Cofnod y Trafodion
The Record of Proceedings

Y Pwyllgor Materion Allanol a Deddfwriaeth Ychwanegol

The External Affairs and Additional Legislation Committee

03/10/2016

Agenda’r Cyfarfod
Meeting Agenda

Trawsgrifiadau’r Pwyllgor
Committee Transcripts

Cynnwys
Contents

4        Cyflwyniad, Ymddiheuriadau, Dirprwyon a Datgan Buddiannau Introductions, Apologies, Substitutions and Declarations of Interest      

5        Gadael yr Undeb Ewropeaidd: y Goblygiadau i Gymru—Cyllid, Ymchwil a Buddsoddi sy'n Gysylltiedig â'r UE

Leaving the European Union: Implications for Wales—EU Funding, Research and Investment

33      Gadael yr Undeb Ewropeaidd: Y Goblygiadau i Gymru—Cyllid, Ymchwil a Buddsoddi sy’n Gysylltiedig â’r UE

Leaving the European Union: Implications for Wales—EU Funding, Research and Investment

59      Papurau i’w Nodi

Papers to Note

59      Cynnig o dan Reol Sefydlog 17.42(vi) i Benderfynu Gwahardd y Cyhoedd o Weddill y Cyfarfod

Motion under Standing Order 17.42(vi) to Resolve to Exclude the Public for the Remainder of the Meeting       

Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle y mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.

The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.

Aelodau’r pwyllgor yn bresennol Committee members in attendance
Dawn Bowden Bywgraffiad|Biography	Llafur Labour
Michelle Brown Bywgraffiad|Biography	UKIP Cymru UKIP Wales
Angela Burns Bywgraffiad|Biography	Ceidwadwyr Cymreig (yn dirprwyo ar ran Suzy Davies) Welsh Conservatives (substitute for Suzy Davies)
Darren Millar Bywgraffiad|Biography	Ceidwadwyr Cymreig (yn dirprwyo ar ran Mark Isherwood) Welsh Conservatives (substitute for Mark Isherwood)
Steffan Lewis Bywgraffiad|Biography	Plaid Cymru The Party of Wales
Jeremy Miles Bywgraffiad|Biography	Llafur Labour
Eluned Morgan Bywgraffiad|Biography	Llafur Labour
David Rees Bywgraffiad|Biography	Llafur (Cadeirydd y Pwyllgor) Labour (Committee Chair)
Eraill yn bresennol Others in attendance
Yr Athro / Professor Iwan Davies	Prifysgol Abertawe Swansea University
Neville Davies
Yr Athro / Professor Colin Riordan	Prifysgol Caerdydd Cardiff University
Swyddogion Cynulliad Cenedlaethol Cymru yn bresennol National Assembly for Wales officials in attendance
Alun Davidson	Clerc Clerk
Gregg Jones	Y Gwasanaeth Ymchwil Research Service
Elisabeth Jones	Prif Gynghorydd Cyfreithiol Chief Legal Adviser
Rhys Morgan	Dirprwy Glerc Deputy Clerk

Dechreuodd y cyfarfod am 13:01. The meeting began at 13:01.
Cyflwyniad, Ymddiheuriadau, Dirprwyon a Datgan Buddiannau Introductions, Apologies, Substitutions and Declarations of Interest
[1] David Rees: Good afternoon. Can I welcome members of the public and Members of the Assembly to this afternoon’s session of the External Affairs and Additional Legislation Committee, where we will continue our evidence collection as to the impact of the decision of the UK to leave the EU? I remind you, for housekeeping, that there are no scheduled fire alarms, so, if one takes place, please follow the directions of the ushers. Can I also ask all Members to turn off their mobile phones or switch them on silent, or any other electronic equipment that may interfere with the broadcasting equipment? We are bilingual, and we operate a bilingual system, so if you require simultaneous translation from Welsh to English, please use the headphones on channel 1. If you require amplification, channel 2 is available for that.
[2] We’ve received apologies this afternoon from Mark Isherwood and Suzy Davies, and I’d like to welcome Darren Millar and Angela Burns as substitutes. Welcome.
13:02
Gadael yr Undeb Ewropeaidd: y Goblygiadau i Gymru—Cyllid, Ymchwil a Buddsoddi sy'n Gysylltiedig â'r UE Leaving the European Union: Implications for Wales—EU Funding, Research and Investment
[3] David Rees: I’ll therefore just go straight into the session this afternoon. Can I welcome Professor Iwan Davies, pro vice-chancellor of Swansea University, and Professor Colin Riordan, vice-chancellor of Cardiff University? Can I welcome you both, this afternoon, to the session? Thank you for taking the time for us. Clearly, your two institutions are major players in the whole higher education sector in Wales, but also in the research arena as well, and Swansea University has been very involved in other aspects of European funding. So, your knowledge and expertise will be very helpful to us this afternoon. Just as a start, perhaps individually you could give us an indication as to how your individual institutions, initially, are looking at the decision and preparing for post-Brexit sessions? If we start with Professor Riordan.
[4] Professor Riordan: Yes, thanks very much. Can I just say, on a slightly more general point about the whole European Union debate and universities, you’ll be very well aware that Universities UK and all universities in Wales as well campaigned very strongly, within the limits of our ability as charities, to stay within the European Union, believing this to be in the best interests of our organisations. The main premise on which we did that was the ability to remain part of a community of 500 million citizens, which is the European Union, on the grounds that scale and diversity are really important for high quality in universities. So, if we can operate within a research and student recruitment arena that large, it just gives us a big advantage. Let’s say, for example, you want to co-operate in terms of research, if you’re doing that with 3 million in Wales, looking for the highest quality researchers to do a complex, multidisciplinary project, that’s going to really reduce the pool of people you can draw from. If you do it in a much, much larger arena, you are going to get higher quality. Having common standards and common policies and procedures, and common funding mechanisms to do that is very advantageous. So, those were the main grounds that we campaigned on, not just that we would lose funding.
[5] I know that a lot of what we’ll talk about is funding today, but, actually, more important to us is the ability to be able to recruit students from as broad a pool as possible, because we’re universities, we do that, we recruit students, and we want the best students who are most able to succeed wherever they may be found, including, of course, in our own areas, but much more broadly than that. Similarly in terms of staff, we want to be able to do the same thing, and we need to be able to collaborate as broadly across the piece as we can. All the evidence shows that if you collaborate internationally on research, you will achieve better outcomes, and we can show that by citation rates and by other means as well. So, that’s by way of a preamble.
[6] There are, essentially, two main aspects to this: the people part and the funding part. In terms of people, the most urgent question that we really need the UK Government to address as soon as it feels able to is the status of applicants from other European countries who want to study in this country, beginning next September, in a year’s time, for academic year 2017-18. Applications for that process opened on 6 September. We’re now into the beginning of October, almost a month later, and we’re still unable to assure students as to whether, if they register next year, their student loan status and their status in this country will be assured. That is a real problem, because if we make an offer and they accept it, we’ve effectively entered into a contract with them, and that’s really quite difficult if we don’t know whether the commitments that are being made to them, not just by us, but also more generally by the Student Loans Company, are going to be honoured or not.
[7] Fortunately, very soon, within a couple of weeks of the vote in June, we received an assurance for this year now—so, students who’re just registering now—and there’s no evidence that I’m aware of that we’ve lost students because of the vote in June. They still want to come to the UK, but they will need that assurance. So, that, for us, is the top issue on the agenda—for the UK Government, really, to be able to give that assurance, or is it possible for the Government in Wales to do that for our students? That’s something we are talking about. So, that’s one issue.
[8] More broadly, there’s a question of what happens after we exit the European Union. What is the status of the EU students? At the moment, they have the same status as domestic students, or Welsh domiciled students—in other words, they receive the same treatment, benefits and status as Welsh domiciled students. We take it that the most likely outcome after the vote would be that they would become, in effect, international students—in other words, students with the same status as anybody outside of the UK—and there’ll be no longer any distinction between students of other EU countries and other international students.
[9] There are a number of reasons—. We’ve actually debated this question of whether it would be better to argue for some special status for students from other EU countries. The only question is: exactly what would that look like? What would the advantages be to us? What would the advantages be to them? There may be greater advantages to them than to us, so that’s something we would seriously need to consider. At the moment, we’re proceeding on the basis that once we leave the European Union, they no longer have any special status in terms of fee, or necessarily anything else.
[10] In terms of staff, it’s so important to us. We have, I think, in Wales, around 1,300 European Union staff working at Welsh universities. The most important thing for us is that we can continue to recruit freely from the European Union and, as far as possible, around the world. The outcome we would like to see is that we can recruit certainly the best academic staff from around the world, wherever they may be found, and that we have a visa regime that allows that. So, in terms of future recruitment, we would like the ability to recruit as freely as we can in order to get the kind of quality of staff. That’s the only way you can compete; you’re only ever as good as the quality of the staff that you can have, and any restriction on that is complex.
[11] We would certainly want to argue very strongly, as I’m sure many people in this country would—I’ve not heard anything very much to the contrary from any side, to be honest—that those colleagues who are presently in this country and presently employed by us should be able to remain on the same basis as they are now and that, whatever their status is, it’s converted into something that equates to leave-to-remain and residents’ and working rights. So, we would certainly like to see that, and the sooner we can give that reassurance, the better. It’s understood that there are broader complexities to all of this, but that’s something we would like to be able to do, because you’ll be aware that there are knock-on effects of people feeling unwelcome; people perhaps looking to leave, accepting jobs overseas or perhaps not coming to us. So, there are areas around that that we can discuss, I think. So, that’s the people side.
[12] On the funding side, it was very good to hear that the Treasury is now going to guarantee projects through to 2023 if they’re concluded before the autumn statement, which I think is 23 November. So, whether that’s structural funds or Horizon 2020, both of which are really important to us. Now, if I take Cardiff University as an example, from the latest research funding strand from the EU, we have had about 36 projects already. We’re very shortly, if you look at those in the pipeline, going to reach the 50 mark. That will be a very big gap to fill. There are research projects amounting to some €18 million just on that side, and then there’s the structural funds as well.
[13] I think it’s worth noting that one of the biggest changes that has taken place since the coalition changed the system and introduced tuition fees and so on and so forth—or higher tuition fees and student loans—is that, and this part is often not noted, we’ve had a big reduction in capital investment available to universities. So, we used to, in Cardiff, receive maybe £14 million to £15 million a year in capital grants. That’s now £2 million or £3 million, and everything else we have to make up, hence—as I’m sure Professor Davies will outline for Swansea—we have to go out and secure our own capital from the markets and some other means, and that’s how we do that.
[14] One big element of that is European Union structural funds, so there’s €310 million available for research and innovation under this present financial framework. What’s going to happen about that, because that will be a major gap to be filled? You’re probably aware that, overall, in the research and education space for the UK, we pay in about £5.4 billion and receive about €8.8 billion back. Again, that’s a gap that will need to be filled.
[15] I’ll just mention one concluding matter, before letting Iwan come in and say his piece, and that is that I think we do need to be insisting and holding the Government to the view that there does need to be some sort of Brexit premium. I mean, what’s the point of doing all this and advertising all the money we’re going to save from not transporting it over there if there is no Brexit premium? Whether we’ll get €8.8 billion equivalent back is a moot point, but I think it really bears thinking about: what would we want to happen to that money? Let’s just assume for a moment that it is there, which I know is a debatable question, but, if it is, would we want to use that to buy into the European funding systems that exist now and retain as much associate status as we possibly can, or would we want to think of something perhaps more international and global and imaginative to do with it—in other words, something that isn’t what we have now—or some hybrid of the two? I think that’s a really interesting question that’s worth debating.
[16] David Rees: Thank you. Professor Davies.
[17] Professor Davies: Obviously, I’d agree with a lot of what Colin has said. I think the first point I’d make is that four of the universities in Wales are highly internationalised and recognised as such in the top 200 internationalised universities in the world. So, we are part of the global network. It’s almost part of the DNA of many of the Welsh universities. So, when we look at Brexit, we’re looking at this from a global perspective and looking at ways in which we can do three things: how we can establish deeper collaboration with international partners; how we can remain attractive as a destination for global talent; and also, as part of that, how we ensure that we have sustainable investment going forward.
[18] Universities are, in the proper sense, global talents. Colin’s already mentioned that we have over 1,300 EU academic staff already working within the sector in Wales. If you were to also look at the broader view, certainly where we are in Swansea, 40 per cent of our recent appointments over the last three years have not been from the UK; so, they’ve been EU and also people from outside of the European Union. The importance of that is that we are in a competitive environment and, as part of that process, we have to be able to attract global talent. The point about research is that research is not a respecter of boundaries. The global challenges are wider than even Europe. How can we engage in that in a meaningful sense and change the world, which is what Wales is all about? Having heard the First Minister talk about Wales’s contribution to Africa just a minute ago, before coming into this seminar today, it strikes you that Wales has ambition to be a player in the world, and its universities certainly have.
13:15
[19] So, in summary, it would occur to me that we would look to the Welsh Assembly to really set some red markers down in terms of the negotiation on behalf of the UK with the EU as part of its Brexit policy. Really, it’s about what the options are for the UK. For us, it would be: is it a full associated country status, is it partial association, or is it third country status? What we’d like to do, really, from a university perspective, bearing in mind that we are global institutions, is what best would fit our needs as such an important sector for Wales.
[20] David Rees: Thank you both for your opening remarks. I think the comments that you’ve provided have indicated some interesting areas that we want to explore further. So, I’ll start with Jeremy.
[21] Jeremy Miles: Thank you. Just to pick up on the point that you just made there in closing, Professor Davies, about the different models of relationship that the UK might have to the EU, one of the questions I know is a live question is the question of continued participation in some of the programmes like Horizon 2020, Erasmus and so on. In your ideal world, so to speak, what would that continued participation look like, and how does that differ from the benefits today?
[22] Professor Davies: I would say that a bilateral arrangement between the UK—and Wales being part of that process—and the European Union on science research is absolutely critical. For me, the issue would be the extent to which we, as Welsh universities, can contribute in the same way to the big science issues, which we are currently doing. Bearing in mind, as Colin’s pointed out, the extent to which—. The contribution that we’re making isn’t a monetary one. Of course, it can be measured in money, but it’s the brilliance of the science of the UK, and the contribution that Wales makes as part of that process, that gives lustre, if you like, to that relationship. So, one would be looking at a two-way process.
[23] Can I also quote Sir Venki Ramakrishnan, who is the president of the Royal Society? Really, the European dimension is critical, but also there’s a global point. When you look at the labs that we have in Swansea—I’m sure the same in Cardiff as well—there are European academicians there; there’s talent from all over the world. That is what we’re bringing to the European science agenda as well. So, we should be looking at this from a position of strength. It’s what we contribute to the research agendas, which are just as critical for the European Union when we leave as when we are part of the European Union.
[24] Jeremy Miles: So, part of that, it seems, is around the decision-making process and the extent to which Welsh universities get to influence some of the agenda, rather than simply the extent to which there’s a financial benefit. You’re making a broader point, it seems to me.
[25] Professor Davies: Well, that’s the reality. The reality is that the point about Horizon 2020 is the extent to which we can have sight of future research themes coming to the fore, how we can freshen some of those research themes, and how we can add to those research themes. So, rather than being outside, we are part of the process of thinking. I’d be confident enough to say that we have sufficient brilliance, as a sector, in the UK to be able to contribute fully. And that would be understood, I think, by colleagues in Europe.
[26] Jeremy Miles: Just to develop that, in terms of the attraction of talent from other parts of the world, you obviously attract talent from way outside the European Union, clearly. Is it your view that it will become harder to attract talent from other parts of the world if you are not participating fully in these programmes?
[27] Professor Davies: The answer is ‘yes’. The evidence of that is that I returned a matter of 10 days ago from China, visiting a number of our collaborating partners—so these are developing strategic partners in top universities in China—and I can’t remember the number of times I was asked what the implications of Brexit were. It wasn’t from the perspective simply of students, although that’s quite important in terms of the Erasmus element to it, but really was about what access can our collaborating researchers have to Europe in the context of Brexit. I think that reputational harm and that fetter on our ability to do big science is the real threat.
[28] David Rees: Professor Riordan, clearly you’ve had, as you said, a large number of projects with the EU. Do you find the same comments?
[29] Professor Riordan: Yes. I think that the big danger that faces us is: are we going to end up in a position where we’re paying large amounts of money in order to be able to stay part of that system—and money that couldn’t then be deployed in other ways has to go on that—but we have little or no influence? It’s a familiar argument, but, over the last six or seven years, I’ve made many, many what we basically call lobbying visits to the European Commission and the Parliament. The most recent event was when the new President of the Commission—when he came in, Juncker decided to take money out of Horizon 2020 to put in this new structural fund, the European Fund for Strategic Investments, which he wanted to create, which has been created. We managed to go over there, persuaded the MEPs—particularly our MEPs, but then, in collaboration with other countries as well, we talked to our colleagues in Germany—and managed to get €500 million of that returned to Horizon 2020 and various other changes made that made it more difficult for that to happen in the future. We just wouldn’t have that influence anymore, and we are such a big player in Europe that I think we need to be—I just think we need to be cautious about how we approach this, because, if we were to say, ‘At all costs we must retain our access’, but we’re prepared to give up all control over it, that could put us sometimes in quite a difficult position. I think it’s worth contemplating the idea that the outcome we’re seeking is that our researchers can access funding systems and common procedures in order to be able to collaborate with the best scientists around the world. Now, there might be other ways of doing that, or there might be a different form of access. I just think we need to think it through and concentrate on what outcome we’re seeking, which is that ability to collaborate and to work with other countries who essentially pool resources in order to do complex research projects that really need that input from different areas.
[30] David Rees: Okay, thank you. Eluned.
[31] Eluned Morgan: Yes, can I just follow up the Horizon 2020 questions, really? Israel has got access to Horizon 2020 and pays into it, and what you’re suggesting, therefore, is that the disadvantage is that you’re not there formulating the programme for Horizon 2020. So, is that the case with Israel—they just have to take it or leave it, what is on the table?
[32] Professor Riordan: They have absolutely no influence on what happens. I’ve also heard directly from a Commission official—and this was before the vote even, but it was along the lines that, ‘If you do remain part of it, you will only get out what you pay in. You won’t get more.’ So, the present imbalance in our favour, which is essentially based on the excellence, as Iwan stressed, of our science and our research—it would no longer work in our favour.
[33] Eluned Morgan: So, can I ask you about that premium, that £8.8 billion that we get back? I may be a little bit out of date, but seven years ago, actually, Welsh universities weren’t punching their weight in terms of the science programmes. Has that changed now, and is Wales actually getting a premium? I understand that the UK might be getting a premium, but are we now getting a premium that we weren’t getting, I don’t think, certainly seven years ago?
[34] Professor Riordan: The issue with Wales is that what we’ve tended to do is not receive the same proportion from the UK research councils as our population would seem to indicate. However, if you look at the population of actual scientists that we have, we actually punch above our weight. So, I think that’s where that’s come from.
[35] In terms of the European Union, it’s all just simply benefit. I mean, anything we get is of benefit to Wales, because there’s nothing that directly comes from Wales, in a sense. So, I think, so far as Wales is concerned, we do better than most English universities because we’ve got more access to structural funds. So, it’s actually more important to us than it is to our colleagues just across the Severn there, because structural funds are really critical, I know, for Swansea’s future, and the other universities—Bangor, Aberystwyth—have all got big projects being funded from that strand as well. We compete very well in the excellence stakes as far as the European Union funding is concerned for science.
[36] Professor Davies: Can I take it a stage further? Effectively, to answer you directly, Eluned, the issue has been addressed. Part of the Welsh Government’s approach in terms of the Sêr Cymru initiative, which is an exemplar, which is really seeking to build up capacity—. You know, the issue in Wales is one of scale. As Colin said, where we have the talent, it is punching above its weight. Our big challenge is how we can leverage from Sêr Cymru, which also leverages, of course, structural funds, as Colin said, leverages Horizon 2020 funds—is a source, really, of bringing into Wales high talent. For me, a key point is the extent to which we can negotiate an appropriate input into Horizon 2020 and the successor of Horizon 2020, which is the real key point, and whether we can have a status, which comes out of the fact that all of the precedents are wholly irrelevant to where we are at the moment, because it’s unprecedented. I think, to pick up what Colin said, we have to be a little more creative and perhaps be a little less categorical in terms of the way in which we define the relationships. The relationships might be multi-layered, and they might also relate to different types of arrangements, bearing in mind that universities are unique beasts in the sense that they are, and have been since they began, internationalised organisations.
[37] Eluned Morgan: Am I allowed to ask one more?
[38] David Rees: One more. Go on.
[39] Eluned Morgan: Sorry. Thank you. Just taking you on to a slightly different area now, that is, about this issue that we’re not allowed to discriminate at the moment because we’re part of the European Union, which means that we are currently, because of the Welsh system, subsidising rich German students to study in Wales—I mean, that hurts. I just wondered, and I’m assuming—and it would be interesting to know whether you have any facts on this, but I’m assuming that more EU students come to study in Wales than Welsh students study abroad. I don’t know if you have any information on that.
[40] Professor Riordan: Absolutely. There’s a huge imbalance there.
[41] Eluned Morgan: So, have you got the analysis that suggests that, actually, for every £5,000 we’re subsidising a student, we’re getting a lot more in from EU students? What does that balance look like in terms of the Welsh Government? It might be different—.
[42] Professor Riordan: As far as the Welsh Government is concerned, the difference—. I mean, if we took away the tuition fee grant for EU students, it’s about £10 million a year, which isn’t a huge amount of money.
[43] Eluned Morgan: Is that just for Cardiff or for—
[44] Professor Riordan: No, no. That’s for the whole of the country.
[45] Eluned Morgan: The whole of Wales.
[46] Professor Riordan: That was a fairly early calculation. It’s probably been refined a bit now. It could easily be checked with the Welsh Government, but—.
[47] Eluned Morgan: And how much do they bring in?
[48] Professor Riordan: In what way?
[49] Eluned Morgan: Well, what would we lose, therefore—
[50] Professor Riordan: Oh, I see. Okay, so—
[51] Eluned Morgan: —what we would lose if we followed this route? You know, would we be better off financially as a Welsh—? I understand from a cultural and sharing point of view, but, financially, would we be better off?
[52] Professor Riordan: Financially, now, we’d probably be a bit worse off, but when Diamond comes in—if it does; obviously, it’s subject to agreement and so on. If that happened, then we’d be better off with the present system because we would no longer be subsidising them, and it would just simply be tuition fees coming in. You’d only pay the so-called resource accounting and budgeting charge, which is the amount that is written off, which is about 30 per cent. So, we’d be better off if—
[53] Eluned Morgan: Under the new system, we wouldn’t be subsidising them in the same way.
[54] Professor Riordan: No, not to the same degree.
[55] Professor Davies: I can give you some statistics on that. As in 2014-15, based on Higher Education Statistics Authority statistics—we’re still working out the 2015-16; they’re always a year behind—there were 5,424 EU students on all modes of study in Welsh universities, of which, in 2014-15, 1,900 EU students were awarded tuition fee loans amounting to £6.6 million. So, effectively, I think, to pick up your point about wealth and subsidising wealthy northern Europeans, that’s part of the negotiation that we have with the European Union. We are both beneficiaries, but also we’re great benefactors as well. I see this as a two-way process, and this is part of the multi-level approach that we need to adopt. And we’re different to England, actually, because of the way in which we arrange things in Wales. That’s why it’s so important that our views, as a home nation, are expressed and understood as part of the negotiation strategy for the UK Government.
13:30
[56] David Rees: Can I ask one simple question? You might not have an answer. When the tuition fees policy was introduced, did you see a greater increase percentage-wise in EU students coming to Wales compared to England?
[57] Professor Riordan: I don’t think we did, and there’s a sort of reason for that. We didn’t go out and specifically try to recruit a lot of EU students to Wales because we knew that would essentially inflate the tuition fee/grant bill. Whereas I’m as sure as I can be—I know, because I was vice-chancellor of a university that did this—that English universities did go and recruit quite aggressively in Europe, particularly eastern Europe, because, seeing as they were home students, it enabled you to—and, as the cap came off student numbers, it became more and more sensible to do that.
[58] David Rees: Thank you. Steffan.
[59] Steffan Lewis: Thank you. You were talking at length about the importance of the collaboration, and that was for scientific research, between institutions here and in other EU states. I wondered if you could give us an example of the difference, therefore, in collaboration in scientific research with non-EU institutions at the moment. What are the practical differences? Why is the current model so beneficial at an EU level as far as Welsh institutions are concerned, compared to, say, collaboration between Welsh and North American universities? What is the practical, actual difference, day to day?
[60] Professor Riordan: Shall I start? Well, the main, huge advantages are that you can recruit staff and students on to research projects right across the piece—you don’t have to worry about visas and so on and so forth—so you’ve got that. You’ve got common mechanisms that you can apply to for funding, such as the European Research Council, or Horizon 2020 projects, or certain structural funds projects as well, and you’re all applying on the same basis. You can apply into the pot in a group and there is actually funding for that. If you say, ‘Okay, we’ve got a research project we want’, and the best scientists to do this—there are some in Australia, there are some in the US, and there are some in some other country outside the EU—where you go to get money for that is much more complicated. It would depend very much on exactly the project and whether there are agreements between research councils, for example, that would allow you to do that.
[61] We do have two international funds now, which were introduced by the coalition, both of them using Department for International Development money, so official development assistance-type money. So, one’s global challenges and one’s the Newton fund. They have slightly different criteria around them. What distinguishes them is that, first of all, all the money that’s spent from our side has to follow ODA rules. So, it would have to be something that fitted in with development assistance-type expenditure. Secondly, they are just more complicated. It takes quite a lot of negotiation, because these are bilateral agreements with other countries, whereas in the European Union, you’ve got a whole set of procedures there. So, it is very advantageous. I suppose the question is: could one take the Brexit premium and create something that was more international, more global than what we have now—a kind of international research council-type approach where we persuade other people, other countries, to buy into it? It would be complicated. It might take time, but I think it’s just worth thinking about whether there’s another way of doing this, rather than simply saying, ‘Let’s get access to a system in which we have very little influence but we pay in a certain amount and get out a certain amount’, where we do have the advantages that I’ve just outlined.
[62] Steffan Lewis: On the point of recruitment, are there many instances, then, of Welsh institutions trying to recruit academics from outside the EU, and they fail to get visas into the UK?
[63] Professor Riordan: Oh, yes.
[64] Steffan Lewis: And would you say that that’s a regular occurrence?
[65] Professor Riordan: It’s a regular occurrence, and frequently—I don’t know how often; it must happen in every university—you’ll have something like a post-doc who’s a junior researcher on a project that runs for five years, and they have a visa for a certain amount of time, and then they have to have it renewed, and sometimes they have to go back to get it renewed. We had one awful case when we had somebody whose mother was grievously ill, in Canada, actually, and if she’d gone back, she would have lost her right to remain. And so she was in this terrible position of not being able to go back to visit her grievously ill mother. We eventually managed to intervene with the Home Office and get that sorted out. You get that type of thing, which are these transaction costs, and also the human cost of that is quite difficult to deal with, which you don’t get with EU projects. So, there are big advantages. We argued very strongly that we shouldn’t leave the EU from the point of view of our universities and so on, and their benefit to society, ultimately, because of that kind of issue.
[66] Steffan Lewis: As a natural follow-on to that, if the current rules surrounding work permits and visas for non-EU nationals are applied to the EU 27 post Brexit, is it your view, then, that that will have a tangible detrimental impact on projects and research projects in Wales?
[67] Professor Riordan: It certainly could do, yes, absolutely, if it was applied in the same way and we had all those barriers. At the moment, the one thing that is complicated is pension arrangements. It’s difficult to transport a pension if you’re a German scientist and you want to come and live and work here for some time. One of the issues they have is how pension arrangements work. But that’s the only block we have, otherwise it’s very straightforward. With anybody outside the EU, it’s not. Some of the Sêr Cymru appointments we’ve had—and by definition, they’re frequently international—you can’t just simply assume that it’s going to be okay visa-wise, you have to go through a whole process. Those have been successful, but those are at a very high level, and anywhere, as you go further down, it does become more complicated.
[68] David Rees: Thank you. Dawn.
[69] Dawn Bowden: This is on a similar theme, but I’ll move on to the student experience of the Erasmus project, in particular. A number of the points that Steffan has raised are quite important around that, in terms of the free movement of students as well, and whether they’ll be able to continue. As I understand it, we’ve got something like 4,000 students across the UK involved in Erasmus—I don’t know how many of those are from Wales. It’s been a hugely successful project, which can only happen as a result of the free movement that we have across Europe. My question, really, is about how you would see something similar replacing that, or not, and if it was going to be replaced, how would that practically work? What would be the financial implications of that? Again, you talked about structural funding for some of the other projects, and that’s not going to be available. Would we be able to find anything that could be as successful and, if so, what barriers would we need to break down to enable that to happen? Are there any models of students studying elsewhere, outside the EU, that could be used as a model for students to move more freely around Europe, post any Brexit arrangement? I’ll just start with that.
[70] Professor Riordan: Well, Erasmus, or Erasmus+ as it now is, is an interesting case. It would certainly be possible, I’m sure—. It depends how the negotiations go, of course. It could be, if everyone flounces off and there’s no proper agreement, that we just don’t have access to Erasmus, but it’s certainly possible, because other countries do have access to Erasmus+, even if they’re not members. I imagine that, again, there would be a cost to that and we could remain part of it, but I think the same question needs to be posed: is that really in our interest?
[71] One thing that the UK has never had is a well-funded student mobility programme for all UK students. So, you cannot, as a UK student, go to an agency—as all German students can, for example, because they’ve got the German academic exchange agency, and they’ve got a similar sort of thing in the US, and while they’re funded differently, they’re still funded well—where you can basically apply for money to study abroad. Maybe there’s an opportunity there to say, ‘Actually, what we really need is an outward-mobility agency for the UK that is well funded and provides grants to our students or, perhaps, helps organise work placements, or that pays for their travel or upkeep. It could be a real opportunity, actually, to do something that we’ve never been able to do in this country before. One particular issue with study abroad for UK students is, in terms of widening access and social mobility, it’s very retrograde. So, it tends to be the people who can afford it. It tends to be nearly all language students and medical students. They tend to come from a certain type of background, which is not of widening access type of background.
[72] So, it seems to be that this is an area, the ability to study or spend time abroad while you’re studying, is skewed heavily in favour of students from more well-off backgrounds. I think it’s worth at least considering the possibility that we say, ‘Okay, rather than just Erasmus—’. The other thing, by the way, about Erasmus is that it’s an exchange. So, we need to find enough places. We need to find enough students to go out into Europe to counterbalance, as it were, those coming in. Because if you don’t—. It’s very difficult in our system because of the tuition fee system. You end up essentially taking on students extra to your complement because you haven’t got enough to go out. So, you’re not freeing up enough places, in a sense. Because far more students want to come here than we have who want to go out. Maybe we ought to look at something where there’s an outward mobility agency, which sends students out all over the world, wherever they want to go. We could certainly include Europe—there’s nothing to stop that at all. But it would be all about getting our students more international experience, which I think will be hugely to their benefit because, at the moment, it still is 2 per cent or under of UK students who spend any time abroad while they’re studying. Other countries have much, much higher percentages than that.
[73] Professor Davies: Can I just follow on from what Colin said? There are three or four key points. The first is that the Bologna process actually is a triumph for the Anglo-American system. So, actually, the Europeanisation of degrees at undergraduate level reflects our situation here in Wales and elsewhere in the UK. So, that actually enables the Erasmus programme to develop. So, there’s a triumph there in terms of thinking.
[74] The second point I’d make is that the Erasmus programme, of course, is a programme that is already mature in the UK. There are 33,000 students actually involved in some kind of mobility in the UK, of which roughly half are Erasmus-related. If we had to overnight find international partners because suddenly our partners in Europe were no longer available to us, it would have a damaging effect on us, as Colin’s already stated—the low number of students who are already involved in some kind of international mobility, even now. So, there’s certainly a transitional issue, putting it at its lowest. Putting it at its highest, we will need to look at international partners with fresh eyes.
[75] What I would say then as well, in terms of the way in which Erasmus has developed, of course, is that it’s rather ironic that, at the time when we are looking at the Brexit, Erasmus itself has increased the scope of its programme to include third party nations. In the context of both Cardiff and Swansea, at least, we’ve been successful in the ways in which we’ve been looking at Erasmus programmes outside of the EU, so Australia, Canada, New Zealand and so on. Part of the attraction there is the way in which we have brought Europe into the sphere of collaborating nations. So, it’s a big issue.
[76] The very last point is, of course, that Erasmus is much more than student ability. It’s also around joint degrees, Erasmus Mundus. Our ability to be able to enrich the curriculum and experience of our students is something that one should cherish as part of any negotiation.
[77] Dawn Bowden: So, my follow-up to that, then, really, is that this is not something we would want to lose. This isn’t something where we might say, ‘Okay, if we lose this, so be it’. This is what you’re saying: this is something that the whole student experience, the benefit—the wider benefit—is something that we need to hold on to. It’s something about which we need to work out how we develop something different.
[78] Professor Davies: It comes back to the point I made to Eluned, really: effectively, this is where we are in surplus, or we are providing a surplus opportunity to the European Union because, as Colin’s pointed out, at least twice as many European students want to come. That’s an important negotiating card, and just think about this: the only other naturally English-speaking country in the European Union, when Britain leaves, is Ireland. The Irish system would struggle to accommodate the demand for all this. So, there is an important negotiating chip that we can play.
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[79] David Rees: Thank you. Darren.
[80] Darren Millar: Thank you, Chair. Can I just ask—? You mentioned earlier on that it was a regular occurrence—people having visa related problems when you were trying to bring them to work in Wales—would you be able to provide us with some figures on behalf of Welsh universities in that respect? I think it would just be useful to see the scale of the problem.
[81] Can I ask you about the success or otherwise that we might be having in attracting funds into Wales from the existing European programmes that we’re part of? As I understand it, with Horizon 2020, a unit was set up back in 2013 to try and maximise the benefits of that to Wales. Do you think it’s been making good progress or not?
[82] Professor Riordan: Yes, I certainly think so. I’m not sure how many projects Swansea’s had, but we’re about to mark the occasion of our fiftieth Horizon 2020 project and I know that we get many more from the whole ‘excellent science’ strand and ‘societal challenges’. We’ve got some numbers here for Wales, which is €45 million since the beginning of Horizon 2020. So, that’s 95 projects altogether. And if we look back to the complete predecessor to Horizon 2020, that was €126 million in 2007-13 in framework programme 7. This is effectively framework 8—we call it Horizon 2020. So, that was €18 million a year that we received from that source up until 2013. I suspect it will be more in this round now.
[83] Darren Millar: You would agree with that, would you?
[84] Professor Davies: Yes. I mean, 21 per cent of all research council funding is European based and that’s not including the structural funds as well. But I’d also like to build on what Colin has said. Framework 8 or Horizon 2020 is more than simply a research fund. It also provides an innovative framework and a financing framework around SME and impactful research. So, when we’re looking at this, one should be focusing, of course, upon the effects on university research, but it’s also upon our mission as well to make an impact in terms of the way in which our research translates into commercialisation. So, when we look at this, it’s a multifaceted approach that we must be looking at.
[85] Darren Millar: And just in terms of what you said earlier, you’re obviously familiar with the processes that are available within the European Union at the moment in terms of being able to draw down the money and the requirements that are in place in terms of some of those requirements to link with business, et cetera. But is it just the fact that you’re less familiar with the other opportunities outside the EU that might be causing you, perhaps, to not take the opportunity to access those a bit more than you are at the moment? Is there a touch of that?
[86] Professor Riordan: There’s possibly something in that, because the other two big funds, they’re nowhere near the size of this, but nevertheless, they’re each about £750 million over five years if you take into account the match funding—
[87] Darren Millar: This is the Newton and global challenges funds.
[88] Professor Riordan: Newton and global challenges, yes. People are less familiar with them; we’re still educating them about them. But nevertheless, they more complicated, because they’re a series of bilateral agreements with different countries, and sometimes on different topics, because they require match funding in each case. So, it is more complicated and it is very constrained by the fact that it’s Department for International Development funding and therefore has to be ODA compliant, which makes it—. But there may well be something about lack of familiarity. People still—and quite rightly, I think—complain about the level of complexity required for European funding. It is extremely complex, it’s very time consuming—you know, the compliance requirements and the way in which you need to account for the time that you use is really sometimes quite extreme. But people have kind of got used to that and do understand it and know how to use it despite the frustrations, because it has been around now for such a long time.
[89] Darren Millar: So, it’s better the devil you know than the devil you don’t or the devil that might come.
[90] Professor Riordan: In certain respects, yes, but I would say that’s a fairly small consideration in the scheme of things, because the thing about the European system is that it is so broad based; there are so many different opportunities for funding and the amounts involved are so much greater, and the sheer scale and the diversity of it are so great, that people can really see that you can get some fantastic projects through that in a way that people find very beneficial.
[91] Professor Davies: I think that’s very important. It’s the scale of it. It’s the fact that you can be imaginative, and that’s where basic science can develop. The challenge of the Newton Fund, for example, which is a great initiative—it’s very much linked to the strategic goals of the UK Government in terms of identifying what persistent problems there may exist that need solutions, as Colin said, in terms of the need for it to be compliant with the office of development.
[92] In that sense, what is wonderful about the European funding is that it does have such a broad base. Now, we could easily replicate that, at one level, in bilateral arrangements, university to university. We’re doing that; that’s what the strategic relationships are, and that’s very important for developing universities in Wales. But, of course, you have to have a certain critical mass to be able to do that, and you have to have bureaucracy within the university system to be able to support that. Also, of course, there are the massive transnational costs that will make you, then, invisible. The beauty of the European funding is that we are very visible globally, and what we would need to ensure is that we’ve still got big global challenges—
[93] Darren Millar: Why would Wales be invisible on the world stage if there were other sorts of arrangements around? Why would Wales be invisible on the world stage?
[94] Professor Davies: Well, let me give you an example. Currently, when we negotiate with strategic partnerships, let’s say in China, we can bring to the table so much significant leverage, not simply in terms of what the university brings, but also our partners in Europe, our access to funds in terms of Sêr Cymru funding, in terms of RCUK funding, in terms of the way in which we can access European Research Council funding, Horizon 2020 funding and structural funding. This is a big offering that we can provide. So, it’s really about—particularly when you look at the challenges in China, where scale is on another level, we have to be able to present not simply Wales as a small and clever nation, but translate that into real opportunity.
[95] Darren Millar: So, you’ve got partnerships already with universities in nations outside of the EU. If and when Brexit occurs, what’s going to prevent you having partnerships with the existing EU nations? Nothing, is it?
[96] Professor Riordan: No, there’s nothing—
[97] Darren Millar: There’s nothing going to prevent you from continuing to collaborate with those other nations, even if there is no Horizon 2020 funding or Erasmus+ funding.
[98] Professor Riordan: I wouldn’t say that. Nothing can stop you collaborating, it’s just do you actually have the resources? So, we have, also, obviously, collaborations with China. We have a very close collaboration and we jointly put money in to create a sort of seed corn. But there aren’t the same opportunities for the academics between our Chinese partners and Cardiff partners to access funds, whereas if you’ve got co-operation with, I don’t know, a German or Polish university or something, you can be putting in endless applications into all the different European—because we’re within that same mechanism. So, we will definitely lose out.
[99] If we don’t have access to it, we’ve got to rapidly think of what we’re going to replace it with. Can we create another international club to which we invite other—you know, can we invite Switzerland, Australia, Canada and the US to join a club with us and they put match funding in? That sort of exists now, actually. There are those co-operations, but you’d need something quite big and imaginative. It’d be a huge amount of work, with no real guarantee of success. It just seems to me that it’d be worthwhile exploring that possibility in case we get into a position where we’re just not going to get access to the European mechanisms.
[100] Darren Millar: Just one final question, if I can, and that is: with the existing funds that are available for us to draw down from within the EU, to what extent are they frustrating, perhaps, Welsh or UK priorities versus the priorities of the other member states, or are they consistent—do they share priorities that you wholeheartedly agree with? You mentioned earlier on, Professor Riordan, the fact that there was this swipe on those funds from Juncker. That was obviously a source of frustration. You had to lobby hard in order to secure some changes from what was actually being proposed, and you were successful in doing that, but to what extent are there other frustrations with the existing system that perhaps a new system might have the opportunity to address?
[101] Professor Riordan: There would be that opportunity, because there certainly are frustrations with the transparency and simplification. I would say, though, that as Horizon 2020 was being conceived of and introduced, we fed very strongly into the discussions as to what it should look like, and I would say that we got 90 per cent of what we asked for. There was a big argument—well, there was a  big debate, put it that way; it’s an academic thing—between the eastern European accession countries and the more established western—well, ‘more established’ is the wrong word; but the strong research countries. So, Germany and Sweden and the UK and Finland and France, and so on. We were saying, ‘The criterion has to be excellence in science—the only criterion for funding should be excellence’, so that should be the top, whereas there was a view that there should be a criterion that said it was about capacity building, so we need to fund people to raise the level. I would say that we won that argument and excellence in science is the criterion now.
[102] The danger that I see is that we come out of the European Union and you’ve got the very strong voice of the UK, which accounts, despite our—. We punch way above our weight, and we secure over 50 per cent of Horizon 2020 funding, which is way more than we would be entitled to by our size, as it were. Yet we won’t have any influence on this. It could well be that, without our voice there, and without our MEPs and friends in the Commission, I suppose, arguing on our behalf, we might end up in a position where excellence is no longer the criterion, and that quite a lot of money goes towards capacity building. Would we want to be part of that? So, I think the import of your question is: could we get a better outcome if we went outside? I think we should certainly consider that. I really think we need to accept there is going to be a big change. Simply saying that we want to stay part of it, whatever it looks like, might not be in our interest, which is why I think we need to consider, at least from our side, all the possibilities.
[103] David Rees: Angela, I think you wanted to come in on this.
[104] Angela Burns: I’m so glad you ended up on that comment, because I do think that we need to look at a plan B. So, one of my questions to you is that, pre Brexit, one of the greatest concerns that the higher education sector had was the consistent underfunding of HE in comparison to other UK nations and therefore, perhaps, throughout Europe. That bit I’m not so sure of. So, if we did have a Brexit bounce in terms of taking the Brexit premium and pouring it into higher education, would substantially raising the investment in HE go at all towards mitigating the Brexit exit?
[105] Professor Riordan: I’m sure it would.
[106] Angela Burns: And how? Could you sort of describe what that might look or feel like? Because I know that one of the big areas of underfunding was in research and development, for example, which we’ve been talking about. I understand the mobility of students, and being able to get the right staff in the right places, but I just wonder, if you had extra pots of money with this premium, where you would fund HE in order to try to mitigate the losses that we’re going to see.
[107] Professor Riordan: The two big things I’d be looking at are, as I’ve already mentioned, the notion of an outward mobility agency for UK students—so, to get our students that. All the evidence says if they spend time studying or doing something reasonably sensible abroad while they’re studying—volunteering, perhaps, in some approved way—that they end up with better degrees and they’re more employable and they actually earn more over their working life if they do that. That’s the evidence that we have. So, that would be great, and it would just enable us to compete better in a global environment if we’re producing graduates who have that sort of—. So, that would be one element.
[108] On the research side, if we were able to use the Brexit premium and then the new research body, UK Research and Innovation, could say, ‘Okay, we can apply this to ensure that we’re highly competitive on the international stage as universities’, but I think we also ought to be thinking of: how do we invest some of it to promote international research collaboration in the broadest way? So, that would include our partners in Europe, but it would include beyond Europe as well, and look for a method of trying to achieve that. That would be the ideal outcome, really—if we had all the benefits that we get from the European Union, but it was more spread round the world.
[109] Professor Davies: And just to really re-emphasise that point, effectively we are introducing transnational costs, so we need to use the Brexit bounce to support that. The other point being, of course, that the key thing about research funding is it increases the percentage research and development investment that we put in. So, we’d need to ensure that the R&D investment in Wales matched the deficit that would be implemented through the loss of Horizon 2020 or similar-type arrangements.
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[110] Professor Riordan: And structural funds.
[111] Professor Davies: Yes.
[112] Angela Burns: Can you tell us of any plan-B thinking that’s going on anywhere—either with Welsh Government, or the UK Government? Have you been involved in anything? Has anybody asked for your views as stakeholders? I know you’re on some of the review panels, but I just wondered how much plan-B thinking is going on, because my slight concern is that the mood music is, ‘We want what we’ve got now’, but obviously things are going to change, and I’d like to think that we are really thinking through what else we can do, cleverly, to help our country.
[113] Professor Riordan: I don’t think an awful lot of progress has been made. I can, sort of, see why that is; it’s because we just don’t know what the situation is going to look like. I think the position of Universities UK at the moment is: let’s keep hold of as much as we can of what we presently have. Personally, I think we just ought to think beyond that. We have to accept the fact that it didn’t go the way we wanted, so let’s just make the best of that opportunity and not just say, ‘Well, okay, it didn’t go our way, so let’s keep as much—’. I don’t think that’s very sensible. The No. 1 thing is: we’ve got to argue very, very strongly that there needs to be a Brexit premium, because in actual, mechanical, technical terms, there might not be one, because it’s calculated pretty much on the economic performance, and if we don’t have that, then we wouldn’t have the premium. Nevertheless, I think we do need to make the argument very, very strongly that we will—. And actually, it will have a really bad effect on Welsh universities if we lose structural funds and those aren’t replaced. We’ve got to find a way of getting that investment back in via that route. Similarly for the research funding, we need to replace or increase that, and for the students. But I just think: let’s think about it more imaginatively.
[114] Professor Davies: I think a lot of it is around the tactics of negotiation. So, we’ve got to understand what our strengths are and we’ve got to try to retain and also think more cleverly, but also we must really appreciate that there are significant assets that currently exist that we’d want to cherish. Let me give you two examples. One would be that there are six European infrastructural research groupings in Britain. So, what happens to them? Those are massively significant. The other, which is not trivial at all for anyone involved in any work in intellectual property law, for example, is the European patents issue. If we lose that, then that’s a microcosm of the kind of issues around the transactional costs that is dramatic in terms of how we can trade with Europe. So, this isn’t so much about trying to retain what we’ve got, it’s really trying to understand that we want to ensure that the friction or the fault lines aren’t wider than they need to be.
[115] David Rees: Michelle, do you want to ask your question?
[116] Michelle Brown: Yes, please. Thank you. I just wanted to come back—. You said that Welsh universities are in a strong position; we have a good reputation on the international stage and we’re a major player in the EU. I know it’s early days—it’s only three months since the referendum—but have you had any thoughts about the way you’re actually going to negotiate with the UK Government to replace the funding that you may lose after Brexit, and to actually feed through what you’ve been saying today to the UK Government to make sure that the UK Government actually leverages the bargaining power, not just of Welsh universities, but of English universities as well, to secure you the best deal?
[117] Professor Riordan: Well, I think there are two ways we do it: one is via Universities UK, which does feed in directly to UK Government, and the chair of Universities Wales, which is me at the moment, is a vice-president automatically of UUK and therefore we have an input via that methodology. Because research and innovation are not devolved matters, we also do get direct interaction with the relevant departments—you know, Jo Johnson, the Minister for Universities, Science, Research and Innovation, in terms of the science and that sort of area that he deals with. There are direct lines of communication with him, for example.
[118] And the other means, of course, is via the Welsh Government. The university has been well represented on the—. Well, first of all, we have of our own higher education group for Brexit, and we’re well represented on the First Minister’s group, chaired by Mark Drakeford—the broader Brexit group—as well. So, I think we do have those channels, but the trick will be, when we understand in more detail what the landscape is like, making sure that we really do debate all the possibilities as to what we really should be asking for.
[119] Just in terms of the likely reception of what we get, we need to think about saying to the UK Government, ‘Look, we could get something really great out of this that is different from what we have now, and we could do it in a different way.’ That might come across better than if we say, ‘We just pretty well want to stay where we are now.’ So, I think we need to think about it in those terms as well—as politically with a small ‘p’, if you see what I mean.
[120] David Rees: Steffan.
[121] Steffan Lewis: Presumably, the rest of the European Union will carry on strengthening how it does collaboration in scientific research, and whilst I very much commend you on your optimism in terms of being able to do things differently, the European Union is going to be roughly 0.5 billion citizens and the UK 70-odd million. When it comes to the offering, if the European Union post Brexit is determined to continue on a certain path, why would it want to shed and change and adapt a system that is working really well for the scientific community? Is there much of a right for us? I may have got the wrong impression, but we’ve said that we want to leave the club but now we want to go back and say, ‘In terms of higher education, we want to help re-draw the whole European project when it comes to collaboration and scientific research.’ Is that really a goer?
[122] Professor Riordan: No, I meant more broadly beyond the European Union, so that we would look at what we could apply the Brexit premium to that would give us broader coverage than just our European colleagues. When we actually come to look at it, it may well be that the consensus is, ‘No, we need to remain plugged into that system, and that that is our best opportunity, really.’ There will just be that danger that we won’t have any influence over it, and I think that could be—. In terms of steering policy, we have had a really big influence, and it could be painful and disadvantageous to us not to be able to influence things in that respect. And they will want to co-operate with us because some really good work goes on in this country that people will want access to from their side, so there’s a sense in which we can work with our colleagues in Germany, France, Poland and places like that to influence what happens in that respect as well.
[123] Steffan Lewis: But, because of the way that the people of Wales and England voted, that they voted not to have influence over many aspects of European policy, and HE is one of them, possibly that will be deemed an area where, actually, we’ve lost our right to have a say.
[124] The other area as well could be the European Investment Bank. I wondered if you could explain to us how that has impacted upon your institutions. Again, with that one, I suspect your optimism is going to be disappointed by the fact that, as you will know, there are other countries outside the EU that can get access to European Investment Bank funding, but only member states sit on the board of that organisation and direct it as well. It would be quite a cheek for the UK to come along and say, ‘We want full membership of the board and we want access to the money, but we don’t want to pay into the institution.’ So, I just wondered if you could talk us through the relationship as it is at the moment.
[125] Professor Davies: I’m happy to do that, but can I just pick up the earlier point about why would people from Europe want to still engage with the scientific community? Because that’s the spirit of inquiry and that’s the nature of the method of science, and also it’s one where people see their subject much greater than their institutional affiliations, and maybe even their country affiliations. That’s the nature of how science research carries on. It still doesn’t mean that we shouldn’t negotiate a position; what I’m saying is that this isn’t really about having influence—it’s about the nature of the inquiry itself. In that sense, I don’t think people voted Brexit in a way that was anti-scientific, in that sense.
[126] Steffan Lewis: Just to clarify the point you’re making, the First Minister has repeatedly said since the referendum that people voted in favour of a hard border, and hard borders—. I was a campaigner for remain and I don’t believe that borders are relevant to the twenty-first century anyway, but the First Minister has said that people voted instinctively on the matter of borders. That will have an impact, albeit that science has no borders and shouldn’t have any borders, but that is a consequence of the referendum in the eyes of some.
[127] Professor Davies: Well, just as trade doesn’t have a border, neither does scientific inquiry. Can I also add one last point before answering on the EIB point? Of course, there is a plan B. There always will be a plan B. We are always inquiring into relationships. Our international partnerships are flourishing and there are opportunities, perhaps working with great Australian universities, where we have very good relationships, of opening up the most expanding region in the world and the Asian countries. We’re not without optimism, but we’re not wanting to cut our nose off to spite our face. It’s recognising our assets and recognising the opportunities.
[128] Negotiating wisely is, I think, what we’d like. The Welsh Government, on behalf of universities in Wales, because you understand our sector better perhaps than others in other parts of the UK, we would hope that we could have a much stronger dialogue, so that we could, as it were, describe some of the ideas that we might have in a more creative way with working with the Welsh Government. That’s always been the strength of the devolutionary settlement in Wales.
[129] But, to come back to the EIB, of course, the key point about the European Investment Bank is that the lending that universities have had in Wales has been from their corporate division. So, the lending we’ve had is upon their commercial terms and, in that sense, they’re treating universities in Wales not as public bodies, but essentially as corporations. So, one of the issues with the EIB would be the extent to which they wanted to eschew that kind of corporate-lending approach. The second point, and I think this is important, is that it is wholly unprecedented—Brexit. And, it is wholly unprecedented on the basis that the UK is a 16.1 per cent shareholder in the EIB. So, what we’re really looking at here is not simply disenfranchising the UK, but also there’s an issue here of a property settlement—a reconciliation of the portfolio of debt and the priorities of debt around that. And that’s not trivial. That’s actually quite a significant point. So, I think that’s a commercial issue and that’s something that has to be worked through.
[130] It is true, as you said, that roughly 10 per cent of the EIB portfolio is not EU related. A lot of that is directed at aspiring countries coming into the EU—so-called accession states. So, again, that’s new. What I’d like to say to you is that I don’t think we should be speculating. As you wouldn’t be speculating on a commercial dissolution, this is something that needs to be done with a degree of care and forensic understanding of the pros and cons of what can be achieved from essentially giving up, and the liabilities and the opportunities of giving up a 16.1 per cent share. If I may say so, the analogy is not dissimilar to the situation that you see with Airbus. People fasten onto the EIB, but these are big issues and need to be approached with a degree of commercial acumen and caution.
[131] David Rees: Thank you for that. You’ve highlighted some interesting points on the EIB for consideration. You undertook research to look at the support you have benefited from in Swansea University, and the alternatives that were available to you. What were the alternatives available to you at that point in time and are those alternatives probably the way forward in the future or will the EIB, do you believe, still be a viable option?
[132] Professor Davies: We—as did Cardiff with their private placement, and Colin can talk about that in a second, I’ve no doubt—looked at the opportunities and, of course, there are cycles in all of these things. Pre Lehman’s, the EIB would have looked like a stodgy proposition. Post Lehman’s, it was the only game in town that was commercial because, essentially, even now, commercial banks will only lend on what they call ‘evergreen facilities’. ‘Evergreen’ means, essentially, you have to renegotiate every five years, which means, in effect, you have to renegotiate after three years, so you’re constantly looking at ways in which—you are looking at refreshing facilities. You’ve got all of the currency and also risk around rates of interest.
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[133] The real strength of the EIB proposition, from where we stood, was that, effectively, it provided 23-year funding, which was not on a bullet basis, it was on a step basis, which meant that you could discharge your debt and it was manageable in the way in which it was done. Colin can talk about private placement. There are a number of different ways in which financial instruments have now been prepared, and I have no doubt that there are creative ways of raising funds, but the beauty of the EIB was, one, it was transparent, two, it had a degree of simplicity. It was—. I mentioned Lehmans a little earlier; part of the Lehmans problem was that it was extremely complex to get through the securitisation mechanism to get actually at the amount that was being borrowed and the exposure. Here, it was straightforward. The other point about the EIB funding, of course, is that it can be linked with Horizon 2020; it can be linked, as in our case, with FP7.
[134] David Rees: Professor Riordan.
[135] Professor Riordan: Yes, I think I broadly agree with all of that. I don’t think the EIB question is a big one, really, for universities because there are other sources of funding and most universities actually have gone—at least, not most, but many universities have gone for bond issues, as we did. If you present a strong enough case, it’s relatively straightforward and you can secure large amounts of funding for very, very low historic cost at the moment. So, I don’t think anyone’s regarding that as a big issue.
[136] David Rees: I’m conscious that we’ve now passed our time allocation. Does any Member have any other questions?
[137] Eluned Morgan: I’ve just got a broad one.
[138] David Rees: A broad one, is it? A short question and short answers.
[139] Eluned Morgan: Okay. I remember—again, a while ago—that, if you compared how much Europe spent on R&D with the United States, including public and private, it was about 3 per cent, and I think we’re about 1.5 per cent. I’m assuming that hasn’t moved much. Is that an opportunity? Is that an opportunity for us to be repositioning the universities in terms of that negotiation—you know, if we are throwing the ball up in the air, making the case? Because, frankly, unless we get involved in R&D and innovation, we simply won’t be competitive in the long term with China spending God knows—do you have any idea how much they’re spending on R&D? Significantly more, I think—7 per cent or so; it’s quite significant. Are those figures still about right?
[140] Professor Riordan: Yes, it’s very similar. We still spend relatively a much smaller—I think it’s 1.3 per cent or something now of GDP, compared with nearer 3 per cent in the US. That’s public and private, as you say, so you would think that there must be an opportunity now, particularly if we look for match funding. I think that could be the potentially real prize—that you go out there and say, ‘Look, we are prepared to put in this, are you prepared to match it, and why don’t we pool those resources?’ and come up with something that really fits our needs and those of the top research countries around the world, rather than having to fit into an existing framework. As I say, in an ideal world, we wouldn’t be in this position at all, but we are, so why don’t we see if we can end up somewhere that is better suited to our needs and, for example, does give us a greater capacity to invest in R&D and innovation and everything that comes with that?
[141] Professor Davies: Can I add, just building on that as well, that most R&D work in Wales is done actually in the university sector—very substantially the case—so, there’s an issue really about raising the GDP element for Wales in terms of R&D in order to capture the Welsh grant capture in terms of universities but also in terms of our competitive position in the UK, because 60 per cent of all R&D in the UK is devolved to universities because that relates directly to global companies. So, for example, the big work with Airbus, the big work with Rolls, Tata, very recently, it’s very deliberately devolved to universities because of the disruptive nature of the research that’s undertaken. So, unless we have the Brexit bounce as part of the R&D point in terms of universities in Wales, even our competitive position within the UK may be affected. So, it’s not just the world—it’s also UK as well.
[142] David Rees: Thank you. Can I thank you both for your evidence this afternoon? It’s been very helpful for us. You’ll receive a copy of the transcript for any factual inaccuracies—please let us know as soon as possible if you find any. Once again, thank you very much. I propose that we have a 10-minute break, and that we reconvene at 2.30 p.m.
Gohiriwyd y cyfarfod rhwng 14:21 a 14:31 The meeting adjourned between 14:21 and 14:31
Gadael yr Undeb Ewropeaidd: Y Goblygiadau i Gymru—Cyllid, Ymchwil a Buddsoddi sy’n Gysylltiedig â’r UE Leaving the European Union: Implications for Wales—EU Funding, Research and Investment
[143] David Rees: Can I welcome Members back to this afternoon’s session of the External Affairs and Additional Legislation Committee? We continue now our investigation into the implications of Brexit, and, in this case, specifically the actions of structural funds, rural development programmes, and funding streams. Can I welcome Neville Davies to this afternoon’s next session?
[144] Perhaps we can start with looking at—. The implications of the decision will be that we’re going to lose aspects of funding streams, as a consequence, if we do a hard Brexit, or any other form of Brexit, in one sense. Can you give an indication as to the benefits so far you have seen from the funds, and perhaps, in your view, the alternative directions we can take to continue those programmes?
[145] Mr Davies: Well, that’s a $1 million question, isn’t it? First of all, Chair, I want to say something about myself, and my background. That might be of assistance to Members around the table. I used to work for local government for 30-odd years, and, for 20-odd years, I was responsible for external funding within the local authority, primarily targeting European moneys at a whole range of different levels. I took early retirement about two years ago, and I’m not working for anyone, as such, at the moment, so I’m here as an independent person. So, I’ll actually say what I want to say, as opposed to representing any other organisation, which is quite a pleasant position to be in.
[146] In my experience, we’ve been accessing major sources of European funding since the early 1990s, and I think we’re into our fifth or sixth main programme at the moment. So, it’s been multi-million pound funding for regeneration, as per se, in Wales. In the early years, it was quite challenging, because it became a bit of a lottery in terms of how you actually accessed European funding. I’m old enough to remember when we actually used to go directly to the Commission—we didn’t have to go via the Welsh Government or, as it was, the Welsh Office, at that time. We developed direct links with key Commission officials, and that opened doors for us, and that was beneficial in terms of moving us forward, because, within the Commission, you tend to find that, as people progressed, they just moved around different directorates-general, and you developed excellent relationships with them.
[147] So, the local authorities, in particular, saw these opportunities, and I then was working for Dyfed County Council, pre-reorganisation, and we saw the major opportunities to support the regeneration plans that we had. I would say that, very early on in the programme, there was very little strategic direction from the Welsh Government. There was no kind of regeneration plan in place to enable Wales to maybe maximise the benefits from European money. It was whoever was the strongest in terms of capacity who made the most of the opportunities that were there, and maybe that was a feature that was a weakness within the old process, because, it being a lottery, if local authorities or the public bodies had the capacity and the experience, they made the most of the resourcing, which meant that, maybe, the neediest areas didn’t actually benefit. That was a weakness, and I would suggest that that was a weakness in the first couple of programmes that we had in Wales, including Objective 1, which came through in the latter part of the 1990s. Of course, the Objective 1 programme, for example, was established in pre-Assembly days. Again, I don’t feel that we maximised the opportunities that prevailed. Things have improved—they certainly have improved—over the last couple of programmes, in terms of some political direction and, of course, more strategic awareness of what was needed.
[148] To give you an example, whereas we in Wales watered down the opportunities because it depended who lobbied most—whether it be local authorities, whether it be higher education, whether it be the voluntary sector or whatever, they seemed to benefit from the whole process—the approach in Cornwall was totally different. They took very much a strategic approach with their Objective 1, and decided to focus their attention on three key projects: I think one was development of the university in Cornwall; the second was developing the information technology infrastructure; and I think the third was the road infrastructure, in terms of accessibility into Cornwall. I think that for something like 80 per cent of the funding at that time, actually, that’s where it went directly, whereas in Wales it was spread across the environment, infrastructure and some elements of IT. So, I think more focus was needed very early on in the process.
[149] I would suggest that, maybe, the sustainability of some of the early projects was doubtful, because I would suggest that many of those have now disappeared. So, we didn’t see a kind of long-term benefit of those early projects. To give you an example, one of the early projects I was involved with was the development of a new campus in Pembrokeshire—Pembrokeshire College—which was the first college to receive funding from the structural funds in the UK. That’s a bonus because it has a plus factor, because it’s still there and it’s proved that it’s certainly supported the young people within Pembrokeshire in particular. But I know that there are a number of others that, I would suggest, don’t exist anymore, and, to me, that’s a big waste.
[150] Moving forward, I think there’s been more strategic direction more recently, but that doesn’t suggest that there couldn’t have been, and can’t be, greater targeting of resources. Sometimes, it’s restricted by Commission officials and by Commission regulation in terms of how much money you can spend on infrastructure, or that the programme needs to be balanced between the European social fund for training and for other activities, but I would suggest that the lessons learnt haven’t been followed through, necessarily, from the early programmes.
[151] David Rees: You highlight that, but now we’re at a stage where the UK has decided that it will leave the EU, we have current projects under way and some of those will, obviously, go beyond the Brexit period—2020 and possibly longer. What percentage of programmes that you’ve been involved with were for three, four or five-year terms, so that we have an idea of how many, the type of, or the percentage that will be going post Brexit?
[152] Mr Davies: When you look at it, they’re isolated initiatives where sometimes they’re annual initiatives or sometimes they’re three-year. The big funding opportunities, whether they be from the structural funds or whether they be from interregional co-operation funds, such as INTERREG, and the links we have with Ireland, or with the rural development plan, for example, these are seven-year programmes. I say ‘seven years’; you get an allocation for seven years, but you actually can run the initiatives after the seven-year period. So, these often become eight- or nine-year delivery mechanisms, and the benefit to organisations is that, in regeneration terms, it’s a major bonus because it’s a long-term regeneration plan that gives you—. Because regeneration doesn’t happen overnight. You do need that length of time, if not greater, to deliver real integrated delivery plans. So, that’s a major bonus for organisations, whether they be in the private sector or the public sector, because no Government, whether it be here in Wales or at an UK level, can give that commitment. It brings with it challenges, because core finance and match funding is a major challenge across the board.
[153] The worry that I have at the moment in terms of Brexit is that many of the existing initiatives will need to start thinking about closure. And closure means that, not necessarily 2000, maybe—. I don’t know what the agreement is between the Welsh Government and the Commission, but I would imagine that the Commission wouldn’t want to see everything closing in 2000 as opposed to maybe 2001, 2002. I don’t know, I’m not in the loop at the moment, but I would imagine what that means is that it shortens the delivery timescales of projects. Bearing in mind that many projects are maybe two years, three years into the programme before they actually start delivering, you’re already chasing the money in terms of trying to deliver something within, maybe then, a three or four-year programme. So, that’s going to be a challenge for organisations over the next three or four years.
[154] On top of that then you’ve got, in terms of preparing project closure, for example—. In my past, we always used to start preparing for closure at least two years before the end of a project. Does this mean now that you have to start preparing over the next year or two for closing these projects? What happens to the individuals employed by organisations to deliver these projects? I would imagine that they would be looking to move elsewhere, and maybe you would lose that expertise here within Wales, because they’d be looking elsewhere for work, and I think that’s going to be inevitable.
[155] David Rees: Is there a danger, then, based on that premise, that we have projects and programmes under way that may not complete because we see staff moving away for their own personal security?
[156] Mr Davies: It’s going to be a challenge for organisations to deliver the projects until the end, because what tends to happen with a project—. It can be split into two parts, the project: you have those responsible for actually delivering, and then you have the back-office team in terms of procurement, in terms of accountants, and everyone else that needs to be in place to actually oversee and deliver this project. Because, if the expertise is lost, then it puts additional pressure on organisations to actually close the books. It’s very difficult to close the books if all the expertise has gone, and that’s going to be a challenge.
[157] There’s a high level of scrutiny as far as European funds are concerned in Wales at the moment. We are subjected to audit from maybe five or six different organisations, whether they be internal audit, Wales Audit Office, you’ve got audit teams set up within the Welsh Government and within the Assembly, you’ve got the European Court of Auditors, and you’ve got auditors coming from the various directorates within the Commission. So, in my experience, we were audited and we would be running, maybe, 30 or 40 schemes and projects within the local authority. Every week, there was an audit. So, that brings a challenge in itself to actually make sure that the money we have received, we can actually keep. Because the easy bit of European funding, believe or not, is actually accessing the money—the hardest part is keeping it. And that’s a major challenge, because project management is critical. We have built the capability here in Wales for project management across the board, whether they be local authorities, higher education or further education. There’s a bit more of a challenge then, maybe, for the private sector, and I think that’s another debate that needs to be had.
[158] David Rees: Angela, specifically on this point.
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[159] Angela Burns: Yes. I just wondered, talking about those projects, I think that in the last round of funding much more emphasis was placed on organisations like local authorities becoming the key partner, and then small projects coming in underneath—they had to partner with local authorities in order to go and get the funding. So, I wondered if you can tell us whether most of the projects out there now are on those kinds of bases, or do we still have quite a significant number of solus projects that have gone forward for European funding. Do you have any feel for that at all? Because I’m kind of assuming that if it has got a big partner, like a local authority, we might be able to do something about a set of recommendations around trying to keep some of the knowledge within a local authority or other big partner—umbrella partner—to help the small projects to wind their way.
[160] Mr Davies: In my experience, the scenario, as it kind of evolved: early on, you had smaller organisations, voluntary bodies, et cetera, accessing money and they found it quite challenging to be subjected to a high level of scrutiny and audit that, being a public body, we’re quite accustomed to. Moving forward to the last couple of programmes, certainly as far as Carmarthenshire was concerned, and some of the other local authorities, the voluntary sector welcomed the fact that local authorities would take responsibility for managing delivery, but were working in partnership with organisations and voluntary bodies. Saying that, there were some—. The Wales Council for Voluntary Action, for example, as an umbrella organisation, certainly had the capacity and the expertise, but as far as west Wales was concerned, the local authorities tended to take on board the responsibilities, and that was welcomed by the voluntary sector.
[161] David Rees: Thank you. Jeremy.
[162] Jeremy Miles: There have obviously been some guarantees in relation to some types of projects for some periods of time that have already been made, and allowing that there will be a range of different types of project, which will have, obviously, a wide range of specifications for what’s being delivered through the funding, could you just talk a little bit about what tolerances there are in some projects for re-specifying it, so that money is brought forward within the contract, obviously depending on what’s being delivered? But is that something that it’s possible for certain projects to do?
[163] Mr Davies: It depends on the nature of the project. If you’re dealing with a large infrastructure project, because you’ve already kind of procured the delivery mechanisms and the companies to deliver on your behalf, you have to work within their timescales. If you’re delivering, for example—I must think of one—the food park in Cross Hands, for example, where we had to use the European regional development fund for building the hard infrastructure in terms of the roadways, the sewers, et cetera, then we had to use the European agricultural guidance and guarantee fund from the rural development plan to build the buildings. Then we had to provide European social fund support to provide the training needed within that food park. So, that was quite challenging in terms of getting that real integration.
[164] It’s very difficult with that example, as a multimillion pound scheme, to actually bring things forward. But, on other schemes, there’s a possibility you could. But then if you were digressing from what was agreed with Welsh Government and with the Welsh European Funding Office in this instance, for example, you had to kind of re-negotiate with WEFO to allow you to deliver maybe through a shorter timescale or even maybe, in some instances, a longer timescale. The challenges then are actually delivery. Could you actually physically deliver within that timescale? More often than not, when you re-negotiate, it results in fewer outputs. So, instead of maybe delivering for 100 businesses, you’re actually delivering for 50 businesses. It’s easier then to kind of cut back on the scheme. The last thing you want here in Wales, obviously, is to actually hand back money to the Commission as well.
[165] It’s not just European money; it’s about the co-financing of the match funding, where that is found, whether it’s the Welsh Government, whether it’s local authorities, education or whatever. So, I would suggest that you’re talking about £3.5 billion over a seven-year period. That’s purely for structural funds. When you look at the impact on rural areas, then, with the CAP and the rural development fund, maybe that’s another £3 billion or £4 billion over a seven-year period. So, potentially, it’s a massive loss for regeneration purposes and activities in Wales. I don’t know whether that could ever be displaced, because what it does guarantee organisations is that there’s a focus on regeneration at a time when there are pressures on health, local authorities, social services and on education. Can you guarantee that kind of focus on regeneration over the next seven or 10 years with financial pressures elsewhere? But again, that’s another debate that needs to be had.
[166] David Rees: In your experience—. Clearly, we’re going to be looking at post Brexit, so we’re looking at what happens to the programmes and what types of things could take the place of such programmes following our departure from the EU. In your experience, because we had the rural development and structural funds, was there a great deal of difference in the way in which they were managed, monitored and audited between the two programmes, or was there a similarity between the two? So, could we replace them with a single fund—a single type of programme—or will we need to look at separate programmes?
[167] Mr Davies: They were separate programmes. That’s the reality. In the ideal world, there should’ve been far greater integration, but they were subjected to different EU regulations. So, the accountability was to different parts of the Commission in terms of managing and delivering the funds. But that doesn’t mean to say that, at a local or regional level, you couldn’t try to integrate the funds. But then it comes back to project management and the capacity of any organisation to manage an array of funds within a single project. You’re talking about not just purely European funding, but you’re also talking about potential match funding that comes from different sources at a Welsh level from different parts of Welsh Government. Maybe in the ideal world, it would’ve been nice to have a single pot of money available within Welsh Government for overseeing and delivering, but the challenge for us at a local level was we used to have to identify different parts of an organisation to actually tap into any additional funding that was available. Again, that was quite challenging, and continues to be quite challenging for organisations.
[168] David Rees: Darren.
[169] Darren Millar: I just wanted to ask you: you’ve made reference to this a number of times now that, obviously, some local authorities are more successful at bidding for cash than others, sometimes because of the experience of the individuals there, or their get-up-and-go, if you like. If there were to be something following Brexit that is a regional development fund of sorts, do you think that it would be better focused at a national level, in terms of national priorities, or more at that local level within the 22 local authorities that we currently have?
[170] Mr Davies: If you’re looking at creative thinking and taking risks, which you can’t really do with structural funds, but you can do with some of the rural development funds, don’t dismiss the thinking and the creative ability of smaller organisations. From some of these organisations, because they’ve been able to challenge the system, some ideas have been mainstreamed and there are opportunities there. But in terms of future targeting, coming back to what I said earlier, I think it has to be done at a strategic level, otherwise you will have local authorities competing with one another to actually maximise the opportunities. But saying that, there are structures being established with local authorities, whether it be city regions or whatever, that provide opportunities for real collaboration to take place. And that’s cross collaboration, not just with the local authorities but also with other organisations.
[171] Again, I think it’s taken a long time to get to where we are now and I’m not convinced that is the way forward. But then that leaves major parts of Wales without the opportunities for some strategic thinking, because you’ve got your Swansea bay, you’ve got your Cardiff and then the other parts of Wales have got basically nothing. So, I think some thinking needs to be done in terms of how you actually ensure that, whether it be north Wales or whether it be the rural parts of Wales, they also are given opportunities to get regeneration cash within their systems.
[172] Darren Millar: So, you see the regionalisation, if you like, within Wales, of local authorities coming together—in north Wales, we’ve got the North Wales Economic Ambition Board—that setting priorities and that being the vehicle, if you like, that accesses whatever funds are available for regional development post Brexit. One of the problems with convergence funding at the moment, of course, is that it applies only to west Wales and the Valleys. There are huge parts of Wales that are not able to access the scale of cash and investment that is available through convergence, simply because they’re more prosperous than other parts of the country, yet things like the congestion in the Newport area around the M4 affect the whole of south Wales, including right up to the west, but EU cash can’t really be spent on those sorts of projects. Do you see this being a potential benefit of anything that might come post Brexit—that there may be an opportunity to spread the cash to other places that might still have a big economic impact on those parts of Wales that are less prosperous than others?
[173] Mr Davies: With European money comes quite rigid regulations in terms of what can be delivered and where it can be delivered. Let’s go back a few years in terms of why you have west Wales and the Valleys and east Wales. It was purely a manufactured region. Early on, I was involved, in the early 1990s, in trying to lobby for west Wales, at that time, which was Gwynedd and Dyfed, to become what’s known as a NUTS 2 area. These NUTS areas are based on statistical regions. For example, Wales is NUTS 1. NUTS 2—we’ve got two in Wales, we’ve got east Wales and west Wales, and NUTS 3 is at a county or local authority level.
[174] But when it comes to structural funding, for example, and cohesion policy, you are only able to allocate resourcing at a NUTS 2 level. NUTS means nomenclature statistical territorial units, I think, doesn’t it, or something like that. So, that’s why you have this region manufactured. Initially it was west Wales and Gwynedd, and then the Valley authorities recognised, ‘What about us?’ So, the Valleys got on board. Then, because not only does it have to be homogenous, it has to be contiguous as well, you had, then, a gap in the middle, which was Swansea, and it thought, ‘What do we do with Neath and Port Talbot? Oh, we have to join them’, even though it didn’t qualify. Then you had north Wales authorities, and rightly so, asking, ‘What about us?’ So, you had north Wales authorities—at that time, Clwyd and Denbigh, et cetera—coming on board as well. So, you have this area—it’s not really homogenous, but for the sake of accessing European money, it was.
[175] Darren Millar: So, who determined the boundaries?
[176] Mr Davies: The statistics come out of the Office for National Statistics. First of all, you have to convince them. Once you’re able to convince them, then you’re a NUTS 2 designated area.
[177] Darren Millar: Who does that convincing, though? It sounds like it was something that emerged from the local authorities—
[178] Mr Davies: Initially, it was local authorities. The local authorities very much took the lead very early on in the 1990s when they saw the opportunities were there. We did a fair bit of lobbying as far as the Office for National Statistics was concerned, and also the Commission. So, we had the Commission officials actually on board with us and then the Welsh Office, at that time, saw the opportunity as well. Obviously, there was intervention from your good selves as politicians to shape the maps, and that’s why we ended up with west Wales and the Valleys—because the GDP was below the 75 per cent threshold, and that was key. So, what we had to do was make sure that, when you look at the statistical base of that region, it would qualify.
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[179] That’s the background. So, in terms of Brexit, you’ve got the authority here within Wales if European funding isn’t involved. You’ve got the capabilities and authority here within Wales to actually shape whatever you think needs to be done as far as future targeting is concerned. But that’s assuming that there will be targeting and there will be resourcing available for regeneration. Rural areas in particular would—because, based on the statistics of the moment, they don’t recognise some of the hidden factors within rural areas: the hidden unemployment and the low wages, et cetera, that you have in mid Wales. It doesn’t take that into account at all. That’s something that maybe needs to be looked at within Welsh Government.
[180] David Rees: I think you’re talking about—[Inaudible.]—within the UK, in a sense, there. I appreciate that. Dawn.
[181] Dawn Bowden: I think we’ve covered it, actually, to a large extent. That kind of background and history and how it all developed—that was really helpful. It was that final point you’ve just come to, about guaranteeing the focus on future regeneration. Again, you did touch on this, I think, at the beginning of your contribution when you said that some of the concerns about—correct me if I misinterpreted what you’re saying—but one of the concerns would be that, yes, we might still have the same amount of money post Brexit that comes to Wales, but there’s no guarantee at this stage that that would be directed into the same areas. So, from somebody involved in all of these processes in the past, how would you like to see a post-Brexit European fund held, administered, earmarked and so on? Would you be looking to have Welsh Government in control of a pot of money with very much specific amounts of funds available for particular types of projects, whether they be regeneration or whatever? Or would you want to see something where that can shift, because the European stuff is very rigid in terms of what you can access? Or would you be looking for something that was a much more flexible fund, which could move with the needs of any particular areas?
[182] Mr Davies: I think clearly the strategic and political direction needs to come from the Welsh Government, because of the range of responsibilities that you have—tackling poverty, unemployment, et cetera. But in terms of shaping what needs to be done, that can be done at a sub-regional level. That can be done, whether it be through the city-region vehicles, north Wales—and then you have a gap, obviously, insofar as rural Wales is concerned. That’s something that needs to be addressed.
[183] So, shaping what needs to be done, I think, is best done at a sub-regional level, because the aspirational needs of west Wales will be, maybe, different to north Wales, and certainly different to mid Wales. There needs to be an element of flexibility in that you would have a range of funds available to tackle any particular issues within that area. But then you need to look at the vehicles for delivering. I don’t think it’s acceptable, personally, that you establish these sub-regional bodies without giving them some delegated responsibility and authority to deliver what needs to be delivered. So, there have to be some delegated responsibilities. That doesn’t just mean money and resourcing; it actually makes them accountable for overseeing and delivering what needs to be done, over and above just purely financial resourcing. And again, they have to be accountable back to Welsh Government. That doesn’t mean to say that Welsh Government or the Welsh Assembly can’t be directly engaged as part of this process. Then you can involve public bodies and the private sector, which has been a major gap over the years. Maybe it’s improved—certainly over the last 10 years. There was very little engagement early on with the private sector. That engagement has certainly increased and improved over the last few years.
[184] So, coming back to your point, yes, there has to be an element of flexibility. The overall management and delivery mechanism needs to be reviewed, because it provides you with far greater scope in terms of allowing you to do that, assuming that the focus will be on regeneration in future. And what do you mean by regeneration? It’s not just about adding infrastructure, it is about tackling poverty, whether training, business support, or whatever, at a regional level. So, I would suggest that, maybe, better integration at a central level is a requirement, as opposed to having, as with any other public body, different parts of an organisation taking responsibility for different bits and pieces.
[185] Dawn Bowden: But that strategic direction would have to be at a Welsh Government level.
[186] Mr Davies: Certainly, yes, with delegated responsibilities, maybe, at more of a regional level.
[187] Dawn Bowden: So that would have to be predicated, then, on Welsh Government having control of that money and not the UK Government having control of it, because it would have to be the strategic direction that Welsh Government wants and not what the UK Government wants.
[188] Mr Davies: Yes.
[189] David Rees: Thank you. Steffan.
[190] Steffan Lewis: Very much following on from the questioning by Dawn Bowden, you’ve touched on this a little bit, but if you were charged now with coming up with a replacement for structural funds, whether that’s at a national level or a UK level for a new regional funding policy that Wales would be eligible for, what features would you take and want to carry on that you’ve had experience of in the European context, and what elements would you be keen for us to absolutely abandon, start afresh and take a different approach? This is one of the things with the Brexit that’s almost certain: there will not be eligibility for European structural funding, so there is a case now to be made for new forms of structural funds to either happen at the UK or national level. So, what would be the features you’d take from Europe and the ones that we absolutely should avoid when considering the future?
[191] Mr Davies: First of all, in future, to ensure that there are regeneration funds available and that they cover a spectrum of activities. You can call it ‘regeneration funding’, but it can actually undertake a range of activities. Some of the failures in the system at the moment—. Let’s look at the positives, in terms of moving forward. What you have at the moment is partnership engagement, which I think is critical as part of the process. Partnership engagement means you get partners involved in overseeing and developing initiatives, whether public-private partnerships, or whatever, or partnerships between local authorities. You can cover a range of features. That partnership engagement is critical, because that’s when you actually get real ownership, real engagement, at that level. There’s a danger—. You don’t want a top-down approach; you actually do want to meet in the middle, and that’s, maybe, where the sub-regional approaches could possibly work, where you have your top-down and your bottom-up actually working together. So, that’s when you have your real ownership.
[192] What you don’t want to see—. Another feature you need to see is long-term planning. Do you actually want to be restricted to four years? Are you able to extend that much further? There has to be accountability. I see nothing wrong as far as being accountable in terms of audit requirements, but I can assure you the system is bureaucratic, and this is coming from someone who has worked in local government and has become quite accustomed to bureaucracy over the years. It can take two, three, or four years for a project to materialise. It actually is ridiculous. You need to invest time and effort in developing a project to ensure all your partners are on board. Once you have your partners on board, the challenge then is to actually keep them on board. Once you have a potential project in place, then you’re challenged to find the resourcing. And you have to go to different agencies, whether different parts of Welsh Government, different parts of local authorities, different parts of other organisations to find and put match funding in place.
[193] Steffan Lewis: Sorry, just on that point, is that a feature that was unique or specific to the UK when it comes to match funding, or do other member states have—? As I understand it, different member states have different approaches.
[194] Mr Davies: It’s a bit of a mixed bag with the member states.
[195] Steffan Lewis: It’s usually central Government, isn’t it?
[196] Mr Davies: In some member states, central Government takes total control. I remember doing this work out in Poland where I was asked to go out to actually help to develop the capacity of organisations out in Poland. I wasn’t very popular because I was telling these organisations—and some of them were local authorities, as well as other voluntary bodies—that they also had the opportunity, but that everything was controlled by central Government. I think the match funding, the core finance, clearly because it’s a large pot of money, certainly has got to be controlled by the Welsh Government, but as a central pot as opposed to having different pots all over the place. So, if something needs to be developed for regeneration, let’s not have to go and chase different departments to make sure we can actually get that money—let’s go to one central source within Welsh Government so that we can actually engage ourselves.
[197] So, the bureaucracy is about developing a project, getting all the partners on board, making sure that you tick all the right boxes in order to be in a position to submit an application, so you have to satisfy Welsh Government requirements, or, more often than not, European Commission requirements. And then that assessment period can take anything up to 12 months, 18 months or two years. So, it’s long term, and if you’re involved in the private sector they want things to happen now and not in three or four years’ time. That is a major challenge—the turnaround. By all means, have scrutiny and have audit, but let’s ensure that the auditors talk to one another because we would be subjected to audit from different organisations, and so the good practice, for example—say we had good practice or even bad practice in Carmarthenshire—that wasn’t kind of the—. The auditors didn’t talk to one another so that wasn’t shared, and that needs to be shared between organisations as well as with auditors.
[198] So, there are number of features there that are positive, but also there are a lot that are negative. The key ones for me are timescales, bureaucracy and the whole process. That certainly needs to be addressed.
[199] Steffan Lewis: Just one final question on that: do you think that there’s a need to look again at the criteria that the European Commission has set for eligibility, whether for the geographic location or—? I mean, was gross domestic product really the right measurement to use as the predominant measurement of eligibility for a region before it could unlock European funding, or is that the right way to go?
[200] Mr Davies: Not necessarily. What is key? What are the weaknesses that we have in Wales? You can actually revisit that.
[201] Steffan Lewis: So, do you think, therefore, following that line of thought, that when it comes to regional policy it should be Welsh Government that looks at the nationwide picture, and then identifies which regions need x amount for specific regeneration in order to meet the national demand? Or should it be Welsh Government administering a pot that eligible regions bid for?
[202] Mr Davies: At an UK level, we don’t really have regional policy. Again, that’s debatable, but I don’t think we have got a regional policy at an UK level. At the Welsh level, I don’t think we have a single regeneration strategy. We have a strategy for infrastructure, we have a strategy for training, we have a strategy for different parts, but do we have one overall strategy for regeneration in Wales? I don’t think we have, personally. And that can be managed and controlled, again, at a Welsh Government level. I don’t necessarily think that GDP is the best determinant for establishing areas of greatest needs within Wales, because, coming from Carmarthenshire, I would suggest that maybe rural Wales is really seriously disadvantaged as part of this process, and with the loss of common agricultural policy funding in future, not just to the farmers but also for the supporting structures within rural areas as well, could, to me, potentially be a major challenge for yourselves.
[203] David Rees: Thank you. I’ve got a question from Eluned.
15:15
[204] Eluned Morgan: Rwy’n mynd i siarad Cymraeg. Roeddwn eisiau dilyn i fyny ar y pwynt yna. Mae’r arian sydd wedi dod o ERDF ac ati yn y gorffennol, yn arbennig i’r ardaloedd hynny yn y Cymoedd ac ati, wedi bod yn arian ychwanegol i’r ardaloedd hynny. Os byddwn ni yn gweld newid o ran CAP, bydd hynny’n golygu arian yn cael ei dynnu mas—mae yna botensial—o’r ardaloedd hynny. Felly, mae’r pwynt yma ynghylch nid jest ble rydym ni ar hyn o bryd ond ble fyddwn ni ymhen 10 mlynedd os yw’r arian yna’n cael ei dynnu allan—i ba raddau mae’n bosibl effeithio ar y rural development plan ar hyn o bryd er mwyn ‘position-o’ ein hunain ar gyfer y dyfodol yna? Ydy hynny’n bosibl neu ydy’r rhaglen yn rhy dynn i ni effeithio arni ar hyn o bryd?	Eluned Morgan: I’m going so speak Welsh. I wanted to follow up on that particular point. The funding that has come from the ERDF and so on in the past, particular towards the areas in the Valleys and so forth, was additional funding to those areas. If we were to see a change in terms of CAP, that would mean potentially money being taken out of those areas. So, this point is not just about where we are at present but where will be within a decade if that funding is withdrawn—to what extent is it possible to have an impact on the rural development plan at present so that we’re positioning ourselves for that future? Do you believe that’s possible or is the programme too tightly controlled for us to impact it at present?
[205] Mr Davies: Y rhaglen RDP—roedd e’n hwyrach—. Rwy’n credu roedd e tua dwy flynedd i mewn i’r cyfnod cyn bod yr RDP yn actually dechrau. Mae’n mynd i fod yn galed iawn i ailedrych ar y strategaeth sydd gyda ti fel RDP, ac os oes gyda ti gyfnod o ddelifro dros y pedair, pum mlynedd nesaf—a dyna i gyd sydd gyda ti—mae’n mynd i fod yn galed iawn i edrych dros y cyfnod nesaf. Mae’n rhaid i ti gofio taw arian bach, efallai, yw’r RDP o’i gymharu â’r CAP. Rwy’n credu bod RDP yn werth tua £300 miliwn, rhywbeth fel hynny, dros y saith mlynedd, ond mae arian cyfatebol yn dod o’r Cynulliad hefyd i’w wneud e’n werth tua £800 miliwn, rhywbeth fel hynny, dros y cyfnod. Ond os wyt ti’n edrych ar y CAP, mae hwnnw’n werth llawer mwy. Fe ddywedwn i fod hwnnw’n werth £2 biliwn dros gyfnod o saith mlynedd. So, colled enfawr i gefn gwlad, nid dim ond i’r ffermwyr ond yn gyffredinol i gefn gwlad, ac nid ydw i’n gwybod o ble y mae’r arian ychwanegol yna yn mynd i ddod. Dyna’r sialens fwyaf sydd gennych chi yma—a oes arian ychwanegol yn mynd i ddod o’r Llywodraeth ganol? Nid ydw i’n credu ei fod e gyda chi yma yng Nghymru ar hyn o bryd ar y lefel yna, neu os ydy e, mae’n meddwl y bydd yn rhaid i chi dynnu arian mas o ryw ffynonellau eraill, ac mae hynny’n mynd i fod yn sialens i chi. Colled enfawr—colled enfawr i gefn gwlad.	Mr Davies: Well, the RDP programme was later—.I think it was two years into the period before the RDP actually started. It’s going to be very difficult, I think, to look again at the strategy that you have as an RDP, and if you have a period of delivery over four or five years—and that’s all you have—it’s going to be very difficult then to look at the next period. You do have to remember that the RDP might be a relatively small pot of funding compared to the CAP. I think that the RDP is worth around £300 million, or thereabout, over the seven years, but corresponding funding from the Assembly makes it worth around £800 million over the same period. But if you look at the CAP, then that’s worth a great deal more. I would say that that’s worth around £2 billion over the period of seven years. So, it’s a huge loss to rural areas, not just for farmers but more generally for rural areas, and I don’t know where the additional funding is going to come from. That’s the greatest challenge that you face here—is additional funding going to come from central Government? Well, I don’t think you have it at present in Wales at that level, but if it does come, then it might mean that you have to withdraw funds from other areas, and that’s going to be a challenge for you. But it’s a huge loss—a huge loss for rural areas.
[206] Mae gyda ti—ar ochr RDP, mae marchnata’n cael ei wneud ynglŷn â phrojectau sy’n cael eu rhedeg yn ganolog gan y Cynulliad. Mae gyda ti brojectau wedyn i helpu’r amgylchedd, Tir Gofal a Thir Cynnal ac yn y blaen. Beth sy’n mynd i ddigwydd? Pa effaith mae hynny’n mynd i’w chael ar gefn gwlad? Fe ddywedwn i ei fod yn mynd i gael effaith enfawr. Rwy’n gwybod, yn bersonol, am ffermwyr lleol sydd ddim wedi cweit deall beth fydd y sefyllfa. Hyd yn oed os wnaethon nhw bleidleisio i fynd mas, maen nhw nawr yn sylweddoli, ‘Wel, o ble mae’r arian ychwanegol yna yn mynd i ddod?’, achos mae’n arian enfawr i’r ffermwyr bach sydd gyda ni yng Nghymru. Sori, beth arall oedd yn y cwestiwn?	Now, on the RDP side, marketing work is being done to draw projects that are centrally run by the Assembly. Then you have those projects to support the environment, Tir Gofal and Tir Cynnal and so on. What’s going to happen to those? What effect is that going to have on rural areas? I would say that it’s going to have a huge effect. I know, personally, of local farmers who don’t quite understand what the situation is going to be. Even if they voted to leave, they’re now realising, ‘Well, where’s the additional funding going to come from?’, because it’s a huge amount of money for the small farmers we have in Wales. Sorry, what was the other question that you asked?
[207] Eluned Morgan: Roeddwn i eisiau gofyn—so, nid oes dim sgôp i newid yr RDP ar hyn o bryd er mwyn paratoi ar gyfer y cyfnod hynny—	Eluned Morgan: I just wanted to ask—so, you believe that there’s no scope to change the RDP at present for us to prepare for that period—
[208] Mr Davies: Fe ddywedwn i ‘na’.	Mr Davies: I would say not.
[209] Eluned Morgan: A gaf i ofyn mwy am y strwythur mecanyddol yma rŷch chi’n meddwl sydd ei angen er mwyn gyrru economic development ar lefel sub-regional? Am beth ydych chi’n sôn fan hyn? A ydych chi’n sôn am ryw fath o Development Board for Rural Wales—recreation o’r DBRW, rhywbeth felly, neu sut ydych chi’n gweld y mecanwaith?	Eluned Morgan: Okay, may I ask further about this mechanism or structure that we need in order to drive this economic development on a sub-regional level? What are you talking about here? Are you talking about some sort of Development Board for Rural Wales—the re-creation of the DBRW, or something similar, or how do you see a mechanism developing?
[210] Mr Davies: Rydw i’n ddigon hen i gofio’r amser yr oedd y DBRW i’w gael, ac i fi’n bersonol, roedd e’n gorff a oedd yn rhoi rhywbeth ychwanegol i’r broses. Rwy’n credu ei fod e wedi bod yn llwyddiannus dros ben, achos roedd e’n rhoi ffocws ar gefn gwlad. Roedd sgiliau yn fewnol. Roedd e’n gallu helpu i ddatblygu projectau, delifro projectau, ac efallai mai rhywbeth fel yna sydd eisiau yn y dyfodol, os ydych chi’n mynd i edrych ar ddelifro rhanbarthol yng Nghymru. I fi, yn bersonol, mae’n rhaid i chi edrych ar beth sy’n mynd i ddigwydd i’r canolbarth achos mae gap gyda chi. Mae gyda chi Gaerdydd, y Cymoedd, y de-orllewin, a rhywbeth nawr yn datblygu efallai yn y gogledd, ond mae gap mawr gyda chi mewn ardaloedd fel Ceredigion, cefn gwlad Caerfyrddin, ddywedwn i, achos mae ffocws y city region yn y gorllewin ar Abertawe ac, efallai, ardal Llanelli, ac nid siẁd gymaint efallai ar sir Benfro a chefn gwlad sir Gâr hefyd.	Mr Davies: Well, I’m old enough to remember the DBRW and, for me, it was a body that provided something in addition to the process. I think that it was very successful in doing that because it gave a focus on rural areas. There were skills available internally. It was able to support the delivery of projects, and maybe it’s something like that that we need in future, if we’re going to look at delivering on a regional basis in Wales. For me, personally, you do have to look at what’s going to happen to mid Wales, because there’s a huge gap there. You have Cardiff the Valleys, south-west Wales, and something now perhaps developing in the north as well, but there’s a huge gap in areas such as Ceredigion and rural parts of Carmarthenshire, because of the focus of the city region in the west on Swansea and the Llanelli area, but there’s not so much of a focus on Pembrokeshire and rural parts of Carmarthenshire.
[211] Felly, mae hynny’n mynd i fod yn sialens enfawr. Felly, mae eisiau rhywbeth mewn lle i dargedu—a dod nôl at beth oeddwn i’n ei ddweud ar y dechrau—a ffocysu ar beth sydd ei eisiau ar yr ochr adfywio yng nghefn gwlad.	So, that’s going to be a huge challenge. So, there needs to be something in place to target—going back to what I said at the beginning—and focus on what needs to be done in terms of regeneration in rural areas.
[212] Eluned Morgan: Nid yw hynny wedi bodoli ers sbel nawr, so pwy sydd wedi bod yn gyrru hynny? Ai llywodraeth leol? Felly, gyda Pharc Busnes Cross Hands, er enghraifft—llywodraeth leol oedd yn gyrru’r initiative yna, ie?	Eluned Morgan: But that hasn’t existed for quite a while now, so who has been driving that? Has it been local government? For example, in Cross Hands business park, has it been local government driving that initiative?
[213] Mr Davies: Ie, a gweithio ar y pryd efo’r WDA, achos ardal WDA yw Cross Hands. Ac mae hynny wedi bod yn llwyddiannus. Achos mae gyda ti gwmnïoedd fel Castell Howell, yn enghraifft dda, ac yn y gogledd mae Halen Môn—cwmnïoedd bach sydd wedi cael arian, efallai, o initiatives fel LEADER a’r RDP, sydd wedi datblygu. A nawr mae cwmni fel Castell Howell â rhywbeth fel 500 o bobl mewn lle.	Mr Davies: Yes, and working with the Welsh Development Agency as well, because Cross Hands is a WDA area. And it’s been very successful. And you have companies like Castell Howell, which is a very good example, and in the north you have Halen Môn. They’re small companies that have received funding from initiatives such as LEADER and the Rural Development Plan, and they’ve developed on from that. And now there are companies such as Castell Howell with around 500 people being employed by it.
[214] Eluned Morgan: A gaf i ofyn jest un cwestiwn arall, jest yn ehangach, ar y rhaglenni eraill nad ydym ni’n rhoi lot o sylw iddyn nhw, fel INTERREG a’r Atlantic area programme, ac ati? Faint o golled fydd y rheini?	Eluned Morgan: May I ask just one further question, which is broader in scope, on other programmes that we don’t necessarily pay much attention to, such as INTERREG and the Atlantic area programme, and so forth? How much of a loss will they be?
[215] Mr Davies: I fi’n bersonol, colled fawr, achos beth oedd mewn lle oedd y posibilrwydd i wneud rhywbeth gwahanol, y posibilrwydd i wneud rhywbeth newydd, a dysgu. Nid ydym ni’n gwybod popeth yng Nghymru, ac mae’n rhaid i ni ddysgu o beth sydd wedi bod yn llwyddiannus, ac mae hynny’n safio amser. Pam ddylem ni ddim dysgu oddi wrth ardaloedd eraill? Rwy’n gwneud lot o waith yn Iwerddon, Ffrainc, yn Sweden, Norwy, ac yn y blaen, ac maen nhw wedi bod yn fwy na hapus i drosglwyddo beth maen nhw’n ei wneud yn dda, a hefyd beth maen nhw ddim yn ei wneud yn dda, a gallan nhw ddysgu wrthym ni. Felly, yn anffodus, nid ydw i’n gweld posibilrwydd o hynny nawr, o hyn ymlaen.	Mr Davies: For me personally, it will be a huge loss, because what was in place was the possibility to do something differently, to do something new, and to learn. We don’t know everything in Wales, and we have to learn from successes, because that saves time. Why shouldn’t we learn from other regions? I do a great deal of work in Ireland, in France, in Sweden, and Norway, and so on. And they’ve been more than happy to transfer what they were doing well, and also what they were doing badly, and they could learn from us as well. So, I don’t see a possibility of doing that from now on, unfortunately.
[216] Rwy’n gwneud lot o waith efo ysgolion yn y de-orllewin, ac mae wedi bod yn bleserus dros ben i weld youngsters yn dod gyda ni i lefydd fel Iwerddon—y tro cyntaf mas o Gymru—yn dod o ardaloedd llwm dros ben, efallai, ardaloedd fel Llanelli, a ddim wedi cael y cyfleoedd i fynd dramor. Maent wedi dysgu llawer—mae wedi agor eu bywydau nhw, agor eu llygaid nhw, o ran beth arall sydd mas yna. Ac mae’n drueni ein bod ni’n mynd i golli hyn, heblaw bod rhywbeth yn cael ei ddatblygu efo’r Cynulliad sy’n rhoi y posibilrwydd i gydweithio efo ardaloedd eraill. Mae INTERREG, er enghraifft, efo ni ac Iwerddon, wedi bod mewn lle ers blynyddoedd. A, hyd yn oed ar ôl i’r prosiectau ddibennu, mae’n dal i fod cysylltiadau gyda ni. Ac mae’r cysylltiadau yna wedi cael eu creu dros flynyddoedd o gydweithio, ac mae hynny wedi bod yn llwyddiannus dros ben. Felly, yn bersonol, rwy’n ei gweld hi’n golled fawr.	I do a great deal of work with schools in the south-west, and it’s been a great pleasure to see youngsters coming with us to places such as Ireland—the first time that they’ve left Wales—coming from deprived areas, in Llanelli, and so on, when they haven’t perhaps had the opportunities to go abroad. They’ve learned so much—it’s opened up their eyes, and it’s opened out their lives as well to the other possibilities that are out there. And it’s a great shame that we’re going to lose that, unless something is developed with the Assembly that offers that opportunity to collaborate with other areas. INTERREG, for example, between us and Ireland, has been in place for years. And, even after those projects are finished, we still have the residual links, and those links have been created over years of collaboration, and that’s been very successful. So, personally, I see it as a huge loss.
[217] David Rees: Jeremy.
[218] Jeremy Miles: Rydych chi wedi mynd â ni lawr i’r lefel Ewropeaidd ehangach yn yr ateb yna. Petasech chi’n edrych ar yr Undeb Ewropeaidd yn gyfan gwbl, pa wledydd, neu ba ranbarthau, yr ydych chi’n credu sydd wedi llwyddo orau o ran defnyddio’r ffynonellau Ewropeaidd yma i drawsnewid eu cymunedau nhw? A beth yw’r agweddau fyddech chi’n pigo mas ohonyn nhw?	Jeremy Miles: You’ve taken us down a broader European route in that answer that you just gave. So, if you were to look at the European Union as a whole, which countries, or which regions, do you believe have best succeeded in terms of using these EU funding sources to transform their communities? And which aspects would you say specifically should be drawn to our attention?
[219] Mr Davies: Rydym ni wedi bod yn llwyddiannus yng Nghymru. Mae’n rhaid dweud ein bod ni wedi bod yn llwyddiannus. O ran tynnu arian lawr, rydym ni wedi bod yn llwyddiannus, ond, o edrych ar y tymor hir, a ydym ni wedi bod yn llwyddiannus? Nid wyf i cweit yn siŵr, achos, fel dywedais i ar y dechrau, y cyrff a oedd wedi paratoi—cael y staff, ac yn y blaen, mewn lle—oedd yn llwyddiannus yn yr holl broses, ac nid efallai ardaloedd a oedd eisiau’r arian yn gyfan gwbl. Felly, mae hynny’n sialens i chi, sef a allwch chi wella’r holl broses yma yng Nghymru.	Mr Davies: We’ve been successful in Wales. It has to be said that we have been successful. We’ve been successful in drawing funds down, but, looking at the long term, have we really been that successful? I’m not entirely sure, because, as I said at the beginning, those bodies that had prepared—had the staff in place, and so on—were the ones that were successful in this process, not perhaps those areas that needed the funds. So, that’s a challenge for you, whether you can improve this process in Wales.
[220] Un enghraifft: sefydlom ni, yng Nghaerfyrddin, ganolfan a oedd yn gallu arbenigo ynglŷn â thynnu i lawr arian Ewropeaidd. Dechreuom ni hynny nôl ym 1992 neu 1993. So, roedd tîm o bobl gyda fi mewn lle a oedd yn gallu rhoi cymorth i’r cyrff gwirfoddol, busnesau lleol, ac yn y blaen i edrych ar beth oedd mas yna ynglŷn â—siaso arian yw e, ond, os na fyddem ni yna, ni fyddai gobaith gyda nhw i dynnu arian i lawr.	One example: we, in Carmarthen, established a centre that was able to specialise in drawing down European funds. We started that back in 1992 or 1993. So, we had a team of people that I had in place that were able to support the voluntary bodies, local businesses, and so on to look at what was out there in terms of—well, it’s chasing funds, truth be told, but, unless we were there, they wouldn’t have had any hope to draw down the funds.
[221] Roedd yn rhaid edrych a oedd eisiau fe yn gyntaf ac os oedden nhw’n moyn gwneud e. Dyna beth oedd y cwestiwn cyntaf: ‘A ydych chi am wneud hyn?’ Peidiwch â’i wneud e os ydych chi jest yn moyn arian’. Dyna’r cwestiwn cyntaf. Os oedden nhw’n moyn ei wneud e ac os oedden nhw’n gweld gwerth gorau o wneud rhywbeth, wel, ‘Dewch i weld beth allwn ni ei wneud.’	They had to look at whether it was needed and whether they wanted to do that. That was the first question: ‘Do you want to do this? Don’t just do it if you need the funds’. That was the first question. If they wanted to do it and if they saw a value in doing something, then, ‘Come to us and let’s see what we can do.’
[222] Pethau fel town twinning—fe wnaethom ni lot o helpu pobl i gael partneriaid mewn ardaloedd eraill. Roedd cysylltiadau gyda ni dros Ewrop i gyd. So, rŷm ni wedi bod yn llwyddiannus yma yng Nghymru yn gwneud hynny. Mae’r Alban hefyd, a’r Gwyddelod, wedi bod yn glyfar dros ben dros y blynyddoedd.	Things like town twinning—we offered a great deal of support to draw those partners together. We had links across the whole of Europe. So, we have been successful here in Wales in doing that. Scotland too, and the Irish, have been very clever over the years.
[223] Ond, yn y blynyddoedd diwethaf, fe wnes i lot o waith yng Ngwlad Pwyl ac yn y blaen i roi nôl i’r system y profiad oedd gyda fi, a hefyd pobl eraill. Rwy’n credu yr oedd hynny’n bwysig. Rwy’n cofio mynd—un enghraifft—â ffermwyr o Geredigion a sir Benfro i Iwerddon. Roedd hynny’n dipyn bach o sialens. Roedd tua 15 ohonyn nhw, ac nid oedd y rhan fwyaf ohonyn nhw, eto, wedi bod dramor. Roedden nhw’n credu eu bod nhw’n gwybod popeth, ond fe aethom ni â nhw i ardal Galway, rwy’n credu, ac fe ddysgon nhw bethau newydd. Roedd hynny fel eye opener i’r ffermwyr yna. Cyn hynny, roedden nhw’n negyddol dros ben a’r unig reswm roedden nhw’n moyn mynd oedd efallai i gael peint neu ddau o Guinness. Ond, ar ôl y broses, roedden nhw wedi dysgu ac roedd cysylltiadau wedi cael eu gwneud. Rwy’n gwybod am un sefyllfa lle cafodd teulu newydd ei greu hefyd. So, roedd hynny’n llwyddiannus dros ben.	But, in the past few years, I did a great deal of work in Poland and in other areas to give back to the system the experience that I had, and the experience that other people had. I think that was very important. I remember—one example—taking farmers from Ceredigion and Pembrokeshire to Ireland. That was a bit of a challenge. There was around about 15 of them, and the majority of them, again, hadn’t been abroad. They thought they knew everything, but we took them to the Galway region, I think, and they learnt new things. That was as an eye opener for those farmers. Before then, they were quite negative about it and the only reason they wanted to go was to have a pint or two of Guinness. But, after the process, they'd learnt a great deal and links had been forged. I know of one situation where a new family has been created. So, that was a huge success.
[224] Rydym ni wedi bod yn llwyddiannus yng Nghymru ond nid yw hynny’n meddwl na allwn ni fyth gwella beth rŷm ni wedi bod yn ei wneud hefyd. Ond mae diffyg enfawr gyda ni o ran symud ymlaen ac fel rydym ni’n mynd i wneud hyn o hyn ymlaen.	We have been very successful in Wales but that doesn’t mean that we can’t improve what we have been doing either. But there’s a huge deficit that we need to face as we move forward in how we’re going to do this from now on.
[225] Jeremy Miles: Ar drywydd ychydig yn wahanol, a fyddech chi’n erfyn gweld bod awdurdodau lleol ar draws Cymru nawr yn gwneud rhyw fath o audit o’r cynlluniau sydd gyda nhw a’r rhaglenni sydd gyda nhw i weithio allan beth sy’n risg a phryd mae’r risg yn codi? Efallai fod y gwaith yn digwydd yn barod.	Jeremy Miles: Taking a slightly different direction, would you now expect to see local authorities throughout Wales carrying out some sort of audit of the plans that they have and the programmes that they have in place to try to work out what is a risk and when that risk will arise? Perhaps that work is going on now.
[226] Mr Davies: Rwy’n siŵr ei fod e’n digwydd mewn awdurdodau nawr ac efallai trwy’r WLGA. Rwy’n siŵr bod y gwaith yna’n cael ei wneud, achos mae awdurdodau wedi bod yn gwneud hyn ers blynyddoedd i baratoi am raglenni newydd a chau rhaglenni. Ond nawr maen nhw’n gorfod paratoi am bwy a ŵyr beth sy’n mynd i ddod. Dyna’r sialens fwyaf, achos nid oes neb yn gwybod beth sydd i ddod.	Mr Davies: I'm sure that that is happening in local authorities now and through the WLGA. I’m sure that this work will be done because authorities have been doing this for years in preparing for new programmes and the closure of programmes. But now they have to prepare for who knows what will be coming. That’s the biggest challenge, because nobody knows what's coming.
[227] Jeremy Miles: Diolch.	Jeremy Miles: Thank you.
[228] David Rees: In your earlier answers you indicated that some of the programmes extended beyond the seven-year MFF period. Therefore, they’d start perhaps maybe towards the end of that seven-year period but carry on into the next period. That’s a likely possible scenario that could have happened in this seven-year period, because we’re not even three years into the seven years at this point in time. The Chancellor of the Exchequer has highlighted that he will guarantee funding for any programmes approved before the autumn statement, which is in November. In your experience, what percentage of programmes would you have initiated to have been approved post three years, in other words, perhaps in the latter years, knowing that they’re going to go on? As a consequence of that, is there a very strong likelihood that we will lose programmes because they won’t be approved and they will not be guaranteed funding?
[229] Mr Davies: I’m sure that there are programmes or projects in the system, and have been in the system for some time, that haven’t been approved yet. It’s questionable whether they are deliverable at the moment because, if they are not approved very soon, with the potential of having to close projects in 2020, if not sooner, you have to consider whether it’s actually worth delivering some of these initiatives, especially when you start looking at the outcomes that need to be achieved.
15:30
[230] Some of the infrastructure ones will take longer than three or four years to actually deliver. If you’re looking at major road infrastructure, IT et cetera, some of these would require six, seven or eight years, maybe, to be deliverable. There will be other schemes out there that can be delivered over two or three years, certainly, but then you have to look at the targets that were agreed with the Commission early on—they’re not going to be achievable.
[231] David Rees: Would you, therefore, anticipate that one of the tasks for the Welsh Government would be to look and speak to all of the organisations to identify those projects that may have been issued post 2017?
[232] Mr Davies: I think they have to look at the deliverability of the existing projects against the targets that were originally agreed when the projects were approved.
[233] David Rees: They would form part of the negotiations with the UK.
[234] Mr Davies: Yes, and that needs to be negotiated between WEFO, the Welsh Government and the organisations, but also with the European Commission—whether they take a hard line in terms of, ‘No, the scheme finishes in December 2020 and that’s it’, or whether there’ll be an element of flexibility to allow those projects to be delivered for, maybe, another year or two years. You are allowed an extra year, to take you to eight years, to actually deliver, then there’s another year on top to close the projects. It can often take a year, if you’ve got a major scheme, in order to get all of the books in place—it can take an extra year to close a project. So, that’s why, when I say seven-year programme, it’s actually nine years to actually close a project.
[235] I don’t know—I’m not in the system at the moment—whether the Commission has agreed with WEFO to enable them to close earlier or to extend. I really don’t know what the situation is. But that’s going to be a challenge, because if they start establishing a hardline approach, in that projects have to be delivered and be accountable financially by 2020, it really narrows the scope of delivery as far as many of the projects are concerned.
[236] David Rees: So, we will need to ascertain how that will work post exit.
[237] Mr Davies: I think that’s critical, leading up to 2020 and what’s going to happen afterwards.
[238] David Rees: Michelle, do you have a question?
[239] Michelle Brown: Thank you, Chair. I just wondered what sort of transitional arrangements you would ideally like to see. In an ideal world, what would you suggest the transitional arrangements should be?
[240] Mr Davies: In order to enable organisations to get their act together, and in order to get sub-regions to get their act together, this needs to be done sooner rather than later. You cannot impose that on organisations and on regions in three years’ time and expect them to get their act together by 2020. Coming back to what Eluned said earlier in terms of mid Wales, for example, you need to get the building blocks in place very soon to ensure that the capacity and the capabilities are there to actually deliver in 2020, and that, internally within the Welsh Government, the resourcing is available and that the policies and the strategic direction are well in place, obviously, at a time when you’ve got, potentially, elections and you’ve got a whole range of other features and challenges within the Welsh Government that could, maybe, help to divert attention.
[241] So, there’s a lot that needs to be done to ensure that the challenges of delivering—. Again, the Welsh Government is responsible for delivering what’s out there at the moment, whether it be the CAP moneys, whether it be the rural development programme or whether it be the structural funds. So, obviously, the staff need to be in place to ensure they’re being delivered. Then you need to look, as I said earlier, at the capacity for developing new ways of thinking—new thinking. Maybe you can start thinking outside the box in Wales—there are opportunities now to actually do it to get the templates and the building blocks in place. But let’s not dismiss some of the good features, as I said earlier, that have emerged through overseeing and managing some of these structural funds, but try and get rid of some of the negative features, that’s all.
[242] David Rees: Are there any other Members with questions? No. Diolch yn fawr iawn for the evidence. You will receive a copy of the transcript for any factual inaccuracies—please let us know as soon as possible if there are any. Once again, thank you very much for your time this afternoon.
[243] Mr Davies: Ocê. Diolch yn fawr.	Mr Davies: Okay. Thank you very much.
15:36
Papurau i’w Nodi Papers to Note
[244] David Rees: Item 4 on the agenda is papers to note. I hope you’ll note the minutes of the meetings on 12 and 19 September 2016. Are Members happy to note those? Thank you.
Cynnig o dan Reol Sefydlog 17.42(vi) i Benderfynu Gwahardd y Cyhoedd o Weddill y Cyfarfod Motion under Standing Order 17.42(vi) to Resolve to Exclude the Public for the Remainder of the Meeting
Cynnig:	Motion:
bod y pwyllgor yn penderfynu gwahardd y cyhoedd o weddill y cyfarfod yn unol â Rheol Sefydlog 17.42(vi).	that the committee resolves to exclude the public from the remainder of the meeting in accordance with Standing Order 17.42(vi).
Cynigiwyd y cynnig. Motion moved.
[245] David Rees: Under Standing Order 17.42(vi), I put a motion that we resolve to meet in private for the remainder of this afternoon’s session. Are Members content? I see that Members are, so we’ll move into private session.
Derbyniwyd y cynnig. Motion agreed.
Daeth rhan gyhoeddus y cyfarfod i ben am 15:36. The public part of the meeting ended at 15:36.