Treasury Spending: Grants to Devolved Institutions

Jonathan Edwards Excerpts

Tuesday 3rd July 2018 Commons Chamber

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I cannot promise to be equally brief, but I will endeavour to stick to the six-minute limit. It is a pleasure to speak about bread and butter issues—the Barnett formula, Barnett consequentials, Welsh funding—considering that we seem to have been talking entirely about Brexit for the past two or three years.

The Welsh Government total departmental expenditure limit budget sought for 2018-19 is £15.827 billion, a reduction of 3.3% in both resource and capital budgets compared with last year’s final budget. I understand that this reduction has primarily arisen because last year’s revised budget included £300 million of additional funds for student loan impairments, and £278 million carried over from the previous year, neither of which has been repeated. It is also down £269 million because of the block grant adjustments arising from the devolution of stamp duty and landfill tax.

I acknowledge the fact that some significant adjustments have been made, but compared with the original spending review settlement plans for 2018-19, which include £18 million extra for the Cardiff and Swansea city deals, I would argue that the estimates in front of us are symptomatic of a negligent Westminster Government, with a comatose Secretary of State for Wales. Where is the money for the Swansea Bay tidal lagoon project, which was mentioned by my hon. Friend the Member for Aberdeen North (Kirsty Blackman)? Where is the money for rail electrification? Rail experts calculate that it would now cost only £150 million to electrify the line between Swansea and Cardiff, Wales’s two largest cities, in a stand-alone project. This compares with a cost of £400 million per mile for HS2, so the whole project in south Wales could be delivered for less than the cost of a third of a mile of HS2.

When it comes to the Swansea Bay city deal, 90% of the money is Welsh public and private money, yet the British Government are propagandising in the west of my country about how they are about to spend £1 billion in our communities. As it happens, that project is being delivered by Plaid Cymru-led Carmarthenshire County Council, definitely not by the British Government. The excuses given by the Secretary of State for Wales when delivering the bad news centre on the projects not being good value for money for the taxpayer. It is very disappointing that the Secretary of State believes that, and some might really question whether the £4.6 million investment for the Wales Office, which is included in the estimates, is value for money.

There is an adjustment of £16 million because of the 5% uplift on the Barnett consequential in the Welsh fiscal framework. For the first time—this is to be welcomed—a needs-based factor has been added to the calculation in these estimates with the aim of ensuring that Welsh funding converges to a level based on the needs of our country. However, we are still left languishing compared with Scotland and Northern Ireland. Welsh public funding per head will be about £10,076, but in Scotland the figure is £10,651 and in Northern Ireland it is £11,042, which is before we start talking about the £1 billion bung for Northern Ireland. Welsh funding per head also languishes behind that for London, where the figure is £10,192. Wales is certainly getting the bad end of the stick. As David Phillips of the Institute for Fiscal Studies argues:

“Although the inclusion of a need-based element in the Barnett formula is to be welcomed, the agreement makes no provision for updating the assessment of relative need in future. Even at the point of introduction the calculation will be based on an already decade old assessment. This could become a source of tension, if it emerges Wales’ relative need is changing, and the agreement is therefore unlikely to end debate around Wales’ fiscal framework.”

Following the devolution of stamp duty and landfill tax this year and the partial devolution of income tax in April 2019, the Welsh Government and our local authorities—through business rates and domestic rates—will control nearly £5 billion of tax revenues, which equates to about 30% of the combined spending of the Welsh Government and local authorities. However, this is far less than the fiscal power available to Scotland and Northern Ireland. While the Welsh budget will be largely protected from UK-wide economic shocks, by means of the block grant adjustment mechanism agreed in the new fiscal framework, devolved revenues will need to keep pace with comparable revenues in the rest of the UK to avoid a shortfall in the Welsh budget. As Guto Ifan recently wrote in relation to his report for the Wales Governance Centre:

“Increased transparency and budgetary information on the underlying block grant, devolved revenues and the adjustments made for tax devolution will be crucial in boosting fiscal accountability and aiding understanding of annual changes to the budget.”

I welcome the fact that we have got to the point where the Welsh Government now have to raise their own revenue to spend on public services; that will incentivise them to consider programmes that develop the Welsh economy—at the moment, of course, they are merely a spending body.

However, if the formula is to be based on population growth, there is going to be an issue. Even if we turned around the Welsh economy so that it was performing better than the UK economy, which should result in better revenues, there might be no net benefit because our population would be likely to lag behind. That cannot be right: we cannot be running a population-based revenue-related risk. We must look at that again, and I would be grateful if the Treasury agreed. This comes back to the argument made by the hon. Member for Aberdeen North: in the post-Brexit environment, if the formula is to decide the funding available to our respective nations, devolved power over immigration will be important for Wales and Scotland.

The lack of transparency and accountability in Welsh funding could be a problem in the long term. The promised boost in funding to NHS England is a case in point. The British Government have set out their estimated Barnett consequentials for the Welsh Government as a result of the extra £20 billion per annum for NHS England by 2023-24. However, those are yet to be finalised and we are none the wiser as to exactly how the uplift will be funded in England by increases in tax—and how that will impact on Wales, once income tax is devolved in April 2019. I hope those on the Treasury Bench will explain exactly how that is going to work.

Although partly devolving income tax is an important step towards fiscal accountability and responsibility, Plaid Cymru has always advocated for the full powers over income tax that are being made available to Scotland—especially the power to set our own bands. Following the UK’s departure from the European Union, there will be no legal or legislative barriers to the Westminster Government’s devolving taxation powers that would allow each nation of the British state to have the fiscal arrangements that suited its needs—not those of domineering London and the south-east of England.

We need to consider devolving three key taxes following Brexit: VAT, corporation tax and air passenger duty. VAT is particularly important to the Welsh economy. Welsh VAT revenues have been far more resilient than any other major taxes, with about £5.2 billion raised in 2014-15. VAT has become the largest fiscal source of revenue in Wales and performed far higher than the UK average; in contrast, income tax remains the dominant tax in the rest of the UK. VAT would be a very good tax to devolve to Wales.

[Luke Graham]

The hon. Gentleman is talking about VAT. Given that VAT is a regressive tax, is his party’s position to increase VAT in Wales?

[Jonathan Edwards]

The hon. Gentleman has brought to mind my recent visit to the United States: in every state there, sales tax is devolved. The argument is clear. If a tax is performing well in the UK context, it would be good to devolve it to Wales.

The Holtham commission recognised the immense benefits of devolving corporation tax in its 2010 report on finances in Wales. It argued that corporation tax devolution could be a critical part of the transformational change that the Welsh economy needs. Corporation tax has been devolved to Northern Ireland, and the Silk commission said in its report that there was no reason why that should not also apply to Wales. Our problem is that whereas Scotland and Northern Ireland have a range of fiscal powers, the Welsh fiscal portfolio is far weaker, which means that Wales is going to be at a competitive disadvantage within the UK.

Long-haul air passenger duty, of course, is another tax that has been devolved to Scotland and Northern Ireland. That means that the competitiveness of our publicly owned airport in Wales is being held back. Bristol airport opposes the devolution of the tax to Wales and that trumps what is in the best interests of the Welsh economy. The Welsh Government, of course, have no say over the ability of Bristol airport to build a second terminal. That will have a devastating effect on Cardiff airport.

Across the British state as a whole, devolved funding arrangements look increasingly asymmetric and ad hoc. There will now be significant differences in the scale and composition of devolved and reserved taxes across each country: how their block grants are determined and adjusted over time, and the borrowing and budget management capacity of each devolved Government. The British state is changing quickly and we will have to have new structures to manage those changes. With Brexit on our doorstep, the case has never been greater for an independent commission, similar to the Australian Commonwealth Grants Commission, to carry out an assessment of relative need, undertake periodic reviews, arbitrate between tax disputes, and collect and publish information on an annual basis about the allocation of finances and funding to the devolved Administrations. We cannot have a situation where the Treasury is judge and jury.

I would like to finish by talking about the UK shared prosperity fund, which has been a major source of income for investment infrastructure in Wales. Convergence funding between 2014 and 2020 is worth £2 billion. Despite it being two years since the referendum result, there is no clarity at all from the British Government on how that fund will work and how funds will be allocated. That will be a major issue for Wales and we will be pressing the British Government on it.

If the British state is to survive post Brexit, it will require radical restructuring and fiscal policy will be a key element in that. The estimates debate is probably not the right time to make those arguments, but I look forward to putting forward suggestions in the months to come.

Oral Answers to Questions

Jonathan Edwards Excerpts

Tuesday 22nd May 2018 Commons Chamber

[Mr Philip Hammond]

A pilot railcard for that age group was launched as a trial, and was fully subscribed very quickly. The Department for Transport will be announcing in due course when the continuation of the scheme will take place.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

As the Minister knows, the communities that I represent in Carmarthenshire received the highest form of EU structural aid. Will he give a guarantee that they will not lose a single penny following the introduction of the UK Shared Prosperity Fund?

[Mr Hammond]

As I think I have already said earlier in this session, we will be consulting, during the course of this year, on the design of the UK Shared Prosperity Fund, the scope and scale of the fund and how the money in the fund should be allocated. I look forward to the hon. Gentleman’s input to that consultation.

Oral Answers to Questions

Jonathan Edwards Excerpts

Tuesday 17th April 2018 Commons Chamber

[Elizabeth Truss]

My right hon. Friend the Chancellor recently made a speech outlining the future of financial services and making sure we get the best possible deal with the European Union. Let us remember that London is a global financial centre—it was recently rated the best in the world—and as well as getting the best deal with the EU, we need to make sure that we can trade with the rest of the world.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

It seems to me that over recent months the UK has changed its position from negotiating the final deal before the transition period to negotiating the final deal during the transition period. Is not the reality that the British Government’s negotiating position will be considerably weakened once we have left the EU?

[Elizabeth Truss]

We have made huge progress in the European negotiations. We are seeing business confidence increasing and investment increasing, and by this autumn we should have agreed a clear framework with the EU so that businesses have certainty about future investment.

European Affairs

Jonathan Edwards Excerpts

Thursday 15th March 2018 Commons Chamber

[Mel Stride]

I believe that my hon. Friend is right. I certainly read that article this morning, and if what it says is the case, that would be good and sensible news, because it would be entirely logical that we should be in a position to go out and negotiate free trade agreements during any implementation period, although we respect the fact that the deals would not be switched on until we were beyond that point.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

As a part of the customs union, we have trade deals with 50-odd countries across the world, and I understand that they are worth some £140-odd billion per annum in UK trade exports. Will the priority during the implementation period be to renegotiate and sign deals with all those countries with which we currently have a trade deal? We know that some of them want to renegotiate the terms and want greater access to UK markets as a result. How many of those deals are we going to be able to renegotiate and sign before we actually leave the European Union?

[Mel Stride]

I reassure the hon. Gentleman that it is an absolute priority for the Government to ensure the consistency and continuity of the existing arrangements as they pertain between the European Union and other countries. I see no reason why we should not benefit from those arrangements, just as those countries will indeed benefit from arrangements with us as we go forward.

We have proposed practical solutions to help deliver a smooth departure from the EU. One such solution is the introduction of a joint committee to resolve issues or disputes that may arise during the implementation period. That approach is a common feature of international trade agreements. The joint committee would, for example, allow the UK to raise concerns regarding new laws that might be harmful to our national interest. We will also continue to discuss our involvement in relevant bodies as a third country during the period to ensure that EU rules and regulations continue to operate coherently.

It is in the interests of both the UK and EU to agree the precise terms of the implementation period as quickly as possible. We are close to delivering that, and we expect it to be formalised at the European Council meeting next week. The implementation period is key to forging the best possible future relationship, giving businesses and Government the time and certainty to plan for Brexit, and preparing the UK for its status as an independent trading nation. It will be a bridge from where we are now to where we want to be in the future—on exit, on day one, and beyond.

Looking further forward, it is crucial that talks progress so that we can agree the terms of our future relationship with the EU. We are now moving at pace to set the parameters of an economic partnership. As a Treasury Minister, I am particularly focused on how our economies will interact and grow together. As the Prime Minister said in her speech on 2 March, the UK is seeking the broadest and deepest possible agreement that covers more sectors and co-operates more fully than any other free trade agreement. A key component of any future agreement should be the inclusion of services, particularly financial services.

[Jonathan Edwards]

The Minister is being extremely generous in taking interventions. Taking him back to the implementation period and the negotiation of trade deals, will the priority be renegotiating the trade deals that we already have with all these third countries via the customs union or negotiating new trade deals with countries such as the United States and China?

[Mel Stride]

The hon. Gentleman will understand that both are an extremely high priority. We will be pursuing both avenues vigorously.

As my right hon. Friend the Chancellor made clear in his Canary Wharf speech last week, financial services is a sector that calls for close cross-border collaboration. The Chancellor also reiterated that it is simply not credible to suggest that a future deal could not include financial services. It is in the interests of both parties to ensure that the EU can continue to access and enjoy the significant benefits afforded by our financial services hub, because it is a regionally and globally significant asset, serving our continent and beyond, and near-impossible to replicate.

The UK can claim excellence in many areas, but in trade in financial services we are truly the global leader. We manage €1.5 trillion of assets on behalf of EU clients, and 60% of all EU capital markets activity is conducted here in the United Kingdom. Around two thirds of debt and equity capital raised by EU corporates is facilitated by banks right here in the UK. The huge economies of scale have led to London’s dominant position in EU financial services. As the Chancellor made very clear last week, we should be under no illusions about the significant costs if this highly efficient shared market is fragmented—costs that will ultimately fall to consumers and companies right across Europe.

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[Paul Blomfield (Sheffield Central) (Lab)]

As we mark the halfway point of this general debate, it is worth reflecting on the fact that we have had a number of thoughtful contributions from Members on both sides of the House. Although I welcome any opportunity for Parliament to debate and, I hope, shape Brexit, no one is under any illusions about the fact that over these two days we are doing anything more than filling time to cover the Government’s legislative paralysis. It is just over a year until we leave the European Union. We have a mammoth legislative task ahead of us, but the Government are holding back the Customs Bill and the trade Bill because they are, understandably, afraid of defeat. They have yet to present Bills on migration, fisheries and agriculture; perhaps they are worried about some of the hard truths in those areas.

The Prime Minister was right to say at Mansion House that we need to face hard truths, on the basis of evidence. Not only do I agree with the Prime Minister, but I agree with her former deputy, the right hon. Member for Ashford (Damian Green), who said:

“If analysis is being produced then publish it. And frankly there will be a big political debate about it. Let’s have this argument in public—that’s what democracies do.”

The country faces critical decisions that will define how we live and our place in the world for generations to come. Honesty, openness and hard truths are the very least that people deserve.

That is why the Opposition pressed for the publication of impact assessments and the Treasury analyses of the future of the economy under the different available scenarios. Those analyses, which have now been published, make sobering reading. Ministers have said on several occasions—I think this was repeated yesterday—that the three options that the Treasury modelled do not reflect their desired outcome. But the Minister for Trade Policy, the right hon. Member for Chelsea and Fulham (Greg Hands), yesterday told the House that the Government were seeking an ambitious free trade agreement with the EU. I think that that was repeated this morning. The central model in the Treasury analysis was exactly such an agreement—it was described as the best possible free trade agreement—so it has been modelled. What did that model tell us? Over 15 years, such a free trade agreement with the EU would result in a 5% hit to the economy. That would mean 5% fewer jobs and 5% less money for public services. To paraphrase the right hon. Member for Broxtowe (Anna Soubry), this must be the first Government in history who are setting as their ambition reducing the size of the UK economy.

At Mansion House, the Prime Minister was honest about the fact that her plans would result in downgraded access to EU markets. What she did not make clear, and what her Cabinet has resisted making public, is just how damaging that version of Brexit would be to the economy. Initially—this feels like some time ago—we heard Ministers talk enthusiastically about their plans for an ambitious free trade agreement with the United States, which would compensate for the damage to our trade with the EU. But according to the Government’s own analysis, even if they achieved that deal, it would boost GDP by just 0.2%. Let us be clear that that would be in return for dismantling our food health and safety standards, among other US demands. We could end up with nothing but a hard border in Ireland if we diverged from EU agricultural standards, and a US deal would require us to do so. If the ongoing negotiations on open skies are anything to go by, the special relationship will not count for much in the cold, hard light of trade negotiations.

It is fascinating to watch how even the more extreme Brexiteers suddenly decide, as the hard truth of the difficulties involved in a US trade deal dawn on them, that the US is not that important after all. On 4 March, we witnessed the spectacle of the hon. Member for Esher and Walton (Dominic Raab)—he was speaking as a Government Minister on Radio 5 Live—dismissing the importance of a US deal and saying that

“the real opportunities of the future will be with…emerging markets”.

US trade deals, the Northern Ireland peace agreement and Treasury economic analyses have all been casually brushed aside by those who long for the deepest rupture with the EU. But Labour will not do that.

[Jonathan Edwards]

In The Times today, the Government made a song and dance about this apparent concession by the European Union that the UK would be able to negotiate and sign trade deals during the transitional phase. Does the hon. Gentleman honestly believe that the British Government and the British civil service are going to be able to renegotiate 70-odd EU free trade agreements that we already have through the customs union, negotiate new trade deals with the US and emerging markets or whoever they may be with, and carry out the gigantic task of renegotiating the trade arrangement with the EU?

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[John Redwood (Wokingham) (Con)]

My business interests are declared in the Register of Members’ Financial Interests, but I do not plan to talk about them today.

Before the referendum, I made a speech in the House saying that we had become a puppet Parliament. All too often, regulations came from the EU that we could do nothing about, because they acted directly. In many other cases, even if we had been outvoted or were not happy about a proposition, a directive instructed the House to put through massive and complex legislation whether it wished to or not. We had a situation in which the Front Benchers of the main parties, alternating in government as they tended to do, went along with this. The convention was that the Opposition did not really oppose, because they knew that Parliament was powerless and that the decision had been made elsewhere, whether the British people liked it or not. That even extended to tax matters, such as a number of VAT issues, including areas where we cannot change VAT as we would like, and to corporation tax issues, which included occasions when we thought that we had levied money on companies fairly, but the EU decided otherwise and made us give it back.

Many British people shared my concern, and that was why we all went out together and voted in large numbers to take back control. The British people wanted to trust their British Parliament again. Of course they will find times when they dislike the Government, individual MPs and whole parties, but they can live with that, because they can get rid of us. They know that come the election, if we cease to please, they can throw one group out and put in place a group who will carry out their wishes. They said very clearly to our Parliament in that referendum, “Take back control; do your job.”

A recent example is that of Her Majesty’s Government presenting a very long and complex piece of legislation to completely transform our data protection legislation. Because it was based entirely on new EU proposals, it went through without any formal opposition. The Opposition obeyed the convention and did not vote against it or try very hard to criticise it. I am sure that if the proposal had been invented in Whitehall and promoted actively by UK Ministers, the Opposition would have done their job, found things to disagree with and made proposals for improvement. We will have this “puppet Parliament” effect all the time that we are under control from Brussels.

[Jonathan Edwards]

Given the scenario that the right hon. Gentleman is putting forward, is it not the truth that the Welsh and Scottish Parliaments will also be puppet Parliaments post Brexit?

[John Redwood]

No, that is not true. In their devolved areas, they have genuine power, which they exercise in accordance with their electors’ wishes, but of course this is the sovereign United Kingdom Parliament, and the devolved powers come from the sovereign Parliament, as the hon. Gentleman well understands, which is presumably why he likes being here.

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[Anna Soubry]

I completely agree; the hon. Gentleman is absolutely right. I take grave exception to the idea that across the length and breadth of this country people were sitting in pubs, cafés, bars or whatever discussing the finer points of the merits or otherwise of the customs union and the single market. The truth is that there are Members of this House who do not know what the customs union is, and there are Members of this House who do not understand what the single market is.

I am not going to name people, but I have had very good conversations with right hon. and hon. Friends about EFTA. I have explained, for example, that members of EFTA can retain their own fisheries and agriculture policies. There are colleagues who have said to me, “Good heavens, I didn’t know that. How very interesting. Can you tell me now about immigration?” So then I explain about articles 112 and 113, and so on and so forth, and about the brakes that could be put on immigration. These conversations have occurred only in the past three or four months, 18 months after the referendum and nearly a year after we triggered article 50. That is why I will say it again: when history records what happened in the run-up to and after the referendum, it will not be in any form of glowing testimony. On the contrary, I think we will all be painted very badly, apart from those right hon. and hon. Members who at least stood up and spoke out. If I dare say it, I think we have been increasingly proved right.

I think people are fed up. They want us to get on with it. They do not quite know what “it” is. Some people actually think we have already left the European Union. But they know that it is getting very difficult and very complicated. I believe that people are becoming increasingly worried and uneasy. It is the dawning of Brexit reality. They know that the deal, which they were told would take a day and a half, or a week and a half, will now take, if not for ever, then a very long time. When I say “for ever”, I mean that, if the Government continue to stick to their timetable, it will not be concluded until way after we have left the European Union. We will get very loose heads of agreement by way of a political statement attached to the withdrawal agreement, which this place will vote on sometime this October or November. People are beginning to realise that they have been sold a bit of a pup.

Only last week, I spoke to a constituent who voted leave who told me, in no uncertain terms—she was quite angry about it—that she had no idea about the implications for the Irish border of not getting this right. People of a particular generation really get it and understand this. Frankly, we are old enough to remember the troubles in all their ghastliness. We also remember the border. Some of us are old enough to remember customs border checks, when we had to go through a particular channel. We remember being terrified that the cigarettes or a bottle of whatever—I certainly would never have done any of these things, of course—might suddenly be uncovered by a customs officer, but that means absolutely nothing to huge swathes of our country. Older people, however, remember the troubles and they know how important it is that the border does not return. They understand how critical not having a border between Northern Ireland and the Republic of Ireland has been to the peace process. They are now not just worried about the return of the border, they are quite cross about it. They are getting cross not just because they do not want it, but because they feel that none of this was discussed and explained before the referendum.

As I have said, we are now having the debate that we should have had before the EU referendum. I am looking towards those on the Scottish National party Benches. The debate held in Scotland in the run-up to the independence referendum was a long, long proper debate. If I may say so as an outsider, every single issue pertinent to the debate was properly teased out and discussed. I do not think anybody could have complained that they did not know the consequences.

[Jonathan Edwards]

The right hon. Lady is making an excellent point. In Scotland, the Scottish Government produced a White Paper—650 pages long—outlining completely what they were proposing. During the European referendum, the leave campaign produced a poster on a bus. That is why we are in the mess we are in now.

[Anna Soubry]

I might not quite go that far, but the hon. Gentleman makes a really important point. I was a member of the Government that decided we would have a referendum. To be very blunt, I am now quite ashamed of the fact that I made a decision that we should have a referendum without the proper debate that we clearly should have had and without the long run-up. More than that, this is the conclusion that I think the British people have also reached: how on earth did a responsible Government put in front of us, the people of this country—notwithstanding how brilliant we are—an alternative that we now see will cause our country so much harm? During the referendum campaign, when “Project Fear” was at its full height—the campaign was very poor on both sides, but “Project Fear” in particular was madness and nonsense—I think that subconsciously, people thought to themselves, “No responsible Government would put something to us as an alternative to their preferred option that would deliver all this stuff, when actually, it will harm our economy, and even undermine or threaten our security and the future of peace in Northern Ireland. They wouldn’t do that.” Of course, now we know that that is exactly what that option was, but we have moved on, as I must too.

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[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

In the time available, I would like to touch on a number of points that are relevant to the debate, starting with what has been its main crux this afternoon: the future trading relationship between the EU and the UK.

Yesterday, the European Parliament passed a resolution on the framework of the future trade relationship, which will feed into next week’s EU summit and the EU negotiating position. It reiterates the position taken by Plaid Cymru from the very first day since the referendum result: the best course of action would be for us to stay in the single market and the customs union. That is the only realistic solution to avoid a hard border on the island of Ireland and—this of equal concern to me—a hard border in Wales at the ports of Holyhead, Fishguard and Pembroke Dock. The EU has frozen talks until the British Government come up with a solution to this problem, but it is on a plate for the British Government, if they would only listen to the evidence.

This is perhaps an opportunity to discuss the Labour party’s policy on a customs union, which is completely different—it is more or less a souped-up trade deal. A customs union is what Turkey has. It does not benefit from all the international trade agreements that the EU currently has. We have had a long discussion today about the 50 or 60 trade areas that they entail, which are cumulatively worth about £140 billion to UK trade. We would lose that. The other factor with a customs union is that while the UK would lose the benefit of the deals with third countries that are currently aspects of the EU customs union, those countries would be able to import into the UK. I had thought that Labour’s solution was a way of dealing with the problem of Northern Ireland, but Turkey needs lorry parks on the border with Hungary and Romania to deal with its border issues. That would be the case in Northern Ireland, so the proposal would not deal with the major issue of the border on the island of Ireland.

The National Institute of Economic and Social Research says that the cost to households in the UK will be about £600 per annum. Rabobank has put the cost of a no-deal Brexit at £11,500 per person. I think that the biggest cost relates to our public services. Some 20% of doctors working in the Welsh NHS come from the European Union. A number have already left. Some 45% of EU doctors in Wales have said they are considering leaving and another 12% have already made plans to go. Last week, I attended a summit with Hywel Dda University health board in my constituency about huge reorganisation plans for the health service in the west of my country. The closure of hospitals is on the table because staff cannot be recruited and retained, and Brexit will make that problem far worse.

Plaid Cymru recently won a vote on the Floor of the House for the first time in our 50-year history of service in the House of Commons on a motion on protecting EU citizenship for UK subjects. Now that the British Government have been mandated by the House of Commons, I look forward to them making progress on that. Indeed, yesterday’s resolution in the European Parliament reaffirmed Plaid Cymru’s position.

[David Linden (Glasgow East) (SNP)]

Throughout the entire process of Brexit, people have been talking about taking back control and respecting the sovereignty of the House. I am sure that, like me, my hon. Friend is therefore looking forward to the UK Government adhering to that motion, which was passed unanimously by this House.

[Jonathan Edwards]

We look forward, as I am sure my comrades in the SNP do, to holding the Government to account on the result of last week’s very important debate.

With regard to a meaningful vote, Members should not be in a position in which we can vote for either a bad deal or no deal. That position was outlined in the other place yesterday when my colleague, Lord Wigley, raised this issue. That strengthens the argument put forward by a number of Members, in particular the right hon. Member for Broxtowe (Anna Soubry), who made the case for a second referendum on the terms of the deal.

I disagree slightly with the argument of the hon. Member for Lewisham East (Heidi Alexander) that there has been no change in public opinion, and I speak from my experience. When I was at the hairdressers in Ammanford on Friday, I spoke to many people who voted out. They were pleading with me to sort out the mess that we now face and said that they would now vote differently. On Saturday morning, when I was buying tiles with my wife in Cross Hands for the bathroom in our home, everybody there said exactly the same thing. I think there has been a big change in public opinion. If people were given the opportunity to vote on the facts before them, there would be a change of opinion.

The next issue I want to discuss is the prospect of no deal. We often hear from pro-Brexit MPs that that should be a bargaining position to hold against the European Union. As the hon. Member for Bridgend (Mrs Moon) excellently set out, a no-deal scenario for Wales would be absolutely catastrophic, and I see no reason to reiterate her points.

I will conclude on perhaps one of the biggest issues, which relates to Brexit’s constitutional implications: the power grab that is now facing and impacting on the Welsh Government, the Scottish Government, the National Assembly for Wales and the Scottish Parliament.

[Mrs Moon]

The Prime Minister has repeatedly said that Brexit means Brexit, but does the hon. Gentleman agree that she does not seem to understand that devolution means devolution?

[Jonathan Edwards]

I fully agree. We have had two referendums in Wales to enshrine our constitutional settlement, but we have a British Government who are driving a sledgehammer through that settlement. I enjoyed the phrase “puppet Parliament” that was used by the right hon. Member for Wokingham (John Redwood). The reality is that if clause 11 of the European Union (Withdrawal) Bill goes through unamended, and unless the British Government accept the recommendations of the Welsh Government and the Scottish Government, our respective Parliaments would be puppet Parliaments within the British state.

That brings me to the new UK internal market that will have to be created following Brexit. Of course, we currently have the EU internal market, which deals with issues of trade within the British state. As somebody who supports Welsh independence, I recognise that there will have to be a UK internal market, if we end up leaving the EU single market, but the challenge at hand is who constructs that UK internal market. Will that be done on the basis of the political reality that we face in the British state—a multipolar state with four national Governments—or will it done through direct rule from Westminster? That is about not only the construction of the internal market, but how it is regulated.

Let me finish on this point: Westminster plays about with the constitutional settlements of Scotland and Wales at its peril. Unless respect is shown to the Welsh Government and to the people of Wales and the people of Scotland, instead of the disrespect agenda that we have at the moment, we will be discussing not Brexit in the years to come, but “Wexit” and “Scexit”.

[Several hon. Members rose—]

Spring Statement

Jonathan Edwards Excerpts

Tuesday 13th March 2018 Commons Chamber

[Mr Hammond]

I am glad to be able to tell my hon. Friend that there will be 20 construction skills villages. We look forward to the bid from Redditch, and I am sure that it will be considered carefully.

As I said earlier, my right hon. Friend the Education Secretary is contributing an extra £80 million specifically to help small businesses that are non-levy payers with the costs of engaging apprentices, and from April many small businesses will benefit from the flexibility that allows large business levy payers to transfer 10% of their levy funds to small businesses in their supply chain. The impression that I have from talking to the CBI and other organisations is that businesses are keen to do that, and many of them will make such transfers.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Is the OBR right to calculate in its report that the United Kingdom will be making payments to the European Union until 2064 as part of the divorce settlement and that that will not include any new commitments that the British Government may make in the remaining parts of the negotiation? Would it not be better just to stay in the EU?

[Mr Hammond]

The payment profile has three parts. There are payments during the two years—more or less—of the implementation period; there are payments as the EU dispenses the so-called reste à liquider over the following few years; and then there is a very long tail of what will actually be very small payments relating to pensions. Of course, by their nature, they will stretch over a very long period, but they are very small amounts of money.

Oral Answers to Questions

Jonathan Edwards Excerpts

Tuesday 27th February 2018 Commons Chamber

[Mel Stride]

As the House will know, we are doing a great deal for productivity throughout the country. We have agreed two city deals in Wales, with £500 million for Cardiff and £115.6 million for Swansea. Since 2010, employment in Wales is up by 7.3% and unemployment is down by 39%.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

My question is this: what investment? The Government have broken their promise to electrify the main line between the two main cities in my country, they will not commit to the Swansea Bay tidal lagoon, and the Swansea Bay city deal is 90% Welsh public and private money. At the same time, the Government are subsidising the most expensive railway in the world—in England. When will the British Government stop taking Wales for a ride?

[Mel Stride]

I am surprised to hear the hon. Gentleman level those accusations against the Government because, as I have explained, we set aside an additional £1.2 billion for Wales in the recent Budget. I have referred to the two city deals, and we are also backing the south Wales metro, as he will know. We are committed to agreeing further growth deals with north and south Wales.

Community Bank Closures

Jonathan Edwards Excerpts

Thursday 8th February 2018 Commons Chamber

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

It is a pleasure to speak in this debate. I congratulate the hon. Members for Stoke-on-Trent North (Ruth Smeeth) and for Hazel Grove (Mr Wragg) on securing the debate, and I thank the Backbench Business Committee for awarding it to them.

I was elected in 2010, following the great financial crash of 2008. I thought at the time that MPs were tasked with two great challenges: first, how to ensure that the public never have to bail out banking failure again, and secondly, how to rebalance the economy geographically. In my view, both tasks required a fundamental rethink of how the financial system works. In reality, I am afraid we have made little progress over the past eight years.

I will speak briefly about moral hazard. The reforms, in my view, have been far too timid. We needed to break up the big banks, move away from the universal model and introduce Glass-Steagall provisions whereby retail and investment banking would be completely separated. That is the only way to ensure that the public are protected from the irresponsible behaviour of city speculators. Splitting retail and investment banking activity would also help to drive forward a more plural retail banking environment, instead of a few major banks dominating.

Creating a more plural banking system is a key element of any strategy to rebalance the economy of the British state on a geographical basis. The banks, having been bailed out by the people—let us remember that we are talking about nearly £1.3 trillion in loans, grants and guarantees from the public—have now abandoned our communities. More than 200 bank branches have been closed in Wales alone in the past six years, and the closure rate in Wales is three times that of London and the south-east of England. I am sure the same can be said of the more rural areas in England, and indeed of Scotland and Northern Ireland. In my constituency, all the major towns—Ammanford, Llandeilo, Llandovery and Newcastle Emlyn—have faced bank closures, and some have been left without any banking provision at all. We are talking about a large chunk of the west of my country.

Since I was elected, HSBC has closed its branch in Llandovery. The argument at the time was that services would be provided in Llandeilo. When the branch at Llandeilo was closed it said that services would be provided in Ammanford, but just a few months ago, the branch at Ammanford was closed. Centralisation is obviously a process, not an event. Just before Christmas last year, Lloyds announced its intention to close its branch at Llandeilo, and NatWest announced closure plans for branches at Llandeilo and Ammanford.

As well as meaning that towns lose their status as commercial centres, bank closures create four major problems for the communities we serve. First, job losses in our market towns are directly associated with the banks in question. Secondly, the loss of vital banking services can be a huge problem in rural areas, where poor digital infrastructure often renders internet banking redundant. In such areas bank closures particularly affect people who continue to rely on cash and cheques for financial transactions. Thirdly, the loss of banking services often leads to the loss of free ATMs in our towns—a number of Members have already referred to the problems that can create, especially for the night-time economy. Finally, the loss of banks undermines the financial underpinning of our local communities, despite the far-reaching consequences of the centralisation of business services over recent years.

Research indicates that bank closures dampen lending by small and medium-sized enterprises in their respective areas by 63%. That has a huge impact on economic performance, with businesses deprived of access to the lending that is so important to help them develop and maintain sustainability. That, of course, furthers geographical wealth inequalities and creates substantial productivity challenges in communities. As was said earlier, we are seeing a huge market failure with dire economic and social consequences, and policy makers must address the situation.

We can look across the world for numerous examples of what can be done to deal with the situation we face. In the Republic of Ireland the credit union movement has been mainstreamed to ensure that it provides vital banking services to the citizens of that country. In the US, credit unions also provide mainstream functions, including, critically, lending to businesses in the communities they serve. A strong network of community banks underpins the local economy. In Germany, strong economic performance is underpinned by the Sparkassen and Landesbanken network, which essentially are publicly sponsored community banks.

In my view we require action on three fronts. First, we need a US-style communities reinvestment Act to ensure that the big commercial banks have to invest their vast resources geographically and equitably, to ensure that businesses can obtain finance and wealth is shared evenly. Otherwise, banks will continue to concentrate on the City of London, and on socially useless investments that deepen sectoral and geographical wealth inequalities in the British economy. Secondly, we need the protection and enhancement of Post Office financial services, so that post offices can operate as all-inclusive providers and community banking hubs. For that to bear fruit, we must ensure that the obsession of successive British Governments with rationalising the network is resisted.

Thirdly, given that the British Government own 73% of RBS—which, in turn, owns NatWest—surely one option would be to change the business model and use that ready-made network. It appears, however, that the UK Treasury’s priority is to support bank closures and to prepare RBS for sale to City investors, but that would be an enormous missed opportunity given that we, the public, own a large share of that bank. Another option, put forward by my constituency colleague, Adam Price, in the Welsh National Assembly, would be for the Welsh Government to step into the breach by developing a network under a Welsh public bank brand.

The consequence of doing nothing is that we will not deal with the two major challenges that I set out at the beginning of my speech. When the next financial crash comes, I fear that the public will once again have to bail out failing financial institutions. Furthermore, there will be no hope of dealing with the grotesque geographical wealth inequalities that exist within the British state.

Oral Answers to Questions

Jonathan Edwards Excerpts

Tuesday 16th January 2018 Commons Chamber

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

8. What assessment he has made of the effect of autumn Budget 2017 on public spending in Wales.

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

Decisions announced by the Chancellor in the autumn Budget resulted in an increase of £1.2 billion to the Welsh Government’s budget. For the first time, this included more than £65 million thanks to the new Barnett boost agreed with the Welsh Government’s fiscal framework. This ensures that the Welsh Government’s block grant will increase in real terms over the spending review period.

[Jonathan Edwards]

The headline-grabbing announcement in the Budget was the alleged £1.2 billion uplift to the Welsh public finances, which the Minister has just repeated in his answer. It was an example of financial trickery best suited to the Foreign Secretary’s big red buses. Is it not the case that more than half that money will be in the form of repayable loans—in other words, financial transactions?

[Robert Jenrick]

I do not agree with the hon. Gentleman’s analysis or with his slightly cavalier attitude to £650 million of taxpayers’ money. This money is at the disposal of the Welsh Government and can be used for important things such as helping to support businesses and helping people to get on to the property ladder through Help to Buy.

Taxation (Cross-border Trade) Bill

Jonathan Edwards Excerpts

2nd reading: House of Commons
Monday 8th January 2018 Commons Chamber

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Ga’i ddymuno blwyddyn newydd dda i chi—may I wish you a happy new year, Mr Speaker?

I wish to confine my remarks to three key points. First, I wish to add my voice to those calling for our continued membership of the largest trading bloc in the world. Secondly, I wish to outline the concerns from Welsh ports, which would face immediate challenges to their existing position as a result of changes to our customs arrangements. Thirdly, the weakness of this Bill’s ability to protect our vital industries will form the final part of my speech, and we have heard many interesting contributions on that point already.

As promised, I wish first to reiterate to the British Government the illogicality of, and harm they will cause by, ripping us out of the customs union. A student of GCSE economics could explain the foundations of international trade as laid out by David Ricardo. His theory of comparative advantage is not complex to grasp. By specialising in particular industries, combined with free international trade, all nations will see positive results. The premise is simple: rather than creating a range of mediocre products, the highly specialised industries of each nation produce better goods, which are then traded internationally, satisfying domestic demand for the products made in other nations. Whether we agree that this commercial international order should be our goal or not, it has underpinned our economic approach to trade for centuries.

International marketplaces have moved on from Ricardo’s time. Instead of cloth and wine, the modern economy trades aeroplane wings, specialised steel products and microchips. To account for this complexity, policy makers have created institutions to manage commerce.

The European customs union is the greatest example of one such institution. By removing physical and financial barriers to trade, it has created the largest, richest, most powerful network of free-trading states in the world. As a result of our membership of the customs union, Welsh businesses can trade on a completely unfettered basis within the bloc, gaining access to 600 million consumers.

As a trading bloc, the EU customs union also applies a common external tariff on entering the bloc, and we should remind ourselves of the extra costs that will hit our exporters if we are no longer members and have no agreement on future tariffs. Carmarthenshire is known for its agricultural produce, so it is worth putting it on the record that the tariff for animal products can be more than 138%, with an average of 20%; the maximum tariff on dairy products can be as much as 134%, with an average of 45%.

I could also point to other major employers in Carmarthenshire who manufacture component parts for export and will obviously follow the upcoming negotiations with great interest. We should not be under any illusion: if it becomes burdensome, financially or through regulation, for those companies to move their goods, they will relocate. Our membership of the single market and the customs union has been invaluable in securing valuable foreign direct investment in areas such as my home communities in the Amman valley.

Before I am accused of scaremongering, today’s shambolic reshuffle was trailed in the press over the weekend as a reorganisation to prepare for a no-deal scenario. The 27 members of the EU are not the only ones with whom we will lose our existing free-trade arrangements. Sixty-seven countries have agreements with EU customs union members which must be grandfathered, although there continues to be some dispute about whether that is possible. The issue will be discussed in greater detail tomorrow when we deliberate on the Trade Bill.

By pulling my nation out of the European customs union in search of some false free-trade, low-tariff Brexit nirvana, the British Government risk the jobs and wages of my constituents. The Minister will undoubtedly claim that this is the will of the people. We can of course engage in a tit-for-tat argument over whether that is the case. However, that denies him the opportunity to outline the purported benefits of the British Government’s approach. For that reason, I ask him the following: if certainty is his aim, and the status quo is certainty, why is rolling the dice on more than half our imports and exports a good idea? Why is he gambling away my constituents’ jobs and wages? Why is he pulling us out of the customs union at all?

I also implore Labour Front Benchers to come to their senses. The constructive ambiguity of the Labour party’s Brexit position may offer marginal electoral advantage, but it provides the silver platter on which the Tories can serve up an extreme and damaging Brexit. Rather than playing hokey cokey with the single market and customs union, I ask Opposition Members to join us and take a clear stand to say we are better off in these great European economic institutions. Let there be no mistake: the Tories can deliver their current policy of an extreme Brexit only because the position of the Labour leadership is to leave the single market and the customs union after the transition phase.

[Kirsty Blackman]

Does my colleague agree that Opposition Front Benchers are not supporting a jobs-first Brexit? If they wanted a jobs-first Brexit, they would keep us in the single market and the customs union.

[Jonathan Edwards]

I am grateful for the intervention, and am aware that during the debate many honourable colleagues on the Labour Back Benches have made that exact point and implored Front Benchers to change their position. Some very interesting reports are coming out of the parliamentary Labour party meeting this evening.

Before the recess, the tangible and immediate chaos created by pulling us out of the customs union was vividly illustrated. The Prime Minister’s attempts to conclude phase 1 of the negotiations were almost scuppered by the issue of customs borders on the island of Ireland. Others will be able to expound with greater invested passion why no such border should exist. However, I would like to raise my concerns about the sea border that my nation shares with Ireland and thus the EU.

Wales and its ports are intimately linked with Ireland. Holyhead, Fishguard, and Pembroke Dock are vital trading links between Wales and the Republic of Ireland. Holyhead is the UK’s second largest port. In excess of 400,000 trucks pass through it every year. A hard maritime border between Wales and the Republic of Ireland will inevitably hit Holyhead hard, and I ask Ministers to read the excellent article of 4 January by my former university lecturer, Professor Richard Wyn Jones, on this specific issue facing Holyhead and his native isle of Ynys Môn, or Anglesey. In Holyhead there is simply no space in or around the port for the kind of infrastructure that will be required to process the number of lorries and trailers that currently pass through it. A hard border in Holyhead can yield only chaos. The same problems apply to Pembroke Dock and Fishguard.

The inevitable consequence of physical constraints in and around the ports is that freight will need to find ways to bypass Holyhead and Wales, especially if there is a soft border between the British state and the European Union in Northern Ireland. Without trade arrangements that mirror the outcomes of what we already have, Welsh ports will be in danger of becoming uncompetitive. With the intention of pulling us out of the customs union, the Bill and the actions of the Minister make it clear to the people of Holyhead that the Government consider their livelihoods to be dispensable.

Finally, I would like to highlight the concerns of an industry central to and symbolic of the Welsh economy—the steel sector. Primarily its concerns centre on trade defence provisions. These are found in clauses 13 and 14 and schedules 4 and 5. I am sure the Minister will have seen last week’s letter in the Financial Times from almost a dozen industry and union representatives highlighting the fact that these clauses

“set up a lighter-touch approach to illegal dumping by China and others than in the remaining EU and any other major economy.”

In the lead-up to the referendum, the exact opposite was promised by the leave side. In an ITV Cymru debate I took part in, Mr Nathan Gill from UKIP, speaking on behalf of the leave side, promised that a British Government freed from the shackles of Brussels would be able to impose prohibitive anti-dumping duties on China. I am sure that that clear promise influenced votes in some communities in south Wales. When he uttered those words, we know the British Government were selling the Welsh steel sector down the river. In March 2016, the British Government blocked attempts to strengthen EU trade defences against imports of cheap Chinese steel that devastated Port Talbot steelworks and took it to the brink of collapse—as we heard from the hon. Member for Aberavon (Stephen Kinnock) earlier. Yet again, it seems that the Government have little concern for steelworkers, preferring to seek dodgy deals with Trump’s America and cosying up to Beijing to protecting Welsh jobs and wages.

Fundamentally, the Bill would be wholly unnecessary, and its deficiencies of no concern, if the policy of the British Government followed the sensible path of remaining a member of the European customs union. For this reason and other reasons I have outlined, my Plaid Cymru colleagues and I will refuse to give the Bill a Second Reading and will vote against it tonight.

Exiting the EU: Costs

Jonathan Edwards Excerpts

Wednesday 29th November 2017 Commons Chamber

[Elizabeth Truss]

I can assure my hon. Friend that we are not dancing to anyone’s tune. What we care about is the future of Britain’s economy, protecting the British taxpayer from excess payments and making sure we secure a good deal, which is why it is so important that we do not discuss these numbers while we are in the middle of a very important negotiation.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I have been informed by a former public finances auditor that international accounting standard 37, on provisions, contingent liabilities and contingent assets, requires the UK Government to account for the divorce payment as expenditure in their public finances—even if the exact amount cannot be calculated. Given that the Government accounts for 2016-17 did not adequately disclose the potential liability, as required by IAS 37, will the Minister give assurances that a liability of this magnitude will now be included in the supplementary estimates for 2017-18 and that that provision will be subject to a vote of this House?

[Elizabeth Truss]

That would be wrong according to accounting principles, because nothing has been agreed. The Office for Budget Responsibility followed the Prime Minister’s Florence speech in laying out its projections for the Budget. I suggest to the hon. Gentleman that he has misinterpreted those standards.