Now, we've listened to the chief executive and the chair of the board give assurances that the Grant Thornton review has really gotten to the core of the problems at NRW, and will provide a starting point for a fundamental rebuild. However, we remain concerned that the membership of the board lacks the timber sector knowledge—a point that was raised by Adam Price in questions yesterday—that we believe is much needed to provide the vital insight and expertise required to address the problems at NRW, and to break down the cultural divides by providing a crucial link between the board and the forestry division. We remain concerned about whether the board has the right skills mix and capacity it needs to turn around the fate of the organisation.

Over the last three years, the auditor general, the Public Accounts Committee and, finally, more recently, Grant Thornton have scrutinised events at NRW in a forensic fashion, exposing a number of fundamental flaws and misgivings of the highest magnitude, and it is to the credit of the current chief executive, actually, that that review was commissioned in the way it was. But one unanswered question does remain: where has the Welsh Government been throughout this process? Had this been a health board, we might have seen the organisation put into special measures as a matter of urgency, yet for the last three years or so, NRW has continued to operate out of control despite it having its accounts qualified for three consecutive years and its governance arrangements completely undermined and brought into question, not to mention millions of pounds of public money that have been mismanaged.

When I stood in this Chamber last July raising serious concerns about NRW, the Cabinet Secretary for Environment and Rural Affairs, as the title was then, was pleased that in response to the qualification of the 2015-16 accounts, NRW had conceded, with hindsight, that they would have handled things differently. The Minister added that the recommendations within our 2017 report were primarily a matter for the accounting officer and the board of NRW. She was assured that NRW had already put in place an action plan to address the issues raised by the auditor general, and that the Welsh Government’s role would be to support NRW in the work they needed to undertake to ensure robust procedures were in place for the future.

We were also told that Welsh Government officials intended to review the governance arrangements for arm’s-length bodies in Wales, and that, as an arm’s-length body, NRW is governed by a robust framework agreement that reflects the principles set out in ‘Managing Welsh Public Money’.

During our initial scrutiny, NRW requested a more precise definition for the terms ‘novel’, ‘contentious’, and ‘repercussive’ in their current governance framework. This request was made specifically to address the auditor general’s recommendation that the timber contracts were novel, contentious and repercussive, and hence they should have submitted their proposals to their sponsoring Welsh Government department in line with the current governance framework. This Chamber was told that, as part of the current arm’s-length bodies review, consideration will be given to providing greater clarity around these issues.

However, despite all of this, little has changed, it seems, leading to the qualification of NRW’s 2017-18 accounts, with the auditor general basing his qualification on NRW’s proposal to enter into transitional contracts that he considered to be novel, contentious and/or repercussive. Alarmingly, although NRW informed the Welsh Government of its intention to put in place transitional arrangements, it did not formally refer them to the Welsh Government as it was required to do. It seems to us that the Welsh Government’s seemingly hands-off approach did not work in this instance, and despite assurance after assurance, nothing at NRW has changed. 

To make matters worse, the Grant Thornton review highlighted the introduction by NRW of a new and novel contract form, standing sales plus, during 2016, which raises very serious concerns regarding the introduction, monitoring and accounting for these new contracts. These contracts are unusual, and we believe have potential implications for the auditor general’s regularity opinion on NRW’s 2018-19 annual accounts. The contracts relate to approximately one sixth of NRW’s annual timber sales. We are naturally concerned that this means there is a risk, potentially, that NRW will see its accounts qualified for a fourth consecutive year. Now, this should surely be the time for the Welsh Government to take more affirmative action to support and address the problems at NRW.

The committee, through its work, has also considered the Welsh Government's internal review of arrangements relating to arm’s-length bodies, which resulted in an action plan published in January 2018. We also received correspondence from the Permanent Secretary to the committee back in September last year providing further information on the review, amongst other new arrangements in hand. The letter notes, and I quote:

'The removal of the ‘Calling-in Procedures’ i.e. a requirement for our Arm’s-length Bodies to refer to us for approval for particular categories of decision, such as single tenders above a specified threshold or issues which are novel and contentious.'

We have questioned the Welsh Government further about the removal of the calling-in procedure and how issues such as those that occurred within Natural Resources Wales would be identified in future. We were told by the Permanent Secretary, and, again, I quote:

'that has been one of the positive outcomes of the arm's-length body review, to make sure that we are giving very clear guidance and more support to them. We are communicating more regularly with them, we're setting out very clear guidance about expectations that we have, and, as I said, bringing them together three times a year for this forum to talk through priorities and share best practice, basically, on how we can manage public money most effectively.'

It seems that the Welsh Government is moving towards a system of enabling arm’s-length bodies greater autonomy at a time when one of its largest bodies is in dire straits, and has failed to report serious issues to the Welsh Government, or at best, adhere to governance rules and procedures. This new approach will reduce, we feel, the opportunities to provide necessary assurance around the actions of arm’s-length bodies.

Concluding, Dirprwy Lywydd, it can only remain to be seen what happens next for NRW under its new leadership, but it is clear that serious concerns remain outstanding, both in terms of internal governance arrangements at NRW and how it functions as an organisation. It is not yet clear to anyone how change will be delivered, and the task ahead is monumental, but NRW now has all the tools it needs to do the job of turning around the organisation, and delivering the services that the people of Wales deserve. We will give the organisation and its leaders the time and space they now need to deliver change, but we will be seeking an update at the end of the year.