Finance Bill
Jonathan Edwards Excerpts(10 years, 4 months ago)
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Shabana Mahmood
Let us see the report. The Minister has had many opportunities in Finance Bill debates where the Opposition have tabled amendments and new clauses calling for such a report. He has not produced one. I have no confidence that he will go away today and ask his officials at HMRC suddenly to produce a report. If he has such a report in mind, he should accept our new clause, and we can then have that debate. We have said that we will increase the rate to 50p. We believe that that can raise money and will be a good part of a much fairer deficit reduction policy.
The truth is that there was no justification for giving a huge tax cut to the richest in our country. We now know that bonuses are up by 83% for those in the financial sector, while ordinary working people are worse off now and will be worse off in 2015 compared with 2010. Wages will be 5.6% down at the end of this Parliament from what they were at the beginning.
The Government have not ruled out cutting the additional rate back down to 40p. We know that this is the ardent desire of many of their Back Benchers. Perhaps when the Minister replies he could tell the House whether the Government are planning any further cuts. They have ducked the opportunity on previous occasions to confirm that they will not go down from 45p to 40p. It will be good to hear from the Minister whether that is the case. The Government’s priorities are all wrong. Ordinary working people continue to struggle with their finances, and the link between the wealth of the nation and the money in people’s pockets and in their household budgets is broken. This Finance Bill does nothing to change the reality of the lives of millions in our country, yet Government Members want to cut taxes for the richest.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
The Labour party now proposes a 50p rate for the additional rate. Is that a permanent measure or a temporary measure to deal with the deficit?
Shabana Mahmood
The hon. Gentleman has made that point in previous debates, and I repeat the answer that I gave then. We have said that we would increase the rate to 50p in the next Parliament as we get the deficit down. I could not be clearer than that.
It is the richest in our country who are benefiting the most from the recovery delivered by the Government. The return of economic growth has overwhelmingly benefited the top 1%, as shown by analysis of HMRC figures by the House of Commons Library, which covered the year when GDP growth returned and the top rate of income tax on earnings over £150,000 was reduced. The share of post-tax income of the top 1% of taxpayers—300,000 people—rose from 8.2% in 2012-13 to 9.8% in 2013-14. Yet during the same period, the bottom 90%— 27 million taxpayers—have seen their share of post-tax income fall.
This cut to the 50p rate cannot be justified when the deficit is high and will not be eliminated towards the end of the next Parliament. Labour in government will increase the rate back to 50p to help us to get the deficit down in a fairer way. Just as we have said that we want the Office for Budget Responsibility to have powers to audit manifestos ahead of the next general election, because we believe that that scrutiny will add to public understanding about the choices that are being made—a call the Government only last week rejected—so too we think that a report as envisaged by the new clause would help the public to understand the impact of the top rate of tax so that they can make up their own minds about who is standing up for them and other working people like them.
Rushanara Ali
I could not agree more. I heard the speech of the right hon. Member for Wokingham (Mr Redwood), but it is clear that there are major divisions in our society. We should all be concerned about that. Tax breaks are given to those who do not need them—to millionaires; responsible millionaires will admit that the stance being adopted is divisive. We should protect those who are struggling the most as well as ordinary middle-income families in this cost of living crisis. I hope that the Government will take on board some of the points made about the social consequences of the tax inequalities that the Government are introducing and making worse.
Let us take my constituency of Bethnal Green and Bow as an example. Families there are significantly worse off than they have ever been. Child poverty is at 42% and there is still high unemployment. There are still major problems of worklessness and young people who are not in training or education. That is a major problem around the country: 870,000 young people remain unemployed.
Changes in taxes and benefits made since 2010 make one-parent families working to support children an average of £3,720 a year poorer. That staggering fall in living standards will affect the most vulnerable. The issue is not envy, but the fact that my constituents are struggling. They will rightly continue to ask why millionaires in the City are receiving a tax cut from the Government of about £100,000 a year. My constituents are working hard to make ends meet and their children are living in poverty. While they continue the battle to survive, they ask why the Chancellor is giving £3 billion a year in tax breaks to millionaires. How is that fair? How are we all in this together if that is the Government’s priority?
Jonathan Edwards
Given what the hon. Lady is saying, would she support a 50% rate on earnings above £100,000?
Rushanara Ali
I am here to debate the new clause. I am focused on what the Government are doing. I support the new clause because it is not fair that £3 billion a year should be going to millionaires. On top of that, as my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) mentioned, bonuses in the financial sector are up by 83%. My constituents are living between the City of London and Canary Wharf; they see the inequities and want a fair chance. They are not complaining about people earning a decent living, but they want the Government to be fair in how they tax.
Shabana Mahmood
My hon. Friend has made his point powerfully, and in his characteristic way.
As we can see, despite the Government’s claims, their record of tackling tax avoidance is simply not good enough in a number of areas. They will say that the avoidance measures in this Bill are radical and bold, and are evidence of a commitment to tackling avoidance. We have supported the measures relating to follower notices, accelerated payment notices and the need to tackle promoters of tax avoidance schemes, although we have questioned the Minister about some of the deeply felt concerns of those who will be affected by the follower notices regime and by accelerated payment notices, which have caused a great deal of debate outside the House. However, although those measures have received the Opposition’s support, the fact is that they are not revenue raisers. They will simply bring in money that the Government were expecting to collect, but which had been clogging up the various back channels and alleyways of the legal system.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
The hon. Lady has mentioned a number of measures, and has made some good points. Should not the Government be pursuing large multinationals such as Microsoft and Google, which are not paying a penny in corporation tax?
Shabana Mahmood
I think the Government should adopt an across-the-board strategy. I think they should deal with companies of all sizes, as well as individuals who engage in the various types of tax avoidance and evasion. I have mentioned a number of areas where there is concern about the Government’s action to date, and about their record of being able to narrow the tax gap.
The Government’s other flagship policy, introduced last year, is the general anti-abuse rule. Of course, it will take some time for the GAAR to settle in, as it is a new measure, and it is not yet clear how it will operate in practice, because it has not yet been the subject of a court case. It is, however, striking that no penalties regime associated with abuse falls within its remit. One would have thought that such a regime was a deterrent, and that the Government would want to make it clear that the type of abuse caught by the GAAR—abuse of the most egregious nature—would not be tolerated. However, it seems that an individual who fell foul of the GAAR, having engaged in the most egregious form of tax abuse, would incur no penalty but would merely be required to pay the amount that had been disputed. That strikes me as an interesting omission from the GAAR and the Government’s arsenal of measures to tackle tax avoidance.
Wales Bill
Jonathan Edwards Excerpts(10 years, 5 months ago)
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Mr Gauke
It is a pleasure to return to the Bill. I will start with new clause 1 and amendments 2 to 5. These are principally technical changes that, taken together, are intended to address two possible scenarios that could occur if a portion of income tax is devolved to the National Assembly for Wales following a referendum. The first issue relates to the tax status of an individual. This is directly relevant to the calculation of certain social security benefits, state pensions and child maintenance payments, and could be affected by the introduction of a Welsh rate of income tax.
An issue could arise where information regarding the tax status of an individual has not yet been established or is not available—for example, if a person has newly become self-employed and it is not yet clear what rate of tax will apply. The new clause resolves the issue by allowing the Secretary of State by order, subject to an affirmative resolution, to deem a person a Welsh taxpayer for the purposes of calculating their benefits.
The second issue relates to a situation where the Welsh rate of income tax has not been set for the coming year at the time when certain social security benefits need to be calculated. New section 116D of the Government of Wales Act 2006 requires the National Assembly to pass a Welsh rate resolution before the start of the tax year, but this could be set late in the preceding tax year, thus not allowing the Government sufficient time to make the calculations that need to be made. In such cases it would be important for the Secretary of State to be able to deem a Welsh rate. This mirrors the position in the Scotland Act 1998, which includes a similar power in respect of the Scottish rate of income tax. The Bill needs to provide for the same contingencies in respect of the Welsh rate.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
In Committee, there was some confusion as to whether Kay Swinburne, the Conservative Member of the European Parliament who represents Wales but lives in England, would be eligible for the Welsh tax rate. Can the Minister clarify that?
Mr Gauke
I fear that the hon. Gentleman may not recall that debate correctly. There is no confusion about the definition of a Welsh taxpayer. A Welsh taxpayer includes anybody who represents Wales or a Welsh constituency. I hope that repetition will provide some clarity for him, but the position was already clear.
Mr Gauke
All I can say is that Wales has a very good MEP in Kay Swinburne and I am delighted that she has been re-elected—[Interruption.] Indeed: by the people of Wales.
I return to the new clauses and amendments before us. However rare the circumstances that I set out a moment ago might be, the potential hardship that a delay in the calculation of entitlements would cause to individuals makes it essential that we make these amendments to cater for such circumstances.
Amendments 2 to 5 are consequential and relate primarily to the commencement of the new clause. As I said, these amendments are minor and technical, but they address an important set of circumstances that could have a serious impact on some of the most vulnerable in society. I urge all hon. Members to support them.
On Government amendment 1, clause 6 gives effect to the Silk Commission’s recommendation that the Welsh Government should be funded from a combination of a block grant and some devolved taxes, with the clause conferring the required competence on the Assembly to legislate for these devolved taxes. Amendment 1 slightly alters new section 116A of GOWA, inserted by clause 6, to correct the possibly misleading impression that those taxes listed in chapters 3 and 4 of part 4A are the only taxes for which the Assembly has competence. The Assembly already has competence for local taxation, which includes council tax and business rates, and this minor amendment clarifies the position.
On amendments 11 and 12, we have been working closely with the Welsh Government in relation to Welsh funding. In particular, the Government recognise that there has been convergence between the levels of funding in Wales and England since devolution, and that this is a significant concern in Wales. As a result, in October 2012 we agreed to implement a joint process to review the levels of funding in Wales and England in advance of each spending review. If convergence is forecast to occur during a spending review period, options will be discussed to address the issue in a fair and affordable manner, based on a shared understanding of all the available evidence.
In advance of the 2013 spending round, a joint review was therefore undertaken by the two Governments and the outcome set out in a written ministerial statement. The review determined that funding levels are not expected to converge during the period to 2015-16. In fact, an element of divergence is forecast to occur. The review also determined that relative funding levels in Wales are within the range recommended by the Holtham Commission. These arrangements ensure that we have a shared understanding of funding levels in Wales, and that a process is in place to consider options if convergence is forecast to resume. There is therefore a firm basis for proceeding with the new financial powers in the Bill, and I hope that when the opportunity arises, hon. Members will withdraw amendments 11 and 12, but I look forward to hearing them make their case.
I turn now to amendments 9 and 10. When it comes to the extent of income tax devolution in Wales, there is a careful judgment to make. Devolving an element of income tax would increase the financial accountability of the Assembly and the Welsh Government in three important ways. First, it would enable the Assembly to fund more of the spending for which it is responsible. Secondly, the Welsh Government’s budget would be directly linked to their economic decisions in areas such as education, skills, housing and planning. Thirdly, the Welsh Government would be able to vary the levels of tax and spending in Wales. However, creating the link between the Welsh Government’s decisions and their budget involves transferring some risk to the Welsh Government. Specifically, the Welsh Government’s budget would benefit if the income tax base grew faster in Wales than the UK average, but would be adversely affected if growth in Wales was slower.
The larger the proportion of income tax we devolve, the greater the potential impact on the Welsh Government’s budget. Devolving 15p of income tax would increase the size of these impacts by 50%, compared to devolving 10p. Devolving all income tax to Wales, which is the stated aim of amendment 9, would increase the potential impacts even further.
Jonathan Edwards
In the light of what the Minister has just said, why has the Prime Minister made a manifesto pledge, should there be a no vote in Scotland, to devolve 100% in the case of Scotland?
Mr Gauke
No, my right hon. Friend the Prime Minister has not made a manifesto pledge. The Strathclyde Commission has put forward recommendations, which will be considered in due course by my party for the next Parliament. I should point out with regard to the amendment tabled by the hon. Gentleman and his colleagues, which suggests replacing 10 percentage points with 100, that the effect would be to produce negative tax rates—a minus 60% tax, a minus 55% tax and a minus 80% tax. I am not sure that that was quite what the hon. Gentleman sought to do, but I appreciate that he was trying to devolve all income tax to Wales. I take the opportunity to point out that there is a technical problem with amendment 9.
There is a balance to be struck between risks and rewards. At this stage we see no evidence that suggests we should move away from the Silk Commission’s recommendation to devolve l0p of income tax.
Owen Smith
It was well worth waiting for the Secretary of State to intervene, but I think that the answer is no. Had he been paying attention, he would know that the First Minister has been very clear—[Interruption.] He says “Ah!”, but I think that there is no surprise in hearing that the First Minister has said that income tax-varying powers for Wales are not a priority, for all the reasons I have enumerated many times in this Chamber. If the Secretary of State was to debate some of these issues with me, rather than standing behind the Exchequer Secretary when it comes to all these detailed parts of his brief, perhaps we would have a clearer idea of his understanding of these issues.
Jonathan Edwards
Is the hon. Gentleman therefore concerned that the 22 local authorities in Wales can all put forward different levels of business rates?
Owen Smith
That is a tendentious and off-piste point, and I do not intend to busy the Chamber by bothering to respond to it.
We are still suspicious of the Government’s motives, not least because the leader of the Conservative party in Wales, Andrew R.T. Davies, has said explicitly that he wants to cut taxes for the wealthiest people in Wales. That is what we suspect that the Tory party would do if, heaven forfend, it were ever to assume power in Wales. We also still have suspicions that the Government are not really serious about doing this for Wales; in truth, we feel that it is more evidence that Wales is of interest to them only as a stick with which to try to beat the wider Labour party. We have heard this on health, on housing, and on education. Again, their perspective is to try to drive wedges into gaps that do not exist.
If the Government were serious about this, they would have undertaken some of the work that they have done in Scotland. When we last met here to debate this Bill on 6 May, we were anticipating a report by the Government—in fact, it was late by then—on the costs of implementing a similar scheme in Scotland. It did not come out on 30 March, as promised, but on 6 May—on the day, slightly unfortunately, of our debate. The report is entitled “Second Annual Report on the Implementation and Operation of Part 3 (Financial Provisions) of the Scotland Act 2012”. It contains welcome news, because it concludes that the total cost for Scotland will not be the £40 million to £45 million originally anticipated, but a mere £35 million to £40 million. That is what it will cost not Her Majesty’s Government but the Scottish Government to implement a separate Scottish tax regime.
One would have thought that if the Government were serious about implementing this, the cost to Wales should be measured, but the Treasury and the Wales Office have undertaken no such analysis. That is particularly troubling because of the point made by my hon. Friend the Member for Alyn and Deeside (Mark Tami), who is no longer in his seat. There is more complexity in implementing this scheme in Wales because of the greater population density on the border between England and Wales—on either side of Offa’s Dyke, or the line between life and death, as the Prime Minister refers to it. Just 4% of the Scottish population and 0.5% of the English population live within 25 miles of the Scottish border, whereas 48% of the Welsh population and fully 10% of the English population live within 25 miles of the Welsh border.
In Scotland, such measures would potentially affect just 450,000 people who travel back and forth across the border, whereas in Wales the number is likely to be closer to 6.5 million. The implementation costs for Wales are therefore likely to be greater, if not the volume of communication that the Government will have to undertake. Were they serious about this, we might have heard some analysis from them today, but we have heard not a jot.
Owen Smith
Absolutely, so perhaps the Secretary of State could come back to the Dispatch Box to explain why that connection was never made in Scotland, and why, in Scotland, the powers relating to the amount of borrowing were a function of the capital expenditure budget. Can he explain why that difference occurred? Obviously, he cannot, so once again, we know that the Government have simply made it up as they went along.
My last point deals with our fair funding amendments. We remain convinced that the Government do not intend to provide fair funding for Wales, and that any extension of devolution of taxation to Wales ought to be subject to a clear understanding, and agreement by the Welsh Government that the fair funding issue has been dealt with. The Exchequer Secretary acknowledged earlier that the issue of convergence has been accepted by the Government in the floor that has been put beneath the Barnett formula. The Holtham commission said that there was a shortfall of about £300 million—perhaps it is now as little as £150 million—in Wales, but we are convinced that the Welsh Government ought to be the arbiter of whether that fair funding test has been met. That is why we would encourage the Government to adopt our proposal of a back-stop power for the Welsh Government to determine whether fair funding is afforded to Wales.
Jonathan Edwards
Diolch yn fawr, Mr Deputy Speaker. It is a pleasure to serve under your guidance as we discuss this vital Bill, which will empower the Welsh Government with an element of fiscal responsibility for the first time. I would have hoped that all MPs representing Welsh constituencies were united in the view that one of our major roles as elected Members is to ensure that the Welsh economy is able to perform far better than it has in the recent past. Considering the incredible wealth inequalities that exist within the UK, with Welsh communities all too often at the bottom of the wealth league, I would have hoped that every political party was united in a mission to turn around the decades of neglect served upon Wales by successive UK Governments.
Far too many politicians in Wales rejoice at the underperformance of the Welsh economy, as it enables them to preach that Wales is far too poor, too small and too weak to succeed as an independent country. Their assertions are plainly ridiculous; Wales has all the ingredients to be a successful nation. We are a country that is rich in natural resources. Our people are highly talented, producing global leaders in science, academia, sport, culture and economics. The real question we should ask ourselves in Wales is: how do we find ourselves in such a predicament? Are we, as a people, content to languish at the bottom of every performance table and at the top of all poverty measurements?
If I was a unionist, I would be ashamed of the fact that gross value added per head in inner London is 12 times larger than that in west Wales and the valleys—the communities I represent. Westminster is not working for Wales, which is why my party believes that the potential of the people of Wales can be achieved only if our own democratic institution has the tools to move our country forward. History shows that changing the colour of the Government in Westminster will make no difference: the Westminster parties are all signed up to the same economic agenda that has failed Wales for far too long, and the people of Wales increasingly understand that. All polling indicates that they want the National Assembly empowered with more political responsibility. A poll by the Silk commission found that 64% believed that income tax should be devolved to the Welsh Government, so it is disappointing, to say the least, that the efforts of Plaid Cymru to improve and strengthen the Bill in Committee hit the infamous Westminster wall. In Committee, we endeavoured to preserve the integrity of the proposals of the Silk commission, which of course were the foundation for this Bill. Disappointingly, all the Westminster parties reneged on the cross-party agreement that had been made during the commission. The Bill undermines what was agreed in the Silk commission, cherry-picking from a comprehensive package. On more powers for Wales, the three Westminster parties are three peas in a pod, despite the protestations of their representatives in the National Assembly.
In Committee, Plaid Cymru put forward sensible and reasonable amendments that would have improved the Bill. Those included removing the damaging lockstep on the proposed income tax-sharing arrangement between the UK and Welsh Governments; inflation-proofing the borrowing powers included in the Bill; and empowering the Welsh Government to issue bonds and tax credits, as has been done in Scotland. We also tabled a series of constitutional amendments on matters as simple as enabling the National Assembly to determine its own name; to set its own number of elected Members; and to determine its own electoral system. Needless to say, none of the amendments was accepted by the UK Government and neither would Labour offer its support, preferring instead to table wrecking amendments that would further dilute the effectiveness of this Bill. I suspect that has something to do with the anti-devolution cabal currently ruling the roost in the Labour Westminster shadow Wales Office.
Wayne David
Can the hon. Gentleman answer this simple question: are he and his party in favour of tax competition and the race to the bottom among the nations and regions of the United Kingdom?
Jonathan Edwards
Enabling the Welsh Government with tax-raising powers would incentivise the Welsh Government to improve the Welsh economy. At the moment, they are a spending body, in essence; there is no incentive for them to improve the economy. That is why these fiscal powers are so important.
Mr Harper
It might help the House if we thought for a moment about what Opposition Members mean when they talk about a “race to the bottom”. They mean that we allow hard-working families and other people to keep more of their own money so that they can make decisions about spending it, rather than having it taken off them and spent by the Welsh Government. That is what Opposition Members mean and it indicates all too clearly what they are about.
Jonathan Edwards
Well, that is the hon. Gentleman’s position. But if the Labour party’s position were to hold true in Wales, there would be a uniform business rate across the 22 Welsh local authorities. There seems to be a slight misunderstanding in Labour’s position.
Alun Cairns
Extending that logic beyond business rates, the same would apply to council tax rates. We have seen a 12% increase in council taxes in Wales since 2010, whereas there has been a broad freeze here in England.
Jonathan Edwards
The hon. Gentleman makes my point for me. He says that there are 22 local authorities in Wales, all with fiscal powers to change council tax rates and non-domestic rates. The Labour party does not seem to think that is a problem in Wales in terms of tax competition.
In my opening remarks in Committee, I also said that events in Scotland would supersede the second part of the Silk commission’s work and probably this Bill. Although it might appear that I have fortune-telling abilities, I reassure you, Mr Deputy Speaker, that I have yet to acquire such powers. Earlier this month, the Tory Strathclyde commission recommended that in the increasingly unlikely event of a no vote in Scotland in September, the Scottish Government should be given full income tax powers, and powers over VAT and the welfare system. The proposed new powers would make the Scottish Government responsible for gathering 40% of the money they spend. Crucially for this Secretary of State and this Bill, the Prime Minister has fully backed the commission’s proposals and promised to include them in the Conservative manifesto for next year’s general election. Contrary to the Minister’s remarks, the Prime Minister said that there was no reason why these powers should not be transferred to Scotland after the general election. Ruth Davidson, the leader of the Conservative party in Scotland, has said that this was going to be in its 2015 manifesto. Therefore, Treasury Ministers’ revelations might be revealing in terms of the debate in Scotland over the next few weeks.
The Secretary of State finds himself in an uncomfortable position, as this Bill represents the Tory offer for Wales. The people of our country can easily compare and contrast what is on offer for Wales with what is on offer for Scotland. Furthermore, the BBC is reporting that all three Westminster parties are pledging an agreement of joint travel, promising more powers for Scotland. Yet, this Bill does not even take us in Wales to where Scotland is now. Wales is not a second-class nation and there is no more powerful message in Welsh politics than equality with Scotland. This Bill is far from being a settlement that will last a generation; if the Tories want to survive in Wales next year, this Bill is unlikely to make it past the Lords in the autumn.
Only last week, none other than the Financial Times stated in its editorial that the UK should move to a federal model, noting that
“the status quo is not an option.”
It added that Wales should be included in proposals for full fiscal and policy autonomy. Today, we will endeavour to put forward amendments that will strengthen the Bill considerably. As the Westminster parties have decided to torpedo the Silk commission, we will also put forward amendments that go beyond its recommendations and reflect the rapid change of the constitutional debate within these isles. We will seek to divide the House on our later amendments in the next group, so that the people of Wales can contrast Plaid Cymru’s ambition for Wales with the apathy of the Westminster parties.
First, however, I will speak to our amendment 9, which is a straightforward, probing amendment. It would make the Welsh Government responsible for 100% of the income tax revenue gathered in Wales, rather than having the meagre 10%-90% split income tax-sharing arrangement on offer in this Bill. My Plaid Cymru colleagues and I have already tried to maintain the integrity of the original cross-party Silk commission recommendations. We tabled relevant amendments to the Bill in Committee, but they were either voted down or abstained on by Labour MPs who would not support what their colleagues in the National Assembly had been saying.
I mentioned the fact that the Tory Strathclyde commission has reported its conclusions. It recommended 100% devolution of income tax to Scotland. The report was fully endorsed at the highest levels of the Conservative party, with the Prime Minister himself giving it his full backing and saying that its recommendations would be included in the Conservative manifesto at the next UK general election. I need not point out to the Secretary of State, therefore, that what his party is offering to Scotland reveals what is on offer here to be completely behind the times.
Wayne David
Is there not a contradiction between what the hon. Gentleman is now arguing for and his total support for the Silk recommendations? Surely he must choose one or the other.
Jonathan Edwards
I appreciate the hon. Gentleman’s intervention. As I have said, we endeavoured to preserve Silk during the Committee stage, but our attempts were completely torpedoed by the Government and by Labour. We are therefore saying that we are going to go beyond Silk in the remaining stages of the Bill.
Even the Financial Times says that the UK should move to a fully federal constitution. As I said earlier, it stated in its editorial on Monday last week:
“A shift to far greater fiscal devolution north of the border would have to be mirrored across the rest of the union. It would require a whole new constitutional settlement whose purpose would be to create a more federalised Britain...First, Wales and Northern Ireland would need to gain similar powers to those in Scotland to raise, and vary, tax rates.”
Crucially, it ended by saying that
“the creation of a new constitutional settlement...is not something that can be left on hold”.
Last week we also learned not only that 55% of the peoples of the UK want greater fiscal and policy powers for Scotland, but that 54% want Wales to have those same greater freedoms, according to an ICM poll commissioned by the Evening Standard.
We are moving towards a far looser Union, and that is why this Wales Bill is a major missed opportunity. I have always said that the powers on offer in the Bill would be completely overtaken by events in Scotland and I have been vindicated, not least by the fact that there is an increasing likelihood of Scotland voting yes in September, thereby making the Bill look like a sticking plaster put over a burst dam.
All the Unionist parties are now falling over themselves to offer increased devolution in Scotland, despite having previously said that that should not be an option in the referendum. They must be kicking themselves that they did not include it as a third option on the ballot paper. Who will believe a word they say when they promise jam tomorrow? I would say, based on past evidence—and on what the Exchequer Secretary to the Treasury has said today—that the only way for the people of Scotland to guarantee more powers for Scotland is to vote for independence.
I would draw the people of Scotland’s attention to the Wales Bill. Here we have a Government who set up a cross-party commission to bring forward a consensus which carefully put together a fully endorsed package of reforms. The Conservatives and the Liberal Democrats then reneged on their word by cherry-picking and watering down the recommendations of the cross-party commission. They added restrictions and caveats further to render the powers unusable via mechanisms such as the lockstep. The UK Government’s attempt to strangle the cross-party Silk commission’s original recommendations by adding caveats, restrictions and locksteps should be a salutary reminder to the Scottish people of the sincerity of Westminster’s promises regarding further devolution. If the Wales Bill is anything to go by, the Government here will make a big headline-grabbing announcement promising more devolution, only to reveal a paltry offer when the surface is scratched away.
Wayne David
I take the hon. Gentleman back to his comments a moment ago, when he said he was supporting Silk. He is now saying that he is not supporting Silk. Is he behind Silk or not? Does he want to see those proposals taken much further? He cannot have his cake and eat it; he must decide one way or another.
Jonathan Edwards
I am grateful to the hon. Gentleman for that second attempt, but I think I answered his question when he first intervened on me.
It is interesting that Labour Front Benchers have only now tabled amendments to the Bill to give Wales control over 15% of income tax revenue gathered in Wales. That proposal is in amendment 10. Admittedly it is better than the 10% on offer in the Bill as it stands, but it is still meagre and shows a lack of ambition and vision for Wales. That is symptomatic of the Labour Government in Cardiff and their puppet-masters here in Westminster. Of course, 15% is better than 10% and we shall be supporting the amendment if it is pressed to a vote, especially as it does not include the lockstep-plus mechanism I referred to in Committee. However, it still reflects Labour’s lack of dynamism. Why only 15%? That figure seems to have been chosen simply because it is ever so slightly better than the Tory and Lib Dem offering.
I see that Labour’s other amendments are more concerned with delay, obfuscation and preserving its own positions than with trying to get the best deal for Wales and its economy. On the vote in Committee to remove the lockstep restriction, Labour abstained, despite the Labour First Minister and Finance Minister having said that it should be removed. Where is Labour’s consistency? Again Labour Members say one thing in Wales and do another at Westminster. They are now saying that Wales should have control over 15% of income tax revenue, yet their amendment says nothing about the removal of the lockstep.
When the Westminster Government announced in November last year that Wales would be getting new powers, they stated that the powers would make Wales an “equal partner” in the UK. Nothing could be further from the truth. The Secretary of State for Wales has previously argued that Wales must be given “equal respect with Scotland”, yet his actions run completely against that. His party is effectively offering Scotland full income tax devolution, yet he is maintaining the lockstep in the Bill for Wales and proposing that we should have control of only 10% of the income tax revenues raised in our country.
In conclusion, I want the same powers for Wales as the other nations of the British state either have or are being offered. If the main party of Government here at Westminster has full income tax devolution for Scotland as its party policy, why on earth should Wales not have those same powers? The changing context of the Scottish independence referendum debate vindicates what I have said all along—namely, that its rapid development will ensure that the powers on offer in the Bill will not be the settlement for a generation that the Government are suggesting.
The Welsh economy needs those powers now, never mind in three years’ time—the earliest point at which they would come on stream. Ultimately, the powers on offer in the Bill pale into insignificance in the context of how the constitution of the British state will alter in the coming years. That should be noted by this Government and all the parties, and we should begin with full devolution of income tax, so that the Welsh Government can determine their own bands and rates.
Mr Gauke
I shall briefly respond to a number of the points raised in the debate. The first related to the cost of implementing the Welsh rate of income tax. HMRC is looking to develop a specific estimate for that cost but, because the timing of the introduction of a Welsh rate is uncertain and because it would depend on the outcome of a referendum in Wales, it is difficult to do so at this time.
I want to make two comments in regard to the comparisons with Scotland. First, the Scottish population is obviously larger than the Welsh population, so that will reduce some of the costs. Secondly, however, a counteracting element is that the number of people living close to the border might result in an increase in the number of people contacting HMRC to seek clarification. The hon. Member for Pontypridd (Owen Smith) mentioned the concern about the number of people working in Wales but living in England, and vice versa. We must remember that the definition of a Welsh taxpayer is based on where they live, not where they work. For the vast majority of people, it will be clear where they are, so we should not overstate those costs. As I have said, however, it is difficult to come up with a precise number at this point.
On the Strathclyde commission, I have made it clear that that will relate to what happens in the next Parliament. We certainly welcome Lord Strathclyde’s recommendations; there is much to take from them.
Jonathan Edwards
Given the comments of the Prime Minister and, especially, of the leader of the Conservative party in Scotland, does the Minister think that Ruth Davidson was being rather exuberant—for want of a better word—in proclaiming that those measures would definitely be in the manifesto?
Mr Gauke
I would say to the hon. Gentleman that what the Prime Minister says will be in the manifesto tends to be in the manifesto. That is a fairly wise approach.
The Opposition have set out their views and I think we have finally got some clarity. I think that Labour’s position is that we should not devolve any element of income tax to Wales, but that devolving 10p is not high enough and it should be 15p. In other words, it is saying that 15p is better than 10p, but nothing is better than anything. Labour also supports the Bill because it wants the Welsh Government to have access to borrowing powers that come as a consequence of having independent revenue streams, but it does not support the Welsh Government having access to the biggest independent revenue stream that might be available, which is income tax. I hope I have characterised Labour’s position correctly. It is simultaneously both for and against, on at least two different grounds.
With those points of clarification, I hope that the Government new clause and amendments will be accepted and that the Opposition amendments will not be pressed to a Division.
Question put and agreed to.
New clause 1 accordingly read a Second time, and added to the Bill.
New Clause 2
Infrastructure guarantees in Wales
‘Her Majesty may by Order in Council provide for the transfer of responsibility for providing infrastructure guarantees in Wales to the Welsh Ministers.’—(Jonathan Edwards.)
Brought up, and read the First time.
Mr Deputy Speaker (Mr Lindsay Hoyle)
With this it will be convenient to discuss the following:
New clause 3—National Assembly ability to hold binding referenda—
‘Her Majesty may by Order in Council provide for the transfer of responsibility for holding binding referenda to the National Assembly for Wales.’
New clause 4—National Assembly for Wales: reserved powers—
‘(1) The Secretary of State will lay a report before each House of Parliament on the further legislative steps needed to move to a model of reserved powers for the National Assembly for Wales and shall lay the report before each House of Parliament within nine months of this Act receiving Royal Assent.
(2) Part 2, except the referendum-related provisions and sections 19 and 20 shall not come into force until the report has been laid in accordance with subsection (1).’
Amendment 8, in clause 19, page 22, line 8, at end insert—
‘(1B) Welsh Ministers may set their own capital expenditure priorities.”
This amendment and amendment 5 enable the new clause inserted by new clause NC1 to come into force by order of the Secretary of State if the majority of voters in a referendum held under clause 11 vote in favour of clauses 8 and 9 (the income tax provisions) coming into force.
Jonathan Edwards
We should be using this Bill to empower the Welsh Government—with an arsenal of powers to enable them to intervene in the Welsh economy. During our discussions on the Bill, we have debated fiscal powers and different elements of borrowing powers. However, we have not debated one lever that could be of enormous use to the Welsh Government and that might not necessarily cost a penny, but that would allow them to provide security to various infrastructure projects that might not take place without such backing.
New clause 2 would allow the Welsh Government to issue financial guarantees for private projects that they choose to support in such a manner. Government guarantees are useful for companies that are then able to draw down private investment to fund their projects. As I have said, these guarantees would cost the Government nothing, unless the project fails.
Effectively, guarantees mean that the Government financially underwrite a project. In many cases, guarantees are more useful for helping projects get off the ground than borrowing powers. It is a simple measure that would help the Welsh Government kick-start infrastructure development in Wales, boosting jobs and growth.
I need only quote what the Chief Secretary to the Treasury had to say about the importance of guarantees when he launched the most recent outline of UK Government-backed projects:
“The offer of a guarantee is helping to get projects going…There is a lot of infrastructure happening in this country because of this programme.”
The Institute of Civil Engineers said that the guarantee scheme had enabled
“viable projects to secure finance in difficult market conditions…It is an excellent example of government making creative use of its resources to get projects moving,”
Last October, the UK Government announced their £40 billion guarantee scheme. Projects earmarked for support included a £300 million biomass energy generation plant in Avonmouth in Bristol; a £400 million gas-storage facility in Islandmagee in County Antrim; two gas-fired power plants in Lincolnshire and Essex; mixed-use development of homes, offices and shops in Aberdeen; a wind farm on the Forth estuary; a renewable energy port facility in north Lincolnshire; a low-carbon fuel plant for commercial vehicles; development of the university of Roehampton campus in Surrey; a wood-fired generation plant in Tilbury in Essex; relocation of Northampton university; a Five-Quarter Energy gas plant in the north-east of England; and ethane storage facilities at the Ineos Grangemouth plant near Falkirk in Stirlingshire.
If we look at the UK Government’s list of prequalified projects, which was updated on 16 June, we will see that none of those projects is in Wales. Despite heady announcements from the UK Government about “co-operation agreements” and the inclusion in the national infrastructure plan of projects in Wales, not one has even reached the prequalified stage, according to the publicly available list.
The UK Government guarantee scheme should not be confused with the national infrastructure plan, which is a wish list of future projects. The plan does include the proposed Wylfa B, with a promise of UK Government financing help following planning approval. The national infrastructure plan of December 2013 mentions
“a new cooperation agreement with Hitachi and Horizon with the aim of being able to agree an in-principle guarantee by the end of 2016 to support the financing of a new nuclear power plant at Wylfa, subject to final due diligence and ministerial approval.”
It has, therefore, still not reached the prequalified stage.
Returning to the UK Government guarantee scheme, the eagle-eyed will notice that none of the prequalified projects is located in Wales. Therefore, the Treasury is using Welsh taxpayers’ money to underwrite projects in other parts of the UK, and Wales has so far seen precious little, despite being desperately in need of better infrastructure to drive forward the Welsh economy. Driving forward the Welsh economy would be a real effort to rebalance the UK economy geographically, yet this Government have no real interest in doing so. They should either bring more infrastructure projects to Wales, or give the Welsh Government more tools to do so. I and my Plaid Cymru colleagues believe that it is for the people of Wales, through their democratic institutions, to decide which infrastructure projects to underwrite and where.
Jonathan Edwards
The point I am making is that all the investment seems to be on an east-west basis, rather than on a north-south basis.
Hywel Williams
Apropos of that intervention, I would have thought that the hon. Member for Alyn and Deeside (Mark Tami) was rather more interested in developing the A55 than the M4.
Jonathan Edwards
I am sure that that very useful intervention will be noted by the constituents of the hon. Member for Alyn and Deeside (Mark Tami).
Plaid Cymru recognises the issue of congestion on the M4 corridor around Newport and wants investment to take place. However, the current Labour Welsh Government’s preference for a new M4 to the south of Newport at a cost of £1 billion is a disproportionate solution to the amount of congestion. According to Friends of the Earth and Professor Stuart Cole, the Welsh Government consultation documentation overestimated traffic growth in 2012 and 2013. The flows were lower than the Welsh Government predicted, so they do not have a strong enough statistical base on which to justify such a huge financial and environmental cost. As the Federation of Small Businesses has pointed out, committing the vast majority of Welsh borrowing capacity and money from outside the borrowing limit in the Bill to one single project is misguided and does not serve the whole of Wales or the whole of the Welsh economy.
Paul Murphy (Torfaen) (Lab)
I am listening with extreme interest to the hon. Gentleman’s points. It seems to me that Plaid Cymru is therefore actively opposing the development of the relief road around the M4, which he will have to explain to those who vote for Plaid Cymru in Gwent and Glamorgan.
Jonathan Edwards
I have huge respect for the right hon. Gentleman. I will outline two alternative proposals that would be a better use of the borrowing capacity of the Welsh Government than blindly following what the Treasury wants.
The new M4 will not be a quick and decisive solution, despite what its supporters say. It will not be completed until 2031, according to the Welsh Government. The £380 million blue route, an upgrade of the A48 corridor that includes flyovers, would represent better value for money and would avoid the environmental damage caused by building on the Gwent levels to the south of Newport. The road upgrade would be accompanied by modern traffic management methods, such as signage to direct traffic flows between the A48 and the existing M4, depending on congestion levels. The blue route is future-proofed until 2035 and, if needed, it could be developed further beyond 2035. Money saved by developing the blue route could be invested elsewhere in Wales. In our previous transport consultation, Plaid Cymru identified transport needs in north, mid, west and south Wales. Above all, Plaid Cymru’s proposal to support the blue route is more innovative and balanced than the proposal with which the Labour and Conservative parties are trying to push ahead. Wales must not get tied into the UK Government’s deal on the M4.
Ultimately, although a new route is needed to relieve the pressure on the M4, what is really needed is the development of a metro system for south-east Wales and the valleys. Early estimations have put the costs at about £1 billion. The reality is that the M4 is used as a local road in south Wales, as the right hon. Member for Torfaen (Paul Murphy) well knows: 40% of journeys made on the M4 in that area are local ones of less than 15 miles. This means that—in one act—commuter journeys could be transferred to a metro system to relieve the pressure on the M4. The great thing about a metro system is of course that, after the initial outlay, a ready stream of revenue is provided through ticket sales that could be used in part to repay the initial expense and reinvest in services and upkeep. The success of the Newcastle and Tyneside metro could be repeated in south Wales if we had the necessary vision.
In conclusion, it appears that the Westminster Government are intent on binding the Welsh Government’s hands on how they utilise the borrowing capacity. The M4 relief road is a case in point. Unfortunately, the current Labour Welsh Government lack the ambition and vision to do something different, and are blindly following the UK Government’s lead. Amendment 8 would make sure that a future Plaid Cymru-led Welsh Government were not bound in the same way but could prescribe more intelligent solutions to infrastructure problems and provide a boost for the whole of the Welsh economy, rather than just the primary corridor routes in and out of Wales that concern the Westminster Government. With your permission, Mr Deputy Speaker, I will therefore definitely push amendment 8 to a vote at the appropriate time.
Paul Murphy
It was interesting to hear the points made by the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), but I want to concentrate on my party’s new clause 4 on reserved powers. I very much welcome the new clause, which relates to the laying of
“a report before each House of Parliament on the further legislative steps needed to move to a model of reserved powers for the National Assembly for Wales”.
[Interruption.] Perhaps I should give up for a second while negotiations are going on behind the Speaker’s Chair.
I repeat that I support new clause 4 on reserved powers for Wales. I remind the House that the Leader of the Opposition, who was in north Wales for the Labour party conference some months ago, said that the next Labour Government would introduce a
“new Government of Wales Act, with powers assumed as devolved to Wales, unless specifically reserved. Bringing Wales into line with Scotland—modernising and advancing the devolution settlement for generations to come.”
I do not see why the Government, and particularly the Secretary of State for Wales, should reject such a proposal. In an earlier incarnation, I was probably more sceptical about devolution than even he is now, but the world changes. As the hon. Member for Carmarthen East and Dinefwr mentioned several times, the world has changed with regard to what might or might not happen in Scotland in a few months’ time. Let us assume, as I hope will be the case, that the voters of Scotland vote no. If that happens, we know that the Government—not the Opposition—will make far-ranging changes to Scotland’s constitution, with its Government being given extra powers as a consequence of his Government’s commitments. The Secretary of State also knows that it is quite likely that a future Labour Government would agree to such proposals. I therefore cannot understand why he is opposed to reserved powers for Wales only a matter of weeks before the possible introduction of a new Bill for Scotland that would give extra powers.
That argument is simple enough, but in a sense it goes back to our previous debate about borrowing. The Treasury Minister tried to make the point, rather heavily I thought, that borrowing could not be greater in Wales because we did not have sufficient streams of income. However, the shadow Secretary of State pointed out that Scotland and Northern Ireland were given borrowing powers for different reasons. Therefore, it is strange that, within Government, Wales is going that way and Scotland is going another way. There is no reason why that should be the case.
Stephen Crabb
The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) said that the purpose of amendment 8 is to ensure that the Welsh Government can use their new borrowing powers to invest in projects that they, rather than Her Majesty’s Treasury, want to take forward. I should point out that the Bill already provides Welsh Ministers with complete flexibility to decide how to use their borrowing powers, in much the same way that they have complete flexibility regarding their resource and capital budgets. I wonder whether the hon. Gentleman was confusing the requirements for the early borrowing powers with the wider borrowing powers the Bill sets out. Regarding the former, he is right that there is a specific agreement between the Welsh Government in Cardiff and the UK Government—specifically the Treasury—to facilitate early movement on a strategic project of importance to the Welsh nation and economy: namely, the M4 upgrade. So, rather than it being a project imposed from above by the UK, it is very much demand-led from within Wales.
Jonathan Edwards
The Bill as I read it states that the Treasury has the final say on what the Welsh Government will be able to use those borrowing powers for, and the UK Government have made it crystal clear that their priority is the M4 relief road.
Stephen Crabb
There is a line in the Bill that refers to Welsh Ministers being able to borrow with the approval of the Treasury. That merely refers to the overall borrowing limit, which the Treasury will agree with the Welsh Government. It is not about the Treasury signing off on individual projects. We want to give the maximum possible freedom to Welsh Ministers to use their borrowing powers to decide on exactly the infrastructure projects they want to take forward. I am very happy to continue this discussion with the hon. Gentleman another time, but that is the situation.
On new clause 2, the Welsh Government already have the power to provide guarantees in relation to their devolved responsibilities. Section 70 of the Government of Wales Act 2006 states that
“Welsh Ministers may give financial assistance (whether by way of grant, loan or guarantee) to any person engaged in any activity which the Welsh Ministers consider will secure, or help to secure, the attainment of any objective which they aim to attain in the exercise of any of their functions.”
So there are no handcuffs or binds on Welsh Ministers. For example, they already have the powers to support the Circuit of Wales with a guarantee, should they choose to do so. Conversely, the UK Government would not be able to provide a guarantee under the terms of the Infrastructure (Financial Assistance) Act 2012 as the Circuit of Wales project does not meet the infrastructure criteria set out in the legislation.
Furthermore, it is the size of the UK Exchequer that enables the UK Government to guarantee substantial infrastructure projects, such the Wylfa Newydd nuclear plant that has been guaranteed with Hitachi. Wales, therefore, benefits from UK Government guarantees in relation to energy and other infrastructure, while the Welsh Government can decide how to provide financial support to help deliver their own devolved responsibilities.
Jonathan Edwards
I can base my position only on the list of prequalified projects, which was last updated by the Government on 16 June. I have a list here of a page and a bit, which has not a single Welsh project on it.
Stephen Crabb
All I can do is reiterate the information that I have received from the Treasury that there are indeed Welsh projects at the prequalification stage. We are currently talking about infrastructure guarantees to Welsh businesses and other companies that want to invest in Wales. I will happily write to the hon. Gentleman with further information to clarify the situation. On that note, I hope that Members agree that the existing arrangements and the Bill before us are therefore optimal and will withdraw amendment 8 and new clause 2.
I turn now to new clause 3, which would allow the transfer of responsibility for referendums to the National Assembly for Wales. I am afraid that with this new clause, we once again find Plaid Cymru trying to shoehorn far-reaching and fundamental changes to the wider devolution settlement for Wales into this specific Bill, which takes forward the recommendations of part 1 of the Silk commission.
Referendums, such as the one this Bill provides for, are intended to allow the electorate to decide on key constitutional issues. Competence for the conduct of referendums, except in very exceptional circumstances, such as those around the Scottish independence referendum, rests at a UK level. I have seen no evidence yet to suggest that there should be any change to the existing devolution settlement.
It is also worth noting that the Silk commission made no recommendations about that issue when it examined the devolution settlement in its second report. Furthermore, there have been no calls from the Welsh Government or the Assembly for this competence to be transferred.
This Bill is focused on delivering new fiscal powers to Wales that were recommended by the Silk commission in its first report, and new clause 3 forms no part of that. I therefore ask Opposition Members to withdraw this amendment as well.
Finally, I turn to new clause 4, which bares a striking resemblance to an amendment tabled by Opposition Members in Committee. The new clause seeks to postpone the commencement of part 2 of the Bill, apart from the referendum provisions and clauses 19 and 20 in relation to borrowing powers, until the Secretary of State has laid a report before both Houses of Parliament setting out the steps needed to move to a reserved powers model of devolution. That report would need to be laid within nine months of the Bill’s enactment, generously giving the Government three months longer than the Opposition permitted in their Committee stage amendment.
With these new clauses, Labour Members once again seek to connect directly the commencement of the parts of the Bill that will devolve tax-raising powers to the Assembly with one of the most far-reaching of the Silk commission’s part 2 recommendations. Other hon. Members have described that as a delaying tactic; some have even described it this afternoon as a wrecking tactic. It reveals yet again the Welsh Labour party’s opposition to the proposals in the first Silk commission report to devolve income tax powers to Wales. It is merely a smokescreen for Labour Members’ deep and widely held scepticism and suspicion—they have used those words this afternoon—and they fundamentally oppose fiscal devolution, which is the next important stage of devolution for Wales.
As this Government have made clear on a number of occasions, a move to a reserved powers model would be a fundamental change to the devolution settlement in Wales. We have also made it clear, as did the Silk commission, that this should be a matter for party manifestos at the next election. Therefore, there is nothing to be gained by requiring the Government to report to Parliament on the legislative steps needed to move to a reserved powers model.
Once again, the Labour party seems to be mired in confusion about its position in relation to the Silk commission’s recommendations in the part 1 and part 2 reports. As is typical of the Labour party, it wants borrowing powers, but it does not want the means to pay back the money borrowed. It does not want true accountability for the devolved Government in Wales; it just wants public spending on the never-never. Just such a reckless attitude by the Labour party got this country’s finances into such a mess in the last Parliament.
This coalition Government have no intention of returning to that sorry state of affairs. We are committed to devolving the tax and borrowing powers in the Bill as soon as possible, so that the Welsh Government can become accountable for raising the money that they spend and for repaying the money that they borrow. I therefore invite Opposition Members to consider the full implications of new clause 4 and not to press it.
Jonathan Edwards
We have had an interesting debate on this group of new clauses and amendment 8, three of which Plaid Cymru tabled: first, to allow the Welsh Government to issue a guarantee to enable them to boost economic development; secondly, to release the handcuffs on borrowing powers to enable them to choose their own priorities—the borrowing capacity in the Bill will be more or less completely consumed by the M4 project that the Treasury favours; and, thirdly, to hold binding referendums based on the Edinburgh agreement.
Labour tabled new clause 4. Obviously, as a party, we fully support the move to a reserved powers model for Wales. It is a pity that the Labour party decided to spoil the new clause with a second element, which is obviously a delaying tactic. The Welsh economy needs these powers now, rather than waiting for a report. It is obviously a wrecking new clause, typical of Labour’s attitude during progress on the Bill in all its various stages. Plaid Cymru is not a tribal party—we vote as we see fit—but we cannot support new clause 4 because of the wrecking element in its second part.
With your permission, Madam Deputy Speaker, I intend to press amendment 8 to a vote at the appropriate time, but I will not press new clause 3 and ask leave to withdraw new clause 2.
Clause, by leave, withdrawn.
New Clause 4
National Assembly for Wales: reserved powers
‘(1) The Secretary of State will lay a report before each House of Parliament on the further legislative steps needed to move to a model of reserved powers for the National Assembly for Wales and shall lay the report before each House of Parliament within nine months of this Act receiving Royal Assent.
(2) Part 2, except the referendum-related provisions and sections 19 and 20 shall not come into force until the report has been laid in accordance with subsection (1).”—(Nia Griffith.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Mrs James
I support having both first-past-the-post and regional Assembly Members. They add a great deal to the Assembly and, as I have already said, the system is fairer and proves that people who stand for smaller parties get a voice. That cannot be opposed, but I am opposed to people standing on both lists.
Mrs James
I want to finish, because I promised to be brief and I want to keep my speech tight.
It is no wonder that the public see us politicians as a bit devious and above and beyond the basic rules, because we always apply rules that suit us. That is what the public see this as, purely and simply: politicians having a second bite of the cherry when they do not. I ask the Secretary of State to reconsider the amendment and to consider our proposals seriously.
Owen Smith
I echo the Secretary of State’s thanks to colleagues from all parts of the House who have engaged in debate and scrutiny of this Bill on the Floor of the House over what feels like quite a long period of time. We have had a constructive set of discussions, which have revealed some of the divisions between Ministers and their Conservative colleagues in the Welsh Assembly and exposed the clarity of the Opposition’s support for devolution.
I join the Secretary of State in thanking Paul Silk and the members of his commission for preparing the groundwork for this Bill, and also for reflecting on the future of Welsh devolution, not just in respect of fiscal powers but beyond that. I am sure that we will debate the measures in the second part of the Silk report at some future stage.
Labour supports much of this Bill, and will not oppose it on Third Reading. In particular, we support the Government’s decision to afford Wales borrowing powers. I have said on many occasions in this House that, in not being able to borrow, Wales has been at a disadvantage compared with other parts of the UK. We have acknowledged that that was a mistake of previous devolution legislation. Wales is a legislature that should be able to borrow in order to invest in vital infrastructure. It is welcome that the Government have recognised that, and are moving to afford Wales those borrowing powers. It is a shame that the borrowing powers are not the same as those that will be enjoyed in Scotland, but, overall, we are supportive of the measure.
We are supportive, too, of the proposal to devolve stamp duty, land tax, landfill tax and other minor taxes. Business rates are also to be fully devolved to Wales. We look forward to the Welsh Government, with their progressive values, using those powers in a fair and progressive manner to deliver, hopefully, innovative and progressive solutions for Welsh people in respect of land and businesses taxes.
I also welcome the move towards a more symmetrical position between Wales and Scotland. Wales is not Scotland, and the history of our two countries is very different. The way in which we came to support devolution is very different, and I have often said that. That asymmetry can be explained by our different histories and the different degrees of support for devolution in Wales and Scotland at the point of the initial referendum. However, that position has changed, which could be due in part to the impending referendum in Scotland. The Secretary of State rightly referred to it as a momentous moment for British democracy and for our country. It is right that we consider how things have moved, and why people’s support for Welsh devolution has strengthened. It seems increasingly clear to us, and also to the Government, that a more symmetrical system of devolution might add to the stability of the devolution settlement and diminish the cause of separatism.
We are disappointed that the Government have failed in this Bill to undertake any serious analysis of how the costs and benefits of tax devolution will be weighed for Wales. Any Government who were truly serious about affording these powers to another Parliament and Assembly should have undertaken that sort of analysis. Indeed, this Government did undertake that sort of analysis in respect of the Scottish proposals to take on taxation powers. I cannot therefore understand why the Government and the Secretary of State for Wales in particular have refused to insist that colleagues in the Treasury undertake a similar measure for Wales.
The argument has been made that a considerable gap is now expected between the passing of the Bill and the adoption of these powers, but there was a considerable gap—three years or so—between the passing of the Scotland Act 1998 and the uptake of its powers, and that did not prevent the Government from seeing the necessity of undertaking the work in advance.
It is also disappointing that the Government have failed to offer any real guarantee about whether Wales will be better or worse off under these provisions. We still do not know whether the block grant will be eroded over time. Initially, it will be protected, but the Exchequer Secretary told us again here today that if Welsh gross domestic product and revenues grew more slowly than those of England, Wales would have less money over time to spend on vital public services. Given the problems of meeting the demand for public services in Wales because of our specific demographics and history, and of a £1.6 billion cut to the Welsh budget since the Conservatives came to power, it would be better for the Government to give some sort of guarantee to the Welsh people that they would not be worse off.
Jonathan Edwards
Does not that point indicate that the hon. Gentleman has no faith in the Labour party’s abilities to improve the Welsh economy while in control of the Welsh Government ?
Owen Smith
No, it does not indicate that at all. It indicates that we are not fantasists. We understand the fiscal reality of Wales, which expends £35 billion a year in public expenditure and raises £17 billion a year in tax revenues, leaving a very large shortfall. We understand that that shortfall is made up by virtue of our being part of a generous Union that shares risks and pools rewards across the UK. Our fear is, of course, that Plaid Cymru Members wish to use this—honourably, from their perspective, as they believe in a separate, independent Wales—to fuel their cause of separatism. We are not interested in fuelling their separatist cause. That is why we have asked questions about the Bill.
We are concerned that the Government have failed to take this opportunity today to use the Bill to take forward the reserved powers model. For the reasons that I mentioned earlier, we think that it would be beneficial for Wales to be placed on a similar footing to Scotland in respect of the devolution model, and the Government could have taken that step in the Bill.
The biggest failing relates to the measuring of benefits and costs to Wales. We will now need to rely on noble Members of another place to undertake further scrutiny of the long-term impact on Wales of the volatility of tax revenues and of the costs of establishing an Exchequer function for Wales. The reason why the Government have not undertaken such scrutiny is that, I fear, they are not terribly interested in Wales. If they were more interested in Wales, they would not have implemented £1.6 billion-worth of cuts. If they were interested in Wales, they would not constantly mislead the public, as we have heard this evening, and seek to divide and rule in Britain when it comes to the respective merits of our health care systems, housing, education and all manner of other things where the Secretary of State chooses to bad-mouth Wales. If they were genuinely interested in assisting Wales, he would have demanded that the Exchequer Secretary undertake a similar analysis to the one that he undertook with Scotland.
The bit of the Bill in which the Government are most interested—as I suspect are nationalist hon. Members—is the bit on dual candidacy. We have heard eloquent and compelling arguments from Labour Members as to why it is right that we banned dual candidacy. It is not right for losers to be turned into winners, as was the case in Clwyd West, in the Secretary of State’s seat. The public do not understand how political alchemy is used to transform people who have been rejected under first past the post, and to put them back into office via the back door. The Secretary of State and his colleagues have wholly failed to explain why they are doing that, other than for narrow party political advantage.
It is fair to say that we have not had many laughs here in the last couple of days, debating this rather dry and dusty devolution Bill. One thing that has amused me is the attempt to paint my party, and indeed me, as somehow anti-devolution. That is as amusing as it is risible because, of course, the Labour party is the party of devolution. We campaigned for it for 100 years; we delivered it, and we will continue to deliver it. We have concerns about tax-varying powers because we do not want them turned to what we think would be malign intent—to fuel the separation of Wales from England. The Secretary of State is right to say that we face a very important choice in Britain; the Scottish people face an important choice. We do not want to fuel separation by encouraging tax competition, with one part of Britain undercutting another in a race to the bottom. That is anathema to Labour values and anathema to the values of the people of Wales.
Wales Bill
Jonathan Edwards Excerpts(10 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Gauke
It is a great pleasure to serve under your chairmanship, Sir Roger, and to respond to the debate.
Part 2 of the Bill introduces a provision to devolve taxes to the Welsh Assembly. Clause 6 introduces a new part 4 to the Government of Wales Act 2006 and confers the required competence on the Assembly to legislate on devolved taxes, including their collection and management. Clause 6 also allows for further taxes to be devolved to the Assembly via an Order in Council and makes it clear that officials working in any body set up by the Assembly to administer the devolved taxes can be designated as civil servants if the Assembly so chooses. This applies whether the body only collects and manages devolved taxes, or is additionally responsible for the existing devolved subject of local government finance, including council tax and business rates.
Clause 7 makes amendments to the commissioners for revenue and customs Acts to allow Her Majesty’s Revenue and Customs to administer devolved taxes on behalf of the Assembly. The clause also amends HMRC’s information powers to allow it to share information with the Welsh Government in relation to devolved taxes.
Clauses 14 to 16 and schedule 2 provide for a devolved tax to replace stamp duty land tax on land transactions in Wales, in line with the recommendation of the Silk commission. Clauses 17 and 18 provide for a devolved tax to replace the existing tax on disposals of waste to landfill sites in Wales, again as recommended by the Silk commission.
Let me address Government amendment 20. In devolving tax powers, our intention is that the Assembly should have a free hand in choosing how it wants its devolved taxes to be administered and by whom. We do, however, recognise that HMRC has many years—indeed, if one includes its predecessor organisations many centuries—of experience in administering taxes within the UK, so we want the Assembly to be able to use HMRC’s services for these purposes if it wishes to do so. The proposed legislation in clause 7 provides for this.
As set out in the Command Paper, though, we believe that this should be on the basis of mutual agreement. The Assembly should not be compelled to use HMRC to administer its devolved taxes, but neither should the commissioners for HMRC be compelled to take on this role. At present, the 2006 Act would allow an Act of the Assembly to modify an existing function of HMRC or confer a new function on HMRC without the consent of the UK Government.
Amendment 20, therefore, amends parts 2 and 3 of schedule 7 to the 2006 Act to make it clear that the Assembly can only confer functions on HMRC and, once conferred, modify those functions if they relate to a devolved tax and the Treasury consents to it. The amendment ensures that the Assembly has the option of using HMRC to administer its devolved taxes, but puts appropriate safeguards in place for the UK Government in recognition of the vital role HMRC plays in collecting tax throughout the UK. I therefore hope that hon. Members will support the amendment.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Will the Minister give us any idea of how long he expects the process of seeking the Treasury’s consent to take, and how long it will be before the Welsh Government can use whatever powers it decides to confer?
Mr Gauke
All I can say at this stage is that we would consider any such request in good faith. We want to work in a constructive manner, and I believe that the UK Government have a record of doing that when dealing with the Welsh Government. Our amendment certainly does not constitute an attempt to delay matters. The Assembly has the option of using HMRC, but it is not compelled to do so. We think it reasonable, if the Welsh Government wish to use HMRC, for its commissioners and the UK Government to make a proper assessment of the overall impact on the UK.
Jonathan Edwards
Is not new clause 1 a credibility test for the Labour party? It has put in place a roadblock on income tax powers, in that their devolution cannot happen until Barnett reform. If it does not support the new clause this evening, that will clearly show that its stipulation is a roadblock to further devolution.
Mr Llwyd
Yes, I agree with my hon. Friend, and not only Plaid Cymru is saying that. In a recent article, Professor Richard Wyn Jones of the Wales governance centre at Cardiff university said that because of the difference of view between Labour colleagues in the National Assembly and those at Westminster, and between Scottish Labour and Scottish Labour Members at Westminster,
“Scottish Labour seem to have no compunction about throwing Wales, one of the poorest parts of the Union, under the bus to shore up their own position… For Wales it is, sadly, a very different story. Yet despite this, the Barnett formula—used to calculate funding for the Scottish and Welsh Governments—operates in a way that ensures per capita levels of public spending is far higher for Scotland than for Wales.”
He develops that theme, referring to the Holtham commission, and continues:
“But what of Welsh Labour? It is surely inconceivable that the Shadow Secretary of State…will have been unaware of the contents of Powers for a Purpose, and its pledge to retain Barnett while rejecting a needs-based replacement. Yet, thus far at least, he has remained resolutely silent in the face of this assault on the long-term interests of Wales.”
And so it goes on: it is a pretty harrowing read, but it underlines the fact that unaligned expert commentators believe that denial of the need to get on with reforming Barnett as soon as possible is undermining the democratic process in Wales and its future.
In our party, at least, we are quite clear. We believe that Wales should be fairly funded on the basis of need, and that the Barnett formula should be recalculated to ensure that Wales does not lose out, potentially on billions of pounds, over the coming decade. We have always maintained that position. However, the thrust of what the Bill offers is, on the whole, a good thing, with greater financial and fiscal powers, despite our disagreement about some of the restrictions and conditions that the Westminster Government have placed on the powers. We are disappointed that they have failed yet again to take the opportunity to address the serious injustice of the lack of fair funding, but the Bill is a means of getting on with the important job of improving the Welsh economy—boosting it and, I hope, creating many jobs in the process through careful investment in infrastructure—because we know that a lot needs to be done.
We know that the Conservative and Lib Dem Government will not commit to reform of the Barnett formula. They have always said that it works, despite the fact that many of their senior figures in Wales have acknowledged that it does not work, but needs reform. This Government can never be trusted to put Wales’s interests first.
Wales Bill
Jonathan Edwards Excerpts(10 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Harper
The hon. Gentleman makes a good point. If we have elections on the same day, we certainly need to ensure that there is clarity about the electoral systems and in the design and printing of the ballot papers, so that it is clear for people not just which parties they might want to vote for, which is a decision for them, but the mechanism by which they can do so. A lot of lessons were learned from that process. We had that in mind when we held the referendum on the parliamentary voting system and we tried to ensure that there was not the level of confusion that there had been in the past.
Amendments 30 and 31 are hopeful amendments. Having considered all the evidence, I think that it makes sense to separate the big elections. I am not sure whether six months is long enough. We decided to shift the elections by an entire year to separate the media coverage and the debates so that people could focus on the important issues. The amendments raise some sensible issues. It makes sense to keep the elections to the primary legislative assemblies in the UK—the Scottish Parliament, the Welsh Assembly, the Northern Ireland Assembly and this Parliament—apart. That was the provision that we made in the Fixed-term Parliaments Act 2011.
I am therefore pleased that the Bill presented by my right hon. Friend the Secretary of State permanently makes the terms of the Assembly the same length as those of this House, but offset by a year to keep the elections separate. That will enable a proper debate to take place before elections to this place and will enable Welsh voters to have a proper debate about the issues that the Welsh Assembly and Welsh Assembly Government will focus on.
Finally, if people’s decisions in Welsh elections are indeed made on issues for which the Welsh Assembly and the Welsh Assembly Government are responsible, my reading of the situation, based on how the Welsh Assembly Government are handling the national health service in Wales, which I will not talk about today, but which we will return to on the second day of Committee, is that the Welsh public might reach a different conclusion from that put forward by the hon. Member for Pontypridd. I look forward to their having the opportunity to do so and to the result, because I think that it might shock the hon. Gentleman. He should not be so complacent.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
It is a pleasure to serve under your chairmanship, Dr McCrea, and to speak to amendments 30 and 31, which appear in my name and those of my hon. Friend the Member for Arfon (Hywel Williams) and my right hon. Friend the Member for Dwyfor Meirionnydd (Mr Llwyd). They are both probing amendments and follow the spirit of the contributions by the hon. Members for Pontypridd (Owen Smith) and for Forest of Dean (Mr Harper).
We welcome the fact that we are discussing a piece of Wales-specific legislation. It is only three years since the remarkable referendum in 2011, when the people of Wales voted overwhelmingly in favour of full political sovereignty over the political fields that were devolved to the National Assembly. I have no hesitation in saying that that was one of the proudest days of my political career. The desktop on the computer in my Westminster office has a picture of the referendum count in Carmarthenshire, with the yes votes piled up proudly on the yes table, and a few bundles of no votes on the no table.
Jonathan Edwards
Well, apart from the Swans staying up this year—another great achievement, which I know the hon. Member for Pontypridd (Owen Smith) shares with me.
Most striking about the referendum result was that it was matched across every county in Wales—apart from Monmouthshire, which only just voted no. When the history of Wales is written, that result will be recorded very strongly when compared with the referendums of ’79 and ’97. It was an earthquake moment, and I remember the shell-shocked faces of many Unionists down in Westminster the week after that historic occasion.
The nature of the game has therefore changed, and subsequent opinion polling clearly indicates that the people of Wales want greater control over their lives. I think they are far ahead of the political class at the moment, and I even include Plaid Cymru in that context. Today we are discussing in historical terms a further milestone on the path towards Welsh self-government, with, for the first time, a national legislature being empowered to have an element of fiscal powers. Needless to say, the Bill does not go anywhere near as far as my party would want in terms of powers for Wales, but as an historian in a previous life I can safely say that when the history of Wales is written, this period will be seen as one of rapid political development for our nation.
As we celebrate the 20th anniversary of the great indie band from Manchester, Oasis, and its first studio album in ’94, I am reminded of one of its best songs, “Little by Little”. I hope sincerely that when we conclude our Committee deliberations we will not be “looking back in anger”—a reference to another of its great songs. Today is therefore another landmark in the political development of our country.
The context of the Bill is interesting in itself, and I get the impression that the Secretary of State would rather walk through fire than deal with the Bill today. I am sure he sees it as a hospital pass from his predecessor. The Bill results, of course, from the UK Government-sponsored Silk commission, in particular part I, and I pay tribute to Sir Paul and his fellow commissioners for their work on both stages of the report. As I said, as a party our evidence to both parts of the commission called for far greater progress than was finally agreed, but we were prepared to compromise to seek agreement and make progress. It is therefore disappointing that we find ourselves presenting amendments in Committee, and endeavouring to preserve the integrity of the Silk commission.
Unfortunately, the Wales Bill has torpedoed the recommendations of the Silk commission, particularly in relation to the lockstep on the income tax powers, which we will discuss later. Even more regrettably, it seems that Labour’s amendments to the Bill, rather than strengthening it as we seek to do, aim to place further roadblocks and move us even further from what the Silk commission proposed.
Glyn Davies (Montgomeryshire) (Con)
The hon. Gentleman is running through the parts of the Bill that he disagrees with, and it is entirely possible that people on both sides of the Committee may disagree because it is a wide-ranging Bill. Does he accept, however, that the Bill makes dramatic progress in that it provides the foundation stones for financial accountability to be vested in the National Assembly for Wales? That is a key step forward that makes the Bill hugely important for the interests of Wales.
Jonathan Edwards
As I said, I think the Bill will be viewed as an important milestone in the constitutional development of our country, but it will not surprise the hon. Gentleman to hear that my ambition for Wales is greater than what is set out in the Bill.
Owen Smith
A moment ago the hon. Gentleman said that Labour was in some way seeking to undermine the Bill, and I am aware from media reports that that is the line Plaid Cymru is taking in the media. I wish to place on record that that is the opposite of what we are seeking to do. We are probing the Bill today but we will support it. We are looking to strengthen the powers held by the Welsh Assembly in many regards, and we are seeking greater symmetry on tax powers with Scotland. Crucially, we will be tabling amendments to secure fair funding in advance of any of those changes, and looking to ensure that we move to a reserved powers model—all of which I am sure the hon. Gentleman would support.
Jonathan Edwards
If that is indeed the hon. Gentleman’s position, I am sure he will join us in the Lobby when we vote on the new clauses later.
The second major context in which this debate takes place is the seismic events happening in Scotland. As I said yesterday in the Welsh Affairs Committee, the second part of the Silk commission’s work will be superseded by the result of the independence referendum, one way or the other. Even the Bill could be superseded by events in Scotland, as its proceedings in the Lords are likely to happen after the people in Scotland have cast their vote in the independence referendum.
Jonathan Evans
Does that really hold good as an argument? The hon. Gentleman will have seen current opinion polls that show that support for independence—as opposed to support for devolution—in Wales is at an all-time low. He has rightly talked about the seminal change in Wales in which the Conservative party has joined other parties to support devolution, but the result of the Scottish debate so far is that support for Welsh independence is lower than ever before.
Jonathan Edwards
I do not want to get into a debate about independence, but the most detailed polling ever undertaken on devolutionary attitudes was by the Silk commission in the second part of its work. It suggested that 20% of people in Wales wanted devolved defence and foreign affairs, and those would be the two last powers that would ever be devolved.
Regardless of the result in Scotland, the constitutional landscape of the UK will change considerably. If Scotland votes yes, that will be the end of the British state as we know it. If it votes no, the likelihood is that it will get significantly more powers, with 90% approval ratings for a devolution-max settlement that would devolve everything apart from defence and foreign affairs. Is the hon. Gentleman seriously saying that the people of Wales would accept the settlement in the Bill if Scotland were to get significantly more powers, even in the event of a no vote?
Chris Ruane
If the vote in Scotland is close but ultimately a victory for no, does the hon. Gentleman anticipate that the SNP will come back for another vote, and another after that, and that it will not be so much a referendum as a neverendum?
Jonathan Edwards
As long the people of Scotland have those aspirations and vote for an SNP Government, I imagine that they would want to ask the question on subsequent occasions, but that is a debate for another time. Considering the way in which the opinion polls are moving, it seems that the question might be settled this time.
Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)
I remind the House that the Prime Minister said a few months ago to the people of Scotland that, whatever happens, devo-max is on offer to them. My hon. Friend is right to say that that means that the constitutional set-up of the UK will have to change, come what may.
Jonathan Edwards
As ever, I am very grateful to my right hon. Friend for his valid and expert intervention. Whatever happens in Scotland, it will completely change the political landscape and supersede Silk and even perhaps what we are discussing today.
With the Scottish question in mind, I believe that the UK Government have missed an opportunity to bring forward a settlement that would have helped them to develop a narrative in Scotland in which the Westminster elite recognised the national aspirations of the people of the nations of the state, and were happy to reform the relations between the nations of these isles to preserve the future of the state. One obvious measure would have been to devolve income tax powers to Wales in the Bill without the Scottish lockstep model. We will debate that issue in greater detail, but suffice it to say at this point that the unambitious nature of the Bill leaves the people of Scotland in little doubt that the referendum is a straight choice between more powers with yes and the status quo with no.
Amendments 30 and 31 would ensure that the poll for an ordinary general election to the National Assembly could not be held within six months of a general election for the UK Parliament. I am reassured by the discussion I had with the Minister before the debate. That, and the comments by the former constitutional Minister, the hon. Member for Forest of Dean, is why I am probing rather than pressing the amendments to a vote. When he took the Fixed-term Parliaments Bill through the House, he did a lot of work to ensure that there would be no coterminosity between the Assembly and the general election. That would have presented a great danger to our democracy in Wales.
Jonathan Edwards
And the Rhyl Journal, although I am not an avid reader, I must admit.
Most people get their political news from London papers. If we have a Westminster election and an Assembly election in close proximity, there is a great danger that the issues for which the national Assembly is responsible will be dropped completely. The Minister has indicated that there is no intention to bring the elections closer and that there are protections in the Bill to ensure that there will be a gap of at least a year between them, so I am happy not to press my two amendments.
On the Labour amendments, the Electoral Reform Society has lobbied extensively against amendment 9, arguing that
“good governance and greater stability is achieved through fixed terms and this should not be a power that is given to the Executive to decide.”
It points out that, as the electoral system for the Assembly makes coalitions more likely, fixed terms also provide stability and security for parties of government. Two of the four terms in the Assembly have seen coalition Governments, so I agree with that point.
Amendment 10 appears to have been drafted with the aim of ensuring that Assembly and Westminster elections are not held on the same day. I would have been happy to support that if it had been pressed to a vote.
The Parliamentary Under-Secretary of State for Wales (Stephen Crabb)
I, too, would like to start by welcoming you to the Chair, Dr McCrea. It is a pleasure to serve under your chairmanship. I thank hon. Members on both sides of the Committee for their contributions to this early part of the first day of our deliberations.
Amendment 9 would give the Assembly the power to decide, by resolution, when Assembly elections are held, and would remove the Secretary of State’s powers in relation to varying the date of Assembly elections and proposing a date for extraordinary Assembly elections. Amendment 10 would prevent the Assembly from setting a date for an election on a day on which it knows, or reasonably expects, a parliamentary general election to be held. The amendments would permit the Assembly to determine the date of Assembly elections and consequently the length of its own terms. That reflects a recommendation made by the Welsh Affairs Committee arising from its pre-legislative scrutiny of the draft Wales Bill.
It is worth pointing out that the Silk commission considered the matter of legislative competence for Assembly elections to be outside its terms of reference and made no recommendations in this regard in its second report. Nevertheless, the Government believe that the devolution of further powers to the Assembly should not be undertaken in a piecemeal fashion, and that the issue would best be considered in the wider context of possible changes to the Welsh devolution settlement arising from the recommendations made by the commission in its second report. The Government made clear, on publication of the report, that recommendations requiring primary legislative change should be a matter for the next Parliament and the next Government, and consequently that they should be for political parties to consider in preparing their election manifestos. We believe the same principle should apply when considering whether legislative competence for Assembly elections should be devolved to the Assembly. It is important that electors are clear on how long they are electing Assembly Members for when they vote in the 2016 Assembly election, and that five-year Assembly terms are in place by then to ensure that Westminster and Assembly elections do not coincide in 2020.
The Fixed-term Parliaments Act 2011 moved this House to a fixed five-year cycle and consequentially provided that the next ordinary general election to the National Assembly for Wales would be moved on a one-off basis by one year from 7 May 2015 to 5 May 2016. This responded to concerns raised by the Assembly that holding general elections to this House and to the Assembly on the same day could lead to the Assembly elections being overshadowed. I am encouraged that Members of all parties seem to be in agreement on the position that we do not want the two elections coinciding. I particularly welcome the Labour party’s support in seeking to minimise the risk of that, which is evident in amendment 10.
Similarly, amendments 30 and 31, tabled by right hon. and hon. Members from Plaid Cymru, are intended to ensure that an ordinary Assembly general election does not take place within six months of a UK general election. I am encouraged that the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) has been reassured by the debate so far and by our previous discussions, and that he is not going to press his amendments on that basis.
There is cross-party support for the principle that, as far as possible, we should seek to ensure that ordinary general elections to the Assembly and to this House should not coincide. With the next Assembly election scheduled for 2016, if the Assembly remains on a four-year cycle, the two sets of elections would coincide every 20 years, starting in 2020—something that all parties are clearly keen to avoid. Clause 1 makes it far less likely that Assembly elections and parliamentary elections will coincide in future. I therefore ask Opposition Members to support the clause, to consider the further devolution of powers to the Assembly in the context of preparing their own parties’ manifestos and consequently to withdraw or not press the amendments.
Mr Harper
Those are all perfectly valid criticisms of list systems where voters are presented with a party choice, rather than list systems where votes have the ability to order the candidates. The hon. Lady’s point on whether people have proper choices is a valid criticism of every list system in which the voter can vote only for the party and has no ability to rank candidates, because in such systems whoever is at the top of the list will almost certainly get elected regardless of whether voters think highly of their personal qualities, but I do not think it is a valid criticism of the changes in the Bill we are considering today.
Finally—[Hon. Members: “Hear, hear.”] Opposition Members groan, but I have been generous in taking interventions. Had I simply spoken and taken no interventions, I would have been finished some time ago, but that would not have been the right nature of a debate in Committee on an important Bill, so perhaps we could have a little less chuntering from the Opposition parties.
I want to ask a question about new clauses 4 and 6, which were tabled by Plaid Cymru. I was a little confused, because new clause 4 states:
“Her Majesty may by Order in Council provide for the transfer of responsibility for setting the number of Assembly Members to the”
Assembly, which is consistent with the points made by the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) in his earlier remarks on clause 1 about giving the Assembly more control, but new clause 6 would give
“responsibility for determining the system of election of members”
not to the National Assembly but to the Welsh Government. It is almost certainly the case that that is not what was intended and that it was intended to give responsibility to the Welsh Assembly.
Jonathan Edwards
I am grateful to the hon. Gentleman for giving way and for giving me the opportunity to respond. We understood from the Clerks that, for drafting reasons, they would prefer to use “Welsh Government” in the Bill, but he is right that the intention is to devolve responsibility to the National Assembly.
Mr Harper
I am glad that the hon. Gentleman said that, because although it may be the case that a party with a majority is in effect the Government and can get the Assembly to do what it wants, there is a difference in giving Ministers executive powers to make changes to electoral systems. Systems of election should at least be determined by the Assembly. I have not made a decision on whether responsibility should lie with the Assembly or remain with Parliament, but it certainly should not become an executive decision of the Welsh Government. It was not the intention, but a combination of new clauses 4 and 6 and amendment 9, which was not moved, would have given the First Minister the power not to have any elections at all. If there were elections, he could have decided the system of election and put himself into a powerful position. I am glad that we have discovered that that is the intention neither of the Labour party nor of the hon. Gentleman.
In conclusion, I shall listen carefully to the Minister, but amendment 15 is probing. I strongly support clause 2 and will vote for it to remain part of the Bill. I am grateful for the clarification that the hon. Gentleman has provided on new clauses 4 and 6.
Jonathan Edwards
It is a pleasure to speak to new clauses 4 and 6, which are in my name and those of my hon. and right hon. Friends. We intend to press new clause 4 to a vote, but new clause 6 is probing.
If passed, new clause 4 would transfer responsibility for deciding the number of Assembly Members to the National Assembly, as explained by the hon. Member for Forest of Dean (Mr Harper) on my behalf. At present, the National Assembly has 60 Assembly Members, which is same as when it was established in 1999. The Scottish Parliament has well over 100 Members, and I am sure, Dr McCrea, that you could inform me that the number in that fine building in Stormont, which I have visited many times, in Northern Ireland is also above 100. Since 1999, the institution’s legislative competence has grown considerably, particularly after the 2011 referendum, which I referred to in my earlier contribution, resulting in full law-making powers in devolved areas being given to the National Assembly. Common sense would dictate that the Assembly, working with the Boundary Commission for Wales, should now determine the number of Members necessary to ensure its smooth running. I take the point made by the hon. Member for Ogmore (Huw Irranca-Davies) in his intervention on the hon. Member for Forest of Dean, but new clause 4’s intention is that, should the discussions be concluded, it would be a matter for the Assembly to determine rather than this House of Commons.
Increasing the number of Assembly Members has been endorsed by the Electoral Reform Society Cymru, as well as the 2004 Richard commission, which was commissioned by the Welsh Government of the time. The present Presiding Officer of the Assembly, Rosemary Butler AM, has also argued that the institution should have 80 members. The second report of the Silk commission, published in March, argued for the same and stated:
“The size of the National Assembly should be increased, and…most analysis suggests that it should comprise at least eighty Members.”
In October 2013, the Electoral Reform Society Cymru and the UK’s Changing Union project published a report, “Size Matters”, that went further by arguing for an increase in the number of AMs to 100. It based its findings on an evidence-based examination of legislatures across Europe and further afield. It concluded that, as the Assembly now controls a budget of nearly £15 billion and can pass laws on education, health and transport, a larger legislative body is needed to ensure that the law-making is done thoroughly and is not rushed.
Mr Harper
I am listening carefully to the hon. Gentleman. One of his arguments for having a larger number of Assembly Members is that the Assembly will need more of them as its responsibilities grow and cover more areas. Given that those powers and responsibilities have effectively been transferred from the UK Government and therefore relate to policy areas that no longer need to be scrutinised in this House, does he think that it follows that increasing the size of the Assembly because of its increasing powers and work load means that there should be fewer Members in this House representing Wales to reflect the smaller work load and lower level of responsibility here?
Jonathan Edwards
That relates to some of the points the hon. Member for Ogmore made earlier. My position has always been that any reduction in the number of Members of Parliament must be complemented with the transfer of significant further fields of power to the National Assembly, as happened in Scotland. Perhaps a more interesting context is the Williams commission, which has been set up by the Welsh Government to consider public service governance and delivery across Wales and, in particular, the number of local authorities. There seems to be a move towards reducing the number of councils and, therefore, councillors. Perhaps that might provide a better context for the debate on the number of AMs in Wales, rather than the number of MPs.
Mr Mark Williams
Given the timing of the Williams commission’s discussions on local government reform, does the hon. Gentleman not think that the amendment would be better placed in our manifestos—my party has already signed up to the reforms recommended in part II of the Silk commission—and debated at that time, rather than now?
Jonathan Edwards
The Minister made that point to me before the debate, but this legislation provides an opportunity now. Rather than making the case either for more Assembly Members or for fewer, the new clause essentially states that when the time comes to make that decision, it should be made by the National Assembly, not the House of Commons. It is a point of principle about where power lies in these matters. Given the shadow Secretary of State’s comments when he intervened on me earlier, I look forward to the Labour party’s support when we vote later—[Interruption.] Well, that is exactly the point.
Hywel Williams
I am disappointed by that sedentary intervention from the Opposition Front Bench. In our view it is the Assembly that should decide, because we see the people of Wales as sovereign, not this place.
Jonathan Edwards
I am grateful to my hon. Friend for that intervention, which highlights the key political difference between Plaid Cymru and our Unionist opponents.
Assembly Members are expected to be members of more than one Select Committee. Indeed, the Committees have a dual role, as they perform scrutiny and legislative functions. That means Members are under tremendous pressure, especially if they serve on more than one Committee, as many do. If more AMs were elected, some would be able to specialise in certain areas, and the burgeoning expertise would ensure that democracy in Wales is better informed. In any case, surely it should be for the National Assembly to determine its membership, not the House of Commons. We will therefore be pushing new clause 4 to a vote. We look forward to the support of like-minded individuals, even those on the Government Benches.
The motivation behind new clause 6 is straightforward. As we have been instructed to draft it by the Clerks, it proposes that the Welsh Government, rather than the UK Government, should have responsibility for determining the system used for elections to the National Assembly. Transferring this responsibility would streamline the election process and bring decisions relating to the democratic make-up of the National Assembly closer to the people it serves. It could also, I hope, lead to a more proportional system being used by that institution. Plaid Cymru’s preference would be for a move towards a more proportional system that reflected the wishes of voters more fairly.
Even with the top-up, the current system is extremely biased towards the Labour party. In the last election, Labour polled 40% yet got 50% of the seats. In elections before then, it has had 50% of the seats, and more, on 30% of the vote. We therefore argue that proportional representation would provide a better reflection of how people vote in National Assembly elections.
Jonathan Evans
Does the hon. Gentleman accept that his new clause could produce the opposite outcome? He may wish for a proportional system, but his proposal might take us back to first past the post, under which, at the last election, the Labour party got 36% of the vote and 65% of the seats.
Jonathan Edwards
I am grateful for that intervention. I had been minded to include provisions whereby the Assembly would be allowed to determine its own system but not to move to a less proportional system such as that advocated by the Labour party with its double constituency system. That would be completely non-proportional, with Labour perhaps receiving 70% of the seats on 30% of the vote, as the hon. Gentleman suggested. However, as a democrat, I believe that these matters should be devolved to the National Assembly. Parties would then fight the Assembly elections on manifesto commitments, and if people decided to vote for a party that wanted an undemocratic political system and one-party rule, that would be a matter for them.
Jonathan Evans
Since the hon. Gentleman is a democrat, he will know that there was a democratic referendum. In that referendum, where I argued for a no vote, we lost the vote, but only by a tiny margin. The electoral system was part of what was voted on when the Assembly was set up. Therefore, surely, if we become less proportional, that should not be in circumstances where there is not at least referendum approval for the electoral system.
Jonathan Edwards
That is an interesting intervention. Clearly, it would be a matter for parties standing for the Assembly on manifesto commitments whether they determined to put their preference to a referendum. The hon. Gentleman makes a valid suggestion, and it could well be the case. However, the basic point of what we are trying to achieve is that that power should reside at National Assembly level rather than with this Parliament here in London.
The purpose of the new clause is not to change the electoral system in and of itself, but merely to transfer responsibility to the National Assembly so that it can change the system should it so wish. Who can forget—this goes back to the point made by the hon. Member for Cardiff North (Jonathan Evans)—the manner in which the Labour party used the Government of Wales Act 2006 to gerrymander the electoral system by banning dual candidacy and imposing on Wales an electoral system that is used only in Ukraine? I am glad that through this Bill, the UK Government will rectify that disgraceful decision made through the 2006 Act.
Any decision by this Parliament on the electoral system of the sovereign Welsh national legislature will always be met with concerns that the UK Government of the day are seeking political advantage. The simplest way to address those concerns would be to devolve responsibility to the National Assembly so that it is responsible for determining its own electoral system. The current situation is tantamount to the European Parliament legislating on the electoral system used to elect Members of this House. Surely, after a decade and a half, it should be a matter for the National Assembly to determine its own preferred electoral system. It does not need Big Brother Westminster determining these matters. London needs to let go and treat the National Assembly with some respect.
Jonathan Evans
I am grateful, Dr McCrea, for the opportunity to contribute to this debate. I know that a number of colleagues want to speak, so I will endeavour to limit my remarks to the matter that causes me most concern—new clause 6 and its proposition that the voting system for the Assembly might be changed by the Assembly itself.
Let me set out my rather unusual position as a Conservative speaking from the Government Benches. Many of my colleagues will know that for more than 30 years I have been a supporter of proportional representation, and that at almost every Conservative party conference that has been held, I have hosted the Electoral Reform Society discussion. Having been elected to the European Parliament on a proportional system, I have no compunction or concerns about such a system. During the passage of the legislation through the House, I was one of only 17 Members to go through the Lobby in support of the amendment to introduce proportional representation.
I remind the Opposition of the debate that took place at the time of the referendum that was held to create the Assembly. That referendum was held after a general election which left my party with no parliamentary representation at all in Wales. I had served as a Welsh Office Minister until 1997. As my election result was declared in the middle of the afternoon on the Friday, I probably had the distinction at that time of being the last Conservative MP to have lost his seat, but my party had 20% of the vote. We have heard a lot about minority parties, Dr McCrea. Between 1992 and 1997 we served together in this House. I suppose it might have been said that your party was a minority party. It would not be said in Northern Ireland nowadays that your party is a minority party, so a little caution on the part of the Opposition might be in order.
When the debate took place on whether the Assembly should be created, the complex system of individual constituencies, then regions in which people are elected on the proportional system, was designed to reassure the people of Wales that we were not going to end up with one-party government—that we would not have a situation whereby a fifth of the people in Wales could vote for a political party and end up with no representation at all. There should be no doubt about that.
I was appointed by my then party leader, the present Secretary of State for Foreign and Commonwealth Affairs, my right hon. Friend the Member for Richmond (Yorks) (Mr Hague), to speak for the Conservative party at the time those debates took place. I remember the debates I had at that time with the Labour Secretary of State for Wales. We discussed the voting system, and he said that proportional representation was an integral part of the settlement to be put before the people of Wales. Bearing in mind the outcome of the referendum at that stage, the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) made it clear that in the more recent referendum there was significant support—transformed support—but also, I would argue, support from across the political spectrum.
My party was identified in the past as arguing against devolution. From the time that the vote took place, my party accepted the outcome of that vote. I remember, as the chief Conservative spokesman for Wales, speaking at that time to the shadow Cabinet and making the point that it did not matter whether the votes were in the hundreds or the low thousands: we as democrats had to accept the outcome of the vote.
I also put that argument to those who now say they want to change the voting system. We know already that those propositions have been put forward. New clause 6 would permit that change to take place. I agree with the hon. Member for Carmarthen East and Dinefwr. I am a democrat. I might be against his clause, but the aspect of it to which I have the strongest objection is that there is no fail-safe to make it possible to go back to the voters of Wales and ask, “Do you want to have a less proportionate system?” Whether by accident or not, to say within the terms of the clause, “Let the Welsh Assembly Government propose something”, is an open invitation for an outcome that I believe is fundamentally anti-democratic. It is no less anti-democratic because it is a decision made in Cardiff, rather than here in Westminster.
I accept the outcome of the devolution vote. Throughout my political life since that vote, I have supported the National Assembly for Wales, but I remember as well what the basis of the settlement is. I am concerned that the terms of the clause present an opportunity to undermine that settlement. That, in my judgment, would let down the people of Wales.
Owen Smith
That is as may be. I merely say once more that this is not a straightforward, open-and-shut case, as it has been presented by the Government. We know otherwise—from the evidence of Clwyd West and other seats in Wales, from public opinion and, frankly, from what our constituents tell us about their dissatisfaction, which extends to the broader issue of the list and first-past-the-post system. We know that the public do not understand candidates being rejected under first past the post and then sneaking into the Assembly by the back door.
Jonathan Edwards
The hon. Gentleman says that he has been inundated by representations from constituents on this matter. I have to be honest and say that I have never had any discussion with a constituent on this issue. How many of the good people of Pontypridd have been on the phone to him?
Owen Smith
I am tempted to say that very few of my constituents—or, I suspect, those from any constituency in Wales—ever want to talk to me about the constitution, which seems to exercise Plaid Cymru all the time. Most people in Wales do not want to talk about the constitution: they want to talk about the cost of living crisis and the other problems that we have in Britain.
In conclusion, the evidence of the recent past in Wales suggests that the previous system was being abused. We have made a clear, principled non-partisan argument that the current system should be retained as it is. In so doing, we are striking a chord with the views of the Welsh Affairs Committee, which did not come to a final conclusion but did say, as a point of principle:
“we consider it unadvisable for electoral systems to be changed frequently. Successive changes to electoral systems risk being perceived as partisan by the public.”
This is clearly a partisan change. The public will see it for what it is and I am sure they would support us when, later this evening, we vote against clause 2 standing part of the Bill.
Mr Hain
I would like to make a bit more progress, because although the hon. Gentleman was generous in taking interventions, his contribution lasted 40 minutes. I would prefer to be a bit briefer, and I normally am very generous.
The fact that, nevertheless, Scotland has retained dual candidature, in defiance of Lord Steel’s advice, is no reason for Wales to do the same. The Government simply will not acknowledge the fundamental democratic abuse of dual candidacy, which is that losers become winners, and that voters are second-guessed and contradicted by the system, their choices denied. The second significant measure the Scottish Parliament adopted after Arbuthnott tried to increase the accountability of regional MSPs to the electorate by changing the voting system and introducing an open list for regional candidates—not something this Bill provides—to give some measure of control for Scottish voters. That was done because the Scottish social attitudes survey 2003 found a high degree of opposition to the party control inherent in the list system. Voters in Wales enjoy no such privilege and the Government are not proposing to give it to us.
On the issue of dual candidacy, two different paths were followed: in Scotland it was through greater clarification of the roles of Members and by turning to open lists; and in Wales we felt that the ban was the right solution to dual candidacy abuse. Nearly a decade on from the Government of Wales Act 2006 I feel that we made the right choice, but much more must be done to give regional Assembly Members more accountability to the electorate. On candidacy, this Bill does nothing to further the evolution of Welsh democracy—indeed it puts it into reverse.
Over the past 15 years, the Scottish Parliament and Welsh Assembly have both evolved in different ways to better suit the needs of their individual electorates. As the Government’s proposal stands, we will return to some of the absurd anomalies we saw in 1999 and 2003. As has been mentioned, in Clwyd West in 2003 every one of the three losing party candidates nevertheless won. Let us also consider the following cases from the 1999 elections, when 17 out of the 20 regional Assembly Members elected lost constituency elections. Thus, more than three quarters of the regional AMs did not have a democratic mandate to represent people—voters had not voted for them—and 15 of these 20 had offices in the constituencies they failed to be elected in.
In the Conwy constituency the Lib Dem AM Christine Humphreys came fourth in the popular vote—she had less than 10% of the vote in Conwy—yet still became an AM for the North Wales region. In Wrexham the Plaid Cymru AM Janet Ryder came last in the constituency, with 2,659 votes—the constituency AM had 9,239 votes—and yet still became an AM through the back door. In Ynys Môn the Tory AM Peter Rogers won 6,031 votes, which put him third on the constituency list—the Plaid Cymru AM who won a majority had more than 16,000 votes—yet he still became an AM for the North Wales region. It is not a partisan argument but simply a truth to state that those results are fundamentally undemocratic.
In the 1999 election more than 215,000 Welsh men and women voted in the North Wales region. Were we to look at every individual who ran as a constituency candidate in that election and collate their votes, we would find that Christine Humphreys, Janet Ryder and Peter Rogers polled less than 6% of the total regional vote and yet still became AMs for that very same region. After two Assembly elections where this was a regular occurrence, and with almost half the population saying in 2006 that they did not understand how their electoral system worked, we sought to remedy confusion over how AMs could still get in through the back door. The ban on dual candidature was the right choice then and remains so now. We introduced the ban in 2006 to stop these anomalies and the confusion they produced in voters’ minds, but now the Government are proposing to start this all over again.
In 2006, Victoria Winckler, director of the Bevan Foundation, conducted a survey, which found broad support for the ban on dual candidacy. Her report also highlighted the need for greater education and understanding among the general public. This report qualified the findings of previous research into dual candidacy. It said that none of it had been sufficient to make a substantial case on whether or not the public were for or against it in elections, but that it did discover considerable public disquiet on the issue with broad support in favour of the ban.
Jonathan Edwards
If dual candidacy is so objectionable to the right hon. Gentleman’s party, will he explain why, when it was in power in Westminster in 2010, it did not ban it in Scotland or for the Assembly in London?
Mr Hain
I have already dealt with that matter, but I will, if I may, correct the hon. Gentleman. It is not objectionable to my party; it is objectionable to voters. That is the point about this, and we are representing the voters’ will.
Perhaps the great irony of the Government’s proposals is that when they released their Green Paper in 2011, they found what was described as a
“small majority of people opposed to the Government’s proposal to lift the ban”,
and yet they still carried on. The Government, who themselves have a small majority, now seek to overturn a small majority. A former Liberal Democrat leader and a Conservative Secretary of State backed my 2006 ban, as did the chairman of the Richard commission. The commission reported in 2004, recommending extra powers for the Assembly, which my 2006 Act delivered. Lord Richard told the Welsh Affairs Committee:
“There is something wrong in a situation in which five people can stand in Clwyd, none of them can be elected, and then they all get into the Assembly. On the face of it that does not make sense. I think a lot of people in Wales find that it does not.”
The eminent Welsh academic, Dr Denis Balsom, said in his evidence to the Richard commission:
“Candidates use the list as an insurance against failing to win a constituency contest. This dual candidacy can also confuse the electorate, who may wish to consciously reject a particular candidate only to find them elected via the list. It should remain a basic democratic right not to elect a particular candidate or to be able to vote a Member out.”
Jonathan Edwards
—is it the hon. Gentleman’s view that if there were a decision in future to change the electoral system in its entirety rather than the minor change proposed in the Bill, it should be for the Assembly to make that decision, rather than the House of Commons?
Huw Irranca-Davies
That is a good discussion to have and it will flow from part II of the Silk commission, which we will debate in the Chamber. It is a worthwhile debate to have in the present situation, where Parliament still has sovereign powers and still in essence passes to the Assembly the ability to do certain things, bearing in mind the commitment from our Front Bench in principle that we look favourably upon the idea of reversing the current position, where it is only the delegated powers that the Assembly can legislate on. That debate is not for today, but the time will come.
The explanatory notes, which Ministers seek to use to justify the reversal, say in paragraph 12 that the concern expressed by many people
“has been refuted in studies by the Electoral Commission and others which have demonstrated that the prohibition”
that is currently in place—the ban—
“has a disproportionate impact on smaller parties who have a smaller pool of potential candidates to draw upon.”
I am genuinely bemused by that. In my own constituency, which is a strong Labour constituency, not only are there Tory voters, but there are Tory elected representatives, a Plaid Cymru representative, and others. I cannot believe that they do not have a sufficient number of alternative candidates to put on a regional list.
All we are talking about is a handful—four candidates—appearing on a regional rather than first-past-the-post list. If they do not have the numbers, that is a real signal of a lack of confidence in the capacity of what have today been termed “minority parties” in the regions. I simply do not believe it—there are people who will and should come forward. Equally, we would have to do the same in the regions. There is an onus on the party to bring people forward in the valleys, the vale, west Wales and elsewhere. The argument that each region would not have four candidates who can be put on the list just does not hold water.
Stephen Crabb
Let me begin, Mr Chope, by welcoming you to the Chair. It is a pleasure to serve under your chairmanship.
Following the 2011 Assembly election, the First Minister of Wales announced that the Welsh Assembly Government wished to be known instead as the Welsh Government. That change was made in order to make clearer the respective roles of the Welsh Government and the National Assembly for Wales following the devolution of full law-making powers. Since then, the term “Welsh Government” has increasingly been used by people throughout Wales, and it is now the commonly used term for the Executive. However, “Welsh Government” remains an informal moniker, and “Welsh Assembly Government” is still the formal legal name in statute.
In recognition of the widespread use of “Welsh Government” as the generally accepted term, and following the request from the First Minister, clause 4 provides for the name of the Executive to be changed formally. That will mean that, for the first time, the new title can be used in formal legal documents, in keeping with common parlance. The clause provides that any reference to “Welsh Assembly Government” in existing legislation should be read as a reference to the “Welsh Government”, unless the specific context requires the former name to be used.
As usual, Plaid Cymru Members wish to go even further and have tabled new clause 5, which seeks to devolve to the National Assembly for Wales the power to change its name through a resolution passed by a simple majority. In renaming the Welsh Assembly Government we are simply reflecting what the Executive are now commonly known as. The same is not the case in respect of the National Assembly; people within and outside Wales know the legislature as the “National Assembly” or the “Welsh Assembly”, and I detect no popular clamour in my constituency or any other part of Wales I visit for a change in the name of Wales’s legislature.
Jonathan Edwards
Is the Minister aware that the leader of the Conservative party in the National Assembly has made a manifesto pledge to change the name of the Assembly and make it a Parliament?
Stephen Crabb
I am aware of all kinds of views from individuals across Wales on what the name of the legislature should or could be. I also recognise that the Silk commission recommended that if the Assembly wishes to change its name to the Welsh Parliament, that should be respected. However in tabling new clause 5 and other amendments Plaid Cymru seems to be doing exactly what it has wrongly accused this Government of doing: cherry-picking the Silk recommendations for implementation through this Bill.
The Secretary of State’s written statement on 3 March made the Government’s view clear: we do not regard this Bill as an appropriate vehicle for implementing Silk II recommendations, that those recommendations requiring primary legislation should be matters for the “next Government and Parliament” and, as such, they are for political parties to consider in preparing their election manifestos. That remains this Government’s approach, so I urge Plaid Cymru Members not to press their new clause to a vote.
Jonathan Edwards
It is a pleasure to serve under your chairmanship, Mr Chope.
I rise to speak in favour of new clause 5, which stands in my name and those of my right hon. and hon. Friends. We will not be pushing it to a vote, because we want to save time and to have a discussion on income tax powers, which is what we really want to discuss in detail. However, I say to the Minister that, regardless of his opening remarks, our new clause is in the spirit of clause 4, which he has just presented. I hope the Government will see sense in due course, either in the later stages of the Bill’s progress in this House or in the other place.
New clause 5 would give powers to the National Assembly to change its name to the “National Parliament” or to any other name should it so decide. I stress that the new clause does not call for the institution’s name to be changed in this Bill, but rather that the power to take this decision should be granted to the National Assembly, as proposed in the Silk II recommendations. The Minister was being somewhat mischievous in saying that we were cherry-picking from the Silk recommendations, because our new clause is in line with the Silk II recommendations, in that it is a matter for the National Assembly if it wishes to change the name of the legislature. The new clause would empower it to make that decision rather than having to make a request to the UK Government of the day, as it has done for the name of the Executive.
The new clause would mean that the National Assembly would be able to change its name by means of a resolution agreed by a simple majority. It is gratifying that clause 4 officially changes the name of the Executive to the “Welsh Government”, a title that has been used widely for practical purposes since the 2011 election. There was a Scottish precedent for this change of title in 2007, when the “Scottish Executive” were renamed the “Scottish Government”. There has been broad agreement that the term “Welsh Assembly Government”, which had been in use since 2002, had been confusing and anachronistic after the separation of the Executive and legislative functions of the Assembly in 2007. It also gave rise to the unfortunate acronym WAG—being given the same label as a premiership footballer’s better half has done little for the democracy of our country. I have never used the term since I was elected, instead always using “Welsh Government”, so I was delighted that following the 2011 election the First Minister made the case that the Executive would be known as the “Welsh Government” thereafter. So I fully support clause 4, which makes that name official in legislation.
Now that the National Assembly is able to pass its own laws, it should be called a Parliament. However, I appreciate that others hold a different view, and that in the European tradition, the meeting place of a legislature is generally termed an Assembly. In France, for instance, the national legislature is called the Assemblée Nationale—if my memory of international rugby trips to Paris serves me correctly. Surely it should be a matter for the democratically elected Members of the national legislature of Wales to determine the name of the legislature in which they serve. That is what we are trying to achieve in new clause 5, but I will not press the matter to a vote. I expect there to be greater deliberations on this topic when the Bill reaches the other place.
Mr Harper
I fully support clause 4, but I want to touch briefly on new clause 5, about which the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) has just been talking. I do not support new clause 5, and I am glad that he is not going to press it to a vote. Although he makes the point that the text of the new clause does not pick a particular name, there is a bit of a hint in the title about where he is going. It is, I think, a qualitative difference. The Minister, in setting out the Government’s position, made it clear that the renaming of the Welsh Assembly Government to the Welsh Government is following public opinion and public usage, and simply therefore reflecting the reality of the situation. What the hon. Gentleman and his party are trying to do is the opposite. They are trying to push for changing the name of the Assembly in order to change the nature of the Assembly. Calling it the National Parliament for Wales, which implies a single institution, is clearly part of their campaign to move to a position where Wales ceases to be part of the United Kingdom and becomes an independent country. That is not something I support, which is why I do not support the new clause and why I think it is qualitatively different from clause 4.
Jonathan Edwards
I was anxious not to get involved in a debate about the actual name, but the hon. Gentleman will be aware that, in the UK’s tradition, Scotland became a law-making Parliament and was named as such. That is why I make the case for using the term “Parliament”. However, there are individuals, including those in my own party, who would prefer to keep the term the National Assembly. We want to empower the National Assembly to make that decision rather than the House of Commons.
Mr Harper
I see that point, but the danger is that the name change becomes part of the campaign to change the nature not just of the institution but of the relationship between Wales and the United Kingdom. That is why I think that the approach the Government are taking in clause 4, which is effectively to reflect popular usage of the term Welsh Government for the Welsh Assembly Government, is perfectly straightforward and sensible. Moreover, that is done through primary legislation and therefore keeps that decision for this House. I do not support new clause 5, which would give that power to the National Assembly.
Jonathan Edwards
It would be wrong to describe this as some sort of partisan nationalist plot to change the name of the National Assembly. As I have already said to the Under-Secretary of State, the position of the Tory leader in the Assembly group is to change the name to a National Parliament. Indeed it is even the position of the Presiding Officer of the National Assembly who is, of course, a Labour party Member.
Mr Harper
I take that point. I would oppose new clause 5 whoever drafted it, because the whole concept of changing the name to achieve a political outcome is not something that I support. We can have a debate about independence and whether the Welsh Assembly should turn into a Parliament of an independent Wales, but we should have it openly. We should not use changing the name as a surreptitious way of moving along the debate and hope that nobody notices. The hon. Gentleman has cunningly designed the new clause so that it does not say anywhere what the National Assembly should be called, but, as I have said, it is given away in the title as a little hint about where he wants to go. It is whatever the parliamentary equivalent of a Freudian slip is, which gives it away.
Mr Gauke
I am grateful to my hon. Friend because he takes me neatly on to the next line of my speech.
Amendments 1 to 4, which were tabled by Plaid Cymru, relate to the single Welsh rate of income tax—the so-called lockstep system. Fundamentally, income tax devolution must work within the integrated UK-wide income tax system. It must work for Wales by increasing the accountability of the Assembly and the Welsh Government, and it must work for the UK by maintaining the stability of the tax system.
Following a thorough and robust assessment of the Silk commission recommendations, we have determined that that would be most effectively achieved through a single Welsh rate of income tax that applied to all bands. There are two main reasons for that. First, the pooling and redistribution of tax revenues is a key feature of our fiscal model and ensures that wealth is shared among the regions and countries of the UK. The income tax structure is a key mechanism for achieving wealth redistribution. It is surely right, therefore, that UK-wide redistribution is decided at the UK level. The lockstep ensures that that will continue to be the case.
Secondly, although there are many benefits of tax devolution, it is not without risk. Specifically, we need to minimise the potential for harmful tax competition, increased opportunities for tax avoidance and evasion, and higher administrative burdens. It is therefore crucial that when we devolve taxes, we do so in a way that minimises those risks. In particular, the Government have consistently been clear that tax devolution should not benefit one part of the UK to the detriment of another. Tax devolution is not about moving economic activity from one area to another, but about empowering the devolved Administrations to generate additional growth and increasing their accountability by linking their budgets to their decisions. That incentivises the devolved Administrations and increases their accountability to the people, in this case in Wales.
Without the lockstep, the Welsh Government could substantially lower the rates of tax for the upper bands in Wales without making any change to the basic rate. That would be a considerable incentive for high earners to move across the border, which would benefit Wales, but would be to the detriment of the UK as a whole. Instead, the lockstep system will enable the Welsh Government to vary the levels of tax and spending in Wales, but the size of any differences will be unlikely to lead to tax competition. For example, they would be similar to the existing differences between the levels of council tax in neighbouring local authorities in Wales.
Devolving an element of income tax is therefore best achieved using the lockstep system. That will enable us to deliver substantial benefits to Wales, while continuing to redistribute wealth throughout the income tax system and minimise the risk of tax competition. I hope that I have helped hon. Members to understand our rationale for the lockstep system. I therefore ask them not to press amendments 1 to 4.
Jonathan Edwards
Does the hon. Gentleman not understand that he has contradicted himself? Indeed, the whole Wales Bill is contradictory. He is arguing that the powers are needed to incentivise the Welsh Government to develop economic growth, but he is placing a lockstep on those powers, making it impossible to use them. It is essentially a handcuff on those powers. There is a huge contradiction in what he is saying.
Mr Gauke
I do not accept that the powers are impossible to use. One can debate whether the rates should be varied, but the fact that there will be greater accountability will benefit Wales as a whole. We must balance the improvement in accountability in Wales with the difficulties that might arise with tax competition in the higher rates, which would be likely to damage the tax base in the UK as a whole. That is why we proceeded with a lockstep.
On amendment 6, tabled by the hon. Member for Pontypridd, I assure the Committee that the Government always consider the impacts of potential policy options and keep policies under review. An assessment of the potential impacts of devolving elements of income tax to the Welsh Assembly is summarised in the documents accompanying the introduction of the Wales Bill, in particular the Command Paper and the impact assessment. That assessment explains how the proposed system of income tax devolution achieves the key benefits identified by the Silk commission, increasing the accountability of the Assembly and Welsh Government and providing flexibility over the levels of tax and spending in Wales, while also minimising the risks of tax competition in the UK whereby significantly different tax rates could affect the behaviour of people living close to the border.
The Government’s assessment of the Silk commission’s proposals look closely at the potential for harmful tax competition in the UK, particularly given the populous border between England and Wales. As a result of that work, the Government rejected a system of three independent Welsh rates of income tax, instead proposing the lockstep system. As I have previously explained, that system specifically helps to minimise the risk of harmful tax competition in the UK. I hope hon. Members agree that the assessment we have undertaken is suitably robust, and that they are reassured by our commitment to keep the policy under review. Clause 22 requires the Government to report annually on the implementation and operation of the finance provisions of the Bill, so we will keep Parliament informed in that regard. On that basis I hope that hon. Members will not press amendment 6.
Amendment 16 was tabled by my hon. Friend the Member for Forest of Dean (Mr Harper) as recommended in the Silk commission’s report of November 2012, and clause 8 provides for the Comptroller and Auditor General to report directly to the National Assembly for Wales on HMRC’s administration of the Welsh rate of income tax. That will provide independent assurance to the Assembly on HMRC’s performance in administering this tax. The Comptroller and Auditor General currently reports to Parliament on HMRC’s administration of its business, including the operation of the UK’s income tax system. Should the Welsh rate of income tax be introduced, it will be operated as part of the UK income tax system. The NAO would therefore be able to report to Parliament in relation to the Welsh rate as part of its existing remit, and clause 8 ensures that reporting to the Welsh Assembly on the Welsh rate will additionally fall within the NAO’s remit.
Mr Gauke
I am grateful to my hon. Friend for that point and I hope I can reassure him. There already exist mechanisms for scrutiny in relation to the Welsh rate by Parliament through existing vires. HMRC’s accounts would contain specific information on the Welsh rate, and they will continue to be laid before Parliament. Hon. Members will be presented with the levels of spending incurred by HMRC in administering the Welsh rate and the amounts of revenue collected. I believe that those existing channels provide an appropriate level of scrutiny for hon. Members in relation to the Welsh rate, and I hope that addresses my hon. Friend’s point.
I also think it right for additional insurance to be provided to the Assembly via the Comptroller and Auditor General’s report, and we anticipate that that report would be produced to a timetable similar to that of the wider report to Parliament on HMRC’s accounts. No doubt my hon. Friend will shortly contribute to the debate, but I have set out the existing mechanisms for scrutiny that will be available to Members of this Parliament, and I hope he is reassured.
On amendments 38 and 39, we have been working closely with the Welsh Government on Welsh funding. In particular, the Government recognise there has been convergence between the levels of funding in Wales and England since devolution, and that this is a significant concern in Wales. As a result, in October 2012 we agreed to implement a joint process to review the levels of funding in Wales and England in advance of the spending review. If convergence is forecast to occur over the course of the spending review period, options will be discussed to address the issue in a fair and affordable manner, based on a shared understanding of all the available evidence.
In advance of the 2013 spending round, a joint review was therefore undertaken by the two Governments and the outcome set out in a written ministerial statement. The review determined that funding levels are not expected to converge during the period to 2015-16, and in fact an element of divergence is forecast to occur. The review also determined that relative funding levels in Wales are within the range recommended by the Holtham commission.
These arrangements assure that we have a shared understanding of funding levels in Wales and a process is in place to consider options should convergence be forecast to resume. In no way would the devolution of income tax have any impact on these arrangements, and it is certainly not the case that income tax devolution would lock in the current level of funding. These arrangements therefore provide a firm basis for proceeding with the new financial powers in the Bill, and I hope that hon. Members will therefore not press amendments 38 and 39. I hope that my comments have been of assistance to the Committee, and that clauses 8 and 9 and the Government amendments will be added to the Bill this evening.
Jonathan Edwards
I wish to speak to amendments 1, 2, 3 and 4, in my name and the names of my colleagues in Plaid Cymru. We intend to press amendment 1 to a Division at the appropriate time.
The lockstep income tax power that is on offer in this Bill is not the one recommended by the Silk commission. We see two ways forward to preserve the integrity of the original Silk proposals. Either the lockstep income tax power should proceed without a referendum, which amendment 1 would achieve, or the Bill should be amended as per the Silk commission recommendation on income tax, which amendments 2, 3 and 4 seek to do, thereby restoring the need for a referendum, as Silk envisaged, on an income tax sharing arrangement without a lockstep.
I remind hon. Members that their parties, through their representatives on the commission, agreed to the Silk recommendations. Indeed, the Labour party’s representative on the commission was the esteemed former Assembly Member, Sue Essex, who is of course a former Finance Minister in the Welsh Government. The purpose of amendment 1 is to ensure that the referendum is on the ability of Wales to vary each income tax band individually, rather than the lockstep that is proposed in the Bill.
I believe that we should not have a referendum on these powers. The borrowing powers that will accompany the income tax powers would be essential to move the economy forward. Capacity will increase with the income tax powers. However, I accept the position of my party that a referendum should be held on the original Silk recommendations. In my view, the principle of fiscal devolution has already been conceded in this Bill—we will discuss the minor taxes next week—so the case for a referendum is not very strong.
Amendments 2, 3 and 4 would alter the Bill so that the lockstep is removed from the income tax power, giving Wales the ability to vary income tax band rates independently of each other, subject to a referendum, as per the original recommendation of the Silk commission. As the Bill stands, the lockstep on the ability to vary income tax in Wales means that all three bands can be moved up or down only in tandem, as is the case in Scotland. I hesitate to point out that those powers have never been used in Scotland, even though they have been available since devolution in 1999. Of course, the Silk recommendation was for the power to vary income tax band rates independently of each other. In reality the lockstep kills the ability to vary income tax at all, which strengthens the argument that I put to the Minister in an intervention—the lockstep hinders what the Government claim to be trying to achieve in the Bill, which is to incentivise the Welsh Government to develop their economy. Without the ability to introduce innovative income tax policy, how are they meant to achieve that?
Hywel Williams
Does my hon. Friend find it peculiar that Labour’s position is to allow an increase in taxes in Wales, thereby handing a tax advantage to England? Its only policy on tax competition is to move it in favour of our friends in England.
Jonathan Edwards
That is an important intervention. The Labour party’s position is that it is worried about tax competition, yet, based on its tax policy, the only tax competition that could happen would favour England and other parts of the British state.
Owen Smith
Let us be absolutely clear: Labour has not argued, and is not arguing, for a tax increase in Wales. We know that the Conservative party is saying that it wants to cut taxes for the wealthiest in Wales. We are seeking to future-proof the legislation so that a Labour Government in Wales would be able to mitigate against further Tory tax cuts for the wealthiest, and introduce tax justice in Wales.
Jonathan Edwards
That is the crux of the argument, and the division between the Labour party and my party. My view is that we should empower the National Assembly and have a mature debate in Wales about what the level of taxation should be. I think the hon. Gentleman is aware of where my political conscience lies—I tabled an amendment to the Finance Bill to reinstate the top rate to 50p. Let us have the debate. Let us trust our Assembly Members to have the debate and let us see the National Assembly mature. The one thing that devolving responsibility for these powers will do is lead to the maturing of the Assembly. Hopefully, we will see the growth and development of our democracy in Wales.
When the Welsh Affairs Committee carried out the pre-legislative scrutiny of the Bill, we had independent witness after witness—I hasten to add that my hon. Friend the Member for Arfon (Hywel Williams) had taken over my role in the Committee for that period, as I was enjoying my paternity leave with my son Llywelyn—giving evidence, except of course the Secretary of State and Treasury Ministers, arguing that the lockstep should be removed. Those giving evidence included the leaders of all the parties in the Assembly, not least the leader of the Liberal Democrats and the Conservatives in Wales. Several distinguished economists, academics and experts, as well as the Chair of the Select Committee on Political and Constitutional Reform, also gave evidence. When the Welsh Affairs Committee visited Scotland following the initial Silk report, there was much excitement about its proposals. Academics, economists, civil servants, Ministers and Back Benchers in the Scottish Parliament were all in favour of Silk’s proposals for Wales, as opposed to what they have in the Scotland Act 2012.
I need not remind Labour Members present that the Labour First Minister, Carwyn Jones, said that the lockstep is a “Tory trap” and that it should be removed. He said the lockstep was “a long way short” of what was considered to be good for Wales, adding that
“binding the rates together is not right for Wales”.
That is a clear indication of the need to remove the lockstep on income tax varying powers.
We in Plaid Cymru are seeking, through amendment 21 and several other amendments, to maintain the integrity of the original cross-party Silk commission recommendations. We believe that the Welsh economy needs that sensible package of reforms in order to increase its ability to bring about economic growth and create jobs. We believe that it is a necessary tool, which will help us to begin to rebalance the economy of the British state by giving greater power to the nations and regions, and will help Wales to begin to lift itself from the bottom of the UK economic league table.
In its present form, the Bill requires Wales to hold a referendum on the lockstep model of income tax and win it in order to gain access to the higher limit applying to borrowing to fund investment. We believe that Wales needs access to that money in order to invest sensibly in infrastructure, secure a good return on its investment, and provide jobs that will have a beneficial effect on the state of the Welsh economy. We are all mindful of the huge cuts in its capital budget that the National Assembly has suffered under the coalition Government.
Given that the lockstep was not the compromise agreed by the parties during the Silk commission’s deliberations, it would surely make more sense to devolve the model without the need for a costly referendum. It is simply an income tax sharing model, with a 90-10 split between the United Kingdom and Welsh Governments. Giving the Welsh Government the ability to vary tax is a theoretical exercise that, as the Treasury well knows, cannot become reality with a lockstep—hence the strings that are attached in the Bill. The big prize of what we propose would be the increased borrowing capacity that I believe is required to help the Welsh economy to regenerate and renew itself.
It is clear that all the other parties are now putting narrow self-interest ahead of the Welsh economy by attaching conditions and caveats to Wales’s gaining of greater fiscal and financial powers. The Tories and Liberal Democrats have their condition of the lockstep, while Labour has its caveat in regard to reform of the Barnett formula, on which its members continue to contort and refuse to commit themselves despite citing it as a precondition for greater financial powers for Wales.
As for the debate in Wales, Andrew R. T. Davies and Kirsty Williams have announced some exciting tax policies that they wish to pursue in relation to the ability to vary taxes. Unfortunately, their colleagues down here in London are completely undermining what they have pledged to the people of Wales in various policy announcements. That is a big hit to their credibility, which may be why the Secretary of State introduced the lockstep: perhaps he wanted to undermine Andrew R. T. Davies.
There has already been much public debate in Welsh civil society about the issue of the lockstep and the power to vary income tax bands individually in Wales. There has been controversy as the lockstep row has engulfed the Conservatives. The Welsh Secretary has claimed that the mechanism would not prevent Welsh Ministers from using the powers—although they have not been used in Scotland since 1999—and has suggested that a 1p cut across all three bands would increase Wales’s competitiveness, a claim which, according to the Welsh Government, would cost £200 million a year. Meanwhile, the leader of the Conservatives in the Assembly rejected the lockstep in his submission to the Welsh Affairs Committee hearing on the powers, prompting a damaging fall-out with the Secretary of State. All the Tory Assembly Members were seconded down here to No. 10 Downing street to try to repair some of the damage.
We are often given the impression that it is the Treasury that does the overruling in all these matters. If Scotland does not have it, Wales surely cannot have it. However, the ability to vary income tax bands individually, as per Silk, would truly allow for the ability actually to vary income tax in Wales, and would be a significant step in the maturing of our democracy. As I said in our first debate this afternoon, it would provide a very positive narrative for the Westminster parties in relation to Scotland, demonstrating that they were serious about reforming the settlement of the UK and going beyond what Scotland has at present.
Mr Mark Williams
As the hon. Gentleman knows, I have a great deal of sympathy with him in regard to the lockstep, and, indeed, with one of his Select Committee colleagues who voted to remove it from the Bill. However, he is ending his speech—I think it is coming to an end: I think he has reached the last sheet—on an incredibly negative note. Does he accept that, in ensuring that our National Assembly has fiscal accountability, the Bill still represents a huge advance on the status quo? I sincerely hope that he will support it on Third Reading for that reason, whatever happens to his amendment this evening.
Jonathan Edwards
Of course the hon. Gentleman is right. We do support the Bill, but we want to use the opportunities provided by the Committee stage to strengthen and improve it. In my view, the lockstep is one provision that needs urgently to be removed. If the United Kingdom Government are determined to introduce it, let us devolve it in the Bill and then have a referendum on its removal. Why have a referendum on the lockstep mechanism?
The Secretary of State has spoken before of his belief that Wales needs the ability to vary income tax in order to be competitive—spoken as a true Conservative—but then does not offer a power that actually allows for any variation in income tax. That is the huge contradiction in the Bill as it stands. It is time for him and his Government to put their money where their mouth is and support our amendments—I am not holding out much hope—and for the Labour Members present to support what their party in Wales is saying by supporting us in the Lobby later.
Glyn Davies
This is a very important debate. The Bill is incredibly wide ranging and has lots of aspects to it, but the one issue that dominates it, as much the most important aspect, is the devolution of meaningful tax-raising powers to the National Assembly for Wales, and that involves a significant part of income tax. In doing that, the Bill will deliver financial accountability to the Welsh Government, which has been lacking since the National Assembly for Wales was established.
Let me give some context by saying something about my own background. In 1997, I was opposed to the establishment of the National Assembly for Wales, because I thought we were considering setting up a body that was not meaningful. I recall being at the count in Llandrindod Wells when the result for Carmarthenshire came through, and there were great celebrations because a yes vote had been snatched from defeat at the last minute. I recall driving home and thinking to myself that that was a key moment, and from then on I have taken the view that the National Assembly for Wales should have law-making powers and meaningful tax-raising powers. If we did not have those two powers, we were creating something that was simply not worth while. That is why this Bill is particularly important and we are dealing here with the key part.
It does not make any sense to have a Welsh Government who claim credit and say how good they are whenever they do something the people of Wales approve of but whenever something is done that the people of Wales do not approve of say, “We cannot do that because we do not have enough money from Westminster.” They transfer the blame, and they do not become a meaningful body until they are responsible for raising their own taxation. All of us know that from other things we might have done in our lives. When I was chair of Berriew community council, a very small village council, the biggest debate we had in the year was about whether we should levy 1p on the rates, just as a precept. It was much the biggest debate because it involved balancing what we wanted to spend with the demands on the ratepayers and it made us think clearly about the decisions we were taking. The same thing applied when I was the finance chairman of Montgomeryshire district council. We had an all-day debate every year about 1p on the rates, because again it was about balancing what the council wanted to spend against what we wanted to raise. That is what has always been lacking in the National Assembly.
I was a Member of the Assembly for eight years, at one stage being the finance spokesman, and I would never use the term “budget” as to my mind it was always an annual spending plan. It was not a genuine budget because it was not informing the people that it wanted money from them and that a balance was being struck between spending and demanding money from the ratepayers. So I am strongly in favour of the income tax proposal, because it is hugely important and it is why I really welcome the Bill. There are other parts of the Bill where my support is at varying levels, but the income tax proposal will be crucial.
My right hon. Friend the Secretary of State will know that I have always had some doubts about the need for a referendum. If we believe passionately that a body must have tax-raising powers to be a viable parliamentary body, we should commit ourselves in our manifestos to going forward with this proposal and then delivering it afterwards. I have come to accept that for two reasons, one of which is that there is a general expectation because of the referendum in Scotland that there will be a referendum on income tax-raising powers in Wales.
The second reason is that I want to stay as true as I can to the Silk commission report, which recommended a referendum, and all parties signed up to that. In pursuing this issue, I think I have to accept that there will be a referendum.
There has been a lot of discussion about the lockstep and the lack of freedom for the Welsh Government to vary individual rates. There will be different views on that, but I perfectly accept the rationale of the argument of the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). I must say though that it diverts us from the huge step forward that the Bill represents.
Owen Smith
The Exchequer Secretary can continue to attempt to suggest that I do not understand the Bill, but I understand it perfectly. I understand perfectly how lockstep works, but equally understand that this Government have cut taxes for the wealthiest in Britain. They have exclusively cut the additional 50p rate to 45p. I also know that his party in Wales has proposed that it would like to go further with Wales, so he will forgive us if we are suspicious of the “tax cuts for the wealthy” motives of the Conservative party. I think we will continue to be suspicious. Unless he would like to get to his feet and tell us that he does not intend that his colleagues in Wales should cut taxes for the wealthiest, I suspect that he will not wish to intervene further.
On the subject of the complexity and cost of the Bill, the Exchequer Secretary left us entirely without answers about how it will work. In order to illustrate its complexity, I highlighted that he has today moved a poorly drafted clause that will see a Welsh Tory Member of the European Parliament who does not live in Wales and who does not have a residence of any description in Wales, but who lives in England, designated as a Welsh taxpayer. The logic of that is entirely lost on me, but I should have thought that he would want to check who his European Members are in Wales and where they lived before he determined that they would get a tax break—in her case, a £700 tax break—were his Government to do what the Secretary of State for Wales has suggested and cut all the tax bands in lockstep by 1%. That is the tax cut that she would get in Wales, despite the fact that she does not actually live in Wales.
Jonathan Edwards
The hon. Gentleman’s point about Kay Swinburne is an interesting one. Based on that, where does he expect that Stephen Kinnock will pay taxes should he be successful in winning Aberavon? Would it be in Aberavon, in Copenhagen or where he pays tax at the moment, in a tax haven in Switzerland?
Oral Answers to Questions
Jonathan Edwards Excerpts(10 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Gauke
My hon. Friend has asked a very good question. As I have said, the Budget doubled UK Export Finance’s direct lending programme. Moreover, earlier this month we announced a £100 million extension of the advanced manufacturing supply chain initiative, and a £1 billion package to support the Aerospace Technology Institute was announced in the 2013 Budget. The Government are working hard to ensure that we secure the growth that is required by small and medium-sized enterprises in my hon. Friend’s constituency.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
The coalition Government promised to rebalance the economy on both a geographical and a sectoral basis, but little progress has been made in increasing business investment and exports as a percentage of GDP. Does not the low level of business investment—which is among the worst in the world—indicate that the business community is not entirely convinced by the UK Government’s economic policy?
Mr Gauke
The reality is that business investment is increasing, by 8% this year and by 9% next year. We have also just seen some very good figures relating to manufacturing growth over the last year. The Government continue to work to secure a balanced recovery, with the support of a number of measures in the Budget, but we are already making very good progress.
Finance (No. 2) Bill
Jonathan Edwards Excerpts(10 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
I beg to move, That the clause be read a Second time.
The Temporary Chair (Mr Peter Bone)
With this it will be convenient to discuss the following:
New clause 6—Air passenger duty: Scotland
‘(1) The Scotland Act 1998, Schedule 5, section A1 (exceptions) is amended as follows.
(2) After “rates)”, insert—
“(1) Air Passenger Duty on all flights that are—
(a) originating from an airport or aerodrome in Scotland; and
(b) not part of a connecting flight from—
(i) a domestic UK airport or aerodrome; or
(ii) a territory specified in Part 1 of Schedule 5A of the Finance Act 1994.”.’.
New clause 7—Rates of air passenger duty (Scotland)
‘After section 30A of the Finance Act 1994 there is inserted—
“30B Scotland rates of duty
(1) This section applies to the carriage of a chargeable passenger if—
(a) the carriage begins on or after the relevant day; and
(b) the only flight, or the first flight, of the passenger’s journey begins at an airport or aerodrome in Scotland.
(2) Air passenger duty is chargeable on the carriage of the chargeable passenger at the rate set by an Act of the Scottish Parliament for the purposes of this paragraph.
(3) The rate of £0 may be set for the purposes of paragraph (2).
(4) Any rate set must not exceed the rate which would apply if this section were not in force.
(5) “The relevant day” means the day appointed as such by an order.
(6) Section 42(4) and (5) does not apply to any order under subsection (5).
(7) An “Act of the Scottish Parliament” means an Act passed under section 28 of the Scotland Act 1998.”.’.
New schedule 1—‘Air Passenger duty: Wales
Part 1
Rates of Duty from 1 April 2014
1 Section 30 of FA 1994 (air passenger duty: rates of duty) is amended as follows.
After subsection (4D) insert—
“(4DA) Subsection (4D) applies if—
(a) the passenger’s journey is a relevant Wales journey; and
(b) apart from subsection (4DB), subsection (2) would not apply to the journey.
(4DB) The applicable rate in subsection (2) applies to the journey instead of the applicable rate in subsection (3), (4) or (4A) (as the case may be).
(4DC) A passenger’s journey is a “relevant Wales journey”—
(a) in the case of a journey which has only one flight, if the flight begins in Wales; and
(b) in any other case, if the first flight of the journey—
(i) begins in Wales; and
(ii) is not followed by a connected flight beginning at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A.”.
The amendments made by this Part of this Schedule have effect in relation to the carriage of passengers beginning on or after 1 April 2014.
Part 2
Devolution of Wales long haul rates of duty
2 Chapter 4 of Part 1 of FA 1994 (air passenger duty) is amended as follows.
3 (1) Section 30 (rates of duty) is amended as follows.
(2) After subsection (1) insert—
“(1B) Subsection (1) does not apply to the carriage of a chargeable passenger to which section 30B below (Wales long haul rates of duty) applies.”.
(3) Omit subsections (4DA) to (4DC) (as inserted by paragraph 1 above).
(4) The amendments made by this paragraph have effect in relation to the carriage of passengers beginning on or after the relevant day as defined in section 30B of FA 1994 (as inserted by paragraph 4 below).
4 After section 30A insert—
30B Wales long haul rates of duty
“(1) This section applies to the carriage of a chargeable passenger if—
(a) the carriage begins on or after the relevant day;
(b) the only flight, or the first flight, of the passenger’s journey begins at a place in Wales;
(c) the passenger’s journey does not end at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A; and
(d) if the passenger’s journey has more than one flight, the first flight is not followed by a connected flight beginning at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A.
(2) Air passenger duty is chargeable on the carriage of the chargeable passenger at the rate determined as follows.
(3) If the passenger’s journey ends at a place in a territory specified in Part 2 of Schedule 5A—
(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph; and
(b) in any other case, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph.
(4) If the passenger’s journey ends at a place in a territory specified in Part 3 of Schedule 5A—
(c) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph; and
(d) in any other case, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph.
(5) If the passenger’s journey ends at any other place—
(e) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph; and
(f) in any other case, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph.
(6) The rate of £0 may be set for the purposes of any paragraph.
(7) The same rate may be set for the purposes of two or more paragraphs.
(8) Subsections (5) to (7) and (10) to (12) of section 30 apply for the purposes of this section as they apply for the purposes of that section.
(9) “The relevant day” means the day appointed as such by an order.
(10) Section 42(4) and (5) do not apply to an order under subsection (9).
(11) A Bill containing provision authorised by this section may not be passed by the National Assembly for Wales except in pursuance of a recommendation which—
(g) is made by the Minister of Finance; and
(h) is signified to the Assembly by the Minister or on the Minister’s behalf.
(12) “Passed”, in relation to a Bill, means passed at the final stage (at which the Bill can be passed or rejected but not amended).
(13) Duty paid to the Commissioners in respect of the carriage of chargeable passengers to which this section applies must be paid by the Commissioners into the Consolidated Fund of Wales.”.
5 (1) Section 33 (registration of aircraft operators) is amended as follows.
(2) After subsection (2A) insert—
“(2B) If the Commissioners decide to keep a register under section 33B below, an operator of a chargeable aircraft does not become liable to be registered under this section just because the aircraft is used for the carriage of chargeable passengers to which section 30B above applies.”.
(3) In subsection (3)(b) after “applies”, insert “or, if the Commissioners have decided to keep a register under section 33B below, that no chargeable aircraft which he operates will be used for the carriage of chargeable passengers apart from the carriage of chargeable passengers to which section 30B above applies.
(4) In subsection (7) after “section 33A”, insert “or section 33B below”.
6 After section 33A insert—
33B (1) The Commissioners may under this section keep a register of aircraft operators.
(2) If the Commissioners decided to keep a register under this section, the operator of a chargeable aircraft becomes liable to be registered under this section if the aircraft is used for the carriage of chargeable passengers to which section 30B above applies.
(3) A person who has become liable to be registered under this section ceases to be so liable if the Commissioners are satisfied at any time—
(a) that he no longer operates any chargeable aircraft; or
(b) that no chargeable aircraft which he operates will be used for the carriage of chargeable passengers to which section 30B above applies.
(4) A person who is not registered under this section and has not given notice under this subsection shall, if he becomes liable to be registered under this section at any time, give written notice of that fact to the Commissioners not later than the end of the prescribed period beginning with that time.
(5) Notice under subsection (4) above shall be in such form, be given in such manner and contain such information as the Commissioners may direct.”.
7 In section 34 (fiscal representatives) in subsection (5)—
(a) in paragraph (a) after “33A”, insert “or 33B”.
8 After section 41B insert—
41C Wales long haul rates of duty: disclosure of information
“(1) An officer of Revenue and Customs may disclose to the Secretary of State, the Treasury or the Department of Finance in Wales any information for purposes connected with the setting of rates under section 30B above, including (in particular) to enable the setting of rates under that section to be taken into account for the purposes of section 118 of the Government of Wales Act 2006 (payments by Secretary of State into Welsh Consolidated Fund).
(2) Information disclosed under subsection (1) above may not be further disclosed without the consent of the Commissioners (which may be general or specific).
(3) In section 19 of the Commissioners for Revenue and Customs Act 2005 (wrongful disclosure) references to section 18(1) of that Act are to be read as including a reference to subsection (2) above.”.
9 In section 44 of CRCA 2005 (payment into Consolidated Fund) after subsection (2)(cb) insert—
(cc) sums required by section 30A(15) of the Finance Act 1994 (air passenger duty: Wales long haul rates of duty) to be paid into the Consolidated Fund of Wales,”.
10 In column 2 of the Table in paragraph 1 of Schedule 41 to FA 2008 (penalties for failure to notify), in the entry relating to air passenger duty, after “33A(4)”, insert “or 33B(4)”.
11 The amendments made by this Part of this Schedule have effect in relation to the carriage of passengers beginning on or after 1 April 2014.
12 The rate of duty in force under section (30B) shall not be greater than the rate which would be in force if the section had not been enacted.’.
Clauses 72 to 74 stand part.
Jonathan Edwards
Diolch yn fawr iawn, Mr Bone. It is an honour to serve under the chairmanship of the best slow left-arm bowler in the Westminster cricket team.
It is with pleasure that I rise to support new clause 2 and new schedule 1, and I will be pushing for a vote at the appropriate time. The UK Government commission on devolution in Wales, headed by Paul Silk, published the first phase of its report in November 2012, which concentrated solely on fiscal powers. Some 18 months later we are still waiting for an essential part of the cross-party Silk commission recommendations to come to fruition: the devolution of responsibility for long-haul air passenger duty. The original cross-party report recommended that responsibility for APD be transferred to Wales at the earliest opportunity and that the Finance Bill was the appropriate vehicle for doing that. The commission had the 2013 Finance Bill in mind, following the precedent set during the 2012 Finance Bill when APD was devolved to Northern Ireland.
It therefore comes as no surprise that I am here yet again attempting to transfer APD to Wales, as was agreed by all the parties in the commission. I will seek to divide the House and to hold other parties to what their representatives on the commission said and, perhaps more importantly, what their representatives in the National Assembly say back in Wales. I would of course be ecstatic if by some divine intervention their masters here in London listened to them for once and voted in favour of the policies they advocate—I do not hold my breath in much hope.
I will go on to speak about the discrepancies between what the Unionist parties say in Wales and how they vote here on devolving APD. First, let me inform the House a little about the background to the UK Government commission’s recommendation to devolve APD as part of a comprehensive package of financial powers and about the stage we are at now. In short, the cross-party Silk commission recommended that powers over stamp duty land tax, the aggregates levy, long-haul APD, landfill tax and business rates be devolved in their entirety. It also advocated a sharing arrangement for income tax, with Wales having the ability to vary each individual income tax band and rate.
After having been made to wait for more than a year by the London Government to grace us with a response to the commission which they themselves set up, we find ourselves already having debated the Second Reading of the Wales Bill in this Chamber. We expect it to be confirmed tomorrow morning that the whole House will return to consider the Committee stage of that Bill after the Easter recess. Yet the Wales Bill has some glaring omissions. It seems like a long time ago now when, last autumn, the Prime Minister and Deputy Prime Minister swept into the Senedd building in Cardiff, to flashing camera lights and an adoring paparazzi, in order to announce new financial powers for Wales. Very few questioned what exactly was being proposed. Only later did it emerge that the Westminster Government were prepared to accept the cross-party commission recommendations only in part and that they would be ignoring some. That is despite the fact that they had representation on the commission in the form of a commissioner representing the Conservative party and a commissioner representing the Liberal Democrats.
In essence, the Government have cherry-picked the commission’s recommendations, even though they were agreed on as a comprehensive package of reforms. It is therefore greatly disappointing that the Westminster Government have decided to ignore the will of the people of Wales, who believe that Wales should have greater power over its own affairs, according to successive polls, not least the ones conducted by the commission while it gathered evidence as part of its reports. Those polls represent some of the most detailed research undertaken on attitudes towards devolution since we first had our own devolved legislature in 1999.
Hywel Williams (Arfon) (PC)
Is all that not doubly disappointing given that our representative on the Silk commission was prepared to compromise in order to get a unanimous report? We gave ground and support to the recommendations of the Silk commission, but the Government are cherry-picking.
Jonathan Edwards
My hon. Friend makes a very important point and of course he is right. As I will go on to say, the Silk commission was a huge compromise for Plaid Cymru, yet we find ourselves the only party represented here in Westminster, and the only party represented in the National Assembly in Cardiff, trying to preserve the integrity of the Silk commission. That is a vital point which the people of Wales will realise in good time.
The devolution of air passenger duty was an important element of the package recommended by the Silk commission. It was therefore a slap in the face for Wales when it was omitted from the Wales Bill, which is currently progressing through this House. Both my colleagues and I have spoken several times about that Bill so I will not go into it too much further, save to say that my party and I have been dismayed by the attempts of both the Government and the Labour party to put narrow party self interest ahead of the Welsh national interest and to lay down road blocks in terms of the Silk commission.
The Government have sought to water down the financial powers recommended by the commission by constraining them through a lockstep.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I note the hon. Gentleman’s points about the Silk commission and about how the principal parties reneged on it. That also happened in Scotland with the Calman commission, which was set up by the Conservatives, Liberals and the friends of Labour, who then reneged on the Calman proposal to devolve ADP to Scotland.
Jonathan Edwards
That is an interesting point. I am sure that the people of Scotland are watching these developments intently, as they will be voting in a referendum on independence in September. The issue is, can they trust anything that the no campaign says in advance of that referendum? I am sure that that will become a growing theme as we approach the closing stages. I wish the hon. Gentleman and his colleagues well in the forthcoming months.
As I was saying, the Government have sought to water down the financial powers recommended by the commission by constraining them through a lockstep, essentially making it impossible to vary income tax in Wales. Meanwhile, the Labour party says that it will block any income tax powers via its Government in Cardiff unless the Barnett formula—the way in which Wales is funded—is reformed. That is despite having 13 years to do so while it was in government.
Labour also now supports the lockstep principle, despite the protestations of the First Minister. There is of course the added twist that the bands can only be moved upwards, which is why I have labelled Labour’s policy “lockstep plus”.
Needless to say, the agreement that was the Silk commission’s recommendations fell far short of what Plaid Cymru was advocating as a party, to which my hon. Friend the Member for Arfon (Hywel Williams) alluded earlier. We wanted a more comprehensive list of job-creating and economy-boosting powers including VAT, corporation tax, resource taxes and capital gains tax. However, in the interests of compromise, we settled on the final recommendations.
The Silk commission argued that should corporation tax be devolved to Northern Ireland, Wales should not be left behind. I follow with interest the unanimous support in Northern Ireland, among all parties, pressure groups and interest groups, for the devolution of corporation tax—[Interruption.] Exactly, that is a very interesting point: the Unionists in Northern Ireland want corporation tax and a whole range of job-creating powers for their devolved Government, yet we have unionists representing Welsh constituencies trying to block any move towards further powers for our country.
The Silk commission argued that should corporation tax be devolved to Northern Ireland, Wales should not be left behind. The fiscal powers recommended by Paul Silk and his team in the commission’s report are still desperately needed for the sake of the Welsh economy. The ability to vary some taxes and to borrow for investment would enable us in Wales better to deliver job-creating and economy-boosting measures and policies to help turn around the continuing bad performance of the economy.
It was also interesting to hear the Secretary of State sing the praises of the lockstep income tax provision of the Wales Bill in a TV interview. He said that it could be used to vary rates and would put Wales at a competitive advantage, but that the devolution of long-haul air passenger duty would put Bristol airport at a competitive disadvantage. That incoherence shows that the cherry-picking of the Silk recommendations falls apart unless they are introduced as a comprehensive and whole package.
Long-haul APD was devolved to Northern Ireland in last year’s Finance Bill, and the Silk commission has recommended the devolution of long-haul APD to Wales. It is clear therefore that today’s debate is the appropriate legislative vehicle to move this issue forward. Although I failed to do so last year, I live in hope that I might succeed today, but given that all the Labour MPs have disappeared home—AWOL again when the interests of Wales are under discussion—I am not holding my breath.
Mr Nigel Dodds (Belfast North) (DUP)
I have a lot of sympathy for what the hon. Gentleman is putting forward. He has mentioned Northern Ireland in relation to corporation tax and APD. Does he recognise though that one big argument in relation to Northern Ireland is the fact that we have a neighbour to our south, another EU member state, which competes directly with Northern Ireland? We also have a land border, and the corporation tax and APD rates down south are much less than they are in Northern Ireland, so there is a unique case in Northern Ireland—but I am not for one minute setting aside the merits of his case
Jonathan Edwards
As usual, the right hon. Gentleman makes a reasoned argument. Northern Ireland has a land border with the Republic, of course, but we would argue that we have a sea border. I normally find myself making the case for equality with Scotland in this place, but in this instance I am calling for equality with Northern Ireland. What is good enough for Northern Ireland is certainly good enough for Wales.
Just over a year ago, the Labour Welsh Government acquired the national airport of Wales, located just outside Cardiff near Barry in the Vale of Glamorgan. The ability to attract long-haul flights to the airport would significantly improve its competitiveness. It has more than 1.5 million people within its catchment area, and long-haul flights could attract people from even further afield given that that is the only airport in Wales or the west of England with a runway large enough to accommodate transatlantic aircraft. The development of the airport could act as a spur to growth in the south Wales economy, bringing in greater foreign direct investment through better business links, which would in turn bring jobs and growth. Quite frankly, I am amazed that the Labour party has not proposed its own amendment to the Finance Bill and that only goes to show that the First Minister has absolutely no influence over his bosses down here in London or, at least, over Labour MPs based in Wales.
In response to the UK Government’s proposals for the Wales Bill last November, the Labour First Minister said that he was “disappointed” that air passenger duty on long-haul flights would not be devolved. I am not surprised, given that his Government had brought the airport under public ownership only a year earlier. In a lecture at the London School of Economics, the First Minister said:
“Air passenger duty is another tax that should, in my view be devolved. While London struggles with where to build additional airport capacity, we in Wales face a very different problem. Our national airport in Cardiff has not enjoyed the growth in passenger numbers and destinations that we need to help drive economic growth. Devolution of air passenger duty would give us a useful tool to incentivise the growth of Cardiff airport and other smaller facilities, such as Anglesey in north Wales. APD has already been devolved to Northern Ireland for long-haul flights; at a minimum, I believe Wales should have parity.”
The First Minister makes my case for me, but where are his MPs? Where are they? It is just a shame that he could not get his MPs to the Committee to vote when he has the opportunity to do what he keeps preaching to the people of Wales in the Western Mail and on the BBC.
MPs representing Welsh constituencies who fail to vote in favour of devolving air passenger duty do not only ignore the economic needs of Wales, the First Minister of Wales and the overwhelming majority of Welsh public opinion.
Mr MacNeil
I am intrigued by the behaviour of Welsh Labour MPs. Does the hon. Gentleman think that Welsh Labour MPs hold their First Minister, Mr Carwyn Jones, in contempt deliberately or accidentally?
Jonathan Edwards
The key point is that if the First Minister cannot persuade his own MPs and those on his own Front Bench in Westminster to propose policies that he is promising to the people of Wales, why should the people of Wales listen to a single word he says to them in the media? It is a test of his credibility and authority and, based on tonight’s and last year’s evidence, I would argue that the First Minister has no credibility or authority whatsoever.
Hywel Williams
Does my hon. Friend agree that the First Minister has form on this matter? He will recall that we proposed a new clause to the Water Bill to implement the Labour Administration in Cardiff’s policy on borders and the control of water. Of course, the Labour Benches were entirely empty and, as he has mentioned, Labour failed to vote on that matter, too. Labour is entirely bogus.
Jonathan Edwards
Once again, I am grateful for that intervention. That is one in a long list of political issues on which the First Minister and his Cabinet members say one thing in Cardiff while Welsh Labour MPs operate completely differently down here. The proof of the pudding will, of course, be the Westminster Labour party manifesto. We will see what influence the First Minister has over that, but the manner in which he has been completely bullied by the shadow Secretary of State, who now supports a lockstep on income tax powers, seems to show that the balance of power is quite firmly here in London.
Bob Stewart
The hon. Gentleman has referred to Cardiff airport. Is there another airport in Wales to which air passenger duty applies?
Jonathan Edwards
Cardiff is the only international airport. We are talking about APD relief on long-haul flights, and it would apply primarily to Cardiff, but I imagine that the Welsh Government would have ambitions to redevelop other airports in Wales—[Interruption.] If they had the ambition, they would want to improve those airports.
As I was saying, public opinion clearly supports the devolution of the tax to Wales. Only yesterday, the Western Mail published the results of a survey that showed that 78% of respondents supported the devolution of APD. On this, as with so many other issues, the powers that be in Westminster are at odds with what the people of Wales demand. In response to that poll, the Welsh Labour Government said:
“We will continue to put forward the strong case for it”—
APD—
“to be devolved in the hope the UK Government will eventually listen to us and the overwhelming majority of the Welsh public who support this move, as reflected in this poll”.
A day after the poll, we have an opportunity in the Finance Bill to achieve that objective, but where is the Labour party?
I am glad that, since Cardiff airport has been brought into public ownership, new management has driven up passenger numbers by 9%. That is a crucial point—the national airport of Wales is publicly owned. I agree with that, as the airport is an essential part of Welsh national infrastructure, but Labour MPs from Wales are not here to ensure that something that is publicly owned by the people of Wales has the best chance of succeeding in the long term.
The devolution of APD could help to ensure the long-term future of the airport and draw passengers away from congested airports in the south-east of England—something I am sure many MPs and their constituents in and around the south-east of England would welcome. I therefore look forward, perhaps somewhat over-excitedly, to some of those MPs joining us in the Aye Lobby. I am similarly amazed that the Secretary of State for Wales is not pushing for the devolution of APD at the highest level, as it would provide us with the ability to develop the Welsh economy, which should be one of his core objectives.
The hon. Member for Vale of Glamorgan (Alun Cairns) is not in his usual place, which is slightly strange, considering that the airport is in his constituency. The livelihood of many of his constituents depends on the vitality of the airport, as well as the aircraft engineering industry that has grown around it, and they will be dismayed to learn that their MP does not support measures that could give the airport a competitive advantage. I should like to make reference in passing to the difficulties that engineering companies operating from the St Athan airbase, which is close to the international airport, face as a result of the management of that airfield by the Ministry of Defence.
The new clause effectively seeks to give Wales an essential tool to support and provide jobs locally in south Wales and the wider Welsh economy. The financial powers recommended by the Commission on Devolution in Wales are needed as soon as possible as a spur to jobs and growth in Wales. The Westminster Government, in the Wales Bill, have cherry-picked the recommendations and omitted the devolution of APD as well as other proposals. The powers included in the Bill may not be implemented until well into the second half of the decade, provided that no more roadblocks are put in place by other parties. Every month that passes without the devolution of those powers, the Welsh economy languishes even longer at the bottom of the economic league table of the nations and regions of the UK, with job and economic prospects diminished, hopes and dreams dashed, and lives stalled.
Plaid Cymru has made jobs and the economy its absolute priority, which is why we have again tabled an amendment on air passenger duty. We want to create a modern and prosperous Wales and, unlike our political opponents, we have little faith in London government of whatever colour achieving that ambition. That is why we want Wales to have the tools to get on with the job without delay. Diolch yn fawr.
Henry Smith (Crawley) (Con)
It is a pleasure to serve under your chairmanship, Mr Bone. I have the privilege and honour of being the Member of Parliament representing Gatwick airport, so aviation is important to my constituents. Aviation is extremely important to the whole of the United Kingdom, as an island trading nation. Many companies located in my constituency are aviation companies, such as Virgin Atlantic, easyJet and TUI Travel, or international companies that have chosen to base themselves close to a major international airport. Therefore, the issue of taxation on aviation concerns not only Wales, Scotland and England, but my constituency in particular.
I would prefer to see us abolishing air passenger duty altogether. We have one of the highest rates of air passenger duty anywhere in the world. I believe that only Chad charges more. Compared with our European competitors, the amount we charge is considerably more. One of our nearby competitors, the Netherlands, used to charge a form of APD but abolished it because of the cost to its economy. Just over a year ago a PricewaterhouseCoopers report concluded that although air passenger duty brings in about £3 billion to the Exchequer, it is estimated to cost the British economy some £16 billion.
I congratulate the Government on their move to reduce the burden of APD, as announced by my right hon. Friend the Chancellor of the Exchequer in his Budget a few weeks ago. It is a great step on the way to reforming and, I hope, one day abolishing this duty. It is a tax that we, as an island trading nation, can ill afford. Reducing bands C and D into band B for flights to capitals more than 4,000 miles from the UK will help many people who want to take well deserved, well earned long-haul holidays. It will also help the diaspora communities, particularly those travelling to the West Indies, India, Pakistan, Australia and New Zealand. Perhaps most importantly for us as an exporting and trading nation, it will help reduce the cost to business of trading with emerging economies such as China.
Catherine McKinnell
The hon. Gentleman makes an important point, and I entirely agree that the Government should be absolutely focused on economic growth. The debate about APD is part of that discussion, and the regional air connectivity fund must also be part of the conversation. The Government need to provide clarity on those issues in this Finance Bill and in the future.
As I said, Labour remains to be convinced of the merits of devolving air passenger duty. The Calman commission proposed that it be considered, and the Labour Government committed to keep it under review.
Jonathan Edwards
The hon. Lady made a telling point in response to my hon. Friend the Member for Arfon (Hywel Williams) when she said that the Labour Treasury Front-Bench team remained to be convinced of the position taken by the Labour Government in Wales. As she knows, the Labour Government are in direct intergovernmental negotiations with the UK Government’s Treasury team. If the First Minister and the Welsh Government cannot convince their own party, what credibility can they have in those vital negotiations with the UK Government?
Catherine McKinnell
I have said clearly that the Labour party remains to be convinced of the merits of devolving APD, but let us remember that the Wales Bill that is currently going through Parliament contains a number of devolved tax powers for Wales and is the appropriate place to debate these issues in the round. Labour’s devolution commission in Scotland considered the matter again and argued that devolving APD within the mainland of Great Britain would generate unhelpful tax competition within the UK.
Jonathan Edwards
We have had an informed and very interesting debate. We have also had an incredible revelation, which I hope the Welsh media will pick up tomorrow. Let me make it clear for the benefit of Labour Front Benchers that Carwyn Jones is the Labour First Minister of Wales.
We heard excellent speeches from the hon. Members for Crawley (Henry Smith) and for Macclesfield (David Rutley), a typically passionate speech from my hon. Friend the Member for Na h-Eileanan an Iar (Mr MacNeil), speeches from both Front Benches, and many good interventions.
The people of Wales own—via the Welsh Government —our national airport, which is a key piece of our national infrastructure, and we need to control air passenger duty if we are to maximise the potential of that asset. This is primarily an issue of jobs and growth, but it is also an issue of gross hypocrisy, given that parties operating in a devolved context say one thing in Wales and something completely different here in Westminster. The Labour First Minister of Wales says that this is an economic priority for his Administration, but he cannot persuade his own bosses here in London, or Labour Members of Parliament based in Wales. This is therefore an issue of the First Minister’s credibility and authority. If he cannot convince his own side, why should anyone in Wales take anything that he says seriously, and how can he possibly engage in detailed negotiations with the United Kingdom Government on these very fine and important fiscal matters?
It is necessary for us to divide the Committee so that the people of Wales can see the truth for themselves, and I therefore wish to press new clause 2 to a Division.
Question put, That the clause be read a Second time.
Finance (No.2) Bill
Jonathan Edwards Excerpts(10 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
I beg to move, That the clause be read a Second time.
The Temporary Chair (Katy Clark)
With this it will be convenient to discuss:
Amendment 4, in clause 1, page 2, line 11, at end insert—
‘( ) The Chancellor of the Exchequer shall, within three months of the passing of this Act, publish a report on the impact of setting the additional rate of income tax at 50 per cent.
( ) The report must estimate the impact of setting the additional rate for 2014-15 at 45 per cent and at 50 per cent on the amount of income tax currently paid by someone with a taxable income of—
(a) £150,000 per year; and
(b) £1,000,000 per year.’.
Clause 1 stand part.
I should inform the House that due to an administrative error some names in support of new clause 4 were omitted from the amendment paper. A revised version is available from the Vote Office with all names correctly reproduced.
Jonathan Edwards
I am grateful to you for that clarification, Ms Clark.
New clause 4, tabled in my name and those of my right hon. and hon. Friends in Plaid Cymru and the Scottish National party, would have the effect of requesting the Treasury to commission a report into reinstating the 50p tax rate for earnings above £150,000 a year, or £3,000 a week, as I prefer to explain the policy to my constituents. I look forward to pressing the new clause to a vote at the appropriate time.
This is an example of bad timing, as I understand that the President of the Republic of Ireland is about to address Members of the Commons and the Lords in the other place. I am disappointed to be missing that. However, there is little doubt that the decision in the 2012 Budget to scrap the 50p top rate and reduce it to 45p is the signature fiscal policy of the current Administration. However, I recognise that the 50p rate existed only for the dying weeks of the previous Labour UK Government, even though they were in power for more than 13 years with a top rate of only 40p. That of course leaves the impression that it was merely an election gimmick for the 2010 general election rather than a matter of deep principle.
Labour’s 13 years of the 40p rate reflected what Lord Mandelson said on behalf of the Blair Government about being
“intensely relaxed about people getting filthy rich”.
None the less, it was expected that the 50p rate, which existed for the first half of this coalition Government, would be set in stone while the UK Government maintained their plan A fiscal strategy of cutting the deficit. Despite disagreeing with the UK Government’s fiscal strategy since entering the House, I accept that the “We’re all in it together” slogan coined by the Chancellor was politically very successful. It was based on the notion that all parts of society were equal partners in a moral crusade to reduce the annual fiscal deficit of the state; that rich and poor, young and old would have to feel the pain as the only remedy for the excesses of the past—or so the story went.
The decision to cut the 50p rate was therefore a political miscalculation in my mind because, whatever way it is dressed up, the Chancellor offered a tax cut for those earning more than £3,000 a week. The notion of “We’re all in it together” was blown apart with one act. How can the Chancellor and the Treasury expect the most disadvantaged in society to stomach reductions in their social security support while the richest get a tax cut? It was an act that confirmed that we are not all in it together.
Let us not forget that in the 2012 Budget a further cut of £10 billion in the social protection budget was announced from 2013 onwards, on top of those announced in the 2010 emergency Budget. Those are the cuts that we are living with today, leaving the clear impression that the tax cut from 2013-14 onwards for the highest earners in society was being paid for by cuts in welfare provision for the poorest.
Jenny Chapman (Darlington) (Lab)
Does the hon. Gentleman agree that it is the scale of the tax cut that is most galling for our constituents, when on average it will be a £100,000 a year tax cut, which is something beyond the imaginations of most of our constituents?
Jonathan Edwards
I can certainly assure the hon. Lady that not many people in Carmarthen East and Dinefwr are enjoying that tax cut. That is why I am speaking in such fervent opposition to it.
Hywel Williams (Arfon) (PC)
It is not only the fact that income tax has been cut but that further cuts to social provision are envisaged. So into the future, people at the bottom of the pile and who face disability and sickness will be seeing cuts to their benefits while the very rich will be seeing cuts to their tax.
Jonathan Edwards
I am sure that my hon. Friend’s surgeries, like mine, are filled weekly with individuals who face problems with reductions in the support that they receive. With all that in mind, it is difficult to look them in the eye and support a tax cut for those on the highest incomes. It undermines the case for the moral crusade I alluded to earlier and public support for the fiscal policy of the current UK Government.
Huw Irranca-Davies (Ogmore) (Lab)
The hon. Gentleman is making some good points. Does he agree that, while there are technical issues in determining the exact point at which the Government will gain more or less from a tax, there is a significant signal from the 50p tax rate, which is that we are, at least to some extent, all in it together? His constituents are not far from mine, and the average median wage in the Ogmore valley is less than £21,000.
Jonathan Edwards
The hon. Gentleman always makes very intelligent points. I believe that he is talking about the Laffer curve. I will discuss the optimal rate of taxation later, but I agree wholeheartedly with his comments.
A report for the Office for National Statistics entitled “The Effects of Taxes and Benefits on Household Income, 2011/12”, which was released in July 2013, showed clearly that, while income tax is progressive, as it should be, the effect of indirect taxes such as VAT means that the bottom fifth of the income groups pay the most out as a percentage of their gross income at 36.6% in taxes, while the top fifth pay 35.5%. The overall tax system is therefore still heavily weighted in favour of the highest earners. Plaid Cymru believes in progressive taxation irrespective of the timing and state of the wider economy. We believe that those with the broadest shoulders should bear the burden of taxation. A Scandinavian model of progressive taxation is part of our DNA.
The House has voted on this measure only once, during the resolution votes following the 2012 Budget debate. I am delighted that it was Plaid Cymru and Scottish National party Members who called that vote. The shadow Chancellor must have been having an off-day, because the entire parliamentary Labour party abstained, apart from two honourable exceptions, the hon. Members for Bolsover (Mr Skinner) and for Newport West (Paul Flynn), if my memory serves me correctly. Although Labour Members voted against the Government’s 2012 Budget, which reduced the 50% rate to 45%, they missed the only vote that we have been able to have directly on the reduction of the top rate.
Pete Wishart (Perth and North Perthshire) (SNP)
I am sure my hon. Friend will agree that what happened to the Labour party that evening was cataclysmic. Does he have any explanation as to why the Labour party missed that vote that evening? Something from the Whips Office suggested headless chickens, but that would be showing disrespect to headless chickens. Does he have any idea why Labour abstained on what was one of the key policies at that point?
Jonathan Edwards
Unfortunately, I cannot enlighten my hon. Friend, other than to say that the Western Mail informed me that senior Labour staff described it as a “balls-up”.
To be slightly more serious, I was happy that, in response to an intervention from me last week on Second Reading, the shadow Chief Secretary, who is in his place, said that should Labour form the next UK Government, it would restore the 50p top rate for the duration of the next Parliament. I would certainly support that, and I look forward to doing so if there is a Labour Government. My understanding before his answer was that Labour was proposing a temporary increase in the top rate, so I welcome that development. I hope that during today’s debate, the Labour Front-Bench spokesman will confirm that that will be its policy at the next election and beyond.
Owing to the manner in which Finance Bills are processed, it is impossible to press to a vote amendments to alter tax band rates, which is why both new clause 4 and Labour’s amendment 4 call for a review from the Treasury of the impact of re-introducing the 50p rate. The 2011 Budget included the provision of a review to reduce the 50p rate. As I said, nobody foresaw the Treasury introducing such a policy within a year. In other words, the 2011 Budget provisions were a sop to Tory donors that their party was minded to reduce the top rate at some point in the future. The following Budget then introduced the policy.
Proponents argue that the reduction in the additional rate to 45p has led to a windfall for the Treasury because of reduced avoidance and evasion. I noticed in the lead-up to the Budget last month that some Tory Back Benchers were making the case for a reduction to 40p for this Budget based on higher than expected tax receipts—some £9 billion—following the top rate changes. In the newspapers this morning the hon. Member for Taunton Deane (Mr Browne) was making a similar call for his party to adopt the 40p top rate come the general election. He is not in his seat, so perhaps he has been told to go somewhere else. I find that argument difficult to swallow as individuals seeking to avoid tax at a 50p rate would surely be minded to do so with a 45p rate. The higher than forecasted tax receipts used to justify a further cut in the top rate was surely as a result of higher than projected economic performance, and therefore a 50p rate would have brought in even more receipts for the Treasury.
Hywel Williams
What credence does my hon. Friend give to the analysis that some high earners deferred declaring their income with a view to declaring it once the 45p rate was introduced, and that that led to higher receipts?
Jonathan Edwards
That is an important point about forestalling, which I will talk about in more detail later.
I note that the Office for Budget Responsibility’s March 2012 “Economic and fiscal outlook” states on page 110 that
“the revenue-maximising additional tax rate is around 48%.”
Again, that blows a hole in the Government’s argument that their reduction of the additional rate was based on sound economic and revenue-raising evidence. That is why they should now commit to carrying out a full report, as the new clause would compel them to do. I would argue that 48 is slightly closer to 50 than to 45.
The Chancellor told the House in 2012:
“The increase from 40p to 50p raised just a third of the £3 billion that we were told it would raise.”—[Official Report, 21 March 2012; Vol. 542, c. 805.]
I know my A-level maths is a little shaky, but that still makes £1 billion, a significant sum to the good people of Carmarthenshire and the good people of Wales and the rest of the UK. The Chancellor’s justification for the tax cut for the super-wealthy was that they would avoid the tax, they might leave the UK, it raised only £1 billion, and the reduction would lose the Government only £100 million. Having brought forward their income to avoid the 50p rate in the first year, the rich delayed it in the final year to benefit from the reduction to 45p. That forestalling and deferment will have cost the Treasury billions that could have been used to avoid some of the worst cuts to those on low incomes, such as those resulting from the bedroom tax.
Recent claims by some on the Government Benches that the tax cut for the richest has yielded more revenue conveniently gloss over the increased likelihood of those with an accountant being able to move their income into the following year, given the Government’s indication a year ahead of time that they were enacting the tax cut. My advice to the Government would be to enact the proper closing of loopholes to ensure that the super-wealthy pay their fair share, instead of the fig leaves of action that the Government have offered previously. They have still not introduced proper measures to make up the HMRC estimate of £35 billion lost each year through avoidance and evasion. Other estimates put the figure much higher. Claims that the rich were fleeing because of the 50% rate are also not very well grounded. Research by the TUC, using HMRC figures, indicated that 59% of those paying the 50% additional rate were employees, most working in banking and therefore unable to leave.
Huw Irranca-Davies
Does the hon. Gentleman understand the disconnect between those who are super-wealthy and the argument that he is making, when I, my constituents and my family, who rely on public services, the national health service and so on, see the sense in paying progressively higher rates of tax, myself included, to make sure that those services are available? Why is it that the super-wealthy do not see the sense in providing for public services? Is it, perhaps, because they do not rely on them?
Jonathan Edwards
That is certainly one argument, and I shall talk about how, with such an attitude, the super-wealthy are cutting off their own noses, and how a progressive taxation system would benefit them as well as people like the hon. Gentleman and me, who earn far less than those who get hit by the top rate.
As the 2012 HMRC paper that examined the effect of the 50% additional rate of income tax noted,
“there was a considerable behavioural response to the rate change, including a substantial amount of forestalling: around £16 billion to £18 billion of income is estimated to have been brought forward to 2009-10 to avoid the introduction of the additional rate of tax.”
This is a massive sum which would arguably have been included in taxation had the measure been announced with immediate effect.
The most recent figures from HMRC revised liabilities up by £2.8 billion in 2010-11, £3.3 billion in 2011-12 and £3.5 billion in 2012-13. This means that HMRC says it earned a total of £9.6 billion more than previously thought from the 50p tax rate. These are of course projections of taxable income, but that makes the case for the new clause which I am pushing.
Ian Swales
The hon. Gentleman makes the point about the £9.6 billion. Is he aware that HMRC says that the main part of that is due to higher income levels, not to changes in tax levels?
Jonathan Edwards
That is a fair point. We are making the case for a review. Let us have the figures divulged further. As I say, they are projections.
Sir James Paice (South East Cambridgeshire) (Con)
Does the hon. Gentleman want a review or does he want a higher tax rate? What would he do if that review demonstrated that 45p, 47p or 48p—anything less than 50p—was the point at which the Laffer curve tipped over? Is he interested in maximum receipts to the Treasury or in some sort of moral argument about equalising the distribution of income?
Jonathan Edwards
That is a very valid intervention. My political position would be to support a 50p rate, but let us have the evidence to make the decision. As I am outlining, the evidence suggests to me that 50p would be a better top rate than 45p, and certainly better than 40p.
Kelvin Hopkins
I agree with everything that the hon. Gentleman has said. If it were shown that an increased tax rate at that level brought in lower revenues, would not that simply be evidence of more tax evasion and insufficient enforcement?
Jonathan Edwards
That is the key point. If we have effective anti-evasion and avoidance measures, an increased rate of tax will inevitably lead to a higher yield.
We are living in very worrying times where wealth inequalities at geographical and individual levels are unprecedented. Parts of London have gross value added 12 times higher than parts of Wales. While London has the highest GVA per head of any area in the European Union, west Wales and the valleys has one of the lowest. The contemporary history of geographical and individual disparities has been truly depressing in this regard. Successive Governments do not have a good story to tell, with rebalancing promised but never delivered.
At the heart of the argument for a reduced top rate of tax is the trickle-down theory that underpins much of the now-discredited neo-liberal economics that the Thatcher and Reagan era ushered in. It was always sold to us that the newly re-empowered financial elites would spend their money and it would trickle down, and the people at the bottom would become wealthier as a result of this benevolent spending. But what has happened over the past 30 years? Inequality has, in fact, grown massively. Instead of the wealth of the super-rich flowing down, the rich, especially the super-rich, have got steadily even richer and hoarded their money. That money is not simply made out of the sweat and toil of their own good fortune, skill and brilliance, but often on the backs of those who work hard on the bottom rung but gain little financial reward for the true value of their efforts.
We often hear the super-rich whine that they have made their money, so why should they pay a lot of awful tax on it? Well, that tax goes towards paying for important services such as schools, to educate the work force of the next generation, and hospitals, to maintain the work force in good health. It also pays for a police force that keeps our communities safe, and a legal system that ensures that the law operates smoothly and in a trusted way to allow for a broadly prosperous economy and a society free from corruption. We erode these provisions at our peril. Taxes do not exist in a vacuum; they provide the services that create the whole that enables individuals to go on to enjoy the freedom of being able to make money and enjoy relative prosperity. That is what the proponents of the trickle-down effect have forgotten and wilfully ignored over the past 30 years, as the hon. Member for Ogmore (Huw Irranca-Davies) said.
My new clause would pave the way for the additional rate to be raised to 50%—a small rise of 5%—primarily because that would be symbolic of a move towards a more equal and just society. Only last month, the International Monetary Fund released a report that concluded that the more equal societies stand a better chance of long-term sustainable economic growth. Of course, the IMF is the high priest of austerity which, throughout the 1980s and ’90s, forced developing-world Governments to privatise their publicly owned industries wholesale and enact wildly free-market policies in exchange for international loans. The result was the plundering of those countries’ natural resources by global multinationals, with little benefit being felt by the poor local populations and the elites doing handsomely. It is therefore quite a turnaround for the IMF to conclude that income inequality impedes growth and that efforts to redistribute are positive.
This is the real political challenge that will face us over the next generation. That is why we should be ensuring that those with the broadest shoulders bear the burden in what will continue to be very hard times for those at the bottom of the income scale, given the massive cuts that this Government are still intent on inflicting. Let us remember that a vast tract of the austerity programme has yet to feed into the system. An additional rate of 50% would help to ensure that the super-wealthy bear the burden and pay their fair share. I urge the House to support the new clause.
Ian Swales
It is a privilege to serve under your chairmanship, Ms Clark.
I represent areas that, I am sure, are not dissimilar to those of Members who have already spoken and intervened and where there is a great deal of deprivation. Anybody who wants to learn about my constituency can look at the long article about it in the business section of last weekend’s edition of The Sunday Times.
The amendments tabled by Opposition Members forget some important things. The Labour party kept the top rate at 40% throughout its time in office, until its very last day in power. The only day the rate was 50% was 6 April 2010—the day Parliament was dissolved for the general election.
The right hon. Member for Wokingham (Mr Redwood) and the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) have both questioned how principled the former Prime Minister and the former Chancellor, the right hon. Members for Kirkcaldy and Cowdenbeath (Mr Brown) and for Edinburgh South West (Mr Darling), were in their commitment to raising the rate to 50%. One thing is for sure: a general election was approaching and they probably knew that the increase would be the gift that kept on giving in terms of headlines. They had levied taxes in any way they could and they knew that going up from 40% was a dubious move in terms of raising revenue; otherwise, they would have done it earlier. What it did do was lead to more headlines.
Millionaires are paying £381,000 more in income tax in this Parliament than they did in the previous Parliament. Having said that, cutting the rate was not the top priority for me or my party. Our priority was to cut taxes for ordinary working people and we are very proud of the large moves we have made in that direction.
We should also remember that taxing the rich is not only about the headline rate of income tax. Let us consider some of the other measures this Government have already taken. Withdrawal of the personal allowance on incomes of more than £100,000 means that there is already a 60% tax rate on incomes between £100,000 and £120,000. On capital gains tax, anybody lucky enough to make a capital gain of £1 million will pay £100,000 more tax under this Government than they did under the previous Government. The 18% rate of capital gains tax under Labour meant that City operators who made capital gains paid less tax on them than their office cleaners paid on their income, which was truly outrageous. People with a pension contribution of £250,000 are now paying £94,000 more tax on it. If anyone is lucky enough to have £1 million to spend after all those taxes, they will pay £25,000 more in VAT, if they spend it on standard rate items. Tax avoidance has also gone down; Her Majesty’s Revenue and Customs, with its extra resources, is clamping down on it. The idea that this Government are sitting around allowing the rich to do whatever they want is absolute nonsense.
Labour’s proposal to put the rate back up to 50% has already been thrown into doubt by the Institute for Fiscal Studies. I am the first to admit that £100 million is a lot of money, but that is all that would come out of it and the IFS has said that it is not a good way to narrow the deficit. HMRC has already said that what the rise to 50% would actually achieve is doubtful. If hon. Members want to review it, we already have real experience of rates of 40%, 50% and now 45%. The Treasury and HMRC conduct regular reviews and a similar review could be conducted on real, existing data. There was a 50% rate for a period, so a real review could be conducted. It is also worth remembering that national insurance is currently 2%, so the marginal rates that people are paying to the Government are not 45%, but 47%.
We have to be careful. The experience in France is fascinating. There has been a wholesale exodus, with the actor Gérard Depardieu taking the extreme step of moving to Russia to avoid what he regards as extreme tax rates. There is no doubt that people with such incomes and that kind of money can, largely, live wherever they like these days. We need to bear it in mind that the population is more fluid than it used to be.
The Red Book makes it very clear that the top decile pays far more tax than it did. That is right because, as the hon. Member for Carmarthen East and Dinefwr said, people with the broadest shoulders should bear the biggest burden; and they are doing so, because of all the changes that have been made. Despite the fact that the amendment suggests otherwise,
“income inequality is at its lowest level since 1986”,
as the Red Book states. I find the idea that income inequality widened under a Labour Government abhorrent, because such Governments should have narrowing it in their DNA. My four grandparents, who all helped to launch the Labour party, must have been spinning in their graves during the 13 years of the previous Government. I am deeply cynical about Labour’s commitment: they cut taxes for millionaires every year that they were in government.
I look forward to discussing this further in Committee. I do not have a particular argument with reviews, but they do not need to be specified in Bills.
Mr Gauke
I suspect that my hon. Friend may well be right, so I am grateful to him on that point.
Clause 1 will help the Government to achieve our aim of a tax system that is fair for everyone, while rewarding those who want to work hard and progress. We will achieve those goals by cutting income tax for the vast majority of income tax payers, including those in greatest need of support, while making sure that the tax system remains easy to understand. I again stress that the reports proposed in amendment 4 and new clause 4 are entirely unnecessary. The impact of reducing the additional rate of income tax has been examined in great detail. The 50p rate was ineffective and meant risking the recovery for which everyone in this country is working hard. I therefore commend clause 1 and urge the House to reject the amendment and the new clause.
Jonathan Edwards
We have had a very interesting debate. We heard excellent speeches from the hon. Members for Redcar (Ian Swales), for Edinburgh East (Sheila Gilmore) and for Ogmore (Huw Irranca-Davies), and my good friend the hon. Member for East Antrim (Sammy Wilson), as well as from both Front Benchers.
My new clause 4 is rather harmless, if I may say so. It calls for a review that might make the case for the Government’s policy—they might want the evidence to back it up—or the case for my party’s policy of a 50p top rate. With all three Westminster parties signed up to continuing austerity, whoever wins the next Westminster election, we need transparency to ensure that the wider public are confident that everybody is paying their fair share. I regret that because the Government have not accepted my new clause, I will have to divide the House.
Question put, That the clause be read a Second time.
Finance (No. 2) Bill
Jonathan Edwards Excerpts(10 years, 7 months ago)
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Danny Alexander
As usual, my hon. Friend is absolutely right. In particular, the measure will help small and medium-sized manufacturers outside London; they are the backbone of our economy.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Will the Chief Secretary to the Treasury tell the House where the UK lies in the global league of business investment as a percentage of GDP?
Danny Alexander
I do not have those figures immediately to hand, but I can tell the hon. Gentleman that, according to recent indices from major international firms, the UK is seen to be in the top two or three countries in the world for companies to invest in. One of the accountancy firms recently published an index showing that the environment for investment in the UK was now among the top half dozen in the world. Our position has improved significantly in recent years.
Chris Leslie
I do not think it helps with social cohesion to move from the 50p to the 45p rate. That sends a very bad signal, and I know that Members on the Government Benches will feel that in their constituencies, especially when the Government are jacking up taxes and reducing tax credits and other help for some of the poorest in society, while giving that very generous tax cut—typically £107,000—to the average millionaire at the top of the scale. I do not think a 50p rate is unreasonable.
It is unreasonable for Government Members to say that a 50p rate does not raise any money—“we cannot possibly do it”. If it is telegraphed to that set of high earners at the point at which a 50p rate comes into effect that it will be going in a year or two anyway, of course they can stave off the point at which they draw down their dividend from their personal service company. Everybody knows how they managed to avoid paying that 50p rate. They waited until the new tax year ticked over, then they paid the lower rate. It was very simple, which is why in the statistics we suddenly saw bonus payments go through the roof, sky high, at the point when the 50p rate fell to the 45p rate. We should have been allowed a proper assessment of what happened at that point.
Jonathan Edwards
I am listening intently to what the hon. Gentleman says and I agree with the point he makes, but will he explain why the Labour party proposes only a temporary return to the 50p rate, rather than a permanent return?
Chris Leslie
We have said that a 50p rate needs to be the policy for the next Parliament. We make judgments in manifestos from one Parliament to the next. Tax policy should never be written in perpetuity. We have said that while the deficit is likely to be as high as it is, the 50p rate is justified. The hon. Member for Cities of London and Westminster (Mark Field) talked about social cohesion. While the process of deficit reduction will now have to continue well into the next Parliament, when it was not expected, the 50p rate is perfectly justified for good social cohesion reasons.
Julie Hilling
I thank the hon. Gentleman for his intervention. At that time our Government needed to act to bail out those banks. He says that the Government need not have acted if the Bank of England had, but the reality is that the Government acted and needed to do so.
It has been claimed that before the global collapse we were spending too much, so why did the right hon. Member for Witney (Mr Cameron) pledge in 2007 to match Labour’s spending plan for further three years—to match our spending on investment, jobs and growth?
The level of debt under the Labour Government before the banking crisis was lower than that we inherited from the Tories in 1997. We brought the deficit down, we brought borrowing down and, far from failing to fix the roof when the sun was shining, we invested in repairing the terrible state of our public services. People were dying on hospital trolleys before they were seen, others were waiting a year to get on the waiting list before waiting another year to have their operations, schools were crumbling, the railways were decaying and youth services were disappearing. We repaired all that, and then the bankers behaved totally irresponsibly and brought down the world economy.
Yes, there was a failure by every Government right across the world to recognise the seeds of the banking crisis, but it was not caused by Labour’s overspending, and it was not caused by Labour’s high borrowing or high debt, because none of those things was going on before the banking crisis. If we had not dealt with the crisis as we did, the whole economic and banking system in Britain would have collapsed. If our Prime Minister at the time had not worked with other world leaders to bail out banks and bring forward investment, the world would have been plunged into a depression beyond belief.
We need honesty from Government Members to acknowledge the truth. The Government should acknowledge that the national debt has doubled on their watch to £1,400 billion. They should accept that wages are down by £1,600 a year since May 2010, and that people will be worse off in 2015 than they were in 2010. The Government should acknowledge that they have introduced 24 tax rises, that energy bills are up by almost £300 since the election, and that even though they inherited a growing economy, they squashed that growth, had three years of flatlining and have overseen the slowest recovery for 100 years.
The Government like to talk proudly about the number of jobs that they claim have been created in the private sector, so I asked them some questions about those jobs. I asked how many of the new jobs created lasted more than 12 months, but they could not tell me because they do not collect those statistics. So I asked them
“how many new jobs created in the private sector in the last 12 months were (a) unpaid workfare or internships, (b) through zero-hour contracts, (c) part-time, (d) part-time working 16 hours or less per week, (e) part-time working eight hours or less per week, (g) paid at the level of the minimum wage and (h) jobs transferred from public sector organisations.”
What a surprise. I was told:
“Information regarding the number of jobs created is not available. As an alternative, estimates relating to the net change in the number of people in employment in the private sector have been provided from the Labour Force Survey (LFS).”—[Official Report, 11 November 2013; Vol. 570, c. 460-61W.]
Estimates showed that more than a third of the new jobs that have been created are part-time, and that a third of those are under 16 hours. However, the Government do not collect the figures for those people who are on unpaid Government schemes or internships, even though those are included in the number of new jobs created. They cannot tell with any accuracy the number of people on zero-hours contracts or the number on the minimum wage. They also cannot tell me how many of the jobs now designated as being in the private sector are simply jobs transferred from the public sector, even though we know there are a large number of such jobs. The proud boast that over a million new jobs have been created is based on sand. We do not know how many are really new jobs, how many are unpaid, how many are low-paid, how many are zero-hours or how many are temporary. The Government like to think that any job is better than unemployment—a job at any price—but that is causing untold misery to many.
Let me tell the House a story of a man who went to the Allerton food bank. He was absolutely made up that he had got a job in Poundland. In week one, no work was offered; in week two, still no work offered; in week three, still no work offered. At this point he and his family were existing on boiled pasta because that was all they had in their household. Fortunately, somebody directed him to the food bank. People at the food bank helped him and spoke to Poundland, who said, “Well, we can’t finish him because he may get hours next week.” In the end he had to resign from his job and take the hit from the Department for Work and Pensions because he had resigned from a job—a job in which he was never given any hours to work. He had to resign so that he could feed his family.
Zero-hours contracts are a scourge on the unemployed, but instead of cracking down on them, the Government fail to collect statistics. Other sources estimate that a million people are on zero-hours contracts; a million people who do not know whether they can feed their families or pay their rents each week; a million people who cannot get a mortgage or a loan to buy a car; a million people who can make no plans for their future. It is like the bad old days when people had to queue up at the dock gates just to be picked for a day’s work. These workers are paid 40% less than those on permanent contracts, and 20% of them have said that they have had money docked or been penalised in some other way if they were unable to work when they were called for at a moment’s notice. Half the people have said that they have had shifts cancelled at the last minute. The Government should take Labour’s lead and regulate zero-hours contracts, not allow the exponential growth that has occurred under their watch.
Jonathan Edwards
The Social Services and Well-being (Wales) Bill was recently passed in the Welsh Parliament and my party put forward an amendment to prohibit the use of zero-hours contracts in that sector, yet the hon. Lady’s party, the governing party in Wales, voted down that amendment. What is her message to her colleagues in Wales?
Julie Hilling
With the greatest respect to the hon. Gentleman, I am not a Welsh Member and I am not a Member of the Welsh Assembly, so I do not feel able to comment. However, I wholly believe that what the Labour party says it will do in government is the action that should be taken, and that we need to crack down on zero-hours contracts.
The Government have presided over the destruction of permanent appropriately remunerated jobs with decent terms and conditions, with the creation of insecure, poorly paid private sector jobs.
At least we have not had the omnishambles of a Budget that we had a few years ago. I am pleased that the Chancellor, albeit secretly, has turned to plan B and is investing in infrastructure. But he is still doing nothing to tackle the cost of living crisis, and he is still ploughing ahead with further unnamed cuts. But we know where some of those cuts are being made. We already know that northern local authorities are bearing the brunt of the cuts in local government spending. Bolton will have lost £100 million from its budget, cutting services to the most vulnerable. Will the Government ever accept that they cannot cut their way to growth; that holding down wages means that more people are reliant on tax credits and many are in poverty?
The proposals on pensions appear to be welcome, but the Budget has done nothing for the 1.6 million pensioners living in poverty. Nor will it do anything for the crisis in social care, which has seen the number of older people receiving support falling by more than a quarter since 2005. Proposals on child care are welcome, but we need action now not in 18 months’ time. I met a woman on Friday in Horwich when I was campaigning for an energy price freeze who told me that she used to work in a nursery, but had to give up her job because she could not afford the child care costs for her own two children.
How on earth can the Government justify sacking tax collectors when the tax gap is somewhere between £35 billion and £120 billion? In 2011-12, before the last round of cuts, 20 million calls to HMRC were not answered. The estimated cost of those calls was £33 million, and the value of customers’ time was estimated at £103 million. Since then, the number of staff has been further reduced. Recent figures show that there were fewer confiscation orders in 2013 than in 2012 and less money was recovered, and only four officials are hunting 124 of the worst tax dodgers. The biggest scandal of all is that the Government say that they reduced the top rate of tax from 50% to 45% because people were avoiding paying their tax. They think that if people are poor they will work harder if their pay is cut. They think that people should pay all their tax, and that will make them better people, getting jobs and working harder. But the rich just have to pay less. They just have to say they will find other means so that they do not have to pay their taxes.
What nonsense. If the poor do not pay their taxes, they are prosecuted. If the rich do not pay their taxes, they get a tax cut. Even sadder, is that in the only full year that people had to pay the 50% tax, when they could not pre-pay or post-pay their tax bills, it brought in £1.1 billion extra. Perhaps I am a little strange, but I think that £1.1 billion is quite a lot of money. It could go some way towards solving some of the problems in our economy and some of the desperate situations my constituents face.
Until the Government deal with the cost of living crisis facing so many people in Britain today, they cannot possibly claim to be building a fairer society. It is an utter disgrace that in the sixth richest country in the world people are dependent on food banks and children are going to bed hungry. It is a disgrace that people are living in houses with no heat because they cannot afford the bills. It is a disgrace that long-term unemployment is going up. Yet again the Government seem to miss the point. They leave the poor and the vulnerable to suffer.
Charter for Budget Responsibility
Jonathan Edwards Excerpts(10 years, 8 months ago)
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Chris Leslie (Nottingham East) (Lab/Co-op)
The debate has been all too short, so let me briefly reiterate to the House that the Opposition support capping social security spending—an approach that my right hon. Friend the Leader of the Opposition first proposed in June 2013. Welfare expenditure is the largest part of total Government spending and it is now £13 billion higher than the Chancellor planned in his first spending review in 2010. We must get a grip of these rising costs but do so in a fair way—tough on welfare inflation but tough on the causes of welfare inflation as well.
The Government might not realise it, but low wages and job insecurity are pushing the welfare bill higher and higher. The collapse in earnings during this cost of living crisis has hit the taxpayer too. Rising rents and the lack of housing supply push up the housing benefit bill. We need action on house building and a help to build scheme far more urgently than ever before. And long-term youth unemployment has doubled under these Ministers, costing the taxpayer more in benefits but also losing revenue to the Exchequer.
Chris Leslie
I am afraid I will not give way because we have very little time. I have to give the Chief Secretary some time to try to make some sense of his proposals.
It is no wonder, I say to the Ministers, that in just the four months since the December autumn statement, they have had to revise their projections for welfare spending. In the Budget on Wednesday, they had to revise up predicted social security spending for next year by a further £1 billion and revise up the expected bill for the year after that, 2015-16, by another £1 billion. Controlling welfare inflation will mean tough decisions, such as ending the winter allowance for the richest 5% of pensioners, but we cannot afford the waste and ineptitude of the current Secretary of State for Work and Pensions, who cannot even be bothered to come back into the Chamber for the end of this debate. That Secretary of State has squandered £34 million by scrapping the Department for Work and Pensions inquiry service, in an astonishing waste of taxpayers’ money. He has written off millions of pounds of universal credit IT spending at an alarming rate. He has failed to tackle fraud and tackle the error and overpayments made by his Department of £700 million last year. The country and the taxpayer need protecting from the failures and the incompetence of this Chancellor and this Tory-led Government.
On the modified charter before us, why have the Government not taken the opportunity to revise the OBR’s mandate to allow the independent audit of policy costings and commitments in the manifestos of the main political parties? Perhaps the Chief Secretary can explain why the Government withdrew their first version of the motion last week, which could have allowed an amendment on that matter, and then hastily retabled a fresh version, which was not amendable. I wonder why they did that.
On the wider set of fiscal targets, will the Chief Secretary explain why the Treasury want to reiterate, in their charter today, the particular points on which they fail? If they want to restate the promise that they originally made to get the national debt falling by next year, be our guest. The motion before us today serves to remind the world of their failure to get the national debt down in 2015-16, and as the OBR said last week,
“We expect public sector net debt”
still to be rising in that year.
So the fiscal mandate is already in tatters. It had expired even before today’s debate. Is the Chancellor even aware of what he is doing? In his Budget speech on Wednesday he used the phrase,
“as a nation, we are getting on top of our debts”.—[Official Report, 19 March 2014; Vol. 577, c. 781.]
Does he not even realise that he has increased the national debt by a third—£1.2 trillion?
A new fiscal mandate will be needed in the new Parliament and we will obtain just that. We will balance the books and get the current budget into surplus as soon as possible in the next Parliament—a fairer approach to deficit reduction and tough on the causes of welfare inflation. We need long-term recovery and long-term growth, not the same old short-term politicking from the Chancellor. Sound management and stronger control are necessary to prove to taxpayers that the important safety net of social security for the vulnerable and those in need is sustainable for the longer term, so we will support the motion, should the House divide.
Oral Answers to Questions
Jonathan Edwards Excerpts(10 years, 8 months ago)
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Sajid Javid
Unemployment in the hon. Gentleman’s constituency rose in all categories under the last Government, and youth unemployment has fallen by 33% so far under the present Government. I hope that the hon. Gentleman will join me in welcoming that. He is right to point out that we must do much more to deal with the problem, but I am sure he supports the efforts that the Government have made in regard to apprenticeships. There have been 1.5 million apprenticeship starts over the last four years.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
6. What consideration he has given to reforming the membership of the Monetary Policy Committee of the Bank of England.
The Financial Secretary to the Treasury (Sajid Javid)
The Government are protecting the incomes of low-income households by freezing fuel duty and taking 2.7 million people out of tax by increasing their personal allowance. The best way to raise—[Interruption.]
Sajid Javid
I beg your pardon, Mr Speaker.
The Monetary Policy Committee consists of the individuals who are best qualified to make the decisions necessary to achieve the Government’s monetary policy objectives: the Governor of the Bank of England, the two deputy governors, two members of the Bank with responsibility for monetary policy and market operations, and four external members who are appointed by the Chancellor. All appointments are made on merit.
Jonathan Edwards
Diolch, Mr Speaker.
Regardless of the result of the referendum in Scotland, it seems inevitable that the devolved Governments will have more fiscal responsibility over the coming years. Fiscal empowerment needs to be matched with monetary policy-setting reform. Does the Minister agree that one option would be to appoint representatives of the devolved nations—and, arguably, representatives of territories outside the United Kingdom that use sterling, such as the Channel Islands and the Isle of Man—to the MPC, to ensure that monetary policy is formulated on the basis of the economic requirements of every part of the sterling zone? Would that not truly represent a partnership of equals?
Sajid Javid
No, I do not agree with the hon. Gentleman. I think the MPC is constituted in the right way. He knows that monetary policy is not a devolved responsibility, and there are no plans to change that.