Wales: Silk Report

Baroness Morgan of Ely Excerpts

Tuesday 21st January 2014 Grand Committee

[Baroness Morgan of Ely (Lab)]

My Lords, I thank the noble Lord, Lord Bourne, for introducing this discussion and congratulate him on his first debate in this place. I associate myself with his generous tribute to Lord Roberts. It is wholly appropriate for the noble Lord, Lord Bourne, to introduce a debate on a report in which his contribution and extensive experience as a former Assembly Member was instrumental. Regardless of how dramatic his damascene conversion was to the cause of the Assembly following his election to that place, no one in Wales would now question his absolute commitment to the cause of devolution. It is a shame that that cannot be said of everyone in his party, but we will watch with interest to see how he votes in some key passages of the Wales Bill.

While I am in a generous mood, I also pay tribute to the noble Baroness, Lady Randerson, and her commitment to devolution. It is good that there is at least one expert Minister in the Wales Office who has a thorough understanding of what is going on.

Part 1 of the Silk report represents real positive opportunities for Wales and the wider United Kingdom. First and fundamentally, it creates the opportunity to address Wales’s anomalous situation among its international comparators in that at the moment the Welsh Government have responsibility for spending but not for taxation. Control of the so-called minor taxes—stamp duty, landfill tax and so on—which Silk advocated can now, if legislation is passed, be used to lever associated borrowing powers to the Welsh Government, which are essential in our current circumstances.

Children across the country today are in the unenviable position of growing up during a time when the Tory Government are removing funding from public projects on a vast scale. Just over two weeks ago, the Conservative Chancellor announced a further £12 billion welfare cut, which will be delivered in 2014-15. This is on top of the array of cuts to public services which have already been implemented.

For the people of Wales, the situation is worse. According to the Holtham commission, Wales is already underfunded through the Barnett formula to the tune of more than £300 million per year. It was good to see the Government accept the Barnett floor, but what the Government give with one hand, they take with another and Wales’s budget will be £1.7 billion lower in real terms by 2015 than it was five years ago. That money would have gone a very long way towards addressing some of the problems in the NHS.

The Labour Party fought for the power and accountability of a Welsh Government which would allow us the opportunity to represent the needs of the people of Wales and to fight for a fairer and better deal for each of them. Let us not forget that the strong growth in Wales which was experienced prior to the banking crisis was based on Labour’s record of investment in Wales under devolution and while Labour was in power in Westminster. This growth came to a juddering halt in 2008 in the face of the worldwide economic crisis, and the economy is still struggling to reach that former position. It is only by looking at the economic concerns of the people of Wales, struggling with the cost-of-living crisis, energy prices, childcare, expensive homes and transport costs that we begin to understand that tinkering with the funding formula for Wales will do little to change the country’s economic outlook. Ultimately, we need significant growth in the economy and, as the noble Lord, Lord Bourne, suggested, a larger, responsible private sector. This would help alleviate many of those issues.

Silk recommends revisiting the current funding formula for Wales—Barnett—before transferring income tax-varying powers. To answer the question of the noble Lord, Lord Wigley, I would go further and suggest that a fair funding formula for every nation and region needs to be put on the political agenda.

Silk was clear on the income tax proposals for Wales and opposed the lock-step nature of what the coalition Government are now proposing. Economic experts and the First Minister suggest that the lock-step approach means that income tax power is rendered virtually unusable. Interestingly, even the Tory leader in the Assembly disagrees with the Secretary of State on the issue of lock step. The key thing to avoid is any race to the bottom across the UK on income tax rates; that would be damaging for every nation. It is interesting to the hear the Secretary of State suggest time and again that we could cut income tax rates in Wales, without any suggestion of how we would make up the shortfall in the public sector cuts which would be necessary to fund any such reduction.

I acknowledge that the Government have taken up the vast majority of the recommendations of Silk, which presents Wales with an opportunity to borrow against future income. This means that we can see increased investment in essential infrastructure projects in Wales. However, can the Minister inform the Committee of the process by which the £500 million level of capital borrowing was arrived at? Can she confirm on the record that this is comparable to Scotland’s borrowing powers? Does it take into account Wales’s relative lack of exposure to PFI debts?

I look forward to seeing the findings of Silk part 2. We certainly will not lose sight of the broader economic challenges which Wales and the rest of the UK are currently experiencing, and acknowledge that piecemeal concessions to the Welsh Government will do little to bring the economic prosperity that is so necessary for our poorest communities in Wales.