The Secretary of State for Wales (Mrs Cheryl Gillan)
I beg to move,
That this House has considered the matter of the Commission on Devolution in Wales.
Before I commence the debate, may I—with the permission of the Speaker, which I sought earlier—say to the right hon. Member for Neath (Mr Hain), who speaks for the Opposition on Wales, that I was shocked to hear of the incident at the Aberpergwm mine at 3 am, but I was also exceedingly glad to know that all three men have been brought out of that mine successfully? It reminds all of us, particularly after the sad events at the Gleision mine, that men are putting their lives on the line each and every day to recover coal. Because both those incidents involved the right hon. Gentleman’s constituency, I thought we should acknowledge that.
Mr Peter Hain (Neath) (Lab)
I am very grateful, and thank the right hon. Lady for that, as will the families and the individuals involved. I thank her too for her support for the miners appeal fund and for her support over the tragedy at Gleision. Today’s incident, although obviously serious, particularly for those concerned—they have suffered injuries, but fortunately they are okay—is in a very different category from Gleision, which was a major disaster and tragedy. Aberpergwm pit is run extremely efficiently by a company with high levels of investment, recruiting miners and apprentices, and in all respects an admirable company. The incident is rather an exception, but it is the third one in my constituency in the past couple of months.
Mrs Gillan
The right hon. Gentleman knows that my door is always open. We have already spoken to other Departments from my office and we will continue to deal with these matters on a cross-party and non-political basis, as is the proper and right way to deal with them.
I am pleased that we have been able to give the House an opportunity to debate in Government time the work of the Silk Commission, the commission that I announced on 11 October would examine devolution for Wales.
The coalition agreement contained three specific items on Wales. First, we promised to take forward the housing legislative competence order that had been held up by the previous Government, and I am pleased to say that we delivered on that. Secondly, we promised a referendum on granting primary legislative powers in devolved areas to the Welsh Assembly Government, and we delivered on that, although on taking office I found that preparations were—how shall I put it?—behind the curve.
Mr Wayne David (Caerphilly) (Lab)
Before the right hon. Lady moves on from the subject of the coalition agreement, may I point out that her party, in opposition, blocked the housing LCO during the wash-up period before the general election?
Mrs Gillan
The hon. Gentleman, who was serving in the Wales Office at the time, arranged the timetabling so that the LCO would fall in that period; he could have delivered it much earlier.
Thirdly, we promised that following the referendum we would establish a process for Wales, in the vein of the Calman commission, and I am pleased to inform the House that we have delivered on that.
Huw Irranca-Davies (Ogmore) (Lab)
Before the right hon. Lady takes credit for every achievement, may I ask her to acknowledge that although the Government put the legislative framework in place, the referendum was delivered by the people of Wales, who voted for it? I am sure she will want to acknowledge that.
Mrs Gillan
The hon. Gentleman is dancing on the head of a pin. This Government gave the people of Wales the opportunity to vote in the referendum, as indeed they did, and I was pleased by the outcome. It was only as a result of a great deal of work and application by the Wales Office and others in government that we were able to deliver that on time and to the schedule anticipated.
I am pleased that today, before the first meeting of the Silk commission, we have given all Members an opportunity to register their views by allowing a full-day debate. It is fair to say that Westminster politicians rarely get the time to stand back and thoughtfully consider the future shape of our country’s constitution. We react to events, perhaps to political and tribal allegiances and timetables and, as John Major said in his Ditchley Foundation annual lecture, the Union cannot be maintained by constant antagonism—for example, between Wales and London.
Like our former Prime Minister, I opposed devolution because, as a Unionist, I believed it could be the slippery slope to separation. I am now less fearful of separation and more hopeful—
Mrs Gillan
The hon. Gentleman suggests that not all Members are less fearful. That is fair and, in the spirit of the debate, I want to hear from Members who do not share the views that he and I hold. My fears about separatism, which have diminished, might be reflected in some Members’ contributions. I am more hopeful that there will be a mature debate and reasoned solutions, delivering a degree of self-determination without threatening the strength of the Union. With the advent of the commission, we are getting time to contribute and reflect.
Geraint Davies (Swansea West) (Lab/Co-op)
Is not the real Conservative agenda to offer tax-raising powers in order to freeze the block grant and end up with a semi-detached Wales, with less representation, thereby securing a permanent Tory-run Westminster, fracturing or destabilising the Union?
Mrs Gillan
I do not know what tortuous mental processes the hon. Gentleman goes through, but I assure him that I have no ambitions in that direction whatsoever. He has been spending too much time with the right hon. Member for Neath, who sees conspiracy theories in every quarter. This is a genuine open consultation, and the hon. Gentleman will hear as I develop my speech that the Silk commission is giving us an opportunity to reflect and try to shape the architecture of devolution in Wales.
The commission provides a coherent opportunity to review the working of devolution in Wales and the financial accountability of the devolved institution. Assembly Members are accountable to the people of Wales at the ballot box. They are judged on their record, on the decisions they make and on the outcomes of their policy decisions. We all know that government is a difficult business that involves administering complex issues and looking after the totality of the system for the people of Wales. We therefore need the commission to examine how the devolution system is working, and whether changes might improve its performance.
Mr David Hanson (Delyn) (Lab)
Will the Secretary of State ensure that the commission looks carefully at the impact of the border? My constituency, and that of many others, is close to the English border. People who live in my constituency work in England, and people who live in England work in my constituency. The differing rates of VAT, corporation tax and quarrying tax, and of expenditure, are important on both sides of the border. I do not want the commission to look specifically at Welsh issues without taking representations from the English side of the border.
Mrs Gillan
I could not agree more with the right hon. Gentleman. I refer him to the commission’s specifications, in which we state that it should
“consider and make recommendations on how best to resolve the legal and practical implementation issues from devolving a package of fiscal powers”.
I think that says it all: we are keeping an open mind. The right hon. Gentleman knows that since becoming shadow Secretary of State, I have been concerned about the implications of the permeability of the border. The commission offers us the chance to look not only at recommendations that might be made but at the practical difficulties.
Mr Hanson
Does the Secretary of State agree that one of the factors that the commission should take into account is that Welsh Members of Parliament such as me, whose constituents use hospitals in England and work in English businesses, should have the right to vote on those matters, too?
Mrs Gillan
We proposed to hold this debate before the first meeting of the commission to enable Paul Silk and the other commissioners to hear Members’ views. The right hon. Gentleman’s point is well made, and I know that when the commissioners read Hansard they will take it on board. I do not want to tie the commissioners’ hands; they must decide how they will work.
Alun Cairns (Vale of Glamorgan) (Con)
The right hon. Member for Delyn (Mr Hanson) makes a principled point, the logic of which should have been extended to the previous referendums on devolution. Why did that not happen?
Mrs Gillan
If I recall correctly, the Richard commission reported before the Government of Wales Act 2006 was enacted. Reaction to the commission—a pick-and-mix effect—was interesting. The 2006 Act contained some items that had not been telegraphed quite so clearly, and the House certainly did not have the opportunity to debate it as fully as I am trying to ensure that we debate things today and in future. My hon. Friend is quite right about that.
Mrs Gillan
I am glad that the right hon. Gentleman agrees that we did not have enough time to debate the Richard commission, which is indeed a fact. I was thinking of the changes to the Assembly’s electoral system, which were not telegraphed extensively and we did not have a chance to discuss—
Mrs Gillan
We may have had plenty of time in Committee, but not beforehand, and there was no wide or extensive consultation. I take the right hon. Gentleman’s point, however.
Hywel Williams (Arfon) (PC)
May I just recommend to the House in general, and perhaps to the Silk commission, that the commission look at the reports of the Welsh Affairs Committee on cross-border issues—which were what started this little exchange? Although the reports recognised that there were problems, they also recognised that there was a great deal of good will across the border, and that the systems were working very well indeed.
Mrs Gillan
That is a very constructive intervention, and in my experience the system does work exceedingly well in some instances, but that will be a matter for the commission to consider, and it will want to look at examples of what is working well and what needs adjustment.
Mrs Gillan
I will give way to the right hon. Gentleman, then I must make some progress.
Mrs Gillan
The right hon. Gentleman will be very pleased, therefore, that the Assembly now has primary legislative powers, and I am sure that he will be spending a lot of his time constructively trying to encourage the Welsh Government to come forward with some legislation, because it is now many months since the election, and correct me if I am wrong—I see the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd) and the hon. Members for Carmarthen East and Dinefwr (Jonathan Edwards) and for Arfon (Hywel Williams) nodding their heads—but we have not yet seen any draft legislation from the Welsh Government, even though they were well prepared in advance of the referendum.
David T. C. Davies (Monmouth) (Con)
My right hon. Friend will be aware, of course, that the loyal county of Monmouthshire voted no in the recent referendum, as it always has in previous referendums.
Mrs Gillan
That shows the advantage of this approach to constitutional change: all hon. Members, no matter where they come from, how they speak and from what direction they approach constitutional matters, will have an opportunity to express their views. I am grateful to my hon. Friend, and I am sure that he will speak later in the debate and let the House know what he feels the Silk commission should consider.
Before I took that series of interventions, I was saying that neither the Assembly nor the Welsh Government are accountable to the people of Wales for the money that they spend on the policies that they implement. The Welsh Government simply receive the Welsh block grant voted by Parliament, and spend it.
That cannot be right. With power comes responsibility, and it is surely better for the devolved institution to be accountable to the people of Wales not just for decisions on public spending in Wales, but by being responsible for raising some of the money needed to pay for those decisions. Even local authorities, despite receiving block grants, have responsibility for raising local council tax, and consequently they recognise the difficulty of raising tax moneys before they spend money. There is no reason why one institution—
Mrs Gillan
I have been very generous, and would now like to make some progress.
There is no reason why one institution should be immune from raising taxes, and instead simply spend money and continue to ask for more—but the Labour party seems to think that that should continue. Only last Friday the right hon. Member for Neath said in The Western Mail that seeking more accountability for the Assembly and the Welsh Government was a “curiously disturbing motive”, so I certainly look forward to hearing his further observations in a minute, because I should like him also to explain the contradiction between his position and that of the Labour First Minister, who welcomes the commission and its objectives.
The first part of the Silk commission’s remit is to look at financial accountability. It will consider the case for devolving fiscal powers and recommend a package of powers that could improve the Assembly’s financial accountability. Those powers would need to be consistent with the United Kingdom’s wider fiscal objectives.
The commission will consider the tax and borrowing powers that could be devolved to the Assembly and the Welsh Government. Those include powers in relation to landfill tax, air passenger duty and stamp duty, but they are not limited to those taxes. The commission’s remit, however, is to recommend the devolution only of taxation powers that are likely to have wide support, and it will need to consult broadly to secure that support not only in Wales but in other parts of the United Kingdom.
Huw Irranca-Davies
I thank the right hon. Lady for giving way again; she is generous. I wish to ask about her position as Secretary of State on a point of principle underlying the Silk commission’s consideration of such fiscal powers. Does she agree that it would be wrong of any review to make recommendations that were to the financial disadvantage of the people of Wales, recognising, good Unionist that she is, that the nature of the Union depends on ensuring that economically disadvantaged areas receive greater subsidy from other parts of the UK? On that point of principle, does she concur that today we should all agree that any review of fiscal union does not disbenefit the status quo in Wales, and should if anything improve its lot?
Mrs Gillan
The hon. Gentleman makes a valid and good point, but once again I do not want to prejudge or tie the hands of the Silk commission, although I cannot imagine a situation in which an agreed solution, as I have anticipated and laid out in the terms of reference, would disadvantage Wales. That is far from my motivation, as he will see as I progress with my speech.
The commission already has contributions to its evidence base from work such as the Holtham commission’s reports, which were prepared to a Welsh Assembly Government remit, but crucially, unlike Holtham, the Silk commission can take things a step further. The terms of reference require the commission to consider implementation and to make recommendations on how best to resolve the legal and practical implementation issues that arise from devolving a package of fiscal powers and having consistency within the United Kingdom.
The commission will aim to report on part 1 of its remit in the autumn of next year, and the Government will consider its recommendations very carefully. Members may wish to contribute directly to the commission as well as in today’s debate, but I very much hope that we will be able to hold a debate, again on the Floor of the House, at some stage following the delivery of part 1 of the commission’s findings, because the intention is to take the matter forward as consensually as possible.
The commission will then turn its attention to the second part of its remit—to look at the current constitutional arrangements in Wales. Specifically, it will consider the powers of the Assembly and the boundary between what is devolved and non-devolved, and make recommendations to modify the boundary, if they are likely to enable the Welsh devolution settlement to work better. Again, the commission will need to consult broadly on its proposals and make only those recommendations for change that are likely to have wide support.
Currently, the Assembly has powers in all 20 devolved areas, and it will be for the commission to decide whether there is a requirement to tidy up the devolution boundary, but any further changes to the settlement will need to be right for Wales and right for the United Kingdom as a whole. I anticipate the commission reporting on part II of its remit in 2013.
With the exception perhaps of the right hon. Member for Neath, there is broad agreement on the basis for moving forward and considering issues of both fiscal devolution and accountability. The Government have moved forward collaboratively with all four political parties in the Assembly, in establishing the terms of reference and the members of the commission, and I thank in particular all four party leaders in Cardiff Bay for the positive and co-operative spirit in which they are engaged with me and my office to agree the way forward.
David T. C. Davies
We are at an early stage in proceedings, but will my right hon. Friend and, perhaps, the right hon. Member for Neath (Mr Hain) when he speaks explain whether those nominees will be representatives who represent what their parties think, or delegates who simply pass on what their parties suggest?
Mrs Gillan
That is a matter not so much for me, but for the right hon. Gentleman, who I am sure will want to deal with it when he addresses the House. As far as the Conservative party is concerned, I want to be as inclusive as I can of people’s views, and that is why I am trying to create a period in which any member can make a contribution. The Conservative party, in particular, will make contributions to the Silk commission’s proceedings.
Hywel Williams
I merely wish to note that some distinguished members of the commission are not strictly aligned to political parties. I am sure that they will make a contribution that might even satisfy the hon. Member for Monmouth (David T. C. Davies). Given the quality of the representation, it would be strange if they were there merely to be mouthpieces for political parties. Clearly, they have a great deal to contribute as individuals.
Mrs Gillan
I am about to come to the composition of the commission, and I will pick up the hon. Gentleman’s point then.
Huw Irranca-Davies
On a point of detail about the possible extension of powers that the Silk commission is considering, will that include energy consents? The matter has been debated a lot recently, as the Secretary of State knows, and it has some support, and opposition, on both sides of the House. Ministers have made it clear that they do not think that it should be part of the commission’s deliberations. Will she clarify the situation?
Mrs Gillan
I am grateful to the hon. Gentleman for raising that matter, particularly as before the debate I was looking at the party manifestos for the Assembly elections. He will know that I regularly receive requests for powers over all sorts of areas, and I expect those areas to be looked at. It is fair to say that I expect the commission—this is subject to the way in which it wishes to conduct its business—to consider requests for energy consents for projects of more than 50 MW, and to consider trust ports, rail and separate Welsh legal jurisdiction, all of which have been raised up the agenda by one or other party, or the Welsh Government. It is right that it should have the opportunity to consider energy consents, but I have an extremely long list of things that other parties want fully devolved, which will not stop until the point of separatism is reached. He and I agree that that is not the way to go. The commission may find itself having to consider several other areas, but I am not going to restrict its operation by anything we say in the House. Indeed, I am looking forward to seeing the outcome.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Will the Secretary of State give way?
Mrs Gillan
May I make a little progress? The commissioners bring a wealth of experience to their important task. The commission is chaired by Paul Silk, a distinguished former Clerk to the National Assembly and to this House, whom we all know. Paul is already getting to grips with his task and introducing himself to those with an interest in the commission’s work.
The hon. Member for Arfon referred to the two independent members, and they are very distinguished. Dyfrig John CBE is chairman of the Principality building society and a former deputy chairman and chief executive of HSBC bank. Professor Noel Lloyd CBE is a former vice-chancellor and principal of Aberystwyth university. Neither is on the commission with a political remit. They are there as independent members to offer their best advice and to support the other members. I am sure that absolutely nothing from them will have a political bias. They will consider matters objectively and with expertise.
There are also four party political nominees on the commission, each nominated by one of the four political parties in the Assembly. Professor Nick Bourne is the Conservative nominee, and former leader of the Welsh Conservatives in the Assembly; Sue Essex is the Labour nominee, and a former Welsh Assembly Government Minister; Rob Humphreys is the Welsh Liberal Democrat nominee, and director of the Open university in Wales; and Dr Eurfyl ap Gwilym is the Plaid Cymru nominee, and best known for giving Jeremy Paxman a run for his money. I am sure that the commission’s debates will be lively. I believe that that is a first-class team, and it will meet for the first time tomorrow to consider how it will work through the next two years. The commission has a challenging brief because, importantly, we hope that it will build consensus on its proposals.
Mrs Gillan
I will give way first to the hon. Member for Carmarthen East and Dinefwr—I have not given way to him previously—and then to my hon. Friend.
Jonathan Edwards
Based on what the Secretary of State says about consensus, which we hope the commission will be able to achieve, will she outline the process, how its recommendations will reach the statute book, and the time frame? No one in Wales is interested in a kicking-into-the-long-grass game.
Mrs Gillan
It depresses me a great deal to hear hon. Members say that I am kicking the matter into the long grass. I am certainly not. I am trying to take a mature and adult look at the financial structures and the constitutional and legislative structures affecting Wales. However, I will not prejudge the outcome, and I will not be prescriptive, but I have to look at potential timetables. Three have been set out. One has a shorter time scale, which assumes that, whatever the recommendations, no manifesto commitments or referendum would be necessary. In fact, it would be very difficult to produce a Bill by the time of the next general election, and the time scale could be unfeasibly short. However, again, I am not ruling that out; I am simply saying that it would be difficult. If we did that, and if there were new fiscal and constitutional powers, they would be implemented post-2015.
Another scenario is based on a manifesto commitment and no referendum, which would lead us to believe that there would be legislation after the next general election. However, I do not know what the Silk commission will recommend, or whether it will require both manifesto commitments and a referendum, in which case the time scale would be slightly longer.
I would like the hon. Gentleman to take me at my word. We are taking a long, hard look at the matter in a genuinely cross-party way. I think he knows that I made some effort to ensure that his party was included, because I thought it was important to start as we mean to go on. I hope that we will continue in that vein, although I appreciate that anything could happen at any time.
Mrs Gillan
My hon. Friend can reassure his constituents that no member of the commission is being remunerated. They have all agreed to waive remuneration, but their expenses will be met from my Department. We have set aside a sum of money over three years to meet those expenses. At this stage, we are not sure how they will pan out, because I want the commission to decide how it will do its work, as it rightly should, and I do not want it to be restricted. He can reassure his constituents that the commission is doing this work for its love of Wales.
Jenny Willott (Cardiff Central) (LD)
I apologise for my voice being about an octave lower than normal. This is not a point I often make, but there is only one woman on the commission. Will the Secretary of State assure the House that it will take evidence from and talk to a wide range of people to obtain a broad range of views from both genders and across all communities in Wales, including different ethnic minority groups, so that it can take account of different perspectives?
Mrs Gillan
That point was well made. I, too, was concerned, and I looked at the gender balance, having been a former Minister for women. I think Sue Essex will be a doughty and robust member—[Interruption.] As my hon. Friend the Member for Lichfield (Michael Fabricant) says, she is equal to two men. I am sure she will give us a run for our money.
I agree entirely that many of the matters that the commission will discuss will be of great interest not only to women, but to ethnic minorities. I am sure that Paul Silk will take on board the concerns of my hon. Friend the Member for Cardiff Central (Jenny Willott).
We now have 12 years of experience of devolution in Wales. That has involved not one but two pieces of legislation that have been used to try to shape devolution to the purposes of the previous Government. There is obviously much that could be said about the effectiveness of the Assembly and the Welsh Government, but that can be better examined and tested with more accountability and the benefit of that experience.
The Government are now trying to ensure that we have a process to assess the position of Wales within the United Kingdom and to take a detailed, objective and structured examination of the architecture of devolution. This is a mature way to ensure that the Assembly and the Welsh Government get the responsibility they need to ensure accountability, and that the dividing lines on devolution benefit Wales and do not leave the Administration perpetually demanding more powers and more money rather than getting on with the business of running the devolved areas for which they have responsibility.
This is also an important statement of intent by the coalition Government. The Welsh Government receive nearly £15 billion a year from the Treasury, but, as I have said, are not accountable for raising a penny they spend. We do not think that is right, and I am certain that taxpayers do not think it is right either. I want the argument, for once, to move away from whether there is enough money to how it is spent and whether it is spent effectively. It is true to say that a Government who take from Peter and give to Paul can always rely on the support of Paul. We are asking the commission to see whether Paul can also make a contribution.
I look forward to hearing Members’ contributions and maintaining an open mind on how we can improve devolution and, through that, the economy of Wales and the well-being of its people. I hope that we will hear moderate, realistic and interesting views on the balance of powers between Westminster and Cardiff. I am sure that everyone in this House will send Paul Silk and the members of the Silk commission their best wishes for the task ahead.
Mr Hain
I am happy to take an intervention a little later.
I am intrigued by accountability; that is why I picked up the Secretary of State on that issue in The Western Mail. I am glad that she reads The Western Mail, and my comments in it, assiduously. It is not for the Secretary of State for Wales to decide in which way the Welsh Government or the Welsh Assembly should be accountable to the people of Wales. The Welsh Assembly is elected by the people of Wales; she is not elected by anybody in Wales. That is the true line of accountability that operates.
Mrs Gillan
All I can say is that, as my hon. Friend the Under-Secretary once remarked, I am a Welshwoman born in Wales and therefore have a great interest in the land of my birth.
I read the right hon. Gentleman’s article in The Western Mail very carefully, and one of the things I objected to was his fear-mongering among the people of Wales. He gives the impression that we would halve public spending in Wales, and that is absolutely not the case. He should be ashamed of even suggesting that and frightening people in Wales in that way. He knows that this is an open consultation to see how we can do things better. Any fool can spend money, but those who spend money need to have some responsibility for raising it so that they can spend it rightly.
Mr Hain
My, my—the Secretary of State sounds rather furious. I seem to have touched a sensitive spot. I shall deal with this point later.
We welcome the establishment of the Silk commission, which, as the Secretary of State said, has been established on an all-party basis. The Welsh Assembly, which is well over a decade old, is now truly embedded into Welsh civic society, so there may be a case for looking at increasing its financial powers and flexibility. As the First Minister, Carwyn Jones, has indicated, devolving stamp duty, aggregates tax and new borrowing could be advantageous to the Welsh Government and, indeed, to the people of Wales.
I agree that Paul Silk is a very good choice for this task—a distinguished Clerk in this House before he became the first, and even more distinguished, Clerk of the Assembly. I welcome what the Secretary of State has said about wanting to go forward on a consensual basis. It is important that any Bill emerging from the work of the Silk commission is born out of consultation and consensus, unlike the Parliamentary Voting System and Constituencies Bill or the Fixed-term Parliaments Bill, which were forced on Parliament with little or no engagement with Opposition parties, the public or interested groups and experts.
Mrs Gillan
May I put the record straight? As the right hon. Gentleman knows, I gave every Welsh MP the opportunity to meet the relevant Minister on an open-ended basis. The PVSC Bill was debated on the Floor of the House for 53 hours and 40 minutes; there were plenty of opportunities for Members to contribute.
Mr Hain
Let me say this to the Secretary of State: when in a hole, stop digging. She knows that she denied Members the opportunity of a Welsh Grand Committee debate, which was requested by my right hon. Friend the Member for Torfaen (Paul Murphy) and by the leader of Plaid Cymru, the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd). Every member of the Welsh Labour group and other Members wanted that debate as well, because Wales is being savagely penalised by this Bill, on which there was no consultation at all.
Mrs Gillan
The right hon. Gentleman asked me a direct question, and I will give him a direct answer. Devolved funding rules, as set out in the statement of funding policy, operate within the UK’s fiscal framework. We therefore expect any changes that come out of the commission’s work or intergovernmental talks to be consistent with that framework, for example as set out in the programme for government. As he knows, that is because macro-economic policy is a reserved matter for the UK.
Mr Hain
I am grateful. The Secretary of State is confirming, then—I am not challenging her on this point—that should there be a derogation in the case of, for instance, stamp duty, that would be taken from the Welsh funding block. That is what I understand her reply to mean.
My second element of disappointment is that the Silk commission will not consider the Holtham commission’s proposals for funding reform in Wales. It was the previous Labour Welsh Government who established the Holtham commission, and it produced conclusive evidence that Wales is now underfunded compared with its needs. As I think both Government parties here in Westminster now acknowledge, it was either naive or cynical of them to promise in their manifestos swift and radical reform of the Barnett formula—a promise that they had to betray after just one week in government.
We are aware that Holtham does not offer a quick solution, and that there would be impacts on the other devolved nations and regions. The introduction of a Barnett floor, which was a Labour manifesto commitment and a proposition featured in the Holtham commission’s two reports, would have ensured that Wales’s position did not become worse. Why have the Government not considered introducing a floor similar to the one that we proposed, which was agreed with the Treasury? It could be implemented relatively straightforwardly, again with the agreement of the Treasury.
The green budget published last year by the Institute for Fiscal Studies entirely vindicated Labour’s approach to the funding of Wales. By showing that the Barnett formula is only now beginning to disadvantage Wales for the first time, it proved that we were right to stick with it until last year, and equally right to proceed with reforming it thereafter. Make no mistake, up until that point the Barnett formula had served Wales well. There is no doubt that had we ripped it up several decades ago, as the nationalists advocated, Wales would have lost out. The collapse of the banks and the scale of the financial crisis suffered by Iceland and Ireland have been devastating to the nationalists’ arguments for fiscal autonomy.
Mr Hain
My hon. Friend, who has expertise in this matter from his previous shadow ministerial job, makes a valid point. Indeed, Tata Steel also talked to us about the carbon price element that is threatening the future of its industry in areas such as Llanwern and Port Talbot.
Mrs Gillan
The right hon. Gentleman will therefore be greatly reassured to know that I was at Tata Steel for our business advisory group meeting at the end of last month, where I had long discussions. I am sure that he would not want to cause any anxiety to the work force. I was pleased to hear that long-term investments continue to be made by Tata Steel and that it welcomes its good relationships and exchanges with my colleagues in the Cabinet on matters pertaining to the success of that business.
Mr Hain
I am glad that the Secretary of State had that conversation, but all I can do is report to the House—and it is important that she hears it too—what the European chief of Tata Steel told a group of Members who met him last week, which is as I have described it. He was not concerned about any of the issues to do with the Silk commission, as we are in this debate. It is important for the Government to recognise that they should not ignore the economic realities and flirt with tax devolution—by, for example, devolving corporation tax—when that is not even on Tata’s agenda.
As for investment, Tata Steel’s European chief pointed out that the new and welcome investment at Port Talbot might not have been made had he been aware of the climate now affecting the company as a result of the Government’s incompetence, which is damaging steel production. Instead of addressing that, the Government are, through the Silk commission, considering matters such as devolving corporation tax.
A review undertaken in 2007 by Sir David Varney for the Treasury pointed to academic research that suggested that only about half the impact of a corporation tax cut was usually recovered through increased growth and investment. The question is: would lowering corporation tax in Wales to, say, the Irish level—if the Silk commission is to consider that—generate enough extra tax, including income tax, to compensate for the £400 million or so that is likely to be lopped off the Welsh block grant to comply with European Union state aid rules and compensate the Treasury for lost revenue?
The Secretary of State for Northern Ireland is an enthusiast for devolving corporation tax. Nevertheless, he told me that he thought it would take at least 15 years for the Northern Ireland economy to generate the growth and jobs that he anticipated from halving corporation tax, as is planned there, that would be sufficient to produce an equivalent income to compensate for the loss to the Northern Ireland block grant. What Welsh Government would choose to lose around £400 million now and each year for the best part of two decades in the hope—and only the hope—that extra inward investment and business activity would eventually make up the shortfall?
David T. C. Davies
Of course I agree with the hon. Gentleman. I live on the border as well. Many of my constituents go across the border, but what right do he and I have to tell the English how to run their health service if we are not prepared to accept that English MPs whose constituents might come over into Wales should also have a voice over what happens within the Welsh health service?
Mrs Gillan
No doubt my hon. Friend will therefore give a warm welcome to the statement made on 8 September by the Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Forest of Dean (Mr Harper), the Minister responsible for political and constitutional reform, announcing our intention of establishing a commission to look into the West Lothian question. I understand that in the not too distant future there will be further statements on the subject, which will of course address the important questions that my hon. Friend is raising today.
David T. C. Davies
I do indeed welcome that statement, and I look forward to participating, but I hope that we do not end up putting the cart before the horse. I hope that we do not all go off in different directions, rather than getting things done in an orderly fashion. The constitution is a very delicate thing, and it needs to be balanced.
David T. C. Davies
That is a sensible point, but my peroration has become more of a conversation now, and I wish to return to it. I shall think about what the hon. Gentleman has said, however, and I suspect that all of us will want to contribute in various and different ways if and when the England question arises.
The Silk commission is addressing fiscal powers. The leader of Plaid Cymru—I think he is still the leader—said that that could have an historic effect on Wales, by which I assume he means that it will lead to all sorts of extra powers being acquired and Wales heading much further along the road that he wishes to travel down. I am very concerned about the prospect of giving fiscal powers to Wales, however. It is hard to see how we could maintain the integration of the various parts of the United Kingdom if we were all doing different things fiscally. The Silk commission has apparently ruled out borrowing, but I have been told by those in a position to know that it has ruled out only some kinds of borrowing, and anything can be examined. There are certainly ongoing discussions about different kinds of borrowing.
Mrs Gillan
The Silk commission can look at future borrowing, whereas current borrowing is at present the subject of bilateral discussions between the Treasury and the Welsh Government. The Silk commission can look at future borrowing.
David T. C. Davies
I thank my right hon. Friend for that clarification, but what she says will not help me sleep any more easily tonight.
Before this debate started, an urgent question was asked on the Floor of the House about what has been going on in the eurozone area. That is, in fact, fairly simple to understand. There is a central bank and a currency area with all sorts of individual parts within it—we call them nation states still, although Brussels will probably want to change that in a few years—and those individual parts have all been doing their own thing. The Greeks have been borrowing as much as they wanted, and have been spending it on allowing their civil servants to retire at 50 and on buying off strikes. In short, they have been spending it on doing things we would never even consider doing—filling people’s mouths with gold, as Nye Bevan would have put it. As a result, there is now an enormous crisis across the whole area because the taxpayers of Germany are simply not prepared to bail out nations that have been behaving in an irresponsible fashion.
Yet we in the United Kingdom, having escaped the economic servitude of the euro—which many Opposition Members would have liked to put us into—now seem to want to create a situation whereby exactly the same thing could happen on a smaller scale. We have a central bank and Government responsible for interest rates and general financial policy, but there is now a proposal that the constituent parts of the United Kingdom—specifically, in this instance, Wales—should be free to go off and borrow at low interest rates, knowing that ultimately somebody else could pick up the bill.
Paul Murphy
No, I do not. I accept, though, that there are people in my own party who may agree with some of the things that I think the Conservative party is guilty of—that is, not being awfully worried if Scotland and Wales left the Union. I have been thinking that for over a year now.
The New Statesman published a very good editorial last week, which finished with this:
“For the Tory right, an independent England—economically liberal, fiscally conservative, Eurosceptic, Atlanticist—is an attractive prospect. The United Kingdom, one of the most successful multiracial, multi-faith, multinational states the world has ever known, remains a cause worth fighting for. Yet, over the past weeks, fixated by the EU, the Conservative and Unionist Party seemed less aware of this than ever.”
The Trojan horse is not Welsh nationalism, but the English nationalism of the Conservative and former Unionist party.
Mrs Gillan
I am enjoying the right hon. Gentleman’s contribution and I know that his words will be passed on to the Silk commission. I assure him that I remain a firm Unionist, not the sort of Tory that he describes.
On a point of information for him on the borrowing powers, the Welsh Government have the ability to borrow under the powers that they inherited from the Welsh Development Agency. The bilateral talks on those borrowing powers are about how that borrowing could be used more effectively. What the Silk commission has been entrusted with is examining new borrowing powers in the context of the package of tax and borrowing powers. I hope that that clarifies the position on borrowing, which I know has been the subject of some speculation.
Paul Murphy
Indeed; I am grateful to the right hon. Lady for telling the House that. In a sense, it confirms my view that there is confusion about what is happening with regard to Barnett and to borrowing. There appear to be simultaneous discussions on borrowing and on what happens to Barnett on the one hand, and the Silk Commission on the other, whose job it is to look at financial responsibility as well. I am saying, “Don’t stop the talks.” It is obvious that Governments have to talk to each other, particularly as we live in difficult times, but I am also saying—she has clarified the position with regard to borrowing—that it is important for that to be part of the Silk commission’s remit.
Although I welcome the Silk commission, I warn the people of Wales that the position is not as simple as it might seem on the surface. I believe that the Secretary of State is generally in favour of the Union, but—judging by the actions that have been taken in the House of Commons over the past year or so—I do not believe that that is true of much of the rest of her party. Those of us who are genuinely in favour of the Union want the Silk commission to be about helping the people of Wales ultimately to have a better deal from the United Kingdom.
Guto Bebb
I thank the hon. Gentleman for that intervention. Given that an intergovernmental approach has been applauded by the First Minister, it is imperative for him to get down to the Treasury as soon as possible to discuss the issue. We are often told that there is a respect agenda between Westminster and Cardiff. It is not therefore for us to say to the First Minister that he must act now, but I would certainly recommend that the discussions should start—and the sooner they start, the better.
Mrs Gillan
Let me reassure my hon. Friend that the bilateral discussions on the Holtham floor are already taking place between the two Governments. It is quite right that those matters have been reserved for bilateral intergovernmental conversations.
Hywel Williams (Arfon) (PC)
I am somewhat surprised to be called now. I hope that my hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) will have the opportunity to make a contribution, and I will be very brief.
First, may I apologise to the House on behalf of my right hon. Friend the Member for Dwyfor Meirionnydd (Mr Llwyd), who has had to leave because of a medical appointment? I was glad to hear the hon. Member for Aberconwy (Guto Bebb) expressing his interest in and loyalty to the Assembly. I shall briefly regale the House with a malapropism that came out on Radio Cymru—only the Welsh-speaking Members will understand this. A farmer from Ceredigion phoned in and called the Cynulliad “the cyn lleied” [Laughter.] I will now explain. The Cynulliad is the Assembly whereas “cyn lleied” means so little. By just a simple transposition he was able to make his point.
My party of course welcomes the establishment of the commission. We are very glad that all four parties in Wales are represented, in addition to the distinguished independent members. It is a great improvement on the Calman commission in Scotland, in which, for whatever reason, not all the parties took part. We are seeing some of the consequences of that in Scotland, where there continues to be extreme controversy about the constitutional settlement. I hope that in Wales we are one step ahead of that problem.
As all hon. Members would hope, Plaid Cymru will participate in and contribute positively to the work of the commission, trusting that its recommendations will lead to better governance of Wales, in the gradualist fashion that my party has always followed. Reference has been made a number of times to our ambition for independence for our country, but I think all hon. Members would concede that in the way we have operated over the years we have been a gradualist party aiming towards independence but prepared to work with everyone else to improve the governance of our country, with growth and prosperity for our country as our aim.
Where others shy away from seeking greater responsibility for the Welsh people and our Government, my party wants them to take it. We want them to do so because by taking responsibility for ourselves, we can create and build the better Wales—the Wales that we all want to live in. Devolution should not stop—indeed, it cannot stop, as Ron Davies said all those years ago—and it will not stop, despite the Secretary of State’s apparent call for a moratorium, which I saw in The Western Mail about three weeks ago. It is clear that in respect of the requirements of good governance, this Government take action, as did the previous Government, to transfer powers to Welsh Ministers. We see statutory instruments appearing fairly regularly to transfer powers. They are perhaps minor powers—they are not changes of principle —but that process will continue.
Mrs Gillan
May I reassure the hon. Gentleman that what I had envisaged was that the major questions—such as energy, ports and the other areas that have from time to time come across my desk, with demands having been made that powers in those areas be passed down—should rightly be looked at by the Silk Commission, but I am certainly not ruling out transfers of administrative matters from time to time where it makes sense? To rule that out would be nonsensical and the door is always open on those issues. I think it is a question of common sense, but we must not undermine what the Silk commission will look at in part II.
Hywel Williams
I am grateful to the Secretary of State for making that point, because her comments and those of other hon. Members could easily be misinterpreted if looked at briefly.
It seems clear that the current arrangements are not sustainable in the long term. The settlement between London and Cardiff is complicated, but that need not be a bad thing—sometimes complicated is good if the system works very well. The system does seem complicated but it is, thankfully, now much clearer than it was under the highly unsatisfactory legislative competence order system that we struggled with under the previous Government. The Under-Secretary was on the Welsh Affairs Committee with me and I am sure that he was tempted to jump to his feet when the housing LCO was mentioned. However, I shall not intrude into that particular piece of history.
Owen Smith
I do not, at all. I am quoting accurately from my article. I suggest that the hon. Gentleman read it and that in future he does his homework a little better lest he be in danger of misleading the House about my opinions, if nothing else. [Interruption.] He can withdraw his remarks whenever he wants.
I thank the Secretary of State for scheduling today’s debate. Labour Members and, I am sure, Members right across the House are extremely grateful that after 18 months we have a debate about a Welsh matter on the Floor of the House. We did not have a substantive one, of course, about the Welsh aspects of the Parliamentary Voting System and Constituencies Bill, we have not had one about growth, and we have not had one about the disproportionate effect of cuts in Wales, but we are having one today, for which I am very grateful.
I asked the Library staff to look into when we last had such a long interregnum between substantive Welsh debates on the Floor of the House, but once they got back to the 1940s I told them to stop bothering.
Mrs Gillan
The hon. Gentleman will no doubt make absolutely every effort to ensure that the Backbench Business Committee, which is now responsible for scheduling our St David’s day debate, allows us to have it. It did not do so last year, despite my letters to it and despite other Members appearing before it to ask for that debate. If we have that debate, we can cover all the matters that he mentions.
Owen Smith
With the greatest respect, I find it extraordinary that the Secretary of State should now view it as the job of the Backbench Business Committee to decide whether we have a debate on Wales. I am surprised that she should go to that Committee to request a debate, rather than go to her colleagues around the Cabinet table such as the Chief Whip and ask for a debate in Government time.
Owen Smith
Indeed, and thank you, Mr Deputy Speaker.
Today’s debate and the Silk commission are extremely important, and I welcome them for two reasons. First, they enable the discussion of issues of genuine magnitude. Part I of the commission’s role on fiscal powers, and part II on the boundaries between the competences of Westminster and Wales, both cover enormously important issues that will have an impact on people in Wales in particular and across the rest of the UK. Secondly, the debate is important because it provides an opportunity to discuss the wider issue of the Union, to which my article referred, and the wider context in which the Silk commission is set. A lot of Members, particularly my right hon. Friend the Member for Torfaen (Paul Murphy) in his excellent contribution, have taken that opportunity. I wish to talk about that wider context.
Government Members, including the Secretary of State, have looked askance today at Opposition Members who have said that they are suspicious of the motivation that may lie behind some of the remarks that have been made, and perhaps even behind the Government’s whole direction of travel with regard to the Union. We are seeing diminishing support from the Conservative party for the concept of the Union.
Those concerns are not plucked out of thin air, and they are not illegitimate. They are born of our reading and listening to comments made by Conservative Members, and of hearing comments such as those of the former Prime Minister, Sir John Major, who said that Scottish ambition was “fraying English tolerance”. They come from reading the conclusions of the report commissioned by the Prime Minister, when he was in opposition, from the current Justice Secretary. It recommended that the only way to deal with the West Lothian question was to create an English Parliament with English votes on English issues, denying Welsh, Scottish and Northern Irish Members a vote.
Owen Smith
The Secretary of State shakes her head, but that was the conclusion drawn by a commission led by the Justice Secretary.
Mrs Laing
No, that is not the logic at all. If the hon. Gentleman argues in that way, he is arguing against himself. He agrees with me and with many of his hon. Friends that it is this Parliament that represents the whole of the United Kingdom, so this Parliament must have the responsibility not only for raising most taxes but for spending them. He has argued, as have others, that devolved Assemblies and Parliaments must bear responsibility as well as wielding power. As I say, if that is his argument, he is arguing against himself.
Mrs Gillan
My hon. Friend is making a valuable contribution to the debate. It is interesting to note that regional-level Governments in other countries raise a percentage of their own expenditure. For instance, in Germany regional Governments raise 56% of the 63% that is spent, and in Spain they raise 23% of the 49% that is spent.
Mrs Laing
As ever, I thank my right hon. Friend. Those examples illustrate my argument extremely well.
There is no doubt that there cannot be proper accountability without a well-constructed democratic system involving fiscal responsibility as well as democracy. At present Wales benefits enormously from public spending. The public expenditure cuts in Wales are considerably smaller than cuts in the rest of the United Kingdom, and public spending is currently 12% higher. As I have said, I entirely support that position. No one is trying to do Wales any harm; quite the opposite.
I am pleased that my right hon. Friend has given the Silk commission the duty of examining the future scope of devolution. Wales can learn much from what has happened in Scotland. There is a significant difference between the situation in Scotland and the situation in Wales because Scotland has, historically, its own legal system and other institutions that Wales does not have—I say that as a Scots lawyer who is perpetually confused by English law when we discuss it in the House—but the commission is nevertheless likely to bring Wales great benefits for the future.
Nia Griffith (Llanelli) (Lab)
We have had a long and full debate, and we have wandered over many subjects. We heard the hon. Member for Monmouth (David T. C. Davies) ensure that we heard a plurality of views. In his own completely inimitable style he told us that the Silk commission should have a remit to consider clawing back powers from the devolved Administration. That view must be unique to him.
Mrs Gillan
The Silk commission can look at the boundaries, and that means adjustments in either direction.
Nia Griffith
I thank the Secretary of State for that clarification.
My right hon. Friend the Member for Torfaen (Paul Murphy), a former Secretary of State for Wales, spoke with passion and conviction, standing up firmly for Wales and pointing out the deep mistrust of the current Government’s attitude to Wales, which is exemplified by the roughshod way in which Ministers are cutting the number of Welsh constituencies from 40 to 30. That fuels deep suspicions about what the Government’s motives are for setting up the Silk commission.
My hon. Friend the Member for Caerphilly (Mr David) stressed the need for a pragmatic approach that brings power nearer to the people but which does the best for the people of Wales. The hon. Member for Arfon (Hywel Williams) referred the Silk commission to his private Member’s Bills, the Bilingual Juries (Wales) Bill and the Jobcentre Plus (Wales) Bill. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), who had very little time, unfortunately, urged the Lib Dems to rebel on the constituency boundary issue.
My hon. Friend the Member for Ogmore (Huw Irranca-Davies) stressed the importance of this Parliament in taking decisions for the whole UK and urged that we move forward wisely, cautiously and with careful consideration of the issues. The hon. Member for Brecon and Radnorshire (Roger Williams) pointed out the importance of the Calman commission and stressed the excellent credentials of its members, and his words have been echoed by many hon. Members.
The hon. Member for Aberconwy (Guto Bebb)—I am not sure whether he is listening—stressed the importance of accountability and talked about practicalities. He spoke of the importance of treating businesses across the whole UK equally, but he then talked about different national insurance rates, so I am not sure quite where he was coming from.
The hon. Member for Vale of Glamorgan (Alun Cairns) talked about the need for stability and there being no further changes for a generation. He stressed the need for the Silk commission to consult effectively and to reach out to those who have not been effectively engaged before, pointing out concerns about the volatility of some taxes. The hon. Member for Epping Forest (Mrs Laing) reaffirmed her strong Unionist credentials and welcomed the commission, which she sees as an important step towards accountability.
My hon. Friend the Member for Pontypridd (Owen Smith) referred to the difficulties of having continual change and to the need to take a long-term view. He also stressed the need for economic stimulus, as set out in Labour’s five-point plan, and pointed out the measures that the Assembly Government are taking to implement elements of that in the areas for which they have responsibility, such as with the successor to the future jobs fund—the jobs growth fund—and with some investment in infrastructure, where they are able to do so.
The Opposition very much welcome the establishment of the Silk commission and the important tasks it has to do. Its first task is to review the case for the devolution of fiscal powers and to recommend ways in which the financial accountability of the Welsh Assembly could be improved. It will no doubt refer to the work done by the Holtham commission in its analysis of some of the possible ways of transferring revenue-raising mechanisms to Wales. It can examine the practicalities and the likely consequences of implementing any such measures. We should not underestimate the complexity of this issue or the dangers of people being, quite naturally, tempted to play the system by switching from one side of the border to the other. That issue has been mentioned by several hon. Members, particularly my right hon. Friend the Member for Delyn (Mr Hanson). Most importantly of all, the Silk commission will need to consult and take account of public opinion. It is vital that a move towards any change has the support and backing of the people of Wales.
We are disappointed that the Secretary of State has decided to make setting up the Silk commission a priority over tackling the challenge of delivering a fairer funding system for Wales—an issue that is specifically excluded from the commission’s remit. If her Government were really interested in delivering the best for the people of Wales, they would have made it a priority to introduce the so-called Barnett floor—a concept that was explored in the Holtham reports and adopted by Labour in our 2010 manifesto as the most practical and immediate step to protect funding to Wales.
Nia Griffith
As the hon. Gentleman will have heard my right hon. Friend the Member for Neath (Mr Hain) explain, we are at a tipping point. Until now, the Barnett formula has served the people of Wales well, but from this year onwards the balance will tip slightly in the other direction. Putting a floor in would offer additional protection and would be a straightforward measure. It could be implemented with the agreement of the Treasury and without having to go into the difficulties of trying to work out a needs-based analysis, which is much more complex but is something that we might wish to see in the long term. So, as Holtham identified, the Barnett formula has served Wales well up to now, but if nothing is done it will begin to disadvantage Wales. The whole point of putting in the Barnett floor is to prevent that from happening and to protect funding. The Holtham commission recommended moving to a needs-based analysis, and it produced evidence of how a needs-based funding system could be made to work in a way that is fair to all parts of the United Kingdom. In its second report, it demonstrated that a needs-based funding formula that is fair to Wales would deliver £117 to Wales for every £100 that is spent in England on devolved activities. It recognised, too, that moving to a needs-based formula would take time but, in the meantime, the Barnett floor could protect Welsh funding. Instead of making that a priority, as it could be implemented quite easily, the Secretary of State has set up a commission that specifically will not consider the issue of funding reform.
Nia Griffith
I hope very much indeed that that bilateral work is progressing quickly and effectively.
It is small wonder, given the Conservatives’ track record on devolution, that many Opposition Members have expressed suspicions about the Government’s motives for setting up the Silk commission. There are suspicions that the Government might be trying to sell Wales short and push through measures that would seriously disadvantage Wales. The concentration of wealth creation in London and south-east England means not only in Wales but in Scotland, Northern Ireland and the other regions of England that public expenditure is greater than the income from those areas, which are all net beneficiaries of the UK tax regime, while London and parts of the south-east and East Anglia are net contributors.
That is for historical reasons, including the early emergence of London as the commercial capital and its importance as a world financial centre, and it is in contrast to other European countries, where the importance of the city state and, much later, unification has produced different patterns of wealth distribution. The disparities have existed in the UK for many years: they are deeply embedded and cannot simply be eliminated by a few years of regional policy or European funding, helpful as that is to compensate for the differences. Nor can they simply be eliminated by substantial growth in the private sector, vital as that is to Wales and across the UK.
With such deep-seated historical differences in wealth distribution, complete financial independence for Wales, as advocated by Plaid Cymru, is an absolute non-starter. With a gap of £14.6 billion between public spending and the revenue raised in Wales, it would mean every man, woman and child in Wales contributing an extra £4,800—nearly £5,000 each a year just to maintain current levels of spending.
Nia Griffith
Those figures were recently provided by the House of Commons Library, on 2 November, and I am sure that it has checked them thoroughly.
We are suspicious about the Government’s motives in setting up the Silk commission, whose remit excludes fair funding. It looks as if the Government might be using it as a back door to cutting funding to Wales, or seeking to adopt measures that could leave Wales subject to fluctuations in funding that would be impossible to cope with. The Labour party will strongly resist any moves that would disadvantage Wales.
Many people have been puzzled by the timing of the debate, as the remit for the Silk commission has already been set, so it did not offer an opportunity to influence its terms of reference. Perhaps, when the commission has had a chance to study the issues, it may wish to seek views or raise questions in an interim report, and that would be a more appropriate time for a debate. Having the debate now, before the commission has even begun its work, but after the terms of reference have been decided, is somewhat bizarre. [Interruption.] I think that the Secretary of State is trying to intervene, but the point was well made by my right hon. Friend the Member for Torfaen that that does make us question the reason for the debate.
Mrs Gillan
I should like to inform the hon. Lady and the House that the terms of reference were agreed with the Labour party in the Assembly.
Nia Griffith
The irony being that today we have discussed the importance of Parliament; many Government Members have referred to the importance of the commission being set up by Parliament.
The Parliamentary Under-Secretary of State for Wales (Mr David Jones)
This has been an important debate and, as it turns out, one that is particularly well timed because the Silk commission will hold its first meeting tomorrow. I am sure right hon. and hon. Members in all parts of the House will wish it well, and that the members of the commission will be grateful for the opportunity to take into account the numerous points that have been made by Members on both sides of the House this afternoon, not only on the commission’s work but on the matters that it should take into consideration when arriving at its conclusions. I am pleased that so many hon. Members were able to contribute to the debate today and make a variety of important points that I am sure the commission will find extremely valuable.
As the Secretary of State pointed out, this is a Government who have delivered for Wales. Despite the doubters and the nay-sayers, we delivered the referendum on primary legislative powers for the Assembly in March and now we are taking that further by delivering on our coalition commitment to establish a commission to consider, first, the question of the financial accountability of the Welsh Government and of the Welsh Assembly, and secondly, the powers of the Assembly, and to recommend modifications to the present constitutional settlement that may enable Welsh devolution to work more effectively within the context of the United Kingdom.
It is timely that the commission should start this work now. The Welsh Government spend some £15 billion of public money each year. They and the Assembly now have considerable powers, which extend to primary law making in the devolved areas. It is widely accepted not only in the Chamber but outside that that level of power should be matched by accountability to the people of Wales for the money that those institutions spend on their behalf. The issue of financial accountability is a hugely important part of the Silk Commission’s remit. Seeking to build consensus around the extent and form of accountability is a challenging aspect of that remit.
The second part of the commission’s task, which will commence towards the end of next year, is also important. By then, Wales will have experienced more than 13 years of devolution. People will have had considerable time to assess whether the suite of powers vested in the Assembly and in the Welsh Government are working as well as they could be in the interests of Wales and, importantly, in the interests of the United Kingdom as a whole. It will be an appropriate time to assess whether modifications to the devolution settlement should at least be considered, so the work of the commission is extremely important. As my hon. Friend the Member for Vale of Glamorgan (Alun Cairns) pointed out, we will need to listen carefully to the views of people across Wales and the United Kingdom and seek to establish a consensus on the way forward. I am sure that Members’ interesting and varied points will be extremely valuable to the commission as it starts its important work.
Huw Irranca-Davies
I am trying to get my head around the idea of the level of financial devolution that will give accountability to the Welsh electorate. In local authorities it is typically up to 20%. Do Ministers envisage such a figure, or 2% or 3%?
Mr Jones
My right hon. Friend the Secretary of State has already indicated the levels of fiscal accountability that are devolved in other parts of Europe. Ultimately, these will be matters for the Silk commission, which, as the hon. Member for Arfon (Hywel Williams) pointed out, will no doubt take into account what prevails in other parts of Europe in arriving at its conclusion, as it should.
In the brief time remaining, I will respond to the various points made. The shadow Secretary of State has explained to me the reasons for his absence, which we fully understand. He was less than enthusiastic about the commission, giving it a “cautious welcome”, which was as cautious as it gets and gave a whole new meaning to “welcome”. Resorting to the oldest rhetorical trick in the book, he set up the straw man of “devo-max”, under which Wales would be responsible for raising all its own revenue. He seemed to suggest that the commission’s recommendations might result in Wales having to raise all its own revenue, as a consequence of which public spending would be halved. I hope that it is unnecessary to point out, but I shall anyway, that the people of Wales should ignore these scare tactics.
Mr Jones
I shall not, as I have very little time left. I am sure my hon. Friend understands.
Fiscal devolution will work only where there is consensus on the powers to be devolved and in circumstances where the transfer of powers does not put unsustainable burdens on either the devolved Administration or the UK as a whole.
The shadow Secretary of State and other hon. Members mentioned Holtham and inquired why it was not being brought within the remit of the Silk commission. Separate bilateral discussions continue between the Government and the Welsh Government on all the Holtham commission’s proposals, including the idea of a funding floor and its wider proposals for reforms—an approach supported by the Welsh Government. The Government and the Welsh Government have started discussions, which will include work to gain a shared understanding of trends in Welsh spending, of previous studies on Welsh needs and of the operation of existing borrowing powers. Once consideration of spending trends and previous needs studies has been completed, and subject to Government and Welsh Government Ministers agreeing that a problem exists, the next step will be to look at options for reform. I put that on the record because of the concerns that right hon. and hon. Members expressed.
I believe that we must rely on the good sense of the commission, which will seek to find consensus—I make no apology for repeating the word because it is crucial to the commission’s work—on the extent to which the Welsh Assembly and Government should become more financially accountable.
I found the shadow Secretary of State’s negativity and tribalism most disappointing, and it was not typical of the debate. He appeared to have little or no faith in the capacity of the people of Wales to run to any extent their own financial affairs and, perhaps more importantly, to decide whether at an election a politician is making an unsustainable promise, which of course is crucial to what it falls to us to consider.
I found the contribution of my hon. Friend the Member for Monmouth (David T. C. Davies) disappointingly and uncharacteristically cynical. [Hon. Members: “Oh!”] I have to say, I found it quite hurtful. He said, almost in terms, that the conclusions of the commission were a fait accompli that would lead inevitably to more powers for the Assembly, but the commission has been asked to consider the boundaries of the devolution settlement and modifications that could work well for the benefit of Wales within the United Kingdom.
I am sorry that the right hon. Member for Delyn (Mr Hanson) is not here, but he made the important point that significant cross-border issues fall to be considered, and it is well within the commission’s remit to decide that in certain cases powers should be repatriated from the Assembly. That is what the Calman commission found in its consideration of the Scottish devolution settlement, and it is quite open to the Silk commission, which has a wide-ranging remit, to do so, too, so I hope that that offers some reassurance to my hon. Friend—who looks very reassured, I am bound to say.
The right hon. Member for Torfaen (Paul Murphy) praised the excellence of the commission members, and I feel it appropriate to echo that praise: we have a very well constituted commission. He raised the spectre of a Trojan horse, however, and doubted whether there was any real consensus on the commission, so I think it fair to point out once again that all the party leaders in the Assembly, including the Labour First Minister, co-operated in agreeing the commission’s terms of reference, and each party has a political appointee on it. I hope that gives the right hon. Gentleman some reassurance that it is not by any means an evil Tory Trojan horse; it is a genuine attempt to see whether it is possible to arrive at a settlement that will benefit the people of Wales in the long run.
The right hon. Gentleman also raised the issue of whether there will be a referendum on additional tax-raising powers, but that very much depends on what the Silk commission itself recommends. I for one find it hard to see how, for example, if there were recommendations on any significant changes to income tax, it would be possible to go forward without consulting the people of Wales as to whether that was what they wanted; after all, that is what happened in Scotland, and I have no doubt that it should happen in Wales.
The hon. Member for Brecon and Radnorshire (Roger Williams) took considerable credit on behalf of our Liberal coalition partners for the establishment of the commission, but I have to point out that it was a joint coalition commitment and one to which the Conservative party is very much wedded. He, too, praised the excellence of the commission members, and he paid tribute to Nick Bourne, the Conservative nominee. I can only echo the hon. Gentleman’s view that Professor Bourne will be an excellent member of the commission.
The hon. Member for Caerphilly (Mr David) did give a welcome, which I believe was genuine, to the commission, and I was very pleased to hear it, but he referred to the terms of reference and queried the reference to the United Kingdom’s wider fiscal objectives, pointing out that we live in a time of stringency that has resulted in spending reductions. Well, of course, it has, and I will not intrude into his private grief by pointing out the reason why we have to cut our public spending, but nevertheless it is quite right that whatever the commission decides should operate within the wider fiscal objectives of the United Kingdom as a whole.
There were excellent contributions also from my hon. Friend the Member for Aberconwy (Guto Bebb), the hon. Member for Arfon, my hon. Friend the Member for Vale of Glamorgan (Alun Cairns), the hon. Member for Pontypridd (Owen Smith) and my hon. Friend the Member for Epping Forest (Mrs Laing), who came up with a memorable toothpaste tube metaphor, which I shall use regularly when talking about the effect of devolution on the United Kingdom. There was also a supportive contribution from the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards).
This has, as I say, been—