Y Pwyllgor Cyllid
Aelodau'r Pwyllgor a oedd yn bresennol
Committee Members in Attendance
|Alun Davies MS|
|Llyr Gruffydd MS||Cadeirydd y Pwyllgor|
|Mark Reckless MS|
|Nick Ramsay MS|
|Sian Gwenllian MS|
Y rhai eraill a oedd yn bresennol
Others in Attendance
|David Phillips||Cyfarwyddwr Cyswllt, y Sefydliad Astudiaethau Cyllid|
|Associate Director, Institute of Fiscal Studies|
|Dyfed Alsop||Prif Weithredwr, Awdurdod Cyllid Cymru|
|Chief Executive, Welsh Revenue Authority|
|Rebecca Godfrey||Prif Swyddog Strategaeth, Awdurdod Cyllid Cymru|
|Chief Strategy Officer, Wales Revenue Authority|
|Sam Cairns||Prif Swyddog Gweithredu, Awdurdod Cyllid Cymru|
|Chief Operating Officer, Wales Revenue Authority|
Swyddogion y Senedd a oedd yn bresennol
Senedd Officials in Attendance
|Georgina Owen||Ail Glerc|
|Leanne Hatcher||Ail Glerc|
|Mike Lewis||Dirprwy Glerc|
Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.
The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.
Cyfarfu'r pwyllgor drwy gynhadledd fideo.
Dechreuodd y cyfarfod am 14:30.
The committee met by video-conference.
The meeting began at 14:30.
Croeso cynnes i chi i gyd i gyfarfod Pwyllgor Cyllid Senedd Cymru, ac, yn unol â Rheol Sefydlog 34.19, dwi wedi penderfynu gwahardd y cyhoedd o gyfarfod y pwyllgor er mwyn diogelu iechyd y cyhoedd. Yn unol â Rheol Sefydlog 34.21, cafodd rhybudd o'r penderfyniad hwn ei nodi yn yr agenda ar gyfer y cyfarfod heddiw. Mae'r cyfarfod hwn, wrth gwrs, yn cael ei ddarlledu'n fyw ar Senedd.tv ac mi fydd Cofnod o'r Trafodion yn cael eu cyhoeddi yn ôl yr arfer, wrth gwrs. Ar wahân i'r addasiad gweithdrefnol sy'n ymwneud â chynnal trafodion o bell, mae holl ofynion eraill y Rheolau Sefydlog ar gyfer pwyllgorau yn parhau. Ar y cychwyn, felly, gaf i ofyn os oes gan unrhyw Aelod unrhyw fuddiannau i'w datgan? Na, neb am nodi unrhyw beth. Ocê. A gaf i hefyd nodi wrth gwrs os y byddaf i am unrhyw reswm yn colli cysylltiad â'r pwyllgor yma, rŷn ni eisoes, yn unol â Rheol Sefydlog 17.22, wedi cytuno mai Siân Gwenllian fydd yn cadeirio dros dro wrth i mi geisio ailymuno? Ac mi nodaf i ar y cychwyn fel hyn hefyd ein bod ni wedi derbyn ymddiheuriadau y prynhawn yma gan Mike Hedges a Rhianon Passmore.
A warm welcome to this meeting of the Finance Committee at the Senedd, and, in accordance with Standing Order 34.19, I have determined that the public are excluded from the committee's meeting in order to protect public health. And in accordance with Standing Order 34.21, notice of this decision was included in the agenda for this meeting. This meeting is being broadcast live on Senedd.tv, and the Record of Proceedings will be published as usual. Aside from the procedural adaptation relating to conducting proceedings remotely, all other Standing Order requirements for committees remain in place. At the outset, therefore, could I ask Members whether they have any interests to declare? No, nobody wants to declare anything. And could I also note that, if for any reason I lose connection with this committee, the committee has previously agreed, in accordance with Standing Order 17.22, that Siân Gwenllian will temporarily chair while I try to rejoin? And I also note at the outset that we've received apologies this afternoon from Mike Hedges and Rhianon Passmore.
Yr ail eitem ar yr agenda yw papurau i'w nodi. A gaf i eich gwahodd chi i nodi'r papur cyntaf, sydd yn lythyr gan y Gweinidog Tai a Llywodraeth Leol ar Fil Llywodraeth Leol ac Etholiadau (Cymru) ac asesiad effaith rheoleiddiol diwygiedig? A'r ail bapur i'w nodi yw cofnodion y cyfarfod a gynhaliwyd ar 9 Tachwedd, sef yr wythnos diwethaf. Ydy Aelodau yn hapus i nodi'r ddau bapur yna? Ydyn, iawn. Diolch yn fawr iawn i chi.
The second item on the agenda is the papers to note. And could I invite you to note the first paper, which is a letter from the Minister for Housing and Local Government on the Local Government and Elections (Wales) Bill and the revised regulatory impact assessment? And the second paper to note is minutes of the meeting held on 9 November, last week. Are Members happy to note those papers? They are. Thank you very much.
Awn ni ymlaen, felly, at y drydedd eitem, sef i barhau ag ymchwiliad y pwyllgor yma i roi Deddf Cymru 2014 ar waith, a gweithdrefnau'r fframwaith gyllidol. A dŷn ni'n croesawu ar gyfer y sesiwn dystiolaeth prynhawn yma David Phillips, sydd yn gyfarwyddwr cyswllt gyda'r Sefydliad Astudiaethau Cyllid. Croeso cynnes atom ni, David. Mi awn ni'n syth i gwestiynau, os ydy hynny'n iawn, ac mi wnaf i gychwyn yn syml iawn drwy ofyn: sut yn eich barn chi mae polisi treth Llywodraeth Cymru wedi dilyn yr egwyddorion y mae'r Llywodraeth wedi eu gosod allan iddyn nhw eu hunain, wrth gwrs, sef i ddarparu treth deg a sefydlog sy'n syml i'w ddeall?
We move on now to item 3, which is to continue our inquiry into the implementation of the Wales Act 2014 and operation of the fiscal framework. And we welcome for the evidence session this afternoon David Phillips, who is an associate director with the Institute for Fiscal Studies. A warm welcome to you, David. And we'll go straight into questions, if that's okay, and I'll start by asking you, simply: in your view, how has the tax policy of the Welsh Government followed the principles that the Government have set out themselves, namely to deliver taxes that are fair, stable, and simple to understand?
Thanks very much. So, the first thing I'd say is it's still largely early days for the Welsh Government's tax policy. We've seen no changes to income tax rates so far, so I guess you could say that's been incredibly stable, but we have seen some proposals from the opposition parties and may see proposals in manifestos in the upcoming elections. I think that was one of the motivations for devolution—to give the Welsh electorate choices over the level of tax and spending and the degree of progressivity. So, stability is a good thing, but that doesn't necessarily mean complete stability. The question of fairness, of course, is somewhat subjective. Some people will think that the system should be more progressive, others think that, actually, it should do more to reward those that have high earnings. It's not really my place to comment on that.
Land transaction tax has seen more changes, and sometimes those have been made very quickly, and there have been differences in policies compared to England. So, that includes raising the threshold more generally rather than having a higher threshold for first-time buyers, excluding landlords from the recent stamp duty holiday. Again, people will have different opinions on the fairness of these differences in policies, but one thing I would say is that rapid changes can be necessary to respond to loopholes, changes in economic circumstances, political pressure when policies have changed elsewhere in the UK. So, I think, overall, we have seen policy being pretty stable. When it has been changed rapidly, there have been good reasons for that, and there'll be debate about what a fair policy should be, which is part of a healthy democracy.
One of the things I would like to see, actually, going forward is some more radical proposals for reform in one area, and that is property taxation. Wales has comprehensive powers over property taxation, and it has opportunities to make that fairer and more efficient, and I think the Welsh Government is considering that issue at the moment.
Well, indeed. I was going to ask you about the consultation that's ongoing on new tax legislation, and you touched on it—this ability to change taxes very swiftly and to give Ministers the ability to do that. From the answer you gave, I presume that you believe that is necessary, but I'm particularly interested, maybe, in what you think the key issues might be that that legislation will need to address.
So, first, I should really highlight I'm not a legal expert or an expert on parliamentary protocols, so I will respond as an economist. My understanding is that the new legislation is designed to allow the Welsh Government to enact immediate changes to policy, using regulation-making powers in a pretty limited set of circumstances, including tackling avoidance and evasion, or meeting international obligations, or when the UK Government has made policy changes that affect Welsh revenues or create a need to respond rapidly. They'd be temporary changes and require subsequent approval by the Senedd, but, unlike now, they could come in immediately and that approval could come later. I guess I think—there are circumstances where you need to act rapidly. I agree, when you identify new avoidance or evasion opportunities, they get promoted, you want to close that off before you can lose revenues via them. Also when delaying policy could actually distort economic activity, could have big impacts on people's tax bills and their behaviour—and I think you can see that with the stamp duty holiday. If you delay a stamp duty holiday, you're creating an incentive for people to hold off completing transactions to wait for the holiday. That can affect revenues. It can also have quite damaging effects on people that really need to complete transactions as soon as possible—they find the other party is holding off to get the stamp duty holiday. So, I think there can be a real need to make policy quickly. That is something where the Welsh Government hasn't had quite the same capabilities as, say, the UK Government has. I think, actually, the stamp duty holiday in Wales—there was a delay of several weeks to that coming in; it wasn't quite as rapid as it came in in Northern Ireland and England.
Obviously, there is a trade-off with scrutiny. So, I think what will be very important is to make sure these powers are used only in the limited and appropriate circumstances the Welsh Government has set out. So, there's a very important role for the Assembly, and, I guess, this committee, to make sure the Welsh Government is keeping its commitment to only use these powers in exceptional circumstances, not as part of the day-to-day tax policy making.
Yes, okay. And I suppose it is striking that right balance, isn't it, between being fleet of foot, but also still remaining accountable in a meaningful way. Can I ask as well, then—the Government recently published its tax policy work plan, which included the aim to strengthen the Welsh tax base. Do you believe that the current devolution settlement gives the Welsh Government the necessary tools to be able to do that, to grow the tax base, and, of course, given that Welsh rates of income tax represents the largest source of income tax, or tax revenue, I should say, to the Welsh Government, what policies do you think it could implement to maximise WRIT receipts?
I think it's really a tricky—well, both are somewhat tricky questions. Wales does have control over a range of policies that can affect growth in economic activity, so that includes economic development and business support, education and skills, transport, housing. Indeed, one of the reasons for devolving tax was to balance the responsibility of spending with some of the revenues that result from effective policies. So, I think Wales does have a wide range of policies that relate to economic development and growth.
Some of the things, of course, aren't devolved—things like macroeconomic management, competition and state-aid policy, and labour market and product market regulations. They probably make sense to retain at the UK level; they're important for the UK single market. We're already moving away from one single market with the EU, and that could potentially have costs. Further fragmenting the market into separate Wales, Scotland, Northern Ireland and England markets would have a similar effect on, I think, prosperity.
Then there are some areas where the case is less clear cut. For example, most transport spending is devolved, but rail capital spending isn't devolved to Wales, and I know that has been a point of contention in recent years. There are elements of social security spending and welfare policy that have been devolved to Scotland, not to Wales. And, of course, there's been this big debate about further borrowing powers, which I think we'll probably come on to a bit later. So, I think there are some areas that Wales already has, some that it makes sense to hold at UK level, and there are those you can have a debate on.
On the question about what policies do you think we could use to maximise growth in the tax base and, I guess, increases in economic activity, that's really the $64,000 question in economics—how do you boost growth—
I thought you were going to answer it for us. That's why I was asking.
If I could answer it, I wouldn't be here. I'd be making money somewhere else. [Laughter.] But I guess, being more serious about the question, Wales's output per person is lower than the UK's for three reasons, really. One is that a lower share of the population is working age, second is that a smaller fraction of those are employed, and third is that productivity and earnings are lower. It's really that last factor that is by far the biggest factor in explaining why Wales's output is lower, and why tax revenues are therefore lower in Wales—lower productivity. So, significantly closing the gap would require boosting productivity.
Again, analysis by colleagues at Wales Fiscal Analysis suggests it's not really about the high-level sectoral make-up, about the share of manufacturing or finance; it's really about productivity being lower in a range of major sectors of the economy, reflecting the types of jobs and the education and skills of the workforce. I think that suggests focusing on a few key areas: skills—attracting and retaining higher-skilled people—and attracting and retaining higher-productivity employers. That can be a bit of a chicken-and-egg situation. How do you attract and retain the people without the employers, and how do you attract the employers without the people? I think that means a focus on factors that could appeal to both sides. So, that means amenities and quality of life. I think we can't forget things like that—transport and digital infrastructure, good-quality public services. I don't think it's just about skills, or just about business support. It's about things that can address both sides of that equation.
I think tax policy can also play a bit of a role as well. One of the things that Wales can do with its tax policy now is it could shift the balance a bit between property and income tax whilst retaining the overall progressivity of the system, and there could be options there that could make the system as progressive or even more so, but actually a bit more efficient at the same time.
I'd also add that I don't think, when thinking about how to—. It's not just how to boost the tax base one should be thinking about. It's actually how to boost quality of life and boost opportunities for Welsh people. I think that's important, because if you focus on just boosting the tax base, getting more people into work, especially lower-skilled people into starter jobs, that doesn't generate much tax revenue because you have a very high personal allowance. It's much better to get income increases for those already on the ladder. But when thinking about social issues, we still have major pockets of Wales with quite high levels of inactivity and unemployment, and there's a need to address that for social reasons. So it's not just about focusing on the tax base; it's about focusing on, I guess, the wider economic well-being of Wales.
Okay. Thank you. Before we move on to Mark, can I just ask about any thoughts you have in relation to the impact that the pandemic, obviously, will have on rate revenues in Wales?
I think COVID will clearly reduce the tax take in the short term, although much less than it otherwise would have if we didn't have the furlough or the self-employment income support scheme, because tax will be paid on those, and it has prevented the loss of even more jobs. I think it's also likely to reduce the tax take in the medium term. The forecasts and projections are that the economy will be smaller than we previously thought, perhaps 4 per cent or 5 per cent smaller in the medium term. There's a lot of uncertainty about that, but my guess would be that it will be smaller going forward than we had previously thought.
What actually matters for Wales and the revenues of the Welsh Government, though, is not just the absolute level of the Welsh tax revenues; it's how they've changed compared to revenues elsewhere in the UK, and that's because of the operation of the fiscal framework. If revenues elsewhere in the UK fall, the block grant adjustment is smaller. I actually think there are some reasons to expect overall the tax base and tax revenues in Wales to fall somewhat less than in the rest of the UK. So, financially, in the medium term at least, the Welsh Government could potentially be a bit better off—it's own revenues have fallen, but the block grant adjustment has fallen even further.
Why do I think that? Well, the first reason is a higher share of employees in the public sector. At least so far, that's been insulated from the economic effects of COVID. Obviously, there have been many effects on the public sector, but employment's not been cut back, and wages have not been cut back. There's a higher share of retirees and a substantially higher share of income tax coming from pensions income in Wales, and, again, that is relatively protected. And the furlough and self-employment income support schemes protect a bigger fraction of earnings for low to middle earners, and there are more of those in Wales relative to the rest of the country.
So, I think there are a number of factors that would suggest that Wales might see a smaller fall in its revenues than elsewhere in the UK. I guess offsetting that could be the fact that some of the public health measures have been a bit more stringent or lasted longer in Wales. That could push in the other direction. And, of course, looking further ahead, if there were big cuts to public sector funding, and that meant cuts in employment, cuts in wages, that could then have a bigger impact on Wales.
So, summarising that slightly rambling discussion, sorry: one is that it will have falls in revenues. What matters is the fall relative to the rest of the UK. There are several reasons suggesting that, actually, there should be smaller falls in Wales, but that's not certain because policies differed in terms of ending lockdowns and so on. And, in the longer run, it will depend on the type of measures the UK Government puts in place to restore the finances. Is it tax rises or is it spending cuts? If it's spending cuts, that will hit Wales harder.
Okay. Thank you very much. Mark.
The Welsh Government has been critical of the mechanism for introducing new devolved taxes, claiming it's not fit for purpose. Doesn't that rather presume that the purpose of the mechanism is to enable the devolution of new and further taxes, rather than only the three that have been legislated for?
I must say, I've seen the notes from the Welsh Government in its annual statement on tax policy about the difficulties that it's faced with progressing plans for new taxes. What I'm not sure of is exactly what those difficulties are. So, it's a little bit difficult for me to comment on the specifics of that issue, but, as I understand it, the Welsh Government is actively progressing plans for the vacant land tax, and its most recent strategy highlights that it's considering also the role of new taxes in funding social care and in reducing the volume of plastic packaging. The command paper, published alongside the Wales Bill back in 2014, lists a number of requirements for policy analysis, and I actually think they're broadly sensible and exactly the kind of things you would want to consider before introducing a new tax. They're the kinds of things that HMRC and the Treasury would consider before introducing a tax for the UK as a whole.
But I think there's also the potential that they could offer the opportunity to hold the Welsh Government to an implausibly high bar as well, if the UK Government decided it wanted to do that. And that's because with some of these criteria, if you interpret them very, very strictly, it's actually very difficult to do all of these things in advance of introducing a new tax. So, quite often, you don't have information on the size of a tax base in advance; there's no data on it. Or you may not be able to model all of the effects it calls for. So, I think it's important you have these processes in place. It's important that there's a lot of scrutiny when introducing a new tax. I think it's also important that, given this power is in the Wales Act, those requirements, I guess, are used in a proportionate way that doesn't unnecessarily hold up Welsh tax policy making.
When you say they should be used in a proportionate way, were you implying that? That's not from the usual judicial review criteria, is it? I don't understand where the proportionality aspect comes from.
The UK Government's command paper identifies a number of criteria for the policy, and then a number of analytical things that need to be done. So, in terms of policy, it says that you need to asses a policy against: does it affect the UK macro-economic or fiscal policy, or the single market; is it compliant with EU legislation; does it include tax-avoidance risks; does it create additional compliance burdens for businesses or individuals. Now, on all of those, nearly all tax measures will have some sort of effect on compliance burdens for businesses or individuals—sometimes they'll reduce it, sometimes they'll increase it.
I think the question that would arise is who should be making the decision on what is the appropriate degree of burden on business or individuals. Does that fall to the UK Government to decide that, or does that fall to the Welsh Government to decide that? I think you might get different opinions on that. I think some of it clearly is an issue for the UK Government—issues like the single market, EU legislation, tax-avoidance risks, at least for the reserved taxes. Clearly that's the UK Government's decision to make those calls. On the call about additional compliance burdens for businesses or individuals, I think there's an open question about, actually, should that be the Welsh Government that decides the appropriate trade-off there or the UK Government decides the appropriate trade-off there.
So, I guess the point I was making is that the command paper lists the range of criteria, but it's not clear to me what the bar is, and it's possible that, if the ball is in the UK Government's court, if it wanted to, it could set the bar very high, in a way that most UK Government policies wouldn't pass. So I think there needs to be, I guess, an appropriate understanding between the two parties about what is the settlement here, what is the role of each side. I'm not sure—
May there just be a difference of understanding in that, in that the Welsh Government looked at these provisions and then decided it was going to test the machinery and come up with various candidates for new taxes, and therefore apply and show where they fit in the criteria, and perhaps assume that, if they met the criteria, according to someone's judgment, they would then get new powers devolved for more and more taxes they might like to put, whereas the UK Government thinks that it's devolved particular taxes and that's the settlement?
The UK Government allowed to be inserted into the Bill the potential for the devolution of additional powers via this mechanism. So it is clearly part of the settlement that the Welsh Government can put a case forward for additional powers. It could be the case that they have different interpretations about whether or not it's satisfying the policy criteria or the analytical criteria. One of the things the command paper also says is that, if there is a difference in opinion—if the UK Government decides not to progress—it will set out its reasons why. I'm actually not sure where we are in that stage—how far along that formal process have we gone, what information has been shared with the UK Government, what comments have they provided back. So before saying whether the Welsh Government's concerns are justified, I would need to see further information about what's actually the state of play at the moment. At the moment, it seems to be being done behind fairly closed doors, so it's quite hard to comment on. All I was pointing out is that there is the potential for the bar to be set very high, given that these criteria are in the gift of the Treasury, if you like, and could be read in a pretty stringent way—a more stringent way than many UK Government policies have to go through.
And may the UK Government simply fear that any new tax that it does agree to through these processes and these criteria—that it will then be held accountable and blamed by people who might prefer not to pay that tax?
That is, I guess, one potential factor, especially given public understanding of the role of different Governments in tax policy making can be sometimes limited. I think how you address that is by, I guess, better education of the public about the role of different Governments in the policy-making process. And if the UK Government has taken that view, it will need to set it out to the Welsh Government in its reasoning for refusing the request.
Moving on, can I ask you how suitable you consider the Barnett formula now to be for calculating changes to the Welsh block grant?
It's probably not much of a surprise that I don't think the Barnett formula is a particularly sensible formula for use in public spending. It's an ad hoc formula that was never designed to be in use for 40 years, it takes no account of needs and it takes no account of factors such as population growth. The only benefit I can see is that it is there, and that change to it would be politically difficult. I guess that I would also add that they have made some changes recently, in respect to Wales, with the needs-based factor. Actually, in the long run, that needs-based factor could turn out to be pretty beneficial to Wales, but we'd still have a kind of system underlying it that is ad hoc and hasn't really got a good analytical basis for it, and entails risks for both the UK Government and the Welsh Government.
And in the narrower circumstances of the pandemic, how effective do you think it's been in allocating appropriate additional funding to Wales?
Well, at the start of the crisis, I put out a blog post that suggested that two elements of the fiscal framework weren't really well designed for the COVID crisis: one was the borrowing powers, and two was the Barnett formula, because the Barnett formula effectively allocates a population share to the devolved Governments, and a population share may not be appropriate if the demographics differ, if the needs differ, if the pandemic is having different effects. I'd add to that that there can also be another issue with the way the Barnett formula works in that there can be uncertainty about the actual funding via the Barnett formula because the Treasury does not finalise the figures until later in the year, usually, so money can be notionally allocated and then clawed back later on.
But, as it turned out, this issue hasn't been such a problem and that's for two or three reasons. One is that, in the end, the pandemic—whilst it's had somewhat different effects across different parts of the UK, the sorts of measures that have needed to be put in place have been remarkably similar. It's not been the case that most of the spending is directly linked to viral caseload, if you like. It's been the economic measures and the public policy measures taken to reduce the impacts on the economy and to improve public health, and those have had to be done everywhere, irrespective, almost, of what the actual impact of the virus is. So, I guess, first is that the impacts have been much more similar across the country than I think might have initially been expected.
Secondly, UK Government has done something quite unusual. It's given an upfront guarantee of funding to the Welsh, Scottish and Northern Irish Governments. So, that, as you know—it's basically allocated money before it's been needed, and it's then given a guarantee to the Welsh and Scottish and Northern Irish Governments, so they know they're getting a certain amount, irrespective of what's spent in England. That has helped the Welsh Government and Scottish Government with their planning, but it's not really a long-term solution to this issue. It's potentially unfair to England, because it could end up meaning that more is spent in Scotland, Wales and Northern Ireland per person than is spent on England, because the guarantee funding exceeds the equivalent funding in England. My view is that the Barnett formula and the funding system has actually, in the end, done okay during the pandemic, partly because of ad hoc changes the UK Government's made, but those aren't suitable for the long term.
Diolch yn fawr. Alun Davies.
Thank you. Alun Davies.
Listening to the exchanges and the questions, I'm coming to the conclusion that, as we debate tax policy and the rest of it, what appears to me to be the case is that the fundamental flaw here lies in the Treasury. We've just had a conversation with Mark Reckless about devolution of taxes. For myself and Nick Ramsay, who is also a victim of the legislative consent motion policy, back in the 2007 Senedd, we spent four years running up and down the M4 trying to get consent to legislate, and by the time we'd got the consent, we'd run out of time to legislate because we had an election due. It was a farcical situation, which was designed well in theory and collapsed in practice. I've got a real sense of déjà vu when I look at these requests for taxation powers that we're going back to make the same mistakes there. And the issue is not so much the structures that we have in place, which, as you've said, Mr Phillips, are not unreasonable questions, but the fact is, the judge and jury are the Treasury, and whatever Welsh Government says and whatever Welsh Government does, the Treasury, at the end of the day, will decide based on what works for the Treasury and not what works for Wales.
So, I wouldn't really want to comment on the politics of the situation. I mean, I guess I would highlight two ways in which we could get more clarity on this issue. So, one, as I said, is—. In preparation for this session, I tried to find out information about what was happening with the process of requesting tax powers for the vacant land tax and, actually, information about the process and the various criteria that needed to be gone through, and I found it very difficult to find that information, some of which I hadn't looked at for several years. So, I think the first thing I would say is that, actually, more transparency around this process, whether that is publishing minutes of meetings or publishing the work plan that's been done would actually be very helpful. It would allow scrutiny of both sides' claims, both what the Welsh Government are claiming and the perspective of HM Treasury. On the issue about the Treasury being judge, jury and executioner on this matter, I think, traditionally, we have had a pretty centralised unitary state model of fiscal relationships between the Governments of the UK. We do now have fiscal framework agreements that cover certain aspects of the policy framework, and they were agreed by both sides. They do include, I think, mechanisms for resolving disputes in there.
No, they don't. It gives you an opportunity to ask the Treasury what the Treasury thinks and the Treasury then tells you what they think.
Okay. So, maybe there's a difference between the Welsh and Scottish agreements in that case. But what I was going to say, actually—I was going to go on to say that the fiscal framework agreements do not cover all aspects of the fiscal frameworks. They don't, for instance, cover fully the Barnett formula, what is included in the Barnett formula or not. They don't include the wider issues around the tax policies and the tax powers. There's nothing in the fiscal framework about the devolution of new taxes, for example; it's not part of the fiscal framework. The information is in the command paper from the Treasury, which is a UK Government document, not a jointly owned agreement. So, I was going to say that there could be scope for broadening the fiscal framework agreements to cover a wider range of topics and potentially to introduce a more wide-ranging dispute resolution.
I guess one option, as well, to consider would be the sort of arrangements that some other countries have, like Australia, where there is the Commonwealth Grants Commission, which is an independent commission with representatives from the various bodies. Now, that actually only makes recommendations that are then decided by the federal Government. But if you have an independent body that makes recommendations, even if the power still lies with the Government—the federal Government in Australia, or UK Government in the UK—you have more opportunity for scrutiny of those decisions if the Government decides not to go along with the recommendations of the independent body.
Well, I absolutely agree with you. I've been banging on about the Australian model for many years and boring everybody to death in the meantime. And I think that you're absolutely right, it does introduce an element of scrutiny, transparency and accountability to the whole situation. And this is something that has been going on for many years, of course, because the Labour Government decided that the London Olympics were a UK-wide investment and therefore there was no Barnett share; now the Conservative Government has decided that the high speed 2 line is an England-Wales railway. A bizarre decision, but there's no, therefore, investment in Wales as a consequence, and the rest of it. And it just seems to be that you're trying to play football and the referee is wearing the colours of the opposite side—that's certainly how it feels here—and why be surprised when the decisions go against you? You know, I've sat in enough joint ministerial meetings to know that when UK Ministers turn up, they turn up as a team, they don't turn up with any sense of independence or a wish to scrutinise their colleagues; they turn up as a team to sing from the same hymn sheet.
I would defer to you on the politics of these situations. I guess I would say that—
Well, structurally, in terms of decision making and in terms of the fiscal framework as it currently exists. It exists in order to enable a policy to be delivered, and that’s fine, that’s fair enough. But in order to exist properly, it needs governance, and that governance also needs to have the confidence of both sides. Surely, that’s—you know, taking the politics out of it.
So, as I said, I think one of the benefits of the fiscal framework agreement was it put some elements at least of the arrangements on a jointly determined, jointly agreed basis between [correction: with] the Welsh and Scottish Governments. I think that was a positive step. As I say, I think there are reasons to expand the scope of those agreements so that they cover broader areas of the fiscal architecture.
I know there have been discussions for several years now—well, when I say 'discussions', I mean discussions amongst civil society for several years—about putting the joint ministerial committees on a more statutory basis, having an independent secretariat for them and having some joint decision-making powers for them as well. I think the Institute for Government has looked at those issues. It's not my area of expertise, but I think there has been a lot of discussion about those points.
I would add, though, that I think the main reason why Wales has not received Barnett consequentials for high speed 2 is because the rail capital budget is not devolved to Wales as it is in Scotland and Northern Ireland. My understanding is that when the rail capital budget was devolved to Scotland in the mid 2000s, devolution was also offered to Wales at that point but wasn't taken up at the time—that's my understanding of the situation. I don't think that that offer is currently on the table at the moment. In my view, the way the rail capital budget was devolved to Scotland was very, very, very generous. Scotland got a population share of the budget for England, despite, historically, demand and usage being much lower than the population share in England. I can understand people in Wales wanting the same deal on this, which would be a significant increase compared to the current investment in Welsh railways, but I can also understand the reluctance on the part of the UK Government to avoid repeating what I consider to be an overly generous mistake in the past in respect of Scotland. So, I can see the political difficulties around that particular issue.
On the broader issues, I think, at the moment, these things are, in effect, in the gift of the Treasury. That can cause problems. I think there are potential solutions to that. I guess it does require the political will to push those forward.
Yes, but the UK Government have done this before, haven't they? They've said, 'We will devolve this and what we'll do is we'll top-slice it and then we'll devolve a proportion of the budget to you, but the whole of the responsibility'. I remember it very well: 'You get 5 per cent population share, but you've got 12 per cent of the network. Go away and try and make that work'. That's not devolution. What that is is shape shifting responsibility, and when UK Government works like that, what they do is they break the trust, of course, of people. They tried it a number of times in a number of different policy areas. As a Minister, I refused the devolution of one issue on exactly that basis, simply because what they were seeking to do was to undermine us and not actually share responsibility across the United Kingdom. But that's an aside. I don't have any further questions.
Ocê, diolch yn fawr iawn. Siân Gwenllian.
Okay, thank you very much. Siân Gwenllian.
Diolch, Cadeirydd. Os caf i, efo'ch caniatâd chi, jest mynd yn ôl at un mater a godwyd pan roedden ni'n trafod y fformiwla Barnett. Mi ddywedoch chi fod yr elfen angen—y peth newydd, neu weddol newydd, sydd wedi cael ei ychwanegu i fformiwla Barnett—yn ddefnyddiol, a dywedoch chi hefyd fod materion gwleidyddol, efallai, yn mynd i rwystro cael newid penodol neu gyfundrefn wahanol i fformiwla Barnett. Tybed, felly, a ddylen ni, fel pwyllgor, fod yn craffu ar yr elfen angen sydd o fewn y fformiwla fel y mae o rŵan, a thrio ffeindio oes yna ffyrdd i gryfhau hwnna mewn rhyw ffordd er mwyn gwneud y fformiwla i weithio'n well o ran Cymru.
Thank you, Chair. If I may, with your permission, just return to one issue that was raised when we discussed the Barnett formula. You said that the need element—the relatively new thing that's been added to the Barnett formula—was useful, and you also said that political issues, perhaps, were going to be a barrier to change, or specific change, or a different system to the Barnett formula. I wonder, therefore, should we, as a committee, be scrutinising that need element within the formula as it stands now, and try to find out whether there's a way to strengthen that in some way in order to make the formula work better for Wales.
Thank you, Siân. So, I guess my high-level view is the need factor is an ad hoc adjustment to an ad hoc funding formula. So, the purist in me doesn't really see it as part of a long-term solution to the funding system in Wales.
I said that Wales could end up doing pretty well from this though, at least if UK Government sticks to the agreement it's made and Wales doesn't see a further increase in its relative needs. The reason I say that is because the agreement states that once spending falls back to 115 per cent of comparable spending in England, it's currently about—well, before the crisis, it was about 120 per cent—once it goes back to 115 per cent, the need factor actually switches from the current 105 to 115 per cent. Now, that might sound like, 'Well, it will remain at 115 per cent going forward', but that's not the case. Because the Welsh population is growing less quickly than England's, less of the extra money given to Wales is needed just to keep pace with population growth. So, with 115 per cent of the increase in England, the amount spent per person actually will start to diverge again in Wales; it would go up to 116 then 117 and so on, and converge to a higher level, maybe 125 per cent of the level in England. So, actually, it looks like Wales could do reasonably well out of this regime in the longer term.
I think there are some risks to that. The first is that the UK Government may not actually wish to continue with this regime in the longer term given that outcome; it may seek to change that agreement. Secondly, that sort of re-divergence, if you like—you know, spending going back up towards 125 per cent or so of the level in England—well, that's only driven by the fact that population growth is slower in Wales, and that gap in population growth could narrow and it could even potentially reverse. In which case, a 115 per cent wouldn't be enough to get 115 per cent of the level of spending in England. And, of course, Wales's needs could change. So, I guess one of the things, I think, the committee may want to do is, in time, investigate, perhaps alongside the Welsh Government, more work like the work Gerry Holtham did back in 2010, looking at the relative needs of the Welsh population, to see what would be the appropriate funding level, to make sure whatever system is in place actually is delivering the appropriate level of funding for Wales.
Diolch yn fawr. Roedd hwnna'n ddefnyddiol dwi'n credu, diolch.
Troi at bwerau benthyca a chronfa wrth gefn Cymru. Dwi'n meddwl eich bod chi'n dadlau dros roi mwy o fynediad i Gymru i bwerau benthyca. A fedrwch chi ymhelaethu am hynny, a sut mae cyrraedd at hynny? Pa weithdrefnau y gellir eu dilyn i alluogi ymlacio'r rheolau cyllidol yn ystod cyfnod o argyfwng?
Thank you very much. I think that was very useful.
So, turning now to borrowing powers and the Wales reserve. I think that you argue for giving greater access to Wales to borrowing powers. Could you expand on that, and how do we get there? What mechanisms could we pursue to enable the relaxing of fiscal rules during a time of crisis?
Thank you, Siân. So, yes, again, back at the start of the crisis, I noted that the borrowing and reserves powers available to the devolved Governments, including the Welsh Government, may be insufficient to allow them to rapidly respond to changing conditions, and smooth any, if you like, asymmetric effects of the COVID-19 crisis on their revenues. And those are, I guess, the two reasons.
One is the that the borrowing powers are not designed to deal with a situation like the COVID-19 crisis, when there can be a need to develop cost and announce new policy measures very quickly, and also when there's a potential for impacts of the crisis to be different across different parts of the UK, and therefore for the Barnett formula not to deliver the appropriate levels of funding. And that's really because the borrowing rules, they don't allow borrowing to cover day-to-day costs of new policy measures. The Welsh Government, in terms of resource borrowing, can borrow for forecast errors; it can't borrow because it wants to announce new policy measures to tackle a pandemic. Now, I identify that as being a potential issue, given potential delays in being able to announce policies in the acute phase of the crisis, and if there's a need or just a desire to do things differently in the devolved Governments.
I think the other issue is that—I think this is an issue that's more for Scotland rather than Wales, if I'm honest. The borrowing limits in Scotland may be too small to smooth revenues. Even in normal times, the outturn figures for 2018-19 in Scotland required a sort of reconciliation between the forecast revenues and the outturns, that was bigger than the borrowing capacity of the Scottish Government. The Welsh limits are relatively larger compared to the devolved revenue, so I think that's a bit less of an issue. But of course, if we see the COVID crisis having much bigger impacts in some parts of the UK than others, the limits that have been put on the borrowing powers, they could turn out to be a little on the low side.
Now, I said that I thought these changes, any changes that should be made, should be temporary rather than permanent. Because you don't want to make permanent changes in the midst of a crisis that may end up creating different problems elsewhere or may not be appropriate for the long term. And I stand by that point of view; I can talk about that a bit more in a minute, if you like.
In terms of the mechanisms that could be in place, well, several countries in the Organisation for Economic Co-operation and Development have explicit break clauses, or exit clauses, or escape clauses from their fiscal rules, which allow the rules to be relaxed in times of crises. I think that was invoked in several countries, and I think several countries have introduced rules around that, to allow borrowing or allow other changes in fiscal rules in the short term. The UK Government decided not to do that. What they did instead was this sort of up-front guarantee. So, in effect, they threw money at the problem. They announced spending increases upfront, before the money needed to be spent, and they gave Wales—[Inaudible.]—guarantee, which at the moment is higher than the guarantee in England for spending. Why they did that, why they didn't reduce, why they didn't introduce these other flexibilities around borrowing, I'm not sure.
Ocê. Efallai yr hoffech chi ymhelaethu, felly, ynglŷn â pham ddim gwneud newidiadau parhaol yn ystod y cyfnod presennol.
Okay. And maybe you'd like to expand, therefore, on why not make permanent changes during the current time.
Well, I think the COVID-19 crisis has exposed one form of asymmetry in the UK's fiscal architecture, and that is that the UK Government—which is the Government for both the UK and England—controls the overall fiscal stance, including the level of borrowing. And there have been concerns, therefore, that that has meant that there's been borrowing to support COVID-19 policies in England, such as the extension of the furlough scheme to coincide with the second national lockdown, that wasn't available to fund COVID-19 policies in the rest of the UK, such as Wales's firebreak lockdown. And the fact the Welsh Government can't borrow to do that is a problem. So reforming the devolved Governments' fiscal frameworks to give them the scope to borrow—whether to fund day-to-day spending, capital investment or to lower taxes—would lessen that asymmetry, and I think there was a strong case for doing that during the COVID-19 crisis.
But I think giving more powers to the devolved Governments could potentially worsen another asymmetry, which results from the absence of any English Government or regional Government in England with a distinct budget or fiscal powers. And this absence of English Government means that, while there is spending and borrowing already that is specifically Scottish and Welsh, albeit subject to quite strict limits, there is no spending or borrowing that is specifically English, except by councils. That's because any borrowing by the UK Government either supports spending on a UK-wide basis, so things like defence, social security or tax cuts, or it generates additional funding for the devolved Governments via the Barnett formula, if that borrowing is used to fund England-only functions, like health and schools. And thus, at the moment, England and its regions lack the ability to choose a different fiscal stance to that determined by the UK Government as a whole. They can't decide to borrow a bit more without that also meaning more money to go to Scotland and Wales.
So, I think if we were to grant significant extensions of borrowing powers to the devolved Governments, which come on top of any borrowing done by the UK Government, we therefore need to think about the situation of England and what would be seen as fair to England. So, I think obviously, from the Welsh perspective, the focus is on what is right for Wales, but from a UK Government perspective, they need to think about the whole of the UK, and I think at the moment, we have a system where England—85 per cent of the population, almost—has a lot of power, potentially this asymmetric power, and we could end up in the other direction where it becomes the underpowered part of the union. So, I think, actually, we need a proper assessment of the whole fiscal architecture of the UK as a whole to make sure that it's really suitable for devolution, rather than any sort of ad hoc things that have been going on, traditionally.
Diolch yn fawr.
Thank you very much.
Ie. Ocê, Nick Ramsay.
Yes. Okay, Nick Ramsay.
Diolch, Cadeirydd. That's the first time I've heard it explained that England hasn't actually got borrowing powers itself; it's an interesting angle compared with what we normally hear. So, that was interesting.
You've answered a lot of my questions, particularly the part about COVID. You highlighted in your evidence, David, that several OECD countries have created agencies dedicated to national regional working across the country, or what would be across the UK, I suppose. How effective are these agencies, and should we have one here?
Thanks, Nick. I think I should say that I'm not an expert on how these agencies and mechanisms have been working, unfortunately. I would suggest speaking with the OECD if that's at all possible. Sean Dougherty leads their work in this area. You can get in touch, but I know him pretty well and I could also put you in touch if that's helpful.
Now, looking at the OECD's report on this issue, it looks like some of these bodies operate a little bit like the UK's joint ministerial committees. So, in Australia, Belgium and Spain, they've activated committees that involve the heads of Government and sometimes other Ministers and specialised sub-committees. Now, the frequency of their meetings varies, I think it's weekly in Spain and bi-weekly in Australia. I don't know how that compares to the UK at the moment, but I think one of the things that may differ—. I know there have traditionally been concerns in the UK that the joint ministerial committees only meet when the UK Government decides, whereas I think there's a frequent regular cycle of meetings in these countries and joint decision making at these meetings, as well as co-ordination. So, there could be some lessons from the operation of these at least, again, in the short term. But Sean Dougherty at the OECD may be a good point of contact to find out more information.
Okay. And you've pretty much touched on this, but going back to the fiscal framework, what are the key elements to a successful fiscal framework, and are there examples of fiscal frameworks in other countries that you feel we could emulate and would be better than what we've currently got?
Yes. I think, overall, the UK's fiscal architecture does have the main essential elements. It has rules on the determination of funding on tax devolution and any adjustments to funding because of that, on borrowing and reserves and issues related to spillover effects. I think one of the issues is that the frameworks do reflect the somewhat ad hoc way in which powers have been devolved. So, whilst the rules on block grant adjustments on borrowing and reserve powers on the needs-based formula are in the framework, other elements, such as what spending is subject to Barnett, are, in effect, under the Treasury's sole control. So, I think there is potentially some work to bring more of the fiscal architecture together under jointly agreed rules between the different tiers of Government.
We talked earlier about the potential role of independent institutions in that. Those institutions can be decision-making institutions. I think, more generally, they're advisory institutions because their decisions are inherently political, but having an advisory institution can still provide increased transparency and accountability and scrutiny of decisions. Whether the current actual rules in the framework—the rules around borrowing, funding and block grant adjustments—whether those are fit for purpose, I think, is a bit less clear. The Barnett formula is hard to defend as a long-run part of the system. I think getting reform is going to be very hard, at least while Scotland is still part of the union.
Borrowing powers are limited, but substantially expanded, and I think it means thinking about England, as I was just saying. And on the block grant adjustments, one of the interesting factors behind those is that the block grant adjustments, because they're linked to what happens to revenues in Northern Ireland and England—they provide very good insurance to the Welsh Government and the Scottish Government against shocks that affect the whole of the UK. So, if revenues fall across the whole of the UK, the block grant adjustments also fall and that means that, whilst revenues in Wales have fallen, the block grant isn't lower, the budget isn't affected that much. So, there's good insurance against common shocks, but there's very little insurance against shocks that adversely affect Wales more or less than the rest of the UK.
So, for example, if, in the long term, COVID was having a bigger effect on Wales, for the devolved tax revenues, the Welsh Government has to bear all of the divergence in revenues compared to the rest of the UK. That's pretty unusual in the international context; most systems have some sort of at least periodic reassessment of the tax-raising capacity of different elements of the country, and I think there's potentially some scope to look at the extent to which there should be some of that risk sharing in the UK as well. So, that's an element that could also be looked at.
So, overall, I think there is scope to rationalise the fiscal frameworks—put them more on an agreement basis, if not a statutory basis—and then to consider the areas of funding formulas, borrowing powers and block grant adjustments in turn, and maybe even have a proper root-and-branch review of the UK's fiscal architecture. And sometimes, crises, like the COVID crisis, can be the catalyst for those sorts of reviews.
Excellent. Okay, well, we are coming to the end of our allocated time slot, so, David, can I thank you so much for the evidence you've given us and for joining us again, as always? You will, as always again, be sent a copy of the draft transcript to check for accuracy. So, with that, thank you so much. There's a lot there that I think we'll mull over and reflect on as we consider our work in this area. So, diolch yn fawr iawn, David. Thank you.
Thank you. Diolch.
We'll now take a short technical break, and the committee will reconvene to hear evidence from the Welsh Revenue Authority at 15:40. Diolch yn fawr.
Gohiriwyd y cyfarfod rhwng 15:28 ac 15:40.
The meeting adjourned between 15:28 and 15:40.
Croeso nôl, bawb, i Bwyllgor Cyllid Senedd Cymru. Rydym ni'n symud ymlaen at y bedwaredd eitem ar ein hagenda ni heddiw, sef, wrth gwrs, i barhau i dderbyn tystiolaeth ar roi Deddf Cymru 2014 ar waith a'r fframwaith cyllidol, neu weithredu'r fframwaith cyllidol, dylwn i ddweud. Ac yn ymuno â ni ar gyfer y sesiwn yma mae Awdurdod Cyllid Cymru, wrth gwrs, a dwi'n croesawu Dyfed Alsop, y prif weithredwr, hefyd Rebecca Godfrey, prif swyddog strategaeth, a Sam Cairns, prif swyddog gweithredu. Croeso i'r tri ohonoch chi.
Mi awn ni'n syth ymlaen at gwestiynau. Mae gennym ni ryw dri chwater awr, dwi'n meddwl, wedi'i glustnodi ar gyfer y sesiwn yma. Mi wnaf i gychwyn, os caf i, drwy ofyn, yn syml iawn, wrthoch chi efallai i egluro'n fras—Dyfed, gallwch chi gychwyn, dwi'n siŵr—eich rôl chi, o ran gweinyddu trethi datganoledig yng Nghymru? Ond yn bwysicach, efallai, beth yn eich barn chi yw'r cryfderau a'r gwendidau yn y dull rydych chi wedi'i ddewis o safbwynt gweithredu trethi Cymru?
Welcome back, everyone, to the Finance Committee at the Senedd. We move on now to the fourth item on the agenda, namely to proceed with receiving evidence on implementing the Wales Act 2014 and the operation of the fiscal framework. And joining us for this session is the Welsh Revenue Authority, of course, and I welcome Dyfed Alsop, the chief executive, also Rebecca Godfrey, chief strategy officer, and Sam Cairns, chief operating officer. Welcome to the three of you.
We'll go straight into questions. We have about three quarters of an hour that has been ring-fenced for this session. And I'll start, if I may, by asking you, very simply, to explain very broadly—Dyfed, maybe you can start—your role in terms of administering devolved taxes in Wales, and more importantly, what you think were the strengths and weaknesses of the approach that you've chosen in terms of implementing Welsh taxes.
Prynhawn da. Mae'n ddrwg iawn gen i, gwnes i ddim clywed hanner cyntaf y cwestiwn gan fod gen i ryw broblem efo'r cysylltiad o'r headphones—jest y rhan gyntaf, sori.
Good afternoon. I'm sorry, I didn't hear the first part of the question because I had a problem with my headphone connection—so the first part of the question, sorry.
Dim ond i ofyn yn gyffredinol i chi roi rhyw drosolwg fach sydyn i ni o'ch rôl chi o ran gweinyddu trethi datganoledig yng Nghymru. Dwi'n siŵr ein bod ni'n ymwybodol o'r rôl, ond jest yng nghyd-destun y drafodaeth rydym yn ei chael heddiw.
Just to ask you very generally to give us a brief overview of your role in terms of administering devolved taxes in Wales. I'm sure that we are aware of that role, but just in the context of this discussion we're having today.
Iawn. So, Awdurdod Cyllid Cymru ydym ni. Ni sy'n gyfrifol am gasglu'r trethi datganoledig, sef treth trafodiadau tir a threth gwarediadau tirlenwi. So, ni yw'r corff sydd wedi ei sefydlu ers jest dros dair blynedd rŵan i gasglu'r trethi yna. Felly, rhan o'r broses o ddatganoli pwerau fiscal yma yng Nghymru.
Okay. So, WRA—that's who we are. We are responsible for collecting the devolved taxes, namely land transaction tax and landfill disposals tax. So, we are the body that's been established for over three years to collect those taxes. So, yes, that's part of the process of devolving fiscal powers here in Wales.
Ac roeddwn i'n holi ymhellach wedyn ynglŷn â, yn eich barn chi, beth ydy cryfderau a gwendidau'r dull o weithredu trethi Cymru sydd gennych chi.
And I was asking then what, in your opinion, are the strengths and weaknesses of your approach to implementing Welsh taxes.
So, dwi'n meddwl, i gychwyn, buaswn i'n dweud fod beth rydym ni'n ei alw yn 'ein dull', hynny ydy'r ffordd o weithredu—bod yn agos iawn at ein trethdalwyr ac yn y blaen—mae hwnna wedi gweithio yn dda iawn. Dwi'n meddwl ein bod ni wedi creu perthynas sy'n gweithio'n dda efo'r bobl sy'n talu trethi. Dwi'n meddwl hefyd bod y pwyslais rydym ni wedi ei roi ar ddata wedi bod yn gryfder hefyd i ni. Ac yn amlwg, yn enwedig yn ystod y flwyddyn ddiwethaf, dwi'n meddwl bod y ffaith wnaethom ni benderfynu cychwyn allan i fod yn 100 y cant cloud based—hynny ydy, yn ddigidol—mae hwnna wedi bod yn hynod bwysig i ni fel corff, yn enwedig o feddwl beth wnaeth ddigwydd efo flood Dennis. Buasai hwnna wedi bod yn amhosibl oni bai ein bod ni wedi penderfynu ei wneud o fel yna.
O ran y pethau yna dwi'n meddwl sydd wedi fy synnu i, rywsut, o sut mae wedi gweithio allan, dwi'n meddwl, yn bersonol, doeddwn i ddim wedi sylweddoli gymaint oedd gennym ni o'n blaenau ni i ddysgu. Hynny ydy, rydym ni wedi gorfod gwneud newidiadau wrth fynd ymlaen, a dydyn ni o hyd heb gyrraedd y sefyllfa lle ein bod ni'n gwneud bob dim mae awdurdod cyllid yn arfer ei wneud, hynny ydy, o helpu pobl i dalu a rhoi'r wybodaeth allan hyd at wneud bach o enforcement. So, hyd yn oed heddiw, dydyn ni ddim wedi gwneud absolutely pob dim. So, mae hwnna wedi synnu fi, i raddau. Roeddwn i, hwyrach, yn meddwl buasai hwnna wedi digwydd ar ôl yr ail flwyddyn, neu rywbeth fel yna. Ond mae pob dim wedi cymryd tipyn bach mwy o amser, ac yn enwedig efo beth sydd wedi digwydd o ran COVID. Mae'n siŵr bod hwnna wedi gwneud i bethau ddigwydd yn hwyrach hefyd.
Well, I think, to start, I would say what we call 'our approach', the way of implementation—being very close to our taxpayers and so forth—that's worked very well. I think we've created a relationship that works very well with the people who pay the taxes. I also think the emphasis we've put on data has been a strength as well. And evidently, particularly in the last year, I think that the fact that we decided to be 100 per cent cloud based, in terms of digital services, from the start has been very important for us as a body, particularly given what happened with flood Dennis. It would have been impossible if we hadn't made the decision to do that.
In terms of the things that I think have surprised me, somewhat, in terms of how things have worked out, personally, I hadn't realised how much we had to learn. That is, we've had to make changes in terms of moving forward, and we still haven't reached a situation where we can say that we're doing everything a revenue authority usually does, from helping people to pay and putting information out to enforcement. So, even today, we haven't managed to do absolutely everything. So, that surprised me somewhat. I thought maybe that was supposed to happen after the second year, or something like that, but everything has taken a bit longer, particularly given what's happened with COVID. I'm sure that that's slowed things down as well.
Ie, ac mae'r broses ddysgu'n broses barhaus, beth bynnag, onid ydy? Ond, yn amlwg, yn enwedig ar y cychwyn, yn enwedig gan eich bod chi'n cychwyn o ddim, i bob pwrpas—mae hynny'n amlwg wedi bod yn broses ddysgu reit benodol, buaswn i'n tybio. Ddown ni'n ôl at rai o'r pethau, yn cynnwys y coronafeirws, wrth gwrs, yng nghwrs y drafodaeth. Ond fe symudaf ymlaen, felly, at Alun Davies.
Yes, and the learning process is an ongoing one, of course, isn't it? That's evident, at the outset, particularly because you started from scratch, to all intents and purposes. Clearly, that's been a learning process that's been very specific, I would say. And we'll return to some of those issues, including the coronavirus, in due course. But I'll move on now to Alun Davies.
Diolch yn fawr. Holi roeddwn i moyn ynglŷn â'r gwasanaethau digidol. Dwi'n gwybod eich bod chi wedi buddsoddi lot fawr ynddo fe—lot fawr o arian ynddo fe, ond hefyd lot fawr o obeithion ynddo fe. Dwi'n cofio rhyw sgwrs yn adroddiad yr auditor yn 2017, ac roedd hynny'n dangos mai'r gwasanaethau digidol oedd y risg mwyaf oedd gyda chi ar y pryd, ac roeddech chi'n dweud bod y buddsoddiad dŷch chi'n gwneud yn mynd i gael impact fawr neu enfawr ar sut dŷch chi'n gallu gweithio. Ro'n i eisiau dilyn hynny i fyny os yw'n bosibl. Sut mae wedi gweithio? Ydy e wedi cyrraedd eich gobeithion, neu ydych chi dal yn gofidio bod hyn yn risg i chi?
Thank you, Chair. I wanted to ask about digital services. I know that you've invested a lot of money in that, and also a lot of hope in it. I remember some conversation in the report by the auditor—I think it was 2017. That showed that the digital services were your biggest risk at the time, and that you were saying that the investment that you were going to make was going to have a major impact on the way that you were operating, and I wanted to follow up on that if possible. How has that worked? Has it fulfilled your hopes, or are you still concerned that this is a risk for you?
Diolch. Cwestiwn diddorol iawn. Mi wnaf i adael i Becca ddweud mwy o fanylder ar y pwnc digidol, ond jest o ran—. Dwi'n cofio hefyd y teimlad bod y ffordd roedd rhywun yn mynd o gwmpas pob dim, gwneud o'n ddigidol a'i wneud o'n cloud based, roedd hynny'n cael ei weld ar y pryd yn rhywbeth efo lot o risg arno fo. A buaswn i'n dweud, erbyn hyn, dwi'n meddwl y ffordd arall rownd. Petaem ni ddim wedi gwneud hynny, petaem ni wedi mynd ymlaen i wneud rhywbeth mwy traddodiadol a conservative o ran y ffordd o weithredu, dwi'n meddwl buasai hynny wedi rhoi lot mwy o risg yn y system nag ydym ni wedi'i gael drwy'r profiad. Ond, mi wnaf i adael i Becca ddweud mwy.
Thank you very much. That's a very interesting question. I'll let Becca give you more detail on the digital issue. I remember the feeling that the way that we were doing things, digital and on a cloud basis, that was seen at the time as something that had quite heavy risks. But I would say it would be the other way round. If we hadn't done that and done something more conservative and traditional in terms of our operation, I think that would have put a lot more risk in the system than we have experienced through our experience. But I'll let Becca say more.
Diolch. Thank you. We're really proud of our digital services, and they've really made us what we are today, I guess. They make it easy for our taxpayers and their representatives to get their taxes right. They also allow us to be efficient, resilient and secure.
So, the initial investment, as Dyfed alluded to earlier, has given us that resilience to cope through the flood and through storm Dennis and the pandemic. And it gave us the ability to let all our people work from home, with really minimal disruption for our taxpayers and their representatives. But I guess, more so than that, our services have just proven to be really very—touch wood—reliable. We run over 99 per cent uptime. We've had six outages in the last two and half years that have impacted our customers—so, only four of these on the phone lines and two on the tax management system—and all of those were resolved within four hours. And I think the way that we were set up and the digital infrastructure we've got has allowed us to respond quickly and effectively to the changes, like the LTT rate changes that we needed to do in July.
I think the fact that our systems are easy to use means we've had a great take up of these digital services. So, we've got 98 per cent of people filing online, 87 per cent of our transactions go all the way through without needing any manual intervention at all, and that's really allowed us two things. Firstly, it allows us to be really efficient, because we reduce the amount of manual processing, and secondly, because we've got such a high take-up, we're able to use the digital tax return as a really effective tool to help reduce tax risk and help people get it right the first time more often. And from our customers' point of view, it works: 88 per cent of our feedback say the services are easy to use, which we're really pleased with. Of course, we always want to keep continuing and improving, and we're still learning as we go, and we're looking to keep making further improvements and changes.
I think, internally as well, one of the things that happened, I guess coincidentally at the time, is that we introduced Teams quite early on this year and, for us as an organisation, that's really become synonymous now with us being able to deliver through the pandemic. So, the fact that we had Teams and we could see each other, it's really allowed us to maintain that collaborative culture that we had all the way through.
I'm glad it's working better for you than it is for me then. That's good to hear. I still wish I'd hardly never heard of this thing, but there we go.
In terms of where you are now, you say you're very satisfied with the progress that's been made and you've managed all the risks over the last two or three years, and that's good to hear. So, where are you today? We are talking about the fiscal framework and such. So, in terms of structures, you have the capacity, therefore, I would have anticipated from your answer. If another tax, for example, were to be devolved at some point, or created or whatever, you have the capacity, the framework anyway, which would enable you to create the capacity in order to deal with that.
Do you want me to pick that up? Okay. So, I think that's a very good way of describing it actually—the framework. So, the business model and way that we chose to deliver, the way we chose to work, is, I would say—excuse the expression—extensible. In other words, it has the basic foundations right across everything that we need to be able to do, from supporting people to pay through to enforcement activity. And, actually, we operate lots of our things in-house, internally. So, we have started an apprentice programme for people learning digital skills. We've done the same things with data skills, with HR skills. So, lots of those other skills that make an organisation really able to do the full sort of suite of things that you'd expect to be able to do are in place and are growing. But, obviously, there's an issue around capacity and how you'd need to do that marginally, but, certainly, the basic framework is in place.
The only other thing I'd say is, in the last 12 months, or less than 12 months, so since we went into lockdown, we took the decision not to carry on doing recruitment, because we wanted to focus on making sure that the people who were in the organisation were connected to each other and had the support that they required. We have had to respond as well in that period to very different changes in patterns of demand for our services, as you can well imagine. So, being able to do that optimally has probably allowed us to cope with not having all of the people that we require in post, which is where we are today, and we are in the throes of recruiting as we speak. So, I suppose, is seems to me that the message would be, yes, it's so far, so good. The framework is absolutely the right thing in place, as far as I'm concerned, and we now need to just make sure that we fill those gaps so that we can be robust in future, as demand for our services will no doubt grow anyway.
Ocê. Diolch yn fawr. Does dim mwy o gwestiynau gen i.
Okay. Thank you very much. I don't have any further questions.
Okay. Just picking up on one thing, Rebecca mentioned, of course, the changes to the land transaction tax rates this year. I'm just wondering how that's impacted on the way that you operate and how you have communicated information around that change to stakeholders.
Do you want to pick that up, Becca, since that's your area of expertise?
I'll just click on unmute.
Yes, that's fine. We can hear you.
Okay. Yes, on the LTT rates, we were able to respond and deal with that rate change really quickly. I think it was a bit of a test for us as an organisation. It was the first time that had happened, and I guess we've had a lot of firsts over the last couple of years. But, this one, we didn't really know how it would go. But we were able to respond to that rate change quickly and it was operational one week after the announcement, and we had no prior knowledge of that change. So, we were really pleased with that.
In terms of communication, we worked with Welsh Treasury on our messaging, and ensured our helpdesk staff were briefed. All our guidance, web pages and LTT calculator were updated within two days. We had telephone line messages to highlight the changes, and we were able to communicate the system updates directly with our users using direct messaging through our operational updates and the newsletter. So, there was a high level of awareness in the profession and among the public. It was a very topical thing that was happening. So, we had quite a significant increase in web traffic and in terms of the use of our LTT calculator. Just to give you a flavour of that, on the day of the announcement, we had over 6,700 total page views, and that's compared to 900 on a more normal day. And, the day after, we had 3,200 page views compared to 622 of that time before. So, quite a significant upchange.
The actual change in the tax system took us two days to do, and, as is good practice, we costed how much it took us to do that change, especially because it was the first time we did it. And we were really pleased as it just took us around £10,000, and the bulk of that was the cost of our people's time, from our policy and communications teams, to do that. And I think it really shows how responsive and flexible our model is, and it's a really good example of that—original investment in our digital services, in our people, so that we could respond to that change in quite that way.
And at a time, presumably, when everybody was working from home—or elsewhere, at least.
Okay. Thank you for that. Siân.
Diolch, Cadeirydd. Rydych chi wedi cyffwrdd ychydig bach ar y ffaith bod eich cynlluniau recriwtio chi wedi gorfod cael eu haddasu, neu eu stopio'n llwyr efallai, ia? Fedrwch chi jest ymhelaethu ychydig bach ar hynny? Faint sydd yn gweithio i chi rŵan, a faint ydych chi angen bod yn eu recriwtio yn y cyfnod nesaf yma, a sut mae'r cynlluniau yna yn mynd yn eu blaen?
Thank you, Chair. You've touched a little on the fact that your recruitment plans have had to be adjusted, or halted entirely, perhaps. Could you expand a little on that? How many people are working for you at the moment, and how many people do you need to recruit in the next period, and how are those plans proceeding?
Sori, dwi jest bach yn araf deg yn cael gwared â'r mute. So, ar hyn o bryd, rydyn ni—gadewch i mi jest gael y ffeithiau o fy mlaen i—o ran nifer y recruitment schemes sydd allan, rydyn ni wedi rhedeg wyth yn barod ac mae gennym ni 12 yn fwy wedi cael eu planio rhwng rŵan a diwedd mis Ebrill. So, rydyn ni wrthi yn recriwtio, fel y gallwch chi ei weld, nifer fawr o bobl, o'i gymharu efo faint oedd gennym ni cyn cychwyn hwnna i gyd. So, mi fydd gennym ni o gwmpas 80 o bobl erbyn diwedd mis Ebrill—dyna beth rydyn ni'n ei obeithio. So, rydyn ni wedi bod yn gweithio efo rhwng 12 a 15 yn llai nag oedd i fod i'w gael.
Sorry, I'm a bit slow unmuting myself. So, at present—let me just get the facts in front of me—in terms of the number of recruitment schemes that we have out, we've run eight already, and we have another 12 that are planned between now and the end of April. So, we are currently recruiting, as you can see, a great number of people, compared with how many we had at the outset of this. So, we will have about 80 people by the end of April—that's what we hope. So, we've been working with between 12 and 15 fewer than we were supposed to have.
Sy'n awgrymu efallai eich bod chi'n gallu gwneud y gwaith gyda llai o bobl. [Chwerthin.]
Which suggests perhaps that you can do the work with fewer people. [Laughter.]
Ia, dwi'n deall sut y buasech chi'n gweld hwnna, ond, os medraf i, fe wnaf i egluro, er enghraifft, rai o'r pethau dydyn ni ddim wedi medru eu gwneud. Mae'r flwyddyn sydd wedi bod jest mor wahanol i beth fydd o'n blaenau ni. So, er enghraifft, o ran nifer y transactions ar LTT, mae gennym ni ddim ond, yn y chwe mis cyntaf, ryw hanner beth oedd gennym ni fel arfer. So, dydy'r galw am wasanaethau, i ateb cwestiynau dros y ffôn, ac yn y blaen, ddim wedi bod cymaint ag oedden nhw. Mi wnaethom ni benderfynu yn y cychwyn cyntaf, yn strategol, i wneud penderfyniad i newid ffocws ein gwaith. Hynny ydy, lle fel arfer rydyn ni'n gweithio'n galed i wneud yn siŵr ein bod ni'n trio gwneud pob dim i osgoi—[Anghlywadwy.]
Well, yes I understand how you could perceive that, but, if I could, I'll give you an example of some of the things that we haven't been able to do. The year that we've just had has been so different to the years ahead. So, for example, in terms of the number of transactions with LTT, we had in the first six months about half the usual amount. So, the demand for services, phone enquiries, and so forth, haven't been as high. At the outset, we made a strategic decision to change the focus of our work. That is, where we usually work hard to ensure that we try to do everything to avoid—[Inaudible.]
Dyfed, dŷn ni wedi colli'r audio, am ryw reswm. Dydy o ddim yn dangos ei fod o'n muted, ond dydyn ni ddim yn clywed Dyfed. Na, dydyn ni ddim yn clywed, dwi'n ofni. O dyna ni; rŷn ni'n clywed rŵan.
Dyfed, the audio has gone. It's not showing that it's muted, but we can't hear you. I'm afraid we can't hear. Oh, there we are; we can hear you now.
Ydw i nôl?
Am I back now?
So, mi wnaethom ni arafu gwaith roeddem ni'n ei wneud ar tax inquiry, tax recovery yn y cyfnod pan doedd gennym ni ddim digon o bobl i wneud pob dim. A hefyd, dwi'n meddwl y gwnaethom ni gymryd mantais o'r ffaith nad oedd yna ddim cymaint o transactions. Felly, mi wnaethom ni newid pwyslais ein gwaith. Ond mae hwnna'n rhywbeth y cei di ei wneud dros gyfnod byr iawn, iawn; dydy o ddim yn rhywbeth sy'n medru mynd ymlaen ymhellach. Jest i roi esiampl o hwnna, rydyn ni wedi bod yn gweithio yn y chwe mis diwethaf efo dim ond un o'r tîm cyfreithiol sydd ei angen arnom ni; so, mae yna ddau ar goll. Wel, mae hwnna'n iawn am gyfnod—[Anghlywadwy.]
So, we decelerated work that we were doing on tax inquiries and tax recovery in the period where we didn't have enough people to do everything. And we took advantage of the fact that there weren't as many transactions. So, we changed the emphasis of our work. But that is something that you can do over a very short period; it's not something that could continue for a long time. And just to give you an example of that, we've been working in the last six months with only one member of the legal team that we need; there are two missing from that team. That's fine for a period—[Inaudible.]
Mae'r sain wedi mynd eto, yn anffodus. Ond mi gawsom ni'r—. Na, mae e nôl.
The sound has gone again, I'm afraid. But we heard—. It's back now.
Mae o nôl.
Mae hynna'n iawn am gyfnod—gweithio felly.
That's fine for a period, to work in that way.
Mae o'n iawn am gyfnod, ac mae yna esiamplau fel nifer y cyfreithwyr sydd eu hangen arnom ni. Er enghraifft, rydyn ni wedi bod yn gweithredu efo un, ac mae angen tri arnom ni, er enghraifft. Ac mae hwnna'n rhywbeth sy'n iawn am gyfnod byr, ond dydy o ddim yn mynd i fod yn rhywbeth sy'n barhaol.
Yes, it's fine for a period, and there are examples such as the number of lawyers we need. We've been working with one, and we need three, for example. And that's something that's fine for a short period, but it's not something that we can endure on a permanent basis.
Ydy cyfnod y pandemig wedi dangos i chi nad oes raid i bawb fod yn eich pencadlys chi? Ac a fyddwch chi'n gallu recriwtio pobl a fydd yn gallu bod yn gweithio yn y gogledd-orllewin, er enghraifft, o hyn ymlaen?
Has the period of the pandemic shown you that not everyone has to be at your headquarters? And will you be able to recruit people who will be able to work in the north-west, for example, from now on?
Dwi'n meddwl ei fod e'n bendant wedi dangos i ni ffordd o weithredu efo'n gilydd heb orfod bod yn yr un un lle. Ond dwi hefyd yn meddwl ein bod ni wedi colli allan yn fawr iawn ar y ffordd yr oeddem ni'n arfer gweithio, sef trwy gydweithio ar draws timau proffesiynol gwahanol, o ran y bobl sy'n gwneud yr operations o ran y trethi eu hunain, y bobl sy'n gwneud cyfathrebu a'r bobl sy'n gwneud data a bob dim felly. Yr oeddem ni'n arfer gweithio gyda'n gilydd yn yr un un lle, ac mae hwn lot yn anoddach nag ydy o drwy fod mewn un lle. Ond yn bendant mae o'n wir ei fod o wedi dangos i ni fod yna ffordd o weithio o bell sydd yn medru gweithio, ydy.
I think it's certainly shown us a different way of working together without having to be in the same place. But I think we have missed out in terms of the way that we were working, namely by collaborating across different professional teams in terms of those who do the operations in relation to the taxes themselves, the people who do communications, and the people who do data and so forth. We were used to working together in the same place, and it's much more difficult now than it is when you're all in the same place. But it is certainly true that it has shown us that there is a way of working remotely that can work, yes.
Ac rydym yn ymwybodol, wrth gwrs, o'r llifogydd a'ch bod chi wedi cael eich effeithio yn y pencadlys gan hynny. Rhwng hynny a'r pandemig, pa brosiectau penodol rydych chi wedi gorfod eu gohirio a pha fath o bwysau fydd rhain, i'r dyfodol, i'r awdurdod?
And we're aware, of course, of the flooding and that you were affected at your headquarters by that. So, between that and the pandemic, what specific projects have you had to delay and what kind of pressure will this place on you in future at the authority?
So, gwnaf i ofyn i Sam, hwyrach, ddod mewn i ateb hwnna.
I will ask Sam to come in on this, perhaps.
Diolch. Can you hear me okay?
So, for the most part, across those two events, which were obviously very challenging for everyone in the local communities and offices around Treforest, particularly in terms of the flood and then obviously the national impact that's had, I think we've done particularly well to cope, as Becca and Dyfed have already outlined. The set-up for IT during that time, particularly being cloud based, enabled us to move to remote working swiftly. The actual disruption to our services was very minimal.
In terms of the projects and the activities that we were looking to undertake, in the most part we were actually able to carry on with those, albeit in some cases at a slightly different pace. We saw, for example, on some of our digital development, we had to slow down slightly. We've also had to look at the timetable for releasing some of our digital changes—for example, our landfill disposals tax return changes and improvements that we've been making. We've been working very closely with the landfill site operators on those changes and some of the consultation that we've been doing with them is around the best time to release this to balance the need to make these changes and the improvements they will bring for the LSOs and for us, but also the ability of the LSOs to receive those effectively. So, that's something we've decided to push back from this summer towards the end of this financial year.
In some cases, there are other things that we were planning to do, particularly during February and March, that we would ordinarily have done by bringing our people together in a more workshop-type situation. So, an example of that is we've been looking at how we can improve and enhance the way that the Welsh language is used across our organisation, but also enhance its use with our customers, and that's work that we had started in January with one of our away-days and we'd intended to carry on that work during February and March. But the flooding and then the impact of COVID meant that we decided to pause that.
Now, we've actually been able to reprioritise and refocus our attention during the impact of COVID to enable us to work more effectively together remotely. And that's something, I think, that's been a positive for us as an organisation—to actually be able to find those ways of working. And so, that's enabled us to start doing some of those projects where, in the past, we would have felt the need to actually come together physically to do that work. And on the Welsh language work, for example, we have actually made really positive progress over the last couple of months on that. So, I think, on the whole, it hasn't affected us as much as we may have thought back in February and March when we had to put these things on pause. And I think a lot of credit goes to our people, as well as our suppliers, in helping us through those periods.
Diolch yn fawr.
Thank you very much.
Iawn. Diolch yn fawr iawn. Gaf i ofyn pa mor effeithiol mae'r trefniadau llywodraethu ar y cyd rhwng yr awdurdod a Thrysorlys Cymru wedi bod o ran eich galluogi chi i weithio gyda'ch gilydd wrth gwrs, a sut mae hynny, efallai, wedi effeithio ar weithredu trethi datganoledig?
Okay. Thank you for that. Could I just ask you how effective have the joint governance arrangements between the authority and the Welsh Treasury been in terms of enabling you to work together, and how has this impacted on the implementation of devolved taxes?
Ie, perthynas eang iawn sydd ei hangen rhyngom ni, a dwi'n meddwl bod honno'n gweithio'n dda iawn. Dwi'n cofio roedd hen permanent secretary yr HMRC yn arfer dweud, 'Tax without government is extortion.' Dwi'n meddwl mai beth sy'n rili hanfodol bwysig i'w ddeall ydy bod beth rydym ni yn ei wneud yn, rili, rhan o beth mae'r Llywodraeth yn ei wneud. So, mae'r ffaith ein bod ni'n medru gweithio'n dda iawn ac yn agos iawn efo pobl yn y Trysorlys yn hynod bwysig i ni, ond, ar yr un tro, fod y berthynas yn parchu ble rydym ni yn gorfod gwneud penderfyniadau annibynnol ein hunain, a'u bod nhw'n gorfod gwneud yr un peth. So, dwi'n meddwl bod beth sydd gyda ni ar hyn o bryd yn gweithio'n dda iawn.
Yes, it's a broad-ranging relationship that is needed between us, and I think that that is working very well. I remember the former permanent secretary in HMRC saying, 'Tax without government is extortion.' I think that what's vital to understand is that what we do is part of what the Government does. So, the fact that we can work very well and very closely with people in the Treasury is very important to us, but, at the same time, that that relationship is respectful of where we have to make independent decisions ourselves, and that they've got to do that as well. So, I think that what we have now works very well.
A jest yn edrych ar y cynllun corfforaethol, pa mor effeithiol ydych chi'n teimlo mae eich cynllun corfforaethol chi wedi bod o ran eich galluogi chi i gyflawni eich gweithgareddau? A hefyd, wrth gwrs, sut dŷch chi'n monitro cynnydd yn erbyn y mesurau perfformiad?
And just looking at the corporate plan, how effective do you feel the corporate plan has been in terms of allowing you to deliver your activities? And also how do you monitor progress against your performance measures?
So, o ran hwnna, dwi'n meddwl bod y mesurau sydd gennym ni wedi bod yn addas dros y cyfnod. So, maen nhw'n dal pethau sy'n bwysig. Maen nhw'n dechrau datblygu hefyd. Yn amlwg, roedd rhai pethau i gychwyn—. Roedd lot o ffocws ar wneud yn siŵr bod pawb yn medru defnyddio systemau digidol; pan ydych chi i fyny at 98 y cant o bobl yn defnyddio'r systemau, dwi ddim yn siŵr pa mor effeithiol bydd hwnna yn y dyfodol, o ran 'Wel, actually, 98.5 y cant—.' Wel, dyw hynny ddim rili yn gwneud lot mwy o wahaniaeth. Felly, bydd yn rhaid i ni addasu pob dim wrth i ni fynd. Ond dwi'n meddwl bod y cynllun sydd gennym ni wedi bod yn helpgar iawn.
Dŷn ni, fel tîm, yn edrych ar y data sy'n dod allan o'n systemau ni yn fisol i wneud yn siŵr bod pethau fel y dylai nhw fod. Dŷn ni'n cyhoeddi lot o'r data sy'n dangos beth sy'n digwydd efo bob mesur, felly. Dwi'n gobeithio ei fod e wedi bod yn helpgar iawn. Buaswn i'n meddwl—. Yr annual report ddaeth allan fis yn ôl—roedd hwn yn llawn o fanylder ynglŷn â'r mesurau.
So, in terms of that, I think the measures we have have been appropriate over the period. So, they capture things that are important and they are starting to develop as well. Evidently, there were some things at the outset—. There was a focus on ensuring that everyone knew how to use digital systems; when we're approaching 98 per cent of people using those systems, I'm not sure how effective that will be in the future, in terms of, 'Well, actually, 98.5 per cent—.' Well, that doesn't really make much of a difference. So, we'll have to adapt everything as we proceed. But I think the plan that we have has been very helpful.
As a team, we look at the data that emerges from our systems every month to ensure that things are as they should be. We publish a lot of the data that shows what's happening with the measures. I hope that it has been helpful. I think the annual report that came out a month ago—that was full of detail about the measures.
Ocê, mae hynny'n ddigon teg. Diolch yn fawr iawn. Fe wnawn ni symud at Nick Ramsay.
Okay, that's fair enough. Thank you very much. We move on now to Nick Ramsay.
Afternoon. Can you summarise what data you publish on Welsh taxes? And how have you worked with stakeholders, such as academics, to ensure you're providing relevant data to support the modelling and analysis of those taxes?
Yes, I'm sure I can. Perhaps Becca might be able to add some more detail to it, but—. So, the data that we publish externally on our website every month or quarter, depending on which tax it is, these are data that are available obviously to people who are wanting to use them for forecasting purposes. So, we publish data also annually that's broken down by local authority area and other demographic splits as well. Those data are not different, in terms of what the forecasters get, to what we're actually publishing externally to the public, if you see what I mean. So, it's the same set of data that goes through the number of transactions that we've had, that goes through the amount of tax that's collected and goes through the different splits of different ways in which those transactions might have come through—so, whether they're higher rate transactions or whether they're not.
Was your question about whether or not that's proved sufficient for forecasters? Sorry, I didn't get the second part.
Yes. What discussions do you have with academics or relevant people who might be involved in the forecasting to make sure you've got enough data?
So, we do have user group conversations with people who are interested in our data. We published something on Friday—you might have seen—which was an explanation with a bit more detail from our head of statistics explaining how our data work, what you can and cannot infer from them and the extent of the possibilities to experiment and provide different cuts and different insights from those data. In terms of whether we deal with—. I'm not sure that we have particular dealings with academics that I can point to on those data aside from what we already publish. We use feedback on the data that we have to try and improve what's already out there and out there for public consumption.
Okay. How are you working with other Government departments, such as HMRC, to consolidate Welsh taxpayer data and maximise its value?
So, we have a really good relationship with HMRC. So, we share data with them, in terms of both data and intelligence, to understand what's going on and to make improvements to the way in which we're managing the taxes we have. [Inaudible.]
I'm back again; I'm back again. Sorry. Apologies. Similarly, we deal with Natural Resources Wales on a similar operational basis, where we're sharing information and data about live issues and things that we're looking at on an ongoing basis.
We have a set of data from Land Registry, which helps us to understand where we might establish that there are other tax risks, perhaps, and be able to do follow-up work on that. So, we have a good working relationship there that has come to fruition after quite a lot of work setting up the memorandum of understanding. You might remember we had lots of questions about that, but that's now all in place and up and running effectively.
And we have started to do some work—unfortunately, just before the lockdown—with local authorities in Wales to see whether or not the data that we have could be of more use to them in terms of the way that they're administrating their taxes. The best example, I think, of this—which is something, I think, with lots of potential—that we need to follow on once we are able to do so, is the observation that when people pay tax to us—a transaction on a domestic or a non-domestic property—that's the first point at which somebody will have declared that change of interest to anybody in Wales. So, in a way, you could think of us as perhaps the beginning of that chain of events; we could be thought of as being a 'tell us once' type service. This was something that local authorities themselves suggested to us as a way of thinking about what we do with our data. So, we've made really good progress in terms of our operational relationships with other organisations, and we had begun to explore how we can perhaps get yet more out of it, working with local authorities. But that's still something that the potential of which is yet to be realised.
You mentioned in your annual report that you're working towards a future data-sharing pilot. Can you expand on this and how it will be of—? You've just mentioned how your data might give benefit to other shareholders. How will that pilot help?
So, that's what I was alluding to, really, the idea that—. Obviously, there are important controls over the way in which we can share our data, for understandable reasons, for confidentiality reasons and protecting data that comes to us from citizens. What we had sought to do—and we are in the process of re-engaging that—is trying to find out from local authorities what is it about our data that they would find useful, that would make it easier to do their role, but being able to share it in a way that they can both use, but that also protects the confidentiality of the data that we hold and the security and the trust that citizens give us by giving us those data. So, in order to do that, what we need to do is establish a specific framework that would have to be agreed with Welsh Government to allow us to then enact what—. Legislatively, it comes from the—. It's dropped out of my head now which Bill it is whereby we are enabled to be able to share those data. So, there will be, basically, a pilot to see whether or not those are effective, and we would be able to do all of that within a legal framework, and it's that that we've not yet been able to kick on with, but that we would really like to get into.
Okay. Thank you, Nick. I was hoping to bring Mark in—Mark Reckless—at this point. I can't see him on the screen, so—. Well, there we are—as if by magic. Yes, okay. Thank you, Mark.
Sorry about that. I've been listening to everything; I didn't know you couldn't see me. Here I am. Could you elaborate on your approach to managing tax risk and the link between that and your ambitions to deliver a fairer tax system in Wales?
Sure. I think I'll hand over to Sam, who can talk more about that.
Diolch. So, we've talked about some of this in the past, and perhaps quite a lot of this recently for the first time in our performance report, and I think, for us, what's really important, and something we've been keen to develop from the outset, is this position of trust, this starting position of trust, within the tax administration, which for us encourages us to develop services and processes that support people to get things right and help people when they make mistakes—so, working with taxpayers, understanding that people will make mistakes, but doing it in a way that actually helps them correct that and pay the right tax. So, we've invested a lot in our services and our capability to ensure that we can do that in a supportive way, providing accurate, timely and effective advice, ensuring we have the right guidance that meets the needs of our taxpayers and the profession—so, we've developed different types of guidance to do that.
But we also have the ability, in the way that we've set ourselves up in this approach, to be able to identify where people are making mistakes, but also where people are making inaccuracies, and, in some cases, those may be deliberate, or we might suspect they're deliberate. So, that enables us then to take a range of actions that are appropriate, based on the nature of risk. In some cases, it enables us to develop preventative measures—so, that may be changes to the digital systems, which we've talked about briefly today—but it also enables us to actually identify those cases where we do need to take further action, and that may involve investigation, it may involve using our formal tax powers, such as tax enquiries and information notices.
So, in developing the operational model for the WRA, we've made sure that we've been able to bring in the right skills and expertise to be able to, basically, deal with the full spectrum of risk, from simple mistakes, where it's very much about supporting and preventative measures, through to the more serious types of cases, where it's very much using our investigative skills and the powers that we have available to us. I think for us, though, it is recognising that the majority of people in the tax system—and our evidence to date does support this—do want to pay the right tax at the right time and very much, for us, it's maintaining that culture that is intended to support people to get their tax right first time, as well as preventing the scope for errors.
But, as I say, we also then have the capability to ensure that people who are deliberately trying to pay less than they owe—that we're able to identify them and address them appropriately.
And how successful do you assess your efforts to mitigate tax risk as having been?
I think today it is very early days. This is an approach that we introduced at the start of the last financial year, so we really only have, I would say, a year's worth of data. I think, the last six months, the impact of COVID's obviously had quite a significant impact in terms of the amount of conclusions or the types of conclusions we can draw from that. But I think the early signs are very promising. I think, on all the three tax risks that we started work on last year from an LTT perspective, we've seen a reduction, which you can see from our performance report, in those tax risks over a period of time. I think, the risks that we're working on at the moment, we would hope to see a similar reduction over a similar period. As I say, COVID has impacted the data and the conclusions we can draw from that. But, for me, it goes a long way to actually showing that this model that we came up with—which is quite different, in our view—it is working. It is something that will continually need investment—circumstances change, new risks may emerge—so, it is something we're learning and continually wanting to invest in. So, we've continued to make changes this year. As I mentioned, the LTT tax return is an example of that, to help try and reduce tax risks in certain areas.
To what extent do you compare and contrast your data, in real time or with a delay, and what would that be, with HMRC and the emerging trends they're seeing for stamp duty land tax in England and, I think, Northern Ireland? Does that comparison inform work to mitigate tax risk, and to what extent do you work with them on that?
So, I think the relationship we have, as Dyfed said, with the other tax authorities is very positive. We have regular operational policy conversations with them to share what's happening within the respective taxes. We obviously have taxpayers as well as agents who operate across the different tax regimes. So, we do share that intelligence and information with each other. Where we identify particular risks and we feel like data would actually help advance our understanding of those risks, we have shared data in those cases too.
As Dyfed said, in terms of general data matching, where we've spent a lot of our time today is particularly around HM Land Registry data— getting access to that and using that—and we see that as a very powerful tool in terms of actually understanding the transactions that are happening in Wales and using that for our risk purposes. But, yes, it's certainly something that I think is working well in terms of the tripart relationship that we have with the other tax authorities.
Why does HMRC have data with the Land Registry for transactions in Wales? Isn't that your responsibility?
Sorry—no, the data that we get from HM Land Registry is the data that we regularly match in terms of actually looking at the transactional data. The data we get from HMRC is data that is basically focused on particular tax risks.
Okay, thank you. Just looking specifically at tax avoidance and tax evasion, is there anything you want to say in terms of particular arrangements that you have in place for those and maybe how prevalent that is here in Wales?
Shall I pick that one up?
Yes, Sam, you take that.
So, I don't think tax avoidance or tax evasion is something that we see as a significant issue across the two devolved taxes. That's not to say that it isn't something that we take extremely seriously, and it's something that we continually keep under review, as we've talked about, making sure that we have the right data, that we're sharing intelligence, that we're sharing knowledge. And it's not just with the tax authorities that we look to share that understanding; we also engage regularly with the wider profession to see what's actually happening in the marketplace. From our experience over the last two and a half years, I don't see it as a significant problem at the moment.
I think we've set ourselves up with the right infrastructure in terms of the skills and the people with the right experience to be able to address the very small number of cases that we see. We've also invested in expertise in terms of intelligence handling and processing and that's something that we continually want to build on. For example, we've rolled out training for all of our staff on intelligence handling recently. So, there are things that we've done; even though we don't see it as a significant problem, we want to be ready so that, if we did see changes in the future, we are set up well to address those particular risks.
Iawn, ocê. Wel, os nad oes yna gwestiynau pellach, dwi'n meddwl ein bod ni wedi dod at ddiwedd ein hamser. Felly, gaf i ddiolch, unwaith eto, i chi am ddod atom ni, ac am rannu'ch tystiolaeth gyda ni? Yn sicr, mae'n gyfraniad gwerthfawr i'r gwaith dŷn ni'n ei wneud ac mae yna ddigon yn fanna i ni bwyso a mesur wrth inni ystyried yr hyn dŷn ni wedi'i glywed. Felly, diolch i'r tri ohonoch chi am ymuno â ni.
Mi fydd y pwyllgor nawr yn symud i sesiwn breifat.
Right, okay. Well, if there are no further questions, I think we've come to the end of our session. So, could I thank you, once again, for joining us and for sharing your evidence with us? It's certainly a valuable contribution to the work that we're doing and there's plenty for us to weigh up as we consider what we have heard. So, thank you, all, for joining us.
The committee will now move into a private session.
bod y pwyllgor yn penderfynu gwahardd y cyhoedd o weddill y cyfarfod, y cyfarfod ar 23 Tachwedd, ac eitem 1 o'r cyfarfod ar 30 Tachwedd, yn unol â Rheol Sefydlog 17.42(ix).
that the committee resolves to exclude the public from the remainder of the meeting, the meeting on 23 November, and item 1 of the meeting on 30 November, in accordance with Standing Order 17.42(ix).
Cynigiwyd y cynnig.
Felly, yn unol â Rheol Sefydlog 17.42(ix), dwi'n cynnig bod y pwyllgor yn gwahardd y cyhoedd o weddill y cyfarfod yma a hefyd y cyfarfod ar 23 Tachwedd a'r eitem gyntaf o'n cyfarfod ni ar 30 Tachwedd. Ydy Aelodau i gyd yn fodlon â hynny? Ie, pawb yn hapus. Dyna ni. Mi symudwn ni, felly, i sesiwn breifat. Diolch yn fawr.
So, I propose, in accordance with Standing Order 17.42(ix), that the committee resolves to exclude the public from the remainder of the meeting and also the meeting on 23 November and item 1 of the meeting on 30 November. Are Members all content with that? I see that they are. We'll move into a private session, therefore. Thank you very much.
Derbyniwyd y cynnig.
Daeth rhan gyhoeddus y cyfarfod i ben am 16:24.
The public part of the meeting ended at 16:24.