to provide evidence – Inquiry into Best Practice budget processes
Following the publication of the Commission on Devolution in
Wales report on Part 1 of its remit, Empowerment and Responsibility: Financial
Powers to Strengthen Wales, the UK Government published Empowerment and
responsibility: devolving financial powers to Wales. The key points of the UK
Government announcement are:
tax: subject to a referendum in Wales, the Assembly and Welsh Government
would be granted the power to vary the basic, higher and additional rates
of income tax up or down in tandem. This would mean that 10 percentage
points of each UK tax rate would no longer be due to the UK Government but
to the Welsh Government.
- Stamp duty
land tax (SDLT) and landfill tax to be devolved to the Assembly, with a
corresponding deduction to the block grant.
(business) rates. The UK Government will work with the Welsh Government to
fully devolve non-domestic (business) rates (While Welsh Ministers already
set these rates in Wales, under current arrangements the revenue generated
does not directly affect the level of funding available to the Welsh
borrowing powers The UK Government has accepted in principle Welsh Government
capital borrowing powers for infrastructure investment, subject to the
availability of an appropriate independent stream of revenue to support
- The power
for the Assembly to legislate, with the agreement of the UK Government, to
introduce new taxes and associated tax credits.
Following this the Draft Wales Bill was published in December
2013, and the Wales Bill was introduced on 20 March 2014. The Committee inquiry will be considering
best practice budget processes to ensure that effective budget processes are in
place for the scrutiny of these financial powers.
The inquiry will be undertaken in two parts but it would be
helpful if your response to this call for evidence could address both part 1
and part 2 of the inquiry.
inquiry’s Terms of Reference
Part 1 – Budgetary best practice and its applicability to
best practice for financial accountability and budget processes,
particularly in devolved administrations
for the budget processes to incorporate new concepts - such as
preventative spending, less restrictive annual budgeting, and
programme/outcome- based budgets.
Part 2 – Planning and implementing new budget
control –outlining the budgetary mechanisms which will control the new tax
and borrowing powers, and how these impact on the Welsh block and the
Welsh economy. In particular, how
the Holtham Commission recommendations will be met.
implementation of new budget procedures to reflect the additional powers.
The Committee would like your view on the following areas:
best practice – What are the principles of fiscal accountability? How do
other countries achieve devolved financial accountability while retaining
central fiscal control?
- Are the
devolved powers tailored to the Welsh devolution settlement – as the
powers in the Wales Bill are based on those in the Scotland Act, does this
create unforeseen problems in Wales?
budgets to outcomes. What new budget
procedures are needed to improve the links between policies, spending
programmes and outcomes? How would outcomes generated by the UK Government
and the global economy be identified separately from those generated by
local Welsh Government policies?
- Tax and
borrowing issues identified in the Holtham Report; e.g. the impact on the
block grant and the ‘indexed method’ for adjustments; the basis of the
devolved taxes; the lack of a needs based floor; no clear resolution of
‘convergence’ issues; what is the tax yield and what borrowing could be
made against this income; what would be the basis of any new taxes and
will they be governed by principles or rules?
budgetary risk - what additional budgetary risks are introduced by the new
powers and how will these be monitored and managed (e.g. how are
shortfalls in revenue managed)?
- How can
the new budget processes be made transparent and understandable to all
stakeholders, and how can stakeholders engage and participate in the
- UK budget
planning - how does the Assembly work with Welsh Government, UK government
and other public bodies under the new arrangements; how should the budget
process be timetabled to meet Welsh and UK Government requirements (e.g.
UK spending reviews)
– how does the Assembly formally implement the devolution of the financial
powers; how does the Assembly scrutinise, approve and monitor the Welsh
Government’s annual tax, borrowing and expenditure requirements; how does
Welsh Government seek approval for new tax and borrowing powers from HM
Treasury, and what role should the Assembly have in agreeing such changes.
information to the Committee
You are invited to submit written evidence to the Clerk of
the Finance Committee at the above address, to arrive by Wednesday 21 May 2014.
If possible, please send your response by e mail to FinanceCommittee@wales.gov.uk by Wednesday 21 May 2014.
The Assembly’s policy on disclosure of information can be
please ensure that you have considered these details carefully before
submitting information to the Committee.
Alternatively a hard copy of this policy can be requested by contacting
the Clerk (029 2089 8120).
Further information about the Finance Committee can be found