Wales Bill

Lord Kinnock Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Monday 7th November 2016 Lords Chamber

In the next group of amendments, we will look at greater borrowing powers. In life, in order to borrow money, one has to have a way of paying it back. It is therefore only logical that the Welsh Government and the Assembly are given the power to vary income tax. It is essential that the Welsh Government stop shying away from responsibility for their income and from full-blown power and control over its activities. We have to come to the day when the Welsh Government no longer blame the UK Government for everything.

[Lord Kinnock (Lab)]

My Lords, in a tiny way this is a historic occasion: it is the first time in my recall that I diverge ever so slightly from the view of my noble friend Lord Morgan, and it is on the issue of the relevance and applicability of referendums. It is clear from what several noble Lords have said that bruises are borne as a result of the fact that we in this country having recently been through a referendum—indeed, I have not only bruises but scars to show for the experience. Nevertheless, the reality is that in a parliamentary democracy referendums are justifiable when there is a proposal to change the way in which we are governed.

That was the basis for the justification of the 23 June referendum, just as it was for those of us who campaigned for a referendum on entry to the European Communities and those of us who campaigned for referendums on Scottish and Welsh devolution back in 1979 and greeted with satisfaction the proposal in the 1990s that referendums should determine whether a Welsh Assembly and a Scottish Parliament were introduced. The same joy stirred our hearts when we saw an enacted proposal for referendums to determine whether major conurbations in England should have elected mayors. I use these references only to demonstrate the realism and the relevance of using referendums when there is a proposal to change the way in which a democracy or part of a democracy is governed.

Such is the case if there is a proposal to offer to the Welsh Assembly the power to levy income tax. That would profoundly change the way in which Wales was governed. It is on that basis that there is a straightforward justification for a referendum on such a fundamental constitutional and economic decision that has immense social, commercial and personal implications for every family, every community, every business and every employee in the whole of Wales.

Left at that, it could be dismissed as an academic, almost arcane argument—but it is not. It is much more prosaic than that. I join with my noble friends in objecting to the removal of the undertaking to give a referendum on the issue of the introduction of income tax-raising powers for the Welsh Assembly. That undertaking was not only given by several political parties representative of and represented in Wales, it was the subject of statute. It remains the subject of statute unless and until this Bill is enacted. For many years—indeed, decades—most political parties offered to the people of Wales the utter reassurance that they would have the final determining word on whether the elected Welsh Assembly is to have the power to levy income tax. Clause 17 should be removed from the Bill to ensure the continuity and integrity of those previous, voluntarily offered undertakings to the people of Wales.

There is a further consideration: we have a model to consider. It has been referred to already. It is, of course, the fact that the Scottish Parliament, from its inception, has had the power to vary income taxation in Scotland and has never seriously considered—let alone debated or proposed—in any formal manner such a variation. Why is that? Because of the utter unacceptability and impracticality of such an idea, even for a substantially devolved institution in a unitary state. I will certainly give way in a moment but will just finish this particular reference. The proposal that the Welsh Assembly should have this additional power in the absolutely certain and cynical knowledge that it would not be exercised is like offering me a car with the capacity to travel at 200 miles per hour and I buy it in the knowledge that the speed limit in the United Kingdom is 70 miles per hour.

[Lord Hope of Craighead (CB)]

It might be helpful to recollect that when the referendum on devolution took place in Scotland, there were two questions. One was on the principle of devolution but the other was whether a devolved Assembly, as it was called in those days, should have tax-varying powers. That was separated out in the case of Wales but in Scotland, where I was, we had a vote on both at the same time. On exactly the point that the noble Lord was making, we had the democratic decision with a substantial majority that the Assembly, as it was then called, should have tax-varying powers. We got it all achieved in one.

[Lord Kinnock]

I am grateful to the noble and learned Lord. At the time, I almost rejoiced in the full implementation of the long-standing Labour Party policy—developed under my leadership, as it happens, on the basis of continued representation from my comrades in Scotland—that a specific opportunity should be given to the people of Scotland to decide on that issue. Equally, and with substantial force, there were representations from Wales that that offer should not be made. Influences, parties and opinions in Wales suggested that that should not be the case. But their views were set aside—while undoubtedly being recognised and respected, as is our manner in Wales—and the issue was never put, and it never generated the merest scintilla of a spasm of objection.

Almost on the contrary, at that time in the 1990s and at this time in the second decade of the 21st century, there was and is no evident support among the public for the idea of income tax-raising or income tax-varying powers to be allocated to the Welsh Assembly. In this era, when all of us, if we have any sense at all, must be aware of the feeling of distance that exists between the general electorate and those who are elected to govern them, we should be sensitive to the idea that when there is no measurable support for a proposition that is as significant as the varying of taxation powers, and yet the recognised elected authority and the Executive go ahead and grant that power, on the best day it will be greeted as an irrelevance. On a less good day, it will be greeted with cynical dismissal.

[Lord Crickhowell]

The noble Lord said that it was a great constitutional change and dismissed the argument advanced—I thought very convincingly—by his noble friend Lord Morgan about the unsuitability of the question to be put in a referendum. However, will not the Welsh Government, or parties in the Welsh Assembly, have to put before the electorate the proposal in their manifesto that they will introduce or intend to introduce or change taxation? If they do so, will they not afterwards face the judgment of the Welsh electorate if the electorate disagree with what they have done and the way they have done it? Surely, therefore, we have a constitutional arrangement that allows the Welsh electorate to make their judgment both before and after a general election.

[Lord Kinnock]

I agree with the noble Lord. Certainly we have not only a constitutional but an electoral arrangement, which is of at least equal relevance. We speak of course in 2016, the year in which—indeed, just a few months after—an election of a new Assembly took place in Wales. I do not recall any proposition from any party—outside Plaid Cymru, which has been entirely and honourably consistent in its proposals—that said, “If you elect us, we will work to ensure that the United Kingdom, in a change of legislation, will allocate to us the power to vary income taxation in Wales”. I know that that is a political point, but it is worth taking into account. On this central issue of accountability, I noted what the noble Lord, Lord Wigley, said when he advanced the idea that the allocation of powers to the Welsh Assembly to levy and vary income tax would enrich accountability in Wales. I say to him, and in part I respond to the noble Lord, Lord Crickhowell, that accountability must relate not to abstract, desirable, mooted, arguable or deluded powers, but to exercisable powers. What we see in Scotland is a myth of accountability. When they have the power to vary taxation, as they have had for the best part of 20 years, and have not even begun to consider the implementation of such powers I simply do not see how accountability—the central principle of democracy—is enhanced by having a power but never exercising it, and never daring to exercise it. Where is the enhancement of accountability there?

[Lord Hope of Craighead]

Perhaps I might correct the noble Lord on a point of slight detail. The Scottish National Party, which is the governing party in Scotland, has made it clear that it intends not to follow the Chancellor of the Exchequer in England on the level at which the 40% tax rate comes in. I think that the proposal in England, and indeed in Wales for the moment, is that there should be a rise of that level at which 40% becomes payable. The Scottish Government have said that they are not prepared to go along with that, so for the Scots the level will remain as it is at present. I grant the noble Lord that this is under a different power which has been given in a later enactment but to say that there is no desire by the governing party to make changes is a little excessive, with great respect.

[Lord Kinnock]

I accept the point entirely. I can respond to it only by saying that I await, without bating my breath, for the implementation of this proposition. I can see the attractiveness of it, especially to a party which is self-confessedly populist and has gained great strength by means of offering simple answers to complex questions. That has served that party well for several years—astoundingly well. I await that exercise of the variation under the supplementary powers granted to them and on that occasion, I will withdraw all speculation about Scottish inclinations to vary taxation powers.

[Lord Wigley]

The noble Lord very kindly talked of our consistency on these matters; I also respect his consistency on them from 1979 onwards. Can I press him on the point that he made about exercisable powers? The next bank of amendments will talk about a new exercisable power to have a capital investment fund. Without some ability to vary taxation, how does the noble Lord square that circle or does he not support the demand for a greater capital expenditure fund?

[Lord Kinnock]

I say to the noble Lord, Lord Wigley, who I respect greatly, that it would be—without oversimplifying this—on the same basis as borrowings are undertaken now. He will know of the generous and immensely useful support given to a variety of projects in Wales by the European Investment Bank. Nobody has required the allocation of tax-varying or tax-raising powers to the Welsh Assembly to enable that support. Since there is also a guaranteed income for the Welsh Assembly—inadequate and stunted by the application of the Barnett formula, as he and I would agree—but nevertheless significant, as he and I would agree, nobody lending money for major capital investment projects in Wales, within reasonable limits and according to the required fiscal disciplines, should worry about it because they will be guaranteed a return on their investment. It is not necessary to add to the obligations of the Welsh Assembly to facilitate that—within limited confines, as I say. I will give him an example, which I will pluck out of the air.

If, for instance, a sensible proposal was made for establishing a link between Rhoose international airport and the main train line from London to Swansea, I would certainly support it, or, indeed a spur road from the M4 or even a direct road from the A48 into Rhoose airport in order to enhance the attractiveness of this major infrastructure advantage, substantially, and rightly, supported by the Welsh Government. There is no reason why a guarantee of return on the investment should not be made by the imposition of a small toll on the road or the railway line. It is not unprecedented across continental Europe. If we want to know how successful such arrangements can be, the noble Lord only has to look that the second Severn crossing. A huge capital sum, vastly in excess of anything that would be needed to link Rhoose airport, has been paid off with, in my view, excessive and unfair impositions—I am speaking of the degree, not the principle. The same thing could be done elsewhere. I am not advocating it; I am simply saying that there is a variety of ways of guaranteeing a reasonable return on long-term capital investment without requiring the allocation of fund raising through income tax-raising powers for the Welsh Assembly.

If this removal of a requirement for a referendum is to have a real justification, it has to have evident support from people across Wales. They have expressed no significant demand for, or preference for, the further allocation of such a power to the Welsh Assembly. The maxim employed earlier by the noble Lord, Lord Wigley, which was coined by a Welshman at the time of the American Revolution, “No taxation without representation”, bears an addition in this century. It is: “No further allocated powers of taxation without at least consultation, without at least deliberation, without at least endorsement and, finally, without at least agreement”. That brings us back to the referendum because where there is an absence of demand for this change in the way in which the people of Wales are governed, there has to be a supreme additional justification for allocating a power that is not only not demanded but that we have every reason to assume would not be exercised, a power that would not lend itself to extra accountability or enhance transparency or enrich democracy. I wait to hear from the Minister a justification of the dismantling of the undertakings previously given by all parties and enacted for a referendum as a prerequisite of the allocation of income tax-raising powers to the Welsh Assembly.

[Lord Thomas of Gresford (LD)]

My Lords, I wonder whether I can assist the noble Lord, Lord Kinnock, in his final question by telling your Lordships about my brother-in-law, who is Welsh, but who has lived in Aberdeenshire since the 1970s. In 1979, like the noble Lord, Lord Kinnock, he was wholly against devolution to Scotland. In 1998, he had not changed his mind, unlike the noble Lord, Lord Kinnock, and in the referendum he voted no to devolution to Scotland, but yes to tax-raising powers if a Parliament should be formed. At the time, we thought this was slightly odd. But what he was saying was that you should not have a parliament unless it is accountable—fully accountable. That is the point.

A lot of water has flowed under the bridge since the Welsh Assembly was constituted, and the Labour Party has, one way or the other, exercised power in Cardiff since its inception—it still does. The purpose of a proper Government is to raise taxes and to spend them, and to be accountable to the people from whom they raise those taxes as to how they handle their money. It is a perfectly simple proposition, but for the last 20 years, we have heard from the Labour Government in Cardiff that if they are incapable of providing adequate services in Wales—for example, in the health service or in education—it is because they do not have enough money sent to them from Westminster.

It does not require a referendum now. The reason why a referendum was provided for in the last Bill and why it appeared to be a good idea was that we were following the Scottish practice of 1998. But we moved on; devolution has moved on. We were tired, as my noble friend Lady Humphreys said, of the excuse that we are failing as a Government because Westminster does not give us enough money. It is time that income tax is devolved to Wales and that proper accountability should occur.

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[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords who have participated in this debate. For the sake of clarity—I correct myself as well—this is a clause stand part debate rather than a debate on an amendment to Clause 17.

I thank the noble Lords, Lord Murphy and Lord Kinnock, for moving and speaking to the Motion that the clause do not stand part. I disagree with their intent. As the noble Lord, Lord Murphy, said, we have been here for nearly 20 years since the first successful referendum in 1997. Circumstances massively changed in that time, as the noble Baroness, Lady Morgan of Ely, said.

Let me try to deal with some of the points. Circumstances have changed since the Silk commission’s first report. The noble Lord, Lord Wigley, has been consistent on this topic, as has the noble Lord, Lord Kinnock. I confess that I have not. I am more like the brother-in-law of the noble Lord, Lord Thomas of Gresford: I have changed my mind on some of these issues. I should set that out first. In the Silk commission, all four parties recognised the need for income tax powers for the National Assembly for Wales. If it was to become a full legislature in the proper sense, it was accepted that it needed income tax powers. Some noble Lords have used the phrase as if it meant all income tax powers; of course, it does not; some income tax powers remain with the United Kingdom. We should make it clear that this is not transferring all income tax powers; it is transferring some. It is a significant change, I agree, but the suggestion made by the noble Lord, Lord Kinnock, for example, that it is a fundamental, apocalyptic change to the way things happen but that it will not be exercised is somewhat inconsistent. It cannot be both apocalyptic and not be used.

I very much hope that it will be used. We cannot necessarily draw conclusions from what has been happening in Scotland. I hope that the National Assembly for Wales will be more imaginative. I was there for 12 years, and there was evidence of a lot of free thinking on many issues, not least in this area, so I do not accept that the power will not be used. We must realise that it is a limited power; it is not transferring all income tax powers to Wales.

I agree with the points made by the noble Baroness, Lady Humphreys, and the noble Lords, Lord Wigley, Lord Crickhowell and Lord Morgan, about circumstances having changed, that perhaps we make use of referendums too freely, and that they are not always appropriate. I feel that if we were to insist on a referendum, it is arguable that we would be holding Wales back. In some quarters—I certainly exempt the noble Lord, Lord Kinnock, from this—it is being put forward as a means of trying to defeat the proposal or slow things down. We would not be doing Wales a great service if we did that. This is a power for a purpose, as was identified by the Silk commission. It is bringing in accountability. It is making what I hope becomes the Welsh Parliament, in name as well as reality, a real Parliament with this element of tax-raising power on income tax.

[Lord Kinnock]

I asked the noble Lord for justification of the change in the law that would be implied by the enactment of the Bill, and he seems to suggest that times have changed and that the Silk commission has made recommendations. Does he believe that times have changed enough to give the Welsh people a real appetite for their Assembly to have the power to impose income tax additions? Does he think the Silk commission was really so conscious of the true economic condition of Wales and the distribution of incomes, referred to by my noble friend Lady Morgan, that it would permit a change that altered the law, removed the requirement for a pre-income tax allocation referendum and justified the introduction of new law? I do not think times have changed that much.

[Lord Bourne of Aberystwyth]

My Lords, I disagree with the noble Lord on this point. I remember the same argument being put forward when we had the 2011 referendum. People were saying that it would not pass and that opinions had not changed in Wales. I remember people on my own side arguing that it would be defeated in all parts of Wales, up and down the country. That did not happen. It was won decisively in every local authority bar one—Monmouthshire, where it was marginally defeated. Do I think that circumstances have changed so that we do not need a referendum? Yes, I do. The noble Baroness speaking for the Labour Party thinks similarly, as do the other political parties. There is probably one political party that does not think that—UKIP—but I disagree with it. Opinion has changed and we would be doing Wales a massive disservice by having a referendum that I do not believe is necessary in the changed circumstances of devolution in 2016.

[Lord Kinnock]

Does the noble Lord recognise that to justify his contention about the movement of opinion in Wales, he referred to the 2011 referendum? Does he not consider that that makes my point for me?

[Lord Bourne of Aberystwyth]

No, it does not. Rather the reverse, it showed that opinion in Wales had changed much more than people thought. The noble Lord put a fair question to me: whether I thought that opinion had changed in Wales such that we did not need a referendum. I hope I have given a very fair answer. It is a truthful one—I think opinion in Wales has changed to that degree.

Arguments were put on various issues in relation to this, not least in the area of borrowing. I agree again that, to have significant borrowing powers, there has to be a separate stream of revenue. This would present a separate stream of revenue, and even if the income tax rates were retained exactly as they are in England, it would give that separate rate of revenue. So, there is that as well. I know that we are coming on to a subsequent amendment on this issue. In view of the fact that I do not believe that this change is necessary and the strength of opinion from noble Lords around the Chamber, I urge the noble Lord to withdraw the amendment.

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[Lord Bourne of Aberystwyth]

That is absolutely right. The National Assembly for Wales doing something imaginative to raise income will be to the benefit of the Assembly and of Wales. That is the whole point of what is going on. I take issue with the noble Lord, Lord Murphy, in suggesting that there is something sinister in the change of heart here. Other parties have had this change of heart; it is a recognition that we do not need a referendum. I suspect that many of the people urging it are hoping to delay things—I exempt the noble Lord from this—or, indeed, defeat it. That should not be the aim. The aim should be to do what is right for Wales. I strongly and sincerely believe that if we were to have a referendum, it would be carried.

[Lord Kinnock]

On the issue of taxation levied on the people of Wales, will the Minister spend a moment explaining the logic, or lack of it, of a fiscal regime that has ensured, as he will acknowledge from his own experience, huge reductions in the public resources available to local authorities throughout Wales, with awkward consequences for some services and tragic ones for others? These include adult social care and post-16 educational opportunity. Where is the rationality in imposing such a fiscal regime nationally—for purposes I disagree with, but nevertheless that is the law of the land—and simultaneously introducing legislation that would, without a referendum, or further ado, allocate to the Welsh Assembly the power to vary, including raising, income taxes?

[Lord Bourne of Aberystwyth]

My Lords, we are being taken in a direction completely off the particular provision in the Bill. As I made clear before, this is a power which, as the noble Lord has just indicated, would enable the National Assembly for Wales to vary income tax up or down, or to ensure that it stays the same if that is what it wants to do. I myself dislike the word “imposing” on the National Assembly or people of Wales. Discussions are going on between the Finance Minister and his team in the National Assembly for Wales—for whom I have the greatest respect—and the Chief Secretary to the Treasury and his officials. I believe that an agreement will be reached. If it is not, we do not get the legislation, because the LCM will only come forward if an agreement is reached to the satisfaction of the National Assembly for Wales, and presumably the Welsh Government as part of that. That will carry things through. I do not see that the local government position is anything to do with this.