The next item is a statement by the Minister for Economy—and I call on the Minister for Economy—on the foundational economy.

Thank you, Deputy Presiding Officer. During the last Senedd term, we made significant progress in our support for the foundational economy here in Wales. This is a cross-Government priority, and we have focused our attention on businesses offering services and products that affect our daily lives: the food that we eat, the homes we live in, the energy we use and the care we receive. Estimates suggest that four in 10 jobs, and £1 in every £3 spent, fall into the foundational economy category. And nurturing the foundational economy is a fundamental part of our plans for the future. It underpins our economic resilience and reconstruction mission. At the economic summit last month, I outlined my vision for the Welsh economy and made clear the role that our economy has in creating vibrant places throughout Wales—places where young people can realise their ambitions and reach their potential, places where anyone can launch and develop a thriving business.

The foundational economy in Wales, as I say, accounts for four in 10 jobs, but they cover a broad spectrum of professions and career pathway opportunities. Fortifying the foundational economy will enhance and enrich employment opportunities and will enable us to focus on retaining Welsh talent in Wales to conserve local life and the economies in our cities and in our rural and coastal communities.

A critical cog of the foundational economy is social care. It enables so many people to live fulfilled lives, whether they are the recipients of care, or relatives and close friends of those receiving care, as well of course as the significant number of people who work in the sector. The sector is facing unprecedented resource pressure, so we're channelling assistance to try to help address this challenge.

Social Care Wales is being supported to help tackle the current recruitment crisis. We have a focused national programme that is helping care providers to reduce recruitment costs, and return-to-work opportunities are being offered to both those furthest away from employment and those facing unexpected life changes, such as redundancy.

We're supporting Flintshire council to become the first council in Wales to directly commission care from microcarers. Recruiting microcarers in outlying villages could help to build rural economies and offer more local solutions, it can also reduce travel requirements and associated carbon emissions, as well of course as supporting the Welsh language. It could help to encourage growth of Welsh-owned businesses, and it is an approach that we will look to promote across Wales.

We are also helping the retail sector to respond to changed shopping habits by providing access to an electronic platform to help enhance the digital presence of smaller retailers and also to help identify opportunities again for reducing the carbon impact. This development is being introduced initially across three local authorities, and I do then expect that to be followed by an all-Wales roll-out.

The pandemic and the ongoing impact of Brexit have emphasised the importance of resilient, local food supply chains. Food is critical within the foundational economy and can help to deliver multiple benefits, providing opportunities for local food suppliers and producers, as well as enhancing health and well-being. It can also play a major role in helping to realise our net-zero ambitions. We've continued to support work to help build local food-producing capacity. Hywel Dda health board has been funded to explore the development of a freeze-cook facility targeted at local food producers.

We're also supporting controlled environment agriculture production. This should help to improve our capacity for year-round crops and will help small businesses to compete fairly to supply food locally, at the same time as contributing to the growth of our green economy. I am determined that we will increase the amount of Welsh food served on public plates. We're working with a range of partners to enable this, including Caerphilly council, who lead on the food frameworks for the Welsh public sector, and we continue to work with major food wholesalers and suppliers to help them to transition to increased Welsh supply.

To successfully and collectively nurture the foundational economy, we must acknowledge the wider benefits that come from local purchasing. This includes supporting fair work, strengthening communities and reducing our carbon impact, as well as improving well-being. Public procurement is worth approximately £7 billion each year in Wales. I am determined that we'll push forward initiatives that ensure that our public money is spent here and to champion a wider recognition of the role that the foundational economy plays in helping to sustain and strengthen our unique ways of life.

I'm pleased to outline that, through support allocated for an NHS Wales foundational economy procurement programme, Welsh suppliers have been able to win an additional £11 million-worth of healthcare contracts from April to October within this year. Social value is now a mandatory criterion in many NHS contracts and we will work with partners to mainstream this further.

We have visibility of NHS Wales's forward contract plan for the next two years and local government has produced a progressive, collaborative contracting pipeline. So, we will work closely together to clarify contract opportunities for the foundational economy and the business support that will give our local suppliers every opportunity of winning these contracts. We'll encourage the involvement of co-operatives, social enterprises and other employee-owned businesses in the delivery of public spending.

Improved visibility of future contract opportunities tackles a significant barrier, which has traditionally limited the chance of local suppliers successfully accessing public procurement. Other requirements, including accreditation and qualifications, can also limit the chances of local businesses in winning contracts. To help address this, I can confirm that I will launch a backing local firms fund this month; it will initially provide support to businesses in the food, social care and optimised retrofit sectors. The £1 million backing local firms fund will build on the success of the challenge fund. As well as accreditation and qualifications, the fund will promote the broad range of career opportunities that these sectors offer. This can appeal to all parts of our rich and diverse population.

Deputy Llywydd, we have achieved some encouraging progress. There remains great scope to accelerate growth in the foundational economy and to fully engage those businesses in our ambitions to deliver programmes such as the optimised retrofit programme, the manufacturing action plan and to help achieve net zero. Realising the potential of the foundational economy requires joined-up working across Government, with business, the wider public sector and our social partners.

In the coming months, I will continue to work with Cabinet colleagues to build on cross-portfolio collaboration that has already been established and to develop approaches that further underline our recognition of the vital contribution that the foundational economy makes to well-being here in Wales.

Conservative spokesperson, Paul Davies.

Diolch, Dirprwy Lywydd, and I'm pleased that the Minister has brought forward a statement on how the Welsh Government is supporting the foundational economy today. Of course, the foundational economy is so vitally important to how we live; as has been said, it covers everything from the social care that's available in our communities to the food we eat, and so it's really encouraging to see the Welsh Government embedding the language of the foundational economy and its principles into its economic policies.

Today's statement has highlighted some of the projects funded via the foundational economy challenge fund, and I know that the impact of that funding has led to some really innovative projects being developed. The statement makes it clear that a £1 million backing local firms fund will build on the success of the challenge fund, which is really positive. Perhaps now is the time, therefore, to review the challenge fund to ensure that there is genuine value for money and that local economies are being transformed as a result of that investment. Therefore, can the Minister tell us how the Welsh Government is monitoring the effectiveness of spend via the foundational economy challenge fund and can he also confirm that he will be publishing an assessment of those projects that have received funding? And can he also clarify whether the backing local firms fund will now replace the challenge fund or, indeed, work alongside it?

Today's statement talks about progressive procurement, and that's something that the Minister knows I'm keen to see delivered right across Wales. We need to see improvements to our procurement practices to ensure small businesses are able to fairly compete for contracts. The Minister says he's determined to push forward initiatives that ensure that our public money is spent here and to champion a wider recognition of the role that the foundational economy plays in helping to sustain and strengthen our unique ways of life, and I'm pleased to hear that. Perhaps he can tell us a little bit more about the NHS Wales foundational economy procurement programme, and given that social value is now a mandatory criterion in many NHS contracts, can he tell us how he'll be monitoring this to ensure that contracts are awarded to the right businesses?

Of course, in order to identify opportunities to localise spend, it's crucial that business support is indeed reviewed. The previous Minister believed that there should be a review of business support, including Business Wales, to ensure that Welsh companies could fulfil public contracts and supply voids. Therefore, can the Minister confirm that that review is taking place, and if so, can he also share with us the outcomes of that review?

The Minister will be aware of the Federation of Small Businesses calls for a foundational economy lens to guide policy making, and I believe there's merit to this idea. One aspect of their lens is to encourage larger businesses to support small and medium-sized enterprises in sectors that are dominated by large firms that have disproportionate influence. The example they use is, of course, in the food industry, and today's statement also considers the importance of the food sector. For example, I'm pleased to see that Hywel Dda University Health Board has been funded to explore development of a freeze-cook facility targeted at local food producers. It's so important that we help local producers in the region and also retain more of the added value from local production.

The Minister will, no doubt, be aware of the Pembrokeshire food park in Haverfordwest, which is a great example of a way of providing opportunities for producers to acquire plots to develop food production and processing facilities that will create added value, and, indeed, create new jobs in the region. Can the Minister tell us what the Welsh Government is doing to develop a foundational economy lens? And can he also tell us what the Welsh Government is doing to support projects like the Pembrokeshire food park and to ensure that good practice like this is being rolled out in other areas?

The Minister may be aware of the report published by the Bevan Foundation last year, which focused on the capacity and potential of businesses in three communities in the south Wales Valleys: Treharris in Merthyr Tydfil, Treherbert in Rhondda Cynon Taf, and Cwmafan in Neath Port Talbot. That report found that support needs to be targeted to microfirms with much more effective communications and networks between businesses themselves and between business, local government and indeed Welsh Government. And so I hope the Minister will take the opportunity today to tell us more about how the Welsh Government is strengthening its communication and networks with businesses, particularly in those areas where local economies are weak.

The Minister will be aware of the work done by Preston City Council in building community wealth, which has successfully promoted inclusive growth of the local economy since 2012, and we can learn lessons from the way in which others are developing the foundational economy. As the Welsh Government is also a significant owner of land and property, it's vital that it's using those assets to deliver social and environmental benefits. Therefore, can the Minister tell us what work has been done to examine how the Welsh Government can use its own assets to develop the foundational economy in Wales? And, as the Minister has reminded us today, the foundational economy accounts for four in 10 jobs and £1 in every £3 that we spend, so we're not talking about small amounts of money here. Of course, the COVID pandemic has impacted resilience in some communities, and it's vital that we understand just how much of an impact it's had on the foundational economy. So, perhaps the Minister will agree to publish an assessment of the impact of COVID-19 on the foundational economy.

Therefore, finally, Dirprwy Lywydd, can I thank the Minister for his statement and say that I look forward to hearing more about how the Welsh Government is developing and scaling up the foundational economy here in Wales? Diolch.

Thank you for the series of questions. I'll start with your point about the challenge fund and the assessment. Fifty-two projects were supported, 47 of those completed at March, and the assessment of those has helped to inform the activity we're now moving forward with as well. There's also, though, plenty to learn from the community of practice internally, which Cynnal Cymru have helped to run for us, and I'll certainly consider whether it would make sense to publish something, perhaps a written statement, providing more information on what we've learned from the challenge fund and to set out more clearly how that's helped to inform the backing local firms fund, which will take forward much of the learning from the initial challenge fund phase, which of course came from a previous budget agreement.

I think you asked later on about food as a sector, and it's something that I've already made choices on, investing in the food sector, not just in west Wales but right across Wales. It's one of the positive advantages that I see for the future of the Welsh economy and people's continuing understanding of where produce comes from and how we then use it. I actually think there's a big opportunity to persuade more people to make use of Welsh food in their own choices, as well as frankly other public procurement choices that I've mentioned as well. So, as I said, food, the retrofit programme and social care are the three areas we're initially targeting the backing local firms fund on, to try to take forward some of the lessons on how we understand what looking at the wider question of social value is. So, it's not simply about the price, but it's the value of what we do when we're spending public money. I do expect that we'll learn more from this next stage as we then continue to roll this forward. And, in many ways, the backing local firms fund, from an external point of view, is probably easier to understand than the foundational economy. It is exactly what it says on the tin: back local firms for them to be successful, to gain more from public procurement, to actually the help that will provide in terms of local jobs, but also that broader point about our impact on the wider world. 

And on the NHS, which again is another—. And I see this from the perspective of being the health Minister, and again within the foundational economy and looking again at local procurement, and now in my current role. The health Minister and I have already issued a written statement on a foundational economy approach within the NHS, so I think it's really encouraging that, within six months, more than £11 million has been spent with Welsh firms who weren't previously engaged and delivering work from NHS procurement. So, that's a really positive step, and I expect us to be able to do more in that space progressively in the future. I know the now Deputy Minister for Climate Change regularly made the point internally within the Government, as well as externally, about how and where you get the money spent on food contracts within the NHS, but much more widely, and where that supply is coming from. So, there is more work that I think we can do, not just in food but a wide range of other areas too. And that will involve monitoring and understanding success and, again, making sure that the lessons from that are rolled out.

I think this goes through to your point about a foundational economy lens, so there are a number of things we're doing. We have a community wealth-building approach in Gwent that takes on board lessons from Preston and others, and our external partners in the Centre for Local Economic Strategies, otherwise known as CLES. That is looking at community wealth building across Gwent, but it definitely includes the NHS, so Aneurin Bevan health board are very much involved in that in looking to understand what we could do better and their understanding of their impact within their local economy and the communities in which they not just provide services but spend lots and lots of public money.

That will also include us looking again at the business support we provide—both the support that Business Wales provides, but when we're talking about the backing local firms fund, some of that will be about business advice for those businesses. So, we're looking to see how we can help them to understand how they can get through the gate and be more successful in procurement in its widest sense. You talked a bit about Welsh Government assets—these aren't just physical assets, of course; I think one of our biggest levers is what we're prepared to do progressively with procurement and our understanding of what we expect people to do, in both direct Welsh Government, but more broadly across the public sector.

I'll consider his point with interest about COVID-19 and its impact on the foundational economy and how that might and might not be, but I'm thinking more clearly about how the business restrictions that we've had have had an impact, and then the success of the interventions we've provided more generally. There is work ongoing on that, but I'm thinking more broadly about the recovery, and how we make sure that the foundational economy actually grows—not just survives, but grows the sector with better paid jobs and better conditions for local firms and local businesses.

Plaid Cymru spokesperson, Luke Fletcher.

Thank you, Deputy Llywydd, and thank you to the Minister for the statement this afternoon.

Traditional macro-economic approaches to economic development have failed to deliver economic gains and social benefits within environmentally sustainable limits or spread fairly those gains throughout Welsh localities. The current model that relies on continual growth, the accumulation of capital and extraction for profit is impossible to sustain on a finite planet with finite resources.

Turning to the statement, current attempts by the Welsh Government to prioritise social utility when awarding contracts—which I wholeheartedly welcome—risks seeing some businesses simply rewording their bids to incorporate the new requirements at paper level only, rather than demonstrating how they embed social value within their proposed work practices. Could the Minister outline what measures the Welsh Government are taking to guard against this?

We also must move away from obsessions with high-value sectors and inward investment to a more holistic view that focuses more attention to the foundational economy. This could be achieved by harnessing the power of community wealth building and anchor institutions encouraging plural ownership of the economy by locally owned or socially minded businesses, who are more likely to employ, buy and invest locally rather than extracting wealth. In Preston—as we've heard already today—community wealth building has been used to tackle the inequalities present in the region and ensure economic development in the area is shared more equally amongst residents. Through this approach, an extra £4 million was spent locally by Preston council over a four-year period.

It's welcome that Welsh suppliers have been able to win an additional £11 million-worth of healthcare contracts, but I'm sure the Minister shares my ambition for us to go even further. It's welcome that the Minister has announced the backing local firms fund. I would welcome further details on that fund, and would echo Paul Davies's calls for a review of the challenge fund. And further, could the Minister outline the Welsh Government's position on creating a Welsh model of local public procurement, built on the foundational economy, specifically through setting a target of increasing the level of public sector procurement to 75 per cent of the total spend of the Government procurement budget?

A new green industrial strategy must not only cease carbon-intensive practices, but provide a just transition with shovel-ready green jobs and a local jobs guarantee that will help revitalise Wales's rural and ex-industrial local economies. Following the lead of the Scottish Government, a just transition commission should be developed to oversee the green industrial transition, and we should establish an alliance of Welsh businesses—which includes the Welsh Government—to focus on co-ordinating action, not just policy, that will achieve social, economic and environmental growth. A just transition is key for the foundational economy in Wales, as so many sectors in the foundational economy suffer from issues stemming from below-average hourly wages and relatively unstable hours of work. This results in more people living in poverty or being at risk from falling into poverty, and has a negative effect on family life, health and spending in the local economy. I think the Chamber can guess where I'm going with this, but could the Minister confirm whether or not the Welsh Government has considered the possibility of establishing a just transition commission?

Of course, increasing pay and providing more secure and stable hours must be an integral part of any policy aiming to grow the foundational economy, and may help us in tackling some of those recruitment issues the Minister outlined in his statement. In food and beverage services, accommodation and retail, for example, workers receive at least £3 an hour less than the average Welsh worker, but these sectors employ around four out of 10 of all employees in Wales. In the retail, food, accommodation and social care sectors, even the best paid employees earn less than £500 a week. What measures will the Government take to improve earnings and hours in the foundational economy, and has the Minister given consideration to how we might be able to incorporate a four-day work week into the foundational economy? I mentioned procurement earlier on—well, there is an opportunity to use the Wales fair work Act and incentivise shorter working weeks by building it into procurement strategy, which is of course all above board, according to section 60 of the Wales Act 2006.

And finally, Dirprwy Lywydd, the gender pay gap is also of concern in the foundational economy, as the largest gender pay gap is seen in the energy industry and is also very substantial in education, health and non-residential social care. There is a notable gap in gross weekly earnings between women and men in all foundational economy sectors, which worsens as pay increases. Chwarae Teg's recently published figures on the Welsh gender pay gap between 2020 and 2021 show that the gender pay gap has actually worsened in this time, increasing by 0.7 per cent to a total gap of 12.3 per cent. As we transition to a greener economy, where much of the focus will be on sectors such as energy, construction and housing, how does the Welsh Government plan to rectify this pay gap and ensure that everyone gets a fair stake and fair work in Wales's future green economy?

Thank you for the comments and questions. I hope that we heard a more positive Luke Fletcher than last week, when he talked about how he self-described as rather negative and seeing the downside. Actually, I think there's a lot to be positive about in the foundational economy, and as I say, we started the challenge fund in particular following a budget agreement with his party in the previous Senedd, and that's allowed us then to start the challenge fund.

Again, much of what he said at the start of his contribution about recognising the value of anchor institutions and how they can have a much bigger impact on the local economy was definitely at the heart of our thinking. It's why we were able to reach agreements on doing that previously. That's part of what I'm looking to take forward. I'm not going to try to unpick the lessons we've learned, but how can we do more and be more—not just enthusiastic, but actually more ambitious about what we can do in practice. That's why I'm really pleased that, within six months, we've done what I've said with the £11 million of extra NHS spending in Wales that, previously, was going outside Wales. That's significant, and I expect us to be able to identify more NHS spend coming back into Wales in the future, progressively. As I've said to Paul Davies, I'm certainly looking to monitor that together with the health Minister, because I want to understand how we've done that successfully in practice, and then to reset our objectives to do more in the future, rather than simply saying, 'We've done enough, let's forget about this and move on.' This is part of the future, not simply something for one statement and then move on.

On your point about how that value needs to be there, I think your points about procurement and supply chain are really important. We know we've made a difference on procurement over the last term and before. We know that there are more Welsh businesses and more Welsh jobs because of the way we've changed our approach in procurement. But the challenge is, again, how we do more, not to be defensive about what we've done or haven't done so far, but how do we say we can do even better. The backing local firms fund is part of that, but it's all the other things that I've outlined earlier today. The work that CLES have done with us, the lesson learning they're already doing with public services boards—they're doing lesson learning to get to the end of this financial year for us to understand more about what we already have done, to then be able to move on and make greater progress. It's already the case that we understand that, within the supply chain, there are some businesses that have a postcode for payment, but all of the activity certainly isn't in Wales. That's, again, part of our challenge—how do we understand as we go through the management of the supply chain itself that we're not just getting primary contractors who are based here, but as you go to the next two steps down, are those businesses genuinely located in Wales, and the jobs are here? And crucially, how do we get Welsh businesses further up that chain within the supply chain so that they're the primary contractor and not the third or the fourth iteration of it?

I expect you will see more of that as we go through what the backing local firms fund will help us to do—and more of the advice that Business Wales will continue to provide within the sector as well. So, I think there is room for optimism because we have already done some of this. A good example of the backing local firms fund is the optimised retrofit programme, similar to your point about the green economy. We've announced £150 million to spend with an objective that should make a big difference for the homes that people live in. That's part of our objective, and the bills and the costs for people that live in those homes. But from this perspective, it's the jobs that will go in that. Where is that £150 million going to be spent? How do we positively identify Welsh firms, Welsh businesses, Welsh jobs that will be taking advantage of that money? And again, that's very clear, and this is a good example of a much more joined-up approach between my colleagues in climate change, Julie James and Lee Waters, and this department to make sure we take advantage of those opportunities.  

I'm not persuaded that we necessarily need a just transition commission, but I think what we have set out, with your points about fair work and also the objectives we have with the social partnership and procurement Bill—fair work will be at the heart of that. There will be lots more to talk about in the scrutiny of that piece of legislation, as well as our approach in a range of other areas. But I do recognise that we have more that I think we can do in the way we choose to spend money, and how we persuade businesses to come along with us—that's by exhortation but it's also about the requirements we have of how we expect Welsh public money to be spent. And that will include our ambitions on reducing the gender pay gap, because I recognise that as the economy is structured, there are many jobs that people assume are jobs for men or for women and yet, actually, we know that that divide need not be the case. We are looking to positively encourage people to consider different careers, as well as, with our foundational economy approach, looking to raise the pay of areas where we know that there are often low-paid women. So, that's why we're talking about social care as a really important sector, but it is also why we'll continue to take proactive and positive steps to encourage women into careers, into skills and training to get those jobs, and for employers to change the workplace. 

I'll finish on this point, Deputy Llywydd. I can honestly say that I have worked in workplaces with different groups of people in different teams, and the best teams that I have worked in are teams that are more balanced between men and women—the most enjoyable teams, the best culture within the teams, the best way to get the most out of each other. So, it isn't just about wanting to do the right thing from an ideological perspective; there's good evidence, not just in my experience but more generally, that businesses tend to do better if they can address this issue about who works for them and, crucially, the fairness of how people get paid. 

Finally, Sarah Murphy. 

Diolch, Dirprwy Lywydd. Backing local businesses is vital and that is why I am so happy to see the £1 million investment for the backing local firms fund from you today, Minister. I know in my constituency of Bridgend the difference that strong local businesses make, and they are the lifeblood of our communities all across Wales. I am especially pleased that this fund will prioritise businesses in the food, social care and optimised retrofit sectors, of which we have many in my constituency. It really highlights how the Welsh Government is truly investing to strengthen our foundational economy and, by extension, the well-being of the people of Wales. Sorry, I haven't got my glasses. Winning more value and better jobs from the food we eat to the care we receive and the homes that we live in is what it should be all about, and this fund, of course, is an addition and builds upon the announcement from our Minister earlier this summer with the £2.5 million funding boost to back businesses in the everyday local economy. So, as you said, we are building all the time. I am also very keen to know, as Luke Fletcher said, more about this fund, how my constituents can engage in it and apply for it as soon as they possibly can.

And finally, I really appreciate the fact that the Welsh Government's backing local firms fund is based on evidence and partnership. This is the reason why I wanted to be elected to represent the people of my constituency—to ensure that when we do have this funding, this really important funding that makes a huge difference, that that is exactly how it is decided. Because, sadly, this has not been the case for Bridgend or Wales when it comes to the UK Government's levelling-up funding, which, frankly, might as well be called the 'backing loyal Tories fund'. So, whilst I am absolutely delighted that we have this additional funding for local businesses today, Minister, I hope the UK Government can learn from Welsh Government on this.   

Thank you. There are two points there. The first is the really positive point for Bridgend and Porthcawl and other constituencies—that you can expect more business to go to local firms to support local jobs. The three sectors initially are the three areas in the backing local firms fund—food, social care and optimised retrofit suppliers, which I'm sure you have a number of within your constituency. It's about how we roll out the understanding of how people can look for the support and the access to business advice for them, but, crucially, for people who are then running those contracts and tendering those contracts to make sure that they're taking up opportunities to invest within their local communities. And I am confident that we will see not just money being spent, but also greater value in local communities as a result of the choice we're making. 

And your second point is about the continuing challenge of the way that the levelling-up fund agenda is being run. The Prime Minister has ditched his previous manifesto promise for Wales not to lose a penny. Those funds are being raided when they should be spent here in Wales. This institution, both the parliamentary side and the Government, should have a say on how that money is spent as decision makers, and it is costing Wales hundreds of millions of pounds at this point within this year. And you're also quite right to point out that money is being spent in a way that looks very much like the UK Member of Parliament you elect makes a difference as to where money is spent, not need, and that simply isn't acceptable or justifiable, and this Government will not take a backward step in making the case for Wales to receive what it deserves. I certainly hope that other parties in this place would actually find it within themselves to do the same. 

Thank you, Minister. We will now suspend proceedings to allow changeovers in the Chamber. If you're leaving the Chamber, do so promptly. The bell will be rung two minutes before proceedings restart. Any Members who are arriving after a changeover should wait until then before entering the Chamber. 

Plenary was suspended at 15:31.

The Senedd reconvened at 15:39, with the Llywydd in the Chair.