Legislation, Justice and Constitution Committee

So, we've got a busy afternoon in front of us. We're going to go to the first substantive item here, which is the Welsh Tax Acts etc. (Power to Modify) Bill. We have an evidence session with the Minister for Finance and Local Government. Minister, you're very welcome in front of the committee this afternoon. I understand you've got a busy week as well, appearing in front of committees on this, which is all very good for scrutiny, I think. Minister, do you want to ask if your officials want to introduce themselves to us, please?

Yes, please, Chair. I'll hand over to Anna and Andrew just to do some quick introductions.

Hello, good afternoon. I'm Anna Adams. I'm a deputy director in the Welsh Treasury, tax strategy and inter-governmental relations.

Good afternoon. Prynhawn da. I'm Andrew Hewitt. I'm the head of tax legislation in the Welsh Treasury.

That's lovely. Thank you, both, very much indeed for that introduction there. We're going to go straight into questions, Minister, and we have a lot to ask you. I should say at the outset that that probably means we're going to be writing to you as well after this session, because I don't anticipate that we'll be able to get through everything, unfortunately. But let me ask you some fairly straightforward questions just by way of opening. They're the standard things that we would ask of you. First of all, are you content that all of the provisions of this Bill fall within the legislative competence of this Senedd?

Yes, Chair, we are. There's no requirement for Secretary of State or Crown consents, and the legislation doesn't relate to a reserved matter; it relates to devolved taxes, which are within competence, and any amendments of legislation within the power of the Bill are amendments to Welsh tax Acts, and regulations made under them only. So, we are content.

Okay, thank you very much for that. And the second one, which hopefully again will be relatively straightforward, is what assessments you've made in relation to the human rights impact of the Bill and what the outcome was of these assessments. Perhaps you could tell us in particular if you're satisfied that the regulations made under section 1 of the Bill, which would have retrospective effect, would be compliant with the Human Rights Act 1998.

Thank you. So, the Bill will not in itself engage convention rights. However, it is correct that the future exercise of the power conferred in the Bill, particularly in relation to making legislation with retrospective effect, may give rise to convention rights, and in particular article 1 protocol 1, the right to peaceful enjoyment of possessions. It's not possible at this stage to undertake a definitive analysis of the issues that might arise as any assessment of these issues will inevitably depend on the policy proposal that is underpinning them in any future regulations. However, it is well recognised in the context of tax that there may be justification for the making of retrospective legislation in order to ensure fairness within the tax system and to prevent abuse of the rules. So, in relation to potential breaches of article 1 protocol 1, the courts have been known to give considerable margins of appreciation to national authorities that, when legislating retrospectively, attempt to strike a fair balance between protecting individual rights and the general public interest.

Thank you, Minister. Now, we're getting to some of the detail of how you're taking this Bill forward, but let me just ask you the obvious one: this Bill is an enabling Bill, so what's the rationale for bringing it forward now? Why do we need it now?

It's clear that seeking new regulation powers should be given really robust and thorough consideration and scrutiny, both in the formulation and the drafting stages and, of course, during Senedd scrutiny. And although I've sought to limit the scope of the regulation-making power in this Bill by the inclusion of those four purpose tests, reaching this point has taken considerable time to analyse and craft in depth. That's why the powers sought in this Bill have been in progress for some time, and the initial design, thinking and planning for the consultation led to engagement with tax and law specialists, and organisations that we engaged with in depth, and subsequently, of course, we had our consultation in 2020, so there's been a long period of continued engagement with those organisations and with discussions through policy officials as well.

I think it was important to allow time for our new devolved taxes to bed in before we explored this in more detail. We don't think it's something that we could have just dropped in during the development and scrutiny of the Welsh tax Acts, but I think the need for these powers now has become more apparent as the Welsh Treasury's knowledge and experience of the devolved tax regime has evolved. So, the devolved taxes were developed with a desire to provide Welsh Ministers with the powers they needed to make changes that could reasonably be anticipated during the drafting of the legislation. An example, for both landfill disposals tax and land transaction tax, is that the legislation provided that reliefs available could be amended and new reliefs introduced by draft affirmative procedure regulations.

Areas were also identified where it was considered that change was most likely to occur. So, for example, a power exists to make changes to partnership rules, partly in recognition of the Office of Tax Simplification's concerns and a review of taxation partnerships. So, in that sense, we were, at the time, crafting legislation for things that we could have reasonably anticipated, but our knowledge now has grown over recent times, and we feel that these are new powers now that would be useful for Welsh Government in future.

Thank you, Minister. That was very helpful indeed. Now, that was your starter-for-10 set of questions. We're going to go on to some more detailed questions now, and, Peter, you're going to lead us off.

Thank you, Chair. Hello, Minister. We've got a few areas to cover. You mentioned the consultation in 2020 and we know from that you highlighted that, in Scotland, the Government has used an expedited Bill on tax matters. I just wondered why you feel then that the regulation-making power approach taken in this Bill is the right one, the right direction, and should we be using an expedited Bill process here as well.

Thank you. So, we have given really careful consideration to the most appropriate vehicle for achieving the policy objectives underpinning the Bill, and the powers afforded by the Bill arguably provide equal or greater opportunities for scrutiny. So, for draft affirmative regulations, the debate cannot take place until either the committee has reported or the statutory instrument has been laid for 20 days, whichever is earlier. Standing Orders do, however, enable a longer period than 20 days between laying and the debate when Welsh Ministers feel this to be appropriate. So, we have here a flexible mechanism that we can consider on a case-by-case basis what time is appropriate for scrutiny, reflecting the complexity of the regulations and the impact on taxpayers. And the made affirmative procedure will only be used in cases of urgency, and here it's proposed there should be a maximum scrutiny period of 60 days. So, we feel that we're trying to maximise the opportunity for scrutiny.

I know that there's interest in the additional dwelling supplement legislation, which the Scottish Parliament introduced, but it's worth noting that, in total, from the date of publication of the legislation to the Royal Assent at the Scottish Parliament, that took 34 sitting days. The made affirmative procedure, with a maximum length of 60 days proposed for this Bill could actually offer 27 additional scrutiny days compared to the expedited legislation you referred to for the Scottish Government. So, I think what we are offering is equal or more in terms of time, and we've got other considerations in Wales too. An expedited Bill would need to be considered by the Llywydd, so they may want to make a statement under Standing Order 26.4 before it could be introduced, and then, obviously, after the Senedd passes a Bill we have the period where the Counsel General or the Attorney General may refer to the Supreme Court, so there's an additional period there. All of this can add around eight weeks, although, of course, it can be shortened by agreement, on top of the actual passing of the emergency or fast-tracked Bill through the Senedd. So, I think that we've recognised in this Bill the value of scrutiny and tried to respect that in the way in which we've made these proposals.

Peter, sorry, before—. I know you want to carry on with this line of questioning. Can I just ask, Minister—? You simply can't amend a statutory instrument, so by the very fact of that, there are fewer opportunities for scrutiny, because you can't amend it.

There's certainly more time for scrutiny, so that Welsh Government can be made aware of the views of the Senedd. But I think that an important point here is that we've got section 5 of the Bill, which has probably received less attention than most sections of the Bill, and that does put in place those protections for taxpayers themselves, which I think is really important. But I'll just turn to officials to see if there's anything else. I can see Andrew's been putting his hand up.

Looking again at the Scottish experience with their additional dwelling supplement, it's something that I think it's probably fair to say is the key driver for our reviewing the legislation, or the Government seeking the additional power for the Welsh Ministers. Part of it is, if you remember, to look to respond to UK action, or UK budget changes, and with the ADS, the Scottish Government effectively received Royal Assent to their Bill three days after the UK Government introduced their legislation. So, the Scots had to respond in the absence of seeing the UK legislation. I think that's something that's important—that if we accept that we need to respond to UK legislation that will have an effect on the amount paid into the consolidated fund, then, clearly, being able to see actually what's going to happen is very helpful. So, here the Scottish Government responded in time using their expedited legislation to have their legislation receive Royal Assent before 1 April 2016, but in doing that, they obviously had to do it absent of any view of the UK legislation to which they were actually trying to respond. I think that's where, partly, we have an advantage to ours—that we can bring in our legislation. In that scenario, obviously we'd have to be very, very quick, but after the UK Government had introduced its legislation, we'd still have time, potentially, for the Welsh Ministers, should they want to, to make the made affirmative regulations before the 1 April date passed.

Thanks for that. Peter, I'm going to come back to you, but we may be on two different playing fields here, trying to argue this. You're arguing about the ability of Welsh Government to respond, which I fully understand, and I get the rationale. What we're arguing is about the ability to scrutinise and amend and change, which is the role of the Senedd. Within an SI process, we don't have the ability to do that. So, I get the points you're making about time, and the ability to think flexibly as Welsh Government. It doesn't allow the ability for the Senedd to have flexibility. Peter.

Just building on that, Chair, this is a big issue for us. Does this proposal respect the role of the legislature, the Senedd? Does it show due regard and respect for our roles? I know that Sir Paul Silk has commented in his evidence that it's the job of the legislature to ensure that appropriate checks are kept in place, and that it does it not surrender its legislative role. Do you, Minister, consider the Senedd would be at risk of doing just that if the Bill is enacted in its current form?

I think that there are really robust checks and balances in place for this legislation, and the scope of the power within the legislation has been really deliberately constrained by the inclusion of the four purpose tests. This is quite a departure from our original thinking, when the consultation was first launched, and this is as a result of the consultation responses that we've received.

I do accept, particularly in relation to retrospective legislation, that absolutely should not be something that you would do lightly or without a clear justification. But in terms of taxation, the courts have been supportive of its use in certain circumstances. I know that Paul Silk's evidence to you has suggested, in respect of the Senedd lock, for example—. He recognises that, given the changes that we've made to the proposals from what we set out in our original consultation, that the argument for the Senedd lock is no longer there, because we have so deliberately constrained the powers that are within the Bill to those four tests.

And also, in some further evidence, I know that Professor Emyr Lewis was quite concerned—well, not concerned, but I could feel an anxiety. Will this direction, will this Bill, give far-reaching powers beyond what it's supposed to do in the future on law on tax? There's some real anxiety that this could go a lot further than what you're suggesting. How do you respond to that?

I would disagree with that in the sense that we have, really, changed our proposal significantly in response to concerns such as those that you've described, which were raised during the consultation process. So, what was originally being proposed was quite broad, and listening to those kinds of concerns that we've heard, we have narrowed it now down just to those four purposes test, which will constrain, really, the ability of Welsh Ministers to use this legislation to make changes in any other areas, other than to ensure that landfill disposals tax and land transaction tax are not imposed where to do so would result in non-compliance with any international obligations, to protect against tax avoidance in relation to landfill disposals tax and land transaction tax, and to respond to changes to predecessor UK taxes—so, obviously, landfill tax and stamp duty land tax, which could impact on the amount paid into the Welsh consolidated fund. And then finally to respond to decisions of the courts or tribunals that affect or may affect the Welsh tax Acts or regulations made under them. So, as you can see, the powers within this Bill are very narrow and specific, and I think that that does recognise the concerns, which you've described, which were raised early on during the consultation process.

Thanks for that, Minister. I was going to ask a couple of questions on the lock, but I think you've just covered some of that, so I'll move on. Looking back at the explanatory memorandum accompanying the Bill, it explains that, for example, where tax avoidance is identified, Ministers may announce that the scheme will be closed down through future regulations from the date of that announcement. But as Professor Lewis said in his evidence, he points out that the Bill does not constrain the powers in this way. Do you agree, and why have you taken this approach?

So, we would obviously want to be able to have the same powers, actually, as UK Ministers have to close loopholes in the law where people are using avoidance techniques. Obviously, we would need and want to do that as quickly as possible to protect Welsh revenues. But as I said previously, we do have safeguards within the Bill as well for the taxpayers. So, should the made affirmative regulations not be accepted by the Senedd and passed by the Senedd, then there are protections in place for those taxpayers as well. So, we've tried to respond to those particular concerns, which I know were raised through consultation and discussion as well. So, I think that the powers being sought are appropriate and, as I say, they seek to give Welsh Ministers the same kind of opportunity to shut down avoidance schemes as that which is available to UK Ministers. Again, I'll just check with officials if there's anything further to add on this specific point.

Okay. No, okay. Thanks, Minister. Do you think it would be preferable for the policy statement on retrospection to make it clear that any changes to Welsh law made using the powers proposed in this Bill will never take effect from a date earlier than the public announcement of those charges by Government? It would be terrible if somebody did something in good faith and then found themselves at the wrong end of the law five minutes after.

Yes, this is something that I am interested in exploring with committee as to whether or not we should be making changes to our proposals to do as you suggest, in terms of only bringing these matters into play, if you like, from the point at which there's a formal announcement of them. So, I'm certainly keen to explore any way in which we can potentially amend our proposals to give taxpayers certainty in that respect. I think it's a good and useful point, and one that we are going to reflect on.

Thank you, that's good to know, because my final question would have been—. You previously told the Finance Committee that you don't intend to seek the Senedd's approval of the Welsh Government's policy statement on retrospective effect. So, on reflection, do you accept—well, I think you do—that there may be an argument for the Senedd to have a role in approving the policy and any future changes to it? I get from your last response that you're looking into that element of retrospection.

I think the main role for the Senedd in terms of when the Senedd will have its ultimate say will be on the approval or otherwise of the decisions made in respect of the regulations. I'm open to making changes to the statement because, again, this is something that we've listened carefully to in respect of the work that the committees have been carrying out and the other discussions that we have with tax professional organisations and so on. So, there could potentially be ways in which we could change the statement based on the findings of committee and so on, but in terms of the approval of the statement, I think that the approval of the regulations themselves is the important point for the Senedd to have its ultimate say, really.

Thank you, Minister. Thank you, Huw.

Thanks, Peter. Thank you very much. And, Minister, you're probably aware that Peter's going to pursue you across different committees now on these and other matters.

Wednesday, yes. [Laughter.]

But before he does, Rhys, we're going to hand to you to take us on, please.

Thank you very much, and prynhawn da i chi, Gweinidog. Gweinidog, it's one of our key principles in the United Kingdom that it's the power of the legislator to decide on taxation, and there's a long history about this. One of the causes of the English civil war was King Charles I forcing taxes, and one of the battle cries of the American war of independence was 'no taxation without representation'. So, there's a fairly important principle here. How can you ensure that this Bill respects that fundamentally important principle?

Yes, thank you, and I think that the fact that it is the Senedd that will have the ultimate say on whether or not regulations that are passed protect that principle, as does section 5 of the Bill that seeks, then, to protect taxpayers should the Senedd not give approval to the regulations—. And I think that we're talking, really, about ordinary circumstances of law making, so the kind of circumstances that I've described as being captured by the four purposes test, and not normal circumstances; they are very much reactive circumstances. So, we'll need to ensure that we have agile powers here. And these aren't seeking powers that there isn't any precedent for; these are seeking powers to give Welsh Ministers the same kind of powers that the UK Government Ministers have to respond quickly and in an agile way to these external events. But, ultimately, of course, it will be the Senedd that has the final say.

I think one of your officials wants to come in.

Yes, great.

I think it's also worth remembering that the Senedd has already given the Welsh Ministers the power to make changes to the rates and bands payable on the taxes. So, taxpayers are impacted, obviously, if rates are increased or decreased positively. That power has already been given by the Senedd to the Ministers to make that, again, with the sorts of protections that the Minister has talked about, that if the Senedd, the legislature, doesn't approve those regulations, then the taxpayers are entitled to have their money back if they've effectively overpaid because of the Government. So, the Government has always sought, when using its powers—these tax powers—by made affirmative procedure regulations, to achieve the ability that what they have done can be unpicked in the event that the legislature does not approve what they have done. So, as the Minister says, the ultimate power rests with the legislature still.

Diolch yn fawr. So, Minister, we've discussed history. I want to discuss some law now, and one of the first lessons that any law student will have at any good university—or even at a not-so-good university—is that law, generally, should always be prospective, not retrospective, and that we should have the utmost caution before we apply any law retrospectively. I am concerned about the fourth option that you have, Minister, about changing the laws retrospectively because of judgments by courts or tribunals. We often, quite rightly, accuse the Westminster Government of undermining the rule of law. But is there a potential here, Minister, that we undermine the rule of law by the Welsh Government changing retrospectively the law simply because it doesn't like a court judgment, or because a court judgment has gone against it?

I'll ask Andrew, perhaps, to come in on this, or Anna, in the first instance, and then I will augment, if there is anything to augment after they have responded.

I think that a lot of the constraint on this power, as the Minister introduced to, I think, the second question from the Chair, is around taxpayers' rights or protections that are provided by article 1, protocol 1, of the ECHR. We need to go through that process whenever there is any legislation to be made. So, there is a protection that will always exist.

In terms of undermining, or trying to reverse the consequences of, court decisions, I don't think that that's actually the intention that we're looking at here. I think that it's more to do with trying to improve the legislation following a court decision. That's obviously one option. But then there may also be times—and I think that the UK Government has recently done it—where voluntary tax returns, or tax returns that weren't required to be made, were made. Court action there has questioned whether, in fact, those were valid returns or not. The UK Government has actually responded to that court decision by making those returns valid, which actually acts as a protection for the taxpayers, but is a retrospective piece of legislation back to the start of self-assessment in the last millennium, as everyone likes to say now. But, yes, it was in 1996 and 1997 that I think the self-assessment regimes came in.

So, retrospective legislation can be positive in that sense; it protects taxpayers. So, I think that there is a point to that. So, that is responding to what the findings of the court are, and then making the legislation, in that case, work so as to provide continued protections for taxpayers and to establish the generally prevailing practice that previously existed. But, we can write to you on that further to raise awareness around that particular issue.

Is it worth as well, Andrew, saying something about the ECHR and how it recognises that tax is special? Your favourite topic, I know.

My favourite topic. Yes, it does. Again, as the Minister set out in response to the Chair, there is a degree of appreciation. I think that there is more of a degree of appreciation by the courts around retrospection in relation to taxes than there is perhaps around other areas of the law. That, I think, is an important point.

One of the things that tax can often—. Where it is slightly different, I think, from other types of law is that it can be unwound. Largely, it is about flows of money from the citizen to the Government. This is again where the Minister has emphasised the importance of section 5 of the Bill, which actually works to unwind the actions of the Ministers, should the Senedd disapprove of the regulations that have been made. So, there are layers of protections. There's the protection that starts when it comes with the making of the legislation. Then, there is also the protection afterwards, if the regulations fail to meet the approval of the Senedd, that the money flows back, as it should do, to the taxpayers. It's less like Charles I, I think, than perhaps might be the assumption. We're not trying to start a civil war.

No, I certainly wasn't accusing the Minister of doing that. But there could be the situation where a court has passed a judgment, you think the court was wrong or hasn't completely understood what was the intention of the Senedd, or the other argument is actually the legislation wasn't maybe clear enough and didn't reflect the intention of the Senedd. But the problem with this is this gives the Welsh Government the power to decide what the intention of the Senedd was over that of the court. How is Welsh Government in a better position to know what was the intention of some previous Senedd than the court is?

So, I think this might be an area where we could look to the wording in the draft policy statement, to potentially review and clarify. The intention of the statement wasn't to substitute the Government's view of what the law was intended to be with that of the courts', because interpretation of the law can only be carried out by the courts. I know that you'll be familiar with Professor Lewis's article where he says, once a court or tribunal has made a decision, then that is the law. So, I think a better explanation of the example might be if an element of the Welsh tax Acts is found to be unlawful by a court or tribunal, then Welsh Ministers may decide to amend the Welsh tax Acts to avoid further challenges to the interpretation of that legislation. Again, this would assume that the regulations were considered necessary or appropriate and were compliant with ECHR principles. I think that there is also precedent for the approach that we're proposing within UK law. So, section 10(2) of the Human Rights Act 1998 allows a Minister of the Crown to amend primary legislation by using secondary legislation to ensure that primary legislation is compatible with the convention rights in situations where a court has determined that the primary legislation is incompatible. So, there is some precedent for the kind of approach that we are proposing here as well.

I'm glad to see the duty to publish a statement in the Bill on the use of retrospective powers, but it is correct to say, once you've got the powers, you could change that policy statement and you can change it without the need for Senedd approval? That's right, isn't it?

As things stand at the moment, yes. I'm keen, though, to perhaps do some more work on the statement based on the comments of this committee and others, and listening to the expert advice that we've been receiving as well.

Diolch yn fawr, Gweinidog. That's very refreshing to hear. Just my final question, then, with regard to the Legislation (Wales) Act 2009, it requires Welsh law to be accessible. Are you concerned about applying retrospective powers—that that will not assist with the principle of accessibility and the principle of certainty, which again are two very fundamental, important principles in law making?

I think this sets out really why the statement will be important, in terms of setting out how Welsh Ministers would use the power to make retrospective legislation as is proposed in the Bill. The statement is intended to provide that security to the public and to the Senedd in terms of the power to make regulations with retrospective effect and to provide that certainty that it wouldn't be abused, and the purpose of the statement really is to be open about the basis on which the power may be used. But, as I say, I'm open to refining the language and purpose based on these discussions. Again, I'll just pause and see if officials have anything on this point.

Na. Diolch yn fawr, Gweinidog. Diolch yn fawr, Gadeirydd. Dyna ddiwedd fy nghwestiynau i.

Diolch, Rhys. Thank you very much. Minister, we note your willingness to engage with this and other committees and the suggestions that we might bring forward there. This is a very tricky area, but I think there might be some things that we can put forward that might be of help to you, so we welcome that constructive engagement. After we've heard about the Tiger Bay tea party, let's now go on to Alun Davies.

Yes, another student of Tom Payne, you'll be pleased to hear, Minister. I'm pleased by your answers to Rhys because, when I was reading through this, my worry was that we're being sold a bit of a pig in a poke here aren't we—you're giving yourself powers to do something retrospectively; you don't know what it might be because those issues haven't come up yet, but you want the powers to do it anyway, and you want to be able to do that without real scrutiny because retrospective powers are always used without scrutiny. That really, really worries me. It really worries me, and I worry as well that we're in a situation here where we don't have the structures in place to hold you properly to account for both the raising of taxation and public expenditure. You will know my views that we should have a legislated budget round, and frankly, in the last half an hour or so, I think you've made the case for that quite well, certainly better than I've ever done. And, is it not the case, Minister, that this Bill will provide powers in place of structured scrutiny?

No, and I don't think that this Bill does make the case for a finance Bill in any case, and I say that because this Bill offers the opportunity to respond rapidly to external events, which the longer process of a finance Bill doesn't. And we've talked previously about keeping that option open for the future, and continuing the discussions around that. But, I think, even if there were a finance Bill, Welsh Ministers would still need the powers as set out in this proposed Act to respond quickly. So, a finance Bill in and of itself wouldn't help solve some of these issues.

And the point about retrospectivity is really important because—. I'll perhaps ask officials to give some examples as to how we might envisage potentially having to use these powers in future, but it could be the case that the UK Government makes a change to a predecessor tax, which would then provide us with an opportunity to either offer Welsh taxpayers the same benefit, or to take a different action in that regard as a result of the changes across the border, but to do so quickly so that Welsh taxpayers wouldn't miss out on benefits as a result of that and wouldn't have to wait until we had gone through the full process before they could benefit. But, of course, if the Senedd would disagree, then section 5 of the Bill means that taxpayers wouldn't lose out as a result as well. But perhaps officials would just give some examples as to the kinds of ways in which we would need to use these powers. I know it's difficult because there are unknowns, aren't there, in this space.

Yes, they are; they're examples. And I'm always grateful to the officials for providing this level of information, but it's irrelevant really, isn't it, because once you've got the powers, you can use them.

[Inaudible.]

Sorry, go on, Andrew.

I was going to say, in terms of the point the Minister made that even if there was an annual finance Bill cycle in Wales, and presumably a budget Bill that would go alongside it as well, this Bill, or the power in this Bill, would still be desirable, I'd argue, or Welsh Government would argue, mainly because, in the first instance, if we're looking to respond to UK budget changes, the UK budget operates in a different way to our budget. We have to have our fixed things: general elections—there are often two budgets. In 2010, there were actually three budget events, and then, just more recently, in the summer, although it wasn't a budget, there was the announcement of the stamp duty land tax holiday. Now, obviously, we could respond to that because we've got the made affirmative regulation-making power to make changes to rates and bands. So, we'd always still need to be agile and alive to these changes.

Also, in terms of avoidance, I think there is a potential benefit to being able to make regulations and bring the changes to the law into effect immediately, or relatively immediately, even if it was by a draft affirmative procedure. And that would add to the clarity of the law rather than removing from the clarity of the law. So, say, in the summer, the UK Government discovers that there's some avoidance activity, they'll make a written statement, they'll hold up the legislation that will be made and then say that legislation will be part of the finance Bill. That Bill might not be published until March the following year. Taxpayers then would need to be aware of this written statement. Our way of looking to respond to these sorts of avoidance activities would admittedly be through regulation-making powers. The regulation-making powers would change the primary legislation, and that legislation, quickly, would reflect the changes made through the regulations, not the piece of paper that exists as a written statement. So, it's upsides and downsides; it's trying to find the balance to achieve the best results for the Welsh Government, the Senedd and Welsh citizens. I think there are advantages to the proposals that are contained in this Bill.

My argument isn't that Ministers are knaves, trying to undermine or attack the population of Wales—that isn't my argument at all. And I agree with you completely, by the way, that there is a requirement for agility in these matters, and that Ministers do need to respond quickly to change in circumstances. I also agree with you—although you didn't put it quite like this—that the UK fiscal structure is entirely broken, and that that makes our ability to work within the cycle quite difficult. I understand the whole of that context; I don't disagree with that analysis at all. My point would be, though, the democratic structure of all of those different elements. I've probably got more criticisms of the Westminster system than most, but it does have a fundamental democratic arc of decision making, through Finance Bills. And what that does is mean that UK Ministers must go to Parliament to seek consent and must make that argument through the UK Parliament. Welsh Ministers, through our current budget round, have all the flexibility and none of the structures. And from our point of view, then, as the Senedd, we are unable to maintain that level of oversight and scrutiny.

The point made by Huw Irranca-Davies at the beginning of this conversation, about our ability to amend, our ability to look in more detail at SIs, is entirely correct. And that makes it a fundamentally different process. In Scotland, the legislative nature of their budget provides a similar democratic arc, and that is missing in Wales. So, for me, I have no issue with the Minister having the powers to act in this agile way, to respond to change in circumstance. I think that's entirely proper and correct that Ministers do have those powers. What concerns me is that, here, they're been asked for in a democratic vacuum, whereas in other Parliaments, that agility operates within a different structure. So, when, Minister, you're saying you want equivalent powers to UK Ministers, what I'm saying is that I want equivalent powers of scrutiny to the UK Parliament.

We've had this debate a few times in respect of a finance Bill—

We have, and you never disagree with me; you always tell me it's not time.

It is something that we would keep under review—

Your predecessor said exactly the same, by the way, and I've come to the conclusion that 'time' means when I retire. I think what we need is a different nature of debate. We're having this conversation today, this afternoon, because you've brought forward this legislation. What I think we need is a very different conversation, whereby we actually debate and discuss the nature of democratic oversight of taxation powers. I know Rhys made the point slightly tongue in cheek about our American revolutionary friends, but it is an important principle of our constitution that, if you take money out of my pocket, somebody holds you to account for it, and somebody votes for it. It's a fundamental point. And Wales I'm not sure is in the position that it should be in terms of that democratic accountability and scrutiny.

I think the point you make is a much wider one than the narrow point that we're discussing in respect of the specific Bill today, and I know it's something that we'll come back to as well. But I do think that, in relation to this specific Bill, we have worked hard to try and ensure that there are appropriate safeguards built in in respect of the time that Members of the Senedd have to scrutinise and discuss the legislation, and then also in terms of the important safeguards that we put in for taxpayers as well. If you look at the proposals as they were when we first introduced them through the consultation document, they proposed a very broad power, which was intended to be used where Ministers considered it expedient in the public interest. We've moved a long, long way from that to something that is much more narrow now.

But doesn't that in itself recognise that that power is inappropriate? I'm glad you have moved in that way, by the way. I welcome it.

We've moved, as I say, from that, because of the concerns similar to those that you're describing now and those that came through the consultation document and the engagement events that we had with tax practitioners and others, to craft something that is much more narrow, much more focused to enable us to respond quickly to these external events.

Okay. Do you have any other proposals at present that you're working on in order to change the way in which we debate and discuss these matters?

We're not—

Is this the only Bill that you're going to be bringing forward in the first part of this Senedd?

Yes. This will be the only Bill in respect of the finance side of my portfolio. You'll be aware of the other side with all of the council tax work and the reform there, which will need legislating for.

And that is in itself important. So, what you're essentially saying is that you're foreseeing that the Government is planning no change at all in this Senedd to the way in which our budget round operates.

I don't think we necessarily need to introduce legislation to change the way in which the budget operates.

You would if you wanted a legislative budget.

If we were to introduce the legislative budget of the type that you describe, which I know you advocate strongly for, then obviously we would need to bring in legislation for that. We don't have plans at the moment to introduce that kind of legislation, but we do have our budget improvement plan, which is, as you know, the five-year rolling plan, which seeks to improve the way in which the budget process is undertaken. That's an important piece of work, and I know it goes more widely into things such as carbon impact assessments and gender budgeting and so on. So, we're always improving and changing the way we do our budget, but not necessarily responding to your specific request at this point.

I think the Government has improved the way its budget round operates, and I think the amount of information the Government provides to the Senedd for scrutiny has improved immeasurably in recent years. I think everybody's grateful to the Government for the effort and work that's been put in to achieve that. I don't think there's any criticism to be made there. It's clearly an improvement, but it still doesn't have the democratic underpinning that tax and spend should have. And that is where I find myself conflicted with this piece of legislation, which, in itself, remains a bit of a pig in a poke, although you have clarified some of the matters this afternoon. It still exists without the democratic context that I think we require in order to fulfil our parliamentary responsibilities. Thank you.

Alun, thank you. Minister, it's interesting, Alun's line of questioning there, because we recognise that the Bill itself is narrow in terms of the way that we're looking at it now, but, on the wider context of scrutiny of finance and budgets coming forward in the Senedd, you've explained quite a strong rationale why the Government needs, as the tax varying powers and the budget powers of the Senedd change, to adapt its game so that it's ready to act fleet of foot and so on. The same argument I think as Alun has just put can be applied to the scrutiny of the wider budget process, so I'm sure we'll come back to that. But let me focus on this just for a moment: you've gone at great pains to explain to us how you are trying to restrict the way in which these powers can be used to give some reassurance to the Senedd and to the wider public that they won't be misused, but it may not be always that we're sitting in front of such a wise and convivial and well-meaning Minister; there might be somebody not so well meaning further down the line. So, let me just ask you: can you give us some examples of how these powers that you are taking will not be used?

That's an interesting question. I will ask Andrew to come in on this point. I suppose they won't be used in any way that doesn't meet those four purpose tests. I suppose that's the most simple answer to that, in the sense that the four purpose tests are very specific and very much do limit the way in which the powers could be used. So, anything that doesn't meet one of those tests would not be a way in which the powers could be used. But Andrew might have some more specific examples.

There is also within section 2 the particular carve-outs for where the regulations can be used anyway, so we can't make any changes to the operation of the WRA or the establishment of the WRA, or in relation to introducing rates and bands. But it's very difficult. We are in the unknown unknowns land, and it's easier to look at situations that—. You know, had you asked the question the other way around, I would have been fine, but—

Of course you would.

Asking it this way around is somewhat harder, because you have to put your head in the world of what hasn't happened in the past. But I think, more than trying to find an example of what wouldn't comply, I suppose, it takes us back to—. The Welsh Government, when bringing forward legislation, looks at the legal framework and what the effect of the legislation is, but also the framework in which the legislation is going to sit, and that obviously includes, again, going back to the European Convention on Human Rights, that we have to make sure that our legislation complies with that. So, that has to be a degree of comfort for taxpayers and for the Senedd, that there are types of legislation that couldn't be brought forward. Should the advice of our lawyers be, 'This will breach article 1, protocol 1', then clearly we couldn't bring that legislation forward, and should that actually happen then clearly the Senedd should use its power and vote down that set of regulations, which is obviously the responsibility and the scrutiny that is available to you. It's not quite right to say that there's no scrutiny or that somehow the scrutiny is less good.

Trying to steer it back to an actual example, I think the comparison in July 2020 between the UK's way of bringing in what they called the stamp duty land tax holiday and our Ministers' way of bringing in the temporary tax reductions that were brought in for LTT is quite illustrative. Yes, the UK Government brought their changes in through primary legislation. An announcement was made on 8 July at the summer statement or whatever it was called, followed by a Provisional Collection of Taxes Act 1968 resolution. Of course, PCTA resolutions by convention are approved, so, yes, there is a vote, but, 'Is there a vote?', I suppose, is a question there around convention. Then, on 13 July, the legislation was introduced. On 17 July, it was agreed. On 22 July or 23 July, it received Royal Assent. That was the speed with which that piece of primary legislation went through. Yes, there were debates in the Commons. Yes, there was a committee of the house that scrutinised the Bill. But I would question if a three-day scrutiny period is actually sufficient for legislation.

You could say, 'Yes, it's primary, isn't that good?', but for us, we did ours through the section 24 LTT Act power that enabled the Minister to introduce made affirmative regulations. Those made affirmative regulations were made. I think our timeline was that the Minister made the announcement on 14 July, and on 24 July the regulations were made, coming into force on 27 July to tie in with the opening up of the estate agency businesses, matched with the ending of some coronavirus regulation restrictions, and then in part because there was the summer recess as well. But the Minister appeared at the Finance Committee and gave evidence to the Finance Committee. We had a detailed explanatory memorandum. And then the vote happened on the twenty-ninth [correction: the vote happened on 29 September].

Okay, thank you. Look, this is fascinating, and this might stem from a different interpretation that we have of what scrutiny looks like, but we'll explore this further, I'm sure, and beyond this one-hour session.

I've only got a couple of other questions that I want to rattle through quickly, but, if colleagues have something desperate, just wave at me, and I'll bring you in before the Minister escapes from our clutches this afternoon and goes on to other important business.

The powers that are being taken within this, even with all of those reassurances, are considerably—. They're quite wide, so have you considered at all—are you open to considering—placing a superaffirmative approval procedure on these?

I think that the affirmative and made affirmative procedures are appropriate for what's being requested, in the sense that we are talking about a narrow range of things. Compared to how we originally envisaged the Bill in terms of being very broad, what we present now is much more narrow and focused, and I do think that the made affirmative and affirmative as set out is probably the appropriately way to go. But listen, Chair, I'm more than open to listening to all recommendations of committees, and we've talked about how important scrutiny is today, and that's why we're here, really, to hear your particular views, and I look forward to considering what they might be.

Okay. Well, we might come back with some proposals around the use of superaffirmative as well, to give additional assurances, if this is the way that you're to proceed there.

Just one final question from me, and it goes to some real detail. Dr Closs-Davies, giving evidence to the Finance Committee, noted that rapid changes to tax legislation can affect taxpayers' resources and lead to poverty, working against the principles of this Welsh Government's Well-being of Future Generations (Wales) Act 2015, so have you given that consideration to the effects on individual taxpayers of retrospective legislation, and the impacts of poverty and so on?

Yes, and that's why, in section 5 of the Bill, we do have those protections for taxpayers, in respect of—. If the Senedd decides not to provide approval, then we wouldn't be looking to taxpayers to pay any kinds of fines attached to the previous decision and so on. Taxpayers will be fully protected as a result of section 5 of the Bill.

Okay, that's brilliant. Colleagues, are there any burning questions that you want to address with the Minister? We've got lots more, Minister, that we wanted to ask, but there's no way we're going to get through it in the final minute. But anything in particular from colleagues? No, no indeed. Okay, well, in which case, Minister, can I just thank you for the evidence session this afternoon, and the explanations that you've given, the willingness to work with suggestions coming from this committee and others—because I'm sure we will have suggestions coming forward—the rationales you've laid out for why you're taking it forward in this way, and also to your officials as well for being with us this afternoon as well, and their additional explanation?

So, thank you very much indeed. We wish you well during the course of the week and your further deliberations on this being pursued hotly by Peter and others. We'll send you the transcript, of course, for checking the accuracy of this and we'll certainly be following up in writing with our other questions as well. Thank you very much indeed.

Great. Thank you. Diolch.

Thank you. Now, colleagues, bear with me. Just to repeat, I've got some problems happening here with my broadband on this end, so just in case I do disappear, hopefully Alun will be able to take over. Can I just check: can anybody hear me at the moment?

Yes, we can hear you, Huw. And see you.

Thank you. It's my end. It's my end it's going. Okay. Right, we'll try and continue, but perhaps, Gareth, you might have to let me know if things go down there.