Diolch. As our report states, the Wales Act 2014 provides the legislative framework to devolve tax and borrowing powers to the National Assembly for Wales, as it then was—now Senedd Cymru or Welsh Parliament—and the Welsh Government. These powers provided the Welsh Government with further tools to vary the level of tax and spending in Wales. In December 2016, the Welsh Government and UK Government agreed a new fiscal framework, which in particular supported the devolution of stamp duty land tax, now land transaction tax, landfill tax, now landfill disposals tax, and the creation of Welsh rates of income tax. Our report states that

'evidence to the inquiry, alongside the real life issues experienced with the funding arrangements throughout the COVID-19 pandemic has shown that the funding mechanisms need to be urgently reviewed by the Welsh Government and the UK Government.'

Although the Welsh Government's budget of approximately £18 billion a year is primarily funded through the block grant received from the UK Treasury, approximately 20 per cent is now funded from devolved tax revenue, and it is essential that this increases the accountability of the Welsh Government to the people of Wales. As our report states, 

'The Barnett formula is used to calculate changes to the block grant based on increases or decreases in UK Government spending in areas where public service provision in Wales has been devolved' and has

'long been subject to calls for reform'.

It was modified as part of the Welsh fiscal framework agreement to include a needs-based factor, providing the Welsh Government with at least £115 per person for every £100 per person of equivalent funding in England, explicitly recognising the higher-level spending need in Wales. However, the 2020 UK spending review confirmed the Welsh Government will receive £123 per person in 2021-22 for every £100 per person in England, equating to around £1 billion more than the Welsh Government agreed was fair to Wales relative to England. Our report states that

'It was proposed that a periodic review of relative need in Wales would keep the needs-based factor up-to-date to ensure that Wales receives appropriate funding. The potential for reviewing the Barnett formula is an area the Committee intends to consider further with the Secretary of State.'

However, as the Secretary of State for Wales said when we questioned him on this two weeks ago,

'we are currently working to a system that was agreed by Welsh Government, and it's therefore, in our view, unnecessary to revisit. What we're able to do with some of the funds and initiatives that we've been talking about this morning is basically have a lot more on top of what Barnett provides, and, again, I see that as a really positive step forward for Wales' and

'Treasury's made the Barnett consequences available in advance, recognising that not to do that would just put delays in the system and therefore prevent Welsh Government's ability to get money to places that need it urgently.'

In its response to our report, as we've heard, the Welsh Government accepted all but one of its 12 recommendations relating to fiscal devolution and Welsh taxes. However, it only accepted in principle the committee's recommendation regarding the accepted recommendation by the UK Parliament's Public Accounts Committee that the lack of transparency over funding decisions is addressed, stating that although it would fully support increased transparency over funding decisions, it is for HM Treasury to ensure it meets any commitments made to the UK Parliament's Public Accounts Committee.

After I asked the Secretary of State in committee two weeks ago what engagement he had had with the Welsh Government or Treasury regarding those Welsh Government claims that the mechanism for devolving competence to introduce new Welsh taxes is not fit for purpose, he said he'd be very happy to take that up with the Treasury. As the Chief Secretary to the Treasury states in his response to the committee's report, the UK spending framework is

'designed to enable the UK Government to manage spending on a financial year basis, including the impact of Welsh Government spending.'

He said he's provided

'significant additional flexibility this year recognising the challenges faced' and he's

'agreed the Welsh Government could carry forwards into 2021-22 any Barnett-based funding above the guaranteed £5.2 billion as well as any repayments of business rates relief—all on top of the Wales Reserve arrangements.'

As he also states, however, that it's imperative that the Welsh Government uses the extra resource it receives from the needs-based formula effectively, and

'the block grant adjustment arrangements help to increase the Welsh Government’s autonomy and accountability, while being shielded from UK-wide impacts', a key and critical point. Thank you.