7 February 2012

• Item 1: Minutes of the previous meeting

• Item 2: First Minister’s Items
• Item 3: Forthcoming Assembly Plenary Business
• Item 4: Monthly update on the Economic Situation
• Item 5: The Welfare Reform Agenda and its Implications

Present:

• Rt. Hon. Carwyn Jones AM, First Minister (Chair)
• Leighton Andrews AM 
• Edwina Hart MBE OStJ AM 
• Jane Hutt AM 
• John Griffiths AM
• Lesley Griffiths AM 
• Huw Lewis AM
• Carl Sargeant AM 
• Janice Gregory AM
• Theodore Huckle QC

Officials:

• Dame Gillian Morgan, Permanent Secretary
• Michael Hearty, Director General Strategic Planning, Finance & Performance 
• Peter Greening, Cabinet Secretary
• Des Clifford, Principal Private Secretary to the First Minister 
• Jo Kiernan, Special Adviser
• Andrew Bold, Special Adviser
• Chris Roberts, Special Adviser
• Sophie Howe, Special Adviser 
• Jonathan Davies, Special Adviser 
• Matt Greenough, Special Adviser 
• Steve Jones, Special Adviser 
• Jeff Andrews, Specialist Policy Adviser
• Marion Stapleton, First Minister’s Delivery Unit 
• Christopher W Morgan, Head of Cabinet, Plenary and Committee Business Secretariat (minutes) 
• Jonathan Price, Chief Economist (item 4)
• Emyr Roberts, Director General Education and Skills (item 5)
• Teresa Holdsworth, Deputy Director, Employability and Skills Division (item 5)

Item 1:  Minutes of the previous meeting

Minutes

1.1 Cabinet approved the minutes of the previous meeting.

Item 2:  First Minister’s Items

Monthly Press Conferences

2.1 The First Minister reminded Cabinet that he would be hosting monthly press conferences, which would be themed around specific subjects. In addition, in between these press conferences, the Minister for Finance and the Leader of the House would be providing fortnightly briefings for the media.

Visit to the Embassy of Ireland

2.2 The First Minister reported on his recent visit to the Embassy of Ireland in London.  

Item 3: Forthcoming Assembly Plenary Business  

Plenary Business

3.1 Ministers discussed the Plenary Grid and noted that a number of Ministerial Written Statements would issue before the Half Term Recess.

Item 4: Monthly update on the Economic Situation

4.1 The First Minister invited Jonathan Price, the Welsh Government’s Chief Economist, to provide an update on the economic situation and related issues.   The first part of the presentation related to the current economic situation, whereas the second part addressed some of the issues that had been raised during previous Cabinet discussions on the economy.

4.2 It was reported that, as expected, the latest data on GDP showed that the UK economy had contracted by 0.2% during the last quarter of 2011, confirming a weak and halting recovery from recession.  A small part of the explanation for the poor growth performance could lay in the decline of North Sea oil production and the ageing of the oil extraction infrastructure, which had resulted in a sustained decline in output.  Early indications suggested that the economy had slightly improved in January.

4.3 The latest labour market data suggested that the economy was stagnant rather than back in recession, and this view had been reinforced by the latest non-official data.  The latest position was therefore somewhat less negative than what had been suggested by the GDP figures. It was reported that Wales had been fairing a little better than the UK as a whole over the last couple of months, particularly in relation to claimant count figures.  

4.4 It was noted that the Eurozone still faced significant uncertainties. However, there was better news coming out of the United States, with almost a quarter of a million jobs being created last month, the best level of job creation seen in that country for nine months.

4.5 The Chief Economist referred to the projected impact of the UK Government’s Welfare Reform agenda and recent data from the Institute for Fiscal Studies, which suggested that the biggest losers in Wales, as a result of the austerity measures, would be poor households with children.  There were also particular issues relating to the number of people on Incapacity Benefit in Wales.

4.6 The impact of cuts in spending and public services was discussed, with particular reference to a study that had been commissioned in 2005 jointly by the UK and Scottish Governments.  This had provided a summary of distributional impacts between local authority services, the distribution by ward deprivation level and the variation between wards.  Evidence suggested that there was a need to focus help on those likely to be hardest hit, particularly poor families with children, and perhaps prioritising those public services that were considered to be ‘most pro-poor’.  Cabinet agreed that it would be useful if the Education and Skills Minister could commission some similar research specifically for Wales.

4.7 New independent research on the outlook for 64 UK cities for 2012 had confirmed Welsh Government findings that Swansea and Newport were facing challenges and were particularly vulnerable over both short and the longer term.  The research had also indicated that Cardiff’s performance was around average.  It was acknowledged that this information could usefully inform the public debate on the potential role of City Regions for economic development in Wales.

4.8 Ministers also considered the differences in trend between public and private sector pay in the South Wales Valleys since 1999 and noted that evidence had suggested that the relative improvement in household incomes in the Valleys was more related to an increase in the number of people employed rather than trend differences in the level of pay.  

4.9 Cabinet discussed the level of public sector spending as a proportion of GDP within Wales compared to other countries and regions within Europe.

Item 5: The Welfare Reform Agenda and its Implications

5.1 The Minister for Education and Skills introduced the paper, which provided an update on the UK Government’s Welfare Reform agenda and its implication for the Welsh Government.  

5.2 It was reported that over the past few months the Ministerial Task and Finish Group had assessed, monitored and considered the cumulative impact of the Welfare Reform agenda across the Welsh Government’s policies and services.  The paper provided a composite update on DWP policy, timelines and delivery issues, while setting out the Welsh Government’s response to the proposed changes and an early analysis of the economic impact of the reforms.  

5.3 Highlighted within the paper were the programmes that the UK Government would be abolishing and the role of the Welsh Government in implementing successor arrangements.  There were both direct and consequential impacts of the changes, which were potentially complex and far-reaching.  

5.4 Notably, the paper highlighted that the UK Government intended to abolish Council Tax Benefit, and localise the responsibility for assisting people with their Council Tax.  In Wales, the Welsh Government would be expected to administer this benefit with a forecast 10% reduction in funding and no additional resources to administer any replacement scheme.  

5.5 In addition, the UK Government intended to abolish the Care Grant and Crisis Loans elements of the Social Fund and introduce a Shared Accommodation Rate for single claimants of Housing Benefit under the age of 35.  Furthermore, a Disability Living Allowance would be replaced by Personal Independence Payments and a household benefit cap would be introduced.  

5.6 To fully understand the implications of these reforms, the Ministerial Task and Finish Group had commissioned an impact analysis and the early findings, based on existing information, were set out in the paper.  This study had highlighted areas of concern and provided a basis for considering measures and whether the Welsh Government was able to mitigate the negative impact of the changes.  

5.7 Cabinet welcomed the paper and noted that the Education and Skills Minister intended to make a Statement to the Assembly at the end of the month on the implications of the UK Government’s changes.  The Statement would highlight the results from the first stage of the analysis.  

5.8 It was reported that the second stage of the analysis, which was scheduled to be completed towards the end of the year, was expected to provide much more detail on the likely impacts of the UK Government agenda, while examining behavioural changes.  It was agreed that this should include an equality impact assessment of the reforms and take into account the cumulative effect on protected groups.

5.9 However, Cabinet did express concern that the devolution of the administration of benefits had serious implications for the Welsh Budget, as the Government was expected to deliver benefits with less resources and might have to bear the administration costs.

Cabinet, Plenary and Committee Secretariat
February 2012