Item 9 on our agenda this afternoon is a debate on the Economy, Infrastructure and Skills Committee report, 'Procurement in the Foundational Economy', and I call on the Chair of the committee to move the motion—Russell George.

Motion NDM7459 Russell George

To propose that the Senedd:

Notes the report of the Economy, Infrastructure and Skills Committee on its Inquiry 'Procurement in the Foundational Economy' which was laid in the Table Office on 5 February 2020.

Motion moved.

Diolch. Thank you, Deputy Presiding Officer. I move the motion in my name. We issued this report in February, however the Government's response was understandably delayed due to the pandemic, and we received this in July. Our inquiry focused on how the Welsh Government would fulfil its long-term commitments to increase local procurement as part of the drive to create stronger local supply chains and build wealth in communities across Wales. Our recommendations contained a large number of questions, because we found that the Government had no published strategy and no clear position on its definition of local procurement.

When giving evidence, the Deputy Minister was unapologetic about taking an experimental approach and not yet having all the answers. The committee was pointed towards the success of the Better Jobs Closer to Home pilot in the Valleys, but against the scale of current unemployment projections, the number of jobs created is relatively small. As the Welsh Government tries to build back better, the scaling up of job creation across Wales I think will be vital.

Our first recommendation asked for clarity on how Ministers would define success, what their concrete plans were and where they intended to focus most effort. The later recommendations asked about the how. For example, how will the Welsh Government monitor the work of public services boards to drive the economic benefits of local procurement? How will it answer the concerns of small businesses that they still can't access overly complex procurement processes? How will greater collaboration on joint bids be supported and incentivised? How can engagement with supply chains be improved? How will the Welsh Government monitor and measure success and collect and share data? And how will best practice be shared and scaled up, something that hasn't been possible to achieve, it seems, in 20 years of devolution?

Much of the Government's response is encouraging. In March the Government's direction of travel was set out in a National Procurement Service report called 'Progress towards the development of a new procurement landscape in Wales', and it's clear that work is progressing, including commissioning the Centre for Local Economic Strategies, or CLES in short, to work with public services boards to improve the understanding of local value of procurement activity and refine their definition of local procurement. I think it is high time that analysing procurement spend went beyond the traditional postcode classification of just counting invoices of companies listed at a Welsh address. And I hope that, in responding to this debate today, the Government can say more about when we'll see measurable, positive outcomes from the work with public services boards.

The current phase of work is set to run beyond this fifth Assembly, with a mid-term review due in April 2021, so it will fall to Members of the sixth Senedd to monitor long-term success. This is a long game. In the foreword in our report I said that our predecessor committee back in 2012 had called on Welsh Government to take specific actions to boost the benefits of public procurement for the Welsh economy, and despite those actions, we still see the same thorny and ingrained problems eight years later. There are still cultural attitudes to risk management in the public sector that work against innovation and change. There is a persistent lack of skills capacity and failure to have early and sustained engagement with local supply chains.

Experts from academia and the private sector told us that the answers are already in Wales. Our inquiry identifies some excellent procurement practices in the housing sector, but good practice is just not translating across to other sectors of the economy. Now more than ever, public money needs to circulate in Wales around the economy rather than leaking out, to create apprenticeships and jobs and community wealth and other community benefits, and to feed into local supply chains. Professor Karel Williams said that effort should focus on key strategic sectors with potential for the most positive impact from local procurement decisions, sectors like care, construction and food. However, the Government says it's still pursuing a sector-neutral approach, and that any sector focus will be decided by analysing historical procurement spend and up-and-coming contracts, taken forward in collaboration with stakeholders. Obviously, data should inform decision making, but how confident are Ministers that a more broad-brush and hands-off approach will yield results?

Stronger engagement with the private sector is also needed. The Federation of Small Businesses Wales proposed that Welsh Government should broaden its engagement with anchor institutions, to include larger private sector companies. The Government says that this is happening and that its approach to anchors is still evolving. A factor in the success of the Preston model of procurement was said to be the signing of statements of intent with local procurement sector anchor institutions, but the Government's response suggests that public services boards are still some way from being ready to sign up to any such agreements.

We find a mixed picture in how public services boards are engaging with the goal of maximising local spend, and the future generations commissioner was actually quite negative about the extent to which future generations legislation is informing procurement decisions. So, the work of public services boards and the development of a community of practice are welcomed, and as this is a continued investment in people and skills, and a concerted effort to try to change the culture within public procurement, hopefully these latest initiatives will finally start to bear some fruit. I look forward to hearing Members' contributions and the Minister's reply, and my very short conclusion at the end, Deputy Presiding Officer.

I'm looking forward to your very short conclusion at the end of the debate as well. [Laughter.] Thank you. Helen Mary Jones.

Diolch, Dirprwy Lywydd. I'm very pleased to be able to take part in this debate. The inquiry, of course, took place before I joined the committee, although I was there just about in time to participate in signing off the report, and I really enjoyed reading what I think is an excellent report. I'm very happy to commend it to the Senedd. It's a strong and detailed set of recommendations and, as Russell George has already said, what it does is to ask all the right questions. I don't think that, in the meantime, we've had all the answers yet, as Russell George has said, and it will be interesting to hear Welsh Government's further response today.

I'm glad the Government has accepted all the recommendations, but it comes back to the question of how, because there is a huge shift needed if this is to be delivered. It's a cultural shift in the way the public sector engages with the private sector. And this pandemic has made it even more pressing that we crack this, that we get it right. I'll just give one example. At the beginning of the crisis, as we will all remember, a large company from over the border was given the contract to provide food boxes for people who were isolating. Now, this was not a universal success. You can understand it was something that needed to be done quickly, but I certainly had constituents in the region that I represent receiving food that was unsuitable for them, and sometimes food that was off, that was actually out of date because it had come from too far away. Now, in the second phase of providing support for those who were isolating, those food boxes were then provided through the county councils, and that made a huge difference. Carmarthenshire was able to work with the Cross Hands-based company Castell Howell, along with other local suppliers. That not only improved the quality of the provision, but it also meant that Welsh public money was being recycled into our economy to preserve local jobs and support local businesses at a crucial time.

Now, this progressive approach has got to be a local approach, and it has to inform how we spend public money with the private sector from now on. The default position—and Russell George has already touched on this—must be to recycle the Welsh public pound within our own economy. We hear all the time from Welsh Government that they haven't got enough money, and I'm sure that that's true, and I would be the first one to say that they should have more economic levers at their disposal, but every penny that we have got, whether it's in our health sector, whether it's in our local authorities, whether it's Welsh Government directly procuring, needs to be spent in our economy. Welsh Government need to do more to demonstrate how they will bring that about. This is a huge transformation and they need to set out for us how they will monitor and evaluate the actions that they take—how will they know that this has worked? Because now more than ever, at this very difficult time for our communities and for our economy, we don't need to be wasting a single penny of Welsh public money outside our communities. Diolch yn fawr iawn. 

Obviously, it's really, really important that we're focusing on the foundational economy at this time, because we are about to enter a really, really difficult economic recession. Local procurement is absolutely key to keeping whatever money is circulating in any particular community in that community, because there's going to be a real shortage of it. So, I read with slight despair that procurement is part of evolving policy across Welsh Government, because it seems to me that we really do need to get on with this. And it is where the public services boards have really got to step up to the plate, because if they're not worrying about how much money is being spent locally with local companies and therefore staying within that local area, nobody else is going to be. It really is get-on-with-it time, because in the meantime, all the other large companies that are based somewhere else will be more than happy to take people's money, and then all the profits go elsewhere. 

You won't be surprised to know that I, obviously, would like to see many more local food networks, as we are on the eve of the abyss of a possible 'no deal' with the European Union. We have no idea just how much disruption to our food supplies there's going to be. And it seems to me that this is absolutely urgent, but it was at least five years ago that Rachel Lewis-Davies, a leading light in the NFU, said to me that farmers will produce anything as long as there's a market, but it's up to the procurement side to specify exactly what they need in that market so that farmers can plan and then produce it, knowing that it is going to be used. There's an awful lot we could take from Puffin Produce, which is one of the most successful Welsh businesses and has actually developed horticulture on a mechanised scale. They've practically collared the whole of the market for potatoes and many other vegetables as well, but we need small businesses involved to produce the sorts of things that are not easy to mechanise, like salads and fruit, in order for us to be able to be delivering fresh food in our schools to our children, who so desperately need it.

So, baby steps have been taken by the Welsh Government with farm business grants of between £3,000 and £12,000 to enable increased horticulture production and use of new equipment and technology for field-scale horticulture, but, really, this has got to be scaled up as a matter of urgency, because we really do not know what's going to be happening around the corner. So, I do hope that the Deputy Minister is going to shed some light on exactly what the public services boards are going to be up to in the next period, which is, obviously, going to be extremely challenging.

Can I thank the economy and skills committee for producing this excellent report and its attempt to analyse what constitutes the foundational economy? I would also like to note the Government's overall positive response to the recommendations made. I believe that what comes out of this report is the clear need to define what constitutes the foundational economy. Perhaps a fair description could be said to be the activities that provide the essential goods and services to sustain everyday life, this regardless of the social status of the consumers. The delivery functions would be carried out be a number of local participants—local authorities, health, education, welfare services and local infrastructure projects—together with utility providers. All should be major contributors to the foundational economy. If we add to these food production and processing, together with the retail and distribution, perhaps we have a complete picture of what we would call the foundational economy. So, how do we make sure that these constituent parts are brought together to sustain a particular locality? Well, this in itself begs the question of on what form would any particular locality be based—local area authorities, local regions, or some other carefully defined geographical entity?

One of the stark realities identified in the report is the lack of the skills needed within local authorities with regard to implementing local procurement policies. Does this mean we should move to larger entities in order to capture these skills, or does the Government create the funds so that these skills can be bought in or developed in-house by local authorities? Other factors affecting a well-structured, local procurement strategy are the difficulties in measuring outcomes and the sharing of best practice. So, will public services boards be instrumental in establishing the principles that govern the criteria for adoption by local anchor institutions and lead on establishing scrutiny boards to collect and analyse data for the foundational economy?

There's little doubt that local procurement by the public sector will play, or to a large extent is already playing, a major role in creating a local foundational economy. Whilst the public sector will provide the anchor support for the foundational economy, manufacturing and food supply chains will also play a substantial part in making it work. Locally sourced food is not only desirable economically, it should also have the benefit of being fresh and, of course, would avoid long-haul transportation costs. Manufacturing on a local basis is more complicated due to the necessity of having economies of scale. These, of course, can be partly overcome by having a Wales-wide market or perhaps an export market to England and the rest of the UK, and even foreign exports. There's no doubt that the expansion of the foundational economy could bring many advantages, particularly to communities that have for far too long been locked in poor economic growth. I'm convinced that both the Minister and Deputy Minister for the economy are dedicated to improving the performance of the Welsh economy, but it is time that the Welsh Government begins to deliver on the many promises made over the last 20 years. The Welsh public demands as much.

When we first published our findings, way back in February, no-one could have foreseen how the emerging pandemic would rip through the economy, nor how our perception and appreciation of employment would shift, and key workers in foundational sectors on the front line. They were the people who couldn't work from home. They were part of the economy that couldn't be shut down. They were delivering essential goods and services that kept the clogs in everyday life turning when so much else ground to a halt—in our food shops, childcare facilities, construction sites and so on. And yet, they are often on the lowest wage. So, now, more than ever, and going forward, public procurement must be used as a catalyst for change, to help build community wealth and resilience through strong, local supply chains.

Other Members have spoken about what 'local' does and what 'local' means, and I'm not going to repeat those points, but I do look forward to the Minister's reply. I'm going to focus here on childcare, and I'm also going to refocus the debate around the social model and the respectability and the pay scales that people should have, and how that has to be built into local procurement. This wasn't prominent in our inquiry, but, as I said, the pandemic has reshaped the debate and childcare is part of that debate. The primary role of public procurement is to secure goods and services for all citizens—and this is the important part—in a socially responsible way, and if we didn't already appreciate it, the pandemic has revealed just how vital a public good childcare is, as essential as our physical and telecommunications infrastructure.

In August, the Welsh Government allocated £4 million to the childcare provider grant, and that helped more nurseries to stay open. In the same month, a survey by the Social Mobility Commission found that one in eight childcare workers in the UK earns less than £5 an hour, and that the average hourly wage in the sector is £7.42, and that is less, of course, than the living wage of £8.72. But if you contrast that, even though those nursery staff are among the lowest-paid workers, UK parents still face the highest childcare costs in the OECD, spending on average a third of their earnings on childcare. So, if procurement does anything, it has to level up those inconsistencies. At the same time, many families will have felt the sting of paying those nursery fees upfront only for their children to miss days or weeks whilst self-isolating or waiting for coronavirus test results. So, of course the Welsh Government's childcare offer is a lifeline for families across Wales, and that UK average is just that: Wales's policy is much more generous than other parts of the UK.

But, going forward and looking at what is important within a community, procurement clearly has to look at the wider experience of those people delivering the services for which the Welsh pound is spent on, and it must absolutely ensure equality within that stream when it comes to the pay scales of those people who are delivering what we all now recognise are the front-line jobs that kept the economy and kept Wales going at a time of crisis. 

Thank you. Can I now call on the Deputy Minister for Economy and Transport, Lee Waters? 

Yes, thank you very much, Dirprwy Llywydd. It's been an illuminating debate because I'd forgotten how simple all this was to sort. My last 23 months in Government have taught me it's a little more complicated, but it's good to be reminded that it's much simpler than that. 

I thought it was a very useful report, and I found the hearings themselves a really helpful way of illuminating the issues and getting them exposed and debated, and I'm not going to repeat the Government's response and read it into the Record. It attempted to be a full response, although I was sorry to hear some Members thought that it was still silent on some matters, so I'd be happy to return to that after the debate because I do think this is a cross-party issue. There's clearly a lot of consensus about the sentiment of what we're trying to do here. This has proven to be complex and tricky to implement. 

I thought Russell George managed to make a rather arid and consensual report into a rather spiky affair with his contribution. And I think it's right that we are challenged, because this is vitally important to the Welsh economy and the urgency we now face both with the pandemic and also the economic collapse—vitally important. As Helen Mary rightly said, we need to make sure that as many Welsh pounds as possible are recycled through to the Welsh economy. 

And we are having some successes, but there are also frustrations, there's no doubt about it. And I think Jenny Rathbone was right to challenge the public services boards in this. The thrust of the comments so far have been directed at the Welsh Government, but this is a whole-system approach that we need, and all public bodies have a responsibility to make sure they use their spending to benefit their communities. But let us not be under any illusion as to how difficult this is. Again, as Helen Mary said, this is a cultural shift that is needed. We have baked into the system the idea that we should always be delivering at the lowest price, and to shift that to a sense of social value is not a simple or quick thing to do, and I think Russell George, in challenging us, saying, 'Why hasn't it been possible to achieve this in 20 years of devolution?'—well, I've got to tell him, it hasn't been achieved anywhere else in the UK either. And that's because it is going against the grain of decades of practice—practice, it must be said, pursued by his Government too.

But I think there are opportunities through the crisis. So, just to give the Senedd one example, and that's the procurement of PPE through the pandemic. Well, we have been able to use the crisis to cut through some red tape that might normally slow things down to secure at least 20 per cent of PPE from Welsh suppliers, and the pandemic has also shown us that, when it comes to well-being-critical goods—and that's what the foundational economy, the everyday economy, is about; it's about well-being-critical services—we need not just supply, but we need resilience. Because, when the pandemic hit, it was all very well buying things for the cheapest cost in China, but, when we couldn't get it out of China, we were in trouble, and it was Welsh manufacturers who helped us out of a tough spot there. And we need to make sure, as we rebuild out of the pandemic, that resilience and local supply and shortening those international supply chains are at the front of our minds as we build new systems. And that is something that we are working on.

But, just to give you an example, we've been working with an engineering firm in Pontardawe who have transferred their activity to producing masks. But it's not as simple as being able to produce the masks at a competitive price—competitive with China—they also need to make sure that it can be procured within the regulations and that it meets the certification standards. You can't simply do any old thing and call it a mask and sell it into the NHS; it has to meet regulatory standards and there's a long process to go through to get those certificates. Now we've been working very intensively with these firms to get them through those barriers, and we're hopeful of getting a successful outcome. Where you simply wouldn't be getting another factory to open in Pontardawe, we can use what's there through public spending to make sure value is achieved within the Welsh economy. But I give that as an example to Members, just to understand the process that has to be gone through—all the ducks in the row that need to be lined up to pull this off. You need the willingness from procurement policy and from the professionals to procure locally. You need to be able to get a price at a point that is within the appetite of the public sector to spend. You need to make sure that the regulatory and the certification measures are all there.

And that's equally as true with food. I met yesterday with Castell Howell, as it happens, with officials, to go through an understanding of how we can encourage more food to be purchased within the Welsh economy. The work that has been mentioned by Russell George in the beginning, by the Centre for Local Economic Strategies, has done an analysis for us on food spend within the Welsh economy, and we know around half of all the money spent on food in Wales through the NHS goes to Welsh suppliers, but about half leaks out of Wales, and, in nearly all of those cases, there are Welsh suppliers that could take up those contracts. So, what's stopping us shifting that into the local economy? Well, there are a number of things, and that's what we're systematically working through now with clients, with public services boards, and we have made progress. COVID has slowed things down, it has interrupted us—understandably, I think, because the public services boards have been focused on dealing with the day-to-day crisis, and not what comes the other side of it. But we've picked that back up; we are now making progress with five PSB clusters.

To address the point of Jenny Rathbone on this food point, I think she's absolutely right about making sure that we have horticulture produced in Wales that can be supplied into Welsh schools and hospitals. We have a project through the experimental challenge fund in Carmarthenshire of getting local food on local plates, but also, in terms of the horticulture, we have funded—she mentioned small amounts of money, but we've funded just shy of £0.5 million in a project using controlled environment agriculture for three sites across Wales to try and grow crops in a non-conventional method, which we think has real potential, and that work has started, and I'd be happy to update her further on what's going on there.FootnoteLink

Information further to Plenary

Can I ask you to draw your remarks to a conclusion, please?

That was uncanny, because I was going to ask you how much time I had left.

You're well over, but—.

Okay. So, just to sum up, then, Dirprwy Lywydd, we are making progress. The pace is not to my satisfaction; this is proving to be very frustrating, because the barriers, both cultural and practical in a pandemic, are significant, but I would encourage you to hold our feet to the fire, because we do need to keep pushing forward on this. This is not going to be a short-term agenda; this is going to take time to turn the culture around. But the measures in the report are helpful, and I'd be happy to return to the subject with the committee at a future date. 

Thank you. I now call Russell George to reply to the debate.

Thank you, Deputy Presiding Officer. I only blame myself, because I agreed to the request of the Business Committee to reduce the time for this debate, so I blame myself—I've only 50 seconds, or 45, now. Helen Mary was focused on recycling the public pound in Wales. Jenny Rathbone argued that—well, was concerned that the policy is still developing at this stage. David Rowlands was correct, I think, in that we need a good definition of the foundational economy, and also concerned—correctly, I think—about skills within the local authorities. Joyce Watson was raising issues around childcare and how we can level up in that regard. The Deputy Minister—I was a little bit unsure about some of his comments; I'm perplexed by his remarks. I can assure the Deputy Minister that my comments were not my personal comments, they were the views of the committee, the cross-party committee, and I'm disappointed that he thinks otherwise, it appears. I was pleased to hear his comment about masks, and I think that demonstrates that, actually, this is achievable, so I think that's positive. I'm very grateful to all those who gave evidence to the committee, including Mohammad Asghar, who was a member of the committee at the time. Thanks also to our great clerking team and integrated team, who support us. I'm sure, Deputy Presiding Offer, this will not be the last time we discuss public procurement in this Chamber, but I hope, by the next time we discuss it, the dial and pace will have moved on a bit. Thank you.

Thank you very much. And the proposal is to note the committee's report. Does any Member object? I don't see any objections, therefore, in accordance with Standing Order 12.36, the committee's report is noted. 

Motion agreed in accordance with Standing Order 12.36.

We will now suspend proceedings to allow changeovers in the Chamber.

Plenary was suspended at 18:22.

The Senedd reconvened at 18:29, with the Deputy Presiding Officer in the Chair.