COMMISSION ON THE POWERS AND ELECTORAL ARRANGEMENTS
OF THE NATIONAL ASSEMBLY FOR WALES

MINUTES OF PROCEEDINGS
of the
 EVIDENCE OF:
WELSH ASSEMBLY GOVERNMENT MINISTER FOR FINANCE,
LOCAL GOVERNMENT AND COMMUNITIES
EDWINA HART

held at
National Museum & Gallery, Cardiff
on
5th December 2002

LORD RICHARD: Thank you very much indeed for coming. I wonder if, for the sake of the record, you could introduce yourself and your colleagues?

EDWINA HART: I am Edwina Hart, Minister for Finance, Local Government and Communities. On my right is Steve Phillips from Financial Planning Division and on my left Adam Peat Director of the Local Government Department .

LORD RICHARD: What has usually been the pattern is to ask the Minister to open the debate and then we would like to ask some questions.

EDWINA HART: I have submitted detailed evidence to you from the local government and community element of my portfolio, but I covered finance only briefly. It may assist the Commission if I therefore give a little more context in relation to the finance aspects of my responsibilities.

The Commission’s terms of reference do not explicitly cover the financial arrangements for funding the National Assembly’s policies and programmes, so these aspects are clearly tangential to the main thrust of the Commission’s work.

As I said in my written evidence, the evaluation of the arrangements for political devolution should not be distracted by the very separate considerations of financial distribution.

I do think it is important to be very clear that the Barnett Formula, which is the mechanism for allocating resources to the National Assembly from the UK government, predates the devolution settlement in Wales by nearly 20 years. A judgment was made in framing the provisions of the Government of Wales Act 1998 that the settlement would be best achieved by not changing that particular mechanism. That was the essential background which I think we all need to be aware of.

The Commission may also be aware that I gave evidence on these matters to the House of Lords Select Committee on Constitutional Affairs earlier this year. A copy of my written evidence to the Committee and copies of the transcript of my oral evidence have been made available to the Commission’s secretariat.

All of that said, members of the Commission may have questions and points that have an indirect bearing on the financial arrangements and my officials and I are ready to answer any queries in that particular regard.

LORD RICHARD: Arising directly from the evidence you gave to the Royal Commission, you said you did not want tax raising powers.

EDWINA HART: If we take the Barnett Formula, it has many critics and we have about 300,000 experts on the Barnett Formula in Wales alone probably. The major virtue of the Barnett Formula is its simplicity and it is automatic in terms of what it does. It is based upon changes to comparable programmes in England adjusted to reflect population share. This helps in the medium term in the planning of programmes for us as an administration here.

Moreover, complex formulae often create as many problems as they start to solve. We only have to look at the distribution formula for local government in Wales to see that. I see Barnett as being reasonably fair and simply and it is a mechanism that has stood the test of time.

There are issues on Barnett which people talk about, the so-called "Barnett squeeze". Assuming the per capita spend in Wales is higher than in England, which it is on the largest budget which is health, the formula only gives Wales a population share which is slightly less than that needed to maintain the relative spend in any one year by us in Wales. However, the Assembly is free to allocate its Barnett consequentials as it sees fit and that is part of what we do in our budget process.

In terms of Barnett, in recent times with the settlements and the comprehensive spending review, we have had Barnett plus, which has helped us on the structural funds programme. That has also been a very useful mechanism because the Chancellor has acknowledged that we needed additional resources.

In terms of Barnett, I remain to be convinced that the change will bring many benefits; hence why I do not support any change. I am also very concern that, when you reopen Barnett, you have to look at it in the context of Northern Ireland and Scotland and in addition an English devolution coming on stream. What impact would a discussion of Barnett have on English devolution?

If we look at some of the statistics that are available, the distribution in the south-east of England is much larger than the proportional share that it should have compared with the north-east so perhaps there is an issue about the distribution within English Departments when English devolution comes which should be discussed prior to the whole settlement in terms of Barnett.

LORD RICHARD: There is a generally accepted view which is that if you turn to assessment need rather than the existing formula, Wales did better and Scotland did worse. If that is right, I can see all the difficulties of unravelling a dedicated formula which has stood the test of time but if it would benefit Wales substantially is it not worth trying?

EDWINA HART: I am not sure that any of the work I have undertaken as Finance Minister has indicated that we would be better off with a needs based assessment. In my opinion, unless you are sure of the end game, you do not start unpicking things. There is a notion that Scotland does particularly well. The position of the Irish is not so certain. We think they are about even Stevens but we also think it is just about right for us. If I thought there was anything to be gained by doing all the necessary work on a needs based assessment, I would do so but I am not in the business of opening a Pandora’s box. Once you open that particular box, you are never sure which direction things are going to flow.

LORD RICHARD: Are you satisfied with Barnett plus?

EDWINA HART: Barnett Plus has been very helpful with the structural fund issue.

LORD RICHARD: It was 400-odd million?

EDWINA HART: Yes.

LORD RICHARD: That is your part of matching the structural fund?

EDWINA HART: Yes.

LAURA McALLISTER: A Barnett review would happen at UK level?

EDWINA HART: Yes.

LAURA McALLISTER: What would you have to lose in a worst case scenario?

EDWINA HART: If the UK government chose to review Barnett, we would have to look at the ground rules for the review of Barnett. There would have to be qualitative treatment for the devolved administrations in that review. We would want to look at what issues we wanted to put into the review. They would have to have a fundamental review about how they fund English government as well. I do not think at the moment I would be calling for a review of Barnett on behalf of the National Assembly for Wales Government.

PETER PRICE: Can I look at the impact on health where Welsh expenditure on health per capita is higher than in other parts of the UK, specifically in England? If you are spending a disproportionately large share of a block on health, it means that you must be spending smaller sums elsewhere on this same per capita comparison. What are the areas where Wales spends less in order to compensate for what it spends on health?

EDWINA HART: I do not look at the budget in that way. I look at the budget as the amount of money that comes in and I look at what priorities we have as a government. The appropriate amount is prioritised towards those priorities.

The budget process, to me, is that there is a sum of money. We know what the figures are over a three year period. We then look at what the priorities of the administration are. We have a very transparent process and it is up to us to match what we need with priorities. I have no worries if I spend more in terms of health, when I look at the health of the Welsh nation.

PETER PRICE: You have mentioned the phrase "Barnett plus" and specifically related it to the structural fund. Do you see any scope for the concept of Barnett plus being extended specifically to deal with the issue of additional health needs in Wales?

EDWINA HART: I see some merit in Barnett plus and the Treasury saw it when they made the arrangements for it in the Spending Review . I am not certain that I would say it is applicable in health but I see the merits as a principle. Once the Chancellor conceded that principle, it allowed us to know in the devolved administration that there was flexibility within the Barnett Formula.

LORD RICHARD: Has he laid down any ground rules for Barnett plus?

EDWINA HART: No.

TED ROWLANDS: Could I ask about Barnett within the context of total expenditure in Wales? You give a figure at the footnote at the bottom of the evidence to the House of Lords, saying, "Identifiable public expenditure in Wales in 2000-2001 …", was 15.6 million and your total budget is 11 million? Is the proportion between expenditure outside the Assembly’s responsibility closing, narrowing or growing as a proportion of the total?

MR PHILLIPS: I would have to check but it is important to recognise that the Barnett Formula deals with additions to the Welsh block, as opposed to the overall total.

TED ROWLANDS: That means that there is about four million plus of expenditure in Wales – I presume most of it will be social security – which is outside the responsibility of yourself.

EDWINA HART: That is right.

TED ROWLANDS: Does the Assembly have any kind of oversight of any aspect of that additional expenditure?

MR PHILLIPS: Very limited. My impression is that the proportion of that expenditure relative to the total has remained pretty constant since devolution. We will check. Our ability to direct and influence is limited in certain areas.

TED ROWLANDS: I think the Scots still produce a total budget. That is, the receipt side as well and they end up with a sort of Scottish PSBR. It was done once for Wales and there was a PSBR of about five million, a deficit between expenditure and receipts from taxation. That has stopped. You do not do that any more, do you?

EDWINA HART: We have not done that since devolution.

TED ROWLANDS: Why? Do you think it is relevant?

EDWINA HART: We try to concentrate on the money that we deal with as a devolved administration. We have never thought about looking at doing this. If it is something that the Commission is interested in, we will look at it.

TOM JONES: What happens when the UK government comes up, for example, with the concept of foundation hospitals? Money has to be allocated for the creation of those. Would that come out of an England NHS function?

EDWINA HART: Yes. It was the English government that made the announcement.

TOM JONES: The funds for that would not be a problem for you?

EDWINA HART: We have our direct consequentials on health and we spend that as we see fit.

PETER PRICE: Can I turn to borrowing powers? Could you explain how the system currently works in terms of how the Assembly’s capital expenditure and the borrowing element in all that is settled in terms of the Assembly, the Treasury and the UK government?

EDWINA HART: We do not have the powers to borrow money in the National Assembly. All our money comes from the UK government in a block and local authorities have the power to borrow money.

SIR MICHAEL WHEELER BOOTH: That raises a fundamental issue. It seems rather against normally accepted patterns of democratic accountability that you can have a parish council in England which can raise money and you have the National Assembly elected by PR for Wales which is, in financial terms, devoid of direct power except to dish out what is given to you.

EDWINA HART: Yes.

SIR MICHAEL WHEELER BOOTH: Logically, it seems so peculiar.

EDWINA HART: The settlements across the UK are different. When we look at the Scottish settlement, they have tax raising powers which they can use in due course. We have to recognise, in terms of the settlement, that devolution is very new and we are working our way through it. In terms of borrowing, that would be quite a major discussion at national level.

VIVIENNE SUGAR: You said in your evidence that you were against tax bearing powers. You did not say why.

EDWINA HART: I shall be very interested to see what happens when the Scots decide to exercise that. I shall be particularly interested in the reaction of the Scottish public and the UK government and the Treasury. Call me a coward but I very much doubt whether these powers will ever be exercised.

TED ROWLANDS: You have virtually become a Parliament. There is not a Parliament that exists that does not have powers to raise money.

EDWINA HART: We are a Parliament in the context of the devolved administrations within the United Kingdom. We have very strong links with the UK government. I like the federated structure that is developing. I do not see that it necessarily has to go further in terms of having tax bearing powers.

LAURA McALLISTER: Are you sure things are progressing as you would wish? If the National Assembly becomes a parliament in the sense you have discussed with primary legislative powers but not financial or fiscal powers and there was a different government in Westminster to Cardiff, how would you function?

EDWINA HART: They would have to give us our Barnett consequential so we would still have money and the authority to deal with matters as we saw fit. It would be no different. It may be different in terms of personal relationships but I do not think I want to go into that. We have the Barnett arrangements now. There is so much money that has to come via the devolution settlement so you always have the flexibility on the amount of money that is already agreed even if there is a change of government.

LAURA McALLISTER: Should the Scottish Parliament use its tax bearing powers, at some point, would that change your mind on at least having tax bearing powers?

EDWINA HART: I would like to see how it pans out if they did it.

TED ROWLANDS: If the UK government cut public expenditure in England, there would be a Barnett consequence by X per cent, would there not?

EDWINA HART: Yes.

TED ROWLANDS: It would be quite reasonable for Welsh entities to say, "We prefer not to take those cuts" and to raise more taxation. I think Plaid Cymru posed the cut in income tax at UK level because it believed it should have it to fund other expenditure. Any party can make that case but you would not have the power to do it without tax raising powers.

EDWINA HART: That is true.

PETER PRICE: If there were to be a government in power in Westminster that wanted to make cuts in things like health and education in terms of the public expenditure element, would you view with equanimity the fact that that would have a consequential effect in Wales of cutting public expenditure and that you would lack any power to do anything about it?

EDWINA HART: The reality is that no government in Westminster is going to make swingeing cuts to health and education. They might decide not to upgrade to the levels that we have as an administration. I deal with the reality of the situation, not what might be.

I am still allowed within my Welsh block to spend more on health than they might be spending anywhere in England already.

VIVIENNE SUGAR: That has not always been the case within recent memory. Public opinion was consistently in favour of paying an increased tax in order to provide particularly for health and education. I can understand that it might be a very rare occasion when the Assembly might want to exercise tax raising powers, but should not the Assembly have the ability to do that in the event of overwhelming public opinion that a specific issue in Wales should be funded?

EDWINA HART: It is always interesting in opinion polls about what the public is prepared to pay for. A lot of councils will argue that putting up council tax by so much for certain services will cause an outcry from the public. In opinion polls, people always say yes to education and health but at the moment I do not feel that tax raising powers are an issue we need to deal with. What we need to do is get the devolution settlement working properly and look at what we require in getting legislative programmes through.

LORD RICHARD: Is it not worthwhile having a residual power? It would be a useful extra arrow in case you might like to use it.

TED ROWLANDS: Or even a hypothecated tax, raising 1p for a very specific purpose.

EDWINA HART: If these are issues that are worth considering, I am sure you will have evidence on them and make your recommendations accordingly.

LORD RICHARD: You are the person who is ----

EDWINA HART: I am the person who administers the current system, which I have found able to deal with. We have had no real problems on this particular agenda. Obviously, some people are attracted to tax raising powers. On the other hand, some people are attracted to tax raising powers because they want to take the devolution settlement a stage further in terms of what they want to see Wales being. I am a great believer in the United Kingdom and devolution in the context of the UK. I see some of these as quite dangerous roads to go down.

LORD RICHARD: Even tax varying powers, as in Scotland?

EDWINA HART: I would be very interested to see what happens when or if they ever do that.

LORD RICHARD: I think they will. The danger is that we would use it, not that we would not.

EDWINA HART: Yes.

PETER PRICE: How does all this fit together? You have given a clear answer that the Assembly itself does not have borrowing powers, but you immediately refer to the local government borrowing powers and, in effect, when the Assembly is determining capital expenditure, it is doing it in the expectation that the actual expenditure will be carried out by other bodies, particularly local government. Is that the situation? When you are looking at capital expenditure, what are you really looking at? Who is going to implement it? There must be some borrowing implications. Do you have discussions with the Treasury about issues of capital programmes and the impact on PSBR and, if so, how and in what context?

EDWINA HART: I can use the money that comes in the block in any way I choose in terms of capital and revenue.

MR PHILLIPS: We do not have discussions as a rule with the Treasury on capital or revenue funding because the consequentials that flow into the Assembly’s budget are at the discretion of ministers. There are some caveats to that on the level of capital expenditure that we are required to follow as a consequence of recent changes to government accounting rules but they are not particularly germane to your question.

Local government does have borrowing powers but those are looked at in the context of the overall settlement for local government within the Assembly’s overall budget.

LORD RICHARD: I do not follow.

MR PHILLIPS: In terms of accountability, I would argue that it is not quite right to say that the Welsh Assembly has no influence or role in borrowing. We do not have the borrowing powers but those powers that flow through to Welsh local government are part of the overall settlement, which forms part of the Assembly’s budget. There is a role for the Assembly looking at local government borrowing.

MR PEAT: At the moment, there is control both in England and Wales on the amount that a local authority can borrow in any one year.

PETER PRICE: Exercised by?

MR PEAT: Exercised in Wales by the National Assembly. In order to borrow they have to have a credit approval from us for the amount that they are borrowing. That credit approval scores as Assembly expenditure against its block. The system is going to change. The Local Government Bill that is just being brought before the House of Commons will introduce prudential borrowing for local authorities. They will no longer require the credit approval from us or in England from the UK government.

The authority will be free at that point to borrow as much as is financially prudent, subject to an overriding ability of the Treasury to impose some sort of national limit if things are getting completely out of hand. The only thing that will count at that point will be what level of revenue support we may have given to the authority to support its borrowing with.

LORD RICHARD: What do you do about the Assembly’s borrowing powers?

MR PEAT: Probably the answer is that we do not need them. We have some pretty good arrangements for end year flexibility.

LORD RICHARD: Has the Treasury ever said no?

MR PHILLIPS: To the best of my recollection, it was not really an issue that came up in the context of the Government of Wales Act 1998 or the White Paper that preceded it.

LORD RICHARD: It seems extraordinary that councils are going to be free from restraints on borrowing. Are you raising this with the Treasury?

EDWINA HART: Obviously we are very pleased about the prudential borrowing arrangements for local government because we have lobbied quite hard for that, but we do think the existing arrangements are all right at the moment.

TED ROWLANDS: Has the Scottish Executive such powers?

MR PHILLIPS: Not to the best of my knowledge.

TOM JONES: Northern Ireland?

MR PHILLIPS: Yes. I do not have details to hand but earlier this year a borrowing package was introduced following an agreement between the then devolved Assembly and the Treasury, but I think that reflects the particular circumstances of Northern Ireland.

EDWINA HART: We keep an active interest in what happens with the other devolved administrations. We have an interest in what happens with structural plans and the borrowing package in Northern Ireland. If there is anything useful from that and it is seen to be advantageous, you obviously make the necessary bid.

LAURA McALLISTER: You said that your job is to administer the settlement as it stands, which is a perfectly valid answer, but our job is to look ahead. It is important that we get to the bottom of this issue. Can you envisage a situation where the Assembly has primary legislative powers in all the key subject areas? Within that, can you imagine a situation where tax varying powers might be important, even if they were residually held and exercised very infrequently, because in a sense the response that "this is the settlement as it stands" is not adequate for us.

EDWINA HART: If we are to have primary legislative powers, obviously we would have to look at the issue of tax varying. If we had primary powers, there would be further discussion on other issues.

LAURA McALLISTER: Surely as a Commission we should be looking at the package of the future?

EDWINA HART: The First Minister has made his position quite clear on this issue and I concur with him.

LORD RICHARD: If you get primary legislative powers in Cardiff, you would be in the same position constitutionally as the Scots. I thought that one of the main arguments against tax varying powers was that the Scots had them and were not going to use them.

EDWINA HART: If we have primary legislative powers, that will show that the devolution settlement is moving along. We have to acknowledge that devolution will evolve in terms of settlement over a number of years. If it evolves and we have primary powers, obviously there will be discussions on the other issues but I do not think that makes any difference. The Scots do have the powers. It will be interesting to see if they are going to use them.

I have a settlement that I have to work with now. I can dream of what settlement I might have in the future and after that but I have to deal with the realities of finance and I think it is important that I keep my feet on the ground.

LORD RICHARD: As I understand it, you are saying you do not want tax varying powers; the existing settlement is fine, but if there is a variation in the settlement ----

EDWINA HART: I may well wish to have a look at it and have further discussions.

TED ROWLANDS: I can see what you might be worried about. If there is a large deficit between Welsh spending and Welsh receipts of the order of five million, if the Treasury sees the Welsh Finance Minister raising money by tax, he could say, "You must have the capacity to close the existing deficit" and in some way he would be tempted to try to reopen the whole issue. Is that a worry?

EDWINA HART: I am quite cautious in all of this and that is why I take the position I do on Barnett. When I see the Scottish position on their tax varying powers, that is one of the reasons why I will be very interested to see what happens if they exercise those powers and for what purpose and what attitude the UK government and the Treasury will to the exercising of those powers in relation to funds that go to Scotland.

MR PEAT: It occurs to me that it might be more difficult to negotiate the plus bit of Barnett plus if we had powers to raise our own taxation.

LORD RICHARD: Your position is wait and see?

EDWINA HART: Yes. I want to see your report.

SIR MICHAEL WHEELER BOOTH: What are the respective figures of varied expenditure of England, Scotland, Wales and Northern Ireland?

EDWINA HART: In a particular area?

SIR MICHAEL WHEELER BOOTH: Overall.

EDWINA HART: I do not think we have those figures to hand but we can send them.

SIR MICHAEL WHEELER BOOTH: I have a figure in my mind which may be wrong that for every pound spent on an English citizen £1.26 is spent on a Scottish citizen. Surely the figures must be very well known and they are relevant to the continuance undisturbed of the Barnett Formula.

LORD RICHARD: Is block grant negotiation easier now than that the Assembly is in existence than it was before?

EDWINA HART: Our primary relationship is with the Secretary of State and he is the conduit into the Cabinet. We have discussions with Treasury ministers as well. We have regular meetings particularly during the run-up to the CSR and the budget process.

MR PHILLIPS: Given that the Barnett Formula predates the devolution settlement, the fundamentals of our relationship in that regard are the same. The fundamentals, in terms of additions to the Welsh Assembly budget are the same under Barnett.

LORD RICHARD: What happens in the Assembly? Do they ever look at it?

EDWINA HART: It is the Chancellor who decides on the amount of money that is available. We have our percentage share and the Secretary of State takes what cut he wants for his office and the rest of the money comes to the National Assembly for distribution.

LORD RICHARD: What is your relationship with the committee – I do not know its name -- of the National Assembly?

EDWINA HART: There is no finance committee in the National Assembly. As Finance Minister, I answer for the whole of the Assembly and that is what was decided when the Assembly was formed.

LORD RICHARD: What about the budget?

EDWINA HART: The budget is a very transparent process. It would start in early summer when we would write to committees asking for their views about priorities for the government. Then it comes back in and ministers would visit me together with the committees and I would produce my budget. Then there are further discussions on my first budget statement and I might make adjustments in the light of discussions and plenary sessions to my final budget.

I do not know if the Commission has seen any of the budget papers we produced but they show every line. It is not like Westminster. You can see every single expenditure line the Assembly undertakes. I have to make statements if I am transferring money across so it is transparent and it is on the Assembly’s website.

MR PHILLIPS: The Government of Wales Act, sections 85 and 86, sets out what is required of the Assembly in terms of the process the Minister has just described and Standing Order 19 sets out the process in terms of the Assembly.

EDWINA HART: On the other hand, it is very helpful to have transparency in public finances.

LORD RICHARD: It is almost the Westminster system, is it not?

EDWINA HART: Yes.

LORD RICHARD: The budget then goes to plenary and plenary decides whether it is okay.

EDWINA HART: Yes.

LORD RICHARD: The Finance Bill is gone through line by line in Westminster, but you have nothing like that?

EDWINA HART: No.

LORD RICHARD: It is just a broad outline?

EDWINA HART: Detailed budget tables are available.

SIR MICHAEL WHEELER BOOTH: Have the procedures in Order 19 ever led to any variation in the budget?

EDWINA HART: Yes. I varied between my first budget this year and my final budget.

SIR MICHAEL WHEELER BOOTH: You varied it of your own volition?

EDWINA HART: Yes.

SIR MICHAEL WHEELER BOOTH: The Assembly did not require you to?

EDWINA HART: No, but the standing committees and ministers made representations on behalf of their committees to indicate there were budget plans they wanted to change.

LORD RICHARD: You could have said no?

EDWINA HART: I could. I have always tried to deliver the priorities of the government and committee priorities in the Assembly as well. We are a corporate body and we try to pull the various strands together in the budget.

SIR MICHAEL WHEELER BOOTH: It has been a process at times when the aggregate public expenditure has been going up and the resources available to the state have been increasing. It is conceivable that that would stop or go into reverse and it would be much more difficult.

EDWINA HART: You would have to look at what your core priorities were.

SIR MICHAEL WHEELER BOOTH: You would do that?

EDWINA HART: Yes, in discussion with my Cabinet colleagues and the committees would be aware if this happened and they would put their priorities in as well. I try to deliver a balanced budget which takes into account all these various strands.

SIR MICHAEL WHEELER BOOTH: The rejiggings of figures have been more a result of discussions between yourself, various ministers and committees rather than discussion, debate or even a motion carried in plenary?

EDWINA HART: Sometimes in plenary sessions issues arise in debate and people say that certain things are a good idea. I take into account what has been debated and discussed when looking at my budget.

LORD RICHARD: What role do you play in the distribution of the increased public expenditure?

EDWINA HART: In terms of the Assembly budget?

LORD RICHARD: Yes. Gordon Brown announces £40 billion. Do you have any say?

EDWINA HART: No. The final say is with the Chancellor. We lobby heavily across departments and with the Secretary of State about issues that concern us that we think there should be more public money for.

LORD RICHARD: Is that Barnett plus?

EDWINA HART: That part of Barnett plus was very heavily lobbied for by us and the Secretary of State for Wales.

EIRA DAVIES: You have a dual role as Local Government and Housing Minister and Finance Minister. How are your responsibilities as Finance Minister scrutinised and how do you balance and get an independent position in that dual capacity?

EDWINA HART: As Finance Minister, I am scrutinised by the whole Assembly. As Local Government Minister, I not only have scrutiny by the whole Assembly but every two weeks from the Local Government Committee as well.

When I first had local government added to my portfolio, there was discussion about whether a finance minister could have responsibility for local government but I have introduced mechanisms in terms of how I bid to myself, as it were. At official level, I allow discussions between senior officials on local government and finance on issues around revenue grant support and housing. Recommendations come from my officials so I do not look in the mirror and debate with myself about the budget. You have to be quite scrupulous in dealing with these things and there has been no criticism of the way I have dealt with it.

EIRA DAVIES: It is an anomaly that, as Finance Minister, you are the only minister not scrutinised through a sub-committee.

EDWINA HART: Yes.

PETER PRICE: One of the strengths of your position in determining priorities is that there is no committee that pulls together these different interests from different committees. It is you and the Assembly as a whole, which is not a vehicle where detailed changes can effectively be made. You have great authority in determining those priorities with your Cabinet colleagues. Is there any reason now why the Assembly has not decided to set up a finance committee to do that sort of broader scrutiny?

EDWINA HART: There has been discussion in the Assembly about a finance committee but there has been no wider ranging discussion because I think people are reasonably happy with the transparency of the existing arrangements. Even when money is transferred across, say in health, it all goes to the health committee so it will be picked up at that stage, before the formal resolution of the Assembly. We have not had any formal demands for a setting up of a finance committee, just some debate and informal chats.

LORD RICHARD: When you say you are passing money across, is that on the basis of a policy decision by you?

EDWINA HART: It can be a policy decision on behalf of another minister who would request the necessary changes. I then agree them and they would go to their committee. Then there has to be a formal transfer to the Assembly.

LORD RICHARD: If I were briefing the Assembly, sitting on the health committee, I could have two bites of the cherry?

EDWINA HART: Yes. On the allocation of any additional money, I would make the necessary recommendations to Cabinet and that is reflected when I have to change the figures for the new Assembly budget. I do a supplementary budget in March as a tidying up exercise and I do the transfers between the expenditure groups in December.

LORD RICHARD: If you are given five billion of increased health expenditure in Wales, you cannot say you want to spend it on something else?

EDWINA HART: Yes, I can. Once the money comes into the Welsh block, it can be spent in any way I wish. I do not have to take into account anything that has been said in Westminster on devolved matters.

LORD RICHARD: Not even when the money is given for a purpose?

EDWINA HART: No. The only area is the PES cover on structural funds which have to be used for that purpose. If I was rewarded with a pot of 50 million as a consequential for something that happened in an individual department, I do not have to use it for the same purpose at all. I could put it into the education or the health pot, provided I had the agreement of my colleagues on the Assembly.

SIR MICHAEL WHEELER BOOTH: Supposing a lot of money is being spent on health in England and you decide you value education so highly you spend more on education. To make that virement do you have to get the Assembly’s assent?

EDWINA HART: It is not a virement . When the money comes in to me, I can use it for any purpose, according to our priorities.

SIR MICHAEL WHEELER BOOTH: The Assembly has to agree?

EDWINA HART: Yes, on the final budget.

MR PHILLIPS: The health consequential does not flow into the Assembly’s health budget; it flows into the central reserve.

TOM JONES: The public hear announcements made in the UK press and in Parliament about lots of money for education and health and then ----?

EDWINA HART: It is very frustrating for a finance minister because you have to say that, as a result of devolution, the Assembly decides where this money goes.

TOM JONES: Obviously there is a lot of time lag because if the minister has decided something will happen and you have to check who wants the money, it means it is six months down the road.

EDWINA HART: Not necessarily. I am on a three year budget cycle now so I know where I am in terms of my budget. If any additional money comes in during the year, I have to discuss with ministers where our priority areas are and indicate where that money will be going. People think that money can be spent quickly and that is not true by the time you have gone through the processes.

PAUL VALERIO: In relation to the fire service, at the moment, your responsibilities and functions are dealt with through revenue finance. Are you seeking to transfer any other functions under the existing Act and how does the situation in Wales compare to that in Scotland?

EDWINA HART: The fire service is a very relevant topic at the moment and we are seeking to transfer additional funds because under the Fire Service Act 1947 this would include policy and funding responsibility. We have gone down to three brigades within Wales. It would not be appropriate for us to take national inspection pay, terms and conditions etc., but we would want a stronger representation on the Central Fire Brigade’s Advisory Council for England and Wales if we did have these powers.

Under the Scotland Act 1998, The Scottish Parliament has legislative competence for all fire service matters in which central government has a locus, but it does not have responsibility for pay, terms and conditions. We would like what they have in Scotland, a responsibility for the service itself. We have worked very hard with the service since devolution. We have done a lot of work on the fire safety agenda and we are now setting up a community fire safety trust as well which will allow us to do work in terms of fire safety and education.

VIVIENNE SUGAR: Can I ask about the coordination of social policy? From a community perspective, it is very difficult to understand that, although agencies on the ground may be cooperating together, some agencies are being directed with different priorities – for example, the emphasis in police targets a couple of years ago on street robberies which were not an issue in most parts of Wales. Could you tell us a little more about what you feel you have been able to achieve to get cooperation with the police, community safety, criminal justice and so on?

EDWINA HART: We have tried to establish very strong links with the four Welsh forces. I have meetings regularly with the chief constables and the police authorities. Law and order is not a devolved responsibility and its wider agenda is at the heart of our agenda. I am able to use existing powers to fund the community safety partnerships that I have and we have powers under the National Health Service Act 1977 to look at issues of substance misuse.

When we look at the priorities in terms of the Home Office and top slicing of police funding for priorities, those priorities are not Welsh priorities in terms of the agenda. They are very much a metropolitan and city agenda.

Fire has now moved from the Home Office; it is now the Deputy Prime Minister’s Office. It is a function of local government; yet I have all the other functions of local government with me in Wales. There is an anomaly there which we would like to see rectified.

In terms of the police, as the agenda progresses, perhaps what will emerge will be arrangements for a police funding formula and an involvement of the Assembly in that area.

VIVIENNE SUGAR: You have given some examples in your submission to the Commission. Is this a complete list of areas where you feel there are anomalies in your powers?

EDWINA HART: I would not say it is absolutely complete. I would be more than happy to send you further information on fire and the police. We would like to be more involved because we have a responsibility on the drugs issue in terms of health; yet we do not have responsibility for the police. I would not necessarily want the police devolved. It is rather like the fire service. There are bits of it that are appropriate for us and bits of the police that are appropriate for us, possibly more involvement in how the funding should be made available to the Welsh police forces.

PETER PRICE: Taking the drugs scene example, the coordination could be made to work better if some powers of the Assembly were changed?

EDWINA HART: It would be administrative arrangements on police funding.

PETER PRICE: You would be focusing only on the police funding angle for that whole scene?

EDWINA HART: I have responsibility for health which I can deal with, because health is devolved totally on that drugs issue. There is no problem on the local government side in terms of the partnerships we have so the only area where we have not the responsibility is in the police side.

PETER PRICE: You would deal with that through an influence on finance?

EDWINA HART: Yes.

PETER PRICE: Could you spell out what sort of influence?

EDWINA HART: We have a very good working relationship with the police and they want to engage in all our partnerships in Wales but the issue is a broader one of how police funding comes to us.

MR PEAT: Could I explain briefly the current police funding arrangements in Wales? They are quite complex. The police receive their non-hypothecated funding from government in two streams. There is the police grant and that is paid by the Home Office. Then there is the revenue support grant and that is paid to them by us. The capital funding is a mixed bag. Much of it is PFI, for which we pick up the revenue consequences, but it is the Home Office who are approving projects that get the funding.

In addition to those two streams, there is a whole series of specific grants, pots of money, which the Home Office has which our forces may bid against. The Home Office from time to time chooses to top slice from the non-hypothecated money to add to the specific kitties that they have and that can cause great difficulty for us if they seek to top slice the money we have put aside for police RSG and particularly if we get to hear about it very late in the day.

The current arrangements are fearsomely complicated in practice and it would be very much simpler if we had the sole responsibility for administering for the police all of their non-hypothecated funding, both the police grant and the revenue support grant. That would be parallel with the existing situation in relation to the fire service, where we have total responsibility for providing the revenue finance, even though we do not yet have any devolved policy responsibility.

Simplification of the finance system does not necessarily entail extension of wider, devolved responsibility in operational matters.

PETER PRICE: But it would carry with it the power to have greater influence over the priorities within the police service because that would be the nature of taking over the powers where the Home Office currently allow bids because they want to encourage the development of the police service in particular areas and you would take over exactly the same sort of role.

MR PEAT: There are possible steps along the road. If all we took over were to be the non-hypothecated funding, by definition, that gives us no greater power of direction because non-hypothecation means it is free for the police force to decide how to spend it on basic operational policing.

If we were to go one step beyond that, and also to acquire the ability that the Home Office currently has to fund via specific grants for specific purposes, perhaps on a Barnett consequential, we would acquire a much greater ability to direct at the margin what the policing priorities were to be.

PETER PRICE: Is that what you are seeking?

EDWINA HART: Yes. I am seeking the first stage because we have to have a consensus as to how we would take this forward. Something you might be interested in is the difficulty on PFI projects involving devolved responsibilities, such as the fire, police and magistrates’ courts. We receive funds from sponsoring departments. The fund support provided by the appropriate government department is limited to result in six per cent consequential and revenue support for PFI projects in England in any given year. Any projects above the consequential ceiling have to be fully funded by the National Assembly. In principle, a police authority in Wales can get agreement from the Home Office for a PFI project and provided that is within the ceiling of the consequential the Assembly will receive the funds but if it reaches the ceiling of the consequential the Assembly will not receive funding from the Home Office to fund this.

The existing arrangements with devolved and non-devolved responsibilities which result in other government departments determining the level of revenue support for PFI projects in Wales mean that the Assembly determines its own PFI support programme. There are anomalies within the financial set-ups which have to be dealt with.

LORD RICHARD: How would you deal with them?

EDWINA HART: We have been making representations on this but this is the nitty gritty of the problems there are within the existing settlement that hamper us having good governance in dealing with our cash.

LORD RICHARD: Does it need legislation to do it?

EDWINA HART: No. We need agreement from the Treasury and others. It is particularly galling that a project can be approved elsewhere and we have no say in it. There are a lot of underlying things in the devolution settlement popping up all the time and we are making the appropriate representations. If the Commission would be interested, we would be more than happy to do a note on these issues.

LORD RICHARD: It would be very useful.

TED ROWLANDS: Would the simplest way be to have a police Barnett formula and a fire Barnett formula?

EDWINA HART: Yes. That would be excellent.

TED ROWLANDS: Would the Fire and Police Federation support you in that?

EDWINA HART: We have done a tremendous amount of work with the fire authorities and they are very comfortable with the work we are doing with them. In a whole host of areas – sprinkler systems in schools, for example – we are ahead of the UK.

In terms of the police we have a very good relationship with the chief constables and the police authorities. They have not indicated that the direction I am going in is not in tune with their way of thinking.

LORD RICHARD: What response are you getting from the Home Office?

EDWINA HART: In terms of fire we await with interest the outcome of the Bayley Report, because that is going to deal with a whole host of issues.

LORD RICHARD: Including these issues?

EDWINA HART: I think it will look at the whole issue of the fire service.

MR PEAT: They have asked us for evidence about our views on the organisation and structure of the fire service in Wales.

EDWINA HART: In terms of the police, we have a meeting with the police authorities on Monday when we will be discussing some of the issues that arise on the settlements.

LORD RICHARD: In your evidence to us you mentioned some of the problems of deficiencies in the Local Government Act 2000.

EDWINA HART: There are several deficiencies where the Assembly was only given partial powers or powers that did not reflect its wishes. For example, the Local Government Act 2000 has the power to set out conditions under which councils pay gratuities to councillors, but we cannot use those powers unless the UK government first makes it legal for them to pay for such duties in the first place.

I was not a local government minister at the time and I can only suggest the reason might have been caution on the part of the UK government and its Civil Service about giving new powers to the National Assembly. There is a reluctance sometimes for UK government departments in this particular area to recognise the Assembly exists and there should be an element of trust.

We have learned some lessons since we have had these problems with the Local Government Act 2000. We are much more proactive in getting our messages across. We have had a lot more discussions at official level and the new Local Government Act that is coming in reflects a lot of what we want in Wales. We have very good relationships with the Wales Office and the practice of producing draft Bills for consultation has been very helpful. In terms of local government, you only have to look at the problems I had with the Homelessness Act 2002, because consultation was not very good. The Assembly was not asked their views on the principles contained in the primary legislation.

LORD RICHARD: Did you say you were not consulted at all?

EDWINA HART: We were not consulted initially at all in a timely manner about the Homelessness Act 2002. We have taken the lead on homelessness issues in Wales and we have been very proactive on this agenda. Sometimes there is a reluctance on the parts of civil servants, particularly in Whitehall, to acknowledge that we are at last free.

MR PEAT: It has been my experience that while some Whitehall officials are content to have a pretty free and easy exchange of information about future plans and will treat us almost as if we were a colleague government department in that respect; others regard the devolved administrations as very strange, distant creatures indeed, to whom nothing should be disclosed.

LORD RICHARD: Which are the difficult ministries?

EDWINA HART: The Home Office. We do not have these problems with the Treasury, which is quite significant. In terms of my portfolio, I see the contrast between my finance portfolio, where we have excellent communications with the Treasury but, when we come to the Home Office, it is a very different arena. Local government now has gone now to the Office of the Deputy Prime Minister and all these changes do not help because you broker one set of relationships and matters change. We have very good political relationships with the Local Government Minister. He is always open to suggestions.

TED ROWLANDS: The whole show is only three or four years old and it is a culture change for everybody. How much are all the problems we are identifying teething troubles or endemic to the settlement? How much of it can be sorted out by the process of the learning curve at Whitehall and here, as opposed to being systemic to the whole nature of the settlement?

EDWINA HART: I would have said 12 months ago that they were teething problems but when you have correspondence for 12 months with government departments and you still have these problems there are real problems at the heart of the system itself. There is an absolute arrogance about the way they feel about the devolved administrations, particularly in relation to Wales. I do not sense that with the Scots. I think they feel that is a more equal partnership.

LORD RICHARD: There is a distinction between attitudes in Westminster and Whitehall and the system under which they operate. Is it the structure under which they operate?

MR PEAT: As I see it as an official, it is in part the nature of the structure. The nature of the Scottish devolution settlement is very clear cut. There is a very clear boundary line and Whitehall officials understand it. There is a very variable level of understanding of the nature of the Welsh devolution settlement. A lot of Whitehall officials start by assuming that it is in some way parallel in nature but less extensive in subject matter than the Scottish one. That is where they go far wrong. Because we are in an England and Wales single legislative system, there is a very much more extensive need for officials in Whitehall to inform us of what they are doing and to consult us about legislative intention than they have need to consult the Scots.

It often proceeds from straightforward ignorance and not really understanding the need to keep us informed and consulted. There are also those who actively resent having to keep us informed and consulted.

MR PHILLIPS: There is in place a system of concordats between the devolved administrations and various central government departments. There is a machinery loosely allied to the JMC structure. At one level it is all set out in exhaustive detail but Mr Rowlands’s point is a fair one in terms of it taking time to embed. It is not an issue of lack of clarity of processes; it is the variable levels of understanding.

LORD RICHARD: I think he was saying the nature of the settlement is such that it gives rise to these anomalies and they are not sufficiently appreciated in Whitehall.

EDWINA HART: It makes it very difficult when you are trying to get a policy agenda forward. The worst aspect of this is that you feel sometimes powerless to deal with it.

TOM JONES: You have expressed several times the frustration at not being able to get changes through the system but we have heard of the transfer of powers from the Home Office to the Deputy Prime Minister’s Office in the case of fire, for example. Whether you have any say in that transfer, it does seem to have implications for you when Whitehall departments change responsibilities.

EDWINA HART: Obviously that decision is made in Whitehall and we have to live with the consequences. Sometimes we think that the responsibilities could come to us. Perhaps they should think to themselves: would it be appropriate for some of these powers to be dealt with by the National Assembly of Wales in terms of the administration.

I always say to ministers that they have to recognise that in Wales there are three million people and 22 local authority and sometimes powers are best transferred to us because we can deal with them more efficiently.

TED ROWLANDS: Have you used the Joint Ministerial Committee structure to air these grievances and to try to get a more sensible view?

EDWINA HART: We use the opportunity at every meeting we have with UK ministers. We have never had to go through any formal procedures as yet.

TED ROWLANDS: The JMC is there for just this purpose and they seem to be under-utilised.

EDWINA HART: It is well utilised in terms of the discussions at the JMC and you have an opportunity for side meetings with other people. I have a sense of frustration and, to be honest, sometimes things do not go quickly enough for me. When I write a letter on 1 June, I do not expect a reply on 1 October.

PETER PRICE: The JMC meetings seem to have a different tempo according to the subject. Some are dealt with more quickly than others. Which ones do you attend and what subject areas and how often do they meet? Specifically in the Home Office area, is there a corresponding JMC committee and how often has that met?

EDWINA HART: I have not been involved in anything with the Home Office so I am not certain if there is a corresponding JMC committee. I have been involved in ministerial meetings, particularly on the drugs side, social exclusion, and I attended a meeting recently on the anti-poverty agenda and I attend the British/Irish Council. JMC meetings come up on a fairly regular basis, depending on the policy areas being driven at the time.

SIR MICHAEL WHEELER BOOTH: You have given the impression that you are not very happy on powers. My impression was that you think the budgetary process within the Assembly works well and does not need to be changed in any respect. Is that right?

EDWINA HART: Yes. It is transparent. It has worked well. I am very happy with it.

LORD RICHARD: Do you have big political arguments about the budget?

EDWINA HART: I would not say so, no, but the opposition might think differently.

PETER PRICE: What would be the consequence of not getting the budget adopted by the Assembly?

EDWINA HART: That was the issue we had in year one when we were a minority administration and we negotiated the budget with Plaid Cymru assistance. The consequences could have been that we would have civil servants setting your budget. That would not have been appropriate, would it? I am not certain on that, but that was the talk at the time.

MR PEAT: We are under a legal obligation to set a budget within a particular time and with an Assembly that has fixed election periods you cannot bring about the demise of the Assembly by not passing the budget.

LORD RICHARD: Thank you very much. This has been extremely helpful.

EDWINA HART: I look forward to receiving your report.

VIVIENNE SUGAR: I wonder if the Minister might come back again to further discuss her portfolio?

EDWINA HART: I would be happy, provided my diary permitted.