments there. We have anincreasingly sophisticated approach to regional working in our economic policy. If I may say, the critical thing is that we are very clear on working with our partners in the regions of Wales on a limited number of very impactful policy priorities, ratherthan trying to do too many things. I am sure colleagues right across Wales would welcome that; it is important.

As a living example of how different parts of Wales can benefit from that particular sector—although there are other sectorsin this space as well—one developer has been proactive in trying to establish direct relationships with further educationcolleges, and has been very categorical about the job roles, skill levels, and qualifications they need in order to make surethey staff their projects using the local labour market as far as possible, which obviously we would all want to see. They had a direct set of conversations with local colleges in north and west Wales in this particular case, which has led to really goodskills provision.

If you have that commitment to use local labour, which we want to see from all developers in that sector, and a directrelationship between providers and employers, you can make pretty fast progress. You were asking me in your earlier question about where we need to work together; for the renewable sector to be able to provide the opportunity we feel it canfor Wales, we would look to the UK Government to be more ambitious in relation to grid and be clearer in terms of policystability.

We look to ourselves to make sure the skills needed are there to map the supply chain we currently have to identifystrengths and areas that need focus, to strengthen our planning offer, and to make sure we have that joined-up approachacross Welsh Government and local government. There are responsibilities on all parties to make that a reality.

Q8                Mr Roberts: You mentioned the shared prosperity fund and that it was an unhelpful relationship with the UK Government, which I understand; the idea was to put more power in the hands of the local authorities.

Three years ago, in front of this Committee, First Minister Drakeford said there would be more of that, with powers devolvingout of Cardiff Bay up to the north, which is often the forgotten relation. Are you aware of any plans in your portfolio to givemore autonomy to north Wales to make our own local choices?

Jeremy Miles: We need to make sure the growth deal in north Wales is working in that way, that choices are taken locally,and to have the direction and pace required in order to make that a reality. We are promoting a CJC model in all parts ofWales, which provides a strong footprint for regional government taking on more capacity and powers in order to be able tomake decisions more closely to those affected communities. My view is we should have a live discussion with all regions inWales about what more we can do with that partnership working in mind to devolve powers away from Cardiff Bay, but itdoes require that regional way of working for it to be sustainable.

Q9                Virginia Crosbie: Bore da. The fact that the economy in Wales has lagged behind most of the UK for the last two decadeshas potentially led to people deciding to leave Wales and work elsewhere. You mentioned policy priorities quite a lot. Couldyou give some details on the impact of your policies on the 20 mph default speed limit and the SPF for the farming sector?Your own analysis indicated that that would result in a hit to the economy of billions of pounds, and thousands of peoplepotentially coming out of the farming sector.

Jeremy Miles: Yes, but that relates to the policy in development. You will be aware the Government are working with thefarming community to make sure we listen to the points made in the consultation we recently had, which has been veryhelpful. The Minister for Rural Affairs has already had very productive discussions with the farming sector in this space. It isimportant that we get to a place where farming is sustainable in Wales—both from an environmental and an economicperspective—and we have a shared priority and objective to make sure the agriculture sector, like all other sectors, is makingits contribution to our climate change goals but is also able to benefit fully from them. The economic analysis, which hasbeen the subject of discussion publicly, is on an earlier set of proposals.

Q10            Virginia Crosbie: You mentioned climate change and energy. Could you please give us an update on funding for Cwmni Egino at Trawsfynydd? My understanding is you have slashed funding for this important project.

Jeremy Miles: I will ask Andrew to come in on the details of the funding. It is a vehicle that has had significant levels offunding, and we are discussing with the UK Government at the moment what role it can have in the future. We want to makesure it has a role in the future because we want to make sure the opportunities that may come down the line are ones whichwe share fully in Wales, but I do not think it is ongoing, as I understand it. Andrew, you might have an update.

Andrew Slade: Yes, we have had to make some hard choices in respect to budgets, not least because of the very large gapwe have across the Welsh Government in terms of the budget for this year. As the Cabinet Secretary says, the future ofCwmni Egino is entirely bound up in discussions that are going on with the UK Government. In a sense, there is aninterrelationship. If we get to a point where we have agreement from UK Government colleagues to progress with plans forTrawsfynydd and a number of other sites and activities across north Wales, that is an area we will be putting additionalinvestment into. Right now, we are not at a point where we can do that in terms of the discussions with the UK Governmentmore generally.

Q11            Virginia Crosbie: Great British Nuclear has made it clear the site is not in its plans for the next stages simply because it istoo small.

I wanted to talk about apprenticeships, particularly young people. You have a different approach from the UK Government toapprenticeships; my understanding is you have dramatically reduced the number of apprenticeships. Could you give us anupdate on that programme, please?

Jeremy Miles: For this Senedd term, we have a target to be able to reach the same number of starts as we achieved duringthe last term, which is around 100,000. We are on course to do that. As Andrew was alluding to earlier, apprenticeship policyis one of those areas facing a number of different pressures. We are working against a backdrop of significant economicchallenges. While being fully committed to our apprenticeship policy, we lost access to EU funds, which significantlycontributed to the apprenticeship budget, and inflationary pressures are necessarily creating cost pressures on frameworks. That is the context in which we are operating.

Our focus is on making sure we protect the quality of apprenticeships. There is a slightly broader definition at play inEngland about how this policy is taken forward. Our focus has been on what we describe as high-quality apprenticeships,rather than extending the policy to lower value courses, but there are choices to be made in doing that.

From our point of view, the way we have prioritised within that is to make sure we are funding those higher-level, moretechnical sectors supporting STEM apprenticeships, in particular net zero preparedness. We are also committed to increasingthe number of degree apprenticeships. We are prioritising apprenticeship investment in those sectors that will supporteconomic growth and community cohesion. Net zero is a critical part of that, so it is a different approach.

I was asked earlier to comment on how Governments work together in this area. One of the more challenging areas has been in relation to the apprenticeship levy, which is a UK-wide employment tax designed to support an Englishapprenticeship policy. There is a tension in that approach. At this point in time, we have a situation where there is anadditional cost to certain employers in the private and public sectors in Wales. No benefit comes to the Welsh Governmentbecause apprenticeship policy was changed in England at the same time as the levy was introduced. It essentially nets out interms of what it means for the Welsh Government, yet we as a Government are still fully funding those apprenticeships. There is a complex interplay there. If asked where we should be working better together in a way that better reflects thedevolution boundaries, the apprenticeship levy is a good example.

Q12            Virginia Crosbie: Regarding the Celtic and Anglesey Freeports, there has been a significant delay compared with freeportsin England. Are you involved with the outline business case? When are people on the ground going to start seeing goodquality jobs coming from the freeports?

Jeremy Miles: We are going through the port process at the moment. The Brexit portfolio was the beginning of the freeportpolicy, and it took a while for the particular priorities we have in Wales to be taken fully into account as that policy is beingdelivered across the UK. I am pleased to say we are in a better place now, and the projects are going through the business-casing system. We want to see those projects become a reality both in your constituency and in south Wales as soon aspossible.

Q13            Ruth Jones: Good morning, Cabinet Secretary; it is good to see you and Mr Slade this morning. I am following on from Virginia's question. We have talked about your desire for young people to get into the workforce and high-levelapprenticeships. How do the Welsh Government plan to deal with the current economic inactivity of young people who—forwhatever reason, and often it is post-covid—cannot work at the moment but want to get into the workplace? Tagged on to the back of that, what are the Welsh Government's thoughts on the latest UK Government reforms to the DWP system?

Jeremy Miles: The economic inactivity rates are much higher than we want them to be in Wales. There are some recognisedchallenges in the most recent data from the ONS, which I understand also affects the data at a UK-wide level. Nevertheless,economic inactivity is significantly higher than we want it to be.

In terms of the approach we are taking, we have a Young Person's Guarantee intended to support those young people nototherwise in education, employment or training, which we are having some success with. We have made good progress indelivering our commitment. Around 27,000 young people have started on skills and employability programmes since thestart of the guarantee. Provisional estimates show an increase in participation, which is quite significant.

We recently had what we called a national conversation in relation to the Young People's Guarantee to talk to those peoplebenefiting from it, the people accessing the provision. They told us things about how the programme is designed, so we havereconfigured it. For example, we have doubled the training allowance for Jobs Growth Wales+, we have increased theeducation maintenance allowance—the only part of the UK to do that—we have increased the capacity of Careers Wales toprovide work experience placements, and we have also increased the funding to further education colleges to providemasterclasses and workshops to those who might otherwise be at risk of leaving education.

There are a number of ways we have been trying to tackle this. It is a challenge right across the world, but the evidence todate is that the Young Person's Guarantee is helping us make headway in at least reducing economic inactivity for those inthe younger age group. It is challenging, and there are significant challenges, post-covid in particular, with increasingnumbers of young people presenting with long-term sickness, which is very concerning.

My view is that approaching it from the point of view of sick notes and limiting support for those with disabilities is the wrongperspective. I do not think it is the right thing to do, and I fear it will not be effective. It is quite a complex area. Working inas bespoke a way as you can with those individuals who need support and help is a much better and more compassionateway of approaching it.

Q14            Tonia Antoniazzi: Moving on to the defence industry in Wales and the Welsh Government's support, Cabinet Secretary,what do you see as the main growth opportunities within the defence and security sectors in Wales?

Jeremy Miles: There are growth opportunities. We have a good offer for aerospace, defence space, and cyber-security inparticular. We have eight universities that are active in that area in different ways, whether it is Cardiff University with itsnew Innovation Campus or Bangor University in north Wales with its Centre for Lifetime and Reliability Testing. There is anacademic offer already.

If you take initiatives such as the Advanced Manufacturing Research Centre, which I am visiting later this week, and theCompound Semiconductor Applications Catapult, there is good infrastructure in place to take advantage of those growthopportunities. There are some particular opportunities on the horizon in relation to the manufacture of helicopters as well as opportunities in west Wales around advanced radar capability. If those are realised, we will be delighted; they will beimportant contributions to the sector in Wales.

Q15            Tonia Antoniazzi: Fantastic opportunities on the horizon. Do the Welsh Government have a plan as to how they will helpindustry make the most of these opportunities and get the most out of it in order to take Wales forward?

Jeremy Miles: There are two aspects to that. We have a number of plans. You asked earlier about our current plans andstrategies for the economy generally. We have a manufacturing sector plan, which is focused largely on high-value andadvanced manufacturing, which I am happy to talk about. We also have a plan specifically for cyber and for the space sector.

There are specific strategies in place that are already starting to bear fruit but are part of that broader commitment toadvanced manufacturing. It is about developing the conditions to make sure we are anchoring key manufacturing companiesin Wales. That is partly about supply chain, but it is also about infrastructure and strengthening collaboration arounddifferent parts of the sector and different stakeholders.

I mentioned academia earlier. This is an area where the five stakeholder model that we hear about so often is potentiallyfruitful, aligning universities with Government, investors, entrepreneurs, and existing businesses around key priorities in thesector. We have seen it work in relation to compound semiconductors in particular, and it is an approach that can have a much broader application, including in this sector. We published our most recent manufacturing strategy this time last year, and we are implementing that at the moment.

Q16            Chair: On the subject of supporting the defence industry, you mentioned potential new helicopter work. Have you had anyconversations with Airbus about its proposal for building the new medium helicopter at Broughton, if it is successful with theMOD?

Jeremy Miles: In the few weeks I have been in post, I have not had detailed discussions but am planning to do so. It is animportant opportunity not only for north Wales, but for the entirety of Wales as well.

Q17            Chair: To be clear, if Airbus is successful in the bid, seeing the manufacture of a new military helicopter at Broughton issomething you and the Welsh Government would be actively supporting and welcoming.

Jeremy Miles: Yes, that would be a very good development.

Q18            Mr Roberts: What is the division of responsibilities between the UK and Welsh Governments when it comes to supportingdefence industry in Wales? What room is there for improving the Welsh Government's relationship with the MOD?

Jeremy Miles: We are always looking to improve relationships between Governments. From my point of view, defence isreserved, but there are economic development opportunities that we have touched on already this morning, which is thearea of focus for the Welsh Government. It is about providing that skills offer, the resilient supply chains and collaborativeway of working, which we can do at a Wales-wide level because of the size of the country. Broadly speaking, that is probablywhere the division of responsibilities lie.

Q19            Mr Roberts: How well and closely do the Welsh Government work with the UK Government's arm's-length agencies, such as DASA and the UK Space Agency? You mentioned earlier you have a plan for the space sector; how well does that dovetailwith what the UK Space Agency is doing from the UK Government's point of view?

Jeremy Miles: The opportunities come at a UK-wide level, do they not? The strategy for broader policy comes at a UK-widelevel. From our perspective, we seek to support those companies. We have about 80 companies in the space sector in Walesthat are doing fantastic work. It is providing that opportunity to cluster and making sure the offer those companies canmake, and have made very successfully, is undisturbed both within Wales—to other companies in the sector or relatedsectors—and also outside, at a UK level and internationally. There has been some success, but we recognise the need to domore because there is an opportunity here; we should always try to do more.

It has been a couple of years since we launched our strategy to increase our economic presence in the space sector. Our aimis to grow the space-related industry in Wales from 1% to 5% of the UK sector. If you are not familiar with it, the strategy outlines some areas of strength we already have, such as low earth orbit satellite capabilities, disruptive launch systems, as well as a number of other areas, and that sets out our ambition.

Q20            Mr Roberts: A few members of the Committee had a wonderful trip to Airbus in France last week; the Chair mentioned Airbus earlier. We appreciate you have only been in the job a few weeks, but will there be any discussions on your part topromote Airbus in bringing more of their overseas operations to bolster what is already there both in Newport and in north-east Wales?

Jeremy Miles: Airbus is a great success story in the Welsh economy; a core employer and critical innovator. We want to seecompanies such as Airbus flourish, grow, and continue to provide those opportunities for people in Wales, and to increase the prosperity of the communities around their locations.

To go back to a more positive approach to intergovernmental relations than I have struck in the last couple of questions, theATRC is a good example of good joint working between the two Governments, but also with Airbus and the local FE college innorth Wales. There are good ways of working when we are aligned around common objectives, and we probably all want tosee more of that.

Q21            Ruth Jones: Following on from Rob Roberts's question in terms of cyber-security, we have an excellent Airbus facility in Newport West. We have also visited that site as a Committee, which was very exciting; I am telling you on behalf of all the Committee.

There is a lot of investment from the Welsh Government in terms of cyber. Why do you see cyber as such an importantsector for the Welsh economy? In our defence inquiry, we have heard from Thales that the Welsh Government are urging theUK Government to position Ebbw Vale as the UK cyber-security base. As the new Minister and Cabinet Secretary, are youpursuing those conversations with vigour?

Jeremy Miles: Yes. Wales is already home to one of the largest cyber ecosystems in the UK, which is something we arevery proud of. The community you represent is a very significant contributor to that, and, as you say, it is a great successstory for us.

I think I am right in saying there are about 150 companies across Wales delivering cyber-related products and services. Wedo want to see more investment in the sector, and I will be continuing the discussions, which you have alluded to in yourquestion. Our key priorities in terms of cyber are to make sure we are growing that cyber ecosystem and building a pipelineof cyber talent. That joined-up approach I was talking about earlier is the best way of delivering that, and we have seensome success in doing that already.

Q22            Ruth Jones: One small supplementary question: this morning, we have seen that the Global Centre of Rail Excellence haspublished about the ongoing work and development, which sounds really exciting. We want this project to come on in leaps and bounds but it is taking longer than expected in terms of the fundraising. How are the discussions going? How are theWelsh Government supporting and getting on with this job?

Jeremy Miles: Because that development is in my own constituency, I am not directly responsible for it within theGovernment, but we want to make sure those discussions are productive and move forward as quickly as possible. In theway you were describing the importance of cybersecurity, that particular project also demonstrates Wales being able to workat the cutting edge of a global sector, which is very exciting wherever you live in Wales.

Ruth Jones: That is very helpful, thank you.

Q23            Mr Roberts: Minister, in our inquiry into defence, we have heard a lot about skills shortages and competition for STEM-qualified workers. You were intimately involved in this sector until very recently as the Minister in charge of education. What are the Welsh Government doing to support the STEM skills pipeline in Wales?

Jeremy Miles: The support we give in schools for STEM is significant. We have a number of initiatives under way to bringmore young people into STEM and make sure it is more inclusive. Historically at least, there are some preconceptions aboutwhat STEM is about and who it is suitable for, and we are trying to break that down. We have made a number of significantinvestments, including in the MIT Global Teaching Labs and other school-level interventions.

A moment ago, we were talking about effectively STEM initiatives in the valleys. One example of that kind of school-level intervention is the Tech Valleys STEM Facilitation programme, which supports relationships between the industry and schoolsin that particular context in Blaenau Gwent, and that has been successful at raising awareness.

One of the challenges in this space that we and Governments everywhere are all trying to grapple with is that we can make the provision available, which we are doing successfully, but sometimes it is about communicating to young people—often their parents as well, depending on their age—what these opportunities look and feel like so they can aspire to do thoseroles, many of which are very high skilled and very high paid but are perhaps less familiar because they are often inemerging sectors. Sometimes it is about landing that sense of some of our key emerging sectors being areas young peopleshould be focused on.

There is some school-level work that needs to happen and is happening around that. We have recently changed thecurriculum, which will provide much more opportunity for close working between visible sectors in the school's communityand the life of the school, which is really important in raising aspiration both generally and specifically in terms ofopportunities.

On an anecdotal basis, if I may, I was chairing a meeting recently in my own region in relation to the floating offshore windopportunity and talking to a developer that had been working with schools on the east coast of England. As a curriculumopportunity, they had been coming into the classroom and working with pupils to build models of floating offshore windplatforms, then going down on to the beach and floating them out on to the sea. I thought that early link between thecurriculum and the opportunities those young people will have in their local areas in the future was very imaginative, so itneeds to start there.

If you look at the approach we take to skills provision, whether it be our Flexible Skills Programme or the increasing amountsof our Personal Learning Accounts, which we are specifically earmarking for digital and net zero. And as I was saying in response to the earlier question from Virginia Crosbie in relation to our approach to targeting our apprenticeships on thosesectors that are significant for our future, there is a common thread that runs through our skills provision.

Q24            Mr Roberts: Apprenticeships and those work opportunities come a little further down the line. On a more foundationalbasis, towards the back end of last year, we saw Wales was once again getting the lowest marks in the UK in terms of resultsin maths and sciences in the PISA scores, and some of the worst outcomes we have ever had. What is going wrong?

Jeremy Miles: I will allude back to my previous role in answering this question. There are many things at play in the resultswe had. Obviously, we wanted to see better results than we faced. I suppose all Governments should have said that as aconsequence of a global reduction in results. For me, the PISA data is only one snapshot, and we have much more granulardata across the school system in Wales that tells us similar things but in a slightly more nuanced way.

In Wales, we have been working with the OECD, which runs the PISA system, for a number of years in order to make sureour school system is resilient for the future, and the reforms now under way are ones we have worked with them on and they are going through our system now. As you will appreciate, the young people who sat those PISA tests are not a cohortof young people who have had the benefit of those reforms. I am absolutely confident that by the time we come to the nextcycle of results, we will see those reforms beginning to bear fruit.

Q25            Mr Roberts: That will be welcome news indeed. My final question on this part is what conversations are you aware theWelsh Government have had with defence companies about whether the apprenticeship and higher education provision inWales is meeting the needs of those companies?

Jeremy Miles: I do not have any specific information on that, but I would be very happy to follow up with you if you wouldfind it helpful. Andrew looks like he might have some information, so I will bring him in if I may.

Andrew Slade: We have regular contacts with all the key companies in the way you set out. Along with the moreestablished mechanisms—including our regional skills partnerships—we are consistently and continuously refreshing ourunderstanding of skills needs across the different sectors.

The Cabinet Secretary has already touched on a number of priority areas for us. We are doing work with a number of theacademic institutions to help with that alongside the work we are doing with companies. My experience of working in theWelsh context over the last decade or so is precisely what the Cabinet Secretary sets out in relation to that ability to jointhings up. You mentioned earlier the business around how do we engage with other partners, such as MOD, arm's lengthbodies, and so on. Again, we have very good partnerships underpinning some of the initiatives the Cabinet Secretary hasmentioned. Those conversations are happening all the time as part of us refining our offer through the plan for employabilityand skills.

Q26            Ruth Jones: Another inquiry the Committee is undertaking at the moment is looking at the population change in Wales,and there is an overall decrease in population; people seem to be leaving Wales. I am sure you will hear very clear storiesabout that from the Committee, but in Newport and Cardiff, for example, we have a population increase, and that in itself isa problem. In terms of schools, houses and infrastructure in general, it is a big issue, and I am wondering how the WelshGovernment are looking to manage the changes in population across Wales?

Jeremy Miles: As you say, it is a complex picture. Beneath the headline figures, you see different trends and communitiesare affected differently, in terms of both migration in and out of Wales and within Wales itself, so there are complex pictures at play.

One challenge that presents—this is just one example—is in making sure we have housing markets that are capable ofresponding to both increases and, unfortunately, reductions in population in some communities. The work we do throughlocal housing market assessments as part of the LDP work is absolutely critical in that.

We have tried to reform our approach to that—most recently a couple of years ago—to make it a bit more nimble andresponsive to the sorts of changes that you are asking about in your question, so the Government are very mindful of that.You will know there is a significant house-building programme in different parts of the south-east of Wales as a result of that.In other communities, we have people finding it challenging to remain living there because there are no work opportunities or they cannot afford the housing. Again, it is a complex picture.

Q27            Ruth Jones: You just talked about housing. If you have housing for the population, where are the schools, the hospitalplaces, and the general infrastructure, and how cross-Government is the work being done to make sure this is suitable for allacross Wales?

Jeremy Miles: There is cross-Government working on it, because a number of these decisions have planning at their rootsand therefore require as much visibility as can be ascertained of developments in the future.

If I wear my previous ministerial hat for a moment, there is quite a sophisticated level of planning in relation to the numberof school places required. It is a constant balance between recognising that we will see a reduction in the number of schoolplaces required at a Wales-wide level—or, in fact, a UK-wide level— which is already starting to show, but the geographicdistribution of that is another question. We work with local authorities, and they are in a constant process of projecting andre-projecting the likely level of demand through their local development plans and in other ways.

As I was touching on earlier in the context of infrastructure in the form of schools, our responsibility as a Government is tomake sure our funding mechanisms for those are sufficiently nimble to be able to respond to that changing picture.

Q28            Ben Lake: Bore da i chi, Gweinidog. You mentioned some of the demographic challenges we are seeing play out acrossWales. Of course, as a Member of Parliament for Ceredigion—where we saw the last census register a significant decline inthe overall population—I am very concerned about the impact these demographic changes will have on the ability to deliverpublic services to an adequate level. Is this something you are discussing with your colleagues in the Cabinet for localgovernment? There are concerns that the current funding settlement for various councils in Wales might not be up to dateand affording councils the resources they require to continue to deliver services that people need.

Jeremy Miles: As you would expect, this is a matter the Cabinet discusses periodically. From my ongoing discussions withthe local government Minister, in terms of how we fund local authorities, the Government priority is to make sure they haveas much resource as we can provide in order to be able to deliver those local services, for the very good reason you havegiven in your question.

There have obviously been challenges as a consequence of the funding settlement Wales has as a consequence of UKGovernment choices. Within that envelope, we have done everything we can to make as much funding available to councilsas possible, but mindful that the pressures we face in our budgets are absolutely reflected in the pressures councils face intheirs. It is fair to say that different councils experience that differently, and rurality can be an additional pressure for theobvious reason that we know.

There is a continuing discussion about the formula for funding local government separate from the overall funding settlementand how that is distributed. In relation to that, we look to local government colleagues to discuss among themselves whetherthere are changes that ought to be made. There are already mechanisms within the settlement to reflect rurality, and Iknow, from my previous role as Education Minister, that has a particular bearing on schools, which I know is an area ofconcern for Ceredigion.

As Economy Minister, what I want to see at the end of the day is that we have economic opportunities in all parts of Walesso people are able to live in their communities and have the opportunity of doing well-paid work. The work we are doing aspart of the co-operation agreement with your party in the Senedd around Arfor is good work. There are things to learn fromthe first iteration of it, and we are trying to do that in the second iteration to make it effective. We have some goodexamples coming out of that.

The other day, I was celebrating a new company starting in Llanybydder, I think it is, which is a research technologybusiness that has chosen to locate there because of the infrastructure available and is bringing well-paid employment in thatsector to that part of Wales. Those opportunities are exciting, and we need to talk more about those because that is the kindof opportunity that might actually be counter-intuitive to people. Having those highlighted might itself be a catalyst for otherpeople making similar decisions.

Q29            Ben Lake: I agree, and that example brings me on very nicely to the next question I wanted to ask you, Gweinidog. Thecompany in question, you are right, is set up further down the Teifi valley in Llandysul, but very pleased to say in Ceredigion.

It does offer a very important example of the potential in more rural areas of Wales that perhaps, as you said, counter-intuitively is quite attractive to some of these digital-based businesses. That company in question has relocated from Londonbecause of the adequacy of the local digital connectivity and broadband specifically.

What work is being done with the Government—over and above Arfor—to try to actively go out to some of these companies in London, Bristol, even Cardiff? If presented with the offer of rural west Wales, if they have the right infrastructure in place—especially broadband and internet connection—these companies may well see that it is quite attractive in this new world ofhybrid working, not just from a cost base for the business, but also for their employees and their work-life balance.

Jeremy Miles: As I was saying to you earlier, one of the critical things is that we have a way of working with our regionalpartners in Wales that focuses in on some specific priorities. For my money, in relation to west Wales in particular, this is oneof those areas where you have examples like Delineate to draw on, and there are some others; it is not unique in that sense. It is fantastic.

When you can highlight and showcase those to businesses in some of our cities, as well as outside Wales, it gives people theassurance that this is something that can work. If a Government outlining its pitch can draw on an example like that, whichis vivid and real, and where people can talk to the business themselves and say, “How was your experience of it?” “Why didyou do it?” That is the magic ingredient.

Q30            Ben Lake: In that regard, Minister, can I take it from your answer that we might see you beating a path to some of thedoors of the tech companies in London, extolling the virtues of setting up in Ceredigion and west Wales?

Jeremy Miles: Absolutely.

Q31            Virginia Crosbie: Just to follow up on one of Ben's questions, if a local council is not happy with their funding from the Welsh Government, what practical steps can it go through to increase it?

Jeremy Miles: There is a revenue support grant, which is allocated on a well-understood formula to local authorities.Allocation happens in accordance with that formula, which can be changed but that does require local authorities to reachagreement on how it might be different. There are obvious challenges that will come from that, but there are many othersources of funding from the Government to local authorities.

I do not wish to keep referring back to my previous portfolio, but it has a particular bearing on this. We simplified, I think, 25separate grants into four large grants for schools support for local authorities, which has meant much more flexibility forcouncils to be able to use that money in perhaps more creative ways. Critically, in the context of your question, it will reduce—this is the first financial year in which it is applying—the administrative costs and resource required to deliver theprogrammes, which will increase the funding effectively.

Q32            Virginia Crosbie: Councils have the power to charge 300% council tax premium, yet not one council across Wales has implemented this. Why?

Jeremy Miles: That is a matter for councils to answer. The task of the Welsh Government is to provide tools to colleaguesfor them to be able to meet the needs of their local economies and communities. A number of councils have said they willincrease the premium for second homes in particular.

The scheme is designed specifically in a way that enables councils to make those choices for themselves, taking into accountthe local profile and what they understand from their local housing market assessments and the interplay of other policyinitiatives in this space. So we have enabled them to make planning choices that are different now, and there are differentrules in relation to non-domestic rates. Generally speaking, there will perhaps be a subtly different mix of interventions thatwork in different parts of Wales. It is really important that those choices are made by local authorities, not by the WelshGovernment.

Q33            Virginia Crosbie: Short-term holiday lets must be let for 182 days. How has this change impacted the economy acrossWales?

Jeremy Miles: The intention behind the policy was to make sure we are saying to businesses that the offer must be a business offer in order to qualify for paying non-domestic rates as opposed to council tax. We will look to see how it operateson the ground but it is important to say that if you are qualifying for a business taxation regime, you must show you areoperating as a business and that was behind the change in the thresholds.

Q34            Virginia Crosbie: We have seen a significant increase in the number of second homes impacting communities acrossWales, with people coming from England to buy their second home, not their first home. Would you agree that the lowsalaries across Wales are leading to the growth in the second home market?

Jeremy Miles: Just to say, I should not characterise it as people coming here from England.

Virginia Crosbie: Wales as well, yes. Everywhere.

Jeremy Miles: Wales is a welcoming country. That is not at the heart of it; the issue really is about whether people canafford to live in their own communities. There are complex issues at play here. As a consequence of different ways ofworking following covid, we have seen different patterns of people moving to live in different parts of the UK. This is not justa problem in Wales; it is in other parts of the UK and right across Europe, and we took evidence from other parts of Europein devising the range of policies we have. At the heart of it is the point I made in an earlier answer, which is to make surethere are sufficient, well-paid jobs in communities right across Wales for people to be earning good salaries.

Alongside that, it is really important and there is a growing understanding that the Government need to make a number oftools available in the toolbox so that councils in particular can respond to pressures on their local housing markets. That isthe approach we try to take. Over the next few years, I am certain we will learn that some things are more effective thanothers, but we can only know that by seeing how this works on the ground, so we provide the widest range of tools forcouncils to be able to respond to this.

Q35            Virginia Crosbie: Last question, on the Welsh language. The Welsh Government have a goal of 1 million Welsh speakers by2050. Given the numbers of young people leaving Wales, you are not going to achieve this target, are you?

Jeremy Miles: We will achieve the target, but it is very ambitious. Our range of policies is pushing in the same direction,but migration patterns in and out of Wales are likely to affect that picture. One of the things I am most hopeful about is theinvestment we have made, but, perhaps more interestingly, the enthusiasm with which it has been received into providingimmersion teaching in Welsh to primary-age pupils.

All authorities in Wales are now taking advantage of that funding. Sometimes it is families who have moved to live in Wales,who do not speak Welsh, but the parents are keen for their children to have access to Welsh-medium education, and theyhave the opportunity of usually a 12-week immersive course. If you have not had an opportunity to go and see that inaction, I would encourage you to do so because it is frankly miraculous. These young people, leaving this provision speakingfluent Welsh, whatever their background—they may have moved from other parts of the UK or from overseas—is reallyrather uplifting.

Q36            Mr Roberts: Minister, I have asked you a number of questions today; this is probably the most important question I haveasked any witness before this Committee for a long time. We are studying the impact of population change in Wales, andthere is a projected long-term reduction in the proportion of working-age people in Wales. Will Wales's finances becomeunsustainable if the projected long-term reduction in working-age people materialises? If it does, what can you do about it?

Jeremy Miles: In what sense do you mean Wales's finances?

Mr Roberts: There is going to be a reduction in the proportion of working-age people in Wales. How will that impact onWales's financial situation and economic outlook generally, and what can you do about it?

Jeremy Miles: In that broader sense, there are some things that are useful to share. As I said in my first answer, if this is unabated, you would expect to see increasing pressures on public services and an impact on our economy so it is reallyimportant for us to make sure that we are attracting young people to live in Wales and that young people who are born andlive here, stay here.

That is the reason I was earlier focusing on making sure we have that strong offer to young people in a range of ways; I talked about the Young Person's Guarantee, but in terms of the youth entrepreneurship and other ways, and the answer Igave to the Chair at the start about making sure we are representing that picture of Wales that encourages people to comeand live here and make their living here. It is about celebrating some of the successes, we touched on a couple in the courseof the discussion today, and making sure we are presenting that image of Wales that we have, which is of a welcoming,outward-looking country that encourages young people to come here, start their families, start a business. That is a veryhopeful picture and there is certainly more that we can do to highlight the offer.

Q37            Mr Roberts: Super quickly as we are running out of time; are you planning on undertaking any kind of significant body ofwork to question whether the Barnett formula works as it should or whether the funding settlements are appropriate movingforward?

Jeremy Miles: I can certainly help you with that; the Barnett formula does not work. In my view, the entire formula isbroken and requires a significant overhaul, which would be in the interests of all parts of the UK in providing that stabilityand a closer reflection of the needs of the various communities it serves. That is the Welsh position and has been for sometime. We have done quite a lot of thinking and work in this area, which we have published.

The former First Minister, when he was the Finance Minister, was able to negotiate some changes to the Barnett formula withthe UK Government, which were helpful, but I do not think that detracts from the perspective that Wales and the UKgenerally need a more stable funding formula.

Q38            Chair: We are approaching the end of the session, Minister, so we are grateful for the time you have given us. Can I justpick up on something that I saw the Secretary of State for Wales saying in the last few days? It is an area that comes underyour current portfolio of responsibilities. He was being very critical of the Development Bank of Wales. Did you get a chanceto see his criticisms, and what did you make of those?

Jeremy Miles: I did see them. He was talking about losses in the accounts for 2022-23. As in all these things, it is important to see those figures in their proper context. My understanding is that those figures were not unexpected and werelargely driven by the worsened economic context. That is borne out by the fact that the very same situation exists with theBritish Business Bank, which reported losses in that same year of £135 million.

On a cash-flow basis, the Development Bank generated about £47 million, and £22 million of that went to repay WelshGovernment loans. Tempting as it may be to isolate that particular figure, it is very important to see it in the broadercontext, not least given the same thing is happening to the British Business Bank.

Q39            Chair: We recently had a very helpful session with the chief executive and the investment director from the Development Bank of Wales. Are you comfortable with the proportion of the Development Bank's portfolio that is sunk into property inWales? Does it trouble you that it is such a large proportion?

Jeremy Miles: It is obviously really important. I gave evidence on this to our Senedd Committee last week, which iscurrently doing an inquiry into the bank itself. I submitted written evidence, which might give you a little more detail on thatquestion if you would find it helpful. It is important to make sure the bank is continually looking to balance its investmentsand loans in a way that supports all parts of the economy and we have a remit to the bank that is designed to achieve that.

You used the words “sunk into property,” and we should recognise that that funding also supports the construction sector,which is a critical part of the economy. It is a slightly more nuanced picture than that but it is right to say that we need tomake sure there is a balanced portfolio and I know the bank feels that as well.

Q40            Chair: Finally on this, the chief executive and investment director were very clear with us that Welsh Ministers have nopower to direct how they invest funds, and it is quite proper that there is an arm's length relationship. They did say,however, that where investments raise potential reputational concerns, advice may be sought from the Minister in specificcases.

In the case of a company receiving loans from the Development Bank of Wales owned by somebody who has criminalconvictions for environmental offences, do you think that should have raised red flags around reputational concerns andtherefore have been communicated to the Minister's office?

Jeremy Miles: As I said in my evidence to the Committee in our Senedd last week, there is a good reason why decisions aremade at arm's length from Ministers, which are reasons I am sure we would all want to see in place. I do not have any moreinformation about the point you are alluding to than I have already shared. In a discussion with the Development Bank, I asked for it to reflect on whether any recent experience causes it to look again at its diligence processes. Those are mattersfor the bank to consider, and they are properly matters that are arm's length from the Government.

Q41            Chair: So on your watch as Economy Minister, you cannot say whether an investment like that would have been made bythe Development Bank?

Jeremy Miles: That would be hypothetical. I have only been in post for the last number of weeks, so I am not sure it wouldbe particularly helpful for me to answer that in that way.

Chair: I am just looking quickly around the table to see whether there are any final supplementaries from colleagues.

Q42            Tonia Antoniazzi: Sorry to do this at the last minute. The financial situation with the Welsh Rugby Union has probablycome across your desk now, Cabinet Secretary. I was wondering if there is any resolution over the loans they have with you?

Jeremy Miles: I do not have an update I can share with the Committee at this time, but I will be happy to do so when I do,if that is helpful.

Q43            Tonia Antoniazzi: We put it in writing to the former First Minister and we could probably do it again, so we will send acopy to you as well. Is that okay?

Jeremy Miles: Thank you very much.

Q44            Robin Millar: Good morning. Grant Shapps, the Secretary of State for Defence, recently said that we are no longer a post-war but a pre-war country. There has been talk of the country moving to a pre-war footing in terms of our industrial strategyand scaling up production. Has there been any discussion within the Welsh Government about contribution to that productionand manufacturing capability, please?

Jeremy Miles: In what sense?

Robin Millar: As the Economy Minister, is there anything you think the Welsh Government might be able to contributetowards scaling up our ability to produce arms and weapons for conflict on the basis the country is on a pre-war footing?

Jeremy Miles: I did not see the interview Grant Shapps gave. I should probably see that for context before I answer yourquestion and I will undertake to do that.

Chair: Cabinet Secretary, thank you very much for giving us your time this morning and being so frank in a wide range ofquestions; we do really appreciate it. We wish you all the best for the new role and look forward to perhaps seeing you againsometime. Mr Slade, thank you very much for joining the call as well. I will bring the meeting to an end.