Wales Bill
Baroness Morgan of Ely Excerpts(10 years ago)
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Lord Howarth of Newport
The Electoral Commission has certain duties that are defined under statute and it offers authoritative advice. However, ultimately, these matters remain to be determined by the elective bodies in question, and that is how it should be.
I want to say a word about Amendment 5, proposed by the noble Lord, Lord Elis-Thomas, which seems to ask no more than that the National Assembly of Wales should take responsibility for its own standing orders. How could we possibly deny it that?
Baroness Morgan of Ely (Lab)
My Lords, I add my appreciation of the fact that we have seen some significant movement during this debate, and I hope that we can continue in that vein for the rest of the day. I want to talk specifically about the agreement or necessity for the Assembly to agree to electoral arrangements. That is very much where the Labour amendment comes from. We have a proposition in this Bill, and we think it would be incorrect for the Assembly not to have a say.
In Committee, the Minister underlined the fact that the majority of the electoral proposals contained in this Bill had been discussed and agreed by the Welsh Government. That is important; there is an important principle here that should be respected. But the principle of devolution also means that it should be a formal process; the Assembly needs to agree to these measures formally and legally rather than have them handed down, even if it is through an agreement that is not as formal as we would like. It is important for us to move to a more legislative approach, and that is what we seek to do with our amendment.
It is also important to note that the Scottish Parliament has the power to make arrangements about Scottish parliamentary elections. That is a divided power between Scottish Ministers and the Secretary of State. So we are simply asking for a degree of consistency. This is a discussion that will go further when we come to Silk 2 and other arrangements. In the context of what we are talking about here the electoral arrangements being proposed should formally and legally be approved by the Assembly.
The Minister spoke in Committee about the danger of a piecemeal approach to devolution and said specifically in relation to elections that there was a need for a “comprehensive approach” across the UK for powers and conduct of elections. That is precisely what we are asking for here—a similar system to that which already exists in Scotland. We do not quite understand why there is a reluctance on this. Could the Minister specify whether there is a principled objection to this or whether this is a question of timing?
Baroness Randerson
My Lords, I fear that I might be about to disappoint one or two noble Lords by not being able to make the leap in one bound to the position that they would like us to be in—but I am pointing roughly in the right direction.
Amendment 4 would prevent electoral provisions in this Bill being implemented until they were agreed by the Assembly, and Amendment 5 would devolve to the Assembly powers over its constitution, structure, membership and elections. As the noble Baroness has just said, the electoral provisions in the Bill arise from consultation undertaken by the Government on the Green Paper that they published in May 2012, and it is fair to say that a lot of devolution debate has flowed under the bridge in the past couple of years. That consultation sought views on, among other things, permanently extending the term of the Assembly to five years; preventing Assembly Members from sitting simultaneously as MPs; and overturning the ban on dual candidacy. In response to that consultation, all parties in the Assembly, including the Welsh Government, supported the permanent move to five-year fixed terms. There was also general agreement that AMs should not be able to sit simultaneously as MPs. The one area of disagreement was on the area of dual candidacy, to which we will undoubtedly return later this afternoon.
There is widespread support in the Assembly for the majority of the electoral provisions in this Bill. It would be wrong to delay the commencement of these provisions as Amendment 4 seeks to do purely because of the desire in the long term apparently to hand over a power.
Amendment 5 would put electoral arrangements among other things more generally in the hands of the Assembly by devolving competence over these issues to the Assembly itself. I am more sympathetic to the intention underlying that amendment. It is a characteristic of most mature legislatures, as the noble Lord said, that their composition and electoral arrangements and the conduct of their Members are issues that are decided on and legislated on by the legislature itself. The Presiding Officer of the Assembly has made similar arguments on a number of occasions, and the Silk commission made a number of recommendations about the Assembly and the statutory restrictions that currently apply to it.
The constitutional debate in the UK at the moment presents an historic opportunity to achieve a clear, stable and lasting devolution settlement for Wales by moving forward together on the basis of consensus. The proposals in Amendment 5 should therefore be considered as part of the cross-party process that I have already mentioned. One or two noble Lords anticipated that point. I ask noble Lords to forgive me for saying once again that this Bill is not the appropriate vehicle for taking them forward. They can be taken forward at this very time in the cross-party discussions that will take place over the next few months and should reach a consensus and agreement, because it is obvious that there is a lot of cross-party agreement that the Assembly should ultimately be responsible for the conduct of its own internal affairs and for issues such as elections.
Lord Howarth of Newport (Lab)
My Lords, we should be grateful to the noble Lord, Lord Norton of Louth, for inviting us to reflect on the principle involved here. When he comes to respond to the debate, perhaps he would give us the benefit of his thoughts on how his principle would apply if, as has been proposed, there should be a senate of the nations and regions of the United Kingdom. Admittedly, I understand that the proposition is that members of the senate should be indirectly elected: they should be sent from the Assemblies and Parliaments of the nations and regions of the United Kingdom. However, I should be grateful for the noble Lord’s guidance as to what principle ought to apply there: whether he considers that a dual mandate in those circumstances should be permitted by law, discouraged or something that the rules of the political parties should embrace—or would he advise a degree of caution in the matter?
Baroness Morgan of Ely
Briefly, it is a good idea in principle for there to be a cross-fertilisation of people from Westminster to the Assembly. That principle was particularly important when the Assembly was set up. However, there is a recognition that there is a time commitment to both the institutions. We now have a situation where the people in the Assembly already do not have the time. We will be talking later about possibly needing more Assembly Members. We do not have the people to do the job at the moment. My point back to the noble Lord is that, although I understand that there should be a principle that the electors can choose who they want, there are other principles that need to be considered. There are the practicalities of how that would work but also the needs of the institutions themselves. Those points should also be taken into account.
“(10) In the event that the power to add new devolved taxes under section 116C of GOWA 2006, or the power to add new devolved taxes under section 80B of the Scotland Act 1998, is used, the Chancellor of the Exchequer must undertake a review of the benefits of symmetry in the devolution of taxes between Wales and Scotland.”
Baroness Morgan of Ely
My Lords, it is getting late, but I want to move this amendment, in which we seek to future-proof the legislation before us. It is clear that constitutional reform north of the border will move forward apace now that commitments have been made in the referendum—and, of course, these commitments must be respected. However, we need to understand that reforms of Scotland are likely to have an impact on Wales. In this amendment, we are asking the Government to undertake a commitment promising that if new taxes are introduced in Scotland we will need a review of the impacts on Wales and to probe whether there will be any benefits from introducing such measures in Wales.
I will give noble Lords the example of corporation tax, to which I am sure the noble Lord, Lord Wigley, will refer. If corporation tax were to be introduced in Scotland, there would undoubtedly be an impact on Wales. Let me be clear—the Labour Party does not want to see devolution of corporation tax to Scotland. It is hard enough to get large corporations to pay the tax that is owed already and the last thing that we want to see is a race to the bottom in terms of taxation across the UK with the consequent knock-on effect on the limited pot available for public expenditure. But the reality is that Labour is not currently in the driving seat in Scotland, and we are not sure what is going to come out of the Smith commission, so if corporation tax is introduced in Scotland and if it were to undercut corporation tax in Wales, or if we were to see a similar kind of thing being introduced on air passenger duty in Scotland, and being introduced and then reduced in Wales, it would be more difficult to attract inward investment into Wales.
We are asking for a degree of flexibility to be able to respond to whatever is introduced in Scotland. If we do not write that into the Bill, we could be waiting for a wholesale constitutional reform debate to be settled but, in the intervening period, Scotland may have started off that process of undercutting us on corporation tax, for example. Scotland may have whipped in and claimed advantage over other parts of the UK, and I do not think that we should allow that to happen.
We do not know where we are heading in terms of direction of travel on devolution. We do not know what the timetable is for constitutional reform, and we need this amendment as a belt and braces approach to protect Wales from the possible introduction of taxes that could be damaging. If the Minister is not going to accept this amendment, I would like to know how she proposes to protect Wales if the situation were to arise.
Lord Wigley
My Lords, I have listened to the noble Baroness, Lady Morgan of Ely, with interest. There are certainly arguments in support of symmetry in constitutional terms; they usually lead to various forms of federalism. If the Labour Party is indeed moving towards a federal approach, that is certainly an important development.
I wish to address Amendment 20 in my name, which would provide that, if corporation tax were devolved to Scotland it should certainly be devolved to Wales or be available. Noble Lords may recall that I tabled an amendment in Committee proposing that if corporation tax were devolved to either Scotland or Northern Ireland, it should also be devolved to Wales. I based that on the fact that all four parties in the Assembly had agreed that this was needed, and that the Silk commission said that corporation tax should be devolved to Wales if it was devolved to Northern Ireland. The response that I elicited from the Minister, Lord Newby, on that occasion, was entirely centred on the comparison with Northern Ireland, not with Scotland. He based his argument on two factors: first, that Northern Ireland has to compete with the lower corporation tax in the Irish Republic. Wales also has to compete with Ireland for footloose inward investment projects, tourism businesses that cross the sea, and in the agricultural food sector, for example, in cheese manufacture. We share a maritime border with Ireland so I refute his argument on that count.
Secondly, the Minister argued on the basis that the tax devolution to Northern Ireland is in order to help it to rebalance its economy, with the implication that Wales does not need to rebalance its economy. That is absolute poppycock. Wales has the lowest GVA per head of any nation or region in the UK, following the rundown of coal, steel and slate. We desperately need to rebalance our economy. I am seriously concerned that a Treasury Minister, for whom I have very great respect, should have been advised by Treasury officials that Wales does not need economic rebalancing.
The Government do not recognise Wales’s needs vis-à-vis Northern Ireland. Be that as it may, the Minister did not try to defend not devolving corporation tax to Wales if it was, indeed, devolved to Scotland. I understand that this has been raised in the context of the Smith commission that corporation tax should be devolved to Scotland. Certainly, in the pre-referendum pledge the impression was given that the devo-max model being touted would include fiscal autonomy, and that certainly includes corporation tax.
In tabling the amendment I am seeking an assurance that if Scotland gets control over corporation tax the question should be firmly on the agenda of similar provision for Wales. I hope that on this occasion I get a more conciliatory response from the Minister, not just for me but for all four parties of the National Assembly that seek such powers.
Baroness Morgan of Ely
I thank the noble Baroness but we must consider and understand that whatever we would like for Wales, it may be influenced by what is happening elsewhere. What the amendment was asking for was simply a report to be written on the benefits of symmetry; we were not necessarily asking for it to happen. We were saying, “Please look at it; would it be an advantage to us?”. I am therefore disappointed that the noble Baroness cannot accept that position but I beg leave to withdraw the amendment.
“Review of Welsh funding
Sections 8 and 9 shall not come into force until a Welsh Government Minister has laid a report before the National Assembly for Wales containing a statement to the effect that the Welsh Government, with regard to the Statement of Funding policy, is content with the fairness of the arrangements for allocating funding from the UK Government to Wales.”
Baroness Morgan of Ely
My Lords, I turn now to the issue of fair funding for Wales. The Labour Party is keen for this Bill to pass because, for the first time, the Welsh Government will be allowed to borrow money. That is essential to help kick-start the economy, following years of government cuts, which have impacted in particular on the infrastructure budget—essential for investment and driving the economy of Wales.
We agree that in order to help leverage this funding, Wales should have landfill tax and stamp duty tax devolved to it. As we suggested in Committee, the Labour Party does not object in principle to income tax devolution to Wales but we have a key concern. Before embarking down this route, which must have the support of the people of Wales—demonstrated in a referendum—we need to be sure that Wales will not be left worse off than it is now.
We have real concerns that the funding issue in Wales has still not been comprehensively addressed. We now know that the Barnett formula will remain in place, but there is widespread acknowledgement that it has done no favours to Wales. It does not reflect the needs of a nation that has an older, sicker population and a more rural make-up, thereby adding to the costs of providing essential services. We accept that negotiations on this issue have been taking place between the UK Government and the Welsh Government and that there is recognition that a floor should be put in place to ensure that Wales does not lose out. That process was started through a statement in 2012, which acknowledged the problem, but we are looking for a more definitive agreement.
The four-party, cross-party agreement that came from the Assembly in the past month asked for,
“an updated assessment of the current level and likely future direction of Welsh relative funding”.
The Assembly asked for those talks to be completed by January 2015, and this seems to be realistic in terms of a timetable, as the Secretary of State for Wales suggested. He wants a devolution settlement by St David’s Day, 1 March. We are therefore happy that we know that something will happen, at least by 1 March, in terms of reserved powers. We are looking ideally for another little present for us for St David’s Day.
The Minister suggested in a recent answer to a question on the Barnett formula in your Lordships’ House that, in terms of funding, Wales now receives 114% of the UK average. This is welcome information but it would be useful for us to have sight of this evidence. Would the noble Baroness or the noble Lord be willing to share the data that demonstrates that 114% has been reached? It is worth noting that the figure quoted by the Minister was at the very bottom of the range that Gerry Holtham, in his report, indicated was an acceptable and fair level of funding, which ran from 114% to 117%.
There were a few factors that determined the lower levels of funding that arose as a result of the funding formula. The 114% could be considered fair only if we did not undertake to include Welsh-language education provision in Wales, for example. They do not do that in England, so it is not included in the Welsh figures. Also, Wales has already made an upwards adjustment on council tax receipts. If England applied the same formula, Wales would be eligible for more money in the block grant. Those two examples alone mean that fair funding should probably be more like 116%, rather than 114%.
We also know that Wales will lose out once public expenditure starts to rise again, which is why we need this sorted once and for all with a long-term commitment. If we can secure a commitment to the floor being in place—even if that does not happen in practice until Wales holds a referendum on income tax powers, alongside the outcome of the continuing discussions on the off-set required in Barnett—I believe we will then be well on our way to securing a decent and fair funding outcome. However, we are not there yet, which is why, central to the introduction of income tax powers for Wales, we need to be assured that the Welsh Government are happy with the outcomes of those negotiations. That is why we have tabled the amendment.
Lord Howarth of Newport
My Lords, I support the amendment that my noble friend has just moved. It is as important as any other that we have debated today. I cannot see a satisfactory future for devolution in Wales until the Barnett nettle has been grasped. It is scandalous that no Government have dealt with this problem since the mid-1970s when the formula was introduced. Cumulatively, since devolution was introduced, Wales has lost out on some £5 billion of funding that it ought to have had, had there been a fair funding formula based on needs rather than on population.
It is true that the gap between what Wales ought to receive and what it does receive has narrowed somewhat in recent years, but we have to anticipate that, as economic growth continues to recover, so the gap in funding and the unfairness of funding will be exacerbated again. It is therefore imperative that there is no further procrastination on this and that the Government agree, with real urgency, to act to secure a just settlement for Wales. The Government were quick to respond to political pressures in Scotland. Political pressures in Wales have been expressed in gentler terms so far, but there will be a continuing sense of injustice that will undermine all the other efforts that we make to establish harmonious and satisfactory political arrangements on devolution for Wales. There are, of course, wider issues affecting the relationships between the nations and regions of the United Kingdom as a whole. I look forward to the Minister giving us a very positive response to the amendment.
Baroness Randerson
My Lords, I always enjoy the conversion of the Labour Party to the idea that the Barnett formula is unfair. The noble Lord, Lord Howarth, made a very important point, which is that it is scandalous that this formula has lasted for so long without anyone inquiring into it. I can assure noble Lords that the Government are aware of the issues and have taken measures to ensure that they are addressed.
This amendment would make the devolution of an element of income tax conditional on changes in funding arrangements. Specifically, the First Minister has raised this issue on numerous occasions, saying that he would not be prepared to recommend devolution of income tax unless fair funding were obtained. The amendment suggests that the Welsh Government have to confirm that they are content with the way in which funds are allocated to Wales from the UK Government before the element of income tax can be devolved.
This Government have already recognised that there has been convergence between the levels of funding in England and Wales since devolution. We took steps in the matter just two years after taking office. In October 2012, we set up a joint process with the Welsh Government to review the levels of funding in Wales and England in advance of each spending review. If convergence is forecast to occur over the spending review period, there will be a joint discussion of options to address the issue in a fair and affordable manner. That system worked well in advance of the 2013 spending round and confirmed that spending is not forecast to converge during the period up to 2015-16. It also established that relative funding levels in Wales were within the range that the Welsh Government’s own Holtham commission regarded as fair. In that context, the noble Baroness, Lady Morgan, quoted the 114% figure that my noble friend Lord Newby referred to last week. I am happy to write to her, and to set out further detail on that figure.
In relation to ongoing discussions about the funding situation, following the first meeting of the Joint Exchequer Committee between the UK and the Welsh Governments last month, we have now further committed to revisit jointly the review process in the light of the powers in the Bill. In other words, we have agreed to find a way of facilitating fair funding. The Government therefore believe that there is a sound basis for an early referendum to be called and I urge the Welsh Government and the Assembly to do so as quickly as possible.
I hope that I have assured noble Lords that the Government are aware of the issues on funding and are addressing them in discussions with the Welsh Government, who are fully conversant with our plans. I urge the noble Baroness to withdraw her amendment.
Baroness Morgan of Ely
My Lords, we acknowledge that the Government have taken certain steps to improve the scandal of Barnett in relation to Wales and we acknowledge that discussions are ongoing. We want the Assembly to be happy and comfortable with that funding process and to accept that it is a fair system, so I am a little disappointed that it should be so difficult to accept this amendment because that is what is being worked towards. It is simply saying that, before these things kick in, let us make sure that everybody is happy. I beg leave to withdraw the amendment.
Wales Bill
Baroness Morgan of Ely Excerpts(10 years ago)
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Baroness Morgan of Ely (Lab)
My Lords, it is wonderful to listen to noble Lords who worked so hard to establish the Welsh Assembly and have the battle scars showing the history of all that went on. The establishment of the Assembly was a gift to my generation and the generation that follows it. Even more importantly, people support it and, indeed, are asking for more powers for the Welsh Assembly. However, it is worth noting that the appetite for independence in Wales has dropped to an all-time low of 4%.
I have a degree of sympathy with the position adopted by the noble Lord, Lord Deben, as this hotchpotch of constitutional efforts to put things together lacks any consistency or coherence. That is the way we have traditionally done it and that is why the Labour Party supports the establishment of a constitutional convention. However, if you follow the logic, you would have to throw out the whole Bill and I do not think that we would like to see that happen. There is an appetite for the Bill to go through. We want to see some important points in this legislation being adopted, particularly the ability for the Welsh Assembly to have borrowing powers. Having said that, it is also important to draw attention to the fact that the constitutional model on which the Welsh Assembly is established has passed its sell-by date. This amendment seeks a massive simplification and clarification of that system of governance over the current so-called conferred powers model.
At present, it is not at all clear what is devolved to Wales. As the noble Lord, Lord Elystan-Morgan, pointed out, if you want to be absolutely sure about that, you have to consult countless Acts and be an expert on constitutional law. That does not help transparency or accountability, both of which are important when there is a clear problem about the way in which people relate to politics. At the very least they need to know who is responsible for what. The introduction of a reserved powers model would help that.
On two occasions, the Welsh Government have been challenged in the courts in relation to their power in certain policy areas. On those two occasions, the UK Government lost the case against the Welsh Government, most recently in relation to the retention of the Agricultural Wages Board in Wales. Thankfully, even the Government have now seen sense and recognise the need to change to a reserved powers model. In Committee, the Minister suggested that a lot of proactive work is already being done on how to move towards a new reserved powers model. We look forward to hearing more detail of how the Government intend to do that. However, the Minister also suggested that pushing for this now would prolong the process and cause serious problems for the Bill in the other place. I do not concur with that assessment because we know that there is a cross-party consensus for this position. We know that much of the work has already been done, as was indicated by the noble and learned Lord, Lord Morris, so we do not understand why the Bill cannot refer to the reserved model and accept in principle that which we all agree with. It makes sense to be given clarification on this prior to the general election and the Assembly election. We understand that there may be a problem with the timing but we are looking for clarification. It makes sense to lay the report before the end of the six-month period; you do not have to take six months in its entirety. There is no reason why we cannot get on with it before then.
The Parliamentary Under-Secretary of State, Wales Office (Baroness Randerson) (LD)
My Lords, there has been a strong sense of history here today and I would say that this Bill adds its little bit to that history.
Amendment 1, in the name of the noble Lord, Lord Elystan-Morgan, would require the Secretary of State to lay a report before both Houses six months after this Bill has received Royal Assent, setting out a timetable of the legislative requirements for a move to a reserved powers model for the National Assembly. As many noble Lords have said, Amendment 1 reflects the general consensus that a move to a reserved powers model for Wales is desirable. The noble Lord, Lord Elystan-Morgan, explained the disadvantages of the conferred powers model and the noble Lord, Lord Elis-Thomas, referred to working with that model. As a Minister in the Wales Office working with that model on a daily basis, I am well aware of the issues. Several noble Lords have provided us with a vivid analysis of the weaknesses of the current model. The noble and learned Lord, Lord Morris, said of the 1970s model that the Government proposed what they thought they could get away with. One may possibly make the same judgment of the late 1990s model, which is the one that was used to establish the Assembly. It is reflected, of course, in the conferred powers model.
A change to a reserved powers model would provide much needed clarity in the devolution settlement—clarity which would make further referrals to the Supreme Court less likely. The Government fully agree with the underlying intention of the noble Lord’s amendment, if not with its detail. Rather than waiting for Royal Assent of this Bill, the Government intend to take forward work over the next few months to produce a reserved powers framework for Wales. Through cross-party discussions and discussions with the Welsh Government, my right honourable friend the Secretary of State and I intend to produce that reserved powers framework and a set of commitments to further devolution agreed by all the parties by St David’s Day 2015. This will be a comprehensive look at the whole picture. Several noble Lords have discussed the need for a constitutional convention. I am sure noble Lords will recognise that this is not something for today. However, in respect of Wales, the Secretary of State—
Wales Bill
Baroness Morgan of Ely Excerpts(10 years, 1 month ago)
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Baroness Morgan of Ely (Lab)
I will speak to Amendments 53 to 55, which are about increasing the amount that the Welsh Government should be allowed to borrow. One of the key reasons why the Assembly is so enthused about this Bill is that, for the first time, the Welsh Government will be able to access those borrowing powers. This is particularly important at the present time as £1.7 billion has been cut from the Welsh budget and the capital budget has been slashed by 33%. If the Welsh economy is to grow, it needs to invest in essential infrastructure. That ability to invest has been choked off by government cuts. It seems unfair that the Government connected the amount that the Welsh Government are able to borrow to the taxation revenue stream of the Welsh Government. Revenue streams in relation to stamp duty and landfill—two taxes that are, it is proposed, to be devolved initially—have proved to be extremely volatile in the past.
How was it determined how much the Welsh Government are allowed to borrow? It strikes me that the approach to Wales is very different from the approach adopted for the borrowing powers in Scotland, where a connection was not drawn to the funding stream but to the capital budget. The Scotland Act allows the Government to borrow 10% of the Scottish capital budget in any year to fund additional capital projects. That would be around £230 million in 2014, up to £2.2 billion in total. Scotland seems able to borrow proportionately considerably more, despite the fact that it has considerable PFI commitments—unlike the Welsh Government. This is not the case for Northern Ireland, where no revenue stream exists apart from the block grant. Yet, it is allowed to borrow.
This Bill allows the Welsh Government to borrow up to £125 million per year, up to a limit of £500 million. However, if the same rationale were used in Wales as in Scotland, so that borrowing was based on capital budget not tax revenue stream, Wales would be allowed to borrow up to £1.3 billion—or £130 million per year—reflecting that £1.3 billion capital budget in Wales. Ideally, we would like the Government to allow flexibility so that the Welsh Government can increase their borrowing powers at a time when the economy looks like it is much more on its feet. Could the Minister outline whether there is any mechanism through which that would be possible?
Lord Newby (LD)
My Lords, in this group of amendments on borrowing powers, I begin with Amendment 52, which would require the Secretary of State to lay an independent report on Welsh bonds before both Houses. As the Government have previously made clear, the subject of bond issuance by Welsh Ministers is something that the UK Government are willing to consider. Moreover, initial discussions have now taken place between the two Governments on the form that those considerations should take and we are keen to progress this work quickly and bring it to a conclusion.
The Government have previously committed to consider Scottish bonds and have agreed to make this source of borrowing available to the Scottish Government. Our record therefore demonstrates that we are able to consider such matters without legislation, and I therefore ask the noble Lord to withdraw his amendment on that basis.
I turn to the proposed amendments to the borrowing limits. The Government have consistently been clear that capital borrowing must be commensurate with the level of independent revenue available to support the costs of borrowing. This is an important principle that ensures borrowing remains affordable in much the same way as mortgage lending must reflect the capacity to service borrowing. It is also worth repeating that the £500 million capital borrowing limit is already substantial relative to the level of independent revenues that will be available to Welsh Ministers when stamp duty and landfill tax are devolved. In particular, the limit is far higher than it would have been had we simply applied the tax and borrowing ratios implemented by the Scotland Act. Such an approach would have given the Welsh Government capital borrowing of only £100 million rather than £500 million. Although the noble Baroness talks about the relationship between capital expenditure and borrowing powers as the consideration that she wants to underlie the amount that the Welsh Government can borrow, it has to be related to the Welsh Government’s management of their taxes; otherwise, by the same logic—perhaps she supports this—large cities and the English regions could also have large borrowing powers if they were simply related to the fact that they are already spending money on capital. The link between borrowing powers and the Assembly is secured by the fact that the Assembly has its own sources of revenue.
Baroness Morgan of Ely
Will the Minister explain how Northern Ireland is allowed to borrow when it does not have this income stream?
Lord Newby
My Lords, as we have discussed in respect of virtually every tax we have talked about today, the considerations in Northern Ireland, and the situation in Northern Ireland, are very different from those in all other parts of the United Kingdom. The noble Baroness is aware of the history of Northern Ireland and why we do things differently there. Noble Lords have made good points about read-across from Scotland to Wales, but it is a lot less easy to do the same with Northern Ireland. Very different considerations apply, and the nature of the economic challenges facing Northern Ireland is rather different.
I fully understand the desire to see as much investment as possible in Wales, but we must ensure that it is manageable for the Welsh Government. Not only must the Welsh Government repay borrowing, they must fund the associated interest payments. That is why we need to ensure appropriate independent funding streams are in place. I remind noble Lords that for every 1% that the Welsh Government have to pay in interest on their £500 million borrowing—if they reach that level—they will have to take £5 million from their overall budget. The maths is clear. It is a very significant amount that the Welsh Government will have to provide from their overall budget in any event.
We should be encouraging the Welsh Government to hold a referendum on income tax powers. If an element of income tax is devolved to Wales, that increased funding stream could allow Welsh Ministers to borrow around £1 billion. Our message to all parties in Wales is that it is time to get cracking, once we get this Bill through, and get that referendum held and the income tax powers devolved.
Finally, in order to manage forecast error, the Government have provided the Welsh Government with exactly the same £500 million of current borrowing as in the Scotland Act, despite the more limited tax powers initially being devolved to Wales. The Welsh Government’s current and capital borrowing limits are therefore relatively generous compared with Scotland, and I ask the noble Lord not to move his amendments.
Lord Howarth of Newport
My Lords, it is enough to make one weep that, in the run-up to the Scottish referendum, political leaders felt themselves driven by expediency to pledge to retain the Barnett formula. As my noble friend Lord Richard explained to the Committee, it is one of the great injustices and malfunctions of government in this country over the past 40 years and a lamentable lack of statesmanship has prevented it being reformed. There was a great opportunity in 2010. The Conservatives had nothing to lose in Scotland. With universal recognition of the need for austerity, there was a political opportunity to deal with it then. That has been made infinitely harder now by the rash and unprincipled pledges that have recently been made.
The report of the committee of my noble friend Lord Richard is unanswerable. We debated it in your Lordships’ House and there was not a scintilla of a persuasive argument to defend the status quo. Indeed, I do not recollect anybody even trying to defend it. The pledges that have been made will come back to bite their authors because I cannot foresee how we can make progress towards new constitutional arrangements in this country following the referendum in Scotland and following the pledges that have been made in respect of devolution so long as there is such a fundamental inequity in public financing. I cannot see how there can be a fair and acceptable new set of arrangements while the Barnett formula is retained.
The noble Lord, Lord Wigley, spoke extremely well and constructively with his practical suggestions as to how we might try to develop a sort of fallback position. My noble friend Lord Richard suggested that if the Scots are to retain their advantage, it may none the less be possible to find ways at least to reduce the inequity for Wales. However, it seems to me that that path also bristles with political difficulties because, if public spending is a zero-sum game, if there is to be more for Wales, then it has to come from somewhere and if the Scots are allowed to retain their present advantages, then it will come from Northern Ireland or, more likely, from England. However, there is, rather belatedly, a growing recognition in the regions of England that the Barnett formula is a lousy deal for the English. I cannot see that there is a path towards remedying at least a part of the injustice from which the people of Wales suffer if it is to be done directly at the expense of the people of England. Hasty pledges have placed us all in immense difficulty but I look forward to hearing from the Minister or the noble Lord, Lord Bourne, who may be able to pluck a solution out of the hat, although I somehow doubt it.
Baroness Morgan of Ely
Today, the First Minister called again for a new funding system that meets the public service requirements in Wales. He likened the Barnett formula to,
“fixing a hole in the roof with Blu Tack and cardboard”.
It is no secret that Wales does not do well out of the Barnett formula. However, we know, following the Scottish referendum, that that formula is not in danger of dying any time soon. Indeed, the Prime Minister made his sentiments on the issue quite clear last week, when he reiterated that he had no intention of reopening the debate on providing a fair funding mechanism for Wales. That seems very different from the position of the Secretary of State for Wales, who said yesterday that he is prepared to address the issue. It would be nice to hear which one of those statements is correct.
At present, the block grant provides 113% of the English level of spending on devolved services, while the Holtham report found that Wales’s relative needs were between 114% and 117%. The noble Lord, Lord Newby, has asked me to be more positive, so I will give it a good go. The good news is that an arrangement was put in place in October 2012 that established a process to review the relative funding of Wales to England in advance of every spending review. If it looked like convergence were happening—for example, if the level of funding between England and Wales looked like it was becoming more equal, despite Wales’s needs being greater, due to things such as ageing population and rurality—then the Government would discuss options to address the issue in a fair and affordable manner. That is the good news.
The problem is that there is no guarantee. It is purely up to the good will and subjective decision-making of the respective Ministers in Cardiff Bay and Westminster. The Labour Party has acknowledged that there is a specific funding problem in Wales and that we will address the issue when we are in office.
I am sorry, but I am afraid that I must return to my negatives. One of the problems with the income tax recommendations is that this issue is compounded by the problem of the devolution of income tax in Wales. It is clear from David Cameron’s insistence that Wales should just pick up that offer of income tax powers that he has not understood the link between underfunding in Wales and the method through which the block grant will be reduced in future, should Wales pick up the option of introducing the Welsh income tax. While it is worth re-emphasising that we agree with the principle of income tax devolution, it is also worth underlining the risks that Wales would be undertaking if we were to devolve income tax powers without changing the Barnett formula.
The idea is that, if the Government suggest that in the first year of operation 10 points of personal income tax receipts are yielded to Wales, then the equivalent amount will be deducted from the Welsh block grant. That cut is then adjusted proportionately in subsequent years. The Government have suggested that the indexed deduction method, as recommended by Gerry Holtham, is used as a method to determine what that proportional cut would be. The problem is that if the block grant fails to produce a fair level of funding relative to need at the outset, as every subsequent change will be based on that initial level of funding, any cut in grant in future, however it will be adjusted, will probably make matters worse as convergence happens.
On the one hand, we are saying that we need fiscal accountability in Wales. On the other hand, we need to ensure that before we set out on this path we start from a fair position. It is critical that a fair funding mechanism is established from the outset, otherwise that unfairness will be locked into the system for the long term.
I know that the Minister is intensely aware of this issue. She has her fingers all over it and has been discussing it for years. However, I ask her to reiterate what the Secretary of State said this week: that he is prepared to look at this issue.
Lord Howarth of Newport
If my noble friend Lord Anderson’s Amendment 57 is passed it will be a very long time before the provisions of this Bill are brought into force. I am against that delay because I want the Welsh Government and the people of Wales represented by them to have the new borrowing powers that are built into the Bill. However, if there is to be a constitutional convention, I am in favour of it taking its time. In the field of constitutional reform, more haste means less speed, as we saw rather painfully in the attempt at reform of your Lordships’ House in this Parliament.
I also think that the constitutional commission, if there is to be one, should be very much at arm’s length from the political parties and the Westminster and Whitehall establishment. It will be important that the public should not suppose that this is any kind of stitch-up or a device for the existing establishment to protect its own interests. The public would want to see that members of the commission were deeply versed in constitutional theory and constitutional law, and that while they may have close affiliations and loyalties to the different nations and regions of this country, they were prepared to take, as far as they could, an objective view of the long-term interests of the United Kingdom.
It would also be essential that they should receive submissions from the public. Those submissions would be numerous and would take a very long time to consider. I am sure that if a committee of wise people formed on these principles were to set to work, they would perform a valuable task in clarifying the issues, educating us all and pointing the way forward. They would probably succeed in coming up with a blueprint for a new federal model of the United Kingdom. However, it is one thing to come up with a blueprint; it is quite another to implement it, and then politics would re-enter. I anticipate that the processes of constitutional change would then be, as has always been the case in this country, incremental, and they would be the better for that.
I cannot support my noble friend’s amendment, but as we reflect on what we might be seeking in a constitutional commission we should disentangle it from our continuing day-to-day requirements of legislation and politics. We should get on with enacting this Bill. We should get on with implementing it and think generously, spaciously and patiently about how to develop a future framework for the government of the United Kingdom.
Baroness Morgan of Ely
My Lords, we have to understand what the Scotland referendum was really about. It was a cry from the people of Scotland who feel cut out of the political process. Of course, that has had an impact not just in Scotland because of the commitments that were made in the last days of the referendum, but it is having and will have an impact across the whole of the United Kingdom. It makes sense for us to place the discussion within a broader context.
We are not in favour of stopping this Bill in its tracks. A lot is in the Bill and there is a lot more to come with Silk 2. It is important that the Welsh devolution process does not stop because of a huge transformation in Scotland. However, it is worth saying that we have to think in a broader way about the constitutional arrangements of our country. What happens in Scotland is having an impact in Wales. Those commitments on Barnett are already having an impact in Wales and there is a problem if they continue to do so. We need to get the balance right and we need to have a broader discussion.
For two years the First Minister of Wales has been calling for a constitutional convention to be established where a discussion about the power relationship between Wales and the rest of the United Kingdom would be undertaken. Who would be on such a constitutional convention? Obviously there would have to be representatives from the devolved Administrations and local government representatives from England. But, crucially, we would also want to see representatives of civil society and the general public. The disconnection between politicians and the public absolutely has to be halted. We would need to work to a clear timetable. The last thing we want is a discussion that goes on for years and years without end. We would also need to think clearly about what the convention would do. We would have to define the core elements of a new constitution that would enshrine a programme of fundamental reform for the UK. The new settlement, while recognising the different circumstances of the four nations, must be based on common principles that reflect the multinational and multi-union character of our United Kingdom.
The referendum in Scotland was a wake-up call for all members of the political class. We must acknowledge the depth of disillusionment in this country and the distance that people feel from the political process. Through establishing a convention, we would have a one-off opportunity fundamentally to reform the system of governance of this country. A constitutional convention is needed and it is well overdue. We recognise, however, that the Wales Bill is not the ideal mechanism for introducing the idea of a constitutional convention, but it seems rather odd for us to be ploughing on with constitutional changes as if nothing has happened. As Carwyn Jones, the First Minister of Wales, has said, the current constitutional settlement is dead. We recognise the need and the demand for more devolution in Wales, but we need to set the whole within the broader UK framework. To proceed in isolation from the wider discussion would be to miss the opportunity to elaborate on a new vision and a constitution for this country, a constitution that would involve, include and invigorate the population so that people would feel as if they had ownership of their own country.
Baroness Randerson
My Lords, the noble Lord, Lord Anderson, has pointed out the flaws in the devolution settlement for Wales. I say to him that I have campaigned for devolution for virtually the whole of my adult life. I have faced downright nasty opposition at worst and a lack of enthusiasm and total incomprehension at best. Long ago, I came to the conclusion that the overwhelming majority of people simply were not interested. It is a really exciting time for me because devolution is suddenly fashionable and a lot more people understand what it is about. Noble Lords will not be surprised, therefore, that I am keen to seize the moment; I am keen to get this Bill through as a basis on which we can take the next step. The Bill is a very important step forward in devolution in its own right.
Yes, there is a great deal to be said for a constitutional convention. The noble Baroness, Lady Morgan, said that the First Minister has been calling for one for two years. My party has been calling for one for 40 years. On that basis, I would argue that one should not place too much faith in the immediate production of an outcome of the concept. I agree with the noble Lord, Lord Howarth, when he says that this is something that we need to think about widely and in the long term. The message from my noble friend Lord Thomas and the noble Lord, Lord Howarth, is that, despite the great advantages of a constitutional convention, we have to get on with it now.
To the noble Lord, Lord Anderson, I say that if I accepted his amendments, it would ensure that Parts 1 to 3 of the Wales Act could be commenced only by the Assembly on a day of its choosing, but the Assembly could not decide to commence the provisions until the recommendations of a constitutional convention had been voted on by both Houses of Parliament or until the Welsh Government had implemented the Williams report. I would say that would mean a minimum of five years. My noble friend Lord Bourne, being a member of the Williams commission, assures me that that should be implemented a lot sooner, but we all know that local government reform in Wales does not prove easy. Therefore, I am not betting my political reputation on the timescale for either of those events.
The last few months have been momentous for our United Kingdom. It is now time for us to come together and move forward, but we also accept that it is not “business as usual”. The referendum in Scotland has led to a demand for reform across the UK. We now have a chance—a great opportunity—to change the way we are governed, and change it for the better. The Government have made it clear that we want a debate on how to make the United Kingdom work for all its nations. We have introduced a new devolution committee, chaired by the Leader of the Commons, to consider how we can best do this. The Wales Office is fully represented on that committee and my right honourable friend the Secretary of State for Wales is also having meetings across the parties to pursue this agenda.
We have as a Government already committed to devolving further powers to Scotland as a result of the referendum, and we will deliver on that commitment. England, Wales and Northern Ireland are now on the agenda. This is the time to put our foot on the pedal of devolution. I regret that the noble Lord’s amendments would apply the handbrake. Wales needs the powers this Bill provides now, not in several years’ time, which would be the case if the noble Lord’s amendments were accepted.
The noble Lord’s amendments would also enable the Assembly to decide the commencement of the provisions in the Bill, subject to his other conditions being met. I regret to say that they are very imprecise conditions and it would be difficult to know when they are satisfied. We will of course—this is a commitment—work with the Welsh Government and the Assembly on the commencement and implementation of the provisions in a Wales Act.
The Bill is about creating truly accountable devolved government for Wales. It is about providing the Welsh Government with the levers to grow the economy in Wales and ensuring clarity for Welsh voters when they go to vote in 2016. All these things would be prevented if commencement of the Bill was delayed in any way, including through the amendments put forward by the noble Lord. I therefore respectfully ask him to withdraw his amendment.
Wales Bill
Baroness Morgan of Ely Excerpts(10 years, 1 month ago)
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Lord Wigley (PC)
My Lords, as well as Amendment 21, I will also speak to Amendments 22 and 23, all standing in the name of my noble friend Lord Elis-Thomas and myself. Amendments 21 and 22 are aimed at allowing the Welsh Government to introduce new tax credits as well as devolved taxes. That would mean that Wales was able to help target areas that require economic stimulation in one form or another.
Paragraph 4.6.8 of the Silk commission’s first report stated:
“In addition to the use of taxes to achieve policy outcomes in devolved areas, credits can also be applied so that activities are effectively subsidised. While existing tax credits such as the working tax credits (and in future the Universal Tax Credit) should remain UK wide, the Welsh Government should be able to introduce its own credits in relation to devolved taxes and through use of devolved grants and subsidies to promote investment and getting people into work”.
I hope that the Government will therefore either accept these amendments or bring forward their own amendments on Report to achieve that end—unless of course the Minister can persuade me that some other power exists or is in the pipeline that will achieve that.
I turn to Amendment 23. At present, any devolved tax to be implemented in Wales must be agreed by each House of Parliament as well as the National Assembly. We feel that it is wrong that a party in the Welsh Government implementing a manifesto pledge should be prevented from doing so by Governments in London. If the objective of this Government is to get the devolved Government to accept full responsibility for their actions then surely they should be given full and undivided authority in such matters. Manifestos and devolved taxes are matters for Wales, and the UK Government should not interfere in them. This amendment therefore removes the requirement for each House of Parliament to agree to the devolved tax so that it is in the hands of the National Assembly. It would mean that the people of Wales were absolutely clear as to where responsibility lies. I beg to move.
Baroness Morgan of Ely (Lab)
My Lords, the tax credits that currently exist are closely associated with welfare payments. The whole issue is integrated into the wider debate about welfare support which provides a basic living standard for people who are working and yet need state help. Introducing any amendment that would erode the provision of welfare in Wales would be a mistake—in particular, without that very comprehensive and structured debate about the implications in Wales. The Minister suggested that the noble Lord is talking about a new kind of tax credit. Could the noble Lord elaborate on what kind of thing he had in mind, beyond what currently exists?
Lord Wigley
If the noble Baroness refers to the Silk report, she will see the arguments made there. The whole point and ethos of the Silk report is to open out as much freedom as possible for the devolved authorities to develop ideas and even experiment with this area to reach the objectives that both she and I would wish they did. It is giving them more tools. I hope that those tools help them do the job.
“Review
In the event that the power to add new devolved taxes under section 116C of GOWA 2006 is exercised, the Chancellor of the Exchequer shall undertake a review of the benefits of parity in the devolution of taxes between Wales and Scotland, and shall review the existing principles of tax devolution.”
Baroness Morgan of Ely
In this amendment we are looking at future-proofing the legislation. We are very aware that there is a fast-moving feast going on in terms of constitutional changes in Scotland so we need to look at how we future-proof it. That is why we have suggested that if any new taxes are devolved to Scotland—and I must say that we probably need to tighten up the amendment’s wording—we would like an opportunity to assess whether they could be offered to Wales as well. That is the idea behind the amendment.
We are conscious that things are changing very quickly and we do not want to lock ourselves in because of the timing of this Bill. Labour is very keen to ensure through our suggestion, which we will come to later, that Wales can vary income tax rates, for example, to 15p in the pound rather than 10p, which is consistent with our position in Scotland. That is not the position of the Tory party which has suggested that it wants to see 100% of income tax being devolved to Scotland. The amendment looks at this consistency in approach and would at least give us the opportunity to think about whether we might like to pick up other opportunities that may be offered to Scotland later; we have to understand that there will be an impact on other parts of the UK if income tax rates are varied. It is correct to ensure that we take the temperature of how devolution has changed between now and the time when the powers to vary taxation at a Welsh level are taken up.
It is interesting to look at the joint agreement that has been made by the parties and the Assembly. On the proposal that if, for example, air passenger duty for long-haul flights were to be devolved to Scotland and Northern Ireland, we would want to look at that. That is the spirit of the amendment: we need to understand that if they are getting extra powers it will have an impact on us. We need to think about how we would want to respond to that.
Lord Newby
My Lords, Amendment 23A seeks to place two statutory duties on the Chancellor of the Exchequer when a new devolved tax is created in Wales. The first would be to review the benefits of symmetry in the devolution of taxes between Scotland and Wales. This would effectively require the Government to assess whether a tax being devolved to Wales should also be devolved to Scotland, although the way in which the noble Baroness moved the amendment inverted Scotland and Wales.
The second duty would be to review the principles of tax devolution. These are three: it should have cross-party support; it should be evidence-based; and any devolution of taxation should not be detrimental to the rest of the UK. These are good principles, and I am not sure that we want to have a root-and-branch discussion of them. What the noble Baroness was talking about, however, were the circumstances in which Scotland gets more powers, and the formalisation of a structure under which the Welsh Assembly not only thinks about them but has a process for discussing those matters with the UK Government.
On the symmetry of devolution settlement, until now the Government have been clear that we consider devolution decisions for each country on their own merits. The existing arrangements provide flexibility for the Government to consider Wales and Scotland either separately or at the same time. However, the Scottish referendum result puts us in a new position in discussing devolution. Nobody seriously believes that we are at the end point in terms of devolution anywhere in the United Kingdom. Over the next year or two, we are clearly going to see a debate of an intensity that we have not seen in England at all, and have not seen in Wales since the Assembly was first established. We are talking about considerable potential changes. In these circumstances, it seems that the Welsh Assembly will be involved in those discussions, not least through the Joint Exchequer Committee if it has any specific proposals. There will be also be almost ceaseless debate in any constitutional convention, if one is established, or more generally in Parliament about what the future structure should look like.
I therefore think that the kind of formal review the noble Baroness proposes will be unnecessary. There will be no lack of opportunity for these issues to be debated. The challenge to the English regions and counties and to Wales is to produce a compelling argument for the kind of change that is required, and then to seek and obtain a political consensus for it. Whoever is in government after the next election will be faced with a situation in which there is a clear appetite for devolution in various respects. That will only crystallise into action when there is real pressure and a consensus in the nations and regions of the UK as to what that future of greater devolution might involve. With that in mind, I hope that the noble Baroness will feel able to withdraw her amendment.
Baroness Morgan of Ely
I thank the noble Lord. It is important to understand that, at the moment, we do not know what that process is. My concern is that if we do not get this down somewhere, it is possible that Wales will be left out of that debate, until a mechanism is devised. Ministers have talked eloquently about the mechanism that may be put in place but, at the moment, there is no formal structure. At this point, we are trying to make sure that there is a proper mechanism in place so that there is an opportunity for us to work out whether anything that is offered in Scotland is something we would want to take up in Wales.
Lord Wigley
My Lords, I am very glad to have the opportunity to speak in this debate and to welcome the step taken by the Government in moving their ground with regard to lock-step. The noble Baroness, Lady Randerson, will well remember that I expressed some fairly strong feelings at an earlier stage with regard to lock-step. We felt that it was an inappropriate restriction and I am delighted that the Government have seen fit to move on it.
Amendment 37, standing in my name and that of my noble friend Lord Elis-Thomas, is included in this bank of amendments. We had a very useful debate on Monday in relation to constitutional principles on which there was a lot of consensus. Although the Government could not necessarily immediately accept the points that we made, they undertook to look at some of them. I hope that the same spirit will be adopted in their approach to other financial matters as has been shown with regard to the lock-step.
Amendment 37 seeks to ensure that the Assembly will be able to levy the three Welsh rates of income tax as it sees fit. The amendment is drafted to ensure that the Assembly will get full responsibility for raising and spending one of the three largest sources of government income alongside national insurance and VAT. If we give the Assembly the power to control these rates, it will enable Welsh Ministers to create additional jobs, which we hope will lead to an increase in the Welsh tax base. That would be an incentive for investment in the Welsh economy—which it certainly needs. As I say, we welcome the fact that the lock-step has been removed, which will give the Welsh Government greater freedom.
Amendment 38 stands in the name of the noble Baroness, Lady Morgan, who will no doubt speak on it in a moment. I will listen carefully to the arguments that she will put forward but I have some sympathy with what appears to be the intention of that amendment. However, I will listen carefully to what she has to say, and will listen to the Minister’s response to Amendment 37 to hear how the Government intend to build on their intention to give maximum flexibility to the Welsh Government.
Baroness Morgan of Ely
My Lords, the Labour Party understands the principle of the need for accountability and the need for the Welsh Assembly politicians to have responsibility not just for spending money but also for raising it. Devolving an element of income tax will undoubtedly increase the financial accountability of the Assembly. It will enable the Assembly to fund more of the spending for which it is responsible and will allow the Welsh Government to vary the levels of tax and spending in Wales and, crucially, it will allow Wales to borrow against tax.
We focus in these amendments on issues of income tax. However, it is worth pointing out that this is just one tax. In context, in 2013 income tax was 26% of the total tax take in the United Kingdom. It is significant, visible and understandable, but it is worth remembering that it is only one tax.
Devolving income tax powers to Wales has never been a priority for the Labour Party and the Welsh Government. However, it is important in terms of positioning the Assembly in the right place in the long term. We should remember that it was the Labour Party which devolved income tax powers to Scotland, but only after asking the Scottish people in a referendum whether they wanted that power. We would have to undertake a similar referendum if Wales were to follow suit. I will elaborate on this further when we discuss that group of amendments.
We will not always be in this situation. We are future-proofing here. I am confident that one day the Welsh economy will grow. There are clear signs that the Welsh Government’s efforts in this area are already bearing fruit. However, we must be aware that the whole principle behind the concept of the UK as a political entity is that we are supported by a social system that is available to all. We must be careful not to erode that basic philosophy and so provide fuel to the nationalist fire. There is a £16 billion annual gap between what Wales raises and what it spends. We must not lose focus on this issue. This is the economic foundation stone of the UK.
What drives us in the Labour Party is not some ideological zeal to create an independent utopia in Wales, but a practical, hard-headed approach to what is best, in particular for those who are struggling on low incomes, are desperate to make ends meet and are often dependent on the state to keep them afloat. We must remember that Wales has a weaker tax base than the UK as a whole. We must be careful when devolving tax powers that we do not lose out. HMRC estimated that in 2010 there were 89,000 higher rate taxpayers in Wales. They represented 7% of all taxpayers and were responsible for 33% of all the income tax revenues raised in Wales. There were only 4,000 additional rate taxpayers paying 45p in Wales. I could practically name them—they were mostly Tories, I will let you know. On the whole, we must understand that our tax base is very weak and we must be careful when we go down this route.
It is also worth noting that a very small proportion of revenues are raised by local taxation and the consequent tendency of Whitehall to wish to dictate how funds from the centre are used has seriously eroded local democracy and accountability. We must be very cautious and note that local revenue-raising should not go too far, since that tends to reinforce the regional disparities of income and wealth.
Tax differentiation can also lead to tax competition. In principle, this is not something that we encourage. We must be clear that we do not want to embark on a race to the bottom in relation to taxation. We are fearful that there is a hidden agenda on the part of the Conservative Party, which is for ever anxious to reduce the role of the state. The Conservative Party is committed to cutting taxes for the wealthiest people. Let us be clear: tax competition will lead to less money in the state pot, which means less money for our schools and hospitals.
The Conservative Leader of the Assembly, Andrew RT Davies, has said that he would like to make Wales into a “low tax economy”. He has pronounced proudly that he wants to cut just the top rate of tax. We must be aware that every time there is a tax cut, it is accompanied by a cut in services. It seems odd to consider this, at this moment in particular, in isolation from the discussions in the rest of the United Kingdom, and we need to consider what is happening in relation to the Smith commission in Scotland. That is why Labour would like to see this discussion occurring in the context of a broader constitutional convention involving the public and representatives of civil society. We must acknowledge that there is a disconnect between politicians and the public, and it is critical that we do not have a conversation about how money is collected and distributed from the distance of an ivory tower. However, the genie is out of the bottle and we need to respond.
Let us be clear that devolving income tax powers will not be a panacea for the economy of Wales. The chances are that income tax variations will not be significant. The previous Secretary of State suggested that he would like to see a 1p cut in income tax rates across the board. Research has suggested that that would cost £200 million. That would mean £200 million in terms of cuts to services—the equivalent of 7,700 nurses losing their jobs—in the hope that the economy would grow. That could happen but in the context of a Welsh Government budget of £15 billion it is hardly going to make a massive impact.
Of course, differential taxation of income would involve the need for a separate Welsh revenue collection mechanism that must be neither inefficient nor costly. The Government do not seem to be clear about the costs involved in establishing this mechanism. In Scotland, it is estimated that differential taxation would cost between £40 million and £42 million to set up. Can the Minister give some indication of how much it would cost to set up in Wales?
In anticipation of the Bill receiving Royal Assent, the Welsh Government have already set out in a White Paper how that mechanism would work. The Welsh Government and the National Assembly will have the ability to develop certain taxes shaped to the needs, circumstances and priorities of Wales. This is the first Welsh tax legislation in modern times. It is both historic and significant for Wales but we need to consider border issues, and I therefore turn to our Amendment 36.
We need to be aware of the complexity of border issues in relation to Wales, compared to Scotland. The Scotland-England border is not nearly as densely populated as the Wales-England border. Only 3.7% of the population of Scotland and 0.5% of the population of England live within 25 miles of the English-Scottish border. In Wales, the situation is totally different, with 48% of the population of Wales and 10% of the population of England living within 25 miles of the Wales-England border. There are more than 130,000 daily commuters. The fact is that introducing a variation in income tax could give rise to the possibility of higher taxpayers moving across the border in one direction or another. My understanding is that no Treasury impact assessment has been undertaken on this matter, although I understand that the previous Secretary of State said that a consultation has happened. Can the Minister confirm whether that is the case and will she commit to a Treasury impact assessment on that border issue?
I turn now to the lock-step issue. The Government have put down an amendment to remove the lock-step, thereby allowing the Welsh Government to vary increases or decreases to individual tax bands independently of one another. Again we would argue that this discussion ideally needs to be set in the context of a UK debate over the organisation of tax across the whole UK. To deal with this in isolation is inviting trouble, and that is why we need urgently to establish the constitutional convention. The public should have a greater say on where power should lie across the UK, including on the nature of tax devolution. Further devolution should not be piecemeal. The Minister referred to that in her comments on Monday. The notion of breaking lock-step is something that needs to be discussed in that broader context
Lord Elystan-Morgan (CB)
I endorse with very great enthusiasm everything that has been said by my noble friends Lords Wigley and Lord Elis-Thomas, particularly on the question of unity. We as a nation have been blighted by disunity for so long. That refrain was taken up over the years by my old and very dear friend Lord Elwyn-Jones: our predilection to fissiparous division. He had a marvellous story, and I hope the House will indulge me for a moment. A shipwrecked sailor was cast on a desert island, the only survivor of the tragedy. He was there for years, but ultimately a ship drew into the bay. A boat came ashore, and there was great jollification all round. Before leaving the island, the sailor showed the boat’s crew where he had been living: his living quarters, where he had kept the animals and a cave with a cross over it. He said, “That is the church in which I worshipped on Sundays”. Somebody among the boat’s crew said, “But there’s another cave with a cross on it”, and he said, “I wouldn’t be seen dead in that place”. That is the sort of people that we have all too often been in Wales, and unity is very greatly to be welcomed. I have already paid tribute to the noble Lord, Lord Bourne. The Silk commission tried to find a reasonable, meaningful, least common multiple. The chairman, the assessors and the four representatives of the various parties succeeded in doing that, and long may that continue.
I turn to the question now of the amendment itself. I accept the principle that it is healthy, proper and courageous for the Welsh people to take on themselves these heavy fiscal responsibilities and that the decision should essentially be theirs alone. On the other hand, I would not wish the situation to develop other than through a referendum because I think that a referendum would clarify the mind—as Dr Johnson might have said—and would allow these issues to be examined in very great detail. I was disappointed in 1997 when the Labour Government, having been elected, made it clear that they would proceed with the issue of some form of Parliament for Wales and then said at the same time that there would be a referendum. I was disappointed but I was enthralled that we managed to carry that referendum, albeit by a slim majority. It gave us a sovereignty and a moral certainty in relation to the matter and I think the same would be true in this connection.
I am sorry that I missed the beginning of this debate—I was upstairs in a sub-committee dealing with European matters and I apologise for that—but I believe I heard the Minister say, with regard to a referendum, that she wished that the matter would be dealt with fairly quickly by the Welsh Assembly. I see that she nods. This is my plea. This is a crucial matter that deals with the very essence of whether a Welsh Parliament can succeed in a credible way. Everything turns in the first place on the validity of that referendum in so far as it reflects the wishes and understanding of the Welsh people. There can be no question of meandering into the dark in this matter, marching possibly to the beat of a distant drum while looking at some faint point of light in the distance. It is the same as a jury contemplating a serious case. There has to be certitude over exactly what the issues are and what the main relevant facts are in relation to them.
Let me come to the point immediately. There are many issues but the most important one is Barnett. The Government have said in relation to Scotland, understandably and perhaps in a mode of panic, that they will not touch Barnett at all. Barnett shall be utterly inviolate. Having said that, it means that it is virtually impossible to contemplate a situation where they will be willing to discuss Barnett in the context of Wales. It is one and indivisible—the bubble is either pricked or it is not. As far as the losses under Barnett are concerned, I know that various figures are mooted. The probability is that the annual loss at this stage is of the order of £200 million to £300 million and will increase as prosperity increases. Be that as it may, I ask the Minister to give these undertakings. First, the Government should appreciate that it is the legal right of the Welsh Assembly, and no other body, to decide whether there should be a referendum and when there should be one. Secondly, they should not contemplate bringing any pressure to bear on the Welsh Assembly in that regard—it should have a free, unfettered choice. Thirdly, there should be no question of asking the Welsh people to determine this momentous matter of a referendum without the Barnett matter having being settled fully, comprehensively and once and for all.
Baroness Morgan of Ely
My Lords, the Labour Party in 1997 made a promise in that first referendum which established the Assembly. In that promise we made it clear that we would not introduce income tax variations to Wales unless and until the people of Wales gave us permission to do so. Let us not forget that we won that referendum by a hair’s breadth. It would be a massive political mistake to go against that. I honestly believe that had there been a question about tax in that referendum we would not have an Assembly today. We have to honour that promise we made to the Welsh electorate. The referendum promise to the people of Wales is one of three locks we want to be sure are in place before tax raising or cutting powers can be used in Wales. If we have learnt anything from the Scottish experience it is that the public will get involved if it is something that impacts on them directly. There is nothing that impacts more directly than income tax so they are sure to get involved in this debate. We must do them the honour of respecting their views and we will not know what those views are unless and until we hold that referendum.
Lord Anderson of Swansea
My noble friend as usual asks some very probing and cogent questions. On the face of it, these transfers of tax responsibility are relatively symbolic because, on the “bucket and the well” principle, what is gained on the one hand is lost on the other in terms of the block grant. It would be helpful if that could be elaborated on. Perhaps the best answer is that these transfers give a basis for the borrowing powers, which are very welcome, and which are contained in the Bill. Just a word of caution, however: the idea of a transfer of stamp duty has already been seized upon by other groups, notably by the Mayor of London, Boris Johnson. London, of course, has far greater resources and far more wealthy houses and land than Wales. If this were to move along the spectrum in the UK, it could have substantial implications, not least for Wales. Therefore, I utter a word of caution. However, on the other side of the coin, the borrowing powers, and the use to which they will be put—pace the noble Lord, Lord Thomas of Gresford, who feels that north Wales is likely to lose out in terms of the borrowing powers—are indeed welcome in principle.
Baroness Morgan of Ely
My Lords, Labour supports the move to devolve stamp duty land tax to Wales as it would be an obvious candidate due to the highly immobile nature of the tax base. The other issue to consider is the fact that housing is already a devolved issue. Devolving this tax would allow the Welsh Government to have a more comprehensive approach to housing needs in Wales. I echo the concerns of my noble friend Lord Rowlands about the impact on the block grant. Obviously, there would be an impact. The Command Paper states that the Government continue to discuss this proposal. However, the problem is that we are back to a negotiated agreement based on subjective decisions, so it is not as clear as we would like it to be.
As my noble friend Lord Anderson said, we have to be very careful about this issue. If Scotland and Wales opt for this measure, what will happen when London, with its £1.3 billion of stamp duty, starts to ask for it? If we go down this route, we must be very careful and do so with our eyes open. I am not saying that we should not go down this route but we should be aware of the floodgates that we might open in doing so. However, we support this tax.
The most obvious problem with the landfill tax is that the more successful the policy of using the tax as a means of getting people not to use landfill is, the less income will be derived for the Welsh Government. The other problem is that the current system of landfill does not identify the geographical location of the taxable activity, so we would have to bring in a whole new administrative mechanism as it does not exist in the UK at the moment. A danger could arise of the cross-border disposal of waste if there were a change in the rate of tax between one country and another. We need to be aware that these things could cause problems. However, as I said, the benefit is that this is a relatively immobile tax and waste management is a devolved responsibility so there would be opportunities to co-ordinate policy, particularly in respect of the environmental aims of the Welsh Government. We are in favour of devolving these taxes given their importance in providing an independent source of income to borrow against but we should be aware of the floodgates that might open in the rest of the UK.
Lord Newby
It is in the Bill. I will correct myself if I am wrong but I am sure that this flows from the point I made earlier about the ability for tax credits to be assigned to these taxes in the same way in Wales as they are in the UK.
The noble Lord, Lord Rowlands, asked what would happen in respect of the existing Landfill Communities Fund and possible contributions to Wales. The fund is financed by contributions from landfill site operators. Obviously, once the Welsh landfill tax is in operation, the eligibility under the UK fund will eventually dissipate. However, I understand that this will not happen immediately. I believe that the Joint Exchequer Committee will determine the exact mechanism for dealing with that, bearing in mind that the Welsh tax is not envisaged to be operational until 2018, so there will be a transitional period and projects that are already in the planning process, or where allocations have already been made, will go ahead.
Questions were asked about how you determine whether somebody is an eligible landfill operator. My understanding is that 13 landfill operators have all their landfill sites in Wales and would need to register for the new Welsh tax and deregister from the UK landfill tax, and that another 11 have landfill sites in both Wales and elsewhere in the UK and would need to register for the new Welsh landfill tax in respect of their sites in Wales but would remain registered for the current UK landfill tax.
The noble Lord, Lord Rowlands, asked what would happen if, as a result of Welsh decision-making, the UK failed to meet its landfill reduction targets under the landfill directive. He also asked about the meaning of the statement,
“the Government will seek to recover this cost from the Welsh Government”—
that is, if the UK were fined. Obviously, if the Welsh Government were to say that they were setting the landfill tax rate at or near zero, and as a result all English landfill operators were rushing to landfill in Wales, and we therefore missed our target, it would be reasonable for the UK Government to say, “We are being fined only because of that decision and therefore it is reasonable that the Welsh pay any fine”. We are talking about a very remote possibility, not least because we are making reasonably good progress in reducing landfill across the UK. We do not believe that we are in danger of being fined under that directive in the foreseeable future.
The noble Lord, Lord Anderson, raised a word of caution and talked about borrowing powers and their limits. All I will say is that the sooner the Welsh Assembly agrees to have a referendum, that referendum is won and an element of income tax is devolved to Wales, the greater the borrowing powers for the Welsh Assembly will be.
The noble Baroness, Lady Morgan, raised a couple of problems. I am new to this debate, but I am slightly surprised at the tone of the noble Baroness. She speaks of problems, of everything being difficult and of unforeseen circumstances. It is quite depressing. She asked about what would happen if London asked for control of its own stamp duty land tax. The English regions—not just London but the Core Cities Group, which represents all the northern cities as well as London—have argued that all property taxes should be devolved to them in the same way that stamp duty land tax will be devolved to Wales. I cannot see it being a problem for Wales as, in cash terms, stamp duty land tax is a very small proportion of the total tax take. It will not have a significant impact on the overall level of public expenditure by the UK. Therefore any Barnett consequentials, for example, of London having control of its own stamp duty land tax, would be minimal. I would have thought—and I know that this applies to my colleagues—that Wales would welcome the thought that England would benefit from a degree of devolution in the same way that Wales expects to benefit.
Baroness Morgan of Ely
If you just look at stamp duty in London, the estimate is that £1.3 billion is collected there. That is quite significant. It is worth pointing out that that is a concern. We want to see this devolved, but I thought that the whole point of the House of Lords was that we look at something and say that there may be a problem here—let us check it out. I thought that was the point of this place.
Lord Newby
We like to do it in a positive spirit. The truth is that stamp duty land tax is a very small proportion of the overall UK tax take compared to income tax, national insurance and VAT. It is only a couple of per cent of that. It is a small tax. It is important for local areas, and it will be interesting to see what Scotland proposes to do, now that it has powers over its stamp duty land tax, to shift the balance of where that tax is borne. One of the advantages of devolving the tax to Wales is that the Welsh Assembly can choose to do something similar if it wishes.
Lord Thomas of Gresford
Surely the distance between Bristol and Cardiff and the services provided from Bristol are such that Bristol sucks people out of south Wales to use the additional services that fly there. That is why it seems to be in competition. What we are after is the development, the building-up, of Cardiff. If it comes within the European definition, that must be good enough.
On the issue of fuel duty, I understand that provisions have been made in Scotland to reduce fuel duty—I stand to be corrected—if you are more than 100 miles away from an oil refinery. In Wales, we have rural areas and people who are very much dependent on the use of motor vehicles—almost exclusively so in parts of Wales. However, Milford Haven, which is not built to supply Wales, happens to be within that 100-mile area in the south; and, of course, we have Ellesmere Port in the north. Consequently, the reduction of fuel duty, as happens in Scotland, does not happen in Wales. However, that ignores reality. It ignores the fact that the needs of the rural population of Wales are just as great as those in the highlands of Scotland. They suffer the same impoverishment as they do in the highlands of Scotland, perhaps even more, and accordingly there is a case for taking fuel duty under the wing of the Welsh Assembly. That does not necessarily mean applying it to the whole of Wales, so that we have queues of English people in Gresford from across the border, which is not something that I would wish to see. That is not the idea at all. It would enable the Welsh Assembly to vary fuel duty with regard to the needs of the people of Wales, which I think is very sensible.
Baroness Morgan of Ely
It is worth putting on record the Labour position on some of these points. First, in relation to fuel duty, we think it will be impossible to organise separate fuel duties within the United Kingdom and probably very difficult to comply with European Union rules within countries. Those cross-border issues we have just heard about could be quite complex and difficult to police. That would be a problem for us. Of course we have genuine sympathy for the problems relating to the cost of fuel in rural areas, but we do not think that this is the mechanism by which we should be addressing it.
On natural resources tax-sharing arrangements, we do not agree that this is a good idea. Wales is not sitting on vast quantities of oil like Scotland’s and a key point to remember is that we do not tax energy production from wind, wave and water in the same way as we do barrels of oil, so there would probably not be much in terms of tax return anyway—we would probably have to invent new taxes. On the issue of corporation tax, one of the most disappointing aspects of the Scottish referendum campaign was to see Plaid Cymru members actively supporting independence for Scotland. It was not surprising but was a little disappointing, because we know that one key thing Alex Salmond wanted to do was to reduce corporation tax 3% below that of the rest of the UK. That would have done untold damage to Welsh companies. It would have adversely affected Welsh companies, so we did not understand why Plaid Cymru was quite so enthusiastically supporting independence.
Lord Elis-Thomas
I spoke on this matter in this House during a debate in June. Let me make it clear that my support was for the right of the Scottish people to express their own self-determination. They have done so, with marvellous consequences for the rest of us. We would not be debating in the way we are tonight if they had not done that.
Baroness Morgan of Ely
That is great to hear, but there are some aspects of Salmond’s policy commitments that I think would have been problematic for Wales and it is worth noting those.
Lord Thomas of Gresford
Does the noble Baroness agree that all the things we have been discussing tonight are levers—things such as airport taxes—that we can use to increase prosperity in Wales to an equality with the rest of the United Kingdom? These are levers that would achieve a balance between the various nations in the United Kingdom. That is what it is all about. If you have a power to vary corporation tax, for example, it may be something that you exercise for a certain period in order to pull in industry, and then you may feel that you face competition from elsewhere and you should drop it. These things are all economic levers to achieve equality of prosperity in the United Kingdom.
Baroness Morgan of Ely
I understand that, but I also think that we should be aware of the dangers of a race to the bottom. That is my real concern. We have already seen that it is hard enough to get many of these corporations to pay their taxes at all, so for us to encourage corporation tax competition within the UK would be very problematic. The problem is that if you reduce the tax take, you start to have to cut services, and that becomes a problem. It means that our schools and hospitals have to be reduced.
On the issue of air passenger duty, it is worth noting that this is another issue where there has been cross-party agreement on devolution, on the basis that if this is provided to Scotland and Northern Ireland in the same way as corporation tax is, then we should be allowed to review it in Wales as well. The point is that if they are going to do it, of course we want to be part of that game. What we cannot have is them going off by themselves. That would be problematic. It is why Scottish independence was a problem for us.
Lord Wigley
I am grateful to the noble Baroness for giving way. She has warned about a race to the bottom as a reason to avoid this, but she then says that Scotland might do it, that that is the first step in a race to the bottom and that we should then do it. Is she not embarrassed by the fact that her party leader signed up to this in the Assembly and she has difficulty in selling it to her group here?
Baroness Morgan of Ely
Not at all. Let me be clear: we in the Labour Party are not encouraging this; we do not want it to happen. At the moment we are not in charge of the government of this country. If it is introduced by the Government, then, of course, we want to make sure that we have a fair crack of the whip, so that Wales can compete as well. We are not encouraging this, though.
Lord Newby
I shall take the amendments in turn. Amendments 49 and 51A seek to include explicit provision in the Bill for fuel duty and air passenger duty to be devolved to the Welsh Assembly. First, I remind noble Lords that Clause 6 of the Bill already contains the power for further taxes to be devolved to the Assembly by Order in Council and therefore the Bill does not rule out in perpetuity any tax being devolved at a future point if there is agreement to do so. I shall explain why we are not devolving these powers in the Bill, starting with air passenger duty. As has been pointed out, the Silk commission recommended that long-haul rates should initially be devolved with devolution of all rates considered subsequently. In the Government’s response to the Silk commission we highlighted HMRC research which suggested that differential rates of APD could end up redistributing passengers rather than creating additional growth. This potential distortion, despite what the noble Lord has said, is particularly acute in relation to Wales, given the short distance between Cardiff and Bristol airports. As the noble Lord, Lord Anderson, pointed out, for many people who fly from south Wales and just across the Severn there is a real and immediate choice between those airports, which they see as close competitors.
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Baroness Morgan of Ely (Lab)
My Lords, my noble friend Lord Anderson has correctly suggested that at the very least matters pertaining to the electoral arrangements for the National Assembly for Wales should be subject to agreement by the Assembly before implementation. That sentiment has been echoed once again by the Presiding Officer in Wales. He noted that,
“in the Scottish settlement, the power to make arrangements about Scottish Parliament elections is now divided between Scottish Ministers and the Secretary of State”.
Surely this is the very least we should ask for the Assembly. We echo that sentiment and therefore support the position of my noble friend Lord Anderson that the Assembly should agree to electoral changes and that these should not be imposed from Westminster.
Lord Elis-Thomas (PC)
Amendment 10, which is in the name of my noble friend Lord Wigley, my parliamentary leader, and myself, is drafted again with the support of the Electoral Reform Society Cymru, which has been widely trailed in this debate and which I am sure it appreciates. This is to find a way of ensuring that the electoral system of the National Assembly is determined by the Assembly itself. The Order in Council procedure would enable both Houses to debate this matter before the transfer of functions of responsibility happen.
As in our earlier amendment, this amendment would ensure that there would have to be a two-thirds majority of voting Assembly Members. I take advantage of this amendment to impress on the Government that there are more checks and balances in the regulation of democracy which can be established for a democratic body in terms of its autonomous function. The idea that legislation for elections can be regulated only by Westminster fails to recognise the importance of the two-thirds majority principle, which we have established significantly in the constitution of Wales over the past 15 years.
Lord Thomas of Gresford
I am very grateful for that assistance from the noble Lord, because I wondered why it would be in the 1975 Act as a disqualification for standing for Parliament. Since this is Committee stage, amendments can always be made on Report to correct that. The nub of the matter is in proposed new subsection (5) in Amendment 15. This adds two additional subsections to Section 16 of the Government of Wales Act 2006. The committee put forward two ways of dealing with the issue: by requiring Assembly Members to resign a disqualifying office before taking the oath or affirmation of allegiance; or by deeming that an Assembly Member had resigned a disqualifying post at the moment that he was elected. It recommended the former course. It also suggested that the Law Commission might consider these issues as part of a wider review across all UK legislatures.
Kicking the issue into the long grass of the Law Commission is unnecessary. Devolution, as we have heard today, has not and almost certainly will not follow precisely the same pattern across the UK, and any short-term attempt to reach conformity is otiose. Such a course might delay changes welcomed by all sides beyond the 2016 election. The parliamentary processes here are surely robust enough to choose the proper mechanism. Amendment 15 suggests neither of the two methods proposed by the committee but follows the drafting of Clause 3 of this Bill, which deals with disqualification of persons elected to the House of Commons. It introduces an eight-day period following the election within which the Assembly Member can resign the post that would otherwise disqualify him.
The committee also accepted the advice of the Counsel General in relation to the power of the Assembly to disregard the disqualification. Your Lordships will recall that that was the process followed in relation to the Liberal Democrat Members. Paragraph 89 of the committee’s report states that Mr Bush thought that the ability of Assembly Members to relieve somebody of a disqualification was a “very unsound procedure”. Mr Bush added that,
“looking at it from general principles, if you have a clear and understandable list of disqualifications that are well publicised in advance and give people the opportunity to think carefully about them before they take the oath of allegiance, the rationale and the practical reason for having that power to disapply the disqualification seems to me to cease. Then, all of the arguments are in favour of getting rid of it, because, undoubtedly, it is constitutionally a very strange procedure indeed”.
I agree. Consequently, my second amendment would remove the power of the Assembly to lift the disqualification if it exists.
I appreciate that further amendments to the Bill and to the relevant order may be necessary if my amendment is successful, but I think that at Committee stage that suffices.
Baroness Morgan of Ely
Perhaps I may make a couple of quick points but, first, I think it is appropriate for us to raise spirits this evening by mentioning that Wales is in the lead by two goals to one against Cyprus in the European qualifiers.
Returning to the amendment, it is important for us to look at the pros and cons of politically restricted positions. I thank the noble Lord, Lord Thomas of Gresford, for drawing our attention to this issue, which is worthy of consideration. It is worth asking whether we should distinguish between people who stand for election and people who win a position. That is something that we should consider. I shall give an example. Somebody from a ministerial advisory group would have to stand down from their position on the advisory group, effectively losing a job, but that is the kind of person whom we should be encouraging to go into the Assembly—people with real expertise and special knowledge in certain areas.
I want to touch on a couple of little points. On the list of people ineligible to stand, there was mention of the Regular Forces. I presume that that excludes members of the Territorial Army. The noble Lord, Lord Elystan-Morgan, was being picky, so I shall also be picky. Regarding members of “any police force”, I wonder whether special constables are considered to be part of the police force. If so, someone such as David Davies MP, who is a special constable, would not be allowed to stand. Some of us might think that that was quite a good idea but the principle is worth looking at.
Lord Thomas of Gresford
I believe that the territorials and special police are not disqualified.
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Lord Crickhowell (Con)
My Lords, I have followed one basic principle fairly consistently: when one has had major responsibility, one should stand aside when one hands over and not be a nuisance by pursuing the matter much further. After eight years as Secretary of State for Wales, I have deliberately kept out of debates about Welsh affairs and left it to others, so I had not intended to say much during today’s proceedings. My second reason for not saying much is that I am in the middle of some uncomfortable medical tests this week and I will not be here for the whole of this evening’s proceedings, or the proceedings over the next couple of days.
However, I was struck by these amendments and thought that a few words might be constructive and helpful. I listened with a good deal of sympathy to what was said about Clause 1 and the report on reserved powers. That caused me no great difficulty and I shall listen with great interest to what my noble friend on the Front Bench has to say about it. I was, however, somewhat alarmed by Amendment 2A. I was rather relieved when, in his introduction to it, the noble Lord, Lord Wigley, at least qualified his enthusiasm for the proposed new clause. I think that he was suggesting that it was a testing amendment and might not be pursued too vigorously, at least at this stage.
Similarly, I sympathise with some of what the noble Lord, Lord Elis-Thomas, had to say on Amendment 3, particularly his final comments about the pace of change. There are important issues to be considered in the aftermath of the Scottish referendum. I am not unsympathetic to that. I was, however, a bit startled by the omission in the amendment of all the exceptions.
That takes me back, rather neatly, to my doubts about Amendment 2A. I confess that it is a long time since I have looked at the Government of Wales Act 2006. I must have done at the time, but it is not as familiar to me as it clearly is to the two noble Lords who have just spoken. I got it down from the shelf and read Schedule 7. I find the extent of what is proposed in Amendment 2A rather alarming. We see the proposed transfer of, essentially, the responsibilities of the Home Office, including youth justice, criminal justice and the courts, sentencing, legal aid, the Crown Prosecution Service and judiciary, and the prison and probation services. That takes us to some of the responsibilities of my right honourable friend Mr Grayling.
What struck me about these provisions is that many of them involve matters of constitutional significance. As a member of the Constitution Committee, I feel almost certain that if these matters were being pursued with vigour at this time, the Constitution Committee would want to examine them carefully and draw its thoughts and conclusions to the attention of the House. I am pretty certain that we would not want to go further along the road at this time without that kind of advice.
The same goes for Field 38, which refers to,
“the Welsh constitution and electoral arrangements”.
That is broad and sweeping, too. If you want to start on that, it would have implications not just for the constitution of Wales in electoral arrangements but almost certainly for other parts of the United Kingdom as well. Again, therefore, I am sure that those issues would need to be looked at much more closely before we pursued them further.
On the subject of broadcasting, I note only that now that I live about 500 yards from the border of Wales with England, I find myself in the extraordinary situation where my Sky set is directed to England rather than Wales, although I live in Wales. I have to have an adjustment on my set so that if I wish, as I often do, to look at the Welsh news in the morning, I have to switch to the appropriate item. I make that point only because it identifies the fact that broadcasting is not a simple and straightforward matter, confined to only England or Wales. Broadcasting has a much wider sweep and I think that we would want to think a good deal more carefully before we moved down that road.
My only point in rising at this time is to say that, yes, I will listen with sympathy and some interest to what my noble friend on the Front Bench has to say about the report on reserved powers and, possibly, the timetable. However, I urge caution about how far the other amendments may take us. It would be rash at this stage in proceedings on a Bill, which, after all, has already been examined in considerable detail by another place, if we were to sweep on to what would be a major set of changes to the devolution settlement. That might make progress on the Bill more difficult and not easier.
Baroness Morgan of Ely (Lab)
My Lords, many of us warned that the referendum vote in Scotland between Second Reading and Committee was likely to change the nature and tone of the debate on the Bill and it has very much turned out that way. The Scottish referendum has changed the tone of that discussion and the discussion of the constitutional development of the UK as a whole, with our hitherto ad hoc approach to constitutional reform found wanting. There is a desperate need now to review the entire constitutional structure of the UK—and Wales, of course, needs to be at the centre of that discussion.
We have to remember that the cri de coeur from Scotland was not just about constitutional arrangements but a cry from members of civil society and the public, who feel cut out of that political process. It was a plea from people to heed the fact that they do not feel as if they are being listened to. We have to recognise the depth of the disillusionment that has developed regarding the nature of government and its relationship with citizens. It is imperative that we now reach a new constitutional settlement that will lay the foundations for a new, reformed democracy throughout the United Kingdom. There has to be a wider process to draw a settlement reflecting the aspirations of all the UK’s constituent parts. It is time for our constitution to be put on a much more coherent footing. It is also important to respect and honour the promises that were made to Scotland during the referendum campaign. The appetite for more powers in Wales has also been stronger.
Lord Purvis of Tweed (LD)
Before the noble Baroness moves on from that point—I do not mean to interrupt her speech, in which I find much common ground from a Scottish perspective—perhaps I may offer her one observation, although not necessarily one for her to comment on much further. It is certainly the case that we found in the referendum in Scotland that a considerable number of Scots did not appreciate that the NHS had been devolved to the Scottish Parliament since 1999, under a different model. Perhaps it is not just the fact that the power resides in the institution but the continuing need to have citizenship awareness among the population that is vital. Whichever model is going forward for the Assembly, perhaps that reflection may be of assistance.
Baroness Morgan of Ely
The noble Lord makes valid points about clarity about where the powers are and the fact that information to the public is crucial so that they understand who is responsible for what. There is still a degree of confusion about this and we need to think it through in a very clear way if we are looking at a much more structured response to the devolution settlement within the United Kingdom as a whole.
I now turn to Plaid Cymru’s amendment to link the reserved powers to an immediate transfer of the recommendations of Silk 2. It is worth emphasising that the whole Labour Party feels quite positive about the vast majority of the recommendations contained in Silk 2. The case for further devolution of power has been well made by the commission. I thank the noble Lord, Lord Bourne, for his work on that commission and welcome him to the Front Bench. We are delighted to see him there. It is important that people understand that the Welsh Government have also responded positively to the recommendations.
With this amendment, Plaid has gone further than Silk in recommending, for example, the wholesale transfer of power over broadcasting, as was suggested, and energy, where the recommendations by Silk are far more nuanced. We are anxious to support many of the recommendations in Silk 2, but we feel that it would be more appropriate for us to include those recommendations within an election manifesto so that we can have the endorsement of the general public for this additional significant transfer of powers.
On Plaid Cymru’s Amendment 3, I do not blame them for attempting this power grab—that is what you would expect of nationalists—but to remove all current exceptions to current permitted areas of the Assembly would entail a huge extra amount of responsibility and the duplication of roles that are better shared at UK level. It would seem rather unnecessary that in the field of agriculture, where Wales already has legislative competence, we should establish our own legislation on, for example, scientific or other experimental procedures in relation to animals. Do we really want to establish our own agricultural import and export rules? Imagine the bureaucracy that that would entail. For every job that we would have to create to make that work, we would have to cut one from our health or education services or from another area that currently receives funding. We understand what the amendment is trying to do but think that it is going a bit too far.
Lord Elis-Thomas
This is about competence. It is the ability to do things, were one wanting to do them in that way. In the United Kingdom, we already have institutions, such as the Joint Nature Conservation Committee, which are virtually federal and in which powers and responsibilities are shared between Scotland, Wales and Northern Ireland. This is not about, of necessity, compelling the Welsh Government or the National Assembly to accept the competence; it is the indication, especially after the Supreme Court ruling of July, that the competence of the National Assembly in the current model is based on those definitions, made by subject in Schedule 7 of the 2006 Act, with exceptions. By deleting exceptions, I sought to highlight the nature of the competence and the possibility of using the reduction of exceptions as a way of translating further powers.
Baroness Morgan of Ely
I understand what the noble Lord is saying. The problem is probably that we need a much more detailed discussion about what those exemptions should be and to what extent they should or should not be duplicated. If this is a probing amendment, that is fine—we understand that that is the case. But taking this big step at the moment would be wrong.
Finally, I ask the Minister why an amendment on reserve powers has not been submitted if the Government have changed their position. Why cannot we now get on with the job? We know that there is cross-party consensus on this; let us not waste any more time.
Lord Rowlands (Lab)
I support Amendments 1 and 18A, but I do so from a rather different position. I am not a censorious critic of the conferred powers model. In the early days of the devolution settlement it was a reasonable and sensible way in which to confer powers. Indeed, in paragraph 4.3, even Silk acknowledges that there was value in the conferred powers model. The incremental argument made for additional powers made sense; it helped the Assembly and the Assembly Government to have greater competence and capacity in those fields.
However, I am now overwhelmingly in favour of moving to the reserve powers. The way in which additional powers have been granted, the whole issue of taxation and, down the line, the whole issue of Silk 2, make it imperative that we proceed and create the process to the greater reserve powers model. I do so not as a critic of the conferred powers model but from the realisation that, in fact, dramatic change has taken place and with that there is a need for the change of model that we have imposed. Therefore, I cannot quite understand why the Government, although they are not perhaps dragging their feet, have not been willing from the Dispatch Box to confirm that it is their objective, too, and that they agree with and support the processes described in Amendments 1 and 18A to proceed towards the reserve powers model. I hope that we hear a different tone from the Dispatch Box today.
Having said that, I, too, like the noble Lord, Lord Crickhowell, cannot support Amendment 2A—and nor does Silk. There is a much subtler discussion in Silk of the issues of criminal and civil justice than the rather bald list provided in that amendment. So unless it has been tabled with tongue in cheek, I cannot support that amendment. Silk did a very skilful job in assessing in detail, particularly in Chapter 10, the difficulties of transferring civil and criminal justice issues, even in police areas. In Silk one often reads that we will have to have cross-border co-operation—a real, meaningful co-operation between either side of the border—to make anything work in the criminal justice and civil fields. So I cannot possibly support Amendment 2A, but I certainly support Amendments 1 and 18A.
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“(1) GOWA 2006 is amended as follows.
(1A) For section 3(1) substitute—
“(1) Subject to subsection (1A) below, the National Assembly for Wales shall determine the date of the poll by a resolution of the National Assembly for Wales.
(1A) The poll at an ordinary general election to the National Assembly for Wales is to be held no later than the first Thursday in May in the fifth calendar year following that in which the previous general election was held.”
(1B) In section 3(2) omit “if the poll is to be held on the first Thursday in May,”.
(1C) In section 3(2)(a), for “that day” substitute “polling day”.
(1D) Omit sections 4 and 5.
(1E) In section 13, after subsection (1) insert—
“(1A) The order may not include provision about the date of an election to the Assembly.””
Baroness Morgan of Ely (Lab)
My Lords, I am a little disappointed that the Minister is not here yet. Is she arriving? Should I propose that we adjourn until the Minister arrives?
The Lord Privy Seal (Baroness Stowell of Beeston) (Con)
My Lords, I offer sincere apologies to the noble Baroness and the Committee for the delay in the Minister returning to the Chamber to continue the Committee stage of the Bill. I had been reliably informed that she was just outside the Chamber and I know that she certainly is not far away. I would be happy to remain in place for the noble Baroness’s speech and to ensure that the Minister is properly apprised of the points that the noble Baroness makes as soon as my noble friend returns.
While I am here, I remind noble Lords of what I said following the Statement that we just heard on Scotland: clearly there is much that noble Lords would like to debate about devolution following the referendum. I am pleased that we will have a debate in government time later this month. I very much look forward to that. Once again, I am very grateful to the noble Baroness and to noble Lords for their patience.
Baroness Morgan of Ely
Thank you. We have just heard about the vigorous referendum campaign in Scotland, where people on all sides talked about the need to respect the established devolved institutions. It should be remembered that the current settlement means that Westminster theoretically still has the power to dissolve the Welsh Assembly or the Scottish Parliament without any consultation with the Welsh public or the Scottish Parliament, although in practice the Sewel convention means that, generally speaking, Westminster does not intervene in devolved matters.
However, in this clause, we are faced with a situation where an autonomous Assembly is being told what to do by Big Brother in London. Westminster has changed the date of its general election and therefore, of course, so should Wales. If we have learnt anything in the past few weeks, it is surely that you cannot let the teenager find her feet and explore the paths she wants to take, only to put a curfew on her, insisting that she comes home at a particular time when you feel that she needs to be told what to do or when her decisions do not suit you.
If Westminster wants to change the date of its own election, so be it. What seems wrong in principle is that this should lead Westminster to impose a decision upon Wales about when she should hold a vote, without any consultation with her at all. The Presiding Officer of the Assembly said that the power of the decision about when to hold a vote is,
“more appropriately held by the Presiding Officer, as is the case for the Scottish Parliament”.
In the Bill, we have suggested that it should be a matter for the Assembly, but we are open to debate on that. The principle that we are after is at what level the decision should be made—who should be making the decision. If the Welsh Assembly wants to hold its election in the same year as a general election, that is surely a matter for the Assembly itself. It is too early to say to what extent we in the UK will go down the federal route. However, one thing is certain. If you are serious about devolution, you cannot hand over the powers but attach a spring so that they can be hauled back to Westminster every time a devolved structure makes a decision of which you disapprove or every time you make a decision that may impact on that institution.
The Welsh Government outlined in their response to the Green Paper produced two years ago that,
“no change to the Assembly’s current electoral arrangements should be made without the Assembly’s consent”.
This is a fundamental constitutional principle at issue. It is a necessary consequence of a constitution based on the principle of devolution. Clearly, the reason for the introduction of the original clause is to take account of the fact that the five-year Fixed-term Parliaments Act has been introduced for the House of Commons. The principle of broader legislative competence for Assembly elections should be considered by political parties when they draw up their manifestos. This is an issue that was dealt with in Silk 2. However, surely it cannot be right to bind the hands of the Assembly at such a sensitive time in our constitutional discussions.
The Parliamentary Under-Secretary of State, Wales Office (Baroness Randerson)
My Lords, I thank noble Lords for their participation in this section of the debate. Amendment 4, proposed by the noble Baronesses, Lady Morgan and Lady Gale, would give the Assembly the power to decide, by resolution, when Assembly elections are held. It would give the Assembly a wide degree of discretion to determine the date of Assembly elections, which is something that the noble Lord, Lord Richard, raised concerns about. We might all be rather worried about that issue because it has such a wide scope. By a simple majority, the Assembly would be able to vote for a change to the length of its terms. Such a power would go beyond that given to other devolved legislatures, which do not have the freedom to vary the length of their terms.
The Government believe that the devolution of further powers to the Assembly, such as this, cannot be undertaken in a piecemeal fashion. Once again, this is an issue that is better discussed and considered in a wider context of other changes to the Welsh devolution settlement arising from the Silk recommendations. It is a fundamental change, as has been said today, to devolve to the Assembly competence over its elections, and it would undoubtedly have knock-on effects on UK government elections. The noble Lord, Lord Rowlands, made the very good point that you would get a higher turnout by holding those two elections in coincidence. I do not think, however, that that would be desirable because it is undoubtedly true that the media in Wales are not strong enough to lead a debate on Welsh issues that is not overshadowed, at the time of the general election, by UK issues.
Amendment 5 seeks to preclude an ordinary general election to the National Assembly being held within 355 days of the UK general election. As I have said, I fully agree with the sentiment behind this, that these should be distinct and separate events. I share the concerns of the noble Lord and the Assembly that holding those elections on the same day would not give electors a clear view of Welsh issues. The Fixed-term Parliaments Act 2011 changed the length of term of the current Assembly to five years on a one-off basis. Without further provision, the Assembly will return to four-year terms thereafter.
Clause 1, however, already provides for five-year terms in perpetuity for the Assembly’s general elections from 2016 onwards. It already does this without the need for further amendment, making it very unlikely that the Assembly general elections and parliamentary general elections will coincide in future. I am sure that the noble Lord will welcome this, and I thank him for his explanation for including his amendment. I believe, however, that the provisions already included in the Bill will go as far as is necessary to ensure that Assembly elections and parliamentary elections do not coincide.
In response to the noble Baroness, Lady Morgan, I point out that the Assembly agreed to the change of date of the elections. This is not something that has simply been visited upon it: it has agreed to it. I welcome once again the conversion of the Labour Party to the idea that the Assembly should have the freedom to do such things as deciding its own elections. It is important in that context that we note that views on devolution are changing fast in some quarters, and it is important that there is public debate as to what additional powers are devolved to the Assembly.
On that basis, I respectfully request that the noble Baroness withdraws her amendment and that the noble Lord does not press his.
Baroness Morgan of Ely
I thank those who have participated in this debate. I stand by the principle that it should be up to the Assembly to determine when its election should be. The points made by the noble Lord, Lord Wigley, about discussion of the Welsh election being drowned out, are valid, but the points made by the noble Lord, Lord Rowlands, about turnout probably increasing significantly if the elections were held on the same day are also worthy of consideration. Ultimately, however, it should be up to the Assembly to decide. I understand the point that the noble Lord, Lord Richard, made on tightening up the wording of the amendment. It is a lot better than the one they had in the Commons, in which there was no mention at all of when the Assembly should have elections; it could have gone on for ever without any. We have improved on that.
The Minister also talked about this being a fundamental change. I think there are fundamental changes going on at the moment, and so we need to make sure that we keep perspective and an open mind on some of these issues. On that note, I beg leave to withdraw my amendment and to suggest that it could be returned to on Report.
Wales Bill
Baroness Morgan of Ely Excerpts(10 years, 4 months ago)
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Baroness Morgan of Ely (Lab)
My Lords, I thank the Minister for outlining the shape and clauses of the Bill. The timing of the Bill is extremely sensitive, as the noble Baroness hinted, with this Second Reading taking place before the Scottish referendum and the Committee stage coming after that referendum. The Bill will therefore be a moving feast. The constitutional implications and the political response in Scotland, and in the rest of the United Kingdom, will need to be carefully considered after the referendum vote, irrespective of the outcome in September. It was interesting to note that the Minister stated that further discussion following the referendum will be possible on certain aspects of the Bill.
We also have a new Secretary of State for Wales in Stephen Crabb, and it was lovely to see him at the opening of this debate. While the previous Secretary of State, David Jones, seemed to have a rather ambivalent attitude towards devolution and despite the fact that the new incumbent has proclaimed himself in the past to be a self-confessed devo-sceptic, pleasingly he appears to have seen the light in recent weeks and has promised to develop a better relationship between the Government and the Welsh Assembly. We shall give him the benefit of the doubt and look forward to this being the case.
We are also entering a pre-election period where manifestos are being drawn up and there is an increasing awareness of the overcentralisation of the state in London. In addition, we are dealing in the Bill with recommendations that have been largely taken up as a result of the Silk 1 commission. Since then, however, Silk 2 has been published and it would seem strange not to take the opportunity to discuss some of the suggestions of that report. On the whole, I shall desist from that temptation although there is one notable exception, to which I shall allude later.
Before I start, however, it is worth pointing out what my motivation is and always has been in relation to devolution in Wales. As a founder member of the cross-party Yes for Wales campaign in 1997 and having then been on the team, along with the noble Lord, Lord Bourne, to draw up the initial standing orders for the Assembly, I was and am a lifelong supporter of devolution. I even remember wearing a sticker to school as a 12 year-old in 1979 in support of that doomed campaign when it took place. However, my motivation has never been rooted in any romantic, nationalist or even patriotic ideals. Neither is it controlled by a fixation on limiting the role of the state. Some would argue that this has been attempted in the Bill through the promotion of competitive taxation, which will inevitably lead to lower taxation across the United Kingdom and therefore a reduction in the size of the state. My motivation has always been to do what is best for Wales: making decisions close to the people, taking local circumstances into account and, crucially, ensuring that the people of Wales, particularly the poorest, are not left worse off.
Wales remains one of the poorest parts of the UK, although the unemployment rates are falling fast thanks to some innovative measures by the Welsh Labour Government. It is absolutely right that Wales continues to benefit from the UK Treasury receipts. The nature of the politics I believe in means that there should be a sense of social solidarity across the whole of the United Kingdom. In Wales, we have more of a sick population due to our industrial heritage, which helped to create the historic wealth of the United Kingdom. We also have a proportionately higher ageing population, many of whom have moved from England—and we happily welcome them to our beautiful country. Nevertheless, there is and has been hitherto a sense that these conditions and historic legacies should be recognised and that there needs to be a redistributive mechanism from the richer centre to the poorer periphery.
However, Wales has seen significant cuts in recent months and years. The IFS has suggested that the total block grant allocated by the UK Government to Wales in 2013-14 is 9.4% lower in real terms than it was in 2010. Further cuts have been announced for 2015-16 which, if implemented, would take the cut to 12%. There has been a 31% cut in the amount earmarked for capital expenditure. That cut in capital expenditure has been a severe handicap to the Welsh Government’s ability to invest in projects and infrastructure that could increase economic activity and grow the economy. Central to the Bill and the key reason why we in the Labour Party are anxious to support it is that, for the first time, the Welsh Government will have the power to borrow.
Let me underline, however, that it is critical that the ability to borrow should not be used by the Government in Westminster as an excuse to cut funding that should otherwise come to Wales. The focus so far has been on the need to borrow in order to invest this money on improvements to the M4 motorway. That commitment was announced by the Welsh Government last week and has received support, in particular from the business community. I believe that that is crucial, but we need to be sure that a similar project in the north of England, for example, would not have been funded out of this Government’s central pot once the Barnett formula has been taken into account.
The ability to borrow is crucial, but we would like to question in Committee why the level of borrowing allowed for Wales is so low. It has been suggested that the mechanism that determines the borrowing levels in Scotland has been used as a template for Welsh borrowing. However, we on these Benches shall argue that there has been an inconsistent approach, and that both Northern Ireland and Scotland have been allowed to borrow irrespective of the ability to raise the commensurate amount through their revenue-raising at a devolved level. Neither has the amount Wales is allowed to borrow taken into account the fact that Wales, in relative terms, has very little to make in terms of PFI payments compared to Scotland. Ideally we need a mechanism in this Bill to allow the Welsh Government to borrow more in future. We need to be assured that a degree of flexibility is allowed in relation to the conditions of borrowing. The ability to borrow, at least initially, is predicated on the fact that two specific taxes will be devolved to Wales: stamp duty and landfill tax. We can consider the benefits and disbenefits of these taxes in Committee, but it is worth noting that the nature of both these taxes is that they can vary considerably from year to year. There has been an agreement that, due to the nature of the variability, an adjustment can be made, but I would like to probe a little further in Committee on the nature of the adjustment deal and how watertight this agreement is.
The disbenefits are obvious. Being part of a larger group means that hitherto Wales has been pooling the risk with the rest of the UK. Probably the most controversial part of this Bill is the power to raise income tax, subject to a number of criteria. The previous Secretary of State for Wales argued, along with the Liberal Democrats, that he would be pushing for a 1p cut in income tax, suggesting that that would be a stimulant for investment and economic growth. He could well be right. However, reducing the Welsh rate of income tax by 1p, as suggested, would cost £200 million in terms of cuts to services. It will be interesting to see how the new Secretary of State feels about that, especially given that he has said that his,
“opposition to devolution … has been driven by a belief that … devolution would foster and feed an increasingly separatist and socialist discourse in which sensible Conservative policies that could promote national cohesion, economic liberalism and”—
note—
“smaller government would find little oxygen for survival”.
National cohesion is the last thing that we will see as a result of tax competition. Smaller government, however, would inevitably be delivered. Just imagine cutting 7,700 nurses, which is what £200 million represents, in the hope that the economy would grow. It could happen, but it would be a huge risk at the expense of central public services. It should be noted, however, that £200 million should also be set in the context of an overall budget for Wales of £15 billion. It must be said that that is pretty small change, and probably would have a negligible effect on the efforts to change the economic fortunes of the country.
Even if the economy did grow, much of that growth would return through income tax receipts to the central UK Treasury, and would go only some way to top up the payments to services cut in Wales. Let us not forget that only 4,000 individuals in Wales paid a top income tax rate of 50p in 2010-11, and that more than 90% of the people of Wales pay a basic rate of tax. The Government believe that devolution should be used to give a competitive edge to Wales, and that the powers devolved should be used to grow the economy. My fear with these figures, however, is that if we are to engage in any kind of tax competition with the rest of the UK, Wales will come out the loser. That is great if you are chasing some kind of nationalist dream of self-dependence; it is a disaster if you are poor and do not want your services cut. We want no race to the bottom. This would prove detrimental to all parts of the United Kingdom.
As the Minister has set out, there are cross-border implications of income tax competition. We would like to address the need for a comprehensive, cross-border Treasury impact assessment which takes into account the fact that 48% of Welsh people live within 25 miles of the English border, with 10% of the English population living within 25 miles on the other side; that is, 6.3 million people. It is worth contrasting this with Scotland, where just 4% of the population lives within 25 miles of the English border, with 0.5% of the English population living within 25 miles on the other side; that is just 450,000 people. The complexity associated with different tax rates, therefore, is much higher in Wales, both for employers and for employees.
We are also concerned that not enough has been done to calculate the cost of collecting tax in Wales. Again, we would like to probe further in Committee the indexation aspects of the impact of income tax changes to Wales. It is essential to underline the fact that Labour has a clear triple-lock system, upon which we would insist before embarking upon income tax devolution for Wales. First, there is of course a need to ensure a fair funding mechanism for Wales. Even with the Bill’s proposed devolved tax arrangements, 75% to 80% of the Welsh government budget will still be provided through the Barnett formula. We need to be sure that we are not locked into the current funding system, which would disadvantage the country for ever. Secondly, we would insist upon a period of assignment to ensure that Wales is not worse off as a result of any tax-varying powers. Thirdly, of course, none of this will happen unless the Welsh people vote for tax-raising powers for the Assembly. Having seen the lamentable turnouts for the European and police commissioner elections, and with the idea of a campaign on a question containing the word “tax”, I would not be volunteering to lead a referendum to promote this in Wales.
Other aspects of the Bill are also important. In the parts relating to electoral systems and frequency of elections, our principal position is that these should be matters for the Welsh Assembly to decide. The public are confused by a system which allows a candidate to stand on both the constituency ballot paper and the regional list ballot paper. Labour will be submitting an amendment to protect the status quo. The Explanatory Notes make clear that the measure will benefit small parties with a smaller pool of candidates, so there is undoubtedly a highly political angle to this, as there is to much of the Bill; my noble friend Lady Gale, who will be helping me out on the Bill, will elaborate on this point later.
We also believe that a shift to the “reserved powers” model of governance should be introduced at the earliest opportunity. We should not wait for Silk 2 to be implemented in a further Bill, but should address this issue now. Once again, the coalition Government have questioned the authority of the Welsh Government to make decisions in certain areas and, once again, recently, the Supreme Court has found in favour of the Welsh Government, ensuring that the Welsh Government have the right to protect vulnerable farm workers. These are costly, bureaucratic fights, which should be halted as soon as possible. We shall be proposing an amendment to include the reserved powers model for the Assembly.
Extra powers would mean extra responsibility for Assembly Members, particularly in the role of scrutinising expenditure. Although this would obviously be a matter for the Assembly, ideally we need an assurance that the personnel infrastructure and the expertise, both in terms of administration and scrutiny, are in place before handing over these powers. Assembly Members are already extremely stretched with 60 Members and I am sure that some noble Lords will want to pick up on this issue during the debate.
Overall, the Labour Party will be supporting this Bill. However, we will take the opportunity to probe and test various aspects of the proposals which we feel need further thought and consideration.
Wales: Economy
Baroness Morgan of Ely Excerpts(10 years, 7 months ago)
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Baroness Morgan of Ely
To ask Her Majesty’s Government what is their assessment of the prospects for economic recovery in Wales.
Baroness Morgan of Ely (Lab)
My Lords, historically Wales has languished economically behind the rest of the UK for generations. Following the boom years of the coal era, harsh reality struck in the 1970s and 1980s when communities across the country were devastated by the loss of big industry—coal and steel, in particular. Wales has taken a long time to readjust to the new world, but at last we are seeing really positive signs of growth. That growth is currently outstripping the rest of the UK thanks in large part to a completely different approach in Wales using direct intervention—good, old-fashioned Keynesian economics by the Welsh Government. We moved to plan B rather than sticking to Osborne’s plan A for as long as he did and we are reaping the rewards quicker.
Rather than declaring a war on Wales the Conservatives should be looking to emulate the success of the Welsh Government on the economy. Unemployment rates in Wales have been tumbling, with the unemployment rate in Wales now lower than in England, Scotland and Northern Ireland. Can you believe it?
Lord Thomas of Gresford (LD)
What does the noble Baroness mean by a war on Wales? Who is supposed to be waging a war on Wales?
Baroness Morgan of Ely
It is pretty clear that there have been attacks and noises coming from Ministers, such as Grant Shapps, for example, who visited Wales and said that the Government are using Wales as a battering ram ready for the next general election.
Plan A by the UK coalition Government in large part has cut and cut public services white crossing their fingers in the hope that the private sector will take up the slack. The Welsh Government have deliberately taken a different approach and intervened in stimulating economic growth through a number of measures, standing by the struggling private sector in maintaining jobs through the tough times of the recession, stimulating economic activity through maintaining Welsh Government investment in infrastructure, and developing an aggressive approach to stimulating inward investment and boosting an export drive.
These measures are now paying off, which is, I suggest, the main reason why Wales is coming out of the recession quicker than other parts of the UK. The unemployment rate in Wales is now 6.7%, lower than the UK average of 7.2%, a 20% reduction in the past year. Despite the fact that there has been a 31% cut in real terms to the Welsh capital budget between 2009 and 2016, the Welsh Government have reserved £1.3 billion of investment in capital funding to improve Welsh infrastructure—more money for transport, housing and flood defences.
Wales will be one of the first countries in the world to ensure superfast broadband for 96% of properties. In England the figure is 90%. Upon completion, Superfast Cymru will make Wales the most connected country in Western Europe. Inward investment in Wales has increased by 200% and produced 7,000 new jobs. Who knows, though, what impact the ambivalent attitude of the Tory Government towards EU membership will have on inward investment in future?
One of the first things that the coalition Government did on coming to power was to scrap the Future Jobs Fund. Wales reacted by creating its own Jobs Growth Wales plan, which has created 11,000 job opportunities for unemployed 16-24 year-olds in Wales. However, while I think it was right for the Welsh Government to concentrate on unemployment because it is the key to better health, better education and better outcomes overall, we are still struggling in terms of wealth. Wales is still poorer relative to the UK as a whole, but the Welsh economy is growing at 1.6%, one of the fastest rates in the UK. The problem is that we are starting from a low base.
We need to continue our focus on driving up GDP levels, a much tougher task. This is about what kind of jobs we have in Wales and encouraging the export of Welsh goods. The Damocles sword hanging over the Murco oil refinery could reduce our export figures significantly. The oil refineries in Milford Haven are critical to the Welsh economy. The Valero refinery alone is responsible for 25% of all Welsh exports. So the closure of any refinery would not just have a devastating impact on employment in the area, but would have a disproportionate impact on Welsh GDP figures. I know that the Welsh Government are doing everything in their power to try to save the refinery. What is the Secretary of State doing to help to find a buyer for the plant? The Welsh Government have developed a programme of support that identifies and helps to build companies’ capacity to export. This is already paying dividends, with an increase of 11% in exports compared with a rise of just 0.4% for the rest of the UK.
Central to improving GDP is the need to build the skills of the Welsh people and to upskill the workforce, ensuring a good stream of graduates. Despite the fact that some Conservative MPs have suggested that applications to universities from people living in Wales are down, the truth is that when the Tory-led Government trebled tuition fees there were 42,000 fewer applications from English students while in Wales there was a fall of just 100. That was because the Welsh Government stood by students from Wales, capping the fees at £3,000. Welsh apprenticeships have seen completion rates rise from 54% in 2006 to 85% in 2012, beating England’s 73% completion rates. Some 90% of these have gone on to find sustained employment or engage in further learning.
There needs to be a particular focus on developing skills in the engineering sector, which will be key to the economic growth prospects of Wales in future. The Royal Academy of Engineering has suggested that there are 95,000 Welsh people who declare themselves as being engineers; 30% of those are over 50 years old and yet only 1,500 applicants were accepted on to engineering courses in 2012-13.
Given the profile of the engineering workforce in Wales, there are not enough young people coming through the system to replace the ageing workforce. That will ultimately result in skills shortages and we will have to recruit from outside Wales. A deliberate focus on that and on driving up the pool of those able to enter the field through better results in maths in school is imperative. Again, the Welsh Government’s focus on numeracy in schools should help with that.
The gap between Wales and London has now become a gulf. Although that has certain advantages in terms of the costs of living in house prices and childcare costs in Wales compared to London and the south-east, the coalition Government need to demonstrate to the country that they are in touch with the pressures that are still being felt outside the M25. We have not seen much evidence of that. The measures that they have taken to stimulate the economy have exacerbated the situation rather than helped it, as evidenced by research by the Centre for Cities, which recently suggested that for every public sector job created—yes, created—in London, two have been lost in other cities. The Help to Buy scheme has undoubtedly helped to cause a housing bubble in London, causing huge resentment outside the capital, where people watch as those who have already bought watch their wealth grow with no effort. That is not help for hard-working people; it is the luck of the draw on where and when you bought a property. It is also unsustainable in the long term.
In December, the UK Government announced their £375 billion infrastructure spending plan for the next two decades. If Wales were to get its 5% share, we should see £18.7 billion of investment coming to Wales. We know that the Wales Office boasts of £2.5 billion of investment that will come to Wales, but I ask the noble Baroness where and when we will see the rest of it and what we can do to speed up spending of the investment already promised. Will we see any of the infrastructure promised by the UK Government delivered during this Parliament?
Wales is absolutely on the right track in terms of the prospects for economic recovery, but more needs to be done to ensure that the two arms of government at UK and Welsh level co-ordinate their efforts to reduce the gap between Wales and London. That means more economic intervention from the UK Government and a more proactive regional approach further to stimulate the Welsh economy and to cool down the overheating that is occurring in London. I ask the Minister to ask her Government to stop the war on Wales and engage in more constructive politics with the Welsh Government. England could learn from Wales on the economy; and, yes, on aspects of education and health, Wales could and should learn from England.
Lord Ahmad of Wimbledon (Con)
The noble Lord’s time is up. This is a time-limited debate to 60 minutes. We can have a brief intervention, but my noble friend needs to conclude his remarks.
Baroness Morgan of Ely
Will the noble Lord comment on the fact that average costs of childcare in Wales are 10% lower than in England in every segment of care from under-twos to after-school clubs. So there is propaganda in his comments that is absolutely not true.
Lord Thomas of Gresford
I am quoting the Family and Childcare Trust’s 2014 survey. In conclusion, there is a massive agenda for the Welsh Government to tackle, but the truth is that the Labour Administration is failing not just the Welsh people but the whole concept of devolution for which we fought.
Local Authorities (Contracting Out of Tax Billing, Collection and Enforcement Functions) (Amendment) (Wales) Order 2014
Baroness Morgan of Ely Excerpts(10 years, 8 months ago)
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The Parliamentary Under-Secretary of State, Wales Office (Baroness Randerson) (LD)
My Lords, this order will enable billing authorities in Wales to continue to contract out certain additional functions relating to the administration and enforcement of council tax, following the making of new regulations in relation to council tax reduction schemes for 2014-15 onwards.
I will first provide a brief overview of the legislative background. The Council Tax Reduction Schemes and Prescribed Requirements (Wales) Regulations 2012 and the Council Tax Reduction Schemes (Default Scheme) (Wales) Regulations 2012 introduced council tax reduction schemes in Wales for 2013-14. Schemes introduced under these regulations are now being successfully operated by local authorities as part of the council tax system.
However, as the 2012 regulations are limited to 2013-14 by virtue of a sunset clause agreed with opposition parties in the National Assembly for Wales, a new set of regulations has been brought forward to govern the operation of the council tax reduction schemes from 2014-15 onwards. These are the Council Tax Reduction Schemes and Prescribed Requirements (Wales) Regulations 2013 and the Council Tax Reduction Schemes (Default Scheme) (Wales) Regulations 2013.
It is now therefore necessary to update the references within the numerous pieces of interrelated subordinate legislation to take into account the new set of regulations that will govern the operation of council tax reduction schemes in Wales from April 2014 onwards. This work includes making the Local Authorities (Contracting Out of Tax Billing, Collection and Enforcement Functions) (Amendment) (Wales) Order 2014. The purpose of the 2014 order is to enable billing authorities in Wales to continue to contract out certain additional functions relating to the administration and enforcement of council tax following the making of the 2013 regulations, which will operate from 2014-15 onwards.
This time last year the Committee approved the Local Authorities (Contracting Out of Tax Billing, Collection and Enforcement Functions) (Amendment) (Wales) Order 2013. The 2013 order enabled local authorities in Wales, under the Local Authorities (Contracting Out of Tax Billing, Collection and Enforcement Functions) Order 1996, to contract out functions connected with the administration and collection of council tax. We wish to ensure that local authorities in Wales continue to have the freedom to contract out these administrative functions. The order being considered today amends the 1996 contracting-out order for Wales by substituting references to the 2012 regulations with references to the 2013 regulations.
The 2014 order will enable local authorities to continue to contract out the following administrative functions: the issuing of council tax reduction decision letters; the payment of a reduction amount under certain circumstances where the billing authority is of the opinion that it would be appropriate; the serving of a penalty notice in connection with an offence committed with a reduction; and the repayment of an amount paid in connection with a penalty related to a local scheme that has been subsequently quashed.
Although this order does not expand on the provisions that are currently in place for the administration of council tax reduction schemes, if it is approved by noble Lords it will carry out an essential function by enabling local authorities in Wales to continue to choose how to deliver their local schemes, whether that is by using internal resources, external providers or a mixture of the two. It is important that we provide local authorities with the tools they need to deliver a cost-effective council tax system. I commend the order to the Grand Committee and I beg to move.
Baroness Morgan of Ely (Lab)
I thank the Minister for that explanation. It is probably worth dwelling on the fact that this is not just needed because of the sunset clause. We need to go back further than that and think about why this needed to be done in the first place. It was necessary because in 2012 the UK Government abolished council tax benefit as part of the coalition’s Welfare Reform Act 2012. The responsibility for replacement schemes was passed on to local authorities in England and to the devolved Governments in Scotland and Wales. However, when it was handed over, there was of course then a cut of 10% in the funding that had previously helped people pay their council tax.
The IFS warned that 320,000 council tax benefit recipients in Wales would lose, on average, £74 a year and that this would hit the poorest the hardest, as 80% of council tax benefit spending in Wales went to those households with the lowest incomes. Unlike in England, where the IFS says that this approach has left 2.5 million households worse off by an average of £160 a year and has resulted in 500,000 people receiving summonses for non-payment, the Welsh Assembly has thankfully stepped in to protect this entitlement for those 320,000 people in the poorest households through a council tax reduction scheme. As the Minister has described, councils in Wales need to be able to contract out council tax services, as they do other services. For that reason it is important that the draft order is passed as quickly as possible, and the Government have our support in that.
What we have seen this week is a concerted effort—the start of an attack—by the current Government, pointing out problems in Wales. We have seen Grant Shapps come to Wales talking about problems we have had there and a concerted effort by the Daily Mail and the Times. This is an example of Wales understanding the needs and problems of the people and standing side by side with the most vulnerable. I do not suppose we will see any coverage of that in our newspapers in the next few days.
Baroness Randerson
My Lords, I thank the noble Baroness for her support for this order. I would point out, in relation to her detailed comments, that my introduction referred to the 1996 scheme on which this is built. This is not a new system. It was introduced all that time ago and it has been adapted to the new council tax reduction schemes.
I make no apology for the fact that the Government have devolved responsibility for this to the Welsh Government. It is my view and that of the Government that this responsibility should lie with the Welsh Government and local authorities. It is right because council tax is levied by local authorities, and arrangements for reduction schemes should therefore also be made at that level.
In relation to the latter part of the noble Baroness’s comments, I would point out that fewer people are this year claiming for council tax reduction than in the previous year. In other words, fewer people are in the difficult circumstances that would ensure that they needed to make such a claim. That is part of the general series of symptoms of an upturn in the economy. The situation in Wales is getting very much better; some indicators suggest that it is doing so at an even faster rate than in the rest of the UK. Council tax is one of the areas of which the previous Labour Government lost control, and I make no apology at all to this Committee for the fact that the Government stepped in to take control. I commend the order to the Committee.