Finance Committee

We'll come to our first substantive item this morning, and that is our third evidence session in the fiscal inter-governmental relations inquiry that we are conducting. I want to thank our witnesses for joining us and thank them for making the time to come and speak to us. So, thank you very much. Could I ask you both to introduce yourselves? If we start with Nicola.

Morning. Bore da. I'm Nicola McEwen, I'm professor of public policy at the University of Glasgow, where I also serve as director for our Centre for Public Policy.

Fantastic. Thank you very much. And Michael.

Good morning. I'm Mike Kenny, I'm professor of public policy at Cambridge university, where I'm also director of the Bennett institute.

Fantastic. Thank you very much for your time this morning, and what we'll try and do is go through some questions that we've got prepared and see where it takes us in this interesting field. So, I'd like to start by investigating your views on IGR structures, the UK Government's attitude towards inter-governmental relations and the operation of the Finance: Interministerial Standing Committee. You've said in your article 'Intergovernmental Relations in the UK: Time for a Radical Overhaul?', which was published prior to the review of inter-governmental relations, that developing a coherent system of IGR

'has been, at best, an afterthought in the UK'.

Do you still feel that that's the case and what are the reasons? Who wants to go first? [Laughter.]

Why don't you open first?

I don't think it's an afterthought anymore. I think we were talking about the origins of devolution where, I think, for everybody concerned, actually, the focus was on the powers to be devolved and the implementation of all of that, with not really that much consideration of what you do at the interface. I think the fact that you had the Labour Party leading Government everywhere—sometimes in coalition—also meant that the inter-governmental structures that were set up were not really used. When you started to have party competition in Government, obviously, people started to realise that, actually, this was quite important, and then as the devolution settlements got more complex, particularly in the context of Brexit, then I think there has been a lot more recognition that this is important and this needs to work better and be more fit for purpose than it has been to date. I don't think we're quite there yet, but I think it's definitely in a different place from the early years of devolution.

I think it is no longer an afterthought, and it's also worth pointing out that it's early days. The system has not been running for that long, and it's been running in a very particular political moment, as I'm sure we'll discuss. I think one of the important things here, which we were trying to talk about in our report on this, is really how to ensure that Whitehall, which does not have a culture of extended regular engagement with the devolved Governments, gives more consideration, if you like—that it gets marbled into the workings, to the mentality, to the habits of mind in Whitehall. I think it's hard to judge based on the early days of this system, but I think there are some signs that that is starting to happen. It's variable, as I'm sure we'll discuss; there are some bits of this new system probably working better than others. But I think certainly the one view within Whitehall is that, actually, this particular set of processes has done more to actually ensure that some departments are more regularly engaged with their devolved counterparts than perhaps some of the initiatives that preceded this. So, I think that's quite an important journey, as well.

Evidence that we've had to this inquiry has noted a lack of engagement between the Prime Minister and heads of government council, since this top-tier forum has not met since November 2022. Does that talk to some of what you're talking about there, Mike? What does it say about the UK Government’s commitment to inter-governmental functions?

The particular forum that you're referring to—the Prime Minister and First Minister forum—is a very important part of this new system. So, it is, I think, striking and a bit disappointing that it has not met since late 2022, though it should be noted that the current Prime Minister did actually move to hold one of these meetings early on, I think, in contrast to his predecessor. The reason that's important is because this is a very symbolic part of the machinery; it's where the Prime Minister can and should send signals to their devolved counterparts at that level that this is a priority for Government. It's also, I think, important in signalling to the Whitehall machine that these new bodies matter. So, I think that that opportunity has not been taken is regrettable. It obviously also is the case that there has been a lot of political turbulence at Westminster and it may also be a sign that this is a governing party that is rather preoccupied by other matters. And, no doubt, the Prime Minister will have engaged with First Ministers in other forums, but I think something about signalling, in terms of this new system, that this matters is very important.

I think what you're saying there is that the signal to the Westminster machine is possibly even more important than to the devolved Governments—that, actually, there is an importance, as you say, to these relationships, and if that doesn't happen, then it creates that tension between, possibly, the Treasury and finance Ministers or devolved Governments. Would that be accurate?

Whitehall is a complex entity, but it is also very hierarchical, and the signal that comes from the top, in this kind of matter, particularly in relation to a system that is new, that is unfamiliar, and where the principals involved are still working out exactly how much to invest in this and how to craft their relationships with their counterparts—. So, I think to have the Prime Minister saying, on a regular basis—. And I think the regularity is important there. It's the fact that the commitment is to schedule regular meetings; I think that's the really important bit of this. That's how the system should be working, and that then sends the signal that percolates down through the rest [correction: the rest of Whitehall].

It's a 'what gets measured gets done' type of thing. Rhianon, and then I'll bring Peter in.

On that particular point, you can have the most wonderful system in the universe, but if it doesn't actually meet—. In terms of a mechanism to be able to enforce that, it's very simplistic, in a way. There must be something more optimal than what we currently have, which on paper would seem to be, perhaps, workable. I'm also interested—and I'll probably come to it later, sorry, Chair—in the co-decision making in terms of making decisions by consensus in terms of the Joint Ministerial Committee. I'll park that, but if you can just comment in terms of the systemic regularity of enforcement of these meetings.

There is no mechanism at the moment to enforce that. I suppose what you do have, though, is, because of the commitments that have been made through the review, that the bar has been set a little bit higher and there is an ability through forums like this to actually call to account those who are not actually discharging their duties under that new system. That may not entirely satisfy you on that score, but I think that is an important move in its own right. But at present there is no mechanism that could enforce that.

I agree with that. I suppose the difference that you could envisage is if you have some sort of statutory underpinning, so there's a statutory duty to meet. We do see that in some other countries. That is not the system here.

So, there's a model.

Sure, there are models, but, here, I think—. I agree with Mike's point around the symbolism. The symbolism is important for all sorts of reasons. Actually, the symbolism would serve a purpose for the Prime Minister too, in that it's the one bit of the new inter-governmental machinery where this is very much a first among unequals, because it is the Prime Minister who chairs, it is the Prime Minister at the top of the table. So, there is a missed opportunity there, I think, from that perspective. But I think it's also important for the relationship building.

I think, to be fair, it's important to acknowledge that that's not the only opportunity for the leaders to meet. They have met on other occasions. We've seen Prime Ministers come to Wales—although not very often. So, actually, there are quite a lot of inter-governmental meetings that take place outside of those formal committees and so on. There are other ways to make it a more regular thing, and perhaps the new secretariat might be able to help with that.

I recognise that things aren't working brilliantly at the moment; you've described the turbulence and different things. Have there been some examples prior to this where there was a more consistent approach and it was better? Would you also agree that it's incumbent on sitting Secretaries of State for devolved nations to be able to have a role in making the Prime Minister bring these relationships together?

I think that would be to put too much onto the Secretaries of State. I can't imagine a scenario in which a Secretary of State can compel a Prime Minister to do something. Actually, most of this is operated through the devolution and union teams, which used to sit in the Cabinet Office and now are in the Department for Levelling Up, Housing and Communities. So, the territorial offices usually attend, but they're not the instigators of the machinery.

No, but they are a significant conduit between the devolved nation and the UK Government.

They can be, but in my experience, I think the devolved Governments tend to prefer to nurture the direct relationship, rather than go through the Secretaries of State.

Thank you.

And it's quite an interesting feature of this new inter-governmental system that there is no role ascribed to the territorial Secretaries of State within it.

Talking in your publication 'Reforming Intergovernmental Relations in the United Kingdom', you said that a new set of principles established as a result of the IGR review underline mutual respect for the separate and shared roles and responsibilities of each Government and the need to build and maintain trust. Now that the IGR structures have had time to bed in, do you think those principles are being upheld? I get the sense that you don't think so, from some of the answers that we've had just now. So, perhaps, Professor McEwen, you want to start there.

I think in that article I was summarising the principles that were published as part of the review, and, obviously, that was an important piece of work in the review. I believe that was led by the Welsh Government, actually, that strand of the review. I think principles are important in that they create the space for all of the Governments to be able to operate in ways that are comfortable for them, but I've always been very sceptical of putting too much reliance on a set of principles, not least because if you look at the principles that are listed in there—promoting understanding and accountability, resolving disputes—some of that talks to process, and process is important, but where it talks about respecting the roles and responsibilities of each Government, well, there are different interpretations of what that actually means in practice. The UK Government may well think its respecting the roles and authority of the devolved Governments, but the devolved Governments will probably have a different view. So, I think principles can't resolve things for you. Politics, ultimately, will resolve things for you, and process can also help. You see that in all sorts of places. The common frameworks principles were really, really important in creating the space for underpinning that kind of engagement, but they mean very different things to very different people. So, there's constructive ambiguity in the setting of principles, which I think is helpful, in some respects, but don't rely on them too much.

I think one of the things that we've struggled with in this committee is getting anybody from the Treasury, for example, to engage with us. The engagement's through a circumvented route, through the Secretary of State for Wales, but they don't make themselves available, even to discuss in private with us, which is unfortunate, and where things fall down at times. Mike.

I was going to say that it's not only not in private, but not virtually either, where we've offered to talk to them over Zoom or Teams. The question I've got you might think is slightly unfair. We've talked about inter-governmental relationships, but shouldn't we have exactly the same rules between devolved Governments and local authorities?

I don't think you should have exactly the same rules. That's an interesting question. I'm not as familiar with Welsh local government, so I'm going to talk about the Scottish context here. Some of the grievances that the Scottish Government has in its relationship with the UK Government are exactly the same as the grievances that local government has in its relationship with the Scottish Government—

Wales is the same.

I do think there are mirrors to look into if you think about those sorts of relationships. And I think, actually, we can learn a lot from examining IGR in this context and thinking about how you can improve the relationships locally.

Thank you.

Professor Kenny, in your 'Green shoots for the Union?' article, you said the new IGR arrangements significantly reduce the UK Government's control of inter-governmental meetings and processes, which is an important precondition for a system that will enjoy legitimacy in devolved Governments. Do you think these arrangements are working as you envisaged, and do the structures encourage equitable relations between the UK and devolved Governments?

That particular piece was, I think, commenting, again, on the review that had then just been announced. I think the features within it that I was drawing attention to, which are, I think, some of the most important aspects of the new system, are the independent secretariat, which I think has been really important—it's a modest but important step forward. Rotating meetings, having meetings in different places, is also important, and also no longer having the UK Government as the authority that decides when the meetings will happen—so, having scheduling [correction: having regular scheduling]. We’ve seen that that doesn’t happen with every single aspect of the system, but at least the principle is clearly there and, in the two other levels, which we’ll come to talk about, I think it has been very important to have regular scheduled meetings that are not just happening at the behest of one Government. So, those steps, they are modest, but I think what I was drawing attention to is the potential that they would have to create the conditions in which you could have more productive regular engagements. I think we’ll come to this in our discussion. The interpretation or [correction: and] the development of the system has [correction: have] been variable. I think some of the ministerial groups work well, others less so, but I think the push as a whole in this direction has been an important one.

You mentioned the idea of equitable outcomes. That is not something that is expressly included in the principles we were discussing here, and I’m sceptical about the idea that this system itself is necessarily going to lead us towards what might be perceived as more equitable outcomes—who knows? But I do think that it does create the conditions in which we may find, as happens in other countries that have these more developed models, there is more co-ordination, and there’s sometimes better co-operation, which come from things like a more regular exchange of views, understanding, intelligence and information. So, I think the system has taken that first step, if you like. What it comes to mean how it develops, I think, remains to be seen.

I'll come to you in just a second, Rhianon. With a general election looming, is it an opportunity to actually reset some of this and put expectations in place, more so from the start of the next UK Government, regardless of who's in Downing Street, but having, maybe, a concerted effort by the devolved nations to set expectations? Is that something that could happen? What sort of way would the three devolved nations be able to influence that within the structures that you've got?

Shall I have an initial go? I think, just in terms of this particular model, one of the things that will be very important, I think, is to have, when another Government comes in, whether it’s the same party or a different party, to have a—. That in a sense, I think, will be a very important test of this particular model, because this will be an administration that isn’t as directly linked to the creation of it, to its establishment, and I think that’s actually, on the UK side, a very important moment. Also, as you rightly point out, there is the potential for a reset moment, and it could well be that, inevitably, a new administration will have its own interpretation and its own sense of understanding of the value of this particular machinery. I think it’s very hard to predict in detail how the devolved Governments would most constructively engage with it, but you could well imagine that a new UK administration will want to be seen to be keen, I think, on framing its relationships with the devolveds more productively, particularly in the aftermath of the more turbulent, conflictual period that we have had. So, there may well be an opening there, I think, at least rhetorically, to do that.

I would also say that if it is a different governing party in the UK, I think they would do well to pay close attention to the fact that this model has been established, it’s still in its infancy, a lot of effort has been invested into putting it together, and I think, as our reflections suggest, on paper at least, this has considerable potential, so that they would be [correction: should be] inclined to think, 'Well, we should give this a go', rather than necessarily moving to reinvent the wheel. Of course, they may want to tweak it in some way.

I agree with that. I think that there is an opportunity, for sure. I think, not just for the devolved Governments, but for the legislatures, if there was an opportunity to collectively identify priority areas, I think that could be very powerful. I don't think it's so much in the machinery. I don't think the machinery in particular is the issue. It's still being implemented, actually—we're not even fully there yet—but it's about some of the processes around that and also some of the substance. So, when I said earlier that there is a recognition now of the importance of inter-governmental relations, it's tended to be more in areas that are devolved. So, we've seen the UK Government develop a greater interest in areas that are devolved, and maybe through the common frameworks process, for example, there was no a priori reason why common frameworks had to only be considered in areas that were devolved. There are complexities all over the place, including in some areas that are reserved that have an impact on devolved responsibilities. So, that would be my suggestion, that you also bring those reserved areas into the mix. I'm thinking of competition policy, immigration—all of these things that are reserved and are the responsibilities of the UK Parliament but that have an impact on the devolved responsibilities, and so creating opportunities there. It's happened a little bit in trade, and that's one example post Brexit, but there are other opportunities, for sure, where that can be developed more.

Rhianon.

Picking up on that, my question really was if, perhaps, you could send the committee a small list of other models around inter-governmental frameworks that you've referenced, because it's interesting to me that the green shoots of the new arrangements that we currently have really don't permeate, on your latter point, in terms of the Treasury—the DAs, for instance, and getting into that culture where it matters in terms of equitable outcomes, which is really at the bottom of this conversation—and aren't going where they need to and don't reach where they need to reach. I don't know if you've got any comment on why the current system that there is—and I'm not asking you to say what you can't—doesn't permeate into the Treasury.

So, I actually think the FISC is the bit of this new machinery that turns out to be working rather well, which I hadn't expected at the time. I was a little sceptical. In the piece that you're referring to, I think I was quite sceptical of the FISC because it was set apart from the other ones. It was the only bit of that review where they still talked about 'DAs' and 'devolved administrations', rather than 'devolved Governments'. It still seemed to be very much the Treasury in control. But, as it turns out, on reflection, I think that was more to do with the Treasury's authority over these issues vis-à-vis other bits of Whitehall. So, I think that was an internal UK Government thing, that the Treasury wanted to keep command of that relationship with the devolved Governments, rather than go through some other central bit of the Whitehall machinery.

But if you look at the meetings, it's the bit that has been regular, they have rotated the chairs, they have rotated the locations, they have been meeting in person. Now, I think that the risk with some of that is that that appears to be because the Chief Secretary to the Treasury has wanted it to happen and has attached enough importance to it. You might have another Minister coming to that role who doesn't think it's very important at all, and we have had previous examples of that. So, I do think there's something about the machinery that has to be more robust so that it can be resilient in the face of ministerial whims, but it is the bit that has surprised me in working reasonably well and what appears to be in a constructive way.

So, you're referencing the mechanism that there is in terms of it, in a sense, being above the others in terms of it actually working, but when I'm talking about equitable outcomes in terms of the devolved Governments, there's obviously the wider issue in terms of the whole need for these systems to work, because there's a general theme, as you're very well aware in Scotland and, I'm sure, elsewhere, that we don't get the fair slice of the pie. That was more of a comment, sorry, Chair. [Laughter.]

I'll move on to Peter Fox with some questions.

On FISC, we note that its rules were different to other standing committees. I wonder if you could explain why that would be, or the rationale for it. And how do you think those IGR structures impact on the power balance between the Treasury and the devolved Governments?

I think the reason why is the one that I was mentioning—I think it is about the Treasury's authority within Whitehall, rather than its authority over the devolved Governments. I think that's a reason for the different roles. But, actually, if you look at the wording, it's quite similar. So, the processes are quite similar. One of the big improvements—. We talked about rotating chairs, and I think that is an improvement. One of the other big improvements is that, prior to the new machinery, one of the problems around disputes was that the UK Government and the Treasury, in this case, were able to deny the existence of a dispute. So, if devolved Governments raised an issue and said, 'This is a dispute we want to escalate', they could turn around and say, 'Well, we don't agree it's a dispute, so it's not going anywhere.' Now, the new system doesn't allow that. We haven't tested it yet, but the system is that no one Government can deny the existence of a dispute. And most of the disputes over the years of devolution have been about money. So, it will be interesting to see how that actually works and how robust it is when the time comes. I think there has been one around Northern Ireland.

Yes, which I think was put into abeyance when the Executive went into abeyance. Whether that will come back will be interesting to see. I would just underline, really, a couple of points that Nicola has made. One, I think, is that the culture of the Treasury and its position within Whitehall is absolutely key and, I'm sure, lies at the bottom of an answer to your question about how and why this sort of somewhat separate [correction: sort of separate] element was carved out. It is separate but it is very similar. So, it's not that they're running a completely different set of rules—that's important. I think the other thing is that my sense of this from conversations with different people involved in the different Governments is that one of the things you do get when you deal with the Treasury is a degree of certainty that there is a mandate for what may come out of the discussions that happen. And that is not necessarily the case in some other Whitehall departments that may find that they are in a separate conversation, if not negotiation, with the centre of Government on some issues. And my sense is that, at times, the devolved Governments have really liked that sense of certainty—that you know who you're talking to, and you know that what is agreed is pretty much going to stick. And that is important, I think. The other point, obviously, here to mention is that there's a lot of bilateral inter-governmental negotiation still going on and that will continue. And the Treasury, I would hazard a guess, prefers bilateral negotiation, and, in many of the areas we're talking about—to do with tax, fiscal questions—that is appropriate, that is entirely correct. I think the question here, as this system matures, is what goes into FISC and what remains in the bilaterals. And that's quite an interesting question to ask: who determines that, and whether there will be some sort of pressures around those decisions.

Would it be too soon to say, then, really, that the FISC would be better operating on the same rules as the other committees?

I think it is too early to say, because I think the rules aren't significantly different enough. The one important difference we should note is that the rules regarding what's in scope for a dispute are different, and that is an interesting carve-out. It will be interesting to see if that survives, because I would imagine that that is something that may well be tested and challenged.

Thanks for that. This is my last question. I note that things have moved on since your 'Reforming Intergovernmental Relations in the United Kingdom' article, but you made recommendations regarding co-decision making and transparency. How effective are the new FISC arrangements in addressing your recommendations in these areas, and what changes could be made to improve bilateral decision making and deliver greater transparency, to contribute to the broader understanding of IGR?

So, I mean, the FISC is a multilateral forum, bringing them all together, and it doesn't really decide anything and it's not very transparent, but apart from that, I think it's been one of the positive stories of the new machinery. I think one of the things that has been important about that is the meeting in person. So, there are a lot of meetings that go online now, which, from an administrative sense, is a bit easier, but, actually, you lose something; you lose something in the relationship building. And when the FISC meets, my understanding is that there are also lots of bilaterals that go on around about that.

I think, in terms of decision making, it's in the bilateral space where that's going to be, not least because the fiscal arrangements are so distinctive still, for all of the devolved institutions. The fiscal frameworks that were negotiated for Wales and for Scotland are distinctive, and we saw, in the midst of generally really difficult IGR between the Scottish Government and the UK Government, a successful negotiation of a revision to the fiscal framework that was able to take place below the radar.

Now, there are issues with that, because 'below the radar' means not very transparent, and I think perhaps there's more—. It would be interesting; I don't know how effective—. I know that the Welsh Government and the Senedd have an agreement on the reporting of Welsh Government activities and engagement in IGR; there's a similar agreement in Scotland. We're about to review the one in Scotland to see how effective it's been, to see if it's living up to expectations, and I don't know how it's been working down here. But maybe there's more that can be done in that space, when things are taking place outside of the formal machinery, they are really important, and it's often a space where things will get achieved and decisions can be made, but it's very difficult for you as parliamentarians to get a sense of that. So, maybe it's more in the direct reporting from Welsh Government that more might be done there to help.

That makes sense. Thank you, Chair.

Rhianon.

Thank you very much. That goes nicely on to my set of questions, actually. So, the committee's heard from Welsh Government that HM Treasury's announcements on devolved funding are unpredictable, or can be, in terms of timing, and we've talked about a lack of transparency in regard to the Barnett consequentials in specific terms. So, could the UK Government, from your perspective, provide more timely communication and clarity relating to devolved funding, particularly around UK fiscal events, and if so, how do you think that could be achieved? And obviously I'm pointing to the ad hoc arrangements that there are around consequentials either being available or—just to throw in HS2—not being available, and the ability to be able to plan and prepare in a timely manner for Wales.

Shall I just start on that?

Sure.

Just on the timing issue, there clearly is a big challenge here. It's not optimal, particularly when these announcements are late in the year, for the devolved Governments to suddenly find that they've got big additional allocations to manage or cuts to manage, and also more generally, the fiscal announcements that are made by the Treasury are likely to have very significant consequences for governmental policies that are pursued here, in terms of, say, tax.

One thing I would say—we go back a bit to the culture of the Treasury issue—is that these sorts of complaints are very familiar to me as somebody who studies British Government, because many Whitehall departments feel similarly aggrieved that they're not in the loop in terms of knowing, having foresight of these announcements, and at times in recent history, I think No. 10 has found itself out of that loop. So, there is an issue here about how the Treasury holds that information and when it's prepared to release it. I would say, as an aside, I do think you'll have noticed, as I have, that the habit now is to trail most of the announcements that come in some of these fiscal events, which does seem to me to undermine the argument that the Treasury has historically made.

But, that being said, how to deal with that? I think there are two ways of going here. One is, I think, it really is important to make the argument that the Treasury should be, sort of, marbling into its thinking, in preparation for these events, the timetables of the other Governments in the UK, and it's not beyond its wit, I'm sure, to do that. And that, I think, just would be good governance. On that heading, there should be a consensus around that, and they ought to do it. The other way to go is, of course, to think about rules relating to additional expenditure or cuts, and whether, therefore, there should be a rule that those run over the following financial year, so that there's more leeway for the devolved to actually manage the implementation of those. That too, it seems to me, would be an important argument to make.

Thank you very much. The mechanism, then, for introducing new devolved taxes is the next area. So, the Welsh Government submitted a request to the Treasury, for example, to devolve powers for a vacant land tax. However, guess what? There's been no progress made in the last four years. What are your views on that? I'm presuming you could be brief.

Sure. It's clearly not sufficient. These are powers that were written into devolution legislation, and we are in a situation where the Senedd—and the Scottish Parliament has similar powers—can't exercise those powers without consent, and there is no agreed process for securing that consent. It reminded me a little bit of the exclusions process related to the United Kingdom Internal Market Act 2020, which is not great. There are problems with that too. But it is something that you could maybe draw upon to say, 'Look, if these powers are to be real, and these are devolved powers, there has to be an agreed process to be able to exercise them.'

So, I understand that some of the issues are around evidence and whether it's strong enough, whether it's robust enough and, at the moment, that's the judgment of the Treasury to decide. I think there is space here for some impartial analytical function to consider what the implications might be. Not for Wales, because that's a matter for devolved Governments to decide, but for the interaction with reserved tax and reserved competence, and that, to me, is the only thing that Treasury really ought to be concerned with.

So, who could feasibly do that to have that independence of Government to be able to actually make that judgment that the Treasury might actually take heed of?

So, that's a good question. And here's another difference, I think, between the FISC and the other inter-governmental machinery, in that the rest of it has this independent secretariat that will have the ability to seek impartial evidence when it's fully up and running and so on; the FISC doesn't have that. It has a separate secretariat that's drawn from the devolved institutions. But they can, collectively, seek reviews. They did so in the case of the fiscal framework. You can commission a review from people with sufficient expertise in the area, and it just means that it defuses some of the politics of that. There would have to be agreement between Governments on who you could trust, I suppose, to provide that kind of evidence, but I don't see why that can't be part of the mix. But getting a process is important.

And with your knowledge of legislation and the frameworks and everything that's there, would legislation be needed to do that? Or would it be something that could be done through regulations or through guidance or through whatever mechanisms that are there?

Either/or, I suppose. You could have had wording written into the legislation—it was 2014, I think—that signalled a process for the exercise of the powers, and that could have been a bit more detailed, and it's hard to go back to that now. But there can be things done through inter-governmental agreement. So, the exclusions process that I mentioned for UKIMA, that was reached as a result of inter-governmental discussion. So, something similar to that, learning the lessons and being a bit better in terms of timing and so on, I think, is something that you can envisage, yes.

Thank you.

Thank you, that's very interesting. Moving on to what we've touched on previously in terms of the ability to dig into the opaqueness of some of this, how effective are the structures in terms of parliamentary scrutiny, and how do you think, for instance, this forum and this committee could improve its scrutiny? And I've been listening very carefully to what you've been saying in terms of what could be possible.

Well, I think it's a really important question, because to start at the sort of big picture end of this, the risk, I suppose, or the downside of inter-governmentalism—which, I think, Nicola alluded to—is that some of this often happens behind closed doors, and it’s Executives, as it were, making deals with each other, which, as we know, is very important. So, particularly if this system gathers pace and becomes more extensive, it’s really important that we have parliamentary scrutiny of it. It’s important, therefore, that we need [correction: have] transparency—appropriate transparency—and we need the right lines of accountability. So, I do think, in general, that the legislatures have a really important role to play in actually finding ways to exercise their scrutiny function appropriately.

I think we’re in the early days of that. As this system is developing, I think that the parliamentary scrutiny side is playing catch-up a little bit. And, with the conversation at the moment, I think that where we need to start is around transparency. So, what gets reported out of these meetings, how useful is that, and how accessible is that? Again, there’s variability across the system. So, in the case of FISC, there are communiqués, I think, that come out of those. They’re useful, to a point. They don’t tell you very much, and obviously we have to understand that there are some issues around confidentiality and so on here, but I think there’s probably more that we could do in terms of asking for—Parliaments asking for—more feedback.

I think that the onus, to a degree, is on the legislatures to make the ask of their own Governments that are involved in those processes, and to formulate what, for them, would be most useful and most valuable. Now, some of it may be written; some of it, of course, may be Ministers appearing. So, I think, the practices that Nicola referred to, in the Senedd and in the Scottish Parliament, are the right way to go. Clearly, there’s more that could be done there.

I also think exactly the same is true in Westminster as well. And I think the question for each of these Parliaments will be: 'What is the right institutional form to do it?' Should it be committees like yourself doing the fiscal side, and then other specialist committees? Or is there a case, as I think there is, for instance, at Westminster, for a particular committee to take up the reigns—so, it might be the Public Administration and Constitutional Affairs Committee or something—to actually become a specialist in IGR? But those are questions for each of the different legislatures to grapple with.

I think when we get some of the letters and reports, they're very brief from the Minister or Cabinet Secretary. So, it might be something that we would take on board and think on further.

I'm going to move on to Mike, because I'm conscious of time, and there are a couple of questions that are really important—I think they're 12 and 13 in your pack, Mike—that I think we need answers to.

I'm going to start at 14, actually, Chair.

Okay, that's fine.

Professor McEwen, you highlight in your article, 'Worth the wait? Reforming Intergovernmental Relations', that the IGR review's report reinforced that

'policy decisions on funding are strictly reserved to Treasury ministers'.

We've had three examples of that: the London Olympics, which became the British Olympics; we had HS2, London to Birmingham, which became an England and Wales route; and we had Crossrail, where, with Crossrail, which obviously was made for London only, we actually got our share of it. But each of these were fairly arbitrary decisions made by the Treasury, and they were made under political pressure. It was a different Government that gave us the Crossrail money and didn't give us money for the other two. But, really, it's a political decision and the Treasury implements it. Do you agree with what I've just said, and do you see the concerns?

I see the concerns, for sure, and that was a bit of the review that had made me initially sceptical about the FISC, where there was still that sort of underlining of Treasury decision. We haven't yet seen how much room for manoeuvre the new rules and processes give to devolved Governments to push more there, to escalate through the formal dispute resolution procedure, because obviously the boundaries of that bit that says, 'Treasury gets to decide ultimately how Treasury spends its money,' and the bit about the disputes and the legitimacy of the disputes—that's a fuzzy boundary, and we haven't really seen that played out.

Isn't that when an independent element to the arbitration process should come in? That—

It's not to arbitration. So, when we talked about this in our report that was feeding into the review, we talked about, potentially, a role for mediation, which is very different. So, I do think it is a matter for politicians and for Governments to decide. I don't think you can pass that decision-making function to somebody outside of Government. I think that is for Government to decide. But we had envisaged that there might be a role for somebody to mediate that sort of discussion. That hasn't made it into the review, but, in the non-financial bits, there is that scope for evidence and analysis to be outside of Government and to help weigh up some of the evidence.

With regard to that dispute mechanism, who can—? Forgive my ignorance of it, but how does it actually work? Is it that unilaterally somebody could raise a dispute and then it gets raised to that committee or to that meeting? Could you talk through how somebody—? Let's take HS2 for an example, and that we had a dispute, how would that be raised and how could it play out?

So, I think the onus is on the officials to try to resolve things before you get to the point of bringing it to Ministers, and you only escalate if that can't be resolved. Civil servants always like to talk about dispute prevention and resolution. So, they try to find a way to get to some sort of compromise position, and, again, that's very difficult for you, because it's not terribly transparent. But I think—. So, there is now a formal mechanism for escalating through different stages, if necessary, if it comes to that. Again, it's still to be tested, but I do think the fact that, under the new system, on paper at least, the Treasury can't just turn around and say, 'No, we don't agree it's a dispute,' I think that is a positive—potentially a positive—step. Do you agree?

I do agree. I think that's absolutely key. It is difficult to know whether the approach to disputes in FISC will be substantively different to the approach to disputes in the rest of this system. I think that's the biggest unknown here, as yet, whether—the Treasury has set up this rule regarding the scope of disputes, what is seen as legitimate for a dispute—whether that will actually prevent these sorts of issues coming up through the FISC process. But I would go back to the point that, because we've now established these practices, and I think because we have these different mechanisms working in other areas of policy, I think the argument can be much more persuasively made to the Treasury and to other parts of the UK Government that, actually, it's not sustainable to maintain a very narrow understanding of what constitutes a dispute or not. So, I think that's one that we need to see play out, and it does need to be tested. I think the testing is important.

And nobody has tested it yet.

No. As I say, a dispute was raised by the Northern Ireland Executive, which I think was put into abeyance. Now that the Executive is back up and running, we have to wait and see to see whether this will—

And was that a dispute about the quantum of money, or was that—?

I'm not actually entirely sure what the nature of the dispute was, so I can't really comment on that.

No, okay. Fair play. Peter, and I'll bring Mike in.

I was just looking at the FISC dispute stuff. There are so many paragraphs of things that they could use, but it seems that it's based on strong relations, and, as I see it, FISC will be good or bad depending on the personalities who have an influence to drive it. So, it's fundamental that the right people—. Because it could work really well with really good relationships, or it could be a disaster.

Yes, I agree, and I think the recent experience has suggested that it's worked well because of the commitment to make it work, which is great, but you really want to have a system that is a bit more robust so that it's not just subject to ministerial whim.

Yes.

My final one: just talking about your article 'Reforming Intergovernmental Relations in the United Kingdom', looking at international case studies, we often think of the uniqueness of Britain, and that's one of our great problems, but having states, having Länder, having devolution within countries, is the norm, isn't it? And apart from Spain—and you might tell me somewhere else—all of them are symmetrical rather than asymmetrical. And that is one of our big problems, that you don't know what's devolved where until you go through a full reading of it. But there are, I think, lessons, apart from making it symmetrical, that we can learn from the financial actions in other countries. It could be Germany, United States of America, Australia, Canada, and I'm not going to give you a list of all the countries in the United Nations, but it is a fairly normal thing, isn't it?

It is. When we looked at the comparative cases for our report, we weren't looking specifically at financial things—I'm going to come back to that in a minute—but what you tended to see was that, in most cases, inter-governmental relations were more routine, less ad hoc, not particularly transparent, but not as lacking in transparency as the UK was, at least then, and sometimes subject to statutory reporting. I would however—. I think that asymmetry in the UK does make it rather unusual and does make it difficult to find models that you can then think, 'Oh well, we could do that.' I cannot think of any system in the world that determines the funding arrangements for a constituent part of it based on decisions it makes for another part. That's the peculiarity of the UK system and the block grant Barnett funding. So, there's no needs-based element to that; I know there are some discussions in the fiscal framework and so on around that, but, still, fundamentally—. That's a little odd in a comparative context.

I would be a little bit careful. So, what you tend to find in financial arrangements is that, pretty much everywhere, there is a fiscal imbalance. So, in other words, the responsibilities of the devolved or provincial or whatever layers of government are greater than their capacity to raise revenue to meet them. So, there is usually a transverse system and that builds hierarchy into the system. What you often find in other countries, though, is that there is more scope for central Governments to influence the spending decisions that take place at the other level—so, through conditional transfers, for example. So, it'd be a little bit—. So, I think, in terms of spending and decisions on spending, there is quite a bit of autonomy in the UK case, compared to others. I know that Ed Poole, the colleague at the Wales Governance Centre, is doing some really interesting comparative work just now—his sabbatical—so, you might want to bring him in for a chat.

We have Ed Poole in fairly regularly.

Yes. [Laughter.]

If Westminster increased health spending by 5 per cent and we got our Barnett consequential of it, whilst we'd have the power to spend that on anything else, the political pressure would be to copy it. And I think that's one of the problems we've had, in that, although it's devolved, we've got full autonomy, but—. Does that happen in Scotland?

Yes, particularly around health spending. But that's politics, whereas, in other countries, what you will find is that there isn't the scope at all, so, you have to.

Finally from me, as it were, the other place that has devolution similar to Britain is Spain, isn't it, where it has different powers in different places, different means of balancing money up. I know that Italy had certain things, where you had a Sicilian project that was ruled unlawful by the European Union. Really, do you see any progress we could actually make to solve the whole problem unless we get devolution symmetrical?

I think I'll let Mike talk about devolution in England, because it might solve some things and create others, other issues, and there's always going to be a bit of an imbalance, given the sheer size of England compared to the others. I think, in the Spanish case—. I assume you're talking about the Basque Country and Navarre and their sort of fiscal autonomy.

And the islands.

Yes.

And Catalonia.

But what you don't have in any of the other countries that we talked about is the biggest bit of territory still being governed as if it were a unitary system, and I think that's part of the reason why we've seen so little change within the UK Government and within the Whitehall machinery to adapt to devolution, because it still thinks very much in unitary terms, as it always did, and I do think that, in the Treasury and in the wider inter-governmental issues, a lot of the problems emerge because of the way that Whitehall operates, and it doesn't think like a federal system—they don't like the term 'federal' anyway, but it doesn't think like a multilevel system; it thinks as it has always done, and so there isn't, really, the need, or there isn't the perceived need, to adapt structures.

I'll give the final word to Mike, if he wants. We've just gone over time, but we'll take a final comment.

I'll keep it brief, and I will keep it brief, because there's a lot I could say about the very interesting English question here. [Laughter.] A very quick point to your question about where else to look in the world: I do think that looking at some of the other Westminster systems, actually, that are outside Europe, may be quite useful, not because of the symmetry point, because they actually are dealing with lesser asymmetries, but still are often dealing with asymmetries, but these are examples of systems—so, Canada, Australia—that have developed in a framework that's recognisable to us, and particularly Australia has a very developed set of inter-governmental layers from which we can learn. I think we've always got to be careful—I would echo Nicola's point—about just borrowing elements from other countries.

On the English point, I do think this is fundamental, and the idea that we can create symmetry—. One way of doing that, of course, has been the idea of sort of cutting England up into different regions, and that model, I think, is just incredibly difficult, if not impossible, to apply in England. And there's probably a longer debate that we could have about that, but I actually think where English devolution is going is somewhat away from that, and, actually, on the whole, I think it's been more successful because of that.

Thank you. Thank you very much for your time this morning. It's been fascinating, and your expertise is very helpful to us from your viewpoints. We will share with you a copy of the transcript. We may have one or two other questions that we might want to pose to you in written format, and if you'd be happy to accept them and answer them if you can, then we would be very grateful.

We're now going to have a short break whilst we reset. If we come back at 10:40.

Thank you.

Thank you very much. Very good to meet you.

Welcome back to this meeting of the Finance Committee, and we will now move on to item 4.

We'll move on to item 4, which is our next evidence session in our inquiry. We've got a witness here with us. Paul, would you mind introducing yourself for the record, please?

Sure. Thank you, good morning. Bore da. I'm Dr Paul Anderson, and I'm senior lecturer in politics at Liverpool John Moores University.

Fantastic. Thank you very much for coming in this morning and also thank you very much for your written evidence to us. It was fascinating and will lead, probably, on to quite a few questions from us for you to go into a bit more detail on what you've said. I'd like to start by looking at the reforms to IGR structures and the need for parity of esteem between all Governments, and that's the framing of my questions. Could you briefly summarise your views on reforms to the inter-governmental relations structures resulting from the review and do you think these arrangements improve bilateral decision making?

So, I think, at the outset, these arrangements are still in their infancy. Two and a half years is a long time in politics, definitely a long time, as I'm sure you'll all agree, but these IGR forums are meeting more or less every three to four months, so they are still in their infancy. But I think they have, certainly, improved inter-governmental relations across the UK and between the different Governments. It's important to disentangle the structures, which I think is what I'm talking about in terms of improvement, and then the operation of inter-governmental relations, which could be better.

So, I think in terms of structures, prior to this, the commitment from all four Governments to work together to move towards constructive relations is important, and that's particularly important given that we have four different Governments and five political parties in power across those four different Governments, so that is a challenge, of course. In terms of the envisaged increased interaction, that's an important improvement, that these meetings will take place or should take place on a regular basis. The other thing that's important is the rotating chairs and the rotating locations, because it builds into what you touched upon in terms of the perception, at least, of parity of esteem.

In terms of improving decision making, I don't see the forums at the moment doing anything near to improving decision making, and that's partly because, in the United Kingdom, inter-governmental forums are not co-decision-making bodies. They're forums to facilitate interaction, communication, but they're not necessarily designed for Governments to come together and co-determine policy or make policy. I think that's probably for both devolved Governments and UK Government. Devolved Governments don't want UK Government interfering in their policy ambits and vice versa. So, I think they're certainly an improvement, but not in terms of co-decision making.

Thank you for that. In your written evidence, you talked about the lack of engagement in the Prime Minister and Heads of Devolved Governments Council. How could that impact on the effectiveness of the IGR process and how does it reflect on the UK Government's approach to inter-governmental relations? Obviously, we heard in a previous session of officials working quite well, but when politicians get involved it doesn't always work the same. Maybe if you could unpack some of that for us.

Sure. I think the other thing in terms—. So, inter-governmental relations are opaque by their very nature, so they will happen, more or less, on a daily basis behind the scenes, and even politicians won't know what's going on, because civil servants will be working across and officials. I think politics does colour the structures, for a more optimistic, positive term, in terms of looking at it. But I think the fact that the council, this prime ministerial forum, hasn't met since November 2022 is disappointing. In fact, it's not good enough, because—. You know, we've lived through a pandemic where, in the first instance, the first thing that citizens of the UK did was look to leaders for how we get out of this, what we do next. And I think there's an important symbolic role that this forum meets—that, if the top forum is not meeting, then why should the other forums necessarily have to meet or feel that, not pressure, but willingness to meet? So, I think it is disappointing. They will meet in other forums, you know, the British Irish Council, and I'm sure there is some interaction, a phone call here and there, potentially.

We are in a general election year. We've obviously had a bit of political turmoil and change of personnel as well, which perhaps affects these relations. But in 2023 it didn't meet at all and I think it really should be meeting at least once a year. And I don't think once a year is enough; I think twice a year would be good. I think, particularly from a union perspective, if you're the UK Government, it's a missed opportunity; in fact, it's the only forum where the Prime Minister sits at the top. I mean, that is the most hierarchical forum that's there, so it's probably a missed opportunity. If your reason for being is to shore up the credentials of the union, which is under significant pressure, then why are you not meeting in those forums? I think it comes back to, potentially, the thinking of Government Ministers, particularly in Westminster and Whitehall, about what these forums are for, and that sort of links to this political culture point that I'm sure we'll come on to.

You talked there about those inter-governmental relations related to, effectively, the political culture and you talked about that in your evidence. What do you mean by that and how could it be addressed? And maybe, if you hypothesise about post general election, regardless of whichever Government is in place, would there be an opportunity to reset this relationship and to build a better way of working through these relationships?

Sure. Political culture, even for academics, is quite an elusive term. But what I'm getting at is that you can have the most efficient, perfect structures on paper—if people don't want these structures to work, they will not work. So, inter-governmental relations, the personalities and individuals involved are the oil in the machine, but they're also the glue that holds these things together. So, there needs to be a willingness for Governments to work together and to make them work. So, in terms of that culture, what we don't have necessarily in the UK is what you'll find in other countries—federal countries, for example—where there is what we call a 'federal political culture', where there is a culture of consensus building, collaboration, co-operation, recognition, partnership, mutual trust. These are the principles that I think make up this political culture; these are lacking in the UK.

Really, it stems from Whitehall and Westminster. There is, in the UK Government and in Whitehall, an attitude of 'Westminster and Whitehall know best'. That permeates throughout the entire civil service. There are people in there, of course, who understand devolution, but quite a lot of people don't and we saw this throughout the pandemic as well. And I think there is an attitude of hierarchy. I was in Westminster, down in Whitehall, in December presenting another project and was told by some of the people in the room, 'But it is hierarchical and that's fine; that's what it is on paper', but, of course, practice and what happens in practice is quite different from the theory of hierarchy. But that permeates, I think. And Boris Johnson's evidence to the COVID inquiry, where he thought it optically wrong that he should have meetings or regular interaction with the First Ministers I think is illuminating here, because it seems that the incumbent Prime Minister perhaps shares that sentiment, because he hasn't made an effort to meet with them in this forum as well. So, I think that hierarchical culture is problematic, because it doesn't lead to those or this idea that we should be working together. We can still have our own autonomy in terms of policy and things, but why not share experiences, why not work together?

We have, in the UK, particularly since 2016-17 and post Brexit with common frameworks, more interdependencies in terms of policy—you know, we have parts of welfare devolved, parts of taxation. Governments need to work together, but the culture of doing that is wanting.

One of the evidence sessions we've had has talked about parity of esteem, and it seems to go to some of the things you were saying there. I think there's that parity of esteem between Governments; there's also within Government. You talk about Westminster, you could equally be talking about Westminster and the Treasury, and the Treasury holds all the cards because they hold the purse strings. So, there's some of that coming through in some of the evidence that we're hearing—how those interactions work within Westminster and within Whitehall, within Government departments and the Treasury, and between devolved nations and the Treasury as well. So, how important is the building of effective relationships encouraging closer collaboration between Governments? Is that taking place or does it always depend on personalities? Or can something be put in place, through the structures, to—not force personalities out of it, because personalities make it work, but what refinements could be made to make it work?

Sure. Well, you could say we should put IGR on a statutory footing and make it legally mandated or constitutionally mandated that these can happen; it doesn't mean they're going to be effective. So, you have inter-governmental forums in various countries. I'll use Spain as an example here where, when the Catalan referendum happened in 2017, the Catalan Government just removed themselves from every inter-governmental forum and said, 'Well, we're not going to engage. Whether you think we should or we ought to, we're not going to.' So, I think individuals and personalities do matter, and I think this is quite interesting with the finance forum, or 'FISC', as I think we've come to be calling it, that we—. From what I see, we have a Treasury Minister that is quite keen on this forum taking place, and that may change, if there is a change of Government or a ministerial churn, as has become fairly common in Westminster/Whitehall. But I think collaboration is important. It is taking place, and I think, actually, the finance forum is quite a success. It's quite a good story to tell here. It's got a good narrative that it is meeting regularly, that they are working together, they're discussing. Issues remain, for sure, but they are working together.

There is not, I don't think, within many of these forums, parity of esteem, necessarily. It is helped by rotating chairs and rotating locations, because I think this checks the dominance of any Government. But, you know, we have a mismatch here in the UK. We have a UK Government that thinks it's at the top of the chain, and we have devolved Governments that think everyone is equal, or want everyone to be equal. And you don't have that, for example, in a federal system; sovereignty is divided. So, the federal Government in Washington is just as equal as any of the state Governments. It may not be in terms of what we think of, but they are, constitutionally; we don't have that in the UK. So, that parity of esteem is a bit more difficult, where you have devolved Governments wanting to be seen as equals, and then a UK Government that certainly doesn't see it as equal, and I think the quote from Boris Johnson shows that, that, 'I'm the Prime Minister. Why should I be meeting with the devolved heads? We are not on the same level.' So, I think that impedes more collaboration between the different Governments.

Thank you. I'll bring Mike Hedges in.

Moving on from that, but coming back to a part of it in a few seconds' time, what do you think are the strengths and weaknesses of the Finance: Interministerial Standing Committee, and is there an improvement on the previous Joint Ministerial Committee?

So, the FISC had a predecessor committee, which was called the finance Ministers' quadrilateral, I think something like that, and, from my research and doing interviews with people involved in that, when I was working on my PhD and a book, the Ministers involved were quite happy with it. There was positive interaction. There are problems around—and I'm sure we'll get on to this—Treasury and communication and making decisions and things like that but I think the predecessor—that committee wasn't as bad as most, or joint ministerial committees. It did meet on a fairly regular basis. But I think the positives in terms of the FISC are the same as the other forums that have been created—you have rotating chairs and rotating locations, and it's great to see that that's been the case with the FISC. So, we've had meetings in Cardiff, in Edinburgh, in London, and the latest one, I think, virtual but chaired by the Minister here. You have an independent secretariat, which I think is important because it takes away some of the work that needs to be done, and I think that that's important when it comes to dispute resolution, which I'm sure we'll get on to.

In terms of the weaknesses, my initial reading when the review was published was, 'Okay, wow. This has gone much further than I thought it could. This is good', and then you got to the Treasury document, and the choice of language was different, it was the 'devolved administration', so that hierarchy coming back in again, but actually, from what I've seen, and looking through the communiqués from the different forums, that hasn't necessarily played out. It seems to be that they've all been working together; they're seeing themselves on an equal footing. So, I think the weaknesses of the system, it's too early to tell. I don't think they've—. But they are meeting regularly, so I think the strengths at the moment certainly outweigh the weaknesses in terms of the structures.

Thank you. It comes back to the power imbalance between the Treasury and the devolved Governments. I think you mentioned earlier, that—I might be putting words in your mouth, and I hope I'm not—'We have long discussions and then the Treasury decides.' And whatever they decided in the first place, it's just going through the motions of consultation and discussion and joint decision making. Is that an unfair description of it?

We then get when the Treasury make decisions that are fairly arbitrary. HS2 and Crossrail had different answers, but they were, effectively, the same question.

Yes. So, I'll get out of the 'putting words in my mouth' by saying the perception from the devolved Governments is certainly that they may be invited to a meeting and brought into a discussion but the decision has already been made. I'm working on a project at the moment looking at relations between the metro mayors in England and the UK Government, and that's their experience, that, 'We think we're influencing, but actually the decision has already been made and this is just a tick-box exercise about us coming along and having a conversation.' So, I think there is an issue in that the Treasury is the dominant partner because it holds the purse strings, but that's always going to be the case because they have more power. So, I think that power imbalance is more or less always going to be there unless we move towards a system of fiscal autonomy where there isn't that reliance, necessarily, on the Treasury, or reliance on that the Treasury makes a decision that has ramifications and, sometimes, these ramifications lead to money through the consequential of Barnett coming to the constituent units in Scotland and Wales, and sometimes they don't.

So, I think here, what's imperative, I think, on the Treasury is a bit more sensitivity on what their decision making means—that if there is going to be a budget soon, then there is engagement from the Treasury with the finance Ministers, perhaps through the FISC, to say, 'This is coming. What are your priorities? What do you think?'. That's more difficult, probably, because of party political incongruence, in that you have, for the sake of what we have at the moment, a Conservative Minister in the Treasury that doesn't particularly care what a Labour Minister here or a Scottish nationalist Minister in Holyrood thinks or wants that to influence, but I think there needs to be a bit more sensitivity on the ramifications that come from decisions made by Treasury.

Peter wanted to come in.

Yes. Just a little one. I mean, I'm not sure how it's working yet. I see the rotating chairs and I think our own Minister is going to chair the next one in June, but are the devolved administrations coming to the table in isolation with their partners, with the other devolved nations, or should there be, or is there, more of a joined-up approach amongst the devolved nations before they come to the table so that they're speaking as a stronger, louder, unified voice in speaking for all, instead of trying to just champion their own causes?

Sure. So, I imagine it's more bilateral. I haven't been in the room, obviously, when these meetings are taking place, but I imagine that it's more bilateral, partly because of asymmetry. The UK is hugely asymmetric, so there's probably more Scottish Government discussion of a Scottish Government position and, from what I've seen from the communiqués, that's certainly 'Minister X discussed what they were doing and what their Government's priorities were', et cetera. But I think you've hit a really good point on horizontal relations, which is what the UK lacks. There are few formal horizontal forums, which are the norm in fully fledged federal systems. So, if you go to Canada or Switzerland, you will find formalised, horizontal forums where the different Governments will work together.

Now, we did see, post 2016 and the referendum, the Scottish and Welsh Governments building up a very good horizontal relationship, in the form of joint letters between the former First Ministers, on issues around Brexit. So, there certainly was a lot of informal, horizontal interaction, and there may be. But I think that horizontal stuff is important. I think it's also important for Parliaments to horizontally work together as well because, for me, with devolution, there are opportunities there for shared learning. We've seen this in devolution, that policy or legislation passed in this place is then taken forward elsewhere. We had the smoking ban in Scotland. It was then rolled out. I think carrier bag charge started here and was then rolled out—things you can learn from other places. So, I think, on the horizontal parts, there's more to be explored there about how Governments can work together. I do think, though, that asymmetry is probably a challenge there, in that they're not dealing with the same issues.

Not only have we asymmetry, but Northern Ireland has been treated differently. I'd describe it as 'Barnett plus', where they had the 2017 money, they had money last year, and they've also had money previously for the Presbyterian lending bank. There's a whole range of these things, and those are the more better-known ones. Somebody described Northern Ireland as getting reparations over and above what they should get as part of Barnett. Do you see that? Why would Northern Ireland depart when they're doing so well out of the current system?

So, I can see why people would perceive—. I'm no expert on the intricacies of Northern Ireland, necessarily. It is normally treated as a case apart, for obvious reasons, and I think where Northern Ireland has suffered a bit has been because of the Executive either being suspended or in abeyance, and that, certainly in terms of inter-governmental relations, where Northern Ireland has—. We've had officials attending but unable to contribute. That may change now.

There is, in terms of dispute resolution, only one dispute so far that I think has been raised, which has been by the Northern Irish Executive, over money. So, it was a fiscal dispute. But the Executive's been in abeyance, so, to my knowledge, it hasn't come back since the Executive's been restored. But I think here asymmetry is a challenge, and I think Northern Ireland has unique circumstances, given enforced power sharing and ongoing issues, particularly post Brexit, with things there. But it is good to see that the Executive's back up and running, and hopefully they will be contributing back to IGR and in these forums as best they can.

Carrying on with IGR structures, are there any other countries, do you think, that we can learn from?

Sure. Good question. So, I will preface this by saying I would be careful about looking at another country and just saying, 'We will adopt this', because the UK is probably one of the most, if not the most asymmetrical country in terms of structures, particularly around finances. I'm not aware of any other case where devolved funding is based on what's spent in the largest part of the territory and then rolled out. I think that's fairly unique. So, in terms of forums, again I would be careful in saying we can learn this from other places. I think, in different federal and multilevel systems, you do have fiscal forums. You have them in Germany and Spain et cetera, but these are conditioned and they operate based on local circumstances or circumstances unique to those countries. I think where the UK can learn is to do more with that federal culture, that working together. It's not a tangible structure that you can say, 'This should be adopted'; it's more changing how people think about interaction and inter-governmental working.

I think the other thing to throw in there is the second chamber. So, there's a lot of talk, particularly at the moment, in the general election year, of a reformed House of Lords towards a senate of the nations and the regions. This conversation has been going on for a while, so no-one hold their breath that we will have a fully reformed House of Lords, necessarily, if there's a change of Government. But I do think it is something worth pursuing, because, if you look at Germany, for example—these are very different circumstances, as the UK is a plurinational state, with four constituent units; Germany is very mononational with 16 Länder—those Land governments have a place in the second chamber. They co-determine things within that chamber; they have a big say. So, I think, not necessarily—. And the second chamber is an important site of inter-governmental interaction, which we miss in the UK. So, I think there is certainly merit in pursuing whether or not a reformed second chamber, to give that chamber more of a concrete role in terms of inter-governmental relations, both in facilitating those relations, as well as scrutinising them, is something that we could probably learn from other federal and multilevel countries.

Okay. Thank you.

Over to Rhianon.

Thank you. You mentioned, and others have, placing IGR mechanisms on a statutory basis, and a theme has been parity of esteem, and you've mentioned hierarchy, cultural change, perhaps the need for English devolution, and all of these things in a melting pot together. But isn't it, essentially, a Treasury issue, in terms of holding on to authority and power, that's at the root of this? And how do we change that system in terms of a parliamentary scrutiny process, from this place, with the powers that we do have within just, for instance, this particular committee, because these are issues where, in a sense, you could say our system is, essentially, not working effectively for the current arrangements that we have?

Sure. So, I think, in terms of the structure of the Treasury when it comes to finances, because of the system we have in the UK, it's always going to have that role at the top because they do hold the purse strings. And, saying that, the UK is fairly, not unique, but, certainly, in terms of substance, in terms of no conditions linked with the Barnett formula. There may be, occasionally, pressure when it comes to consequentials, but, certainly, when the Scottish and Welsh Governments get their budgets, there are no conditions, which doesn't necessarily happen elsewhere, where grants are conditioned to be spent on those things. So, I think, in terms of that, the UK, or devolved Governments have quite a lot of autonomy.

I think in terms of scrutinising IGR, I empathise with any parliamentarian scrutinising inter-governmental relations, because these are, by their very nature, Governments. They're Executive dominated and they are opaque, so parliamentarians looking to scrutinise IGR, or academics like me reading through communiqués, you only know what's been said there, and the communiqués have got better but they still don't tell you what really was discussed. They're not minutes, per se, of the meeting. Those minutes are not in the public domain, and it's a summary. So, I think, with the new arrangements, there's probably a bit of expectation or impetus on Parliaments to also look at how they can better scrutinise these things. And I think, optimistically—uncharacteristically optimistically—that it's a bit of trial and error, because Parliaments can try and work out, 'Okay, well let's try this.' I get that this is a bit of an investment in terms of resources, so you want to try something that works, but I think, given that the inter-governmental relation forums have been informed, Parliaments, and particularly horizontally, working together through forums can come together and think, 'Okay, how can we best hold Government to account on IGR?', because I think that's important. I think the key thing for Parliaments is raising the expectation that Governments should be willing to work together, and have good communication with Parliaments or committees like this, to say, 'This is what was discussed, this is what we raised', and be held to account that way.

So, in regard, then, to functionalities from a scrutiny perspective, do you see merit in joint working between legislatures that are devolved, in terms of placing this on a thematic level—

Sure.

—and then pushing that, then, to the UK Westminster Government and Treasury et cetera?

Yes, without a doubt, I think that's—. It's difficult. I mean, you know how difficult it is to get a Minister to appear before a committee, and this is shared across the entire—

Well, it's hugely difficult to get a UK Minister.

Sure. And even within Westminster—. I don't know. I think maybe in my evidence I included a letter from someone—I think it was William Wragg, when he was chair—saying his disappointment that they couldn't get a Minister to appear in Westminster before the committee. But, there, is there not then an opportunity for the different forums to come together in one meeting, to say to a Minister, 'Okay, you don't have to appear in four separate Parliaments—

Do it thematically.

—but let's have—'? So, I think of this—so, I haven't thought this through, but this is off the top of my head—in terms of the way the Liaison Committee works in Westminster, where you have the Chairs of the committees grilling the Prime Minister. Why not have a committee between the four Parliaments, with representatives from the finance committees, having a meeting with a Treasury Minister or whoever? I'm not using the word 'grilling' there, because they might listen and it might put them off, but—.

One thing you may have picked up on is that we do have an inter-parliamentary forum for the finance committees of the three devolved nations, and we did go to London, to Westminster, and we did meet with other committees there—

You're going to burst my bubble here, aren't you? I can feel it.

—but we didn't get a Treasury Minister to come and see us. We got a former Treasury Minister to come and see us, but we didn't—. It's something that we grapple with as committees, and it's something that we see a benefit in, shared understanding of shared concerns. But it's something that—. It's good to see that you're thinking in a similar way to us, as three committees trying to find those common themes, and, as Rhianon was saying, to try and do that joint scrutiny, if possible, because it's something that is important, and it shows a collective power, I suppose, all together.

And I think perhaps it's also about framing that. A Treasury Minister—any Minister—can easily dismiss going along to a committee, and, again, here perhaps, personality of Minister is important, because, if the Minister doesn't want to, then they don't have to. But I think if you frame it in that sense, if there's one meeting with all the committees, then there's a good reason to say to the Minister, 'Well, this is—'.

We tried that. [Laughter.]

I was so optimistic this morning, and now—.

Can I just follow that up? In terms of the overall mechanism, we've touched upon a statutory basis in terms of meeting systemically, and of course although that's not going to deliver the holy grail in terms of cultural change overnight, surely there is merit in trying to pursue that, in terms of, the model that you've just thought of at this moment in time, it sounds eminently worthy of looking at, but if there were to be a statutory basis around these things it's going to be an extra lever in terms of cultural shift and this whole hierarchical, 'I'm not going to go and speak to the devolved committees'—. Because it's actually very poor in terms of relations that that attitude is prevalent, and it is prevalent. I don't think we've ever had a UK Minister, have we?

Well, we have.

We've had the Secretary of State.

We've had the Secretary of State for Wales, but nobody—

But not a UK Minister in terms of the Treasury.

No. Michael Gove has spoken to us—well, not this committee, another committee. The Treasury Ministers are the real problem; they won't talk to anybody.

That's what I mean.

Sure, which is fairly obvious, because, if you look at the disputes raised in the JMCs, three, off the top of my head, were to do with money. So, I can understand a Minister thinking, 'Well, I don't want to put myself in the firing line for unhappy devolved Ministers to—'. I gave, I think last year or the year before, evidence in the Scottish Parliament where I said the same thing. There is always merit, I think, in exploring the statutory footing. But, in the UK system, as we know, the Sewel convention was on a statutory footing and the Supreme Court pooh-poohed that and said, 'Well, it's not really—it's still a political convention.' But I think there's merit in moving towards—. But I think let's see how these relations are embedded. It certainly has led to improved interactions. So, I think, if this works, then, hopefully, it will help slowly change the mindset and then perhaps people would change their tune, but I'm not—. Again, individuals matter.

Thank you, Rhianon. Peter Fox.

Thank you. I think we've covered my first question, which was going to look at perhaps a dedicated committee to hold things to account or to challenge things further. So, I'm going to move on then, and if we could just explore a little bit around dispute resolution within the FISC, if I may. How effective do you think the dispute resolution mechanism is to address power imbalance between the UK Treasury and devolved Governments?

So, I think, first of all, in terms of the effectiveness of the dispute resolution mechanism, we don't know—it hasn't been properly tested. On paper, it's much, much better than what went before. So, before, the UK Government, even if it was party to a dispute, could dismiss a dispute and say, 'We don't think this is a dispute.' So, I think before I said they were judge, jury and executioner—that they no longer are. So, there's a much more independent process for dispute resolution. And it's fairly similar in the FISC and in the other forums, with the exception that the grounds for raising a dispute in the FISC are limited to something along the lines of challenging the principles of the statement of funding policy, or something like this.

So, I think, on paper, the ability to raise a dispute is much better and no Government can dismiss. So, if the Welsh Government were to raise a dispute, the UK Government couldn't say, 'We don't think this is a dispute.' But there's a process, which I'm challenging myself now to remember, but I think, if a Government raises a dispute, it goes to the secretariat—I'm happy to be corrected on this if I'm wrong—that then measures this dispute against criteria to say, 'Yes, this is a dispute.' And in addition, what Governments are able to do is bring in independent advice as well, and that didn't exist before. So, I think it certainly is an improvement.

In terms of challenging the imbalance, I think that is more difficult in the FISC dispute resolution mechanism, because the grounds for raising a dispute are limited. So, there is a list of principles within the statement of funding policy, and so, therefore, it's more limited to raise a dispute. My understanding is that the Northern Irish dispute is with the Treasury. Again, I'm happy to be corrected on this, but I think, from what I've gleaned, it's something to do with pensions for people affected by the Troubles. But I'm happy to be corrected if that's not the case, because I think this is what—. I've tried to find out. So, it will be interesting to see if either that has been resolved—I'm not sure—or, if it hasn't, whether this dispute comes back.

It certainly looks on paper like there's a—. It's pretty powerful, pretty strong, but, like you say, it's not been proven yet. I just wondered, do you think, perhaps pre-empting what might come forward, if it might be better, beneficial, to have the inclusion of an independent arbitrator to help oversee things?

So, I think, really, until it's tested, we don't know, but I think there already is an element of independence in there with the secretariat, and the secretariat and Governments can bring in people from the outside. Because it goes up in levels: I think it goes first—. Once the secretariat decides it is a dispute, it then goes to officials—and the onus there is that we shouldn't get to a dispute resolution mechanism; it should be resolved before—then it works its way up. So, from FISC, if it's not resolved at official level, it goes to the council, which would have to meet in order to discuss it. And it's been given time limits, so, I think it's within 10 days that they have to meet. So, I think on paper, it certainly looks like—. And I think the process is much more independent than it was before. So, I think, until it's tested, we won't really know how it's worked, but, certainly on paper, you're right, it looks better.

And it's very dependent on good relationships, it suggests as well, to resolve things before they get—. But that's wishful thinking, I think, with politicians.

Well, potentially, but I think here, as well, there is quite a lot of onus on the Treasury and on UK Government because they are the bigger partner here. So, parity of esteem is important, but we have a fairly hierarchical system in that the Treasury is at the top, and thinks it's at the top, so, there is onus there on them to engage a bit more with devolved Governments to avoid disputes before we get to that stage.

Can I, just on a point of clarification—? So, in regard to the mechanism, a sort of governmental anti-social behaviour order that never gets reached, does that apply to the Treasury, in terms of the councils within this new system, or are they above this dispute mechanism system?

No, no, no; they are—

So, they're involved. So, technically, they're in the same mechanism?

My understanding is—. So, within FISC, they operate within the same—. So, they can—. Because if a devolved Government, let's say the Welsh Government, raises a dispute over its finances, it's going to be against the Treasury, so they will be party to the dispute, which is going to now be dealt with in a fairer, independent manner, whereas before the Treasury could say, 'We don't think—.' So, the London Olympics is a good example, where I think they came back and said, 'We don't think this is a dispute. We're not taking it much further,' and dismissed it. They can't do that anymore, so the power imbalance has shifted a bit there, perhaps—or definitely.

So, we did get some money from the London Olympics, except it was substantially less than we thought we should.

So, yes: politics. [Laughter.]

You've highlighted that it's more restrictive in raising disputes with FISC than the other committees. Could you elaborate on this and why do you think that is?

So, the terms of reference lay out that—. I have it here, for example:

'all parties acknowledge that policy decisions on funding are strictly reserved to Treasury ministers, with engagement with the devolved administrations as appropriate. As outlined in the Statement of Funding Policy, funding disputes may only be raised where there is reason to believe a principle of the Statement of Funding Policy may have been breached.'

So, they have in their terms of reference that—. All very good; no member—so, no Government—can reject a dispute, but if your dispute is not within this criterion of challenging or—. So, they are, and I think that's where it's interesting; you don't have that in the other arrangements for the interministerial groups or the IMSC.

Do you think there are any avenues that devolved Governments can go down to sort of challenge that?

No. And I think here the issue is that most disputes are going to be around money, so, from a Treasury perspective, I can understand why they want to restrict this, because most devolved Governments are going to challenge and say, 'We're not happy with this.' But I think perhaps—. Going back to your earlier point, that horizontal working, working together, to—. So, if a specific Government has a dispute, then it works with the other Governments to bolster what they're putting forward to say, 'Well, this isn't just us; this is the three Governments, or two Governments, agreeing that this is a problem', or something like this, then maybe that horizontal can work. But, at the moment, as it stands, no, it's much more limited for raising disputes.

Yes. Thank you very much. That's all from me, Chair.

Thank you very much.

I'm fiddling here; I was paying attention. But, just looking, over half of England after tomorrow will actually have regional mayors. I didn't add it up, but it comes to about 28 million, 30 million people, including the Greater London area. How is that going to fit in in the future? Manchester is bigger than Wales. West Midlands is roughly the same size. But London is bigger than Wales and Scotland.

Sure. So, it's a good question. I have a publication coming out this afternoon specifically on—[Laughter.] I haven't planted that. [Laughter.] But I have a blog post coming out this afternoon where I say, from tomorrow, we will have not only almost 50 per cent of England—by 2025, there'll be four new mayors, so more than 50 per cent, and that's—. But, from tomorrow morning, 50 per cent of England's GDP will come from areas led by a mayor. These mayors have no forum to meet with civil servants or Whitehall or the Prime Minister. They don't even have a forum to meet with Michael Gove, who is the Minister in charge of them. So, I have something coming out this afternoon saying that there should be a forum. But I think—. England is moving towards that more asymmetrical approach, and there's a challenge here for whichever Government wins the next general election. The first challenge is filling in that map, and then the second challenge is improving those relations.

So, over the last eight months, I've been touring England doing interviews with mayors, chief executives, Whitehalls, for a project that I'm working on at the moment on looking at these relations, and it is interesting: I have a mayor—who I'll not quote, but kind of paraphrase—who says, 'We are bigger than Wales, but they have their own Secretary of State and they have their own forum, they have their own Parliament. Together, these regions, we are bigger than Scotland and Wales and Northern Ireland in terms of population, but we don't have the access that they do.' So, inter-governmental relations is an area, moving ahead, where it'll become even more interesting as well.

We've got a couple of minutes, Chair—

Yes, of course. Carry on.

When Cumbria and north Lancashire create a mayoral system, the whole of the north of England will then be covered, won't it? And we're making our way down through the midlands. The difficulty for the south of England, I don't underestimate, but I think that when you get to 60 per cent of England having regional mayors, then the pressure's going to be on for the rest. The pressure is also going to be on for there to be more symmetry. Policing is devolved to some and not to others. We don't have policing devolved, but London does and Manchester does. There will be movement, won't there, towards symmetry. It might take a few years and it'll be well beyond my political lifetime, but I think that, at some stage, we'll have a semi-federal Britain.

Well, who knows? I think there's merit in exploring this and, probably, at heart, I am a federalist. On asymmetry, I don't have a huge issue with asymmetry in certain aspects, because I think it's important to constantly recognise and remind the UK Government that the UK is a plurinational state where, particularly in the devolved nations—Northern Ireland, Scotland and Wales—there's a strong sense of identity and belonging that cuts across political parties.

England is more interesting. I've come from Liverpool today, where there's a very strong sense of Scouse identity, but that's not something that's necessarily shared with other combined authorities. So, for the next Government coming in, whether it's a Labour Government or the Conservatives stay, there is a challenge here in addressing English devolution as it moves forward. Because what you have, for example, in the north of England is a very strong collective of northern mayors, who will work together. When the Government announced ticket closures at rail stations, four or five of the northern mayors came together to say, 'We will legally challenge this', and 'We don't want this to happen', and the Government u-turned. So, they do have some power. One of the mayors I interviewed said, 'In the absence of inter-governmental relations, we have the media.' The media can be just as powerful. We saw this, for example, with Andy Burnham on the steps of the town hall. So, I think there there's a big challenge.

Also, in terms of inter-governmental relations, there is no representative of England in these forums. The UK Government has this dual-hatted role where sometimes it speaks for the UK and sometimes it speaks for England. I think that is a challenge as the UK evolves.

Thank you very much. It's been fascinating. If we do think of other questions as we go through this, maybe we'll be able to write to you with any of those. There will be a transcript available for you to check for accuracy. It's been great to have you with us this morning. It's been very informative.

In accordance with Standing Order 17.42, I propose that the committee resolves to exclude the public from the remainder of this meeting. Is everyone content to do so? Okay, we'll go into private session. Thank you very much.