Cause and effect – understanding how budget decisions affect people’s lives

Published 15/07/2019   |   Last Updated 27/05/2021   |   Reading Time minutes

The budget is the most important policy tool of a government. It is a comprehensive overview of its priorities and intentions. But how budget decisions are made, and the impact they have on different people and communities, has been a source of contention for Assembly committees for many years.

Last November three committees held a joint session for the first time to explore how the Welsh Government assesses the impact of its budget decisions. It found that the Welsh Government’s current approach is ineffective in some ways, and could arguably be failing to fulfil its legislative requirements.

What is an impact assessment?

Budget decisions affect people in different ways. For people reliant on services delivered by a government, funding decisions can have a significant impact on their lives. It’s important that these decisions are based on a full range of evidence, and that people who are already more likely to be poorer, or less able to access services, are not disproportionately or unfairly affected.

The Wales Centre for Public Policy (WCPP) says that impact assessments should be a “structured understanding of the consequences (intended and unintended) of governmental actions”. They should be conducted before the decision is made, based on forecasts, but also linked to evaluations to understand the actual impact.

The then Leader of the House Julie James AM told the three committees that a budget impact assessment should also help to “maximise” the positive impact of decisions, to actively reduce inequalities by targeting funding where it is most needed.

An impact assessment can also set out the different options explored by the government before making a decision, to demonstrate where trade-offs were made.

The Welsh Government has various legal obligations to assess the impact of its decisions on:

What does the Welsh Government currently do?

The Welsh Government publishes an impact assessment alongside its draft budget each year.

But the impact assessment has changed significantly in recent years. In 2011-12 the Welsh Government was the first government in the UK to publish a detailed equality impact assessment of its budget, and in 2010 it published an analysis of its spending on each age group for the first (and only) time.

In 2015-16 many different impact assessments were amalgamated into one (the ‘strategic integrated impact assessment’ (SIIA)).

The current SIIA aims to assess the entire budget for its impact on: equalities and human rights, children’s rights, the Welsh language, climate change, rural proofing, health, biodiversity, and economic development, with socio-economic disadvantage as an ‘underpinning consideration’.

What do people think?

The committees concluded that:

“the current SIIA does not provide an effective analysis of spending decisions, and could arguably be failing to fulfil its legislative requirements as a result”.

Experts like the Children’s Commissioner, Future Generations Commissioner and the Equality and Human Rights Commission (EHRC) told the committees that, in general, the integrated approach has weakened the impact assessment.

These three stakeholders also told the committees they had little input into the SIIA process, and did not have a shared understanding of the purpose and expected outcomes of the process.

The committees recommended that the process should be taken back to fundamental principles.

Members heard that the current assessment appears to use equality, children rights and other factors as tools for justifying spending, rather than demonstrating how those factors influenced decision making. The Children’s Commissioner said:

“[mentions of the UN Convention on the Rights of the Child] appear to have been used to back up the particular decisions and allocations that have been made rather than analysing the impact of different options.”

The committees’ report cites a number of examples from recent years where the likely consequences of a budget decision were not thoroughly assessed beforehand, resulting in their subsequent reversal.

The committees suspect that impact assessments of individual policy decisions are being undertaken, but not published in a transparent or accessible way.

In contrast, the Scottish Government publishes detailed analyses of options when making financial decisions, which set out why it chose to make those decisions, and what the expected impact will be. See the analysis of options and policy position papers for the new Scottish Child Payment benefit as examples.

Stakeholders were also concerned that while Wales has various innovative laws that require many factors to be taken into account during decision-making, this can lead to complexity and confusion. The prospect of further incorporation of international law, and the commencement of the Equality Act’s socio-economic duty in Wales (see our previous article for more information about this), is likely to exacerbate these issues.

The committees recommended that the Government should use the Well-being of Future Generations Act as a framework for the impact assessment, while ensuring that other factors (such as equality and children’s rights) are not diluted as a result.

What’s going to change?

In response to the committee’s recommendation to publish all individual impact assessments in one online location, the Welsh Government said “while it would be possible […] further consideration needs to be given as to whether this would aid accessibility, understanding and transparency”.

The Children’s Commissioner thought this was inadequate. She said that the current situation is not “sufficiently transparent” and that the change proposed by the committees would “demonstrate a real commitment from Welsh Government to transparency”.

The EHRC said that the current publication of assessments is inconsistent, and urged the Government to publish them in a ‘common format’. It also emphasised that the Welsh Government’s aim of a streamlined approach to assessments must not come at the expense of detailed analysis.

The Government committed to working more closely with the commissioners, and to fully evaluate the SIIA process. The Government’s response states that it is also testing “alternate approaches” to understand the impact of spending decisions, and exploring how the Future Generations Commissioner’s journey checker might support this work.

The Future Generations Commissioner suggested there may be “a way of finding a lighter touch, high-level impact assessment using the Wellbeing of Future Generations Act (WFG Act) as a framework, and then a deeper dive where specific impacts have been identified to still cover those areas that are important”.

With the prospect of further incorporation of international law and duties on the horizon, the EHRC and Children’s Commissioner highlighted concerns that the Welsh Government’s research on this issue is not progressing fast enough.

The three committees will continue to pursue these issues in their individual budget scrutiny in the autumn.

Key reading

The joint report of the Finance Committee, the Equality, Local Government and Communities Committee and the Children, Young People and Education Committee was published in March, and will be debated in Plenary on Wednesday 17 July.

The Welsh Government’s response to that report can be read here. The Children’s Commissioner, Future Generations Commissioner and the Equality and Human Rights Commission (EHRC) also responded to the report (which can be read at the bottom of this page).

Article by Hannah Johnson, Senedd Research, National Assembly for Wales