Review and reform of budget process
Published 13/10/2020   |   Last Updated 18/12/2020   |   Reading Time minutes
The Senedd will debate the Finance Committee’s legislative budget process report on 14 October 2020.
This article briefly summarises the main recommendation from the Committee’s final report and the Welsh Government’s response.
Budget process: brief background
The Wales Act 2014 gave the Senedd powers over:
- stamp duty land tax;
- landfill tax; and
- the power to vary the rate of income tax in Wales by up to 10 percentage points
The Act also gave the Welsh Government:
- wider short-term borrowing powers; and
- new powers to borrow for capital expenditure.
In 2017, the Senedd and the Welsh Government agreed a budget protocol for the principles underpinning the current budget process. The Welsh Government’s annual budget is currently authorised by a budget motion and tax rates are agreed by resolution.
Does the budget process need to change?
The Finance Committee has worked to improve financial scrutiny throughout this Senedd. As part of this work the Committee thought it was time to review the budget process and sought to learn from international best practice. This included recent experience of reform in Scotland, led by the Budget Process Review Group (BPRG). The BPRG’s report identified four key objectives for implementing a legislative budget process;
- to have a greater influence on the formulation of the budget;
- to improve transparency and raise public understanding and awareness of the budget;
- to respond effectively to new fiscal and wider policy challenges; and
- to lead to better outputs and outcomes as measured against benchmarks and stated objectives.
What did the Committee find?
The Committee recommended that there should be annual legislation to pass the Welsh Government budget. This would involve a budget or finance bill being voted on and approved by the Senedd.
The Committee recognised that as well as considering how such legislation would be set up, this would need a detailed review of the wider budget process. A new process would need principles of simplicity, transparency and accountability to be at the heart of its development.
The Committee considers that the approach taken in Scotland, whereby experts and stakeholders came together to review the process and agree a way forward, is something that we can learn from in Wales.
This would allow for a balanced view to be taken on issues such as:
- whether there should be a finance or budget bill;
- how the public can be engaged in budget and priority setting; and
- how the process would change wider financial scrutiny in the Senedd.
The Committee concluded that a legislative budget process would “better reflect the maturity of the Senedd”, stating:
Making these changes will strengthen the role of both the Welsh Government and the Senedd following the devolution of fiscal powers.
While deciding whether to take work forward on a legislative budget process will be a matter for the Sixth Senedd and the next Welsh Government, the report sets out a direction that a process could follow.
What is the Welsh Government’s view?
While not disagreeing with what the Committee wishes to see from a budget process, the Welsh Government responded by stating that the current process provides sufficient flexibility, which could be reduced by a legislative process. The government added “before undertaking such reforms there would therefore need to be clear additional benefits identified which are not available within the context of the current process”.
You can watch the debate on Wednesday 14 October at Senedd.tv.
Article by Martin Jennings, Senedd Research, Welsh Parliament