LAUNCH OF RICHARD COMMISSION REPORT, WEDNESDAY 31 MARCH, 2004

OPENING SPEECH BY RT HON LORD RICHARD QC PC

Thank you all very much for coming. Our report is a distillation of a great deal of detailed evidence produced by many of the people here today and we are very grateful indeed to you for your contribution.

Could I first of all explain the practical arrangements for this morning. I will introduce the report and give you some of the background on how and why we’ve reached the conclusions we have. I will then open it up for questions, for about 20-30 minutes.

I’ll be taking the questions from the Chair – if you want to talk to individual Commissioners afterwards could I ask you please to channel requests through our Press Officer, Elfyn Thomas. We’ll be aiming to finish by midday – after that we’ll be delighted if you could join us for some food next door.

It has been a great privilege to conduct this review. It has been a unique opportunity to examine the governance of Wales and make recommendations for the future. Naturally we hope that the politicians and the people of Wales will consider carefully not only what we recommend but also the rationale for those recommendations. The argument and the evidence are set out in detail in the report.

I will run through the chapters of the report because I think that will give you a sense of how we evaluated the evidence and the way our thinking developed as we worked up to the analysis in the last two chaptersand our resulting conclusions. In each chapter we examine a different aspect of the devolution settlement and present detailed findings arising from that chapter. Chapters 13 and 14 pull together the issues addressed in the earlier chapters and present our conclusions on the way ahead.

[as it’s a long speech it might be worth giving a bit more structure up front than this]

The first chapter explains how we have approached our remit and the processes we followed. When the First Minister asked me to Chair the Commission I was delighted to agree because of its intrinsic importance to Wales. I certainly expected it to be quite a major exercise, but once we started we realised that we would have to work very rapidly and cast the net very widely in order to establish a sound evidence base for our work.

In all we held 115 evidence sessions, 3 academic seminars and published two consultation papers – dealing separately with the powers and the electoral arrangements. We received over 300 written submissions and we held 9 public meetings across Wales. We visited the Parliament at Westminster 3 times, went to Edinburgh to meet Scottish Parliamentarians and others and met the Speaker of the Northern Ireland Assembly. This is the evidence base that underpins our analysis and conclusions, as set out in the report we agreed.

We felt it was important to keep a very practical focus – how are things working at the moment, how could they be better? But at the same time we held on to some key principles – is there clear accountability, is the system open and transparent, can it deliver, is there strong and effective scrutiny, can people understand it sufficiently to get involved and have an impact?

I think it is worth making the point here that we genuinely did have an open mind. Speaking for myself, I had no preconceived views except perhaps the thought that it was early days to be rethinking the settlement. I would certainly not have supported change for change’s sake and it was only in response to the evidence that the need for change became clear in my mind.

Before getting in to the meat of the report’s analysis of the present situation, we felt it important to understand how we got to where we are today.

So prior to 1999 administrative devolution was very well established. Whitehall certainly resisted the pull to devolve more powers to Cardiff but slowly but steadily that is what happened throughout the 20^th century. The process was taken forward by both Labour and Conservative governments, with a bit of pressure from Plaid Cymru and the Liberals pushing things along.

From the beginning of the 20^th century the process of administrative devolution continued so that by the end of the century the Welsh Office had substantial powers and almost total budgetary freedom. The direction of travel throughout the century was clear – towards more decision making in Wales for Wales, within the broader UK framework.

The key change in 1999 was in respect of accountability – bringing in a new elected body with its own mandate. There was an expectation that there should be an administration in Cardiff, accountable to the Assembly with the tools to do the job it was elected to do.

Chapter 3 reviews public attitudes to the issues before us.

In our public meetings, we found that people do understand that the current settlement allows the Welsh Assembly Government to do things, but within a constrained framework. Some felt that Wales had been short-changed compared with Scotland; a person in Merthyr said that executive devolution amounted to half a devolution and that it didn’t work. The opposite view was also put to us: – that it was too early to change, that the present model is what people voted for and needed time to bed down, and, from some, opposition to the whole concept of devolution.

We heard every point of view but it is fair to say that, on balance, the positive view of devolution was stronger than the negative one. Many people stressed how much they appreciate the Assembly’s open and accessible method of operating.

The second half of Chapter 3 reviews the public opinion survey evidence. Overall this was remarkably consistent with the messages from our meetings. Two findings seemed to us worth highlighting.

First, the opinion survey evidence shows that public support for a parliamentary model of devolution has almost doubled since 1997, rising from around 20% to 38%, with support for an executive Assembly remaining about the same, around 27%. The number who would prefer to have no elected body at all has roughly halved – from 40% to 21%.

In addition, when asked whether they would trust the Assembly to operate in Wales’s best interests, two thirds of people report that they would trust the Assembly at least most of the time.

Chapters 2 and 3 set the scene and context for the Assembly’s work. Chapters 4 and 5 provide the factual meat of the report. Chapter 4 is a detailed analysis of the Assembly’s structure and activity – what it has done and how it has chosen to allocate its time.

In summary we came to the following conclusions:

• there is room in the Assembly to take on more work with 60 Members– through more flexible working, smaller committees and sitting for more weeks in the year;

• but this wouldn’t be sufficient to cope with a programme of primary legislation – and we came to the view that, with primary powers, an extra 20 Members would be needed;

• with greater powers there would need to be a much stronger focus on scrutiny than there is at the moment;

• and the corporate body structure would have to be replaced with a separate executive and legislature.

Chapter 5 goes to the heart of the issue – are the devolved powers adequate to allow the Assembly to meet the needs of Wales? To answer this question we looked in detail at each portfolio to see what had been done with the powers and what constraints had been identified.

We found that the Welsh Assembly Government had been creative in operating within the devolved powers. There are many examples where they had been successful in delivering policies designed for Wales. Again to summarise a complex picture what we found was that Ministers were doing their best, as you would expect, to deliver within the particular framework of powers that they had inherited. Where they hit constraints they were finding ways round them.

While, bOn primary legislation we found that by y and large, the Welsh Assembly Government had managed to get the primary legislation needed for their most urgent priorities, there were frustrations about the time needed to deliver change in a number of areas.

Overall, the pace of change since 1999 was striking. We felt that this has changed the context for debating the powers – in 1999 the Welsh Assembly Government was getting to grips with its powers, by 2004 it is recognised as the initiator of policy on devolved matters and its capacity to do this has developed considerably. The evidence of Ministers, the Permanent Secretary and the civil service staff representatives confirmed this.

At the start of our review, some people suggested that the complexity of the settlement was a problem. The evidence we received showed that this has become much less of an issue for those close to Government. However, the problem of knowing what the Assembly can and can’t do remains a central issue for accountability to the people of Wales.

In Chapter 6 we look at the quangos – recognising that their accountability was a key issue in the devolution campaign. Some argued that it was the question of accountability for the quangos that really resonated with people at the end of the 1980s. But as a lot of people mentioned to us the bonfire of the quangos has not yet materialised. So we wanted to establish whether this was a question of powers or one of policy choices by the Welsh Assembly Government. We took evidence from most of the bodies themselves, as well as asking Ministers and Committee Chairs about the impact of devolution on their relationship with them.

There hasn’t been a bonfire of the quangos of the quangos but they they are much more closely supervised by government than they were before 1999. Getting the relationship right is a matter for the Welsh Assembly Government, but we were concerned about the scope for confusion on accountability. There is a three way relationship at the moment between the Government, the Committee and the ASPB and there is a need to clarify who is doing what in terms of scrutiny and accountability. Overall our conclusion was that policy on the quangos was not a question of powers, although major restructuring would require primary legislation.

In Chapters 7 and 8 we examine the relationship between Cardiff and London – how it has changed since 1999 and what are the realities of the relationship.

One of the key messages, not suprisingly, is that thisThere is a formal structure, but a great deal depends on the day-to-day working relationship between departments. How Whitehall works with devolution depends on: the particular issue in question, the Minister’s position, the departmental culture and attitudes of individual officials and other things including the sheer pressure of events. For the system to work well there needs to be goodwill on both sides and the capacity to react quickly to pressures and opportunities.

This raises the question of sustainability – could the system cope if there was a government at Westminster that was opposed to devolution? We recognise that this issue can be overstated, and that it is impossible to foresee how such a situation would play out in reality. However there is no getting away from the fact that the present arrangements do offer plenty of scope for obstruction and delay if someone wanted to exploit it in that way.

Overall the thing that struck us about the present situation is the extent of engagement with Whitehall on legislation and on policy making more generally. The Welsh Assembly Government is extensively involved in legislation, not just in making its own secondary legislation in Wales but also devising new legislation for Wales to be incorporated in the Government’s primary legislative programme. It is already in the lead on a good deal of legislation for Wales on devolved matters and this is increasingly accepted in both Cardiff and London as the right relationship.

In Chapter 8 we look at this from the Parliamentary end. If legislation is agreed between the Welsh Assembly Government and the UK Government – how is it then scrutinised in Cardiff and Westminster? This chapter draws heavily on the evidence of Welsh MPs and Peers as well as Assembly Members.

This brought out very clearly that there is a problem of split accountability. Legislation which is initiated by one set of politicians, based in the Assembly, is debated and scrutinised by another set of politicians in Westminster. The Welsh MPs told us that their role in the process is ambiguous. If a proposal comes forward from the Welsh Assembly Government and is included in a Government Bill – are they entitled to challenge it from first principles or simply to try to improve it from a practical point of view? Should the opposition and other backbenchers in the Assembly have a role in the process?

We did find examples of effective scrutiny of proposals initiated in Cardiff but there were also examples of significant proposals receiving little scrutiny. There is scope for better joint working between Cardiff and Westminster – especially where there is pre-legislative scrutiny, and the Welsh Affairs Select Committee is doing a great deal on this. But there are real practical constraints on how far this can be taken. It is important to acknowledge that scrutiny at Westminster in respect of legislation for England, or indeed scrutiny in the Scottish Parliament, is not perfect. Overall we felt that the problem of split accountability in respect of legislative proposals generated by the Welsh Assembly Government but passed at Westminsterin the legislative process. Dealing with this was not going to go away. The need to address this is an important part of the case for change.

In Chapter 9 we look at the breadth of the Assembly’s powers. Setting aside the question of primary legislation – this chapter considers whether Assembly’s responsibilities should be expanded to take in more policy areas.

I will deal with this only briefly because, perhaps unexpectedly, we make only a limited number of recommendations here.

The terms of reference required us to look at the breadth of the powers and we all started off with the expectation that we probably would make specific recommendations either for or against possible extensions. We did look at a number of proposals, including taking quite detailed evidence on the police. Indeed arguments for transferring the police were put to us.

The Assembly Government is already pushing against the boundaries of devolution in a number of areas – proposals are already being developed for the transfer of animal health, student support and fire service powers. Other things such as rail and power stations, are under discussion.

This is a rapidly changing picture and for us to add to the list other major areas with very complex implications would not make sense [sounds a bit weak]. All these proposals have significant capacity implications for the Assembly itself and for the Assembly Governmen

t.In this context we took the view that it would not be appropriate for us to make specific recommendations for further transfers. We felt that the Assembly Government should determine the priorities here – and debate this more strategically than has been possible up to now.and timescale but we do highlight the strategic and capacity implications which can be substantial. This would be highly relevant if the Assembly were at the same time seeking greater powers in the areas already devolved.

In Chapter 10 we review the financial powers – are they adequate and is there a case for adding a tax-varying power.

The central point is that fiscal policy is not devolved in the UK – the amount of spending power in the devolved administrations is determined by the UK government, with the exception of the Scottish power to vary the basic rate of income tax by up to 3p either way. Although it has primary powers, the Northern Irish Assembly does not have this tax-varying power.

We also note that the UK devolution settlement does provide the devolved administrations with a degree of freedom to allocate the Budget that is very extensive in international terms.

Some people argued that because finance is such a crucial power we had to look at Barnett. We did review the evidence and the arguments but it is one thing to recognise the shortcomings of Barnett, it is another matter to find another system to replace it that all can agree to. We concluded that we were not in a position to evaluate the alternative methodologies or their implications for Wales.

Finally we looked at the case for a tax-varying power. We review the various options for such a power in Wales. If the Scottish variable rate option was available it would provide a potential additional source of revenue of around £360 million – for which the Assembly would be directly accountable to taxpayers.

However the Scottish precedent shows, as does the Northern Irish experience, that tax-varying powers are not essential to the operation of primary powers. We concluded therefore that, although desirable in principle, a tax-varying power would not be essential in practice if primary powers were devolved.

Within this devolved financial envelope, we looked in more detail at the cost of the Assembly itself and how the actual cost compares with the estimates in A Voice for Wales.

The White Paper put the cost of devolution at around £15-20 million in 1997- which would be around £17-23 million now. This is roughly what it costs to run the Presiding Office and the Cabinet Secretariat.

But the cost of devolved government is far more than this. The report (Table 11.2 page 218) shows that the cost of devolved government in 2002 –03 was more than double the cost in 1997-98, after taking account of inflation.

That is a substantial increase and we examined it in detail. To some extent, this is the cost of the increased engagement that was many witnesses told us they particularly valued. The evidence demonstrates that there has been a great deal of change, in terms of new policies, more consultation and more scrutiny.

We also found that the 43% increase in the cost of devolved government is not out of line with what has been happening across UK Departments.

So we thought it fair to point out that had the Assembly not been established, it is unlikely that the cost of the Welsh Office would have remained at the level it was in 1997-98.

Against this background we examined what would be the additional cost if the Assembly were to acquire primary legislative powers. It is not possible to evaluate this precisely because it would depend on the scale of the legislative programme but we thought it was important to produce the best estimate we could based on clear assumptions.

The largest single additional cost would be the cost of the twenty extra Members that we feel would be necessary to enable the scrutiny of the legislation. – most of this cost would fall on the Presiding Office. In addition there would be a need for additional capacity in the Welsh Assembly Government to staff the Bill teams and provide extra drafting capacity. We worked on an illustrative assumption of around 4-6 average sized Bills a year On this basisThe figures provided to us indicate that the direct cost would be in the order of £10 million a year, of which about a quarter would be on the government side and the remainder in the Presiding Office. The costings are spelt out in detail in the report.

Although the bulk of the evidence we received was on the powers side of the remit, the issue of the electoral system exercised us a great deal when we came to pull our recommendations together.

The AMS has a number of advantages – it has created an Assembly which by and large represents the four main parties in Wales. But it clearly provokes strong opposition and we considered in detail whether the system could be adjusted to overcome some of the concerns expressed, and whether it could be used to create a larger Assembly.

Basically we concluded that it couldn’t. The fundamental problem with AMS, and this was at the heart of most of the concerns, is that it creates two classes of Assembly Member – representing different but overlapping constituencies and elected in a different way. This is an inherent feature of the system.

We came to the conclusion that the AMS could not bear the weight of an increase to 80 Members. Bearing in mind that a degree of proportionality was intrinsic to the devolution proposals we felt that an Assembly elected entirely by First Past the Post was ruled out, as was the Alternative Vote and the Supplementary Vote systems.

There is also a highly practical point: in the Welsh context with First Past the Post there simply wouldn’t be enough opposition Members to provide any effective scrutiny or challenge to the largest party. It is hard to see how this could be supported as part of a proposal to increase the Assembly’s powers, given what we were saying elsewhere about the crucial importance of scrutiny.

We came to the conclusion therefore that if AMS is to go - the best alternative to AMS is the STV system. We set out three reasons for this:

• all Members would have the same status and the same relationship with constituents;
• all parties would have an incentive to campaign in every constituency;
• there would be greater opportunities for minority representation.

In the final two chapters, we pull the earlier evidence together and reach our conclusions on the way ahead.

Chapter 13 sets out the criteria we adopted for reaching our conclusions and the various models we considered for the future.

We set these against our vision of the role we think the Assembly should fulfil. This is the test we used to develop our recommendations on the way ahead. We think this reflects the aspirations of people in Wales for an Assembly that has a real job to do and has the powers to govern Wales effectively.

We didn’t think the status quo was a sustainable option. The weight of the evidence presented to us pointed clearly towards giving the Assembly greater powers – so that it could implement the policies on which Members were elected and be directly accountable for them. The evidence of the earlier chapters left us in no real doubt that change was needed.

The surprising thing – and I want to emphasise this – is that we didn’t reach this conclusion because the present system isn’t working. Almost the opposite in fact. It is precisely the success of the Assembly and the Welsh Assembly Government in establishing itself as the government of Wales in the key public policy areas that creates the pressure for change.

We examined in detail the dynamics of the present situation and found that the Assembly is increasingly setting the legislative agenda for Wales in devolved areas and negotiating with Whitehall and Westminster for the legislation it needs. Since this is already happening, and likely to happen increasingly in future, it seemed to us that the most efficient and straightforward process would be for the Assembly itself to pass this legislation in Cardiff.

This would mean that where proposals were initiated and consulted upon in Wales – they could receive full legislative scrutiny here too. This would be an onerous burden for the Assembly to carry and would require it to create greater capacity, mainly in the Committees. It would also be necessary to increase the Membership to 80.

The model we suggest for a legislative Assembly for Wales is on page 250 of the report. I would like to dwell only on two key features.

First – we have decided not to recommend the Northern Ireland model. That model includes three categories of functions – transferred matters where the Assembly can legislate, excepted matters where the Assembly cannot legislate – and a middle category where the Assembly can legislate but only with the consent of the UK Government.

We are not recommending that model for Wales - for the simple reason that it would make the settlement too complex. It would be necessary to determine matters that could be devolved, matters that could not and an in-between category. The Northern Ireland middle category is there for reasons specific to themat province and we didn’t see a need to go down that route for Wales.

Our model has only two categories – matters that are reserved where only Westminster can legislate, and the rest where Cardiff can legislate. We think that is by far the simplest and clearest solution.

Second: our model is specifically tailored to Welsh circumstances. It envisages a continuing steady flow of England and Wales legislation at Westminster, reflecting areas of policy agreement, or cross – border issues, or other practical needs. This is likely to be even more extensive than has been the case for Scotland using the Sewel procedure, where experience has shown that there is often a compelling case for common legislation simply on practical grounds.

But where there are distinctive Welsh policies, or issues that have higher priority in Wales than in England, the legislation would be passed in Cardiff.

To allow this to happen there would need to be new primary legislation to replace the Government of Wales Act – a new Wales Act. We estimate that this could be done by 2011 if that was desired – we set out an illustrative timetable on page 261.

In the meantime, we believe there is scope to give the Assembly greater freedom to implement its own priorities through a new approach to delegated powers. The thinking here is that, with the agreement of Whitehall and Westminster, future primary legislation could be designed with framework powers for Wales that gave the Assembly much more scope than would normally be the case with delegated powers.

In the final chapter we set out our overall conclusions. We recommend our model of a legislative Assembly and spell out the practical implications this would have:

• it would require an Assembly of 80 Members;
• the scrutiny of primary legislation would require a change in focus in the work of the Assembly, particularly in Committee – with a much stronger culture of detailed scrutiny and challenge;
• the corporate body structure would be replaced with an executive and legislature;
• the voting system would need to change – STV is the best alternative to AMS;
• tax varying powers would be desirable but are not essential to the exercise of primary powers.

I apologise for a rather long opening speech. We have concluded that a legislative Assembly is the most logical and straightforward way to enable the Assembly and its government to do the job it has been elected to do. For compelling practical reasons there will still need to be legislation on devolved matters at Westminster – the balance will depend on a number of factors including political and practical considerations.

This is the view we have reached in the light of the evidence. It is driven by the principle of accountability and our analysis of the dynamics of the existing settlement. To sum it up, and this is a personal gloss on it, my feeling is that the Assembly is very rapidly out growing the existing structure.

We have tried to produce a balanced report. We have set out what seems to us a logical and sustainable way forward – but we have also set out in detail the practical implications of our proposals, for the Membership, electoral system and the costs. The detailed argument is set out so that people can consider our reasoning and come to their own conclusions on the evidence.

Today is the conclusion of our work as a Commission - it is now over to the politicians in the Assembly and at Westminster to take forward the debate and determine what should happen in response to our proposals.

Thank you very much – I now invite your questions.