Cynulliad Cenedlaethol Cymru

Bore da. Good morning, everybody. Welcome to our Finance Committee on 5 November, bonfire night. I'm sure there won't be too many fireworks here this morning. Can I welcome Members and the public to the meeting today? The public items of the meeting are being broadcast live on Senedd.tv and the Record of Proceedings will be published as usual. The meeting is bilingual and simultaneous interpretation is available. We're happy to have Elfed Williams joining us online today, and we also have apologies from Dan Thomas this morning as well. Are there any declarations of interest that anyone needs to declare? Sera.

Okay. Diolch yn fawr iawn. Thank you very much. Does anybody else have any declarations? No. Okay, thank you for that. 

The second item today is papers to note. There are four papers to note there. Is everybody satisfied that we do so?

Chair, just one question on the letter from the Cabinet Minister in relation to the Welsh tax Acts, inviting you to join that working group. Is it your intention to do so? And I'm asking the question because, on the Legislation Committee, which I sit on, the Chair has decided to recuse herself from joining that group because she thinks there's a perceived conflict of interest.

Yes, thank you, Huw. We've had a similar discussion here this morning as well. The current position is that we're going to go away and get some more information about what's expected, whether the invitation as Chair of the committee is as an observer or as an active member of the group. I think members of the committee had similar concerns about possible conflicts whilst legislation is certainly going through at the moment. And the other area is the timing of this. So, I think you're right to raise it as perhaps a concern and something that we need to go away and consider. 

I think there needs to be consistency between the committees. 

I agree. Yes, thank you. On the papers to note, anything else from anybody? No, okay. Thank you for that.

The third item on our agenda this morning, then, is: Audit Wales—scrutiny of the estimate 2027-28 and interim report 2026-27. It's our second evidence session. I'd like to welcome our auditor, Catherine Mealing-Jones. Would you like to introduce your colleagues who are with you today?

Yes. Bore da. Catherine Mealing-Jones, Auditor General for Wales. I'll ask colleagues to introduce themselves. 

Okay.

Diolch yn fawr. Kevin Thomas, executive director of corporate services. 

Ann-Marie Harkin, executive director, audit delivery. 

Lovely. Well, thank you for being with us this morning. We've got just over an hour to explore a number of areas off the back of the estimate of income expenses for the year ending March 2028, which seems like a long time away, but I'm sure will come round pretty quickly. I'll kick off with a few questions and then colleagues will come in after that.

First of all, there's a request for an increase in your baseline call on the Welsh consolidated fund of £238,000, about 2.3 per cent compared to the previous financial year. Could you just outline why that level of funding is necessary?

Yes, diolch. I mean, the first thing to say is that we very carefully scrubbed through all of these figures to make sure that we're only asking for what we believe we really need. As the auditor general, I have to put forward an estimate, working with the Chair and the board, that I require to deliver my functions. The additional funding is there to cover essentially three elements, I guess: inflationary increases, and then work on our strategy, and to offset inflationary rises and deliver our fee regime. So, we believe we've put together a balanced package that we can work to.

In looking at this, we have to have an eye to our regime, set up in legislation, and be really clear, because we have no ability to keep reserves. We can't go into deficit, so we have to make sure that we're within a budget that we can manage. We can only charge audited bodies what the audit costs, so that brings some constraints around how we can do our financing, and we govern all of this by keeping a very close eye on our key performance indicator to stay within 2 per cent of our target.

Okay, thank you. And then, as chair of the board, are you satisfied this is a reasonable request?

Okay, thank you. And I hear the comment there about some of the challenges back from the board and I don't know whether the auditor general wants to comment on this next question. What sort of consideration was given to reducing the ask? What sorts of things were up as an option, to mean that the ask would have been lower than the 2.3 per cent that's been requested?

Thanks. And when you were, as you described, testing the ask, what did that process look like in terms of things when you—? A request for investment, for example; how does the board test that ask?

And is there a set structure for that, or is it quite ad hoc in those meetings in terms of that testing process when it comes to ensuring that it is the right amount being asked for?

Okay, thank you. And I wonder, as auditor general, new in this role—we'll stop using that phrase very soon, don't worry—how you find that process compared to your previous roles, and your expectations coming into the role, of that testing, as it were.

Yes, I found the whole process very structured and stepped. And the degree of detail and rigour that's put behind the initial challenge through the executive board team, and then into the board setting and the sub-committee, is pretty rigorous.

There are two areas that Ian and I have been discussing where I think we would like to do some further work in the coming year. One is on a clearer statement of investment principles. So, I believe that we take those principles through the discussions that we have at the board level. Obviously, as a board member as well, I'm part of those discussions.

And the other piece of work that we're keen to do—and because we are effectively presenting an estimate that is for a transitional year, as we set out to you in our evidence session last time, so some of the money we're asking for is to do work to pivot towards our new strategy—is we'd like to do some work on a benefits management structure, so that we're much clearer in terms of the benefits management cycle when we're making an investment.

So, I believe we follow the principles through the business cases that we make, and so on. I think it could be slightly sharper, and that's one of the things that Ian and I have been discussing. 

Diolch yn fawr iawn. Huw. 

Yes, just on the structure and the timetabling of the process, we're obviously considering the estimate now at quite an advanced stage relative to the Welsh Government budget, which still hasn't been published in draft. I think there's a reasonable likelihood that the funding increases that Audit Wales are requesting will be higher than what is likely to flow into other parts—front-line services within the public sector. And I think there is a challenge with that, candidly. But I wonder: do you still consider it appropriate for Audit Wales to be setting their budget so far in advance of the Welsh Government budget itself being agreed?

I think we—. The legislation sets out that we need to lay our estimate, which is essentially our budget for the coming year, no later than 31 October each year. We obviously need to comply with that legislation. I understand that—

But do you consider it appropriate?

It is appropriate that we comply with the legislation. As the Finance Committee knows, there are some restrictions and a lack of flexibility with the legislation as it stands, and we're keen, if we can, to pursue some potential changes to that. So, I guess that would be something that we'd consider as part of that process if the Finance Committee would support us. 

And if I can respond as well, I think in taking it into the strategic frame, I think it just makes us even more determined on our work, our future work, on impact. So, there's a lot that we do that we do through statute. And we're creatures of statute, we have to comply with that. Obviously, we work every day with the rest of the public sector, and we're very aware, and indeed comment on some of the challenges that the wider public sector are facing. And, of course, on a human level, we can see the impact that that has on leaders who are working within that environment. But I think it's—. My argument would be that that's why public audit is all the more important. So, our timing we can't do much about, but our stance, in terms of our determination to double down on all the advantages and impact that public audit can bring, is redoubled by that. 

Yes, and I acknowledge the discussion we've had in the committee about measuring that impact and increasing in terms of value for money.

Thank you. I'll come on to a specific point before I bring other colleagues in in a moment. I'm just looking back at the estimate you made in October 2024, so two years ago now. The estimate there for your medium-term financial plan was about a £1 million lower than where you're finding yourselves at that point on the medium-term financial plan, which is the year ahead of us now. The proposal for the call on the Welsh consolidated fund for 2027-28 in revenue is now 10.8 per cent higher than you forecast two years ago. Why do you think this is?

May I pass that to you, Kev?

Yes. Sorry, I don't have those figures in front of me, Sam. We look at our call on the consolidated fund each year. We do our estimate on the basis of need, and we take into account a whole variety of factors—inflationary pressures, costs of staffing, et cetera. We go through it at quite a granular level, firstly at management team and then through, as Ian has outlined, a number of discussions and challenges at board. We do look to keep the call on the consolidated fund and, indeed, the impact on audit fees as low as possible whilst maintaining our quality standards and the timely delivery of our work.

I would also draw the committee's attention to the first exhibit in part 2 of our estimate, which shows the trend of the cost of public sector audit in Wales over a decade. Over that decade, we've reduced, in real terms, the cost of audit by just over 10 per cent. That's about £24 million. And so looking at it over that timescale, I think that does demonstrate our ongoing drive to keep costs as low as possible, but, as I say, whilst ensuring that we keep focused on the quality of the work and the impact of that work.

I just wonder, as Audit Wales, what that says about your planning processes, if it's nearly 11 per cent out just in a two-year period. Two years ago you were saying your likely expenditure was going to be X, and it's now 11 per cent higher than you predicted just two years ago. What assurances do you have that your medium-term financial planning processes are appropriate?

Thank you. I have a few more points there, but I know time is going on, and I need to bring others in as well. Lyn, would you mind coming in at this point?

What is your estimate of the value of the decrease in your employer pension contribution costs for 2027-28 due to the reduction in the rate following the 2024 valuation of the civil service pension scheme?

Diolch. I think the total value of the pension decrease is £1.15 million, looking at Kev. But we should say that when this was last revalued in 2019-20, the call on the Welsh consolidated fund at that time was £732,000, and we've continued to only draw that from the Welsh consolidated fund. We've used that benefit, if you like, to fund three things. First of all, we've passed it on to our fees regime, so that we can hold fees at a below-inflation level. We're using some of that benefit to deliver our preparatory work for our strategy, and we've offset some of our other inflationary rises. But the bulk of it has been passed on to keep fee rises as low as possible so that we're not passing on a much higher fee rise to the audited bodies.

You say the reduction in employer pension contributions has been used to mitigate fee rate increases. Can you explain the basis of this approach? If your employer pension contribution rates increase in future, how will you fund the rise in your costs?

I'll perhaps pass to Kev in a minute, but the current valuation is now fixed at 22.32 per cent until March 2031, so some way into our strategic frame. I would have to be honest and say that we couldn't sit here today and say how we will fund that. We would have to look at the annual round of estimates. And obviously, if we have had any legislative changes, we might be in a different position in terms of how we would deal with those costs. In terms of the first part of your question, are you okay to answer that, Kev?

Yes, sure. We set firstly fee rates or fee scales. We look at our skills mix, our chargeable days and overheads, and come up with a calculation of a fee rate. We then apply that rate at individual audit bodies depending on the size, the complexity and the risk, and the number of staff that we need to work on a particular audit. When we calculate those fee scales, we do consult with all public bodies in Wales. We've just completed that exercise over the summer, and as I think Catherine has mentioned, the overall increase in fee rates was 2.25 per cent. Without the offsetting impact of those pension contribution reductions, the fee rate increase would have been in the order of 7.2 per cent.

The reason for that significant increase is because, as the committee knows, over the past couple of years we've been addressing an audit backlog. We've taken on more staff to help us deal with that, so we've had a larger cost base over which to apportion overheads. When we took those staff on in the first place a couple of years ago, we had the opposite impact on fee rates. They went up by just 1.7 per cent in 2025-26, but we did flag at the time with the committee that once we had cleared the backlog and had reduced back to pre-backlog staffing levels, we would see that opposite effect. We would have seen that this year were it not for that pension, which we've managed to offset.

Okay. I'm just going to go back to page 51, point 9, in the pack. This says:

'we may charge a fee which differs from that originally notified.'

Have you got particular examples of why that would happen?

It's page 31 of your report.

It's page 51 in my pack. I don't know if it's the same—

Yes. In your report, it's page 31, just for reference.

We would charge an additional fee in the instance maybe that the quality of the accounts that were submitted to us were not where they needed to be, the timeliness of responses from officials, maybe, when we were doing the audit was not where it needed to be, or indeed if there was an audit issue arising. Often, it will be quite a complex audit issue that arises. As you will appreciate, under our fee regime and under the statute, we have to charge the cost of the work that we undertake. So, if the work takes longer, if it requires even maybe a higher grade of staff because they are more complex issues, then we would need to pass that cost on to the audited body.

Thank you, Lyn. Before I bring Elfed in on a couple more questions around some of the fees and other costs or requirements, just going back to the pension points, obviously the pension contribution costs being reduced this time round is a benefit, as it were, to you. I think it was 2019 when the pension contribution costs went up. You came to the committee with a supplementary budget asking for more funding, essentially. So, why aren't you coming back here to suggest a reduction in your funding when the pension contribution costs are actually coming down this time?

You're absolutely right. In 2019-20, we saw additional funding of £732,000. As Catherine has mentioned, we haven't uplifted that for inflation, so, over the past seven years, Audit Wales has absorbed all the inflationary increases on the £732,000. If you look at part 2 of the estimate, there's an exhibit 3, which shows us taking out that £732,000 in its entirety. It takes it down to £0. But as Catherine has outlined, we have sought to increase the investment in strategy: two additional posts to help us deal with escalating levels of correspondence and some of our AI activity, and also to offset some other inflationary pressures. What we're left with is an increase of 2.3 per cent on the consolidated fund, which is below the current rate of inflation, which is standing at 3.5 per cent as at the end of September.

I appreciate the response. I understand technically what you've chosen to do here. In the spirit of it, though, it seems as though, perhaps to some people, when there's an increase in your requirement for pension contributions, you come here seeking that money, but when the opposite happens, you don't do the opposite thing, which is to come back and say—. And you're essentially soaking that cash up in your own activities internally. Is that a fair reflection, do you think, or am I being unreasonable?

I think it's very difficult for us to do anything else in terms of the way the legislation works. Logically, if we followed that through, I think it would be difficult for us to do that. Obviously, under the legislation, if we don't spend what we're given, we always give it back. So, that's a part of how it works. I think it would be easier to do if we were able to do things like hold reserves, for example, and run our budget in a different way. I think it's also difficult in a regime where we can only charge audited bodies for the cost of the audit. Some of the adjustments that we've made through our estimate are trying to be fairer to audited bodies or trying to be very rigorous about only passing on the costs. This becomes more tricky when you're trying to change your organisation to be able to deal with the future, because you cannot then pass on the costs of the need to make that change to the audited bodies that you're auditing that year, which is why we've got the uplift. And also, in future years, we may come back to the committee asking for a further uplift in order to address those points. So, yes, I understand what you're saying about the spirit, but I think we're a bit locked into the regime that we're in.

The letter doesn't necessarily allow the spirit to do what you may want to do. I've got a couple of people who want to come in before Elfed. I'll go to Cai first, and then Huw.

Just quickly, you say that if you don't spend all your money, you'll give it back. What are the incentives to giving it back? 

We have to.

Yes, the legislation says that any unused funding is returned in full to the consolidated fund at year end. We have no capacity to keep any of that money back. We do also—

If there is, let's say, for simplicity, £1,000, you've got the option to give it back to whoever you give it back to or spend it on a nice coffee machine. There's obviously an incentive for nice coffee. Why would you not do it?

It's public funding. We are involved in the best use of public funding.

When was the last time you've given any money back?

Every year.

It's like landing on a postage stamp to get our budget in on target, so we always have to overshoot slightly in order to not go into a deficit, which we can't do either. So, we always then give back the balance that we've overshot by, if you see what I mean. So, yes, we give money back every year.

Thank you. Huw, and then Elfed.

I just had a question following up on Lyn's line on fees. There's a reduction in fee income forecast for next year, associated, I think, with the clearing of some backlog issues. In the papers, there's a 'Pressures/Inflation' figure of £929,000 associated with that fee. Can you just explain to the committee the read-across? Because if it's less income because you're doing less work, that makes sense, I'm just—. I can't quite work out how the decrease from your current level of fee income to what's forecast is characterised as 'Pressures/Inflation'. Does that make sense?

Are you able to direct us to the bit of the paperwork that—

It's page 7 of the 'Estimate of Income and Expenses for Audit Wales for the year ended 31 March 2028', pack page 17. So, you've got 'Audit Fee income', 2026-27, £18,491,000; then 'Pressures/Inflation', £929,000, and your estimate for the next year is £17,562,000.

So, the £929,000 reduction in fee income relates to that clearance of the backlog and that reduction of 20 staff that we've achieved over the past two years. So, we reduce the number of staff generating income, we get less income in. If you look at the difference between the reduction in income and those staff costs—the staff costs include a negative number of staff, down 20, you've got the impact of the pension, which we've just discussed, and our staff are also entitled contractually to increments on a sliding scale and also to an inflationary pay award—that's what makes up the £1,416,000. The £929,000 is directly because of that reduction in income because we've cleared the backlog.

So, is it just a labelling issue that it happens to sit in the 'Pressures/Inflation' column?

It's a pressure because we have less income coming in. It's—. Yes.

Okay. Thank you. Elfed, can I bring you in on a couple of questions, and then we'll perhaps bring Sera in after that? Is that okay?

Shall I start, and perhaps Ann-Marie can come in? Thank you for those points. And, obviously, if there are specific issues that have been raised by community councils, I'm very happy for you to contact me separately and we will work those issues through.

Just on the principles: obviously, the town and community councils are a key part of our regime and a really important part of what we audit in terms of bringing that transparency and accountability about the use of public funds right to the heart of the communities of the people of Wales. We do have a solid regime in terms of town and community councils, and also we are very transparent about the fees that we are going to charge upfront. So, we have to charge the audited body the cost of the audit, and that's just a given.

We do consult on our fee regime. So, there is an opportunity every year for audited bodies to respond to us about the proposed fee regime. This year, we had 12 responses, I think, to our fee consultation. So, these points didn't come through that fee consultation. And separately, of course, we're always happy to engage with umbrella bodies, et cetera, that cover that section of the audited bodies.

Ann-Marie, I don't know if you want to add anything about any of the specifics? It's difficult to deal with individual complaints within this setting, but obviously we'd be happy to tackle that outside the committee, if that's helpful.

Yes, absolutely. Any complaints, please do encourage community councils to write in to Catherine or to myself, because that's clearly not what we want. But what I would say is that we are required to undertake audits of these returns or the accounts that are submitted by community councils. In some cases, those returns are of very good quality, they're submitted on time; in other cases, that is not the case. And often in those cases, additional work is required, maybe there is some to-ing and fro-ing, and what that does do, as we discussed earlier, is to put up the audit fee. Because, again, we have to charge for the work that we undertake. So, I'm very happy to work with community councils to look at ways in which we can reduce their individual fees.

There is a fee consultation and they can respond to that—some of them do—but often their comment is about making the fee regime as proportionate as we can, bearing in mind that a lot of these bodies are quite small. We have sought to do that. So, we will only do a full audit, if everything is okay, every three years. In the interim years, we would do what we call a 'limited assurance review'. So, we have sought to be as proportionate as we can in our audit approach. My understanding is that the Welsh Government, as well, have been looking at the whole set-up here and, really, whether there is more that can be done in this space. But please do encourage them to talk to us, to write to us, because we are very happy to talk to them.

Elfed.

The funding for audit work not funded through fees increases by £301,000 to £5.3 million, or 6 per cent, in 2027-28 compared to 2026-27. You note this increase includes

'2 new posts to deal with increasing volume and complexity of work on correspondence.'

Can you provide a breakdown of the elements that make up the increase and the reasons for them?

Yes, certainly. I think, possibly in common with other public bodies that have come before the committee, we're seeing a fairly steep rise in the correspondence that we're receiving. I think it's a 50 per cent increase over the last year or so. The greater use of artificial intelligence amongst correspondence is leading to an increase in the complexity of the correspondence that we're receiving. The correspondence that we get at Audit Wales, and I get as auditor general, is obviously a really important way in which members of the public can draw to my attention issues of concern that they would like me to consider, when I'm considering the overall programme of audit work. So, really, it's something that we've got to get right.

We've also seen, this year, a rise in objections. So, electors have a right to object to aspects of local authority accounts, and we've seen an increase in that. So, the additional money is for posts to cover folks to deal with correspondence—I think an additional post there—and also an increase in the capacity in our law and ethics team, because we're needing to deal with quite a high degree of complexity in terms of getting right the way that we're addressing the issues that are being raised.

Okay, Elfed.

I'll just ask one more for now and, with your permission, Chair, maybe if there's time at the end, I'll come back and ask some more.

Yes, thank you.

You requested an increase in the costs to be met from the Welsh consolidated fund in 2027-28 for 'WCF Control/compliance' of 7.7 per cent, noting it reflects the pay increase, but this change is significantly higher than any inflationary measure. What else does this increase cover?

Kev, could you—?

Yes. Sorry, I've just got the call up here. Would you mind, Elfed, just repeating the line that you're focusing on there?

Yes. The 'WCF Control/compliance' of 7.7 per cent, noting it reflects the pay increase, but this change is significantly higher than any inflationary measure. What else does this increase cover?

It's the contribution to the staffing costs associated with the control of the consolidated fund, which is something that's administered by our law and ethics team, work around audit quality and associated activity. The £24,000 reflects pay increases. So, we budget for a pay increase each year to reflect inflation. Staff are also entitled to incremental pay progression if they are not at the top of a particular scale. So, that's what that £24,000 equates to. 

Thank you, Elfed. Diolch yn fawr iawn. Sera, I'll bring you in next. 

Diolch yn fawr.

Diolch yn fawr. The additional capital funding that we're asking for is covering three key areas: investment in our core ICT infrastructure, investment in our digital platform, so we continue to enhance our digital platforms in Audit Wales to enhance our capability and capacity. And really, these are around making sure that they're more of a time release for auditors, so that auditors are able to spend more time exercising their professional judgment rather than being data-entry clerks. Effectively, that's what a lot of these platforms are doing. And then, the other capital call is just around general things that we need to do to maintain and upgrade, where necessary, our leased estate.

On our ICT work, we've taken a build-our-own approach, really trying to maximise the benefits of our Microsoft tenancy. So, a lot of this is built around that. And also, it means that it helps us with resilience in case key members of staff leave—we know that we can access other experts who will be able to use those technologies. So, we're reasonably resilient there.

In terms of the timescales, I think I'd be slightly cautious at this point about being really clear about the benefits and efficiencies. But just to say that this is one of those areas—. When I spoke earlier about the discussions that Ian and I have been having about our investment principles, this is one of those areas that we'll be putting through that new approach, to make sure that we're taking that whole lifetime approach to the investment and really tensioning the investments against one another.

The final point I'd make about some of the ICT investments is that I would say we've been fairly modest in terms of our investment at Audit Wales on this. The figures that are in the estimate are—. We recognise they're a call on vital public money and a spend on us is not a spend on another area, but, I think, compared to the approach that other audit bodies have taken, and certainly the firms in audit, I think this is a really considered and proportionate approach to our capital investment, and hopefully we'll be able to demonstrate that in the future years.

Through our business case approach and investment principles. Obviously, the other aspect of that will be the work that we'll be doing to build our impact framework, so that we can attribute the investments that we're making to the impact that we're having in future in a much more cause-and-effect way.

The bulk of that £100,000 is invested in a rolling programme of laptop replacement. All our staff are allocated a laptop. It's really important. They can do their work in an Audit Wales office, they can work on client sites to do that, and what we want to do is to minimise downtime, which leads to a lack of efficiency, loss in income. And what we found to be very successful is making sure that we don't have any laptops that are more than three years old. So, we have this rolling programme that we invest in new laptops, switch the old ones out, so that people have the latest and best technology to support the efficient delivery of their work.

Diolch.

Thanks, Sera. Cai. 

What do new laptops help you in your job that a three-year-old laptop doesn't do?

It's purely down to the breakdown likelihood. As laptops gets older, they become unreliable, software updates get slower. We don't want laptops to break. We want people to be focused on delivering their work, rather than having IT problems and having them fixed. We found that three years is the sweet spot in terms of replacement. So, that's the programme that we've had in place for a number of years and which has been very successful.

'For a number of years' is interesting, because I know with laptops in the past, to go back to maybe 2010, you would have them for three years and they were rubbish. I've noticed with my laptops, I can have a really old laptop, but it's doing a great job now. So, how long ago did you start doing this every three years: 'We'll replace the laptop'? And is it time to maybe review that?

We've been doing it for at least a decade. We constantly keep that under review, and we feel that at the moment three years is the appropriate time in terms of breakage, in terms of support for software, which is always being developed. It requires more processing power all the time. There are particular apps and software applications that members of our team run, and we find that the best technology means that they can do so efficiently and effectively. If it became apparent that a different rolling programme was appropriate, then we would look to implement that, but we still feel that three years is the sweet spot.

Is it possible to get access to one of the old laptops that is running slowly?

I'm not quite clear what the—

You say, 'This laptop is inefficient, it's time to buy a new one', and I would just like to see the laptop, so I can review that. Because otherwise you're just saying it's slow, but I can't—. I'm surprised that three-year-old laptops—

Perhaps we should say something about our disposal strategy for our old laptops. You know, they don't just go in the bin. There's a well-established regime around the useful economic life of laptops. And obviously we have to take the security and safety of the information that we hold about the public writing to us and the information we get from public bodies carefully. So, the cyber security side of this is important. I think it might be more productive, perhaps, to come back with some further information about our disposal regime and so on, because this isn't just money lost and the investment goes in the bin.

Equally, as auditor general, I have to be assured that the laptops that my staff are using are appropriate and that we've got a useful economic life regime that is appropriate for us. I think the fact that the £100,000 has stayed static is an indication of how we try to hold costs down. Anyone who's been buying laptops recently will be aware that there's been a very steep inflationary rise in the cost of that kind of hardware. So, it is something we really pay attention to. I'm understanding your point to be about are we bearing down and not unnecessarily changing our laptops when we don't really need to, and the assurance I'll give the committee is that, yes, we absolutely do try to make sure that we're only replacing when we need to and that our replacement strategy does put money back into the pot, but we can perhaps come back with a clearer line on that.

Okay. That's helpful. I think Sera wanted to come in. 

Thank you for that intervention, Sera. I'll bring Huw in, and we'll perhaps go on to other bits then. Huw.

Thank you. Can we talk about the strategy for 2027 to 2032? So, there's a new ask for £463,000 non-staff costs—I assume that's externalised. I wonder if you could talk us through the breakdown of that ask.

so Yes. I talked in the previous session about the fact that we were looking at this as a transitional year. We're looking at a strategy that will cover a period out as far as eight years, but at certainly five. I think, within that £463,000 investment, candidly, we haven't absolutely pinned down everything we're going to spend the money on. Some of the costs are going to be recurring because they will be about bringing staff in to cover some of the key areas, so things like the digital and AI expertise that are going to be needed. Some of it will be work that we will do in terms of bringing in people with an understanding about some of the areas that we're starting to get into, things like sustainability reporting, for example, how we ourselves are going to audit AI—you know, those types of skill sets.

So, are we talking specialist consultancy?

Potentially, or staff. We're in that stage of working through. We've literally only just fired the starting gun on the strategic work. We're making some modest investments this year in some external support to help us think through what we're going to need, and I expect that to carry on into the early part of the next financial year. I think, in the early stages, some of that will be in terms of buying in expertise to help us, and in the later stages of the year, maybe recruiting staff in those key areas, which is why some of those are recurring costs. So, that's where we're at with it.

So, you've put the entirety of that £463,000 in your baseline. You've mentioned recurring costs—do you expect that £463,000 to roll over for five years?

It's very hard for me to say that sitting here today—

In which case, why have you put it in the baseline?

Because I believe there will be recurring costs through staff. The other thing that I think, as I said earlier, just to be very clear, in order to run—. We're in this situation where we can't add some of these costs to fees because they're not yet being used to deliver the audit. We can only charge people what we're using in the audit. In terms of the degree of challenge, the changes in public audit and in the audit profession more generally, it is possible that the cost of audit could start to rise in order to deal with the kind of complexity that I've been talking about and the different specialist expertise that we will need.

So, there is a scenario where the £463,000 ask actually increases on the baseline. I just want to be really clear with the committee that that's a possibility. Absolutely, we will challenge, and I'm sure Ian and the board will challenge me very hard on that. But I think it's important to be clear that that's where we see it at the moment. I think it is likely to be recurring costs and it is possible that that cost will rise.

Okay. Can I ask, then, what in my head feels like a linked question in relation to Audit Horizons, which I'm not very familiar with, but within the pack it describes itself as a strategic programme? I wonder what is your new strategy work and that £463,000 needing to do that horizons hasn't been doing already? Does that make sense? 

It makes perfect sense. So, Audit Horizons was a programme of work to look at a package of things that were to do with audit modernisation, new standards; others may be able to say more about exactly what it covered. What we will do is now wrap the Audit Horizons work into what will be a much longer term piece of strategic thinking, so the two sort of converge during this year in terms of how they are handled. But for any audit body, there will always be a need to be looking ahead and scanning to see what the latest changes are, obviously responding to the changes in standards that need to happen, which we work on with our international colleagues as a result of the changes in the public sector environment. So, there's a sort of ongoing change and adaptation piece, which I think was what Audit Horizons was all about. And then there's the work that we're doing on our new strategy. For the next year or so, we will run those two things together, because we're much more actively thinking about the future. Once we've settled on the strategy, we may split those out again, but we're running them together at the moment.

Yes, because in the estimate, you're asking for the additional £463,000 and £155,000 for Audit Horizons.

That's right, yes. Yes, because those staff who have been doing that horizon-scanning work are still in post and still need to be paid for.

Do you expect that to drop off in future years?

No, I don't. As I was saying to you, I believe that the work that we will need to do to keep public audit adaptable and able to deal with the things that are going to be facing the public sector—there is a potential that they could increase.

So, one of the recommendations, I think, from the previous Finance Committee was about the horizons work being underpinned by robust business cases.

Yes.

How have you addressed that recommendation and looked to have measurable outcomes from that work?

Well, we've certainly had robust business cases. I don't know if others are able to address that question in terms of how that worked before I came.

Yes, it was that, essentially, Audit Horizons paid for two additional members of staff. One was in what we call our audit development and guidance team—an audit lead on the performance audit side—and the other was to part-fund a software engineer to help us turn digital opportunities into, I suppose, more efficient ways of performing audit work. So, those two individuals will still be in post.

Now, before we put any new member of staff into our establishment, it goes through a very robust process, which involves me writing quite a detailed business case, that business case then being scrutinised by finance colleagues, human resources colleagues and going, ultimately, to our executive leadership team. In the case of something like Audit Horizons, that was also scrutinised by our board to make sure that they were comfortable that the case we were making was robust and would generate improvement for the organisation in the way that we work.

And just lastly, Chair, the future strategy—you're saying you've not quite pinned down what you will need to be doing and spending in relation to the £463,000. When do you think you will have that clarity?

Again, I hesitate to put an exact date on it. I mean, within the next few months; we're now actively thinking about the strategy. Again, all I would say, sort of linked to what we've said earlier, is if we don't end up spending it, we'll give it back.

Or you get a new coffee machine. [Laughter.]

We won't be buying a new coffee machine.

Thank you, Chair.

Diolch, Huw. Perhaps if I bring Elfed back in. I just want to pick up the point that Huw mentioned there in terms of previous committee recommendations, because one of the recommendations this committee made in the last Senedd term is that, in your future estimates, you should provide a breakdown of overall staff salaries, distinguishing between contractual increments, pay uplifts and other drivers. That doesn't seem to be in your report, even though it's a recommendation of this committee. I was just wondering why you felt that wasn't needed or included.

In terms of what we've put in the budget, we are conscious that we have shared with the committee in previous years the value of the budget for the pay uplift. That has kind of stifled our ability to have proper discussions and negotiations with our trade union partners, and in discussion with both our exec team and with the board, we felt it was appropriate to provide that at this level within the published document. Of course, happy to share further breakdown with the committee, but that's the main driver for that decision.

I can't recall—and maybe I should have had this prepared before I ask you this next question—how you responded to that recommendation when we made it and how that aligns with what's actually happened.

My recollection is that we didn't commit to provide that breakdown within the estimate, but I think, in the written response that I think we provided in January of this year, we've provided a little bit more detail about how the figure is made up.

My recollection is similar to yours, Chair. [Laughter.]

That's helpful, thank you for that assurance. I'll bring in Elfed now for a couple of questions. Thank you.

Thank you for that question. So, you're right in saying that we are having challenges with some local government bodies, or local government bodies are having challenges in delivering accounts for audit. And in some cases, that will maybe span over two, and, in one case, three years, which is unfortunate. We are working extremely closely with those councils, those local government bodies, to try and improve the situation.

So, our staff—. As set out in our stakeholder survey and the positive responses that we get from these bodies, they welcome the fact that we work very closely with them. We have engagement directors and an audit team who are very much with them through this, and we do everything that we can to support them. We also support on a more Wales-wide level, so that we would regularly attend meetings of the treasurers and the treasurers' executive and their development days. We would also run good-practice events as well, where those local government bodies that are maybe doing it a little bit better can share their experiences, and we can share our, I suppose, knowledge as auditors about what they can do to maybe get the information to us on a more timely basis.

We're not on our own in Wales in this situation. Other parts of the UK are facing similar, and, in some cases, worse challenges, but that's not to say that we don't want to be better in Wales. And we have seen an improvement this year. So, last year, we had 16 local government bodies of the 32 principal bodies that submitted to us for audit by the due deadline of the 30 June, and, this year, that rose to 20, which was gratifying. We were really pleased about that. I would expect further improvement now next year.

For those 12 bodies that were unable to—. Well, 10 actually, because two came in shortly afterwards. For those 10 bodies that were unable to submit accounts by the 30 June deadline, they each have individualised recovery plans—so, clear dates by which they would be getting documentation and accounts to us. And we're working very closely with them to ensure that those dates are met and are doing everything in our power to improve the situation. I'm confident that, for the 2026-27 accounts, we will be in a much, much better place and, hopefully, that word 'backlog' we won't have to use anymore.

Thank you. Elfed.

'delivered in accordance with the planned timetable in 2025-26...from 81% to 83%'.

A lot of hard work by some very, very good staff. So, on the performance audit side then, as you'll be aware, it has been our ambition to catch up again on a backlog of work that we had in the local government and the NHS local audit space. We achieved that as at 30 June for our local government work. So we were very happy about that. And we've also made some significant headway in terms of our NHS work as well. It does mean as well that we have this year probably prioritised—. We've had to put less of our performance audit qualified accountancy staff into supporting the financial audit part of the business, and we've been able to use more of those staff on local performance audit work as well. So, I suppose there has been an element of how we've chosen to prioritise resource in different parts of our audit portfolio.

Okay. Thank you, Elfed. Just looking around the table, I can't see any other Members wanting to come in at this point, so I'll ask a couple of questions before we wrap up as well. Just going back to some of the points around the capital investment in digital in particular, I heard the comment on how firms have progressed probably quite rapidly in this space and I expect other public audit bodies in the UK may have as well. How do you assess your position at the moment in terms of where Audit Wales is in terms of the benefits of digital? Is Audit Wales lagging behind where others are? Are you about on the curve, or are you ahead of the curve in terms of the opportunities that digital presents for those perhaps more administrative roles that can be picked up digitally?

We do work very closely with—. I meet regularly with the other auditors general and the head of the National Audit Office as well, and our teams meet as well. And obviously this whole area of digital support and the use of AI and the challenges of AI has been a very high topic of conversation. It's also something we've covered a lot in the board and, indeed, I think we'll cover it again when we get together for our forward look. I think that each regime is slightly different, and we're always very mindful of using technology in a way that doesn't run ahead of what we're trying to do. So, we're not trying to use technology for the sake of it; we're trying to embed it in our business where it works.

Coming in, I was surprised at how little we were spending on digital technologies, but, actually, now I understand our strategy more clearly, I think we're about right. We do have a somewhat different audit regime to the other audit bodies, and certainly to the firms. And I think we have different drivers. One of the things we want to do through the strategy is really pin down the enduring value of public audit for the Welsh people and for the public sector far into the future. And a lot of that is going to still rely on human judgment. So, the tools are there to support that and free that up. So, I think our approach, which is more about productivity, perhaps, than the firms', where I think they're perhaps more focused on driving down their costs absolutely, is a bit different. So, I think for where we are I think we're about right.

I wonder perhaps with—. The Finance Committee, we're primarily of course interested in some of those numbers and making sure that value for money is there, which I'm sure you are as well. But I wonder—. To gain those productivity gains the most and therefore drive some cost savings, potentially, you're also reliant on public bodies' digital systems being in a similar space as well. I wonder how hampered you are in gaining these productivity increases by other public bodies not being in the same digital space as you might want to be. Is that a fair comment or assessment, or are they actually in the right sort of space as well?

Well, I think we've made a few comments about where public bodies are with their digital progress through some of our review work. I think it comes down to a key message I've been trying to get across to the committee today, which is that I think we will go through a phase, in terms of our relationship with other public bodies, where we may almost need more capability to be able to fully understand how other bodies are using digital technologies and to be able to assure that use. So, I think the efficiency curve, if you like, around some of this is potentially a bit lumpy in terms of the early parts. So, I think there's our use of it and how we use it within our business, and then, when you turn to how we use it to look at other bodies, I wouldn't say we were hampered, but I think there's an understanding point, a few years that need to be got through, so that we reach a kind of equilibrium around some of these technologies. I think particularly AI and that whole area of how you assure other people's use of AI and everything that goes around that, I think, is going to be a particular challenge for us and for them over the coming few years.

Okay. Ian.

Thanks, Chair. I totally agree with Catherine's comments. I meet three times a year with the chairs of the other UK public audit bodies to discuss areas of common interest, and clearly AI and technology is one of them, and I think we're pretty much in the same space. And as a board, I think we're really interested in what AI can provide for Audit Wales and the public sector, but we're taking an interested but cautious approach, because of the concerns, as well, around AI. Catherine was referring to when we'll have a couple of days together to discuss things, and this will be one of the main discussion items: how as a board do we take an overview of AI and developments of AI? So, it is an area that will develop.

Thank you. It's not necessarily directly linked, but there are clearly concerns broadly at the moment around cybersecurity, particularly with public bodies' access to information. I expect that will be part of your conversation as well, about ensuring the mitigations against those risks are currently appropriate and perhaps what the future may hold for trying to mitigate those risks as well. And that may feed into future estimates, I expect, as well. Is that about right?

Yes.

Yes. It's one of our core strategic risks as an organisation and for the board, yes.

Okay. Thank you. I can't see anybody else wanting to come in at this stage. So, thank you for being with us this morning. That's appreciated. We'll close that item there. Thank you.

So, Members, the next item on our agenda is item 4, which is a motion under Standing Order 17.42(ix) to resolve to exclude the public from items 5, 7, 8, 9 and 10 of this meeting and the entirety of the meeting on 12 November. Are Members content? I can see that you are. Thank you very much.

Welcome back, everybody. We're on to item 6 of our agenda here this morning, which is the Taxation (Wales) Bill, evidence session 1. We have the Cabinet Minister for Finance with us here this morning, Elin Jones. Perhaps, Elin, you'd like to introduce colleagues that are with you here today as well. 

Bore da, bawb. I'm India Hitchen. I'm the policy lead for this Biil, and I'm also the policy lead for legislation and strategy within the Welsh Revenue Authority. I'll pass over to Dave. 

I'm the strategy and capability director with the Welsh Revenue Authority and have overall leadership as the senior responsible officer for this particular piece of legislation. 

I work in the Office of the Legislative Counsel and I'm the lead drafter for the Bill.

Diolch yn fawr iawn. Thank you for being with us here this morning. We have on the agenda around an hour and 15 minutes together to go through a few questions. Perhaps I'll start with some questions before I bring colleagues in.

First of all, we recognise it's a series of what are mostly technical and administrative amendments to the Welsh tax Acts. I just wonder whether you or colleagues could describe, if this Act does not pass, what difference it would make. 

Thank you for allowing us the opportunity to discuss the detail of this Bill. As you've mentioned, Chair, it is very much technical in its nature and it provides for the opportunity to clarify, strengthen and futureproof the Welsh tax Acts as they exist and as they are administered currently, and it'll support information sharing between the WRA and local authorities as well. Getting to this place and introducing this piece of legislation is the fruition of the experience of the WRA in administering the tax Acts that we have and the tax collection in place at this moment and where measures can be taken to make the system more effective for all concerned.

If a Bill of this nature is not ultimately passed or had not been introduced, the everyday working of the WRA would continue, but there would be elements that could be strengthened by this Bill that would be of benefit to those people who are payers of tax or who administer the taxes, and the opportunity to strengthen and clarify would not be able to be taken. Therefore, that's the experience of eight years of what's been learnt about what could be improved, and this is an opportunity to make those improvements and put them into legislation. Perhaps officials could give a more direct flavour of what the opportunities that could be lost by not passing this Bill would mean in practice to the WRA and others.

I'm happy to kick off, if that's okay. As the Cabinet Minister has outlined, there have been a number of areas, as you can see, across the Bill, where—. None of those, I suppose, have arisen or—. They've all arisen through direct practice—things we have seen, things we've had feedback on from the tax-paying community, from tax professionals and the like. The inability to pass the Bill—. I suppose, ultimately, if it didn't pass, it would mean that those particular clarifications, improvements, strengthening—. We wouldn't be able to deliver on those, first and foremost. So, that would leave, in some areas, some uncertainty remaining for taxpayers. Things might not operate, as you've said, as efficiently as they could.

But there would also be some of the futureproofing and opportunities missed out on, for example the opportunity to share protected information with local authorities. That's a gateway we're looking to introduce through this Bill, which will lead to a number of efficiency savings on the part of the local authorities in the actions they take to collect and manage local taxes. We wouldn't be able to realise those. So, it's a number of practical areas, as I say, in response to things that we have seen, some technical changes, some questions of interpretation or clarity, but also those futureproofing opportunities, I think, would be missed. What I'd say is that those issues wouldn't go away. We'd have to continue to live with them until a future opportunity arose, maybe, to come back and correct them at that point. So, I don't think they're nice-to-haves, in that sense.

Just to add, this is a piece of legislation to do this work on reflection of eight years' work of practice by the WRA and others. In the Westminster context, there is an annual finance Bill where these kinds of measures could be introduced in legislation on an annual basis. We don't have that process in Wales at the moment, and therefore this once-in-eight-years or once-in-however-many-years Bill is the process of catching up on some of the practices that could be improved and the clarity that could be improved on for everybody. I think that context is important to why a Bill is necessary at some point always in a taxation process, because there are always those lessons that have been learned in how it's operated that need to be strengthened via legislation.

Thank you for that. It's useful context to kick off this session here today. We're going to go into some specifics now, and in particular looking at some of the amendments to the Tax Collection and Management (Wales) Act 2016. Section 1 recognises a distinction between formal committees of the WRA and committees established by WRA staff in relation to functions they're authorised to carry out. I'm just wondering what challenges are currently faced by the WRA with the way things work today, and how section 1 of the Bill will impact on strategic oversight and operational management at the WRA.

I see this section as primarily around clarity and ensuring that the WRA is clear in terms of how it establishes its committees and sub-committees and the membership and voting arrangements within those committees and sub-committees. I'm not an expert on the day-to-day running of committees within the WRA, so others can contribute to that.

Thank you. Diolch yn fawr. I think I would go a little further there to say that, as the Minister said, this doesn't change in a practical sense the practical operations in terms of either the role the board currently plays or how the existing staff committees are functioning. It's more a pre-emptive change, partly to deal with the risk of possible challenge to the decisions taken by respective committees, particularly the staff-formed committees. Because within the WRA, the ability to take decisions on particular cases, for example, has been delegated by the board to members of staff of the WRA, via the chief executive. Ultimately, the ability for staff to come together and take decisions about those cases is something that is bread and butter, if you like, of what we do within the operation and the collection and management of those taxes. The decisions we stand by with those we obviously want to be maintained and not in jeopardy in any way. So, it's to put beyond doubt, I suppose, the distinction between those types of committees and therefore how they operate in practice.

Thank you. Can I just understand, sorry—? You described putting it beyond doubt and providing clarity, but what practical challenges—? Is there an example you can give as to how the current arrangements make things less clear and at times things are within doubt? 

I think because it doesn't define what a committee is in that sense, and therefore the membership of those committees. Therefore I think this helps to distinguish between the committees of the WRA—so, committees of the board and sub-committees of those, as opposed to other committees previously unmentioned, left ambiguous, which would be staff formed.

Okay. That makes sense. 

The way that the law is structured currently doesn't make that distinction. It sets out a series of requirements in respect of committees in the TCMA, but I think the intention is that that's a reference to the committees that include the executive or non-executive members of the WRA as a whole. They're not intended to operate on the committees staff might set up. But because that distinction isn't drawn out, it's a bit unclear in some places whether some of those rules do in fact apply, or would apply, to staff committees, like the rule about non-executive members being involved in decisions of the committees or being involved in the committees. We wouldn't want that for the staff committees. 

Of course, the reason that would have been put in legislation initially was to ensure that delegated decision making is appropriate, I assume. I guess what we want is assurance that the way the Bill has been drafted ensures that the delegated authority still remains at the senior committee level, as it were, and then decisions about what is delegated are decided at that level to enable operational decisions to take place at the sub-committee level. 

Yes, that remains. The authority to delegate remains with the WRA as a whole, but once that's done, the rules that then apply to the different types of committee, whether they're staff committees or whether they're committees of the authority proper—. We're just making sure that the rules that are appropriate for the authority proper don't impinge on the activities of staff committees.

Yes, okay. That's useful. Thank you so much. Sera. 

Which one of you wants to take adran 2?

I think first and foremost—. Obviously, as a recap, this is around the delegation of WRA functions and the potential for onward delegation of those functions, and so what we need to do and the restrictions around that, ultimately. So this is principally, initially, to deal with a technical issue again around the existing delegation that WRA has in place to Natural Resources Wales.

Again, if you're familiar with the way that the tax collection and management Act is established, there are powers within that for Welsh Ministers to decide for the WRA to be able to delegate to other bodies. The only named body in there currently is Natural Resources Wales, and the WRA has indeed established a delegation of functions in respect of NRW for certain landfill disposals tax functions. The technical point that the Bill is looking to address first and foremost is the fact that we're clarifying, if you like, that NRW, the body corporate to whom you've delegated the functions, is also able to delegate onto, ultimately, its own members of staff, who are the people who will perform the delegation, if that makes sense. So that's the technical issue that, over time, we wanted to address.

Obviously, in the way that the legislation has been drafted, the provision, it does also open up the opportunity, should we wish at some point in the future, to explore further delegation to other bodies, for example, via the further delegation route. But it's worth saying on that point that that's not presently envisaged. We’re not expecting NRW to look to delegate to anyone else other than its own staff. But it is again a futureproofing measure in that sense, because it's possible that other newly established bodies in the future might be suitable in this sort of setting. But hopefully that clarifies the point.

It's a technical problem that appeared once we started trying to draft the provisions in relation to committees. So, this is my fault, this section. They started asking questions about how the delegation system worked, because NRW has its own power to delegate, and it wasn't clear that there was a direct line between the delegation that was happening under section 14 of the WRA's functions to NRW, and then the NRW's ability to delegate onwards to its own staff. Because the power that NRW has is a power to delegate the NRW's functions, not a power to delegate other people's functions that have been delegated to NRW. So, it's a product of the drafting staring.

And in order to complete this circle, there are regulation-making powers here as well to enable Welsh Ministers to prohibit or limit further delegation of WRA functions in the Bill as well, so that Welsh Ministers and this Senedd retain, then, the ability to prohibit an onward delegation, should that be the view of the Welsh Ministers that NRW should not be doing that at that point.

Yes, to create an unnecessary power grab from—

Exactly. We'll stop that before it starts.

Do you want to carry on, Sera?

No, that's it from me. Diolch.

Okay, thank you. 

You're welcome to continue.

Yes, please.

Diolch yn fawr, again, for the question. Recognising, I think, within this particular section, the ability to disclose protected information, there are the two new gateways. Each have slightly different purposes, so I'm happy to just cover each of those, if that's helpful, just for clarity.

The first, if you like, is the narrow gateway supporting WRA functions, which will enable the WRA to be able to share protected information with principal councils, with local authorities, narrowly for the visitor levy functions of the WRA. So, it's for the WRA's own purposes, if that makes sense. That is to support and supplement the information we'll be able to gather as we undertake compliance and enforcement activity on the visitor levy, with, obviously, the visitor levy coming in from next April for Cardiff Council—the first of the local authorities to take that forward. 'It's an additional tool' is probably how I would frame that.

Obviously, the WRA will itself be gathering information more widely. As of the start of last month, we have started to administer the national register of visitor accommodation providers in Wales. That in itself is going to be a key source of information that will support the administration of the visitor levy from April, as I say. We have other sources of information, intelligence, data, which we'll be relying on, as we're doing in practice currently with our existing two devolved taxes. We've drawn a wide pool of information to identify potential instances of risk and explore those. Obviously, we engage directly with taxpayers to understand their situation and their circumstances, if we have any concerns about what might have ultimately made it into the return. So, this would be an additional tool to be able to seek information from principal councils and from local authorities that might support that compliance activity.

Presently, of course, if you think about the very narrow, targeted interventions we might want to make, or queries we might want to make of the principal councils, we wouldn't be able to do that if we have to explain who the taxpayer is, if that makes sense. So, you know, in asking the question about said taxpayer, we would need to name said taxpayer, to give this as an example, which, in itself, would be a disclosure of protected information. So, this is, as I say, a narrow gateway, but it enables and supports that. So, that's the first of the two gateways.

The second, then, is actually not for the WRA's own functions, but it is for the functions of principal councils, as you mentioned. So, supporting them with the collection and management of the local taxes, so council tax and non-domestic rates, because the WRA—. We recognise—again, this is the opportunity if you want to seize—that through particularly the land transaction tax data, for example, that we collect, identifying property transactions, particularly if there might be higher rates payers, for example, gives an indication of the use of a property and if there are other properties that owners might have acquired, for example.

So, that kind of data could be useful, as we've recognised, for local authorities, for those principal councils, in taking that forward as part of their own compliance activity. So, that one is less of a WRA need, if that makes sense, but we recognise we're part of a broader tax infrastructure across Wales. There are opportunities to partner, obviously. We're beginning to partner more readily with local authorities anyway, through the visitor levy, as I mentioned before, so this recognises some of our further deepening of that partnership.

I'll answer that one. So, we undertook a full UK general data protection regulation article 36(4) consultation with the Information Commissioner's Office, which you're obligated to do when you develop legislative proposals related to data sharing. So, during the policy development cycle, you pre-empt upfront and undertake an engagement with ICO. That then informs the development of the data protection impact assessment, which I've got in front of me, which has been published on Welsh Government's web pages, which goes into a lot more detail with regard to the policy intent behind the changes, as well as the safeguards that are inbuilt within the Bill, and the identified risks of the sharing and the proposed mitigations to those risks as well.

Yes, that's correct. So, the change to the legislation is the start of a process with local authorities. The information-sharing agreements would be developed, a memorandum of understanding, as well as—. It's important to note that these two information-sharing gateways proposed in the Bill are permissive, so they don't obligate the WRA to share anything. As such, the WRA would need to be satisfied that suitable data infrastructure was in place in accordance with UK GDPR before sharing. I think it's also worth noting that there are also other safeguards within the Bill. In TCMA, Welsh Revenue Authority officials, so myself and Dave, any time we are handling protected information, if we were to disclose that unlawfully, then we are criminally liable for that disclosure. And as such, with the information sharing proposed in this Bill to local authority officers, there is a criminal offence attached to further disclosure of that information once it is disclosed to those teams.

Yes, that's correct. So, WRA's privacy policy and data privacy notice informs taxpayers about how their data may be used and protected, and further information about that is in the DPIA as well. But it's worth noting that for LTT taxpayers, so for land transaction taxpayers, WRA's privacy policy says that agents should provide a copy or summary of the version of the tax data privacy notice to their clients. So, this is very much inbuilt within WRA's current operations. We're very upfront about how information is used within the WRA when taxpayers interact with us. That same message will be repeated in full in the tax privacy notice also.

Thank you very much. I think we're just going to jump slightly further ahead in terms of the Bill sections now with some questions. Huw, you were going to pick up some questions.

Yes, although I was going to ask about section 3 still—

Oh, please, yes.

—and it's up to you, then, Chair, whether you want me to go on to section 7 or not. But just on the information-sharing gateways, the first in relation to the visitor levy one—would this only come into effect where a principal council is applying the levy, or could the information be possibly shared with councils not applying the levy also? I'm thinking about the national register of visitor accommodation. There could be data points within that that would be of use to councils that are applying a premium on second or empty properties. Would they still be able to access that data via this legislation, regardless of having applied the levy?

If it's okay if I respond, there are two gateways with different purposes, I suppose. The one that is for—and Huw will correct me if I'm wrong here—the visitor levy purposes only is limited to that, for the WRA to seek information that we will need. So, we wouldn't be sharing via that particular gateway with local authorities for wider purposes, if that makes sense. Whereas the other gateway is the one that shares the WRA data with the principal councils and would enable them to use it for checking, as long as it's linked to the local taxes situation. So, that'll be the council tax or non-domestic rates and some of the examples you mentioned. That's the one that I think would be—

Okay, fine. But then with that second gateway, my understanding is that that is intended to be narrower in its focus than the existing register gateway. Could you just perhaps explain in what way and why it is narrower? Are there any concerns that by limiting the flow of information—obviously, you need appropriate safeguards—you're making it harder for principal councils to pursue potential tax liabilities?

Apologies. I maybe misled you slightly earlier, I'm not quite sure, but when you mentioned a narrower gateway, this is a new gateway that doesn't exist. There is currently no means for the WRA to be able to share the data for local tax purposes. So, this is actually opening a door, opening a gateway whereby we will be able to do that, because presently we can't share the data at all for local tax purposes.

My understanding is that rather than permitting disclosure in connection with any principal council function, the Bill confines disclosure to local taxation functions only.

Apologies, that's correct. Yes, that's correct. So, any local tax compliance enforcement activity, indeed, that's—. It's a new gateway, so, again, we have nothing to begin with. That establishes a gateway to share for those purposes. You're quite right that what the gateway does not do is share for broader purposes beyond that. Again, this is a reason, I suppose, why it's drafted in that particular way. It's from, I suppose, tax authority to tax collecting bodies' discussions, if you like, where we've had the discussions in the past about how the WRA data might be useful. We've not had discussions about using it for broader purposes. Obviously, that is something that members of the committee and, indeed, the Senedd might want to consider. But, actually, we've tried to put it in that way, thinking of ourselves in the tax collection management space, as I mentioned before, as a collective infrastructure, if you like, across Wales. So, that's why it's been put in that way, trying to kind of balance, I suppose, and having a very clear, purposeful rationale with the safeguards and so forth.

Have you had any requests or feedback from principal councils suggesting that wider scope would be of use to them?

Not to my knowledge as part of the consultation, I don't think we have.

That's not been the subject of discussions thus far we've had with the officers.

Thank you. Yes, carry on.

Fine. Let me just skip ahead, then. 

Yes, sure. 

I'm looking at section 8 now, if that's okay. Sorry to jump ahead. This relates to the powers of inspection. Could you just outline, for starters, I guess, why this additional right of inspection is needed? 

Okay. The Bill recognises that there are limited circumstances where giving advance warning or delaying inspecting a site as tribunal approval is sought could seriously prejudice the assessment or collection of tax in relation to landfill disposals tax, as evidence might be concealed. So, the amendments here therefore provide a balanced framework that maintains taxpayer safeguards while ensuring that the WRA can undertake effective compliance activity when necessary in the context of landfill disposals tax. So, it's identifying an area where there needs to be a degree of change that's required so that the WRA have an ability to inspect where they believe that inspection needs to happen without notice in order to protect the taxpayer and to ensure compliance. So, this has been drafted in a way where the appropriate safeguards are in place for all. And we can discuss that further, but it's something that's been identified as part of an armoury that would enable better execution of the work of the WRA in the context of this tax.

I don't know if you want to explain in a little bit more kind of real-life experience of how this will be a useful part of the tools at your disposal to administer and execute tax compliance.

Thank you, yes, happy to kick off again. So, I think this is, again, an additional tool that we might be able to use to support particular kind of investigations. So, it's recognising that the existing route we'd have to inspect premises are either—. The options we've got, it's through consent, through agreement, prior agreement with the particular taxpayer or the person whose premises we're looking to inspect, or we'd need to go via the tribunal to get the notice to be able to turn up unannounced in that sort of context. Now, that kind of inhibits—. Particularly if we have to go via the tribunal route, it inhibits our ability to be able to act much more quickly, and one of the things we're looking to seek to do is work more in real time with Natural Resources Wales to join some of their site inspections, and do that kind of more joined-up working, I suppose, which is, as the Cabinet Minister mentioned, very helpful if you want to get out and see the evidence in situ. Because, obviously, giving prior warning otherwise, at a point where we're aware that there could be some evidence that could be useful for the tax collection purposes, that would give time and advance warning to, potentially, conceal that, as you've said.

So, the introduction of this new route, I suppose, to be able to do an unannounced visit enables the WRA—but, again, in a very constrained way, only where we consider there's a case where giving advance notice could seriously prejudice the assessment or the collection of the tax—it enables us then to be able to go out and provide the notice—so, determine ourselves within the WRA to issue that notice—turn up then at the premises and, hopefully, inspect the site. So, that's the—

Is that without giving any notice, or—

Say it again, sorry?

Is that without giving a notice?

No, that's with a notice at the point of inspection, yes.

With a notice. Sorry, I interrupted you.

If they're not there, they get no notice when you're doing it?

The notice would need to be left prominently. That's one of the things, again, that's captured within the legislation. So, it would need to be made prominent. But we would need to actually be able to access the site. So, for example, what the WRA cannot do is force entry. That's a key—. Whether the individual is there or not, that's something that the WRA is unable to do. So, if we were not able to gain access to the premises if nobody was there, we wouldn't be able to go in and inspect. Again, we'd have to seek recourse to do that.

Sorry, just to be clear: if no-one's there and you don't have to break through any gates, are you still giving yourself permission to go in there?

That's correct, yes—at present, yes.

Right.

So, my understanding is that the taxpayer would retain the right to refuse entry. If that's the case, would they be informed of that right during this process?

Do you want me to—?

Yes, please.

Yes, so it's how we phrase that. I wouldn't say it's quite a right to refuse entry. What the WRA is not able to do, as I mentioned before, is force entry. So, if at the point of the inspection, when we provide the notice, if the taxpayer refuses to grant us access to the site, the WRA is unable to enter and perform that inspection. And what the notice would set out is the consequences of that. So, there would be no penalties applicable to refusing WRA entry at that particular point in time. What we would need to do is go away and then seek tribunal approval to be able to come and inspect the premises. And if at that point, again, entry is refused for the WRA, that's when civil penalties may apply.

But if you're saying that an advantage of having this power is where there may be evidence that could otherwise be disposed of—. Playing the hypothetical here, if somebody is wanting to hide something, they could not grant you entry, you would still have to go away, seek tribunal permission, and they would dispose of the evidence, which I guess then leads me to the question: as a matter of policy, Minister, do you think this legislation ought to give stronger powers of entry to the WRA to avoid that risk of, in effect, tax evasion?

Well, I'll ask officials to advise the committee, as they would advise me, on if we were to go further on the powers of entry, because I think we start to go down a route then that is more complex in terms of the rights that people will have or not in the context of legislation and infringements on rights. So, I think that the way that we've added this aspect to the inspection options available to the WRA is proportionate to what we're trying to achieve in this context. So, that's my policy take on it—that it's proportionate to what we're trying to achieve, without going down a route where there would have to be far greater analysis on where the rights lie for taxpayers and for people in having access forced upon them, which is another level then. I don't know whether anybody wants to comment on why this is proportionate to what the practice that we are trying to guard against is in this context.

Perhaps before you do jump in, David, I wonder if it may be worth commenting on the experience of other tax-collecting bodies and how this has helped inform the drafting of this Bill with that in mind.

Yes, thank you. I was just going to make that point, actually. So, I think by moving us into this space—the ability to do an unannounced visit with the inspection, but retaining that ability for the individual to refuse access—that brings us in line with HMRC in particular, and Revenue Scotland. So, to go beyond that to enable, effectively, the WRA to have the right to force entry, would see us stepping further than those tax authorities. And I think, as the Minister mentioned, one of the things that we've keenly had in mind is that balance, I suppose, because entering premises without consent is a significant intrusion and should only occur where there's a clear statutory basis for doing so and it's clearly established. So, I think doing away with the ability to refuse us entry at all would take us, as the Minister says, quite a step further beyond the other tax authorities into a space where then individuals' rights—. There's a lot more thought that would need to go into that, because that would be quite a step, and it might be something that, as I say, the Senedd wants to consider. But I think, from a WRA perspective, we're trying to bring parity. It will be a tool. I think we've seen from the experience of other tax authorities that they have not gone beyond that themselves because that tool is effective and is useful. That's why they've—

Well, that's the key point then, isn't it? Are the additional powers available to other tax authorities currently proving effective? Because, in what we've just explored, it would seem to me that there is the ability to circumvent the new powers if somebody was so minded to do. Have you got evidence from HMRC and Scotland that the extent of the powers they currently have is sufficient to do what they need to do?

My understanding is 'yes', but—. You go.

Yes, we did undertake conversations with both HMRC and Revenue Scotland officials whilst developing the policy, and, insofar as was made available to us, yes, they're effective at doing what they need to do.

Okay.

Okay, Huw. Okay, thank you. Let's move on. So, Elfed, can I hand over to you to ask a few questions, please? Thank you.

Dave, do you want to kick off or shall I?

Yes, I'm happy to kick off. So, yes, this is one of the points around clarity, I think, again in terms of the existing practice we've adopted and how the legislation, in terms of what we're doing in practice now—. There is a degree of ambiguity, I suppose, around the final amount on which late-payment interest should be calculated. It could be read as being the original amount, or it could be, as the WRA has been doing to date, recognising that it could be the ultimate amended amount, let's say. Because we recognise that there are instances where taxpayer amendments will be made, or indeed the WRA, through some of our investigative inquiry powers, may also look to amend the amount of tax that is payable. So, this particular provision is to put beyond doubt that it is the final correct amount, if you like—the amended, corrected assessed amount—that is the amount on which the interest will be payable, not the original amount. So, it's a point of clarity, I think, that aligns with existing WRA practice.

Okay. Thank you. Elfed.

On this particular point, I think it's fair to say that there have been no instances to date where this has been an issue. This is more trying to pre-emptively correct the position so that the Crown has the full range of review and appeal rights, as any other taxpayer does. Because there was that inconsistency, there was that lack of clarity. This is, effectively, a simple correction to ensure that the same is applicable across the board. So, no issues to date, but it's a futureproofing issue. 

Okay. Anything else you want to pick up, Elfed? 

Okay. Diolch yn fawr iawn. Thank you very much. I'm going to move us on to section 11 of the Bill. There are some specific exceptions being introduced, it seems, for people exercising collective rights within the higher rates provisions so that transactions benefiting from certain reliefs are not treated as higher rates residential property transactions. Could you just outline the rationale for the changes?

Yes. I'll leave officials to do that—  

Sure. Thank you.

—in detail in terms of, I think, the first of these, certainly, is one on futureproofing and the second one, on the higher rates, may well be something that's been learned in practice as well. But collective rights transactions, India, is that you, or—?

Yes. Well, I don't know—do you want to go and then I'll jump in?

That's fine. Thanks, Dave.

I'm happy to. So, yes, the first of these is around, as you mentioned, collective rights, and this is recognising—. I should say that all of these are instances where we've had feedback from the taxpayers and from the tax professional community around, I suppose, the extent to which for some of the existing rules, the anti-avoidance rules essentially, perhaps have—. Over time experience has shown they have created some areas where genuine commercial transactions are being caught by those rules, and what this is seeking to do through the particular changes is to take those back out of that, if you like, to carve them out of those particular instances, which, ultimately, of course will benefit taxpayers.

So, the first of the particular transactions, the other one relating to collective rights, that's recognising that collective rights are statutory rights, rights that allow qualifying tenants of flats, for example, to acquire the landlord's interest in the premises. So, it's when, perhaps, leaseholders may come together and try and buy the freehold—that's the particular example in mind. The way that the rules currently work is that there's a potential for that whole transaction, affecting all the taxpayers, to end up paying higher rates in certain circumstances. So, for example, if there's a short lease, less than 21 years, or if leaseholders are connected with the buyer, then, in those sorts of instances, if only one of the leaseholders would be a higher rates payer because of a property elsewhere perhaps, the entire transaction becomes higher rates, which affects everyone. So, what we're, essentially, looking to do through this particular change is to stop from that happening, so that actually the transaction remains at main rates rather than being switched on to higher rates for everyone, if that makes sense.

And then the second one—

Sure. Was there anything else you wanted to add to that at all?

I don't think so, at this stage, no.

No, happy?

Great. Then, the next one, which is the higher rates of LTT, the persons who do not count as buyers, or 'A to A+B', in the language we like to tend to use. There are a number of situations where this comes into play, but, to pick an example, if an individual, let's say some unmarried partners, want to—. Well, one owns the property and the other one wants to be given a share of that property or acquire a share in that property, as it currently stands, again, this is a higher rates kind of issue. B is the only person, in practice, who is acquiring the additional share, but the circumstances of both persons are taken into account when determining whether it should be higher rates. So, if person A has an existing property elsewhere, perhaps they've got a buy-to-let property, their circumstances could colour the whole transaction again. So, even if, for person B, it's their first property and they wouldn't be a higher rate buyer, but A is, again the whole transaction gets switched on for higher rates. So, again, this is recognising that that's a known issue. It's something that's been around for quite some time. So, therefore, again, through the change in the legislation, we're looking to rectify that to take it back out of the higher rates situation.

Thank you. That's just applicable to residential property, isn't it?

Yes.

Is there a reason why commercial property hasn't been considered within that as well?

There's no higher rate for non-residential transactions. It's a different system.

Okay. Sorry, yes. So, no higher rate for non-residential.

Correct.

Yes, fine. Okay.

Sorry, I didn't turn my mike on, did I?

No, that's fine. Thank you. Okay, great. Thank you for that. Lyn, can I bring you in with a couple of questions?

I'm moving on to section 13, addressing the effect of the current 'deeming rule' for leases granted in accordance with the LTTA 2017. Explain the 'deeming rule' and the role it plays in the avoidance risk relating to leases, and also what would be the effect of the proposed changes.

Explain the deeming rule. [Laughter.]

Well delegated.

I'll attempt. Yes, so this one is, again, a recognised nominees and bare trustees sort of situation. Ordinarily, under the LTT rules, the trustees are looked through, so you're considering who is the beneficial owner of the property, and the tax applies to them, and that's how you'd work it through. But, in the particular instances of the grants of leases, there's a rule that applies that means you don't look through, so you retain just the trustee level interest. So, if the lease is granted to a bare trustee, the trustee is treated as both the legal and beneficial lessee, meaning the beneficiary is not considered party to the transaction, and the inverse is also true. So, if a lease is granted by a bare trustee, the trustee is treated as the lessor, so disposing of both the legal and the beneficial interest again, and the beneficiary is not considered. So, that's the existing rule. So, it creates an exception, if you like, to the normal look-through rule, and that's something that was introduced—. It's not an LTT change when this tax was brought in. That was already in existence at the UK level. It was introduced by the Finance Act 2003, so some time ago, for stamp duty land tax, as it was at the time, to address potential avoidance activity whereby leases might be used to avoid tax on rents and ultimately transfer the economic or beneficial interest to someone with little or no tax paid.

So, that was the issue that the rule was trying to address. There were several different ways in the past where that took place, but the rule sought to prevent any sort of tax avoidance in that instance. So, that rule was adopted when the land transaction tax legislation was passed at the time, but what, again, through experience and feedback from the tax professional community, we've seen over time is that it can restrict the availability of certain reliefs for transactions that are genuinely commercial. So, the changes we're looking to make, therefore, through section 13 of the Bill, provide some exceptions to that general rule about the grants of leases involving nominees and bare trustees to ensure that certain categories of genuine commercial transactions are taxed appropriately.

So, the specific kinds of exceptions we're looking to introduce through this, exceptions to the broader anti-avoidance rule, relate to the sale and lease back arrangements, overlap relief, and the surrenders of regrants of leases, and areas there where reliefs might then therefore be obtainable by those genuinely commercial transactions. So, the changes, they do address issues arising from the current rules, where the use of a nominee or the bare trustee can affect the eligibility for those tax reliefs or alter how the tax is ultimately collected, and could require checking tax treatment with the WRA before the tax rate would take place. So, ultimately, we're trying to get back to the place where, through these narrowly targeted exceptions, the true beneficial owner, rather than the nominee or the bare trustee, is treated as the relevant lessor or lessee. So, it's kind of shifting it back, if that makes sense.

It's worth just saying, as with all of these changes, that we'll be providing thorough guidance, available technical guidance, on the application of the rules and how they work, and communicating those, as we generally do, with taxpayers and with agents and through the different channels we have available to ourselves. We engage a lot with the tax professional community and with taxpayers.

You will be keen to know that you've answered all of the questions I was going to ask. [Laughter.]

I'll move on then to section 14. Again, LTTA 2017, and how introducing a statutory definition of 'landfill cell' would benefit the proposed legislation. Why the definition 'landfill cell'—is it based on the Scottish model?

Thanks, Lyn.

Would you like to take that?

India.

I'll take this one. So, the amendment is intended to provide greater certainty for landfill site operators as to what is classed as a taxable disposal for the purposes of LDT. So, it's intended to help taxpayers to get it right the first time and minimise the amount of disputes and queries that we may get in this space that can arise from disagreements in interpreting the legislation because there isn't currently a definition of a landfill cell in LTTA 2017. So, that's why the proposal here is to introduce that statutory definition. It becomes clearer as to what material used in a landfill cell is taxable—as well as there being specific exceptions listed in the Bill of authorised landfill site activity—so that it is taxable for LDT purposes. The intention, really, is to just make it clear that tax will be due where material is being used in a landfill cell when one of the other exceptions as listed in the Bill doesn't apply, and, ultimately, the intention is to make that clearer.

Now, as to why we were quite interested in what they've done in Scotland—. We carefully considered that, but there's a lot of similarities between the taxes. So, when landfill disposals tax was devolved to Wales, a very similar tax was devolved in Scotland. So, if you look at our two pieces of landfill legislation side by side, they are quite similar. So, it does mean that it provides a level of consistency, but also, if there are things done with other tax authorities in the UK, there is merit to considering whether or not a similar approach is viable and appropriate in Wales. And for this particular change, that was the assessment that was done.

Okay, Lyn? Can I just build off the back of Lyn's question there? I know there was a particular industry group who did raise concerns that the proposal in relation to section 14, as they described

'may inadvertently bring some recovery activities into scope especially where those recovery activities share some similarities with those of an inert landfill cell.'

How have you considered their concerns and do you think that their concerns are valid?

I think there's an ongoing conversation to be had with—. I assume you're referring to the landfill site operator that responded to the consultation.

Yes.

There's an ongoing conversation to be had with industry representatives in relation to how the changes would affect authorised landfill site activity, but, in terms of the assessments that have been done, we're confident that the changes are appropriate and that's why they've been presented in the Bill. But there is that ongoing conversation that should be had.

Okay. How would you gain their confidence that the changes are appropriate, if those who are experiencing this day to day feel like it may cause some issues?

It's interesting that—. We have a customer relationship manager model with landfill site operators within Wales. So, as a tax authority, we maintain very excellent, open lines of communication; we have, basically, a direct line to landfill site operators in Wales. So, as part of the—. As this Bill moves through the Senedd, then engagement will be planned with those landfill site operators to talk about the changes, and that will be a venue for them to discuss any concerns that they have with the way the legislation's drafted and any impact that that might have on authorised landfill site activities. But, as I said, it's quite a different model to other tax authorities in the UK, in that we do very, very regularly maintain direct communication with LSOs.

Okay. I suspect it might be something that we as a committee may want, as we go through our evidence, to understand further as well. So, thank you for that.

I'm just going to jump back slightly in terms of some of the areas within the Bill. And in particular, I'm interested in section 4, which creates a statutory power, giving you

'discretion to withhold repayments arising from taxpayer amendments once an enquiry has been opened until that enquiry is concluded.'

I just wonder how much of an issue that is for you at the moment and then why you feel it's important that this change is made? David, is that you?

Yes. Thank you, yes. So, I think it's fair to say that the inability to withhold payments hasn't been a high-volume issue for the WRA to date, and that's recognised in our analysis of the impacts. But what it does—or would—enable us to do in the future is, in certain instances, obviously, where we are confident, if you like, that there has been an error in a tax return and we've opened an enquiry—. So, again, these are some of the safeguards that are in place; we need to have identified the risk, opened up that enquiry. What this would then enable us to do is withhold the repayment. Because what we've seen in practice in some instances to date is that if you work on a 'refund now, check later' kind of system, that can ultimately mean that at the conclusion of the enquiry—and we have had some instances of this—we then assess additional tax that becomes due, also with sometimes a considerable amount of late payment interest. So, there's quite a hit then for the taxpayer at that time. So, this is trying to redress that situation whereby, as I say, in a small number of targeted instances, where we think that, in particular, there's an issue within the return, we think there has been an error, we then would withhold that payment for that time until such a time as the investigation, the enquiry, is concluded. Of course, if it concludes that additional tax was not due, we would return that repayment through a repayment to the individual taxpayer, of course with repayment interest too. So, it does work the other way around, if that makes sense.

I think the logic behind it makes sense; some of the detail within it just perhaps may be of concern, because the Bill does not seem to place any time limit on you withholding those payments. Can you understand why some people might be concerned that there is no time limit there?

Yes, I'm happy for you to—.

So, I think a time limit per se is—. I think we need to think about this just in terms of the context I was just describing around enquiries, for example. So, the point at which the payment is made that we might then withhold, and the point at which perhaps it might be returned, often will depend on the circumstances of the enquiry. So, some are more straightforward, they might be concluded more quickly; others, of course, can be that bit more complex, or it's quite difficult perhaps to get hold of some of the key information to arrive at the final assessment, so it may take longer in those instances. Obviously, we, from a WRA perspective, try and be as effective and efficient as we can and close enquiries down certainly no later than they should be, on the basis that the evidence was available to us. Given that, a fixed time limit doesn't work in that sort of situation. But the obligation on the WRA is that, once it's concluded, if we find a repayment to the taxpayer is due, the WRA needs to do that and do that promptly. I think our current position is whereby we look to make refunds as quickly as possible. We checked just before we came into the room, and I think it currently takes between 25 and 40 days to process that repayment and get it back to taxpayers, generally speaking. So, it's relatively quick. Sometimes, we need to find out further information about payment details, bank details and so forth, to be able to make that repayment, hence the delay in some instances. But it's certainly not a matter of months, if that makes sense.

Cai, do you want to come in?

You say it's not a matter of months. Do you think, therefore, just for peace of mind, it's worth adding to the legislation a limit that is definitely not going to be hit—that in 12 months you'll get it back? 

It's something for the Senedd, perhaps, to consider. I think, from a WRA perspective, we obviously look to try and process it, as I say, very quickly. But there are some instances—if you're trying to seek additional information, for example, for whatever reason, if we're not able to get the bank details to be able to make that transfer back, or perhaps the contact with the taxpayer isn't as good—in which it's conceivable that it could take longer than that. That's obviously not where the WRA is currently. But on the introduction of a time limit in that respect once matters are concluded, that's something, perhaps, for the Senedd to consider. 

I'm just trying to understand what the incentive is for the WRA to give the money back in a timely manner. Because if I'm the WRA, and I've got these powers, I don't really care when I give it back to them, unless there is a specific time limit in this.

The WRA is a professional body. The people around me at this point who work for the WRA are professional officials who do care that the execution of their work is done properly and that they are providing the correct repayment, if that's the case, to taxpayers. That's what an effective tax system should look like, and I'm confident that that's what the work of the WRA currently does.

In terms of putting a statutory limit on the face of the Bill, I can see the instinctive attraction to that. But all cases are individual in their nature, and complex at times, and having a statutory limit will not be flexible enough to enable the complexity of some cases to be addressed, because of the limit in place. Quite often, when limits of that nature are placed in either guidance or statute, they can become targets in themselves. It's important to work to best practice.

Ensuring that this is done in as flexible and timely a way as possible is what we want to achieve in this, and not tie hands or force consequences through a statutory limit. I understand how putting a limit would be a possibility, but I think that, given that it's about the administering of what are sometimes, I'm sure, quite complex investigations, then a limit is not appropriate in this context, I'd say. But as a committee you may add a different view to that.

Thank you. Yes, the committee can add a view, and, as we know, in the process, individuals can lay amendments to be debated by the Senedd as well. That's useful. Thank you for that.

Just before we close off, section 5 of the Bill seeks to provide a mechanism for dealing with the associated late payment interest position when a taxpayer claims relief in respect of overpaid tax. I'm just wondering how the current approach deals with late payment interest and the challenges that this has presented, therefore giving you a reason to introduce section 5. 

Similar to section 9, section 5 represents something that the WRA is already doing in practice. The WRA has already been recalculating and repaying late payment interest. The provision puts beyond doubt that taxpayers can receive a refund of late payment interest where they have successfully claimed relief for overpaid tax. The amendment to the legislation provides that clear mechanism for dealing with associated late payment interest when giving effect to overpayment relief. If you were to question the reason why section 5 and section 9 are different, it's because claims are dealt with differently in TCMA to other matters that are addressed by section 9 in the Bill. So that's why they ended up as two separate sections, but it's the same policy.

It's the same concept. Okay. Thank you for that. That's appreciated.

Just to close off this session here, unless other Members want to jump in at any point, we know the Bill is estimated to cost £420,000 or thereabouts, and all costs incurred are administrative costs, with the WRA incurring £389,000 of costs and principal councils incurring around £33,000 in costs over the 10-year appraisal period. There's also a cost saving estimate of £2.6 million. Could you explain to the committee how that recurrent cost saving of £2.6 million was calculated and how it’s split between any beneficiaries? Thank you.

Just as an introduction to that, it's important to put that in the context that the £2.6 million is on an assessment of staff time efficiency that's freed up over that period of 10 years as a result of the introduction of this new legislation and the clarity and efficiency that it provides for. So, it's not a direct cash saving in itself. But I'll ask one of—. Is it you, India? No, it's Dave. He can talk through the detail of how that assessment is done.

This assessment, as you mentioned, has been drawn from the external consultants we used, Alma Economics, where they did an analysis of the provisions within the Bill. They did that through engagement with the WRA, obviously using a lot of our information, as well as engaging with local authorities, to assess what the impacts would be, to look at particularly, as you mentioned, some of the staff time savings, being the key area. Obviously, there are also benefits to taxpayers as well in terms of reduced costs in a number of areas for them too, in terms of having the process, if you like, to work through.

I think the split, broadly speaking, is about £2.4 million, £2.43 million—I think that is the benefit in the local authority space. That's largely driven by the efficiencies and time savings on the part of local authority staff engaged in the local taxes compliance and enforcement activity through better access to the WRA data. The remaining £170,000 or so is the WRA's cumulative staff time efficiencies within the WRA, if that makes sense.

That's helpful. Thank you very much. Those are the areas we wanted to get through as a committee. There’s nothing else anyone wants to bring up, I can see. So, thank you for your time with us today. We will, of course, have further evidence sessions in relation to the Bill, and we look forward to that information that we receive in due course. Thank you. We appreciate it.

Diolch yn fawr.

Members, earlier on in our meeting we resolved to move into private session now, so we'll do that. Thank you.