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

MINUTES OF PROCEEDINGS

of the

EVIDENCE OF:

MICHAEL GERMAN

LEADER, WELSH LIBERAL DEMOCRATS

held at

Caradog House, Cardiff

on

28^th February 2003

LORD RICHARD: Thank you for coming. Could you identify yourself for the purposes of the record, and then perhaps you could open up the position from your point of view and we can ask you questions.

MIKE GERMAN: Thank you very much indeed. I am here in my capacity as leader of the Welsh Liberal Democrats in the National Assembly for Wales. I have with me Robert Roffe, the policy officer for the Welsh Liberal Democrats.

You have our document before you but I would like to say why we have done it in the way we have. What we have looked at is how the Assembly's current powers have enabled us to achieve what we have set out to do. We have also identified those areas where we have been thwarted by the lack of powers and have tried to identify Assembly Government initiatives, clearly stated, which due to the Assembly's lack of primary legislative powers it has either been thwarted in or been unable to enact in full or in total or in part, and we have tried to cover every area of the remit.

We have given examples of primary legislation which we have sought but not been given parliamentary time for which is another part of the issue, because it is obviously not just the lack of power but the lack of issue.

We see the movement towards a Welsh Parliament as being a key strategic policy for longer than I have been around in the Party and clearly it has three stages: step one would be to establish a senate, and we have suggested 80 members though it is a matter of debate as to whether exactly 80 is right but around 80, which would have the legislative power and would have therefore the ability to scrutinise effectively, and it would be balanced by a reduced workload and therefore a reduced number of members of Parliament representing Wales.

Step 2 would be the replacement of the funding mechanism, the Barnett formula, with a revenue distribution formula, and we have suggested a way in which that would be determined, the Finance Commission for the nations and the regions of the United Kingdom, and, thirdly, to move from the post of the Secretary of State for Wales with the posts where most of the functions that would have been transferred to the Welsh senate being replaced by a Secretary of State for the nations and regions of the United Kingdom with a remit to represent all devolved bodies at United Kingdom Cabinet level.

That is what we have set out in our document and I am very pleased to be able to answer questions or to talk further on the matters which we have tried to raise.

LORD RICHARD: Thank you very much. You have, indeed, set out in your paper in fair detail many of the issues which we would like to raise with you.

Fundamentally I suppose what you are saying is that you do not like the existing constitutional settlement and you think it ought to be changed.

MIKE GERMAN: Indeed. It was part of a fudged process, we believe, because we were always seen to be the tail-end charlies on the back of a Scottish settlement which was clear and had a much clearer direction to it, and in the process of bargaining which took place to enable us to set up what we currently have it was certainly the case that compromises were made which, if you were being logical about the way in which you had created an easily definable division of responsibilities between what happens in a National Assembly and what happens in Westminster would have been much clearer, and the Scottish model gave something of that clarity which we did not think we got in Wales.

LORD RICHARD: But Scotland had been talking about it for years and years.

MIKE GERMAN: And I do regret the fact that we did not have a convention in Wales which I called for on many occasions prior to the establishment of the referendum, because I think it would have helped certainly to overcome some of these problems. The issues had been on the table for a considerable length of time, and back in the 70s with the previous devolution referendum part of the problem was that it did not carry a weight of political opinion in the sense that it seemed to be carrying forward the Welsh opinion with it, and I think the lesson for us all was that in referenda campaigns you need to carry people with you whether these be part of what I would call civic society or the public at large, and if you do not carry all the civic society then you are not able to explain the issues at length and in detail. The campaign was fairly constructed for a very short period of time, and I know because I was responsible for my Party's commitment to the Wales campaign, and the level of involvement between the political parties was quite limited. In fact, the only level of co-ordination at any formal level occurred in a public house down the road here once a week where key members would meet and discuss the campaign together.

LORD RICHARD: What strikes me about your proposals is that you are not starting off with a clean sheet, and therefore to try and import the Scottish model now I would have thought would be rather difficult. Given the fact that you have what you have at the moment, how would you move from the present position to the one you would like?

MIKE GERMAN: The first point that is obvious to us is the primary legislative powers of the areas of competence that we currently have where clearly people would expect us to have been responsible for education per se in the context of having the budget for education and therefore being able to spend on it and to be able to control the issues that are behind it. The division between primary and secondary legislation is very artificial because it does not give you strategic routes that you can take, and convoluted exercises around secondary legislation to give you a route forward are not necessarily the best way of ensuring that you have a strengthened policy role in the areas of competence.

I do not think that there is any way in which the secondary legislation route can be strengthened. I do not think you can say: All that happens in that route should therefore be within the competence of the National Assembly and that that solves many problems.

You could say that the route for the Henry VIII type clauses in primary legislation would be a possible route to take you down the opportunity to have a lot of freedom to be able to work carefully, but the logical conclusion is that you should be able to drive forward your policy agenda yourselves in the areas for which you have competence and for which you are responsible for the overwhelming part of the budget. So primary legislative powers seem to be appropriate in the areas we have competence in.

We would see that as being of primary interest and, secondly, following on, there are the funding mechanisms which obviously affect not just Wales but the parts of the United Kingdom that are already devolved and also the English regions when they become devolved.

I understand there is pressure from at least two regions of England, probably more, who want to go down this route and inevitably the budgetary regimes which follow would have to have some logic beyond population because that is where we are heading with convergence on board. So a more logical funding regime for the greater devolvement of powers there are going to be within the United Kingdom seems to be appropriate.

That seems to me to be fairly different from the current settlement in Scotland so it is legislation for the Scottish route I am talking about, but the funding route applies universally across the United Kingdom.

LORD RICHARD: But it is terribly difficult to see the routes by which you move from the situation you have now to a quasi Scottish situation here. You can do it with new, but you have to tear up the transfer of functions order to start off with, have you not?

MIKE GERMAN: Its number 1 and 2 parts, the drawerful which comes when you want to know what you can do in Wales, is part of the problem. We will have to have a revised and completely reformed transfer of functions order and, if you take the other things into context, certainly the size of the National Assembly and the powers that go with that, you could put it into a reformed Government of Wales Act which is where we need to go and other amendments or extensions to it, and the Transfer of Functions Act would have to be much more simple in its outcome than currently, which lists laws by the pageful.

TED ROWLANDS: Have you made any attempt to cost this?

MIKE GERMAN: We have certainly had an attempt to cost in comparison with the Scottish Parliament. In Scotland the Parliament costs £206 million out of a budget of £15.6 billion, and the cost of their legal system on top of that is £1.1 billion. At the current moment the cost of the Assembly is just over is £120.7 million out of a total budget of between £9 and £10 billion, depending which year you take.

The total cost of the English and Welsh courts is £7.76 billion of which £43 million is the cost of the Welsh court system, so if we were to move down having a legal structure in the light of a Parliament for Wales with a legal structure to follow from it, and I think there is some logic that should be the case as well, then obviously that £43 million would come out of that £7.76 billion budget for the England and Welsh courts. So the increase in costs would be in the running of the Assembly itself with more members, but off-set against that would be the decrease in costs by having fewer members of Welsh members of Parliament, which is the situation pertaining in Scotland now. They are reducing their numbers of MPs, I believe.

TED ROWLANDS: So can you just give me the cost of the National Assembly and the Welsh Assembly Government? There is the Assembly cost, there is the Welsh Assembly Government cost and, with all these additional powers being transferred, what would be the comparative costs?

MIKE GERMAN: The relationship between the Scottish Parliament and the cost of its Parliament against its budget would be, we think, approximately the same, so £206 million out of £15.6 billion and the relevant percentage that would cause upon the £9-10 billion. We can send you the figures.

TED ROWLANDS: Yes.

MIKE GERMAN: It would certainly be an increase on the £120.7 million but that would be off-set by the costs of fewer members of Parliament in Wales.

TED ROWLANDS: Your package in your submission, primary legislation powers, tax powers, increased membership, abolition of the Secretary of State and fewer Westminster members, is such an alternative package to that which was contained in the Voice for Wales and Government for Wales Act. Would you welcome or support the principle of this package being put in a referendum?

MIKE GERMAN: I think it is absolutely essential. Our party line has always been, and I support it, that it has to be put to the people and there is a debate and one which I support that says that either a general election or a referendum would be appropriate. There are some people who say a referendum specifically and not putting in an election campaign, and that is a matter for further debate, but certainly it has to be put to the people.

DR McALLISTER: Looking at page 34 of your paper, you say, "Subject to a referendum of the Welsh people, Welsh Liberal Democrats propose that a Welsh legislature..." - you are talking about the income tax varying powers. Would you be calling for a referendum if it was purely primary legislative powers and not tax varying powers?

MIKE GERMAN: No. Obviously it would be a case that would have to be debated in the general election campaign but not subjected to a referendum, but on the tax side of measures which is a major change moving away from the way the powers can be granted that should be put to the people in a referendum campaign.

LORD RICHARD: Just that?

MIKE GERMAN: From primary legislation flows all the other things about the size of the Assembly, the size of the scrutiny model and the role that that plays, and in my view that has to be put in terms of the general election campaign because it would be unwise of any political party not to put these issues in their manifesto, but clearly in terms of changing the tax base upon which people are being asked to make an opinion, that should certainly go to a referendum.

All of that has to be subject to the views of the people but some of it could be the views in an election campaign through the manifesto commitments.

TED ROWLANDS: In essence what you are arguing for is far more than Wales only. To that extent, are we really looking at the art of the possible or the desirable?

MIKE GERMAN: What is clear to me is that the legislation being currently proposed by Westminster government for England will lead to a discussion about the way in which the formula for funding those parts of England for the functions they carry out, as with London, and to some discussion as to how that formula works. At the moment we have this back-of-an-envelope job which divides it up, that was the way Barnett described it at the time; that he felt long ago it has served its purpose and things have moved on. So the formula for funding the nations and regions of the United Kingdom has to be a United Kingdom role because for to us determine, apart from the tax varying powers for ourselves, how that should be ruled out clearly there would be a role for us to play in that commission, and the structure of the commission would be such that it allows the United Kingdom government to make up its mind based upon the evidence and the advice given to it.

TED ROWLANDS: Any formula has its winners and losers - there is no such thing as the ideal formula which satisfies everybody. To what extent do you believe that Wales is losing out under the current Barnett formula because we have heard other evidence that in fact Wales does better as a result of the Barnett formula?

MIKE GERMAN: The hard evidence we have is that the Treasury review which took place I think in 1997, which looked at the way in which Scotland and Wales came out of the funding formula, gave an estimate that Wales was 2 per cent below in terms of what it got of the national cake - in other words, we were 2 per cent out which is quite substantial in terms of the overall budget that we achieve.

Now, that is the last remaining extant piece of Civil Service work that has been done on this, but there have been substantial pieces of work by academics which have justified that as well.

The difficulty in the same formula is that Scotland would appear to benefit over and above the current Barnett formula but any needs-based formula would have to fluctuate over time as the needs of the regions changed. If Wales became more prosperous and we had fewer health needs because we were earning more money then clearly we would be in a better position and therefore we would expect our percentage of the cake to be reflected accordingly.

TED ROWLANDS: You say in 2.6, "Perversely, although Wales has a proven need for higher public expenditure than England, the effect of the Barnett Formula is that, as public expenditure increases, the rate of convergence of spending ... accelerates", but at the moment within the block expenditure Welsh expenditure is 125 per head to English 100 - directly comparable. Now that is not ungenerous.

MIKE GERMAN: If you look at the way in which, and it is pages of text, each of the headings under which the responsibilities of the National Assembly are measured, and the figures were all in a document provided by the Treasury just before the Assembly was set up, you can see clearly that over a period of time gradually we are moving towards a population-based formula. In other words, we would get from a 5.95 or 5.94 per cent of the various departmental expenditure plans from the United Kingdom government ministries. Now, that is the case, and it is certainly the case that, if you look at the Treasury according to need figures, we are behind.

Now, you can statistically cut a cake in a number of ways --

TED ROWLANDS: But just comparing like with like. The block grant expenditure in Wales and the equivalent in England divided by head of population is 125 to 100 Wales over England within the comparable block grant expenditure.

MIKE GERMAN: I think the problem is that the English figures do not represent the differences between the regions. If you look at the north east of England and then looked at its needs and compared it against Wales, it would be different. You have to accept as an axiom of politics of fairness in a sense that the tax regime is there to equalise the needs for people and therefore you would expect there to be more spend in the north east of England and in Wales than you would in the south east corner.

We also know, however, that the block figures that have been given do not always include all of the expenditure for regions and R&D universities and overseas embassies and all sorts of other things - we have to make sure we are comparing like with like. It is the regional dimension which is missing from the English figures.

SIR MICHAEL WHEELER-BOOTH: Why are you so confident that a needs-based assessment would act to the benefit of Wales?

MIKE GERMAN: It would certainly act to the benefit of Wales in our current position and I would hope in the longer term that it would not need to, because no one wants us to be a poorer part of the United Kingdom - certainly not us in Wales. I would have thought that what we should be aiming for is to at least reach the average and to be beyond that. Being a prosperous part means you do contribute to the poorer parts, and I think that sort of transfer of taxation which comes from that view of taxation that it is there to equalise the services that people provide, more or less in a United Kingdom global sense, is important but I would maintain that it is not a position we want to be in for a long period of time.

SIR MICHAEL WHEELER-BOOTH: Secondly, we have been given quite strong evidence by your colleagues in government that you are not keen on looking at Barnett. How do you think politically this is going to work out?

MIKE GERMAN: I accept this is difficult for the Scots and in my terms I had to negotiate the position which we have arrived at - not only with my colleagues in our Party in the United Kingdom as a whole but also in Scotland, and the position we have reached is the one we have described. I think there are ways in which you have to look at deprivation within regions. The tools you need in order to measure need are going to be very finely tuned in order to make it work as well. I understand there are divisions of opinion in other parties and certainly in the Labour Party about this issue, but it does strike me that if you start from the base that tax is there to help equalise and to provide and fill the gaps where quality of life and ability to have money in your own pockets and make things happen is present, then a needs formula is axiomatic. If you simply have a formula based on population then it assumes everyone has an equal need across the United Kingdom, which is clearly not the case. We have to balance it across the United Kingdom as a whole.

LORD RICHARD: But getting that agreed is a monumental task. Everybody's perception of need will differ; so much of it is subjective. Is there any evidence that you are likely to be able to do it?

MIKE GERMAN: The opposite is true. If you set up the machinery for people to have access to a route which would lead to a needs-based formula from the United Kingdom government, then the consequence of not agreeing is that you do not have the settlement you might like, and therefore this would be a negotiation which would be conducted across the piste. We have done it in Wales on the local government settlement. We are not there yet, but there was an obvious dislike of the way in which the block grant which accounts for something like 80 odd per cent of local government expenditure in Wales has been distributed and since that, three years ago, the Commission or rather the serious work took place to try and reflect a needs-based formula, and a much more complex but much fairer solution has now emerged and is continually being updated where it is based upon some aspect of need. The real problem is that the current local government formula looked at need as expressed in previous historic spend rather than value for money, and I feel strongly about that. But there are ways in which you can measure need, and we are doing it all the time. Public agencies are doing it all the time in allocation of their funding; the Treasury is doing it in terms of its allocation of budget - its perceived need is where we move from. Whether and how you reach agreement between the regions and nations of the United Kingdom is interesting, but if you do not reach agreement because it is time-related you get the settlement which is going to be imposed upon you.

This is the system used by the German L@ nders where they sit together, the Bundes, and arrive at a distribution formula for the German L@ nders. They seem to be managing quite well but maybe there are complaints from various different L@ nders at different times of the year but you would expect that, but in the end it seems to be a comfortable solution they have lived with for some time.

PETER PRICE: At first glance the Barnett formula appears to provide a simple basis upon which there is a division but when you look at it in terms of the process, following each comprehensive spending review, within the Treasury they prepare a document showing for each spending area what is the attributable proportion for Wales and Scotland. Now that complex document prepared behind the scenes has quite a significant impact on the amount of the Welsh block grant.

To what extent are you aware of the Welsh Assembly Government being involved in the process by way those figures are established? Is this something perhaps at the level of purely information to civil servants or does it come to the level of the Welsh Assembly Government in Cabinet meetings?

MIKE GERMAN: It certainly does not reach the political frontline, as it were. What happens, as I understand it, is that it is dealt with at Civil Service level checking for omissions and arguing about the relevant percentages - this is operational level at 96.6 per cent, or is it 96.7, of the budget for health that we are seeking an agreement upon - and as I understand it, in the bowels of the Treasury, there is a team of civil servants who are the devolution team who spend their time burrowing away at this percentage figure producing large sheets of paper on it, but because it is a very technical operation you have to argue minutely that it has gone beyond the Civil Service route and I would not have heard about it unless I quizzed one of the officials in the finance division of the Assembly on this matter. I did ask to meet them but I was informed this would not be sensible because they would not understand that the level on which they were working was so minute and that each level was a micro level.

TED ROWLANDS: You raise the issue of micro taxes in your document. As a matter of curiosity, are these powers you sought within the Scottish model or without?

MIKE GERMAN: No. They are wholly at the moment in the United Kingdom Treasury model. The particular issue we were interested in was R&D tax credits and I know that the Chancellor of the Exchequer has been particularly keen to look at the sort of tax measures which would give enhancement in, let's say, areas like Ebbw Vale and the Newport issue related to the way they are dealing with the closures of the Corus steelworks. Now these are geographically located tax measures encouraging companies and people to invest --

TED ROWLANDS: But putting aside the merits, in this particular case this would be a measure that goes beyond Scottish model?

MIKE GERMAN: Yes.

VIVIENNE SUGAR: I wanted to move to the question of the number of Assembly members and MPs. The proposal here is for 80 members of the Senate and a reduction to 28 MPs. Could you rehearse the rationale for those numbers?

MIKE GERMAN: Yes. The rationale for 80, and it is not a fixed figure - it could be either side of that to a small degree - is that in order to carry out the scrutiny that is essential for the new role that we would be proposing for the Assembly there would be a sufficient number of members not engaged in the executive or in managing the machinery of government to be able to carry out those tasks. We know, given the current number of members, the difficulty there is.

For example, civil servants struggle with the ability to put on an extra meeting. They cannot do it because of people being on more than one committee, cross membership. Time-tabling is horrendous at the moment.

I think the number of members therefore that we are proposing for Westminster we would only propose at the point at which the power to transfer is basically a transference of the time function we would see as part of the need to move into Wales - in other words, to carry out the same functions carried out by MPs globally across Wales - and since Westminster would no longer have the primary legislation aspects relating to the Welsh dimension, there would be a reduced role for MPs in those aspects of their work, and this figure is drawn largely on our understanding of that percentage reduction in their workload.

VIVIENNE SUGAR: So the 80 would be based on two representative AMs from each existing parliamentary consistency?

MIKE GERMAN: No. We would prefer STV. It was not our choice in the first place and the single transferable vote has two advantages. One is it retains a geographical representation, even though on a bigger scale, but secondly the choice of who is elected is with the elector and not with the parties, as currently. For that reason we would support the STV and it also gives a fairer outcome.

Obviously the proposals on 80 reflect that. If, however, we were forced to extend the existing system, there are two issues that we do not like about the existing system: one is that the lists are determined by the parties, and we argued for this in the Government of Wales Act - that we would have preferred the parties to have presented their names and the voters could have put their names alongside the names themselves and selected from the list rather than the parties choosing - but clearly the current regime as against Scotland is not reflective of the proportionality of votes to number of members for each party who are elected, and therefore if we were to go down the list system route again the number of list members would be extended in order to create that parity which is not there between votes and seats.

VIVIENNE SUGAR: So if there was no change, no increase to 80, no extension of powers and you had to make the existing system work, how would you get over the pressures that you described earlier? You have one idea about weekly meetings of committees but what else could be done?

MIKE GERMAN: I do not think weekly meetings is a possibility.

VIVIENNE SUGAR: I thought I read that.

MIKE GERMAN: We would want weekly meetings or sub-committees or some form of better scrutiny but we could not do it at present with the current membership we have because of cross-membership. It would be impossible unless we reduce the number of members on committees, but they are already eight or nine - one is eleven - but it is important that there is that level of scrutiny which requires expertise.

SIR MICHAEL WHEELER-BOOTH: You think bigger committees are usually better than small?

MIKE GERMAN: No. I think there is an optimum size, but somewhere in the middle which puts a huge onus on to a smaller number of people. People develop their own expertise in a committee in a specific area and the political spread which is important to retain, the proportion of members who come from each of the political groupings --

DR McALLISTER: But you could still get that with a smaller committee?

MIKE GERMAN: You can but it is very difficult then to meet the detailed scrutiny because you are putting the onus on a very small number of people who have done a huge amount of detailed work whereas that load is spread across a whole number of members beavering away at the detail. We also have no sub-committees, to my knowledge of any of the committees of the Assembly, and that is because it has been impossible to timetable across because of cross-membership.

DR McALLISTER: What about the argument that you could manage time more effectively within the National Assembly's programme - I do not just mean on a weekly basis but on annual basis in terms of the number of recesses and so on.

MIKE GERMAN: As I understand it, and I do not know the detailed numbers, we reflect what happens in Westminster in terms of numbers of days or I think they have just leap-frogged us slightly with their reforms.

DR McALLISTER: That does not make it right!

MIKE GERMAN: No, indeed. Can I refrain from commenting on that?

There is also the issue of making it a place in which people who have families and so on are able to work, and with the school holiday regime as it is and with the hours that we currently keep that is possible - though there is an argument for extending the hours in which we meet, but I do find it probably more difficult to extend the number of days that we meet in the week. I think the Monday and Friday are very important for both government on the one hand and constituency work which has to happen outside that timeframe.

I remain an agnostic as to whether we should exceed the number of days that Parliament has in Westminster.

VIVIENNE SUGAR: How do you feel about some of the other ideas that are around about the creation of a finance committee, and the idea that the regional committees might meet for longer and be more focused in what they cover? Or the idea that there should be plenaries outside Cardiff on a regular basis? There are a lot of ideas floating about at the moment.

MIKE GERMAN: On the issue of the regional committees, I believe we have a real problem because they meet on a Friday which is a constituency day and many members have commitments which they need to keep. Wales being what it is you might find yourself in Tenby when you are representing people from Welshpool, and it is a day for many people rather than half a day. The regional committee could have, and certainly our evidence to the internal work we did in Assembly made it much more powerful and to make more scrutiny and more recommendations and more local analysis, and that is absolutely right.

At the moment we have an audit committee function but a finance committee function would be essential. Of course, the issue then is whether you need a minister for financial responsibility alone separated from other functions, and that relates again to the number of ministers or secretaries committed under the Government of Wales Act, which raises an issue again.

On the issues of plenaries outside Cardiff I used to be a great fan of moving the event around, but there are enormous costs in terms of translation facilities and in terms of the number of additional civil servants you would have to employ to move it around. I have latterly come to the view that having a symbolic once a year meeting in the north of Wales might give people an opportunity to hear and see the Assembly, but much more important would be to get the committee work out there and to do more of what the government has been doing at the moment holding open mike sessions in different parts of Wales where people can engage with the Assembly more directly.

The third one of those is next week, and people have turned up in large numbers and have questioned us about all sorts of issues on spec, in the way that the regional committees have also done the same - in fact, most of the regional committees have these open mike sessions. So I am more in favour now of increasing the number of committees that get out and about rather than the whole operation itself.

TOM JONES: That is about making the existing system work within Wales. What about the relations between Cardiff and London? On the Rawlings Principles which the Assembly passed unanimously in plenary, what has the Assembly done to convey to Westminster those principles, or its wishes according to those principles?

Secondly, where has the Animal Health Bill got to and what has been the process to make that Bill provide for Welsh interests? How much of a frustration is that?

MIKE GERMAN: Dealing with that latter point first, I have to be slightly careful with my political hat on because I do know the answer to some of the question about where the Animal Health Bill is and I will be making a statement to the Assembly on this matter; we are having a debate on the transfer of powers later this month, and I will be perfectly happy to let the Commission know after that the process we have gone through.

It is certainly the case that it has been a long, drawn-out affair and it has also been frustrating for the Assembly given that its decision after foot and mouth was that these powers were essential for the proper managing of a crisis like foot and mouth. The United Kingdom government's response to the foot and mouth crisis in the reports which it had commissioned and reported on foot and mouth said that these powers should be transferred to the National Assembly for Wales. There are a number of subsequent matters which need to be dealt with which I will be announcing in my statement.

On the general relationships, distinguishing between Parliament and the Assembly as a whole and the government and Whitehall, certainly it is an interesting query because in terms of Whitehall/Wales relationships, it is very much in my view dependent upon the nature of the ministry to whom you are talking. Since much of the detail of the work goes on at official level, sometimes you can be working away for days on what appear to be very many miniscule points which would then result in some form of political action by ministers or by the Assembly as a whole.

On the parliamentary side, the Welsh Affairs Committee has made it clear that it is not wanting to tread on the Welsh Assembly's territory but there is a certain degree of overlap between the two, and I would hope that whatever the partnership arrangement is, because there is bound to be one between a Parliament for the United Kingdom and for Wales, that relationship would be one of mutual support rather than of seeing a superior measure against an inferior one.

TOM JONES: But what happened to the Rawlings Principles in particular? Did you just leave it after the debate or take it to the Secretary of State for Wales' office?

MIKE GERMAN: I am trying to be careful on this because the internal relationship between Whitehall and Welsh Assembly Government is one where obviously there are improvements which could be made in the way in which we work, and one of the big problems is the size of the Secretary of State's office because he has to spend his time squirreling away - not him personally - at finding out what his other ministries are up to working with very limited staff. I do not think anyone here would with enthusiasm raise the size of the Secretary of State's department but frequently civil servants from the Assembly government have to be lent to them to carry on, and they cannot cope with the amount of work given that they have a bigger role than the Scottish Secretary of State.

In terms of the way in which the Rawlings Principles have been taken forward, there are two mechanisms. One is through the Presiding Officer's discussions and the other is through the Assembly Government's discussions about the way in which we can improve the process between the two parts.

DR McALLISTER: Having read section 6 of your paper, it is fairly optimistic on what might be achieved purely by Wales gaining primary legislation powers.

Whilst we were in Scotland we heard from various witnesses that they were relatively dissatisfied with the degree of input they could make in the European arena as it currently stood. From another angle I know there have been fairly major debates within the Belgian regional government system and also within the German lande framework. Both of those are federal, and they feel they are currently being excluded from some of the critical decision-making processes in Europe.

Were Wales to gain purely primary legislation powers and become a constitutional region as defined within the EU current framework, how would that enable us to be more influential?

Following on, where has Scotland exercised more influence than Wales up till now because it is technically a constitutional region?

MIKE GERMAN: First of all, recognising that the power of the EU lies in the Council of Ministers, and having had the great privilege, you could say, of attending Council of Ministers' meetings and seeing how they operate, the real issues are determined there. There is an increasing role for the European Parliament but it is member state bargaining which determines policy.

I once described this as a route by which the European Union itself was seeking to give more authority and power to its regions within the European member states; at the same time the member state was acting as the gate-keeper for the discussions that were going on, and we are at a very critical time at the present moment in the future governance of Europe.

My reading of the situation is that the regional element, whether it be those with legislative power or those without but certainly with legislative power, is beginning to emerge as having a more specific function. Peter Hain has submitted evidence on behalf of the United Kingdom government to the governance conference and they have taken forward in the United Kingdom a very powerful line on the role which regions can play and that is very interesting because it now means the United Kingdom is very supportive of driving that issue forward.

What has been obvious to me also is that being present as a Minister for a regional government at a Council of Ministers is something which many other countries would really love to do. The Germans and the Spanish are very envious indeed of the ability for people like myself to be there and to be able to influence what goes on. I should add the influence is not always around the table but around the building, as it were --

LORD RICHARD: At the end of the lunches? Do they let you into the lunches?

MIKE GERMAN: Not to the formal lunches but there are more informal types of lunches. One occurred very recently, and there are routes to being able to influence in the informal rather than the formal context.

LORD RICHARD: Would you try and influence the British position, or the people the British were negotiating with?

MIKE GERMAN: Certainly it is important that I influence the gate-keeper first, and as long as the power lies with the Council of Ministers then it is the United Kingdom position, but being aware of and being able to talk through with other Member States their positions is very vital because in the end the United Kingdom has to compromise with the positions that come about.

Now, to go back to the fundamental question about primary legislation and how that would help us, and I am going to try and explain it in terms of Scotland in a moment, the more influence you have within your own Member State the more clout you have in trying to establish the Member State's position. At the moment in the agricultural field, where powers are usually joint and several, there is an awful amount of discussion between United Kingdom ministers with devolved United Kingdom ministers in order to try and make that position clear. The more that the influence within a Member State of the regional government has the more it has influence in trying to get a United Kingdom position, because the implementation of a United Kingdom position can only be done through the implementation of those directives, or prior to the implementation of those directives it has a role that it can play.

LORD RICHARD: Scotland has more clout than here?

MIKE GERMAN: Scotland has more clout, and I will give you one example of the changes made to the animal movement regime which have just come in, where the Scottish position is they were able to influence because they had the primary powers to select the number of days in which animal movements could take place, whereas I have had to work on the basis of veto rather than the basis of being able to influence in terms of the changes I wanted to make.

PETER PRICE: Can I take up the issue of policy formation and the overlap with legislation and primary powers? In your paper you have given a lot of good examples of the ways in which the Welsh Assembly Government has been frustrated in not being able to move forward through lack of primary powers, and because there are so many good examples there I think perhaps we have focused very much on your paper, but I would like to take up something that is not there and that is the formation of policy.

When you get papers from civil servants proposing new policy directions or developments of policy, how far is the constraint about primary legislation reflected in that paper? Is it a question of looking at the area and saying, "This is what the policy ought to be: these are the methods of implementation that you will need", and simply listing the primary legislation as part of it, or is the whole paper written on the basis of what you can do within your existing powers? What is a typical policy paper in its format?

MIKE GERMAN: Typically it would work within the current powers that we have. Quite often a civil servant would add a comment that to go beyond this would require approval of Westminster or primary legislative powers or primary powers or an Act or Bill or whatever determined by Whitehall or Westminster. There is no general rule on this issue but government is for ever trying to find a route through in order to put through its policy objectives.

The clearest example was on Assembly learning grants where having the Rees recommendation that we should be able to abolish up-front tuition fees was one there was pretty genuine support for yet we were only able to deal with the grants issue, and we had to go through a very circuitous route through local authorities and not the clear route of being able to have a grant machine for Wales which was a straightforward application. We had to find a route through in order to deal with it so a lot of the policy papers that came back to us on that specific issue were saying, "Well, you cannot deal with upfront tuition fees, put it to one side", and then we had to deal with the tortuous route which you would have to go through giving money to local authorities and building on access funds in order to provide the grant regime that we currently have for higher education.

HUW VAUGHAN THOMAS: On that specific example, you might argue that that is a better use of power - namely that you are moving down, you are empowering local authorities, creating a framework for local authorities using guidance notes or whatever, increasing their finance - than pulling into the centre and administering?

I do not see in a sense why you describe that as "tortuous" because that would be a more traditional approach.

MIKE GERMAN: Sorry, I probably did not make myself absolutely clear on this matter. It is essential that local authorities deliver the grant regime but the way in which they have to deliver it is through use of the access funding and that is the tortuous regime, not that the local authorities should deliver it per se.

Of course, the upfront tuition fees issue would have been something that we would have moved through local authorities, working through where people lived in their local way and I think that is the democratic way to do it. I was not suggesting that it should not be local authorities but that the way we had to implement it was tortuous - not the delivery mechanism at the end.

TED ROWLANDS: Returning to the powers you seek, there has been one area in devolution and in the transfer of Welsh Office functions and the Government of Wales Act which was not transferred - namely the whole issue of pay, conditions and pensions of the public service - and that was not just a Whitehall issue but a common wish that was often underpinned at that time historically by the belief by those who worked in the service that they did not want huge regional differentials. I see that the whole drift of your paper, and others, was that this set of functions should be transferred to the Welsh Assembly on the assumption that at some time in the future there would be differential pay skills and conditions of service within the public service.

Are the Liberal Democrats going down that line, and do they have the backing of those in the public service to do it?

MIKE GERMAN: Prior to the 1999 elections and continually throughout I have asked the teachers' unions, the nursing associations and so on whether they would want this route to be followed - even the BMA - and at first the answer was a straightforward flat "No", but I have detected a change and a shift to people realising that, if you are going to have a different style of service in education or health or whatever, then the consequence of devolution is diversity. We will have a different way of doing things with health, as we are with the structure of the local health boards in Wales, and there will be different regimes, different styles of structures and staffing, and I think there has been increasing recognition that the ability to be able to get at the politicians who make those decisions and the ability to be closer to them will give them, they may think, a better deal.

TED ROWLANDS: The assumption is that it will be always be better?

MIKE GERMAN: Indeed, as it is with the Chief Constable of Gwent who challenged us last week to transfer police funding to Wales because he says he gets a better deal, or he is "listened to" more by the National Assembly for Wales because it is a smaller set of people.

TED ROWLANDS: Interestingly we read second hand that the Home Office is very keen to create regional policing pay structures - for other reasons, mind you.

The other area is prisons. We do not have a cross-section of prisons in Wales, and we have a prison service that I would have thought was quite small in terms of size and population and expenditure. Is this a case of sweeping them all along, or is there a merit in the transfer of prison service responsibilities?

MIKE GERMAN: I think it goes with the justice structure bringing crime policing and justice together - the legal structure. It is the tidying off of that end of the process.

Clearly we would have to purchase, as is currently the case with the health service now and many other services, from England appropriate spaces --

TED ROWLANDS: So for anybody found guilty of murder and therefore serving life we would have to purchase a place in Garton or in any high-lifer prison in England?

MIKE GERMAN: Yes. Thankfully and hopefully we do not have many of those, but some.

SIR MICHAEL WHEELER-BOOTH: Following up the last question, I used to be partly responsible for staffing one House in Westminster and I was always keen to have more interdependence and cross-fertilisation with the other House, with the Civil Service, with outside, with private, and indeed, if devolution came, with devolved assemblies. You are going for a Welsh civil service. I do not see why it is incompatible and it has to follow from primary powers. I do not follow how dual accountability would work, and it seems to me it would make it less likely to have bright young Welsh men or women going to London, Edinburgh, Belfast or wherever.

Conversely, it seems to me you want this richness and you want one lot of people to learn from the other, and you learn better when on the whole you are young. I am not suggesting swapping Permanent Secretaries, or that the old warlords should be chucked on the dust heap, but you want to have transferability and I am very wary about this idea of having absolutely independent services. It seems to me rather minimalist and rather unLiberal Democrat.

MIKE GERMAN: It is, of course, very much in favour of the process of devolution which is very Liberal Democrat, but the model is Northern Ireland where the Northern Ireland Civil Service have been and are independent of the United Kingdom Civil Service, and always have been.

One remark put to me by a civil servant, who shall be nameless, is as follows: "Minister, you can tell us what to do but you cannot tell us who will do it", and that reflects the fact that the structure of appointments, the way in which the tasks should be carried out, the number of people, the officials you have in a particular area, rely in our view on the Permanent Secretary who in turn is responsible to London. It is not a matter of great tension but it is a matter where in policy terms, if we are directing people and we want to increase the size of our resource to undertake specific work, we are responsible to a Permanent Secretary who in turn is not responsible to us beyond the moral and legal obligations that he fulfils within the context of the Government of Wales Act.

On transfer of staff, there is a fair bit of transfer between the Wales Office and the National Assembly but not between other government departments and there never has been, but there is no reason I am told why that could not continue as happens now with the Northern Ireland Assembly.

Equally, one of the key things we are keen to move on with is giving people opportunities in the European context, both in UKREP and also in the Commission and other institutions, and we have already got placed people there who have no relationship with the European Commission - they are our officials seconded to the European Commission for experience. You are absolutely right that there is a richness that comes from being able to share expertise and experience and I would hope that would be able to continue, but that could be done through protocol and activity and perception and I would think that the restraints we currently have on that exchange of expertise are nothing to do with the fact that we are part of a home civil service but more to do with the way in which we support those mechanisms and people wanting to exchange, and encouraging them so to do.

VIVIENNE SUGAR: Regarding the reference to public service commission, your point about the Permanent Secretary currently reporting to London is to the Civil Service Commission, so this idea of a Welsh Civil Service would not give you, as politicians, the power to direct that you seem to be seeking if you have a Welsh Commission.

MIKE GERMAN: I think the Welsh Commission would be important but I do not think it would stop us from the opportunity to do what I think is a fairly good balance between the professional role which officers play, both in local government as well as in national, and the role of policy formation and direction which a politician would want to see encouraged. There are examples where it has not been possible; I can think of examples where I have been trying to encourage them to get more resource for work that I want to do which has been constrained by the overall and over-arching number of civil servants, the roles that they have and the levels of skills they have in various areas.

SIR MICHAEL WHEELER-BOOTH: But that is within a relatively small department, and that is one of my underlying points.

If you have a small area and nobody can easy criss-cross into bigger ones, you have old Mr Y who has been doing cabbages for forty years and young 20-year-old bright young thing who would be wonderful at doing cabbages but you cannot do it.

MIKE GERMAN: Well, you can, you see, because there are currently ways in which you can encourage people to move between areas which are not part of the Home Civil Service - between Northern Ireland but particularly with the European Union, and with European Union institutions. That possibility does exist, therefore, but that is an operational end rather than a professional end which I think is to do with policy direction and much more to do with policy involvement.

One of the interesting consequences of devolution in Wales has been that the middle-ranking civil servants have been liberated. There are younger civil servants who are anxious to take opportunities available to them. There are plenty of opportunities since we cover such a vast range of operation here in Wales; the opportunity does exist within Wales even though it is a smaller number. Whether it is six in Wales and 300 in London does not matter because you do have that opportunity - in fact probably more opportunity in a smaller operation - to get those skills.

LORD RICHARD: Minister, can I thank you very much for coming back this afternoon? We are very grateful because it gives us a much firmer view of how the Liberal Democrats see matters.

MIKE GERMAN: Thank you. I wish you luck with your deliberations and I will send the information I promised in the post.

LORD RICHARD: Thank you very much.