Finance Committee

Okay, we'll move on to our substantive item this morning, then, which is the next and penultimate evidence session that we have on fiscal inter-governmental relations. We've got Ed Poole here with us. Ed, do you mind just introducing yourself and your role for the record, please?

Diolch yn fawr iawn am y gwahoddiad i siarad gyda chi. Ed Poole ydw i.

My name is Ed Poole. I am a senior lecturer in politics and international relations at Cardiff University. I'm also part of the Wales Fiscal Analysis team. So, thank you for the opportunity to speak to you on a slightly different issue than the budget, which normally we, as Wales Fiscal Analysis, would be doing.

There we are. Diolch yn fawr. Thank you very much. As you've probably been watching, we've had six sessions to date on inter-governmental relations. It's been fascinating to delve under the bonnet of some of this work. I'd like to start by looking at your views on the IGR structures and the UK Government's attitude towards the IGR and the operation of those inter-governmental relations. So, as a first question, how important is it for heads of government to actively engage in inter-governmental relations and how does the establishment of the Prime Minister and Heads of Devolved Governments Council, in response to the UK Government's IGR review, compare to other international approaches? I know you've been doing a little bit of research into this and some work, so if you wanted to start setting the scene to start with and then go on to that, then over to you.

Sure, I'm happy to do that. I think there's no doubt that, particularly where you've got a state in which many of the important public functions are transferred to other levels of government, those types of regular participation in inter-governmental meetings, at both the technical and official level all the way up to the high political level, are going to be important. We see these types of forums operating in decentralised states, and certainly in the federal states—Canada, Australia, Belgium, Germany, Spain, Switzerland—and all of these countries will, to greater or lesser degrees of effectiveness, have these types of senior-level ministerial councils.

I think one thing I would note is that, in the UK, there's still a great deal of—. There are differences of opinion about the nature of the state that the UK is. Certainly, in the devolved context, not just in Wales, but in Northern Ireland, in Scotland, there's an understanding that sovereignty has been transferred to different levels of government, there's more of a polycentric nature of sovereignty, and, therefore, these types of ministerial bodies, which might not be of equal parity, but certainly have mutual respect, regular meetings, regular inter-governmental forums, would be the type of body that you would expect to see in federal systems. I think the difficulty we have in the UK is that not everybody—and not political parties, I'm talking about different actors within the UK system—share the view that this is a multicentric system of sovereignty. So, we've had, in successive devolution Bills, by whichever political party since devolution was established, statements that, regardless of the devolution of power to Scotland, Wales and Northern Ireland, don't in any way diminish the sovereignty of Parliament in Westminster. So, we have this traditional view—Parliament in council, parliamentary sovereignty—and on that view, there isn't a need to have that multilateral IGR that we would expect at a Welsh or Scottish context, and you would see in countless federal systems across the world.

Two points. You've heard me say before—I'll say it again—the Treasury don't seem to have come to terms with the fact that it's not the Welsh Office they're dealing with, but a Parliament. How are the devolved parts of England—the mayoral system—going to fit in, or should it fit in? And if it does, how is it going to fit in? Greater Manchester has powers in certain areas that Wales does not have, for example, and also it's bigger.

Well, I think you've hit on a very important point, which is that we have an uncertain understanding of what the state is at the moment. England historically, as we know, hasn't had a government of its own and, therefore, the Westminster Government has been representing not only by far the largest part of the UK, but also the central Government itself. And so that question of those equal partners around the table is a difficult concept for Whitehall often.

I think there have been new proposals in the UK Labour Party's manifesto for a new forum, to have the combined authority mayors in a devolved setting, but then we go back to the question of, 'What is this IGR for?' Is it for these heads of Government, effectively—the First Minister of Scotland, with a huge number of different and important public service powers, just like the First Minister of Wales and the First Minister in Northern Ireland—compared with combined authority mayors, some of which, as you mentioned, greater Manchester, have a large number of devolved powers, but others not having anywhere near the number of powers that the mayor of greater Manchester has—? So, we have this real complex system that isn't actually mirrored in any decentralised state, let alone a federal state.

The United States of America have got it right. You might be in Montana or New Jersey, or you might be in New York or California, but you have exactly the same powers, and the person in the street knows whether it comes under the state, or whether it comes under Washington. Here, if you mention policing, which a number of us have different views on, then you would have, for example—. If you're in greater Manchester, policing's devolved. If you go to the west midlands, it isn't devolved. You come to Wales, it isn't devolved. You go to Scotland and Northern Ireland, it is. Such a complicated devolution settlement cannot hold for any length of time. Would you agree with that?

Well, I think what we've seen over the past 25 years is that very, very rapid progression in the settlement. Not only in the number of powers that have been devolved, but you've hit on the combined authorities in England—that is a journey that has not yet concluded. This is not going to be resolved any time soon, whether it's relating to the three nations of the UK, or whether it's about regional devolution in England.

Going back to the initial question, with regard to the interplay between different Governments, and heads of Government in particular, is it beholden on the heads of Governments to show an example of how it should happen? The fact that the Prime Minister and Heads of Devolved Governments Council haven't met since November 2022—what does that say about that relationship? I think you've alluded to it in your answer, but does it—? By the top not meeting, it’s very hard for anything else to happen, or does everything else happen and that doesn't need to happen because—?

I think that there's very much an element that the pattern will be set at the top. That's not to say that under the new system there haven't been a huge number of meetings, useful meetings, at the inter-ministerial group level, the lower level here. I do think that it goes back to the point that the whole durability of this system is going to be dependent on the UK Government's willingness to enter into the system in the kind of spirit in which it was intended.

I think, yes, you're right that there hasn't been a meeting since November 2022. I do think, though, that in contrast with the previous system, and certainly in contrast to the previous Prime Minister, there's been a more positive start. That was very frustrating for both observers and participants, when there were no meetings at all. I think that has changed. Certainly, as I mentioned, at the medium and lower levels there's a lot of activity in these groups, and that is a positive thing. I think that, even though there's certainly frustration in other international systems, in IGR internally, I think one of the common factors is that they do meet—not all at the same level of frequency, but there is a regularity in the meetings, and I do think that would be very important going forward.

We've had some evidence to this committee when it comes to the FISC element—so the Finance: Interministerial Standing Committee—and that's based on good working relationships between ministers and officials, but it also has been hit with some change of Cabinet Secretaries, or Chief Secretaries to the Treasury more often than not. Just expanding a little bit on what you were saying there, on that parity of esteem between those Members around that table, maybe you could talk a little bit—. You seem to be implying that that parity of esteem isn't there, that there's a superior and an inferior relationship rather than colleagues around the table. Could you talk a little bit about that?

Sure. It's going too far to say that in all federal and decentralised systems there's parity of esteem between all of the actors around the table. I think mutual respect, certainly. I think parity of esteem: in every system, you'll have some of the sub-state entities, to put it in a better term—the states, the territories, the provinces—believing that they don't have the same kind of political cachet, if you like, as the leaders of the central government. You hear this from regions all the time, that they're being summoned to attend at a central heads of government council, and particularly in those states where the central government controls the agenda and/or has a veto vote over the outcomes of those co-ordination meetings. In those types of places it's not true to say it's complete parity of esteem. However, certainly mutual respect.

Okay. So when it comes to FISC in particular—and obviously we were talking about the financial elements of that, and devolved funding in particular, and we'll come on to some of those things later with my colleagues—some of the evidence that we've received to this committee has noted that power imbalance between the Treasury and devolved Governments, as well as Treasury and departments within Government as well in Westminster. How do you think that could actually be resolved? Is there a mechanism within FISC that actually—? What are the options available and, maybe, have you got a preferred option from your evidence or from your research?

Sure. Firstly, this is an improvement on the previous system. The finance quadrilaterals were extremely closed box. We didn't know what was going on. It doesn't look like an effective system. The new one is an improvement. The concern about that is the carve-out of the dispute resolution area in that, where, unlike the other areas of inter-governmental relations in the new system, there isn't the ability to have it arbitrated by a third party. Policy decisions on funding

'are strictly reserved to Treasury ministers, with engagement with the devolved administrations as appropriate.'

That's a different set of circumstances for dispute resolution. And, of course, in the Finance: Interministerial Standing Committee, all of the disputes are going to be about money, not only when it comes to decisions on funding but on the statement of funding policy. That is, essentially, carved out of the process.

We know that the statement of funding policy is incredibly important in the devolved context, because that's what sets the comparability factors for the Barnett formula, and that is the document that effectively, for example, determines whether HS2 will be an England and Wales or an England-only project. Those questions are carved out of dispute resolution.

Those are the areas in which there's still a weakness. It goes back, actually, to Mike Hedges's point about Treasury—that the Treasury has historically in the UK system been the primus inter pares when it comes to UK departments, and that is not only the case, as you point out, with the devolved Governments, but it's also the case with other UK Government departments.

Is the system rigged so that the Treasury always wins?

It's an improvement on the previous system, but the most important areas that are going to be subject to dispute in devolved financing are going to be funding decisions over policy, and the comparability factors, particularly in the statement of funding. There'll be possible room for engagement and negotiation, but still there's no ability to go out to third-party arbitration in those areas, while we have seen progress in other areas of the various different committees.

Diolch yn fawr. I'll bring Mike Hedges in—. Sorry, Peter, did you want to come in?

No, I might end up stepping on another Member's questions.

I wouldn't mind. The committee has heard that inter-governmental relations are more routine, less ad hoc and subject to statutory reporting in other countries. Is that a better or worse system?

We'd certainly want to have as formal and as regular a set of meetings as possible. I think that this is the way that we embed that kind of culture of mutual respect and parity of esteem in the system. In most systems internationally, you will have the process of the committees embedded in statute. It doesn't necessarily mean, of course, that the mechanisms that are put in place will be entirely effective. Again, it depends what the mechanisms are for. In some states—certainly the UK, but also Spain and Italy—these are states where there are different understandings about what the nature of the state itself is, whether it's a federal state where we'd have a clear constitutionally defined role for all of the participants at the table, or whether it's more of a state that has decentralised certain functions, and therefore you still have the centre of sovereignty instilled, if you like, in the central Government. That, I think, goes to the question of what are inter-governmental relations for, rather than whether putting it in statute that there should be meetings is the way forward. I think it probably can't hurt, but the question is whether that's going to lead to greater effectiveness.

Peter, did you want to come in?

Just linked to the earlier questions about this mutual respect and parity of esteem, I don't know if we get ourselves too hung up and we should perhaps acknowledge that it's very difficult for a country with a population of 3 million to feel it has parity with a country with 57 million, or whatever, but that mutual respect is fundamental to acknowledge each other's roles. I suppose it's trying to understand where the clear deficits are in that, because anybody can talk mutual respect, but, actually, it's how they act it out. Perhaps we should be identifying where those deficits are, and then focusing on each and finding the solutions to each, instead of trying to package it all up. I wonder if we could sort of incrementally address that. I've probably gone off-piste a bit there, but it's trying to understand what those actual deficits are and what we can put in place to change it.

Would you suggest, potentially, either legislating or putting things in place to do that? Is that what you're saying?

Yes, I think so. It's that dispute resolution, really, working through these things, so if we find there's a deficit in one area in a relationship, we address it, and do it in bite-sized parts. Are we trying to take too big a chunk to put right in one go, when we should be working through it to try and address the bits? Because there may be individual sticking points that scupper the whole of what we're trying to achieve, because it's just too unacceptable to the Treasury or whatever—I don't know. I don't know if you have any reflections on that.

I'd entirely agree. I think that you'd want to make sure that you're bringing the UK Government along with you. There is an improvement, and it really should be acknowledged that the new set of mechanisms is an improvement; it's trying to embed that, through the culture of regular meetings and so on, to make sure that that engagement continues. So, I'd entirely agree.

I suppose it really needs our Government here to be almost, not creating a manifesto, but laying those expectations down of the new Government really quickly, to get those things established very early.

It's relationship building as well, so you can put things in the rules, but you can also build relationships. I think it was the Cabinet Secretary for finance in Scotland who was saying that building relationships with an ever-changing Chief Secretary to the Treasury is very difficult. So, it's that stability bit as well, and working through. There are some things that you can put into laws, but there are other things that you can put into more the practical elements of building a way of working. Back to Mike.

Between you, you've answered the follow-up to one of my questions there, which probably helps us. Peter raised the point that if it's 57 million against 3 million, there is only one winner. But if it's 3 million against 10 million, 12 million, and other parts are between 3 million and 5 million, as in a system where you've got full devolution within England, doesn't that make it easier? The point we're not making here—and the Chair will tell me it's none of our business—is that English devolution is the key to this. Because otherwise, it's going to be a big, centralised English state against Wales and Scotland and Northern Ireland, and there can only be one winner in that.

The challenge we have here is that, as we alluded to earlier, the new combined authority mayors vary enormously in the amount of power that they have. If there was a body that included the First Minister of Northern Ireland, First Minister of Scotland, the Prime Minister, with combined authority mayors of some of the smaller areas, with very few powers that have been transferred to them, to what extent is that a useful inter-governmental forum, given the political dynamics, given the powers that are exercised by the different players in that room? Of course, discussion, as we've talked about, is always useful, but to what extent is that a body that would be useful in terms of the powers that are being discussed?

As it is now, no. We can keep on talking about England as a unitary country, but, of course, England was made up of eight kingdoms: Mercia, for example, and Wessex and East Anglia. So, England has not always been this unitary body. I think that we're moving in the right direction, but we need to get everybody in the same place. The powers of greater Manchester and London need to be replicated across the rest of the English areas, and every part of England needs a combined authority of some kind or another. Would you agree with that?

It's a little bit beyond my remit in terms of the future shape of devolution. I think that's fundamentally a political question.

I think we can get hung up on what England's systems are for local government or a step higher. They are England. They are part of England. It would be like our city deals starting to demand a bigger say in different things as a regional entity. Well, they have, to a degree, with—

I would actually support that, but that's a different matter.

Let's move on to where we should be. We've had evidence submitted to the inquiry noting the UK is the exception when it comes to the absence of a needs-based element to devolved funding. Are there examples of Governments allocating devolved funding in other countries based on need, and how effective are these in delivering sufficient resources to devolved Governments? And, of course, you had the Azores judgment, didn't you, which did limit what Portugal could do.

Yes, absolutely, and that's, actually, an important point when it comes to the limits of autonomy in decentralised fiscal states in Europe. I think, going back to the question, equalisation based on needs or based on tax capacity—and I'll come on to that in a moment—is the usual means across decentralised fiscal systems of funding sub-state Governments. The exceptions to that, within the Organisation for Economic Co-operation and Development, tend to be particularly centralised countries, and they tend to be where the transfers to lower tier Governments tend to be more discretionary or based on specific programme funding, like different policy areas that are funded individually, rather than by some universal standardised formula.

In the OECD, the examples of countries that don't use this equalisation based on needs or tax capacity are the United States, the UK, France and Japan, with France being the quintessential centralised state in terms of the governmental functions, and the US having a lot of discretionary programmes—Medicaid, food stamps and so on and so forth. The UK and the US are the standout exceptions when it comes to the funding of sub-state Governments, because these are the states that have a very significant regional tier—when it comes to Wales, Scotland and Northern Ireland, anyway.

Most countries that do use equalisation have a mix. Some will equalise on the basis of needs, as we're very familiar with since the Holtham commission report in Wales. Others will tend to equalise based on a measure of the tax base of the region that will equalise based on the region's potential ability to raise revenue through its own resources. We know that, in any given region within a state, we've got income levels varying, property values varying, businesses activity varying. All of these, of course, contribute to the tax base. So, if we equalise on that, it means that regions can provide a comparable standard of public services regardless of their own ability to generate revenue through taxation. In the Welsh context, we have a weaker tax base, as we know. To provide a comparable level of services, we would have to have a higher tax rate than would be the case in England. So, equalisation on that basis is another way of doing it.

Normally, states will use a mixture of those two types of equalisation. We've got, in Australia, the Commonwealth Grants Commission that mixes both revenue-raising capacity and needs. Germany also does this. The constitutional court there very strictly interprets a rule that has equal public services across the entire country. We see a horizontal transfer—it's called the Länderfinanzausgleich—which transfers revenue from the richest Länder, like Bayern and like Baden-Württemberg, to the poorest Länder, and it's been very strictly interpreted in the German constitutional court.

How do they resolve it?

The Australian grants commission will take a huge amount of evidence, like the boundary commissions do here—files and files and files of evidence—and then this is an independent group of experts that will adjudicate themselves. They're arm's length from Government. There are lots of bodies where there'll be—. Canada has a process where there's, yes, arm's length, or organisations that obviously consult, but it's not one individual Minister making the final judgment.

And—sorry, Mike—in those systems, is it on an annual basis, or do they do them on a—?

Multi-year.

Multi-year, because, otherwise, you're constantly doing bureaucracy, basically, rather than actually getting on with what you need to be doing.

That's right. Australia does have a ministerial council that meets every six months, but if they were to do that at every meeting, it would—. This is something that takes a very—

So, it's multi-year, at three or five years—

That's right.

—and it's reviewed then periodically.

Yes, that's right.

Right, okay. Thank you for that.

I'm not sure the Boundary Commission is a good analogy, seeing as they created a constituency stretching from lower Brynamman to Presteigne.

Yes.

Three quick points that you may not want to answer, and then a question. City deals, of course, are outside the Barnett formula. Northern Ireland funding—quite a lot of that comes from outside the Barnett formula. And London is making noises about why it is a net contributor. But the question I've got is: His Majesty's Treasury's announcements on devolved funding can be unpredictable in terms of timing and lack transparency regarding Barnett consequentials. How effective are approaches for fiscal inter-governmental relations in other countries in ensuring funding transparency to devolved Governments, and what could the UK Government learn from these processes?

I will confess, I don't know the ins and outs of the budget timing in all decentralised fiscal states, but, to my knowledge, there's nowhere that gives as little notice on future funding changes to regional Governments that have very large-scale spending responsibilities. I'm sure there are systems where local governments with relatively smaller responsibilities will have very limited notice, but where you have governments, like the devolved Governments, with very large-scale funding responsibilities, I'm not aware of a system that gives so little notice.

Normally, particularly in federal states, but, actually, also in the decentralised states, you don't get one notification, but there's a kind of preliminary notification, followed by a final. So, if you imagine, say, at the start of a calendar year, when the central government or the federal government is going through its own budget process, at that stage it will give an indication of the likely changes to future funding to the lower tier governments. Then, later in that calendar year, when their budget is passed through its legislature, they will be able to give the final notifications to the lower tier bodies, which probably won't change very significantly. So, effectively, you've got a year or so before the start of the regional tier government's fiscal year, and you've got a pretty good steer on where your funding settlement is going to be.

I myself used to work in the Commonwealth of Pennsylvania's budget office for four years, and this question about knowing about when future funding would arrive just wasn't really raised because you had much more security—a huge number of different programmes and it wasn't a block grant, and each different funding programme would have different conditions attached, but you'd have quite a lot of notice about the amount of funding that would come through to the different funding streams. The only exception I remember was when President Obama had a stimulus programme at the very start of his term. A very large amount of additional money would be coming to the states, and that was at very late notice because it was being negotiated at that time in the US Congress. But that was about additional top-up moneys rather than the base level of the budget.

And this is before both our time, but did New Deal work under the same system?

Sorry, say again—excuse me.

Did Roosevelt's New Deal work under the same system?

I'm a student of US history, but not about the budget transfers under the New Deal, I'm afraid.

Okay. Thank you.

Peter.

Thank you. Ed, the independent commission suggested that there ought to be a principle established that funding changes confirmed after a fiscal event in the autumn can be managed across financial years. Do you think this would be a suitable approach, and what more could be done to ensure the devolved Governments have the flexibility to manage their funding allocations?

Yes, a really good question, and I think this is—. There are several countries where reliable, multi-year fiscal planning is helping the regional tier of government plan their budgets better. In the eurozone, it's pretty much required. The stability and convergence programme, the pact, previously required all central and regional tier budgets to be co-ordinated, because, obviously, the eurozone has an interest in co-ordinating fiscal policy across not just the member-state tier but also the regional tier, which has quite a lot of borrowing and spending responsibilities. That pact is now called the economic governance framework as of this year, but still there's this requirement for co-ordinated multi-year planning by all tiers of government, which we don't have to the same extent in the UK. Certainly, this is the norm. And even in countries that are not in the eurozone and don't use formal multi-year planning—Switzerland is an example—those countries are still associated with stability and predictability in their equalisation schemes and the grants that are coming. So, most states, particularly in Europe, will have a multi-year framework, which gives more stability over the future budget.

Yes. That's helpful. Through not having that, that feeds into this lack of mutual respect, doesn't it?

Yes.

That's one of those key planks again that are fundamental to building the case to establish that ability to manage those funding allocations. So, thank you for that.

The committee has taken a lot of evidence, and one bit that was highlighted was the subjectivity of the Treasury when it comes to categorising some of these projects. Mike has spoken a lot about Crossrail, HS2 and things like that, and that subjectivity is a point of challenge for a lot of us. How do you think the approach to categorising spending programmes could be made more objective and fairer for devolved Governments?

I think, as we referred to earlier, the statement of funding policy, which is where the fact of HS2 being an England-and-Wales-designated project comes from, is excluded from the dispute-resolution procedure. You know, 'This is not in the scope of dispute resolution.' I think that's a pity. I know why it's there, because, as we've talked about before, with the Treasury, it's very important that the Treasury is brought along as part of these processes. I do think that there's scope here to have some sort of independent body or arm's-length body, potentially, that is drawn from equal numbers of participants from both sides that could meet, perhaps even in a closed-door process. But some of the best systems in Europe, when it comes to results for the sub-state Governments, are where there is strong bilateralism, rather than multilateralism. South Tyrol and Trentino have very successful sub-state funding arrangements, and those agreements are negotiated by closed-door meetings, bilaterally, but with equal numbers of participants nominated from both sides. So, we don't know what happens in the room, but it tends to get better results as a consequence of having those closed-door meetings where you have equal participants from both sides. Just having the Treasury being judge and jury on the statement of funding policy is always going to be the sticking point on this.

Sorry, Peter. In those closed-door meetings, if you like, in your instinct, is that based on those people going into the room already having a relationship, or is it that—? What's the dynamic there? Why do they work?

So, how it's been described to me is that you will get political nominees, who might come from very diverse backgrounds in terms of political party and their ideology. When the cameras aren't rolling and when there's an ability to sit down and, yes, talk it out over a long period of time, people can be brought in from more extreme positions. So, over a period of time, there's a give-and-take within that group, that one side, whether it be the central government or the province, or whether it be from the different political parties nominated by the central government and the provincial government, over time, there's a convergence as people get to know each other, and there are no cameras rolling, so there's no—

There's no grandstanding, I suppose.

Exactly, there's no grandstanding. Also, if one of the members has to make a very large concession, they don't then face the public consequences of so doing, and the results of those negotiations are then ratified by the Italian Parliament—there are no amendments allowed to the consequences of those discussions. The agreement is made by that group of people and then it's ratified by the Parliament. So, my point here is that it's just generally assumed that multilateralism and transparency is the right way to go. Sometimes, particularly with very small players—and Mike Hedges talked about this earlier, with Wales being a small population compared with other parts of the UK—sometimes in those cases, having bilateralism in a co-ordinated, low-key, low-intensity environment is the way forward. This has got experience in Wales—the fiscal framework negotiations were conducted very efficiently between the UK Government and Wales and, actually, the result of the fiscal framework, in the main, has been a positive result for Wales. So, we've seen this happen in the past; we just haven't seen it over all areas or in areas like HS2, where it's really, really important, not just because of the funding loss because of HS2, but the fact that it's designated as an England-and-Wales project pulls down the entire departmental comparability factor for transport. So, whatever funding comes from the UK Government for transport is going to be reduced over the period of the project. So, that is why this is so challenging, and it would be great if there were an ability to have that low-key bilateralism that might resolve it.

And clearly, we've heard in previous evidence too that personalities are big, important factors. So, you could have a period where it could work really well and we are lulled into a false sense of security, and then it can be destabilised, and that's where, I suppose, it needs anchoring in legislation. When you get a good partnership that is working well, that's the time to get it anchored, and that's what needs to—. Perhaps there's an opportunity heading our way where we could perhaps do that.

Yes.

I've got a couple of questions on scrutiny, because scrutiny is a key part of all of this. Do you think that legislatures are placing enough importance on scrutinising inter-government relations, and what could they do to progress the agenda?

In general, as mentioned several times, I think this is an improvement—the new system is an improvement on the previous one. Under the previous Joint Ministerial Committee system, there was very little scope of engagement, either from the public or from parliamentary scrutiny—very, very brief communiqués and so on. I think, when we're thinking about inter-governmentalism in general, one argument, as I just alluded to in the previous answer, is that, sometimes, executives need a closed forum to discuss highly political topics. And so, there's an argument that executive-to-executive negotiation is what's important here, but then followed up by robust communication with the legislature. And I know this will continue developing, but, with the new system, the Ministers here will report to the Legislation, Justice and Constitution Committee, for example, about what's been happening in terms of the new system. That is all important. So, I think, yes, communication, but not necessarily missing the importance of that executive-to-executive discussion.

So, we can recognise the deficit. What more could we do, then, as devolved legislatures, to work together to strengthen our collective position?

With other devolved legislatures, as well?

Yes. Could we become a more powerful entity if we did more in that respect?

We've certainly seen other inter-parliamentary bodies that have been set up—there's one for finance. Of course, there's the NATO Parliamentary Assembly, there's the British-Irish Parliamentary Assembly. All of these bodies are important in knowledge exchange. They're not generally decision-making bodies; that is an executive function, as it should be. But, broadly, there's nothing formalised here, and in general I think that, as I mentioned before, this kind of good practice is going to have to flow from the top, so if we get the regularity of meetings at the council that then flows through to the middle and the lower tier institutions of this new system, I think that is going to create its own dynamic. So, of course, working with other devolved legislatures on knowledge exchange is going to be a benefit; however, I think the overall strength of the system is going to derive from that good practice coming from the top.

And in your experience around other countries, where those arrangements do develop, are they seen to be a more powerful entity? Are they acknowledged better as a collective from the provincial Governments?

Yes, and again, there's no single model here, so in some, it tends to be the federal systems where these co-ordination bodies are powerful, to a greater or lesser extent, of course. I think it's the states where they're more like the UK, in that there are differences of understanding about what the nature of the state is; that's where there's more confusion in the IGR system.

Thank you. Thanks, Chair.

You've alluded to one there and we've set up between ourselves, the Finance Committee here, and in Scotland and Northern Ireland now—as that executive finds its feet again—the Interparliamentary Finance Committee Forum. Do you think that that has any merit in doing some of this knowledge sharing? And does it have the potential of being a way of scrutinising decisions on a sort of devolved nature that affects us all, and whether or not there are some things that we, as a collective of three devolved nations, should be looking at from our meetings, and to see what outputs we should be looking to achieve from it?

Sure. As we know, this is one of the most technical areas when it comes to Government. Understanding the fiscal framework, how moneys flow, the timings of notifications of transfers from budgets; this is all really technical, and so I think that research function and mutual understanding between the various devolved bodies, both the legislature and the Government, are always going to be a benefit, and other inter-parliamentary groups also have done this research function and it's been really useful in understanding how this works.

I would say that, in any multilateral context, it might be difficult for bodies to agree a certain position. As we know, on many issues, when it comes to finance, Wales's interests might not align with other parts of the UK when it comes to funding. Whether it's Barnett funding or a needs-based formula—all of the things we've been discussing—Wales's interests might not align and, therefore, multilateralism might be more valued for its exchange of technical information than necessarily coming up with a fixed position for all of the different bodies that participate in it.

When the inter-parliamentary forum—. Recently, we went to and held a session in Westminster with some committees there as well, and we had I think it was six or even seven different political parties around the table, sharing information and sharing and speaking to committees in the House of Commons. What was frustrating was that the Treasury wouldn't engage, and that's always an issue, and we've found that from our committee and other committees from other devolved nations.

It's just how, practically, or how do we get that engagement and that sort of mutual respect, in a way, of being able to discuss? Whether or not that needs to be behind closed doors or whether or not it's in public, it's just to be able to talk these things through, to understand. Because in those meetings in particular, just sharing the room with colleagues from Scotland, in particular, was enlightening for us as Members of this legislature, just to understand where we're coming from to start with, and those elements.

Is there something that we could do to maybe formalise that inter-parliamentary forum, so that it had more clout, I suppose, or teeth? Or do you think that it would be better for us just to leave it as a way of bringing people together to discuss, rather than doing anything further to try and maybe emulate the FISC, because the FISC is obviously between the Ministers, whereas this is committees of Parliaments?

I don't see a downside of doing so. I think that, in general, of course, these inter-parliamentary bodies don't tend to be decision-making bodies, they tend to be information-exchange bodies. More important to the success of this is going to be the Finance: Interministerial Standing Committee working, drawing the UK Government into more regular meetings, with more consistent Treasury participation. I think that's the key to the medium-term success of the system. Of course, inter-parliamentary bodies are very important for knowledge exchange. I think that regular meetings can't hurt on that, and I'm sure that there are ways in which you, as legislatures, can agree some sort of way of putting it into Standing Orders or what have you, but I think the IGR system as a whole is going to be dependent on the council and then the subsequent tiers down.

With this committee, in particular, we get reports from FISC; we get a letter, very often, from the Cabinet Secretary once she's been to those meetings, and she gives us a short report. Is there more work that this committee could do in the scrutiny element of actually finding out more, or how should we be engaging with the Cabinet Secretary to interrogate what went on? Is there merit in that, or is that something that should form part of our regular work in this committee?

Again, from the outset, I think it's good that there are reports coming down, because there was a period quite recently where there were no meetings going on. So, the fact that you're actually having communication from the Cabinet Secretary is a positive thing in terms of the IGR system as a whole. Of course, the new system gives each devolved Government the ability to choose its own system of reporting to its legislature body. So, if there's a better way of doing that, then it's within the committee's role here in the Senedd to negotiate or, not necessarily formally, share best practice with the Cabinet Secretary. I think that it depends on your committee and the other committees' capacity to scrutinise what is being reported to you and, potentially, if they are issues that are somewhat sensitive and haven't been reported publicly in communiqués, then you could have closed-door sessions with the Minister to talk about this. But I think, again, this will depend on your own capacity to scrutinise those types of memorandums.

Thank you very much. We've touched on it a few times during the session this morning: mediation and arbitration when it comes to resolving disputes. You've talked about different international examples of how this is done. You're very well aware of the Welsh context. In your opinion, what would be the best way of mediating, especially bearing in mind what Mike was saying and what Peter was saying about how we're 3 million against 57 million, that power imbalance? How would you suggest would be the best way for us to be able to resolve some of those differences?

I think the key to all of this is how much the UK Government's going to engage with the new dispute-resolution procedures and all of the IGR procedures that have recently been introduced. That is absolutely fundamental, because, in the end, there's not going to be a dispute resolved if there aren't any meetings going on, which, potentially, is in the UK Government's ability to just not attend these meetings. So, actually, encouraging continued engagement is, I think, the best way to think about dispute resolution. We talked, obviously, about the specific carve-outs over really important areas, but I think the way to resolve that is to have that continued engagement. So, I think, as Peter Fox mentioned earlier, having the new Government—whichever party wins next week—having the new administration take ownership of these new mechanisms is going to be really important going forward. There are obviously different models; we can have multilateral negotiations and I mentioned the bilateral closed-door meetings that can also be useful in resolving disputes and there is, of course, third party mediation that's available. But, in the end, it's going to come down to the UK Government's willingness to take these new mechanisms seriously.

Is there a body within the UK currently that could take on that sort of independent arbitration? I'm just thinking either the Office for Budget Responsibility or the National Audit Office, or somebody who could look at the facts and make a decision and that be binding on—

Yes. Do you know, I'm struggling because—? We've talked about it multiple times today, the UK is a state that hasn't often worked in this way, so, actually, you're inventing new mechanisms that bind the UK Government. And under one interpretation, not the one that's often shared in the Welsh context but under the interpretation of a sovereignty that, sometimes, it's Crown in Parliament, it's single-source parliamentary sovereignty, and having an arm's-length body arbitrate against that sometimes pushes against those single mono-sovereignty views of the way that the British state works. So, I struggle to think of a particular body, but there are, of course, judicial bodies that are able to make judgments that compel Government. So, it's not completely alien to the British system, but it would need real thought and the ones that you've mentioned are potential candidates, but that would be a very large change in their existing role.

Yes.

[Inaudible.]—a question that you'd want to answer, perhaps, but there has to be a role for our political conduits from Wales, be that our Secretaries of State or our actual residing MPs. So, when they go to Parliament, they don't just forget or abdicate the needs of Wales, or to have that respectful relationship. And if those collectives could come together to make sure that the Government listens to the needs of the Welsh—you know, there's a role they can play there, as well. And I don't think we hear enough from our parliamentary representatives or our Secretaries of State, who can actually make the case for a fairer system, and I think that's something—. I know you're looking to ban those this afternoon—

Yes. This afternoon. We'll have that discussion later.

Well, we might need a Secretary of State to set our budget this year. [Laughter.]

Exactly.

There is that element, and obviously with fewer MPs being returned next week from Wales, but at least—. Yes. So, that's a—

But the dynamic looks like it could facilitate a far better outcome for Wales, perhaps.

Potentially, yes, so there are elements, and as this inquiry has gone on, we've teased out a lot of information. And I think that probably brings us to time, unless you've got something to add in on this.

Yes. Just to respond very briefly to Peter Fox's comment, that, actually, the intra-party route is often the means to resolve these kinds of difficult problems. We see that again in those states that are most like the UK and Europe, in the sense that there isn't this very fixed federal constitution. So, in Italy, in Spain, there tend to be strong party systems, where regional issues in smaller regions like Sicily, Sardinia, those issues are resolved through their party representatives in the central Parliament, rather than through this strong multilateralism, which doesn't really work in the Italian or Spanish context. So, actually, that does have a model elsewhere in Europe.

But in places like Italy, you've got multiparty, rather than, in Westminster, it is red and blue and a few of the others, so it tends to be much more of an adversarial two-party state, rather than a—. When we were talking about America, then it certainly is a two-party system, whereas in those countries where you tend to have proportional representation systems, where you have multiple voices that have to work together to resolve, because you don't get a one-party domination—.

Just very briefly, so that's absolutely true, but they also tend to work in pacts. So, there are many right-wing and left-wing parties in Italy, but they align under the same umbrellas, when it comes to prime ministerial candidates and Governments. There are many parties, but they tend to work through the two-party channel, effectively.

But it allows for those regional voices to come through, because you need that regional voice of that regional party, I suppose, to be able to hold that coalition together.

I agree.

That's an interesting point. So, they have to be also well informed to be able to make the case, and I think that's where there's perhaps a deficit here: how much time do we invest in helping our parliamentary representatives understand the issues we are now looking at? I can't remember—. If we asked many MPs, 'Could you quote some of the issues regarding fiscal settlements and things in Wales?', they probably wouldn't know much above mentioning Barnett. And perhaps there needs to be a piece of work about helping to educate parliamentarians of the need for more to be done for Wales, when they're there.

Well, thank you very much.

Diolch yn fawr iawn i ti, Ed. Mae wastad yn bleser dy gael di yma. Diolch yn fawr am ddod heddiw. Mi fydd yna drawsgrifiad o'r sesiwn er mwyn i ti tsiecio bod y wybodaeth yn gywir.

O dan Reol Sefydlog 17.42(ix), fe wnaf i benderfynu rŵan gwahardd y cyhoedd o weddill y cyfarfod yma. Ydy pawb yn fodlon? Diolch yn fawr.