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Introduction

This chapter considers the scope to broaden the Welsh devolution settlement to improve service delivery and accountability. The scope of the devolved powers has remained largely the same as those exercised by the Secretary of State before 1997, despite the transformation of the Assembly into a Senedd with full legislative powers.

We considered the breadth of the settlement through the lens of 6 key areas where the boundaries are a matter of live debate.

To do justice to these issues, we established 6 sub-groups to review the available evidence on the following topics:

  • Broadcasting and public service media
  • Employment rights and protections
  • Energy
  • Justice and policing
  • Transport
  • Welfare benefits

There are many other potential candidates for review of the devolution boundaries, but we lacked the time or capacity to include them in our inquiry. These too should be subject to rigorous study and consideration with a view to making the settlement stronger and more effective.

In some cases, the neglect of shared governance that we identified in the previous chapter led us to conclude that further devolution is necessary to ensure fair treatment for Wales. That might not have been the case had the UK government invested more in inter-governmental relations and treated the Welsh Government as an equal partner in the governance of Wales.

Our approach

We considered the findings of recent and concurrent expert inquiries into these subjects from a constitutional perspective and took evidence to give us an understanding of the pressures on the devolution settlement.

We did not re-interrogate the findings of these inquiries: where they made recommendations for further devolution, we considered whether this was urgent and essential to the viability of the settlement, or whether the issues could be addressed in longer time.

The matters we consider urgent include those where the need for greater policy coherence is most acute. Governance arrangements where there is tension between the objectives of the 2 governments do not serve citizens well. We recognise that such tension will always exist to some degree, but the division of responsibilities should aim to minimise its impact on citizens.

The depth of evidence available to the sub-groups from the relevant inquires varied considerably. On some subjects the group was able to consider a well-evidenced case for change, with others the picture was less complete. Overall, this work deepened our understanding of the workings of devolution and has informed our findings and conclusions.

We set out summaries of the findings of the 6 sub-groups below. Their full reports are published on the commission’s website.

Background

We noted in our interim report that, apart from the specific taxes devolved in the Wales Act 2014 [footnote 1] and the limited expansion of powers conferred by the Wales Act 2017 [footnote 2], the progress of devolution since 1999 has generally involved deepening (devolving primary legislative powers in respect of the devolved matters transferred in 1999) rather than widening (expanding the scope of devolved matters).

As a result, the legislative powers of the Senedd in 2023 largely reflect the set of executive functions held by the National Assembly in 1999, which in turn were based on those previously held by the Secretary of State for Wales. In the run-up to 1999, there was no process of review of the suitability of those executive functions for exercise by a democratically elected assembly; nor in 2007, when the National Assembly gained primary legislative competence, was any assessment made of what would be an appropriate set of legislative responsibilities.

These responsibilities are defined in Schedule 7A of the Government of Wales Act 2006, as amended by the Wales Act 2017. This sets out the matters reserved to the UK Parliament, so that all other matters fall within the powers of the devolved institutions. Schedule 7A includes some matters that are reserved in all 3 devolution settlements, such as economic and fiscal policy, foreign affairs, nuclear policy and national security.

Schedule 7A includes other matters where the settlement for Wales is different from Scotland and Northern Ireland. These include the reservations in respect of the legal jurisdiction, justice and policing, and rail infrastructure.

The boundaries of the settlement matter for reasons that are sometimes evident to the public, and for technical reasons that are less obvious. Some reservations have far-reaching implications: the reservation of justice and policing in the Welsh settlement is the basis for reserving anti-social behaviour and alcohol licensing, which are primarily local matters.

Negative impacts at the boundaries of the devolution settlement do not necessarily mean that everything should be devolved. In our view, they suggest that the UK government and Welsh Government should be open to reviewing the settlement to reduce the impact that it is having on service delivery, unless there is a strong strategic or efficiency case for the current settlement.

Citizens’ views

Our research shows that many people do not know which government is responsible for what and are confused about responsibilities for policing or the health service (see chapter 4). In general, the balance of opinion is in favour of devolving more powers than not, but people express some reservations when asked about specific powers (see Chapter 4 and 6). In our online surveys, many who expressed opposition to devolution did so on grounds of efficiency and cost (this was particularly the case for responses to Dweud eich Dweud: Have your Say). For both supporters and opponents of further devolution, the perception of which government could deliver services most effectively was a significant factor in their views on the desirability of further devolution (this was a theme throughout all of our citizen engagement, with respondents basing their views on governance arrangements on their experiences of public service delivery. We discuss this in more depth in chapters 2, 4 and 6). This suggests the importance to citizens of defining the devolved powers in ways that minimise inefficiency and waste and enable effective delivery.

Shared governance

The sub-groups noted that in some cases further devolution was proposed as a solution to problems which were not fundamentally caused by the division of powers set out in the devolution legislation. The problems identified were:

Policy differences

Where the priorities of the UK government are at odds with the values of the majority centre-left opinion in Wales. Examples of this are calls for the devolution of benefits because of the perceived punitive approach of the current benefits sanction regime, including the 5-week waiting time and limiting benefit payments to the first 2 children in a family.

Unfairness

Where UK government control has led to Wales being short-changed in terms of planning and investment. For example, the very low proportion of the UK’s rail infrastructure investment that is directed to Wales.

Neglect

Where UK government control means the interests of Wales are sidelined, for example in the context of post-Brexit trade negotiations where the interests of the manufacturing and agricultural sectors, both of relatively greater significance in Wales, seem often to be of secondary importance to those of financial and professional services.

Weak accountability

UK government control limits the scope of scrutiny and accountability to the Senedd and the people of Wales, as is the case with broadcasting, rail or the regulation of the energy industry.

In such cases, there is a temptation to assume that devolution would solve the problem. The issues are often more complex than that and there may be solutions, short of devolution, that should be considered.

Shared governance arrangements between the Welsh Government and the UK government could be a better solution than either continued reservation or devolution, provided the mechanisms established are effective and underpinned by a relationship of trust and respect.

Shared governance arrangements might include a requirement for agreement; formal arrangements for consultation; and processes for appointments to governing or regulatory bodies. Such shared arrangements form a crucial part of Welsh governance, but they often fall short of the partnership model that is required. They can be inconsistent, arising from diverse pieces of legislation and reflecting a particular relationship with individual Whitehall departments. We believe that these arrangements, ranging from minimal consultation through to something akin to shared governance, need further attention.

Findings of the sub-groups

The findings of the sub-groups are summarised below, in alphabetical order. The full report of each sub-group is included in the commission working papers published on our website.

Broadcasting and public service media

‘Broadcasting and other media’ is defined as a reserved matter in Schedule 7A of the Government of Wales Act 2006, as amended by the Wales Act 2017. Westminster sets the framework for the regulation of broadcasting, with the most relevant legislation being the Broadcasting Act 1996 and the Communications Act 2003. As in Wales, broadcasting is a reserved matter in both Scotland and Northern Ireland.

In parallel with the commission’s work programme there were 4 inquiries into broadcasting in Wales:

The sub-group met the joint chairs of the Expert Panel on a Shadow Broadcasting and Communications Authority and the authors of the Institute of Welsh Affairs report. The sub-group felt that no further evidence was needed for their work, in the light of the 4 inquiries.

The sub-group reviewed the inquiries' findings and considered their constitutional implications.

It endorses their common theme that there is a strong case for strengthening the influence of Wales in this complex and rapidly changing landscape. A stronger voice for Wales would help address the significant cultural and democratic challenges posed by changes in technology, viewing habits and the growth of unregulated global digital platforms. The Welsh perspective on UK affairs is often absent in media content which would be strengthened by Welsh produced and Welsh inflected commentary. The goal is to strengthen Welsh output, content creation, and public engagement with democratic institutions in Wales to safeguard the Welsh language, identity and culture and ensure that the needs of the citizens are met.

The sub-group found that there is a broad consensus that Wales should have more influence in policy decisions, governance, and accountability mechanisms in this area. Current accountability arrangements mean that scrutiny of activity in Wales and about Wales lacks robustness and depth. This is a priority to address.

There are several ways to achieve this, for example, more co-operation between committees in Westminster and Senedd; closer co-operation between the Welsh and UK governments on key decisions in relation to policy, funding and regulation; and including Welsh representation on any independent funding commission.

The report of the Expert Panel on a Shadow Broadcasting and Communications Authority identifies several pathways to further devolution which could strengthen Wales’s influence. The sub-group agrees with the panel that further technical work is needed to understand the complex regulatory arrangements and the implications of the different pathways. This should not be a barrier to progress on strengthening Wales’ voice through stronger inter-governmental and inter-parliamentary co-operation.

Employment rights and protections

Employment law is an interface where Welsh Government and UK government policies collide. The devolution boundary is a continuing area of tension between the Welsh Government's policies of social partnership and fair work, and the UK-wide regime of employment rights and protections. This is a reserved matter in Scotland.

The case for reservation is to enable a UK-wide regime of employment rights and protections which underpins the single UK market. However, problems such as low pay and poor employment practices have a major impact on the Welsh Government’s ability to reduce child poverty, promote fair work and improve health and well-being.

The starting point for this sub-group was the research of the Commission on Devolution and Work established by the Wales Trades Union Congress (TUC), which ran in parallel with our inquiry. At the time of writing the TUC Commission’s report was due for publication in December 2023 (Jenkins, J. Future of Devolution and Work Commission, TUC Commission on Devolution and Work – the sub-group received an advanced copy of the report, noting that there may be further changes before publication). The commission met the Chair, Professor Jean Jenkins, to discuss the research conducted by her commission and its emerging findings.

The Wales TUC Commission’s research indicates that trade union members are evenly split on whether powers on employment rights and protections should be devolved. The commission found that devolution could risk undermining current collective bargaining structures, and proposes that further work is done on this. Its report gives priority to action by the Welsh Government to strengthen political leadership on fair work, to support better enforcement of existing rights and protections, and to promote trade union activity and democracy in the workplace across the devolved public services. The report recognises that responsibility for funding for enforcement rests with the UK government. In calling on the Welsh Government to supplement these non-devolved responsibilities, the Wales TUC report underlines the concerns about the pressures on the Welsh budget.

The sub-group sought the views of business on the potential devolution of employment law, and received evidence from the Federation of Small Business, the Institute of Directors and Make UK. The general view was support for the value of a common set of rights and protections across the UK to business, include those from outside Wales.

The sub-group noted that there is no consensus on devolving employment rights and duties, and that the priority for the workforce is the enforcement of existing protections and UK government funding of the relevant agencies.

Energy

The energy sub-group did not have the benefit of a substantial recent inquiry to inform its work. In the time available the sub-group was only able to take a broad overview of the issues, but from the evidence it identified 4 key issues:

  • Inter-governmental engagement and the boundaries of the settlement
  • Regulation
  • Local energy generation and trading
  • The management of the Crown Estate.

The sub-group considered evidence from the Institute of Welsh Affairs, the Welsh Government, Community Energy Wales and the Crown Estate.

Energy generation and distribution is an area where the binary devolved or reserved nature of the devolution settlement does not sit easily with the practical realities of delivery. Rapid technological change will change the role of the (reserved) National Grid and its current monopoly on distribution, and hence the role and powers of government in relation to its operations.

UK energy policy and strategy has a huge impact on devolved matters, including economic development, housing, poverty health and wellbeing. However, the UK government’s engagement with the Welsh Government in the passage of the Energy Act 2023 was late and inadequate. In the view of the sub-group, the 2 governments’ overlapping responsibilities on energy would work much better with stronger consultation and co-operation, with the Welsh Government as an equal partner.

Some of the current reservations in this area seem outdated and lacking strategic rationale, such as local heating systems and energy efficiency. The UK government should be open to reviewing and amending these by agreement between the 2 governments.

The role of the regulator in relation to energy development is crucial, but the Welsh Government has no formal role in its governance. This too should be the subject of a joint review. Ofgem’s proposal for Local System Plans has been welcomed by the Welsh Government as a means of ensuring that regulation is more responsive to the specific needs of each area.

Many of the barriers to local energy generation and trading are policy and funding issues. Some barriers will be reduced by technological change, for example, access to the National Grid. Devolution of energy incentives would help but would require access to more funding than is currently available to the Welsh Government.

The sub-group was not able to consider the implications of devolving the management of the Crown Estate in Wales in detail. The UK government’s Silk Commission which reported in 2014 did not recommend devolution of the Crown Estate (Empowerment and Responsibility: Legislative Powers to Strengthen Wales, 2014), but the Smith Commission’s 2014 recommendation, now enacted, to devolve the management of the Crown Estate in Scotland has created a new precedent which should apply to Wales.

The sub-group recommends an urgent review of the devolution settlement and inter-governmental relations in relation to energy and the Crown Estate, by an expert group capable of taking a forward-looking view of the settlement.

Justice and policing

Justice and policing are devolved in Scotland and Northern Ireland. The possibility of devolving these policy areas to Wales has been considered extensively, most recently by the Thomas Commission in 2019, which made the case for the devolution of justice for the people of Wales.

The sub-group took the report of the Thomas Commission as its starting point. The authority of that commission derives from its comprehensive evidence base and the expertise of its members, which included senior members of the judiciary, experts in penal reform and the operation of prisons and probation, a retired Chief Constable and legal practitioners practising in Wales and internationally.

The sub-group found that the evidence makes a strong case for change to secure better outcomes, better value for money, increased transparency and more accountability.

The sub-group made efforts to find evidence in support of the current boundaries of devolution for policing and justice, but the responses were few and far outweighed by the evidence for change. The sub-group found that with careful planning, devolution is achievable with minimal disruption to services. The sub-group was agreed in its findings from the evidence on the shortcomings of the present system and the feasibility of devolution, with the member nominated by the Welsh Conservatives dissenting from the recommendation for devolution, on the basis of her party’s strong commitment to maintaining the single jurisdiction of England and Wales and wider concerns, including value for money.

The evidence received by the sub-group reinforced that of the Thomas Commission in relation to the problems of the current system. The case for devolution rests on weaknesses in governance, policy coherence and accountability at the Welsh level. These would persist whichever party formed a government in Westminster. Personal commitment by individuals in devolved and reserved services is not enough to overcome the consequences of structural failings which result from incoherence in the allocation of statutory responsibilities between the 2 governments.

Furthermore, the England and Wales justice system faces major challenges of funding and leadership and in tackling these Wales will always be a relatively low priority for the UK government. With devolution, there would be scope for innovation and reform, building on the expertise of the justice workforce and national and local stakeholders such as local authorities and health boards.

Evidence from Northern Ireland demonstrated the opportunities to improve outcomes through whole-system delivery and accountability in a small jurisdiction, and the scope to adapt a small prisons estate to changing requirements. The only evidence the sub-group received making the counter case to the Thomas Commission was that of the UK government, in a letter from Lord Bellamy to the Co-Chairs in March 2023, and in the oral evidence of the Secretary of State for Wales.

The sub-group decided that it could best add value to the work of the Thomas Commission by focusing in detail on the practical implementation of its recommendations.

The sub-group concluded that devolution could be achieved without major disruption, through a programme of work led jointly by the UK and Welsh governments, which should be tasked with agreeing a timetable and implementation plan, likely to require some 10 years to deliver. The most straightforward services to begin the process are policing, given its funding and governance structure and close working relationship with devolved services at national and local level; youth justice; and probation.

Transport

Transport is partially devolved. Most aspects of road building and maintenance are devolved, but most aspects of traffic management are reserved. Some aspects of buses and taxis are devolved. Aviation and shipping are largely reserved. The Welsh Government has a limited role in managing rail services, but rail is largely reserved. This is a highly complex area of devolution, very few aspects are wholly devolved or reserved, and there many exceptions within the reservations.

In the absence of a recent inquiry to inform its work, the sub-group conducted a rapid review of pressure points in transport. It found that the evidence points to rail infrastructure as the most pressing area of tension, and a strong case for change in respect of the funding and governance of rail infrastructure, where there is long-standing unfairness in the current arrangements.

The sub-group heard evidence that the current settlement drives up the cost and complexity of delivering rail services while underfunding provision in Wales. This is unfair to passengers and taxpayers and constitutes a continuing grievance that is undermining confidence in devolution.

The sub-group considered calling for a shared governance solution based on better inter-governmental relations. However, the recent history of relations outlined in the preceding chapter led it to conclude that such a solution is unlikely to produce a fair outcome. It would also not address the accountability gap in the current arrangements, where the complex governance structure for rail decisions does not allow for enough direct scrutiny of bodies such as Transport for Wales, Network Rail, the Welsh Ministers or the Secretary of State for Transport by UK Parliament and the Senedd. Nor are these arrangements clear to the public when they wish to raise concerns over rail provision.

The commission therefore concludes that full devolution of rail services (‘Railway services’ is used in broad sense to include rail infrastructure as well as the related rail operation powers) in Wales, funded fairly, would achieve better outcomes for citizens and better value for money for public investment. It would give the Welsh Government the responsibility for creating a coherent, efficient, and fair transport network, thus improving governance and accountability.

It is essential that devolution is based on a fair and transparent funding settlement, agreed by both governments and scrutinised by elected members of Parliament and the Senedd. The sub-group received several sources of evidence that rail infrastructure in Wales has been underfunded compared to need for many years.

This is compounded by the Welsh Government’s fiscal framework, which with tightly limited borrowing powers and limited year-end flexibility was not designed with managing rail assets in mind. As a result of this, public services in Wales are adversely affected as funding is diverted from other programmes to manage cost pressures on the rail network. The Welsh Government does not have to fund railways. But if it does not, the rail infrastructure will degrade over time and make it difficult of the Welsh Government to meet its other objectives, such as mobility for those without cars and mitigating climate change.

In light of the sub-group’s work, the commission believes that the sense of injustice on this issue is significant and justified. If not resolved, it will continue to fester and erode trust in the settlement. Accordingly, we see devolution of rail infrastructure and the related services as a priority for the viability and stability of the current settlement, alongside a fair funding transfer and a review, and if necessary, adaptation of the fiscal framework to effectively deliver these responsibilities.

Welfare benefits

There is some, limited, devolution of welfare benefits to Wales at present. Council tax benefit and free school meals have been devolved since 1999. The Discretionary Assistance Fund was devolved later by UK government, when it was also devolved to local government in England. Powers in relation to the remaining cash benefits (the state pension, Universal Credit, disability benefits, winter heating allowance) are reserved to the UK Parliament and government and administered by the Department of Work and Pensions (DWP). The level of payments and the conditions governing eligibility are set out in regulations made by the UK Parliament.

The sub-group based its work on evidence from the Bevan Foundation on a common approach to benefits in Wales. The sub-group drew on the expertise of the commission’s Expert Panel on the history of the partial devolution of benefits in Scotland, following a recommendation of the Smith Commission in 2014.

This partial devolution of benefits led to substantial additional costs to the Scottish Government’s budget, both from increasing the rates of those benefits and creating a new agency, Social Security Scotland, to administer them. One of the challenges that Scotland has faced is the interaction of devolved and non-devolved benefits which means that complex administrative changes are required every time the UK government makes changes to reserved benefits.

Social security benefits are wholly devolved in Northern Ireland, but the powers to diverge have not been used.

The sub-group noted the report of the Wales Governance Centre  which suggested that, for reasons of demography and benefit take-up, the Welsh budget might have benefited considerably if the benefit powers devolved to Scotland been devolved to Wales at the same time. It found that the report’s assumptions might not have materialised, but it was likely that Wales would face similar cost pressures to those experienced in Scotland.

The sub-group heard from the Minister for Social Justice about the work initiated by Bevan Foundation research  and delivered in partnership with the Welsh Local Government Association, to improve the operation of those benefits already devolved to Wales. These include housing benefit, council tax benefit and free school meals. The aim is to create a streamlined Welsh benefit system, with a single point of entry and common eligibility criteria, which is much easier for citizens to access.

The sub-group noted the case for reservation of social security based on solidarity and risk sharing at the UK level.

The sub-group’s view was that further devolution of benefits to Wales would be feasible only with a substantial increase in tax and borrowing powers to enable the Welsh Government to take on the related risks and liabilities.

Funding pressures

The demands on the Welsh Government to fund or supplement non-devolved services, for which it has no budget provision, is a source of significant pressure on the devolved budgets. This can be a form of devolution by stealth, where the Welsh Government takes on responsibility for funding matters for which the UK government is responsible. Examples include:

Rail infrastructure

The Welsh Government has made substantial investments when the UK government has not prioritised investments that the Welsh Government regards as essential. For example, the Welsh Government has taken responsibility for the Core Valleys Lines and is contributing significant sums towards electrifying and otherwise improving rail infrastructure. Transport for Wales 2022/2023 plans for how to spend Welsh Government funding include £243 million for design and build works to transform the Core Valley Lines rail assets (net £106 million ERDF funding); £23 million for infrastructure maintenance renewals and other rail related capital spend; and £10 million for design and build works on other non-Core Valley Lines railway stations.

Police and Community Support Officers (PCSOs)

Since 2011, the Welsh Government has funded over half of the PCSO cohort in Wales, at a cost of £23 million (2023-2024 Budget provision) after the UK government ceased ring-fenced funding for PCSOs in the police funding settlement.

Discretionary Assistance Fund

the Welsh Government created this emergency support fund when the UK government abolished the DWP’s social fund. The current cost is more than £30 million a year.

Employability programmes

Welsh Government funding is designed to fill gaps in DWP employment support provision. Some schemes have been funded largely with EU money, but Welsh Government funds are also used.

Provision for Ukrainians fleeing the war

The Welsh Government funded accommodation and a range of services which were not provided for Ukrainians arriving in England. Although the UK government provided some funding, the Welsh Government has spent over £50 million on this in 2022-2023.

These investments are policy choices by the Welsh Government, made under pressure arising from UK government decisions. In the first 2 examples, these pressures would be removed by adjusting the devolution settlement, with fair funding, in line with the findings of the sub-groups.

Where the Welsh Government takes on significant new powers, there will be a requirement for new policy capacity and expertise to exercise those powers, over and above the resources transferred from the relevant Whitehall department. This means that the merits of proposals for further devolution have to be considered in relation to other candidates and the capacity pressures they would create.

Conclusions

In line with the evidence received by our sub-groups, we make the 4 recommendations set out below.

In relation to justice and policing and rail services the current settlement does not serve the people of Wales well. Unless this is addressed, the problems will continue to fester, and it will appear that the UK Government is not willing to listen to a reasoned case for change. Reform is essential to ensure the viability and stability of the settlement.

In relation to broadcasting and energy, our recommendations relate to strengthening the role of the devolved institutions on matters that are of great importance to Wales.

On the same grounds there is a strong case for enhanced inter-governmental engagement and co-operation on employment rights and social security benefits. Further consideration of these areas is needed to ensure that the arrangements provide an effective voice for the devolved institutions on behalf of the people of Wales.

Recommendations

7. Broadcasting

The Welsh and UK governments should agree mechanisms for a stronger voice for Wales on broadcasting policy, scrutiny and accountability, and robust work should continue on potential routes to devolution.

8. Energy

The Welsh and UK governments should establish an expert group to advise urgently on how the devolution settlement and inter-governmental engagement in relation to energy could be reformed to prepare for rapid technical innovation in energy generation and distribution, to ensure that Wales can maximise its contribution to net zero and to the local generation of renewable energy.  The remit of the group should include advising on the options for the devolution of the Crown Estate, which should become the responsibility of the devolved government of Wales as it is in Scotland.

9. Justice and policing

The UK government should agree to the legislative and executive devolution of responsibility for justice and policing to the Senedd and Welsh government, on a timescale for achieving the devolution of all parts of the justice system to be agreed by the two governments, starting with policing, probation and youth justice, with necessary funding secured, and provision for shared governance where needed for effective operations.

10. Rail services

The UK government should agree to the full devolution of responsibility for rail services and infrastructure, to Wales with fair funding and shared governance on cross border services.

Footnotes

1. The Wales Act 2014 devolved stamp duty, landfill tax and business rates to Wales, with a power to legislate to replace them with taxes specific to Wales. The Act also contained provision for further taxes to be devolved with the agreement of the UK Parliament and the Senedd. The Act extended the borrowing powers of the Welsh Government, gave the Senedd powers to vary income tax rates under certain circumstances, and made some miscellaneous changes about the operation of Senedd and government in Wales. (Back to text)

2. The Wales Act 2017 expanded the responsibilities of the Welsh Ministers in the areas of transport and energy. It gave the Welsh Ministers and Senedd more control over the operation of the Senedd, including powers over Senedd election. The 2017 Act also gave the Welsh Ministers executive functions (‘common law type’ powers) and changed the legislative model from a conferred powers model to a reserved powers model, bringing the operation of the Welsh devolution settlement into the same model as the Scottish devolution settlement. (Back to text)