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«Summary: Intervention and Options RPC Opinion: Not Applicable Cost of Preferred (or more likely) Option Total Net Present Business Net Net cost to ...»

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Impact Assessment (IA)

Impact Assessment of the Wales Bill

IA No:       Date: 07/06/2016

Lead department or agency: Stage: Final

Wales Office Source of intervention: Domestic

Other departments or agencies:

Type of measure: Primary legislation

DECC, DfT, DCLG, DEFRA, HMT, HMRC, CO Contact for enquiries: Peter Newbitt 020 Summary: Intervention and Options RPC Opinion: Not Applicable Cost of Preferred (or more likely) Option Total Net Present Business Net Net cost to business per In scope of One-In, Measure qualifies as Value Present Value year (EANCB on 2009 prices) Two-Out?

£m £m £m Yes/No In/Out/zero net cost What is the problem under consideration? Why is government intervention necessary?

The Government established what became known as the St David's Day process in November 2014. Its aim was to determine where political consensus lay in implementing the recommendation of Sir Paul Silk's Commission on Devolution in Wales second report (Silk II) on the powers of the National Assembly for Wales. The process also looked at whether there was political consensus to implement for Wales any

elements of the Smith Commission proposals for Scotland. The command paper, Powers for a purpose:

Towards a lasting devolution settlement for Wales, published on 28 February 2015, set out the recommendations on which there was political consensus. These form the basis for this Bill.

What are the policy objectives and the intended effects?

The policy objectives of the Bill is to deliver those element of the St David's Day agreement which require primary legislative changes. It will create a clearer and stronger settlement in Wales which is durable and long lasting. It creates a reserved powers model for Wales so as to provide a clear seperation of powers between devolved and reserved matters. The Bill also devolves a number of additional subject areas which includes taxi regulation, energy consenting up to 350MW and onshore oil and gas extraction. The Bill also removes the requirement for a referendum to be held to implement Welsh rates of income tax. It will be for the Assembly and Welsh Government to assess impact of their policy choices.

What policy options have been considered, including any alternatives to regulation? Please justify preferred option (further details in Evidence Base) The Bill imposes no regulation itself and itwould be for the Welsh Government (WG) to assess any regulation that they impose through the new powers the Bill devolves to them. The St David's Day agreement set out those recommendations from the Silk Commission second report (Silk II) which had unanimous support from all four of Wales' main political parties. The measures in the Bill strengthen the devolution settlement in Wales by moving to a reserved powers model. The Bill strengthens the powers and responsibilities of the Assembly and the WG by devolving powers in a range of subject areas. The removal of referendum requirement to implement the Welsh rates of income tax means the WG will be more accountable for money raised for spending. The Bill was published in draft and was subject to pre-legislative scrutiny from October 2015 to February 2016 by the Welsh Affairs Select Committee. The provisions were also discussed with the WG and the Assembly's Constitution Committee (CLAC) during that period.

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Other key non-monetised costs by ‘main affected groups’ Employers/Business : Marginal compliance costs will depend upon design of devolved policies and devolved income tax

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Other key non-monetised benefits by ‘main affected groups’ Welsh Government : Increase the accountability and autonomy of the WG. The removal of the requirement for a referendum for the devolution of income tax will allow the WG to be more accountable to the Welsh electorate. National Assembly for Wales : Increase autonomy of the Assembly. UK Government : This enables the Government to devolve further powers and responsibilities to the most appropriate level, consistent with its broader approach to devolution and decentralisation.

Key assumptions/sensitivities/risks Discount rate (%)       N/A

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Evidence Base (for summary sheets)


The Wales Bill sets out the new reserved powers model for the devolution settlement in Wales and those new powers that are being devolved. It is a constitutional Bill: the provisions enable the devolution of powers to the National Assembly for Wales and the Welsh Government as well as clarity on what is devolved and what is not through the reserved powers model in Schedules 1 and 2. It will be for the Assembly and the Welsh Government to determine how these powers are used, and as a result, what impact their policies have for business, individuals and other affected parties. Legislation will be required in the Assembly or Welsh Ministerial executive orders to deliver the changes following the devolution of powers; it will be for the Assembly and Welsh Government to set out the impact assessment of their changes.

This Bill also removes the requirement for a referendum to trigger the devolution of an element of income tax as legislated for under the Wales Act 2014. Alongside the Bill the Government announced at the Autumn Statement & Spending Review 2015 a funding floor in the relative funding it provides to the Welsh Government. This, together with devolution of income tax, will allow the Welsh Government to grow the Welsh economy and increase its accountability to the Welsh electorate.

This impact assessment covers the impacts of devolving these powers. It does not assess how the Assembly or Welsh Government will use those powers but will rather cover the direct impacts on businesses and individuals of devolving these powers. The impact assessment splits the powers into those that are being devolved to the executive (Welsh Government) and those to the legislature (National Assembly for Wales). It also references and updates the impact assessment drafted for the Wales Act 2014 on income tax devolution. The impact assessment does not cover the election and Assembly procedural clauses as these would have minimal or negligible direct impacts on businesses and individuals. Any direct impacts would come as a result of changes made by the Assembly to its electoral system.

Where specific functions are transferred to the Welsh Government the budget assigned to the relevant UK Government departments for those functions will be transferred. Therefore the Welsh Government will only face additional costs if in exercising these newly devolved powers they decide to provide for further regulation. The Bill does amend the Assembly’s standing orders so that each Assembly Bill is accompanied by a justice impact test. This will help to ensure that any burdens on the justice system as the result of provisions in an Assembly Bill are adequately assessed.

The powers will be transferred to the Welsh Government at a specified date and there will therefore be transitional provisions in place.


Extending Welsh Ministers’ executive powers to Welsh Offshore Zone Currently Welsh Ministers have responsibilities for marine licensing and energy consents in the Welsh inshore area and the Bill extends this to the Welsh offshore area. This will ensure that Welsh Ministers are responsible for energy consents, marine planning, marine licensing, marine conservation and fisheries in the same maritime area. In relation to marine licensing adequate transitional provisions will be put in place so the Marine Management Organisation will only retain responsibility for determining any new licence applications which have been made before the commencement date. Natural Resource Wales/Welsh Minister will be responsible for determination of applications for variations and transfers of marine licences made before the commencement date.

The fact that Welsh Ministers will cover both inshore and offshore areas should however lessen burdens on businesses as this will provide clarity over who grants licenses and consents and so aid consistency of decision making. The number of applications for marine licences in the Welsh offshore area is very small. Nonetheless there will be some benefits for businesses that would otherwise have to deal with different licensing authorities and, potentially, different regulatory regimes.

Onshore petroleum licensing The licensing of onshore oil and gas extraction underlying Wales will be devolved to the Welsh Government. This will mean that Welsh Ministers will be able to grant licences for oil and gas extraction within the Welsh onshore area. These powers will complement the Welsh Government’s existing powers over planning and environmental permits. As a result, the Welsh Government will have full control over the decisions relating to onshore oil and gas developments, including hydraulic fracturing (shale) operations.

There may be some additional administrative burdens for businesses who operate across England & Wales if the Assembly legislates for a different regime for the granting of licences in Wales. However, the nature of any burdens cannot be assessed until any new onshore licensing regime for Wales is put in place. It should be noted though that with the alignment of licensing with WG planning and environmental functions this will mean that businesses should need to only go to one decision making authority for applications for onshore oil and gas extraction.

In expectation of the devolution of onshore petroleum licensing, and following discussion with prospective licensees, no new Exploration and Development Licences will be awarded in Wales under the existing UK-wide licensing arrangements. As a consequence, no licences were issued for the 14th Landward Licensing Round which took place in 2015 and nor will any future UK-wide licensing rounds include blocks in Wales. Once the powers have been devolved, the holding of licensing rounds will be a decision for the Welsh Government. There are 19 existing licenses in, or partly in, the Welsh Onshore area. The Oil and Gas Authority assess that applications to amend these licences, for example to change a licence holder or operator, are unlikely between now and the transfer of functions to the WG.

Were there to be any such changes requested during this period, the OGA would consult Welsh Government officials as necessary. There would be a minimal, temporary impact on business if such action were required. Licences which straddle the border, will be split, leaving an England licence and a Wales licence.

Onshore petroleum: right to use deep-level land in Wales Legislative powers relating to access to land for the purpose of searching or boring for or getting petroleum within the “Welsh onshore area” (see the exception to the reservation of D2 (oil and gas) in new Schedule 7A to the Government of Wales Act 2006) will be devolved to the Welsh Government.

Section 43 of Infrastructure Act 2015 (IA 2015) provides for a right to use deep-level land (i.e. land at depths of 300 metres and below) for the purposes of exploiting petroleum and deep geothermal energy in “landward areas” in England and Wales. Sections 45 and 46 of IA 2015 give the Secretary of State the power to make regulations containing “payment schemes” and “notice schemes” requiring “relevant energy undertakings” to make payments to landowners and others in respect of the right to use deeplevel land and to give notice in respect of the exercise of the right to use deep-level land. The intention is that these regulation-making powers will be exercised only if the voluntary commitments made by the industry to notify local communities and make payments in connection with the right to use deep-level land are not satisfactory.

We cannot assess the costs and benefits until, and unless, the Welsh Government has decided how it wishes to administer any such regime. However, for businesses that might operate across England & Wales, it is possible that the devolution of these powers might create some additional administrative burdens, if there were to be a markedly different regime in Wales.

Bus route registration

Currently, any operator that wants to run a local bus service must register this with the Traffic Commissioner. The Bill will devolve the power to legislate in respect to local bus service registration in Wales. This would enable the Assembly to determine the regulatory framework for local bus service registration in Wales (as is the case in Scotland) including what the rules for registration are and how they are enforced. As of 31 March 2015, there were 1483 local bus registrations in Wales, up from 1058 in 2014.

The Welsh Government already has the ability to determine a number of aspects of bus policy, including the provision of subsidies, and the Assembly has legislative competence over tendered services, concessionary fares and the facilitation of smartcard ticketing. The new powers we are devolving over local bus service registration will complement the existing powers devolved to Wales, particularly those relating to strategic transport policy and transport integration. The Assembly could decide to change the existing bus registration system, so there could be an impact on those bus operators that operate local bus services both sides of the English-Welsh border, if they had to comply with two different bus registration systems. Additional administrative costs could be borne by bus operators as the Welsh and English regimes for bus service registration become different.

The Assembly will have the powers to legislate to change the regime which local bus services in Wales are subject to. It will therefore be for the Assembly (if they decide to make any changes to the law on bus registration) to make transitional provisions to help smooth the introduction of their changes.

Taxi regulation

The Bill will devolve legislative competence over the regulation of taxis and private hire vehicles (PHVs) to the Assembly. Taxi and PHV services are currently licensed by local authorities (district council/unitary authority level) under legislation that covers England and Wales outside London. There are 22 licensing authorities in Wales. Within the legislative framework, local licensing authorities set their own policies and standards.

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