Item 5 on the agenda this afternoon is a statement by the Minister for Economy and Transport on the Global Centre of Rail Excellence in Wales. I call on the Minister for Economy and Transport, Ken Skates.

Diolch, Dirprwy Lywydd. In June 2018, I advised Members that the strategic outline case for a global centre of rail excellence in Wales was approved, together with funding for next-stage project development. I would now like to update Members on the significant progress that has been made to date. I'm pleased to say that a technical briefing session for Members will be held in conference room B at the conclusion of this statement.

In line with the new approach to economic development that our economic action plan sets out, this project takes us in a very new direction. Rather than reacting to the needs of individual businesses, this is a solution to an industry-wide problem. As we have with the Advanced Manufacturing Research Institute and with the Institute for Compound Semiconductors, my aim is to create a facility that will attract the leading lights of the business world and draw them to put down long-lasting and valuable roots here in Wales.   

As with the other examples that I've given, this project was initiated in response to clear industry demand. Indeed, the need for a world-class dynamic testing environment for the rail industry, located in the United Kingdom, has been discussed for at least 15 years, but has unfortunately advanced very little. Our analysis suggests that progress has been delayed for at least three reasons: firstly, a lack of leadership, a lack of availability of a very large and suitably consented site, and thirdly the inherent difficulties and complexity of developing a compelling business case in a multistakeholder environment. 

Our response to these challenges has demonstrated clear and effective leadership, and I am pleased to say that we have made real progress in less than 12 months by developing a credible, deliverable project, de-risking the opportunity, and establishing the foundations for an investable proposition in partnership with industry. There is, of course, though, still much to be done.

Our project is now fully focused on the preferred Onllwyn/Nant Helen site in the Dulais valley, and has undergone a number of engineering iterations in recent months to inform the evolving master plan. The current proposals, which will be subject to further research, environmental impact assessment studies and consultation, include: an approximate 7 km of electrified test oval, providing a maximum line speed of 110 mph; a separate and unique infrastructure test track facility incorporating a platform and station environment; a large, well-equipped maintenance facility; secure storage for 400 rail carriages; a decommissioning facility; and a research and development and education centre, which will include labs, office space and training facilities in a dynamic environment away from the operational network.

While a phased approach may be a prudent option in due course, with some of the many integrated elements delivered on a more advanced timetable than others, this circa £100 million facility would employ around 400 people in the construction phase, and upwards of 150 people permanently when fully operational in all aspects. It's worth noting, Dirprwy Llywydd, that Germany’s leading test facility, though established 20 years ago, is now employing 500 permanent staff and another 100 visiting engineers working on specific projects. In short, the added catalytic potential and future opportunities are considerable.

I've always said that we will need strong partners in the public and private sectors to deliver this project, and I'd like to refer to them both today. I'm delighted to announce that the strong and supportive informal working relationship between Welsh Government and the neighbouring local authorities of Powys and Neath Port Talbot has been formalised in a joint venture agreement. The purpose is clear: to work in partnership to deliver a future beyond coaling operations that allows an appropriately restored site—a statutory requirement overseen by local government—together with a site that is eventually acquired on the basis that it is suitably prepared for the construction of a test facility. This will clearly and obviously require an agreed way forward with the current landowner, Celtic Energy. Initial technical discussions are under way, and I have been advised that those discussions are positive and constructive on all sides.

Welsh Government and its JVA partners are also working in partnership to develop and submit a formal planning application for the project. Considerable work has already been undertaken, and environmental impact surveys have been commissioned. I'm advised that a formal planning application should be ready for submission by the end of this calendar year or early in 2020. We will, of course, be consulting widely with the local community and other stakeholders on the proposals prior to the planning submission.

I'd like to thank our local authority partners for their efforts to date, and to encourage them to re-double their efforts, working alongside Welsh Government through the next phase of project development.

Elsewhere in the public sector there is great interest in and support for our project plans. For example, within Network Rail, the infrastructure testing capacity that could be delivered in Wales is a particular focus of positive and ongoing dialogue. I'd note that Network Rail has a significant programme of research and development planned between 2019 and 2024, and we are seeking to engage with Network Rail to bring a significant part of that programme to the GCRE.

I'm also pleased to report that both the UK Rail Research and Innovation Network and Innovate UK are keen to see our ambition realised, with opportunities here for very considerable added-value partnerships and synergies with universities within Wales and the wider UK.

Dirprwy Llywydd, I've also written to the Secretary of State for Transport, and also the Secretary of State for Business, Energy and Industrial Strategy, asking for their support. The GCRE is closely aligned with UK Government as well as Welsh Government policy objectives, not least the aims of the very recently published 'Industrial Strategy: Rail Sector Deal', which sets out to:

'transform the rail sector by taking actions to increase the use of digital technology, boost productivity, improve the service received by those who use our railways and build the skills of the UK workforce to capitalise on those opportunities.'

This is precisely what GCRE will hasten, and it is the rail industry that is saying so.

Throughout 2019, the project team has also been engaged in an extensive process of private sector industry engagement and soft market testing. Response from the rail industry has been almost universally positive. A number of major rail companies, based both in the UK and internationally, have expressed strong interest in joining the partnership and the project as partners or as investors. This project will not be realised without a robust partnership effort with the industry. Officials are now considering the most appropriate way to formalise a partnership approach across the rail industry that will enable the project to draw on the best expertise available.

The focus here initially will be the necessary task of further refining the focus of a core business case and ensuring that all opportunities are grasped effectively. If we are successful in this effort, and there can be no guarantees at this stage, the financial, commercial, capital and operational equation will become clearly defined and, hopefully, compelling.

So, my message to the rail industry and all of our stakeholders today is a simple one. Thank you for your positive engagement to this point. Agree with me now that the many years of circular discussions should end here. It's time to move beyond a status quo of mend and make do. A global centre of rail excellence here in Wales is the best opportunity in a generation to deliver an international asset here in the UK that will deliver immense benefits to the rail industry for decades to come. Importantly, for the people of Wales, this is an opportunity to create high-quality employment and to rejuvenate the local economy. Continue to work with us and let’s make this happen together.

Thank you, Minister, for your statement today. I agree with you that it's an ambitious project, which I believe will create a hotbed for the rail industry here in Wales and contribute to the economic importance of the UK rail industry, especially in the context of Brexit, given the fact that the main European facilities for testing infrastructure and rolling stock are based on the continent. 

I'm particularly pleased that my home county of Powys is collaborating on this project, with Neath Port Talbot as partners also. You provided a written statement on this last year. Can I ask what progress has been made by the Welsh Government in investing and in strengthening the academic and R&D presence here in Wales? Secondly, you said that you were going to further consider the establishment of a research programme and the creation of a new chair in rail engineering innovation in partnership with our Welsh universities and other universities across the UK, so I'd be grateful for progress on that. 

With regard to the next stage on business case development, can I ask for more information on the findings of the outlying business case that is in development and the timetable for that to be published? Would you also be able to provide details on the level of investment, sources of public and private sector funding, and information on both the public sector and rail industry partners that will be and are involved in the centre? I noticed you mentioned in your statement that a number of major rail companies have expressed a strong interest in joining the project as partners or investors. So, perhaps a little bit more on that. 

And finally, could you put some meat on the bones on what the expected wider social economic benefits will be for the area and how those proposals relate to wider policy areas such as skills, the economic action plan and regeneration?

Can I thank Russell George for his questions, and also for his support and encouragement on this important project? I think it has, it's fair to say, cross-party support, and there is a good degree of excitement across the Chamber and indeed in the region that will benefit from this world-class centre of excellence.

Russell identified the European centres. Of course, there are two test facilities, currently in the Czech Republic and in Germany. Both have existed for a significant length of time. The industry across Europe, but particularly in the UK, has said that now is the time to develop a new facility, and the site that we've identified in Wales is perfectly suited to what will become the first in the UK and, in all probability, the best facility of its type in Europe, possibly on the planet.

We've invested already £1 million in developing the proposals. We'll be moving further as part of the next stage to assess the degree of investment that will be forthcoming from the private sector, but based on our soft market testing to date, it's our belief that the entire cost of building the project will come from the sector itself. There will obviously be interest from academic institutions, and the creation of a chair of rail engineering will be part of the research and development element of the project that I outlined in my statement.

I'd hope that, during the briefing session that is to follow, the findings of the outline business case will be shared with Members, but I will of course follow this up with further detail in due course.

And Russell George also raised questions about the wider social and economic benefits of this project and how it fits with the economic action plan and with our skills policy well. Well, first of all, with the economic action plan, we have moved away from the focus of individual business support to looking at how we can create magnets to draw in investment and facilities that solve entire industry solutions. I identified the advanced manufacturing research institute in north-east Wales, which will focus very much on composites and lightweight materials for the aerospace and automotive sectors. There's also M-SParc, which supports the aspirations of the Energy Island drive on Anglesey. The compound semiconductor research institute in the cluster is another example in south-east Wales. The steel research and development facility in Swansea bay I could identify as well, and another magnet that is to be completed very soon is the international convention centre. And, of course, in terms of the creative industries, we supported the development of Wolf Studios, which again is one of the best facilities of its type for that particular sector.

These magnets are designed to lock in investment for the long term in Wales. They are designed to knit perfectly with the UK industrial strategy as well as with our skills policy. And, within the three regions that are producing regional skills partnerships annual reports, there is a need to ensure that the pipeline of skills provision supports these magnet projects. So, of course, in future years, I would expect the annual skills plan for the region that will benefit most from this intervention to reflect on the need to ensure that as many people in that region as possible are skilled up for employment at the test facility.

I think it's also worth saying that, although conservatively we've estimated something in the region of 150 permanent jobs, the number is far higher in Germany, and there will also be a very significant number, we expect—several hundred—of sub contractors, external employees and industry experts who will be attending the site on a very regular basis, and that in turn will support the development of the visitor economy, which is of course very important to the two local authority areas that have formed the joint venture agreement with Welsh Government.

May I welcome this statement and may I thank the Minister for making this statement, and also welcome the broader vision set out here of having a global centre of rail excellence here in Wales? We are talking about a potential investment that is huge here, if we are to deliver that aspiration, and that vision is to be warmly welcomed, because we are talking about Onllwyn here, the Onllwyn at the top of the Dulais valley there, where investment is greatly needed and the jobs are desperately needed. So, in terms of scrutiny—and I do understand that there are meetings to follow this that will set out some of the details of this project for us as Assembly Members, but in terms of responding, and in terms of the broad scrutiny of the statement that you’ve made this afternoon, could you set out more financial detail? That is, essentially, how much financial risk will you, as the Welsh Government, shoulder here? How much funding can you announce today will be provided directly from Welsh Government funds for this project? That’s the first question.

In terms of the possibility of a ‘no deal’ Brexit, and following on from the question that you’ve already been asked by Russell George, of course, there is a partnership here with nations on the continent of Europe. What kind of impacts do you anticipate if there is a ‘no deal’ Brexit, in terms of the major vision that you’ve set out this afternoon?

Of course, we do welcome investment, because the background to all of this, as you know, because you have referred to some of these figures yourself, is the lack of financial investment in rail infrastructure in Wales over a period of many years, and the Minister is very familiar with this. Particularly between 2011 and 2016, Welsh railways received just 1 per cent of the funding to make rail improvements, although we have 11 per cent of the UK network. So, in that five-year period, only £198 million out of a total budget of £12.2 billion—it’s only that £198 million that was spent on the Welsh railways. That is an appalling situation.

Of course, also during that same period, Welsh railways have been underfunded by a £1 billion, whilst there was far greater investment in areas of England—for example, the £30 billion for Crossrail 2 and so on and so forth. It’s true to say that if per capita expenditure in Wales on the railways corresponded to the per capita spend in the south-east of England, then £5.6 billion would’ve been invested over the past 20 years under Labour and Conservative Governments at a UK level.

So, there’s been a loss that has to be put right, so if we can secure a percentage of what we have missed out on as a nation over these past few years in terms of rail investment, then that will be welcome. That’s why, as a party, we do welcome this development, because we see it as a positive investment in our railways and in our trains, but specifically in our railways—those railways that have suffered underinvestment over many years. Thank you.

I thank Dai Lloyd for his questions and his contribution. It is, of course, a very bold vision—we have significant ambitions for the rail sector in Wales, alongside the £5 billion journey that we've embarked on with Transport for Wales, delivering a new Wales and borders franchise, and the huge and transformational metro programme in south-east Wales, alongside the advanced manufacturing research institute that will boost gross value added in the Welsh economy by £4 billion, and alongside the development of the international convention centre and many other magnets that are either being delivered or are planned. We believe that we are delivering on the objectives of the economic action plan, which is about creating the environment, the facilities and the opportunities to bring forward the private sector to invest as much as possible in long-term sustainable employment opportunities within Wales. 

Dai Lloyd asked the very important question about the financial ask and the financial risk on the taxpayer, on the public purse. I do wish that the Minister for Finance were here to be able to hear me say this very clearly, but I do not expect the taxpayer to pay for this monumental facility—this game-changing facility. All of the soft-market testing that we've done so far leads us to confidently say that this will be a facility that the sector itself will pay for. That said, Dai Lloyd is right to identify the risk of a 'no deal' Brexit. A 'no deal' Brexit would, of course, create difficulties in terms of being able to get rolling stock from continental Europe here and back swiftly. However, there is huge demand for facilities of this form across the European Union and, furthermore, there is ample demand from within the British sector, the British market itself, to justify the creation of a test facility of this scale. And therefore I am confident of its success, regardless of what happens in the coming months.

Dai Lloyd is also right to reflect on what could have been had Wales received what it should have benefited from in terms of rail infrastructure, and £1 billion is a very significant figure, a huge amount of investment that could and should have been made in rail track, stations and level crossings across the Wales and borders network. That's why I'm hoping that the Secretaries of State for transport and business and industrial strategy will actually recognise the benefits of this particular facility being based in Wales, and in turn, and in so doing, will ensure that this particular facility benefits from the rail sector deal, and that the UK Government will back it up by ensuring that innovation funding is steered towards it.  

Can I thank the Minister for his statement, and I very much welcome the vision for the new centre up at the top end of the Dulais valley, as Dai Lloyd said, an area that has obviously had mining in its past and is now looking to develop a new direction that you wish to go in in my neighbouring constituency of Neath?

You mentioned a couple of points, I think, I want to raise with you, and I also welcome Neath Port Talbot and Powys councils for their vision in recognising the opportunities such a project will bring, and working together here is going to be critical in this move forward, and I'm very pleased that they've joined the Welsh Government in a joint agreement. The questions I want to raise: you mentioned universities—what discussions have you had with universities so that they are aware and they will be getting involved in the development and the research aspects that this offers? Because if you're talking about a chair, it's an across-the-UK opportunity for those universities, but have you had discussions with both Welsh and UK-wide universities as to the opportunities? 

Have you looked at UK research funding? You talk about Innovate UK research funding, and clearly the UK will have to put some funding into this—I'm not talking about EU funding now; I'm talking about Innovate UK funding—to look at how they're going to perceive this opportunity, so that they can actually invest into this?

Network Rail is mentioned here, and you want Network Rail to actually look at their programme and how we can fit in. How far have those discussions gone as to how Network Rail will be looking at involvement in this project? And are they going to submit themselves at some point to actually say, 'Yes, we will use this centre as part of our programme as well?' That's going to be crucial, I think, to the future.

I also want to ask about rail gauges. We all think that rail is one track, but, actually, there are various gauges available. Is the centre going to be looking at multiple gauges or a single gauge? Is it going to look at freight as well as passenger? Is it going to look at different rail gauges, because if you're going to attract European investment and European companies, you may need to look at different gauges to suit their needs as well? So, will the centre have a difference in the gauges being used, and, as a consequence, have you thought about that in the planning application? It's all well and good to say we're going to have a planning application, but what's it for? Is it just for the track, is it for the whole infrastructure, is it for the maintenance centre? Will the planning application be a totality, or will it be piecemeal in that sense as well?

And finally, and Russell highlighted this, and I think it's important—the skills agenda. This, if it comes off and works, will, you said, initially give 150 permanent jobs, highly skilled jobs, some of those will be, and, as you highlighted, European colleagues have up to 400 or so. They're going to want a newer facility; if they've got one on the doorstep that is brand-new, they'll be looking at it. So, we could end up seeing quite an expansion as a consequence of this. Have you put into place plans to actually develop skills both of the existing workforce in the area, but also university graduate skills that come into this scheme, to ensure that we are able not just to have facilities, but that we can actually have the people who will work there?

Can I thank David Rees for his questions and, again, for his support as well for this project, which will bring enormous benefits for the Dulais valley? It will transform opportunities for many people, young and not so young, in the Dulais valley, who are looking for well-paid, high-quality employment. I'm incredibly grateful to the work that is being undertaken collaboratively between Powys and Neath Port Talbot councils and Welsh Government. It's not the only joint venture and it's not the only partnership that Welsh Government currently enjoys with local authorities across Wales—there are many other partnerships, such as the partnership concerning Cardiff bus station, the partnership in Newport, which has seen Welsh Government work with the private sector on the international convention centre, and the partnership that we've been able to form with Wrexham County Borough Council, concerning the transport interchange in Wrexham. I'm keen, wherever and whenever possible, to co-produce facilities and opportunities and to ensure that we design the environment in which businesses can thrive together. I have been incredibly impressed by the enthusiasm that's been shown by both Neath Port Talbot and Powys.

Already, the sector works very closely with many universities across the UK and discussions are ongoing between the sector and universities about how we can maximise R&D and innovation opportunities within the United Kingdom. Of course, I think given the close proximity of Swansea University to this particular location, there will be huge potential benefits for that institution. But it won't be limited just to Swansea University. I want to make sure that we attract the best and the brightest but that we also create as many opportunities for our own universities, and, it has to be said as well, for our further education institutions and work-based learning providers. I think it will be absolutely vital that the regional skills partnership in the region views this particular project as a priority for ensuring that there is a strong pipeline of skilled people able to serve it and, indeed, to benefit from it. 

I'd refer Dai Rees to my statement in so far as the work with Innovate UK and Network Rail is concerned, but the next stage will see technical project viability analysis undertaken with the entire rail industry. This is the exercise that, if successful—and all indications to date show that it will be successful—will make the investment case very compelling indeed. We're currently seeking legal advice on the procurement options for this analysis work. It should also be said, Dirprwy Lywydd, that the potential of this project to create sustainable job creation in a post-coal future is incredibly compelling. But we're not going to rest on our laurels and expect the public to support it blindly. Indeed, the next phase of work will involve detailed consultation on all aspects of the projects—those aspects that David Rees identified—the facilities, the track itself, the R&D opportunities, the hub that will see education facilities created. And so, we're going to be working with our local authority partners as well as with the local regeneration group and the local community, to ensure that everybody is firmly behind and supportive of this particular intervention. 

And then the scope of what it offers—Dai Rees questioned the gauges and freight—well, the scope of what it offers will depend on the scale of interest from the rail industry itself. But I am determined to ensure that when we present the planning application at the end of this year or in early 2020, it will capture all of the elements that I've identified in my statement and which I hope all Members will take the opportunity to be further briefed on after this statement.

I add to the cross-party support and, indeed, enthusiasm and excitement for this project. Could I ask the Minister to be a little clearer about who's driving this forward? We have this joint venture with Welsh Government and the two local councils, which is very positive. You mentioned just now presenting the planning application—can I infer from that that it will be the joint venture that will be making that planning application? Who in the sector is involved? It's great to hear that they'll be funding it, but, when the Minister speaks of the sector, I don't know whether that's Network Rail, Transport for Wales, a train operating company, or others who are associated with it. What type of player does he expect to be paying for this? And also—and, with respect to this one, I entirely understand if commercial sensitivity prevents him from saying everything that he may know, but what is the role of the current landowner, I think Celtic Energy? Do you expect them to remain a long-term partner in the project, or is it likely that, at some point, someone else will take over ownership of the land and be taking this forward?

Finally, you say there's a testing facility in Germany currently, but we don't have anything like this in the UK. To the extent that testing is needed, I assume that some of that has been happening in Germany that might otherwise happen in the UK, but is it also the case that some testing now needs to happen on live lines that could otherwise be happening on this 7 km track, and will we at least in the margin be able to look forward to a few less engineering disruptions when we have this facility, if it comes to pass?

Well, Mark Reckless is absolutely right that live line testing can be disruptive and therefore having a 7 km test facility, which trains can be tested to a maximum speed of 120 miles an hour on, is incredibly desirable, not just for the operators and the manufacturers but also for passengers. To date, Welsh Government and I, as the responsible Minister, have been driving this particular project, but we have now formed the joint venture agreement with Powys and Neath Port Talbot and, in parallel, we'll be working jointly with the current landowner, Celtic Energy, to secure all the necessary options, all of the necessary consents and the land forms that will allow the rail project to proceed in a timely fashion. And therefore, from this date, we will be working together in full partnership.

Insofar as the sector is concerned—by the sector, I mean that we have engaged extensively with network operators, with manufacturers of rolling stock, with operators of rolling stock—the cost of sending rolling stock currently from one European country to the Czech Republic or to Germany is very considerable indeed, and it can cost tens of thousands of pounds simply to send a train, a carriage, from Spain over to Germany. With the opportunity, for example, for CAF, based in Newport, to utilise a facility just along the line, further down the line in the west, we could see huge economic benefits for those particular manufacturers as well because the savings that they will incur will be significant indeed. And that is why we believe that, simply within the British market, there is enormous and sufficient support for the project to go forward, but the added bonus of being able to attract manufacturers and operators from across Europe would be something I'm sure every Member would welcome.

In the future, in terms of the ownership of the asset, well, that will be determined through the joint venture agreement in conjunction with those who will pay for it, and those who will be paying for it will be industry manufacturers and operators themselves.

Thank you very much, Minister.