National Assembly for Wales

Are we happy to note the papers? Diolch yn fawr. 

Our substantive item this morning is looking at our legacy report and legacy work and reflecting back on the last few years. I'd like to welcome the Cabinet Secretary here. Do you want to introduce yourself and your official for the record, please?

—reflecting on how the budget process has worked, what your thoughts are, how it could be improved, what might change, and what's frustrated you in the past. You first took the Cabinet Secretary for finance role back in 2016, and you've seen that role evolve in that time to now. Obviously, you were First Minister in the meantime, so a different aspect of budgeting, and those conversations with different officials in the Treasury and all that aspect of the role. Could you reflect on what's changed, what's stayed the same, and what might you have done differently, looking back?

Thank you, Chair. I think the essence of the role of finance Minister remains the same over that period. Your key responsibilities, as they have seemed to me, include making sure that the spending plans of colleagues are aligned with the programme for government on which the Government has been elected. I think finance Ministers have a particular responsibility for looking across the Government. Other than the First Minister's office, it's the only part of the Welsh Government where almost every bit of business is copied into, so you have an ability that other colleagues won't have to make sure that what's happening in this part of the Government and what's happening in that part of the Government are coherent from that alignment with priorities perspective.

You have an ongoing responsibility, always, for monitoring the budget. A lot of your time as finance Minister is trying to keep the show on the road. There have been years, during the time that I've been doing it, where that has been very difficult indeed. It has not been so difficult in the last year, but the 10-year period we've been talking about is an era of austerity, Brexit, COVID, cost-of-living crisis, all of those things. It sounds like a routine thing to say, your responsibility for monitoring, but, actually, in many years, that's been a very big challenge, just to manage to keep the budget side of the Welsh Government under control.

After that, I think the role is just shaped by circumstances, rather than the changing nature of the role. Thinking of your question, Chair, the first time I became a finance Minister, it was at the very start of a term. We’d just had an election, there was a new programme for government, my job was to try and work with colleagues to think across the whole of the five years ahead. I vividly remember my office was next door to Carl Sargeant's. On almost the first day, Carl came through the door—and you remember he was a presence when he came through the door—and said to me, 'You've got to find me a large number of millions of pounds', because he was responsible for the housing pledge of that Government. He said, 'Unless I get capital early on, I'm never going to be able to deliver the target.' If you're a finance Minister at the start of a period, I think the role has to reflect that. This time, I've become a finance Minister in the second half of a term, when the programme for government is established already and many of those patterns have already been laid down and so on. So, I think a lot depends on the circumstances of the time.

From my own personal perspective, I think lots of my time has depended on where you are in relation to devolution. The first time I was finance Minister was a period when a then Conservative Government passed the Wales Act 2017, which brought fiscal devolution to Wales. I spent a lot of my time in those years with the establishment of the Welsh Revenue Authority, with taking legislation through the Senedd to set up systems for land transaction tax and landfill disposals tax. From a finance Minister's point of view, that was a busy time in devolution—new powers coming to the Senedd, lots to set up to deal with those responsibilities for the first time.

Then there was a period, from 2019 to 2024, that was a period of frozen devolution. Nothing was coming to Wales in that era. Suddenly, you're not as busy on that front as you had been. And now, again, I think devolution is becoming unfrozen—not as fast as some of us might like, but I think that's the trend. I've spent a lot of my time in recent months working with colleagues on how we deal with post-European Union funding that is coming to Wales, how we're going to manage that. I remain hopeful that a vacant land tax will still materialise in the final weeks of this Senedd term. I've been—

I thought that was a unicorn.

You may turn out to be right, but I'm hopeful. I suppose in terms your question about how finance Ministers do their job, I have spent more time in the last 12 months on a renewed sense of devolution of responsibilities than I would have for the five years previously. In that sense, the role is very context dependent.

Does that balance with the priorities of the Exchequer in London as well? You've talked there about shifting priority. It tends to be driven by shifting priorities in Westminster and in No. 11 and the Treasury. You talked about devolving taxes to start with and then nothing much going on and now that changing again. In the last few years, we've seen so many different Secretaries to the Treasury, and I know your predecessor Rebecca talked about having to build a relationship every single time, which has a lot of effort involved, rather than getting on with moving things. So, having that stability in those relationships hasn't always been the case, even in the latter years since the last general election.

I think there are two different points in the question that I would think of. You are very dependent, as a finance Minister here, on the financial context set by the Chancellor of the Exchequer. Sam might have a different view of this, but I think that it is just factually true to say that in the budget for this financial year, we had more extra capital—£365 million in additional capital—than in the previous 10 years combined. That's a very different context, isn't it? If you're a finance Minister in a period where capital is in very short supply, you're having to do things like the mutual investment model. The first time I was finance Minister is when we developed that, because we were in a period of capital starvation and there were so many things we really needed to do and couldn't do them through conventional capital alone. This year, my focus has been much more on trying to make sure we spend the money that we've now got, because suddenly the tap is turned on and you're dealing with a very different context. So, quite certainly, the job you do is shaped by some of the policies that lead to the quantum of money that you've got available for purposes in Wales. 

The second part of the question, Chair, was about personal relationships and how you get on with people and how you manage. I thought one of the things that we succeeded in doing with the previous Conservative Government—and it was Michael Gove who led the work for the UK Government—was to agree a new inter-governmental relations system. It was intended to be a more predictable institutionally based set of arrangements, rather than just personal contacts and picking up the phone to people. From a finance Minister's point of view, that's the Finance: Interministerial Standing Committee, isn't it? Rebecca absolutely suffered from the fact that every time she went to a FISC it was a different Chief Secretary to the Treasury.

I would say that those arrangements at least have a different degree of predictability. The FISC does meet; it meets every quarter. It has a greater degree of shared responsibility. I've gone to meetings in the past with UK Governments where the agenda is set by them, the minutes are taken by them, the chair is held by them. Now FISC rotates, it rotates geographically. If it's in Scotland, it's the Scottish finance Minister who takes the chair, the agenda has to be agreed between all four nations, any nation can ask for an item to be on the agenda. So, I think, while by no means perfect, the institutional arrangements for bringing people together are stronger today than they would have been before the IGR work was completed.

That brings me on to one of the biggest drivers for this committee, or for you, which is setting out the budget every year. That timing issue has always been a problem for scrutiny, but also, from your point of view, for setting the budget. Those relationships with the Treasury and when the Government in Westminster set their budget or that fiscal event is the thing that drives here. Thinking about the engagement that you've had, and possibly Rebecca had, with this committee, how do you think the scrutiny element and the time constraints that we've had on that and being able to to do a good job of asking the questions that test your thinking, to make sure that it is robust—? Because that's what scrutiny is all about. 

I suppose my own view is that it's slightly a curate's egg. Here are the good things: I think the fact that, at the suggestion of the committee, we now have that debate before the summer is a really good development. I will be strongly supportive of it. By then, as a finance Minister, you've probably already had your first round of bilaterals with all your colleagues, and you are about to have a second round, in which you agree work that's to be done over the summer to prepare for the draft budget early in the autumn. It's a very good point in the process to have that early sighting through a Finance Committee debate on what the emerging priorities are, a sense check of what this budget is going to have to respond to and so on. Thinking of the question about developments and process, I think that's been a strong new strand, and the next Senedd will be sensible to continue to adopt it, I think. 

I think the engagement work that the committee does is really valuable. I really enjoyed the session that I was able to share with you with the Youth Parliament and so on. But we rely quite a lot on the work that you do in that way. Because finance Ministers obviously have engagement—there are lots of people who want to meet you to tell you how hard their lives are and how much they need more help from you, so you're not without engagement—but I think you're able to do it in a slightly different way. I get information fed to me as part of my thinking that comes from the work that you do there. So, I would say both of those things are strengths of the way the system works. I think there are more tensions between what a Government has to do and what the committee would ideally like, when it comes to the scrutiny of the budget in the autumn.

I think it's often been a real challenge to lay a draft budget in October without knowing what the Chancellor's thinking is going to be at that point of the year. You have always, I think, argued for the Welsh Government to declare its hand early, and I suppose, from a Government's point of view, there's always an anxiety that you'll have one set of plans, and then a few weeks later you're going to have to tear them up and—. Well, not tear them up, but they will be significantly amended, and in that sense, we probably would rather wait to see the context we're in, and you'd rather we went earlier than that. We've both got our reasons for why we prefer a course of action.

I myself, just to be frank with you, have never understood the argument that Senedd Members don't work in the recess, because I think everybody does. We've had moments over time when we believe that counting the recess as a week in which scrutiny can happen is a legitimate ask of committees, and I think the committee's view has generally been that it isn't a week that counts.

At one point, we were nearly having Christmas dinner with Rebecca Evans. The Wednesday before Christmas was the latest that we did a scrutiny session, and that's challenging, just from that point of view.

Of course. I completely understand. And it's been our ambition—and I think it's probably been a shared ambition—that we always do declare that budget before Christmas, and we've always managed it. There have been some years when that has been a real achievement, given the condensed period of time that there has been after a UK fiscal event. But I think there are some parts of the process in which it's almost inevitable that the legislature and the Executive will be responding to slightly different drumbeats.

Sam, did you want to come in?

Yes. Thank you, Chair. Thanks, Cabinet Secretary, for those comments. Just thinking about the scrutiny of budgets, my only mild experience was of some of the stuff from my previous role on a local authority, and what always surprised me there were the things that drew members' attention in terms of spend. Some things may be financially, certainly, pretty insignificant, and be, at times—. A lack of scrutiny of those big spend areas—in a local authority, that'll be education and social care—whereas some very small spend areas get huge amounts of attention. I sometimes wonder about this place, where there are some big spend areas, such as in health and social care, disproportionately large compared to other areas—rightly so—but I just wonder whether you reflect on the way we as a Senedd scrutinise, at times, and where our attention is drawn to, and whether a future Senedd should, or could, review the way it focuses attention in terms of where that scrutiny takes place, from a financial point of view. Because, actually, some of those massive spend areas probably don't get the level of scrutiny that much less significant spend areas get. Is that a fair comment?

I think it's a very fair comment, and I would say it's a danger inside Government as well as in scrutiny by committees. Over the years, I've said quite often to some of my colleagues that all we're doing here is looking at the icing and ignoring the cake. There's a big sum of money that you have at your disposal, and all you want to talk to me about is the little bit extra that we may be able to find this year. Should we not be looking at the cake and looking to see whether there are different ways in which the cake could be baked? I've stretched the analogy now too far. But I think that's probably an even bigger danger for a Senedd, because all Senedd Members will be receiving campaign—there'll be people writing to you, there'll be organisations wanting to influence the budget—and if you're not careful, your attention just gets dragged to the things that are most in the news and where there is most noise. That leaves less attention to look at the more fundamental, bigger sums of money, and so on.

One of the reasons why I was in favour of an enlarged Senedd, and remain in favour of an enlarged Senedd, is that I would hope that, when people aren't as busy trying to cover as many aspects of responsibility as people are now, there will be people who will be able to develop a greater depth of experience and knowledge in a particular area, and will be better equipped, therefore, to ask some of those questions than maybe is possible when the Senedd is running on fewer people than we know it needs to do the job it's asked to do.

Okay. Thank you. Mike, I'll come to you now with some questions.

Thank you. I'm going to talk about prioritisation in budgets. As you know, I'm a fan of zero-based budgets; that's not something the Government has ever dealt with properly. We had a movement on to it, but it never got down to zero-based budgets and there were too many untouchables in the system for that to work. This is something we've talked about for a long time: prevention, productivity, climate change adaptation. If all you do is the same thing over and over again in terms of funding, giving the same money to the same people, then what you're going to end up with is the same outcomes. As you know, I'm a great fan of the future of artificial intelligence, which we need to massively improve productivity, especially in health. That's not a view that is held by the health Minister, for example. I think it is important that we look to how we spend money. Do you think we've spent money wisely over the last five years in dealing with prevention, in dealing with using technology more effectively, and in dealing with mitigating climate change?

Well, I think I could defend the way in which the Welsh Government has spent money in those areas, certainly. But, actually, if you look at the last five years, what has the Government been doing? I think we've been involved in repair and recovery. In 2021, when this Senedd was elected, we were still in the depths of COVID. You will remember, in the early days of the election campaign, we weren't allowed to knock anybody's door because of the level of spread and anxiety. So, so much of this term has been spent dealing with the consequences of those major events: Brexit, COVID, inflation. It's been very hard, it seems to me, to do some of the things that Mike is talking about, because, most of the time, we have been dealing with the consequences of those major events.

I still think, if you looked at our record on flood prevention, for example, in relation to climate change, we have still managed over that period, year on year, to increase the amount of investment we've made in dealing with the consequences of severe weather events in the winter. If you look at the flooding we've had this year, and how far the investment we've already made saved homes from being flooded, that is a genuinely preventative spend. It is genuinely responding to climate change and so on. Had we been in calmer waters, I think there were other things we would like to have done, but for so much of our time we've been just responding to the pressure of events.

I won't push it much further, but, far too often, we've built walls where planting trees, creating floodplains would have had a more—. It's long-term advice. I've got it in Mumbles, in Swansea, where we've built a very high wall—a very expensive high wall—but, in 20 years' time, whoever is sat in here will be talking about adding to the height of the wall as the sea levels rise.

Look, I think, again, if you were looking at the pattern over the years, it's not that long ago when concrete solutions to flooding were the way in which the industry and the people who dealt with it thought you should do things. Now, natural forms of flood prevention are much more likely to be the first resource. They work very well in some places; they are a challenge in others: in valley communities where topography means there are far fewer opportunities to spread water when it's in oversupply, and things like that. But I think the big trend is exactly the one, Mike, that you've described.

And finally from me, you've produced a lot of documents alongside draft and final budgets. What in your opinion has been the most useful in communicating your budget decisions? This is one of my bugbears, especially on the local government settlement: people talk about percentages, not absolute amounts. For example, Monmouthshire always gets the least money per head of population for all sorts of good reasons I don't want to go into, and Blaenau Gwent always gets the most. But if the budget ends up with Blaenau Gwent going up by 2 per cent and Monmouthshire going up by 4 per cent, Monmouthshire has done well, whereas, in reality, Monmouthshire gets a lot less.

What I'm saying is, more about absolute numbers and, more importantly, per head of population. That's a much better way of explaining a budget in areas than percentage increases. That's also probably true, in my opinion anyway, for departmental increases. A small department gets a 4 per cent rise—. And also something that was done by either you or your predecessor, when something was moved from one block to another—went from climate change into local government—and all of a sudden, climate change was showing at a 10 per cent reduction. I think that, and I'll finish on this, getting it down to areas of spend and amount spent in areas, because percentages and changes can cause confusion. 

Again, I think there were strands in the question, Chair. In terms of the budget documentation that we produce, I think different bits of the documentation are more useful to different audiences. So, the budget explainer, which is our attempt to try to explain the budget to a lay audience—people who would have a general but relatively passing interest—that's more useful to them than the budget report, which is really aimed at a much more specialist audience, people who are interested in the finer details of it all.

I myself find the distribution analysis paper that we produce alongside the budget one of the most useful things, because it gives me a reassurance, and I'm able to explain to other people, that it's a Government that spends its money for those people who need the money the most. The significant bulk of our money is spent on people at the bottom end of the income distribution, rather than the top. So, I look at that one very often first, and I always look at the strategic integrated impact assessment document, because that's where you see whether you managed to discharge your responsibility for coherence across the Government. So, I think different documents are useful for different audiences, rather than saying some documents are more useful than others.

On that document, how does that interplay then with the Well-being of Future Generations (Wales) Act 2015? Because, in theory, you should be able to see—. The strategic impact assessment should have, hopefully, that longer term view and the principles within that Act, and how well does it do it, and does it need some further refining?

Well, obviously, always you could say it could do with further refinement, it could be better. The well-being indicators are the hinge that link the two documents together, because the well-being indicators are produced as part of the well-being of future generations Act, and the SIIA reflects the well-being indicators as one of the ways in which it assesses impact. So, I think there is a very direct relationship between the two.

Is there a chicken-and-egg bit there, then? So, from the point of view of you checking back at the future generations Act, rather than thinking, 'Well, these are the things that we should be doing, therefore the priority goes in that way.' How does your department work, effectively? Which way do you look at it? Do you make decisions and then check back against it to check that it works, or the other way around, I suppose?

The strategic integrated impact assessment is, to an extent, a post hoc document. It looks at the decisions you've made and asks, 'What are the impacts these decisions will have on different parts of the population, and how do decisions made in one part of the Government align with decisions made elsewhere?' So, in a sense, it is a looking back at the decisions you've made and testing them against those criteria. But I’m not sure how you would resolve that in a different way. And it’s not the only way in which—

But are you mindful of that when you're making decisions in the first place, so thinking, 'Well—'—?

Yes.

Just to mention the future trends report, I think we are required by law to publish that at the start of each Senedd term, and we've recently started work on the future trends report for the next term, and the intent is to align that with the budget process so that the future trends report is published ahead of the budget, the first budget of the next Senedd term, and the data that is going into the future trends report can be used to inform the budget decisions that are made at that point. So, definitely the aspiration and the aim is to ensure that, when Ministers are making decisions, they've got that evidence base in front of them and can think about impacts prospectively rather than retrospectively. But, yes, you do need to look back as well.

Can I just also mention a point on the information that we publish? There is a real balance here, or a tension, between publishing the right information and publishing a lot of it. We publish a huge amount of information. I was just digging out the local government settlement when Mike Hedges was asking his question, and there is a table in the local government settlement documents that sets out spending per head by local authority, but it's in a massive spreadsheet that has 16 tables in it and—

It's about halfway through the table, the big table, the major table. The first table you get to is the percentage increase.

Yes. And so, obviously, the percentage increase is important, and all the other stuff is important as well, and it's making good judgments about which things you give more prominence to. Sometimes I think we probably put out too much information and it can confuse rather than inform.

You did say, 'We do too much.'

Well, I believe we do, and there is a fallacy that is to be found in lots of parts of the public service, which is the ‘more is better’ fallacy, that more of something must mean you’re doing better at it. I'm afraid I think that over time we have added on more and more bits of information that we publish alongside the budget, and I'm not sure that there is a genuine return on that investment. It takes a load of time by civil servants to produce all these documents. Do they have the impact? Do they have the readership? Do they all need to be published alongside the budget? Would they have more impact, would they attract more attention, if you published some documents at a different point in the process? I have thought a few times that the chief economist's report, as it’s no longer called—I’m sorry, I’ve forgotten now what we call it—

The Wales economic and fiscal report. 

There we are. 

It trips off the tongue, doesn't it? [Laughter.]

Yes. What we used to call the chief economist’s report—would it be better to produce that before the summer? 

Around the same time as the priorities report.

Yes. So, that lens, which is a once in a year lens about the big trends and things like that, could inform the thinking of the committee and others at the outset of the process, rather than waiting for it to be published alongside everything else when it’s much harder for anybody to find time to give it the attention that it probably deserves. Because it’s always a really interesting read and it does stand back to give you a sense of the economic context for the next 12 months.

So, my own view is that we publish too much, that it doesn’t have the impact, therefore, that it might do, and maybe one way of doing that would be to think about the point in the year in which some documents are made available.

So, is there a suggestion there that either the next Welsh Government or the future finance committee needs to do some work on looking at what is produced—there may be a collaborative way of doing it between the committee and the Government—and how useful is it and timescales? And it's something that might be, depending on what my colleagues suggest, a recommendation, that we look at that sort of aspect and see what's produced and when it’s produced as something that might be a future line of work for either this committee in the future or for a future Welsh Government.

Quite a lot of the documents that are produced are in response to committee recommendations that such reports should be produced. So, I do think the committee has been very influential in that, and if this is a legacy session—I'm thinking ahead as well, Chair—then, you know—

A review of those documents might be a good idea.

Yes, a collaborative review, in which we both look at them. The document we produce every year, which is a huge document, which is the capital pipeline document, we publish that alongside the budget as well. I think it's another candidate, myself, for saying, 'Does it have to be alongside the budget?' Is there another point in the year in which that document could be produced that would allow it to have a bit more attention? It would still be there for people to draw on in looking at the budget. But we publish it all alongside the budget, in that pantechnicon that arrives with the draft budget documents.

And in the life cycle of this committee, we have very busy periods and we have slightly less busy periods, so, going back to Mike's point regarding the scrutiny of different aspects, it might give ourselves as a committee a fighting chance of being able to review and scrutinise properly other documents that are very fascinating, but, when they're coming all together, they're a mountain.

You just can't, can you?

Okay, thanks. Mike, did you have any further questions?

No, that's it from me.

Okay, thank you. I'll bring in Rhianon then. There we are.

Diolch, Chair. Can you hear me?

Yes, we can.

I think, in terms of aligning documents to the budget—perhaps talking about some of the wood and the trees; I'm going to follow on from that theme anyway—the budget improvement plan has come to the end of its five-year window. What has been achieved as a result of the implementation, and is there value, Cabinet Secretary, for, in a sense, futureproofing and carrying on with the budget improvement plan's remit in the next Senedd?

Thank you to Rhianon for that, Chair. She's quite right; the budget improvement plan has come to the end of its five-year period. I think things have definitely been achieved during it. What it aimed to do was it aimed to put a greater emphasis on accessibility of data, accessibility of information surrounding the budget process, and I think we worked hard to try to do that. I think it moved us to providing a greater focus on the basis for decisions, rather than just the decisions themselves, so a greater emphasis on evidence and a greater emphasis on data. I think it had a greater focus on cross-Government impacts of spending—not just the individual portfolio impacts, but the cumulative impacts. I think it tried to help us look forward in the budget process, rather than just always reporting on what had been done. So, I think it's been a worthwhile exercise. I think it's been a fruitful area for collaborative work between Finance Committee staff and people who work in the Welsh Treasury. For that reason, I think there is a case for having a new iteration of it. My own view actually echoes something that Mike said earlier on, that the impacts of artificial intelligence over the next Senedd term by themselves would merit a budget improvement plan to look at the way in which the processes and the data flows and so on over the next four years are to be navigated, because this is going to be an enormous impact.

Thank you for that. Moving on to gender budgeting, and in terms of it not being a dead data drop, but, in a sense, policy moving, the last were published alongside the draft budget, in terms of our three gender budget pilots. What, Cabinet Secretary, do you think the next steps are to be able to fully embed gender budgeting within the lens of being able to drive Government policy, how we prioritise and how we evaluate things going forward in this area?

Well, Chair, to make one general point, I think any finance Minister will always be under fairly constant pressure from committees of the Senedd, organisations beyond the Senedd, who want to argue that the budget should be analysed from a particular perspective, and all of those things are well argued and there's always a strong case. But the children's committee will always make a recommendation, in my experience, that the budget needs to be analysed from the perspective of its impact on children and young people. I've seen recommendations from rural affairs committees that there should be an analysis of the budget from the perspective of its impact on rural communities. I've seen recommendations from Welsh language committees that the whole budget should be analysed for how all the decisions that are made across Government have an impact upon the future of the language and so on.

So, there will always be—. If you're a finance Minister, there will always be people coming to you asking you to mount an exercise to analyse the whole of the budget from a particular perspective. In this five years, the one of those that we have taken forward is gender budgeting. I think there are good reasons for that. I think every Cabinet I've sat in has had more women in it than men. It's a subject that has some very strong supporters within the Senedd. But a future Senedd will, I think, want to ask itself the question about whether a continued focus on gender budgeting is the right focus, because we have done quite a lot of work in this Senedd term, and you could argue—and I think the question implied it, in a way—that what we should be focusing on now is embedding the lessons from what we've done, rather than going on just learning more lessons. The lessons, I think, are that you can use gender budgeting to disaggregate data, that you can bring more analytical focus on it if you have a concentration on it, and that you can therefore move your consideration of gender impacts earlier in the policy-making process than you otherwise would.

In terms of the Welsh Government, what we're trying to do is to take the learning from the pilots and disseminate that across the Welsh Government, because they have been pilots with particular groups of people working on particular sorts of policies. What we really need to do now is to generalise that and make sure that the whole of the organisation is able to benefit from the work that has been done. As I say, beyond that, there is a wider debate about whether disaggregating the budget according to a particular perspective is the best way of using our time, or whether more effort on the integrated impact assessment is a more fruitful way of understanding the impact that decisions have on people's lives.

Thank you for the response. I'm not going to delve into the reasonings behind gender budgeting at this session or argue for it as a driver of policy, as I'm sure everybody is aware in this room of the reasoning behind it and how it can close inequality gaps between males and females. As we all know, women are the poorest in society, generally speaking.

I'm going to move on to my next question. How useful then are the new—? We've touched upon this earlier, Cabinet Secretary, it's a bit repetitive, but I'm going to ask it anyway, because it's going to be extremely important, obviously, for the next Senedd as well: how useful have the new inter-governmental relations structures been in enabling you to raise fiscal issues specific to Wales? And how has the change in UK Government impacted on your relationship with the Treasury? Thank you.

Thank you to Rhianon for that. I think I said earlier, Chair, that I do think that the gains that were made in that inter-governmental relations work have been real and they are maybe more real in the FISC than they are in some other aspects of that architecture, because it has operated as it was intended in its regularity of meetings and in having a slightly greater degree of equality of participation between the four nations. And I hope that the way we report to the committee is helpful on that, because I write to the Chair of the committee always in advance of a FISC to let you know that it is happening and to outline the items that are going to be discussed there, and then I write again after a FISC to give a sense of what was actually discussed and where those discussions will go next. So, I think the answer to the question, 'Are the institutional arrangements better than they were?'—the answer to that would be 'yes'. Have they changed with a new Government? Well, of course, in many ways, they have changed, and from my point of view, they've changed very positively and I can point to various outcomes, I think, Chair, that demonstrate that.

Some of the underlying challenges in the system, though, still remain. We've had two Chief Secretaries to the Treasury in the first 15 months, so the Whitehall merry-go-round hasn't stopped; it's slowed down, quite certainly—the change in people is not as rapid as it was at one point—but it's still the truth that people move jobs more quickly in Whitehall than they do in Wales, and therefore you feel you've managed to get somewhere in a conversation with somebody only to find you are starting again. So, that hasn't been eliminated.

And one of the big—. What's the right word? I was going to say 'fights'—I mustn't do that. One of the big arguments that was there when the inter-governmental relations review discussions were finally concluded was that the Treasury refused to be covered by the dispute resolution mechanism that covers everything else in the IGR. So, that remains the case that there is no degree of independence in any dispute that arises between any of the parties at the FISC and the UK Government.

And they're still judge, jury and executioner, effectively.

They still are, and we still work away at that, and we will be working away at that in the Barnett discussions we will have at the next meeting. So, lots of things are better; not everything is as, I think from a Welsh Government perspective, we would want to see it. But if you wanted to see the practical difference that a different Government makes, then the money we've got for coal tips, which we argued so hard for with the last Government and didn't get and we now have £143 million-worth of investment from a UK Government; new financial flexibilities that we argued for for a long time and didn't get—I would say we have made a start on that, there's more ground to gain, but we've gained ground, and we didn't before.

And another way in which I think the new Government is different to the previous Government is that it has codified some of the way in which information is provided to the Welsh Government on changes in UK funding. And there were years—and I don't want to say this in a sense of blaming people, because it was largely the extreme circumstances of COVID—when money came to the Welsh Government very late in the financial year, without any prior warning that there was suddenly going to be an injection of funding, and if you didn't know that until halfway through February and you've got six weeks of the financial year only to go, it was very difficult to make best use of that money. We now have a codified system in which we get early warnings; they're not promises, they're ranges—'You can expect that the budget will increase or decrease between—', and you get that in enough time to plan for it. So, that's another way in which I think things are different and, from my point of view, better.

And just to top and tail that, Chair, in terms of some of those areas, and perhaps others outside of the independence of the dispute-resolution system that are yet to be put in place, what else do you think would be of critical importance? Obviously, the committee has given recommendations as well, but what else do you think should be in place, if you can answer that for the committee?

Well, amongst the issues that I will be pursuing, Chair, are the ones well known enough, really, to the committee. The whole Barnett comparability issue—the money that we get depends upon the percentage of a UK department's budget that the Treasury believes is comparable with our responsibilities. I would like a bit more sunshine to be shone on how those comparability figures are arrived at. They have a really big impact on our budget, and sometimes comparability figures swing between one comprehensive spending review and the next. I'm quite certain the Treasury will have a rationale for it and an explanation for it, but we never see that. We see the result, and so I'm keen that we open the box a bit on that and get a chance to contest some of that sometimes if we need to.

I'm keen to discuss a more rules-based system for occasions when Barnett is ignored or avoided. The Northern Ireland bung, as it is called in the shorthand, when Mrs May's Government gave £1 billion to Northern Ireland for core purposes—health, education, transport—with no money going to England, Scotland or Wales for that purpose was just a deliberate decision to avoid Barnett altogether, and it shouldn't have been. We need a more rules-based system where a Government cannot suddenly decide to override the conventions that we all go by.

And then there's the much-rehearsed national insurance contribution issue, where I believe, and the Scottish Government and the Northern Irish Government believe, that the fiscal framework, the rules that govern all of this, should have meant that we should have been given the actual sums of money that were incurred in Wales, rather than a Barnett consequential of what was spent in England. Those are the sorts of nitty-gritty, practical ways in which Barnett operates that I'm keen to focus on alongside the more independent oversight issue.

I'm just conscious of time, but, Mike, you wanted to come in briefly before I bring Sam in, because—

[Inaudible.]—show you calculations. I think the Welsh Government should do that as well, rather than just give us final figures. And the second one, Barnett sets the minimum amount of money to be paid. You can actually have more than Barnett and you can actually have money outside Barnett, can't you?

You can certainly have money outside of Barnett by agreement, and we do get more than Barnett. We get 105 per cent as a result of the agreement we struck back in 2016.

I'll bring Sam in. Thank you. Diolch.

Thank you, Chair. I'd like to ask a couple of specific questions, Cabinet Secretary. I'm very conscious that, after May, the make-up of this place will be different for all sorts of reasons—Senedd expansion, as well as the political arithmetic. There'll also be a number of very experienced Members of this place who won't be standing again. I'm just wondering, looking back and then perhaps looking forward, whether there are any particular principles of the way in which finance has been scrutinised by this place, or that you think would be helpful for a future Senedd to continue. Would you have any particular worries with that big shift in the make-up of this place, if some of those principles weren't continued? 

Thank you, Sam. I'll take your last point first. Yes, I think we're right to have anxieties about a more complex set of political arithmetic in the next Senedd. We've become very used to navigating our way through a system in which one party has never had a majority. So, we're much more adept at—and it's much more part of our political culture—working across party boundaries than in other Parliaments, where that is generally regarded as a failure of the system, whereas I've certainly come to regard that as a strength of our system. The fact that we have to talk to one another and we have to reach agreements between one another I think has become a strength of the way that this place operates. However, that could be more challenging, depending on how the cards fall, and there may be a wider span of views in the next Senedd, although many of us were here in 2016 to 2021, when there were certainly Members of the Senedd at that point who came with a different underlying set of approaches to both devolution and the operation of the institution. But I think you're right; we should draw on our strengths. We should draw on the fact that we've been around this track many times and there will be many people in that next Senedd who will carry that culture in with them. The political challenge will be to find a way in which that willingness to work collaboratively for the greater benefit of Welsh people, to find a way in which that can be turned into practical action.

I think if I was thinking of the more mechanical side of things, what would I suggest? First of all, I think it would be wise for an incoming Government to stick to the pattern of two supplementary budgets and a single main budget every year. You don't have to have supplementary budgets. They are not an obligation on a Government, but for many years now, the Welsh Government has produced two supplementary budgets in the year. I think it would be wise for an incoming Government to stick to that pattern, even if they might be tempted not to put themselves through it in that way, but I think it does add to orderly conduct of financial matters. I certainly think it brings greater transparency, because three times a year, people are able to see the decisions brought together and codified in that way. So, I think sticking to the underlying patterns that we've developed would be sensible advice.

If I was talking to a finance Minister in a future Government, I probably would be saying to them, 'Spend more time on capital than the political world would push you towards', because the political world here deals almost exclusively with revenue. All the things that you're asked in committee reports and in debates in the Senedd are people asking you to find more revenue for certain things, and if you're not careful, you don't look at the capital side of your budget and the possibilities that that produces for long-term productivity growth, for growing the size of the cake rather than always focusing on trying to divide up the cake that you've got. So, I think, from my perspective, I would be saying that to them. I think if I had slightly more time to think about it, I'm sure there are other points you'd want to pass on as well.

Thank you, Cabinet Secretary. I'm conscious of time, Chair, as well, so I appreciate those additional comments.

If the Cabinet Secretary has got a few extra minutes—. We've come to you a bit late, so you're okay to go over a few minutes. Carry on, Sam.

Thank you, I appreciate that. Just going to some specific points, then, and I would want to come back on the capital stuff there, but we can't. The Green Paper you published towards the end of last year, proposing changes or seeking thoughts on changes to the Welsh tax Acts—could you just point out what some of the issues you hope might be addressed through any possible changes to the future of the Welsh tax Acts?

Thank you, Chair. So, just to be clear, there were two documents that we published in the autumn. One is a paper that reviews the future mechanism that should be used to make changes to the Welsh tax Acts. Chair, had I had an opportunity yesterday, I would have mentioned this to you, but I mention it now, that we're on the verge of publishing the report of the work that we did in the autumn. On that, I've done my best to report regularly, both to the Senedd as a whole and to this committee, on that work. I'm in front of you one more time, and I know it's primarily on the supplementary budget, but if it is useful to the committee to ask any questions on the report and the next stage there, I'm very happy to do that if that is helpful.

The other document is a document that was jointly produced by the Welsh Revenue Authority and the Welsh Government. It's a reflection on the first decade or so of the WRA's performance. There are some pretty technical things that that experience now suggests could be improved. Some of these ideas come directly from the WRA. Some come from tax professionals who work with the WRA.

So, for example, there is a reading of the governance rules that were set up by the Senedd for the WRA that says that it's impossible for executives of the WRA to make a decision unless they have a non-executive alongside them making it. Now, I don't think that was ever really our intention. We expected non-executives to operate at the board level and in some of the important sub-committees, but we did not expect people who are full-time, very experienced professionals to have somebody else on their shoulder every time they make a decision. So, just to clarify that, in a way that's been a bit of an inhibition, and for us to be able to respond to some of the other things that have changed in the meantime—leasehold changes, freehold enfranchisement, for example—to make it simpler and quicker for the WRA to be able to respond to those things.

The work was done, Sam—. In a way, it's a bit of a response to your last question. It's going to be a four-year term, not a five-year term. I think an incoming Government will want to have some legislation to be put in front of that new Senedd, and it might take a while for a Government to work up some of the bigger policy things that legislation deals with. This would be non-contentious, there are no party political dimensions to the changes that are being produced here, and this would be a Bill that would be ready for an incoming Government to go with. It would be useful, non-contentious. You've got to find time on the floor of the Senedd to do it, you could do it early on, while some of that other work was being concluded. That's why I've tried to work with others to get it ready, so it's there for an incoming Government to move on if they want to.

Thank you, Cabinet Secretary, and thank you, Chair. Just talking of Bills, we've had 24 Bills come through the Senedd in this term. Alongside each of those Bills, of course, is the RIA, the regulatory impact assessment, which sets out some of the associated costs with that legislation. I just wonder how you'd reflect on the quality and accuracy of costs that are drawn up in the RIA and whether there are opportunities to improve that in the future.

Well, Chair, a lot of work has gone into improving the regulatory impact assessments and, indeed, the explanatory memorandum, because we now have an affordability assessment that we include in the EM as well as the figures in the RIA. I think my own experience of it is that the challenge varies enormously between different Bills. Sometimes, you are dealing with a Bill where the costs are actually not that difficult to assess.

I think the very first Bill that I took myself through the Senedd was the Human Transplantation (Wales) Bill. There was a Bill where the costs involved were actually reasonably easy to assess, because the system already knew an enormous amount about the number of people who were waiting to receive an organ, the number of people who became organ donors every year, and the cost of producing, as I remember it, two or three new critical care beds if you did have more organs being donated. The RIA was not that much of a challenge, because you knew so much about it.

To give you a more recent example, we've provided in next year's budget the full first year amount that was asked for in the RIA for the British Sign Language (Wales) Bill. But that was not difficult to do, because the amounts of money were very specific; you knew what was needed, it was there. That’s one end of the spectrum.

At the other end of the spectrum, yesterday on the floor of the Senedd, we were at Stage 3 of the Environment (Principles, Governance and Biodiversity Targets) (Wales) Bill, where we are talking about biodiversity targets that haven’t even been set yet. Providing an RIA that estimates the costs of decisions that haven’t been made is a very different prospect. We try to deal with that by moving away from pinpoint data, which is what RIAs used to have, to range data.

It’s very important that the RIA is explicit with everybody about the limitations and challenges of the data. And I’m quite sure, as ever, that there’s more that could be done and improvements that could be brought about. But, as I say, I think the challenge is less about whether the RIA system can be improved and more about recognising that, amongst those 24 pieces of legislation, some of them are just easier to cost and some of them are very challenging to cost, and as a result, sometimes the Senedd gets quite broad ranges that I know the Finance Committee has not always felt were good enough for the purpose.

And then, just briefly, if I may: with that, in terms of your planning for future budgets, how useful do you find that information held within the RIA to then set those future budgets? With that range in mind, you’re having to then play between the two.

Well, my starting point always with my colleagues is that if they’re bringing forward legislation, then they have to plan for the financial consequences of that. There is no pot of money held at the centre that says 'for legislation implementation'. It’s part of an annual negotiation with colleagues who have ambitions and want to bring forward legislation.

Is that the same then for secondary legislation? Because a lot of the Bills that we’ve been talking about—that now are Acts—were framework Bills.

Yes.

And it's a bit of a bone of contention with ourselves that you create an Act, but you then don’t necessarily tell us what the funding—because of the things that you’ve talked about—for any secondary legislation that comes through on regulation, because you don’t know what those decisions mean. So, it’s a challenge then for, I suppose, departments rather than yourself as the finance Secretary to say, 'Well, you have to find it within your department if you’re bringing this Bill forward.'

Yes, I agree, and it is a challenge for departments, but I think from a finance Minister’s point of view, in those discussions you were having before the summer, leading to the draft budget, one of the things that will be on the agenda will be the legislative ambitions of that portfolio, including secondary legislation. I do have to say to my colleagues, ‘Well, that’s great. I can completely see why you want to do that, but if you can’t pay for it, you can’t do it.' Very exceptionally.

We do do regulatory impact assessments on secondary legislation as well, where it has significant impacts, and that is obviously taken into account at the appropriate time as well.

Looking at things like the Agriculture (Wales) Act 2023 and the sustainable farming scheme, and they’re all coming down the line.

Yes, there were regulations yesterday in the Senedd that the Cabinet Secretary took through; minor in impact, I guess, in the big scheme of things, but information provided with those bits of legislation.

We didn’t have a chance yesterday because there was so much on the agenda, but one of the pieces of secondary legislation yesterday was to provide a new relief for people buying property that they would then put into Leasing Scheme Wales. If you'd looked at the RIA, there were figures in there that showed that if two people are accommodated in Leasing Scheme Wales over the five years, compared to temporary accommodation, that saves £30,000. And then, that’s used to offset the reduction in income you will get by having a relief for those purchases. It’s all there in the RIA alongside that piece of secondary legislation.

Do you want one more question?

I'm good there, Chair; I'm conscious of time. Thank you.

Thank you for indulging us with your time a little bit longer, but I think it’s been a really, really interesting session. Thank you for your contribution, and thank you for your continued engagement with this committee. It’s always good to have you here and to be able to go in a bit more depth than we can do in the Chamber.

Can I ask you one last cheeky question, I suppose? Which one of our recommendations gave you the biggest headache?

Well, I think I've probably referred to it already, Chair, because at some points, the committee has made a recommendation about the Welsh Government publishing its draft budget much earlier in the autumn. And we try and take all of the recommendations of the committee seriously, and we've never really been able to respond to that one in the way that the committee would have preferred. I've tried to explain today why, from a Government's point of view, we've not been able to do that. But I think, had we tried to do it, it would have been the most challenging in procedural terms.

I haven't had a chance to say, so maybe I should say that, in many ways, some of the most helpful reports from the committee are the work that you have chosen to do, not on the budget process directly, but, for example, the report that you produced on financial transactions capital. We have made a lot of use of that and tried to make some real progress in the recommendations you made. So, the work the committee has done, which is not on the treadmill of the work you have to do in relation to the budget, we haven't mentioned, I don't think, that much this morning, but I think it is often where the committee has a real impact.

And our report on inter-governmental relations, I know that chimed with a lot of what you were thinking, and being able to go into the Finance: Interministerial Standing Committee and so on and say, 'Well, this is the view of the Senedd, as opposed to just the Government.' But, thank you very much. As always, there will be a transcript for you to check for accuracy. But, diolch yn fawr iawn, and we'll see you for the second supplementary budget.

Diolch yn fawr.

So, that brings us to item 4, which is,