The Assembly is due to debate the Finance Committee report on the financial estimates accompanying legislation (PDF, 446KB) (published October 2017) on 24 January. This follows the Committee’s inquiry on the subject, held in June and July 2017, which built on recommendations made in the Legacy report (PDF, 4MB) of the Finance Committee of the Fourth Assembly.
The financial estimates accompanying legislation are included in the Explanatory Memorandum of a Bill under the Regulatory Impact Assessment (RIA), Standing Order 26.6(viii) sets out what this should include. As part of its role, the Finance Committee scrutinises these estimates at Stage 1 of the legislative process.
The Committee’s inquiry
In order to assess the reliability of the estimated costs of a Bill and whether the actual costs of implementing legislation accurately reflected those estimates, the inquiry considered how the Welsh Government prepares its financial estimates and how costs and benefits are monitored and evaluated following implementation. 
Evidence was received from a range of stakeholders, including the Wales Audit Office (WAO), Public Policy Institute for Wales and the WLGA, as well as organisations subject to the above legislation. The Welsh Government also attended committee to provide evidence.
The inquiry examined a number of areas, including; the content and presentation of RIAs; how the Welsh Government engages with stakeholders; funding for new legislative costs; subordinate legislation; and, how post-implementation review of costs might be undertaken.
Regulatory Impact Assessments (RIAs)
The Committee recognised improvements that the Welsh Government have made in the presentation of RIAs so far in the Fifth Assembly, such as the inclusion of a standard summary table at the start of each RIA. In line with this, the Committee considered how costs and benefits are recorded and received evidence on the difficulty of costing cultural change, but also the importance of costing this element of any piece of legislation.
The Committee held concerns that there might be limited scrutiny, in terms of costs, to changes to legislation/RIAs made after Stage 1 and recommend that in future the Welsh Government provide the Finance Committee with a summary of cost implications of any changes after Stage 2. The Committee’s report goes on to note the circumstances surrounding the Additional Learning Needs and Education Tribunal Bill as an example of why this might be necessary.
Stakeholder engagement
Witnesses provided evidence on the level and timing of stakeholder engagement when preparing legislation/RIAs, with the Cabinet Secretary for Finance and Local Government suggesting that the Welsh Government could learn from its experiences in order to improve the way it worked in this area.
The WLGA told the Committee that a key feature of good practice, in terms of legislation, was early engagement. The Welsh Government legislation handbook (PDF, 3MB) now recommends publishing a draft RIA as part of the consultation on a Bill.
Funding for new legislative costs
In terms of the accuracy of RIAs, the Committee received contrasting evidence from two organisations established under Welsh Government legislation - Qualifications Wales and the Future Generations Commissioner. Evidence on the former suggested that the relevant RIA provided “quite a realistic estimate”, whereas the Future Generations Commissioner felt the equivalent RIA was “way off the mark”.
Evidence from the WLGA provided a context of increased financial pressures due to a number of factors, including new legislative requirements, with the WAO suggesting that public bodies aren’t always clear as to whether new functions will be accompanied by (or require) funding.
Subordinate legislation
The Committee explored the costing of subordinate legislation and the difficulty of assessing primary legislation that may contain a number of regulation making powers (such as the Social Services and Well-being (Wales) Act 2014).
In evidence, SOLACE stated that where the detail of costs are contained in subordinate legislation there is a risk of “creeping onset of costs which have not been identified”. The Committee therefore welcomed the intention of the Welsh Government to strengthen guidance in this area to ensure that as full a picture of the costs of subordinate legislation as possible is provided when primary legislation is proposed.
Post-implementation review of costs
Post-implementation review of the costs of legislation was another key focus for the Committee, with the Committee noting that an understanding of the actual costs of legislation is integral to assessing how well the Welsh Government is managing its resources. Evidence from stakeholders suggested how this might be undertaken and the Committee heard from the WAO and Welsh Government that post-implementation reviews of legislation were being undertaken, however, these weren’t, at that time, considering costs.
The Welsh Government outlined that post-implementation review is an expectation of its legislative guidance and costs and benefits are one of the elements that the Welsh Government‘s legislation handbook says should be a consideration when undertaking such a review.
Welsh Government response to the Committee’s report
The Welsh Government provided its response (PDF, 269KB) to the sixteen recommendations of the Committee’s report in December, accepting fifteen either in whole or in principle.
The recommendation rejected by the Welsh Government related to RIAs containing explicit reference to how costs will be funded (and by whom) – Recommendation 10. The Welsh Government believed that extending the analysis to consider how costs will be funded “moves beyond the design and intended purpose of the assessments”.
The Welsh Government has updated and published its revised legislation handbook (PDF, 3MB); chapter six contains guidance on the preparation RIAs.
Article by Owen Holzinger, National Assembly for Wales Research Service
