The next item is a statement by the Chair of the Finance Committee on the budget process. This is the first statement by a committee Chair in this fifth Assembly. I hope that it will lead to many committee Chairs taking the opportunity to make such statements to the Assembly. Therefore, I call for the first statement from the Chair of the Finance Committee, Simon Thomas.

Thank you, Presiding Officer. I hope that this will lead to a great many statements of this kind and I’m very pleased to be making this statement today. I welcome the wisdom of the Business Committee to enable committee Chairs to inform the Chamber of their committee’s work and priorities. As it is the start of a new Assembly term, and the Finance Committee has been busy setting out its work programme, this is an opportunity for me to share our thinking with you.

This is both an exciting and challenging time for Wales with fiscal devolution and new budgetary processes. Just last week, the committee met with its key stakeholders to discuss these challenges and to look at our aspirations for the future.

One of the main roles of the Finance Committee is to consider the draft budget and how fiscal devolution to Wales is going to impact on how we do this. This year’s budget is due to be published on 18 October and we have already held a consultation, which is closing today. However, as the consultation has been issued prior to stakeholders having sight of the actual spending plans, we also intend to launch a dialogue that will allow interested parties to convey their views via the Dialogue app. We hope that this, along with the formal consultation, will provide evidence for not just the Finance Committee, but the other committees during their budget scrutiny sessions. We will also be holding a stakeholder event in Merthyr Tydfil.

This will be the last year that the budget is considered under the current Standing Orders—hopefully—and just this morning in committee we considered a paper on the proposed changes. As Members will be aware and recall, from April 2018, Wales will be responsible for collecting and managing two new Welsh taxes, namely the land transaction tax and the landfill disposals tax. The Welsh Government will also have new borrowing powers for capital investment of up to £500 million, and borrowing powers of £500 million—an additional £500 million, that is—to manage short-term budgetary fluctuations arising from tax devolution. These changes will result in changes to our budgetary procedures, which I will return to shortly.

In the last Assembly, Royal Assent was granted to the Tax Collection and Management (Wales) Act 2016. This Act establishes the Welsh Revenue Authority, responsible for collecting and managing these devolved taxes. By now, the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Bill has been introduced to the Assembly. We had our first scrutiny session in committee this morning on that Bill. Therefore, the autumn term will be very busy for the committee as it scrutinises this technical and complex Bill, which I am pleased to tell the Assembly is the longest piece of legislation to be introduced into the Assembly so far. The Bill will impact on a great number of the Welsh public, so our engagement will be vital to ensure that it is clear, robust and workable as a piece of legislation shaped for the needs of Wales.

Many of the key stakeholders for this inquiry are from professional and legal backgrounds. So, the committee will be hosting a roundtable CPD accredited event with a variety of professional organisations, institutions, law firms and those from the tax and conveyancing fields to discuss the implications of the Bill, as well as making a general call for evidence, which was issued last week.

These taxation Bills will lead to revenue raising powers for the Welsh Government, which leads me to one of our key priorities for this coming period, which is to consider changes to the budget process in order to deal with these new fiscal developments and to ensure that funding arrangements are suited to Welsh circumstances and priorities. In preparation for these changes, the fourth Assembly’s Finance Committee undertook work to consider a future budget process.

A new budget process in required in readiness for the draft budget for 2018-19. The committee will begin scrutinising that budget next autumn. It’s crucial that the Assembly has robust processes in place to scrutinise the Welsh Government’s plans. Assembly officials have been meeting regularly with Welsh Government officials to discuss options for an interim non-statutory budget process and protocol, which would be achieved via changes to Standing Orders—hopefully—and by updating the existing protocol between the Finance Committee and the Welsh Government.

In considering this process, we hope to develop a model that maximises time for meaningful scrutiny of Welsh Government spending, taxation and borrowing plans by the Finance Committee, other relevant committees and the public. We have also aimed to ensure that delivery partners have certainty of funding available at the earliest possible opportunity.

This work on fiscal devolution means that it is an exciting time for the Finance Committee and, hopefully, for the Assembly as a whole. We hope that the Wales Bill will allow us to put our budgetary procedures on a statutory footing with an annual budget Bill, which is a further step in the Assembly’s evolution to being our Parliament.

I welcome the statement by the Chair and the new practice of committee Chairs reporting to the Plenary session. Can I congratulate whoever came up with that as an idea, because I think it does help with the Assembly to make sure that committees don’t work in little silos, but actually inform the rest of the Assembly as to exactly what’s happening?

As we move from solely an allocation of resources to a system where income is raised as well, then we need to change the way the Finance Committee works. I agree with the Chair that we need a revised protocol, updating the current protocol between the Finance Committee and the Welsh Government. Can I at this stage pay credit to the former Minister for Finance and the former Chair of this committee for the work they did on the last protocol? I think that they both worked very well to try and ensure that the Finance Committee was in a position to scrutinise the budget and that the protocol was able to work effectively. So, I think that we owe a debt of thanks to them because whatever we do in the future will be building on the work that those two ladies did.

Does the Chair agree with me that we need to consider whether tax and spend scrutiny should be done at the same time or separately, as they are at Westminster? And, do we need a tax review mechanism to ensure that the taxation system for raising revenue in Wales is working effectively?

I’d like to thank the Member for also being the first to ask a question of a committee Chair, and I will certainly pass on his congratulations to the enlightened people who came up with this idea. I’d also add my thanks to the previous Chair and the previous finance Minister for their work in this regard as well. A lot of what I said in the statement was building on—as he knows, as a member of the previous committee—the work of that previous committee.

I think he raised two specific questions with me. First, how we deal with tax and spend. Yes, I think the scrutiny of that is an open issue for the committee and the Assembly to debate. My own preference would be that we did it together. I think you look at tax and spend together. I think looking at it in the round is a preferable way to do that, but other institutions have other ways of doing it, as he pointed out, and I think that that’s something that we need to bear in mind, learning from other places, but never copying other places, necessarily.

A tax review mechanism, I think, is an interesting point. I think it brings us, really, to the heart of why taxes are being devolved in Wales. It’s not simply as an administrative function, as might have been thought of, it’s a key thing that actually empowers Welsh Government and powers the accountability of Welsh Government, because for the first time we’ll have a Government that’s responsible for part of the revenue that it spends. I think any Government, therefore, would want to have a process by which it reviews that tax revenue and would have a mechanism for the most effective way and the most efficient way of raising taxes. I think that will keep the committee very busy for the next five years.

Can I thank the Chair of the Finance Committee for his statement this afternoon—a first in the history of this institution and an exciting development? Also, can I thank him for allowing all Assembly Members early sight of the statement before Plenary today, which did avoid the shuffling around that sometimes happens of limited copies of oral statements? That’s something that the Welsh Government might like to consider as well in the future.

The substance of the statement is vitally important, as Simon Thomas has said: the devolution of tax powers and the development of financial capacity both of the Welsh Government and of the Assembly. You do make the obvious point in your statement, Simon, that the consultation has been issued prior to stakeholders having sight of the spending plans—understandable time wise, but not entirely satisfactory. What kind of dialogue, conversation, are you envisaging that we have with stakeholders from this point on to gain their views when that information is properly available?

As you say, a key priority is to consider changes to the budget process, hence the fourth Assembly’s committee report, which I was familiarising myself again with earlier. Are you content that the recommendations, the 12 recommendations, that were made in that report—I know it’s not necessarily our remit in this Assembly, but are you confident that those recommendations are being followed, at least in the main?

You did mention the devolution of tax powers and the new Welsh Revenue Authority. There have been a couple of meetings, involving the Cabinet Secretary, on the establishment of the WRA and the adoption of the chair, over the last couple of weeks. What role do you envisage the Finance Committee having in the ongoing formulation of the WRA and the selection of the board and, indeed, of the chair? We were there at the very start of the legislation—are we going to have an ongoing role in watching over how the WRA develops?

And, finally, you say you hope to develop a model of budget scrutiny that maximises time for meaningful scrutiny of the Welsh Government. How will this model work? I’m sure you’re aware it’s not just a case of the committee finding time, it’s also a case of the Welsh Government finding time as well to be scrutinised. So both those elements have to work in tandem. But thank you for your statement—a first in the history of the fifth Assembly.

I thank Nick Ramsay for his questions, and for his welcome, obviously, to this process. I think, first of all, in terms of the stakeholders, he put his finger on an ongoing issue, of course, which is that the consultation we have on the budget is before we see the budget itself or a draft budget, and, indeed, before we saw the programme for government, which was only launched itself yesterday. Ideally, you would want to match a programme for government with the allocation of resources, and then make some kind of series of recommendations about whether they were appropriate or effective or efficient. However, we will redouble our efforts as a committee to engage with stakeholders once we see the draft budget, from 18 October.

I mentioned the Dialogue app that we’re going to use. That’s fairly new from the Assembly’s point of view, but it has been used over the summer, I understand, to engage with different individuals and in consultation. The app allows people not merely to respond but to respond to how others have responded. So it allows an iterative discussion around priorities and ideas. So I think, and I hope, that that will enrich not only the Finance Committee, but the other committees that are looking at what people have to say about their remit as well. And we’ll also, as I said, have a formal stakeholder meeting in Merthyr Tydfil, which I hope you will attend, and also a formal consultation. So, we’re trying to cast the net as widely as possible to get people on board.

But that really comes down to how we go forward. There was a set of recommendations, as you mentioned, from the previous committee. I am confident that the spirit of those recommendations is being taken forward at present. There is some negotiation and some agreement that has to be agreed between the Assembly side and the Government side, regarding the exact timetabling, when it happens, how recess is timetabled into that, how we deal with it in Standing Orders, so that the Government has the correct amount of flexibility it needs to produce a budget, but we have the time. And the aim of this—as he will remember from the recommendations—is to increase the time for scrutiny of actual proposals, budget proposals, and also to allow other committees to have a more coherent approach to the budget scrutiny themselves, with perhaps the Finance Committee having a slightly more strategic kind of directional way of helping those other committees, individual subject committees, to do their work on the budget as well.

I haven’t been approached formally to be part of any process around the appointment of any members of the Welsh Revenue Authority. I’m sure that the committee will want to maintain its scrutiny of that authority and that process, and I’m sure we will also want, in time, to invite members of the authority in and the chair for scrutiny and for sessions where we’re able to question them and see the approach being taken by the new revenue authority. But it’s very early days, of course, on that.

I think, in terms of the model of scrutiny work, that’s dealt with in the way that we discussed how we take forward the recommendations of the previous committee.

I warmly welcome the statement itself and the constitutional innovation that it represents, which also reflects the development of this institution as a parliament and takes us to the core of the statement: the need to review and amend the process of agreeing the budget, which, in comparison with many other Parliaments in the world, gives far too much power to the Executive and too little to this place. As I understand it, the Finance Committee has a right to make recommendations, but the Assembly has no power to amend the final budget motion, although this power does exist in unlimited ways in some Parliaments—I’m thinking of Congress in the USA, but, even in Westminster, there is a right to cut expenditure and, of course, to vary the tax recommendations through a finance Bill or a fiscal Bill, and, in Sweden, of course, the committees have the right to decide on the allocation of funding within particular areas of spend. Will the committee look at some of those options as we assess changes to Standing Orders?

And, secondly and finally, Presiding Officer, to what extent will the committee be able to look at the issue of the information provided to the Assembly so that we can achieve our scrutiny role successfully? The information is a little bit thin and a little bit superficial at present—that is, headings rather than spending at an individual programme level, and there’s no information about the expected performance against spend. We could look at best practice internationally in terms of budgetary transparency, for example, published by the OECD, and, in order to allow this Senedd to achieve its role effectively, shouldn’t we invest in specialist capacity similar to what Congress has—the Congressional budget office—that is independent of Government and accountable to us as an Assembly, which would be a basis for us to make our decisions based on more expert advice?

Thank you to Adam for those questions. I wouldn’t have expected any less than those very detailed and interesting questions from him, and it’s true to say—. There are three things, truth be told, that I think he had to say: first of all, the rather thin information that he described, and that has been a concern of committee members for several years now. Perhaps the most obvious one is when you look at the allocation of funding for the health service in Wales, which is just very simply put to health boards, and there’s no understanding then of how the funding is then used below that level. The committee has an interest in improving that information. That has to be done on a joint basis and in agreement with the Government, so it comes down to the protocol that we will be able to agree with the Government, but I also suggest that the other committees, the subject committees, have a role to request additional information. And, sometimes, indeed, by the time that those committees look at the budget, there is additional information available. I do hope that the two things that we’ve suggested, the protocol and the additional time, are going to add to the opportunities to draw down that information, but, at heart, Adam is asking for more information at the very beginning. I think the Finance Committee has heard that request and is eager to fulfil it.

The second part is what you will do with the information and whether there is a need for independent scrutiny of that, and, very interestingly, this arose in evidence from the Cabinet Secretary in committee this morning. Adam will know very well that there’s a budgetary framework agreement in Scotland, which means there has to be an independent budgetary office to report on the financial situation in order to have a voice on that in any dispute between the Scottish Government and the Scottish Parliament. And the same is true—the Member mentioned Congress, but the same is true in Canada as well. There will be, I think, a need to search for that and seek that independent voice in this process. Whether that comes from an independent office whether that comes from an independent office or other protocols with, for example, the Office of Budgetary Responsibility in London, using their resources and skills, we haven’t discussed in committee yet, but it certainly is something that we are aware of, and we are eager to lead on that discussion in this Assembly.

The final point—well, yes, it’s very interesting. When you look at the budget that is proposed, passing it or rejecting it are the options, of course. That’s what I was referring to at the end of my statement when I spoke about a financial or budgetary Bill. Of course, when you introduce a Bill, you can amend it and you can change it. There are very interesting questions arising from that. There’s no time to go through all of those, but there are very interesting questions about whether the Assembly could add to expenditure or just cut expenditure, whether the Assembly can increase taxes or just decrease taxes. There are different rules, as Adam Price will know better than I—there are different rules in different countries. But, in terms of the committee looking at this issue, I’m happy to confirm that we’ve had a meeting last week with the parliamentary budget office in Canada where this was a topic of discussion and where we discussed what Canada’s doing in terms of the federal parliament and regional, state parliaments. So, it’s a very live question, but, certainly, if this place is to grow into a proper Senedd for Wales, then we will have to, to all intents and purposes, have the budget introduced as a Bill that can be amended by Assembly Members.

May I also thank the Chair for outlining the committee’s priorities over the next year? It’s clear that we’re going to have a very busy autumn with this huge Bill on land tax devolution that we will be scrutinising, and we will also be scrutinising the draft budget, of course, and also there’s the possibility now of us scrutinising landfill tax, so there’s a huge amount of work in the pipeline.

Roeddwn yn awyddus iawn i ddod yn aelod o’r Pwyllgor Cyllid am fy mod yn credu ei fod yn lle gwych i gael trosolwg o ble y mae’r Llywodraeth yn gosod ei blaenoriaethau ariannol, sy’n amlwg yn adlewyrchu ei blaenoriaethau gwleidyddol. Roedd rhagfynegiadau brawychus y Sefydliad Astudiaethau Cyllid yr wythnos diwethaf ynglŷn â thoriadau i wariant cyhoeddus yn y dyfodol yn hynod o sobreiddiol. Ar ryw bwynt, credaf y bydd angen dull llawer mwy radical arnom o ran ein dull o ddarparu gwasanaethau pan fydd y toriadau hynny yn ein hwynebu. Mae iechyd, wrth gwrs, yn faes sy’n llyncu bron i hanner cyllideb Cymru, a hoffwn bwysleisio’r pwynt a wnaeth Adam Price: credaf fod gennym allu cyfyngedig i graffu yn y maes hwn yn yr ystyr mai’r byrddau iechyd sy’n gyfrifol am y gwariant manwl hwnnw, a chredaf fod hwn yn faes—rwy’n falch o weld eich bod yn cytuno bod angen i ni allu craffu’n well yn hynny o beth.

Credaf fod y gorgyffwrdd rhwng y Pwyllgor Cyllid a’r Pwyllgor Cyfrifon Cyhoeddus yn ddiddorol. I raddau helaeth, credaf mai’r gwahaniaeth yw bod y Pwyllgor Cyfrifon Cyhoeddus yn edrych yn gyffredinol ar werth am arian ac effeithiolrwydd gwariant y Llywodraeth, ond mae ein cyfrifoldeb ni wedi ei gyfeirio’n fwy at wariant yn y dyfodol. Credaf fod yr wythnosau nesaf yn hollbwysig i’r Gweinidog cyllid yn y drafodaeth ar fframwaith ariannol Llywodraeth y DU. Hoffwn ofyn a gawn ni neilltuo amser i sicrhau y gallwn graffu ar unrhyw gytundeb y bydd y Gweinidog yn llwyddo i’w gael yn y cyswllt hwnnw. Rwy’n arbennig o awyddus i wybod am agweddau benthyca unrhyw gytundeb ariannol newydd. Hoffwn gael cadarnhad fod hynny’n rhywbeth y byddwn yn neilltuo amser ar ei gyfer.

Rwyf hefyd yn awyddus iawn, fel aelod o’r pwyllgor, i ystyried y rhagolygon ariannol tymor canolig a hirdymor ar gyfer Cymru. Er ein bod yn oes gadael yr UE, ac mae unrhyw ragolygon yn anodd ar hyn o bryd mewn perthynas â’r economi a fframwaith rheoleiddio a fframwaith masnach, credaf fod angen i ni edrych o ddifrif ar y newidiadau demograffig a fydd yn ein hwynebu yng Nghymru. Mae angen i ni wneud rhywfaint o gynllunio ariannol hirdymor a chredaf fod honno’n rôl yr hoffwn i’n pwyllgor ymgymryd â hi a hoffwn ofyn a fyddech yn cytuno â hynny. Edrychaf ymlaen at weithio gyda’r Cadeirydd a holl aelodau’r pwyllgor, gan fy mod yn credu bod y pwyllgor hwn yn hanfodol ar gyfer y Cynulliad.

I thank Eluned Morgan for her kind words and for pointing out how busy we were and then asking us to do more work. [Laughter.] I think that’s a very appropriate way forward. I think, on the first point, if I can say, through the Presiding Officer, if there’s been one positive thing that’s come out of this first statement, it’s clear that we’ve had members of different parties, all demanding, or at least requesting, more information on the budget process to scrutinise the Welsh Government and I think that, in itself, has been a valuable way of airing these things because this is about better information for better decision making. This is not when we’re looking at the budget process through committee, certainly, and this is not about a necessarily party-political approach; this is about key questions that she has raised and, as she said, that the Institute for Fiscal Studies has raised as well about where the burden falls. She will know from the report—and I was interested to go to the briefing from the IFS—that if we, for example, were to protect health in Wales by 1 per cent or 2 per cent, the cuts in local government would then shoot up into the scale between the 10 per cent and the 12 per cent and up to 17 per cent. It looks quite frightening. These are the main choices that have to be made.

We, surely, as an Assembly and in our committee structure, should assist the Government at least in finding the information to make those choices and for exploring, together with the public, how those choices are made. Eventually, once the decision is made by Government, it’s the Government that’s accountable for that, but as a committee we should throw as much light on it as possible.

On the relationship with the Public Accounts Committee, the Chair is a member of the Finance Committee at the moment, of course, which helps things. She will know, from this morning as well, that we, as a Finance Committee, are responsible for the actual revenue or rather the estimates of the Auditor General for Wales. So, we have a relationship there. But, broadly, I would agree with her—I think the Public Accounts Committee looks at value for money. It’s a retrospective learning process, which is very useful of course, and extremely, sometimes, headline-grabbing, in the way that it does that, and that’s inevitable, whereas I think we have a far more forward-looking, planning kind of approach. I think both of us—both committees, that is—need to work together in that way.

I think the final, main point that she was making, of course, is in terms of mid and long-term planning, demographic changes. That’s not just for the Finance Committee, but all the subject committees will have to be doing some of that work as well. But I agree that we should be looking at it in those long terms. It does turn around whether we’ll get a financial framework that is robust enough for this Assembly to approve a legislative consent motion for the Wales Bill. That’s what it boils down to. We know that we are reliant on Welsh Government to negotiate with Westminster on that. The Scottish Government took a long time, or rather Westminster took a long time—I don’t know quite who to blame, but they took a long time. We had confirmation in committee this morning, in a public session, that the Minister meets monthly at least with the Chief Secretary to the Treasury. So, there’s a process ongoing, and I agree with the Member that the Finance Committee should give its views on that process in order to help and inform and show and demonstrate, particularly to Westminster, that as an Assembly as a whole, we have a stake in this as well.

Presiding Officer, may I add my congratulations to you and the Business Committee for introducing this procedure. I only wish it had applied in the fourth Assembly when I was Chair of a committee. Perhaps there is a direct link with the fact that I am no longer a Chair that we can now be trusted to exercise this type of scrutiny and feedback in the Chamber.

I think that how the Government presents its budget and the accompanying documents is a key test of the openness of any democracy. I think that our procedures need to provide for maximum amount of transparency and clarity. I think, inevitably, budgets are challenging, but information can be presented in very opaque ways and that absolutely aids no-one, including the public, those interested and the civic sector. I was delighted to hear, incidentally, about the development of the Dialogue app. I’m sure that will connect us much more broadly to the outside world, or at least to those outside in Wales who are going to be influenced by our decisions.

I think accountability is also key in allowing effective analysis, so that budget decisions can be tracked year to year—it is often very difficult to do that, incidentally—and also maximum consistency in how financial information is presented. We know that governments are powerful beasts and it doesn’t matter who’s running them, but, sometimes, a way of avoiding embarrassment is to present the accounts in a slightly different way to previously and it can be very tough to analyse them. Above all, I think we need time for deliberation of these measures. I think we have a fairly good record in the Assembly so far, but, of course, our workload now gets more intricate and extensive in terms of its financial responsibilities. I do hope that we never see the day when we guillotine things and reduce the time for effective scrutiny and deliberation. Can I finally ask the Finance Committee to look at ways we analyse those areas of important public policy and the initiatives in those areas that Government introduces in areas that cut across departments. It can be very difficult to know how much money is being spent, for instance, on improving mental health and well-being because so many areas of Government are affected, or, indeed, another example very close to my heart—looked-after children and care leavers. I think when a Government does announce a major initiative in a cross-cutting area of public policy, that’s a good time for the Finance Committee to make some sort of estimate of what the total spend is there, how it’s changing and how effective it is. Thank you.

I thank David Melding for his questions, and I recall that I wasn’t aware that he was shy in coming forward in the previous Assembly with his views at any stage, and I think he maximised the opportunity, but I’m very pleased that there are even more opportunities now for Chairs and for committees as well to inform the Assembly.

I think he raises an important point around tracking changes from year to year and being able to see the effectiveness, as I would put it, of Government programmes. I don’t think the Finance Committee is an accounts committee, and I think we are better when we don’t, possibly, look at it as an accounting way, but rather look at the global sums—or, rather, fairly headline sums—and look at the effectiveness of spend, and whether what the Government says it intends to do has sufficient resources to deliver on that. But I certainly agree that, as we move to this new process, we need to understand under our Standing Orders how we can follow the pennies, or at least the tens or the hundreds of millions, and how they might be done in a way that makes sense, as we see, for example, when a programme changes ministerial responsibility, that it can then disappear from a particular line and it’s very difficult to see.

I think David Melding put his finger on a couple of other key ways we can do this, which is to look and track cross-cutting issues. You mentioned mental health and looked-after children; I would agree with those. I would also add to the mix, from the perspective of the Chair of the committee, the Well-being of Future Generations (Wales) Act 2015, which is now entrusted to the Minister who most reports to this committee, but which, of course, is designed to affect Government spending and the way that Government resources are used right across the board, and it doesn’t fall easily within one committee. So, I think there’s a role for something like the Finance Committee to take an overview of things like the future generations Act and similar ‘well-intentioned but let’s see how they deliver’ kind of objectives from Government. Really, it then comes down to whether resources are being put behind that which the Government says it wants to achieve under, say, its six or seven objectives or whatever it might be under a Bill, or an Act as it becomes then. That’s a clear way that the Finance Committee can help and assist other committees without trespassing on other committees’ responsibilities.

I thank the committee Chair. I have certainly learned a great deal from this afternoon’s statement, and it’s good to see the Cabinet Secretary was also here to listen to the committee Chair’s statement.