David Jones
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Wales Bill
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The Secretary of State for Wales (Mr David Jones)
I beg to move, That the Bill be now read a Second time.
The legislation before the House today delivers an ambitious package of devolved powers for Wales, including powers providing incentives and opportunities for the Welsh Government to grow the Welsh economy and increase prosperity; powers making the devolved institutions in Wales more accountable for raising some of the money they spend; and powers that make devolved governance in Wales fairer.
The Government have a strong record on Welsh devolution. We have delivered a referendum on full law-making powers, established the Silk Commission on Devolution in Wales, which has since published two comprehensive reports, and have now introduced the first Wales Bill in more than eight years. The Bill implements most of the recommendations that the Silk commission made in its first report. I wish to record my thanks to Paul Silk and his commissioners for the dedication and hard work with which they reviewed the case for devolving fiscal powers to the National Assembly.
The powers devolved to Wales by this Bill will, for the first time, make the devolved institutions in Wales—both the Welsh Government and the Assembly—directly accountable to the electorate for raising some of the money they spend. The Bill will give the Welsh Government more levers to enable it to deliver sustainable economic growth in Wales. It will also deliver borrowing powers that will allow the Welsh Government to invest more in critical infrastructure, not only in transport links such as the M4 and the A55, but in schools and hospitals.
The Silk commission included commissioners from all four political parties in the Assembly, and reached unanimous agreement on its recommendations. I hope that the same spirit of co-operation and broad consensus will extend to all parts of this House today in respect of the Bill.
Let me turn to the detail of the legislation. The Bill provides that the Assembly will assume responsibility for devolved taxes. These are, initially, a tax on land transactions and a tax on disposals to landfill, replacing stamp duty land tax and landfill tax in Wales. The commission recommended the devolution of both taxes. This will put new economic levers in the hands of the Assembly and the Welsh Government.
Geraint Davies (Swansea West) (Lab/Co-op)
What does the Secretary of State say to the Mayor of London, Boris Johnson, who has now asked for stamp duty to be devolved to London, which would give him £1.3 billion? Is this not a charter for the proliferation of all sorts of competitive taxes across different parts of the United Kingdom?
Mr Jones
It seems to me that that is a concern of the Mayor of London and does not really fall within the scope of today’s discussion.
Our proposal will put new economic levers in the hands of the Assembly and Welsh Government, while also providing independent streams of revenue to facilitate borrowing. It will help Welsh Ministers to grow the Welsh economy and ensure that its performance has a direct impact on their budget.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
In devolving those minor taxes, the UK Government are conceding the principle of fiscal empowerment for the Welsh Government. Why does the Secretary of State therefore feel the need to require a referendum on devolving income tax?
Hywel Williams (Arfon) (PC)
Is it the principle of devolution or the practice—the specific nature of income tax devolution—that requires a referendum?
Jonathan Evans (Cardiff North) (Con)
Has my right hon. Friend noticed in recent days—not just from the interventions so far, but from some Labour Back Benchers—the idea that there should not be a referendum and that the matter should be left to a general election, depriving the people of Wales of a vote?
Mr Jones
Yes, I have heard that, certainly from those on the Plaid Cymru Benches. I would simply repeat that it is appropriate that the people of Wales have their voices heard on such an important matter.
The Bill also provides a mechanism for additional taxes to be devolved in future, with the approval of both Houses of Parliament and the Assembly. I am pleased that the Bill delivers new borrowing powers to the Welsh Government—again, as recommended by the commission. As for capital borrowing, we are providing the Welsh Government with the ability to borrow up to £500 million to invest in capital infrastructure in Wales. That is a generous limit, allowing the Welsh Government to get going on the much needed upgrade of the M4 around Newport. It also reflects the independent funding streams for which the Welsh Government will assume responsibility through the two devolved taxes and is a limit that can be increased in future if the Welsh Government become responsible for additional taxation, including income tax.
Alun Cairns (Vale of Glamorgan) (Con)
Does my right hon. Friend not agree that the project for a new motorway around Newport is essential? There has been far too much delay—it was cancelled by the Labour Administration back in 1997, despite the previous commitment. Today’s announcement is basically the green light for the project to go ahead.
Mr Jones
Indeed. I think that everyone in the south Wales business community recognises that the M4 is indeed a foot on the windpipe of the economy and we are anxious to see it upgraded. The competence that we shall be giving the Assembly Government—in fact, we have already extended it to them—will enable them to proceed as quickly as possible with that essential upgrade.
Chris Bryant (Rhondda) (Lab)
While we are on infrastructure improvements, the Government here have much boasted that they will be electrifying the valleys lines. Every time they seemed to suggest that they would pay for it, but now it seems they are refusing, so who will actually be paying for the electrification of the valleys lines?
Mr Jones
We are skiing somewhat off piste, because that is not within the competence of this Bill, but there is clear correspondence between the Assembly Government and the Department for Transport on how the upgrade would be funded, and it is absolutely clear that the Welsh Government were paying for the upgrade of the valleys lines.
Owen Smith (Pontypridd) (Lab)
Does the Secretary of State wish to deny that he said on several occasions that it was his Government who were paying for the electrification of the railways in Wales, including the valleys lines?
Mr Jones
What I will say is that we made it absolutely clear that this Government were paying, directly and indirectly, for the upgrade of the main line as far as Swansea and for the valleys lines. I think that if the hon. Gentleman has a word with his friend the First Minister, he will find that there was an exchange of correspondence between the two Administrations which made the funding arrangements very clear, as did an e-mail from the Office of Rail Regulation.
Mr Jones
No; I will make some progress.
The Bill also provides for a referendum to be held in Wales on the devolution of an element of income tax, should the Assembly decide to call one. The Silk commission recommended that income tax devolution should be subject to a referendum, as it was in Scotland in 1997, and the Government agree with that recommendation. As I have said in the House on several occasions, I should like the Assembly to call a referendum as soon as it is able to do so, and I personally would support a yes vote in such a referendum. It would make the Welsh Government, and the Assembly, significantly more accountable to the people who elect them.
Stephen Mosley (City of Chester) (Con)
Has my right hon. Friend been able to give any consideration to the impact that changing tax rates in Wales will have on cross-border regions, particularly the economic sub-region that covers Chester and north-east Wales? Has any assessment been made of what would happen if the rates on the two sides of the border were different?
Wayne David (Caerphilly) (Lab)
The Secretary of State has put it on record that in his view the Barnett formula is coming to the end of its life. What progress have the Government made in reforming it?
Mr Jones
We have made it very clear that we need to rebalance the finances of this country before we will consider that. Let me remind the hon. Gentleman, however, that in October 2012 there was a specific agreement between the Welsh Government and the Treasury that on the occasion of each spending review there would be an assessment of the issue of convergence, and that is indeed what happened on the last occasion.
Owen Smith
The Secretary of State said a moment ago that he would be voting yes and campaigning for a yes vote in a referendum on tax-varying powers. May I take him back to the time when he was a Member of the Welsh Assembly? In his maiden speech, he said:
“We have no tax-raising powers—long may that state of affairs continue.”
When did he change his mind?
David T. C. Davies (Monmouth) (Con)
As one who has not changed his mind, may I ask whether the Secretary of State was as surprised as I was to read in the Western Mail that Opposition Members are offering to give the Assembly the power to raise income tax by up to 15%—and this only a few years after they all seemed to agree that the Assembly had the tools with which to do the job?
Mr Jones
Indeed: a Damascene conversion. The hon. Member for Pontypridd (Owen Smith) is a particular enthusiast—he now believes that 15p should be devolved to the Assembly, whereas as recently as 5 February he clearly stated that he did not believe in any tax devolution at all. He will clearly have some interesting explaining to do later in the debate.
Owen Smith
I think that the Secretary of State has just misquoted me. He will know that what I have said previously in the House on several occasions is that I do not believe in tax competition.
Mr Jones
The hon. Gentleman changes his mind with astonishing regularity. For example, on 5 February, in a Welsh Grand Committee debate, he said:
“I do not believe for a moment that having additional responsibility for tax-varying powers would confer any extra degree of accountability on the Welsh people.”—[Official Report, Welsh Grand Committee, 5 February 2014; c. 18.]
However, during last weekend’s speech to the Welsh Labour party conference, he spoke glowingly of the prospect of devolving 15p in the pound and said that that would
“increase both the accountability of the Assembly and its borrowing capacity too.”
He is clearly a bit at odds with himself, and we look forward to hearing what he has to say later on.
Mr Peter Hain (Neath) (Lab)
Will the Secretary of State explain how, with income tax devolution, Wales will continue to benefit—like, for example, north-east England, a comparable area, does—from the redistribution of income and wealth that comes through the Barnett formula, albeit imperfectly, from the 40% of GDP that exists in London and the south-east of England if income tax is devolved?
Mr Jones
That is an important point and it is a matter that would have to be debated in a referendum. My own view, as the right hon. Gentleman knows, is that Wales would benefit from a modest reduction in the rate of income tax, but I have to remind him that all we are talking about is a referendum that would empower the Welsh Government to decide on the rate of tax they want to charge the Welsh people. If they decided they did not wish to do that, there would be no compulsion on them to do so. However, it would provide Wales with an additional borrowing stream referable to the level of income tax devolved. It would also provide a powerful incentive to the Assembly Government to grow the Welsh economy, because clearly the more the economy grows, the more would be the revenue.
Mr Hain
I understand the Secretary of State’s point. However, I find it very interesting that he has not got an answer to my question—namely, how would Wales continue to benefit from the vast wealth that exists in a relatively limited area and is redistributed right across the UK? The fact that he does not have a clear answer makes me extremely sceptical about this entire proposal.
Mr Jones
Clearly, Wales would not be deprived of Barnett consequentials; the right hon. Gentleman knows that. We would have an additional tool for the Welsh Government to use, should they decide to do so, in growing the Welsh economy. I would have hoped he would be bold, because he has spoken in the past of the need to grow the private sector in Wales. I would have thought a small differential in the rate of tax would be a significant incentive to that private sector growth.
Mr Hain
The Secretary of State is being generous in giving way, but this is an important point. The Barnett consequentials will continue to come through from that portion of income tax which remains reserved to the Treasury, but the bit that is devolved under the scenario the right hon. Gentleman proposes would not, unless there was some kind of compensating mechanism which is not described. That is what makes me extremely sceptical about this.
Mark Tami (Alyn and Deeside) (Lab)
As the hon. Member for City of Chester (Stephen Mosley) has made clear, this is not just about the Welsh economy; it is about the cross-border economy. Changing tax rates, whether personal or business, will obviously have an impact both sides of the border.
Mr Jones
The hon. Gentleman is entirely right, which is why the Government went out to further consultation before announcing their response to the commission’s recommendations. Again, these are points he would no doubt raise in the context of a referendum debate, and given the view he has just expressed, he would clearly be voting against the proposal.
Mrs Cheryl Gillan (Chesham and Amersham) (Con)
I congratulate the Secretary of State on introducing this Bill. I approve of virtually all its contents. I was reading a document produced by the Government in March this year on financial empowerment and accountability, and I was greatly heartened to read that if the Welsh rate of income tax is implemented following a referendum, the Government have accepted the Silk commission’s recommendation that the block grant adjustment should be determined using the index reduction mechanism originally proposed by the Holtham commission. If I remember correctly, those proposals were supported by the Labour party. It goes on to say:
“The detailed operation of the system will be discussed with the Welsh Government.”.
Surely that is the assurance that we need to hear and that will make sure Wales gets its fair share.
Mr Jones
My right hon. Friend is entirely right. The indexation proposals would amount to a damp, which would effectively smooth out any peaks and troughs in relation to overall UK income and act as a strong reassurance to the Assembly Government. While I am on my feet, I would like to thank my right hon. Friend for her part in commissioning the work of the Silk commission in the first place.
Wayne David
Has the Secretary of State resolved his differences with the leader of the Conservative group in the Welsh Assembly on income tax devolution?
Owen Smith
Will the Secretary of State explain how the indexation method works? Has the Treasury done any analysis on whether the Welsh people would be better or worse off if the rates were not amended at all in Wales? At the moment, that is unclear.
Mr Jones
It should be entirely clear to the hon. Gentleman, because the Under-Secretary of State for Wales, my hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb) took the trouble to write to the Chairman of the Grand Committee, the hon. Member for Gower (Martin Caton), on 10 February, setting out these matters in great detail. I know that a copy of that letter was sent to the hon. Gentleman, and he will know, having read it, that the provisions are as follows:
“In the first year of operation (and any transitional years) the block grant adjustment will equal the amount of tax revenue generated by the Welsh rate of income tax set at 10p. It is important to note the following:
This is the amount of income tax forfeited by the UK Government as a result of reducing the main rates of income tax by 10p in Wales. If the Welsh Government sets a rate of 10p then there will be no impact on their budget compared to current arrangements. By setting a rate of, for example, 11p or 9p the Welsh Government can increase or decrease its budget (respectively) compared to current arrangements, as the block grant adjustment will still be based on the 10p forfeited by the UK Government. That means that the higher or lower revenue resulting from a rate of 11p or 9p (rather than 10p) would not be netted off the block grant.”
Mr Jones
Well, the hon. Member for Pontypridd had not read this letter, so I am reading it out to him. It goes on:
“In subsequent years the initial deduction is indexed against movements in the UK NSND”—
that is, not savings, not dividends—
“income tax base. That means that if the UK NSND income tax base contracts by 2%, the block grant adjustment will decrease by 2%; if the tax base grows by 2%, the adjustment will increase by 2%.”
That should have been absolutely clear to the hon. Gentleman, but he clearly did not read the letter, so I am glad to have had this opportunity to acquaint him with its contents. It clearly contains the reassurance that he seeks.
Mr Jones
No, I will not give way.
Subject to the outcome of a referendum, the legislation provides for the introduction of a Welsh rate of income tax. The main UK rates of income tax would be reduced by 10p for Welsh taxpayers, and the Assembly would be able to set a new Welsh rate—a whole number or half a whole number—which would be added to the reduced UK rates. The rest of the income tax structure would remain a matter for this Parliament.
The Silk commission estimated that reducing the Welsh rate of income tax by 1p would cost the Welsh Government around £185 million, without taking account of any gains resulting from people moving to Wales to take advantage of lower tax rates. That is not an insignificant amount of money, but lower rates of income tax would boost the spending power of working people in Wales and bolster growth in the Welsh economy. Stronger economic growth in Wales could deliver a real boost in tax revenues, providing the Welsh Government with more resources to invest in devolved services and infrastructure across Wales.
Some Opposition Members, most notably the hon. Member for Pontypridd, have suggested that the devolution of an element of income tax is some sort of unspecified coalition trap, set to ensnare the Welsh Government.
Geraint Davies
May I ask for clarification on something, because my right hon. Friend the Member for Neath (Mr Hain) talked about the levels up to the current rate? At a marginal tax rate of one extra penny, the gross value added in Wales is 70% that of the UK. My understanding is therefore that the extra penny charged locally in Wales would generate less income than an extra penny charged across the UK and then transferred over to Wales—so we would lose out, would we not?
Mr Jones
For the reasons I have explained, there would be no loss. May I remind the hon. Gentleman, as I reminded the right hon. Member for Neath, that there would be no compulsion on the Assembly Government to change the rate of tax? This is simply an issue of whether or not the competence should be devolved. Once it is devolved, it is then a matter for the Assembly to decide what the Welsh rate of tax should be.
Jonathan Edwards
The Secretary of State mentioned that one of the main reasons for devolving income tax was to incentivise the Welsh Government, yet he handcuffs them with his proposed lockstep, which was not included in the Silk recommendations. In the unlikely event of a no vote in Scotland, does he expect the lockstep to remain in Scotland following its referendum?
Mr Jones
I am not here to speculate on what will happen in Scotland in September, but I will talk about the lockstep in a moment—no doubt the hon. Gentleman will be paying close attention and intervening as he considers appropriate.
The reality is that this legislation—income tax devolution following a referendum—is a real opportunity to be seized with both hands by the Welsh Government. It is an opportunity to make Wales more competitive and to make the Welsh Government more accountable, as the hon. Member for Pontypridd now agrees. Our challenge to those who view the devolution of income tax negatively is not to shy away from this opportunity, but to seize the moment with enthusiasm and support the proposals in this Bill for a referendum on income tax devolution.
The Silk commission recommended that the Welsh Government should be able to set separate Welsh rates of income tax for each of the three income tax bands, but the Government believe that a single Welsh rate for all three bands—the so-called “lockstep”—is the right system for Wales. The same system is being introduced in Scotland under the Scotland Act 2012. The Government have a responsibility to take a UK-wide view: to consider the interests not only of Wales, but of the United Kingdom as a whole, including Wales. If the devolution of income tax is supported in a referendum, the lockstep mechanism would be the best way to maintain a progressive tax system that redistributes wealth across the whole of the UK but does not unnecessarily benefit one part of the UK at the expense of another.
The Bill also devolves responsibility to the Assembly for its own budgetary arrangements, so that it can establish new procedures for scrutinising and setting the annual budget. That was also recommended by the Silk commission, and by the Welsh Affairs Committee following its pre-legislative scrutiny of the draft Wales Bill. The Bill before us today and the Command Paper the Government have published alongside it have benefited greatly from the Select Committee’s thorough and rigorous scrutiny, and I am grateful to all hon. Members on that Committee for their hard work.
Although the majority of the Bill is devoted to fiscal devolution, the legislation also implements a number of other important reforms: it permanently moves the Assembly to five-year terms; it removes the prohibition on dual candidacy; and it makes provision to preclude Assembly Members from simultaneously being Members of this House. Those are all changes which we consulted on in our Green Paper in 2012. The move to permanent five-year terms will make it less likely that Assembly elections will clash with UK general elections, now that the length of Parliaments is fixed at five years. It is important that Assembly elections should be contested, wherever possible, on issues specific to Wales, and the Bill ensures that they will not be overshadowed by the wider issues that often dominate elections to this House.
Chris Bryant
The Secretary of State has used the word “accountable” 14 times so far in his speech and has talked about how this Bill will make politicians in Wales more accountable, but it is going to mean that there will be fewer elections. Does that not make them less accountable?
Mr Jones
I would not have thought so. By the way, I am grateful to the hon. Gentleman for counting how many times I have used the word “accountable”. That now makes 15. I would have thought that he would be concerned to ensure that Assembly elections were not overshadowed by general elections, and that in my book makes for accountability.
Mr Mark Harper (Forest of Dean) (Con)
I am surprised by the hon. Gentleman’s intervention. When the Fixed Term Parliaments Act 2011 was going through this House, it was Labour’s First Minister in Wales who agreed that the date of the Assembly election in Wales should be moved to 2016 so that it would not coincide with the general election. The hon. Gentleman does not seem to be joined up with his own party.
Chris Bryant
The thing is, it is the former Minister who is not very joined up with his own memory. At the time, Labour voted for a four-year fixed-term Parliament in here, which would have meant a four-year fixed term for Wales as well. In that way, we would not have had to coincide and we would have had greater accountability. Let us have a general election now, shall we?
Mr Jones
As we have five-year terms for general elections, we take the view that we should also have five-year terms for Assembly elections.
The removal of the ban on dual candidacy restores the position to how it was in the Government of Wales Act 1998. I believe that the change is supported by all parties other than the Labour party, which introduced the ban in the first place. The ban on so called “double-jobbing” between the Assembly and this House addresses legitimate concerns about whether it is possible for someone adequately to represent constituents’ interests in two elected legislatures at the same time.
The legislation also implements several changes that have been specifically requested by the Welsh Government, including formally enshrining that name—the Welsh Government—in statute, as it has been common parlance for the Welsh Assembly Government to be so referred to for several years now.
In responding to the Silk commission’s recommendations, the Government made it clear that we were unconvinced by the case for devolving air passenger duty to Wales, so the Bill makes no provision for that. Neither does it make provision for the full devolution of business rates. That is because, in terms of legislative competence, business rates fall within the devolved subject of local government finance and so we need make no further provision in this Bill. In order fully to devolve business rates, the Government are amending current funding arrangements so that the Welsh Government benefit directly from revenues raised by that tax in Wales.
Finally, as I said in my written statement to this House on 3 March, we do not see this Bill as an appropriate vehicle for implementing the recommendations made by the Silk commission in its second report. The commission’s second report raises crucial questions about the future governance of Wales within the United Kingdom, and it would not be right to rush into implementing its recommendations without careful assessment. It is essential that we take the time needed to get things right. Consequently, the Bill is focused on devolving the package of tax and borrowing powers to Wales recommended by the commission in its first report. Including a whole raft of other powers would merely serve to delay the Bill and jeopardise its enactment before the 2015 general election.
The Government believe that devolution should be used to give a competitive edge to Wales, and that powers devolved should be used to grow the Welsh economy and make Wales a more prosperous place. The Bill will deliver that. It will make devolved governance in Wales fairer, more accountable and better able to support economic growth. I hope, and I believe, that we can achieve a broad consensus in this House around this Bill, and make rapid progress. I commend the Bill to the House.
Owen Smith
I am not talking about Scotland today; I am talking about Wales. I am talking about the Clwyd West scandal, which the Secretary of State oversaw. I am talking about the fact that this measure is clearly in the interests of the Tory party and nationalist allies, which is why our nationalist colleagues are so keen to intervene.
Owen Smith
Clearly, the Secretary of State is going to explain it differently.
Mr Jones
In the first place, let me say that I object quite strongly to the hon. Gentleman’s suggestion that I would ever be involved in gerrymandering, particularly given that it was his party that introduced this atrocity in the first place in the 2006 Act. May I refer him to what Professor Roger Scully said in his written evidence to the Welsh Affairs Committee:
“If parties that are defeated at constituency level can still win representation through the list, then it is difficult to see why that should not also apply to individuals”?
Individuals represent parties; where they happen to be standing makes no difference at all.
Owen Smith
I am just getting over the fact that the Secretary of State referred to what we thought was a fairly simple safeguarding of democracy as an “atrocity”. I am pleased that I let him intervene, because he chose to read out a piece of evidence given to the consultation on the measure. I note, however, that the Secretary of State failed to inform the House that the overwhelming majority of respondents to the consultation were opposed to the measure. Clearly, this is a nakedly partisan reversal by the current Government. Let me be clear with the House: if we get the opportunity to win back power in this place, we will reverse the measure.
Owen Smith
I am very sorry, Madam Deputy Speaker. I was not, of course, rolling my eyes at your good self, but at the Secretary of State. I put on the record that my inability to recall the name of the constituency of the Minister without Portfolio, might have something to do with the multiple aliases that he deploys outside this House and which make it very difficult to recall how to refer to him within it.
Mr David Jones
I would not want the hon. Gentleman to have wasted his eye rolling. Just for clarification, is it his case that the Labour party wants devolved income tax competence to be able to increase the rate of tax for the 4,000 or so who pay the additional rate of tax in Wales, but not to cut the standard rate of tax for the 1 million-plus who pay the standard rate?
Owen Smith
I have already made that very clear in this House. I take your admonition that I should be coming to the end of my speech in the spirit in which it was intended, Madam Deputy Speaker, although I believe that I have spoken for slightly less time than the Secretary of State. [Interruption.] If it is significantly longer that is perhaps because I have addressed more of the substance of the Bill than the Secretary of State, who glossed over most of the gerrymandering and the other reasons for it.
Let us be very clear that our proposals to allow the Welsh people, if they so choose at a referendum, to give powers to the Welsh Government to set a progressive rate of income tax would guard against a Tory Government with malign instincts reducing the justice of our taxation system in Wales and increasing the outrageous targeting of Wales that has been described and exposed in other areas in recent days. We will not allow such exposure on the economy to be passed on to Wales. We will not allow Wales to be worse off as a result of the measures, and we will scrutinise the Bill extremely carefully.
Mr David Jones
I am grateful to the right hon. Gentleman for giving way. The hon. Member for Rhondda (Chris Bryant) is entirely wrong. Is it not the case that Wales is the only country in the world where, under this electoral system, dual candidacy is presently banned?
Mr Hain
I am not sure about that, but what I can say is that we should look at the experience in Wales. If there is no such bar in other countries, then perhaps there was no such abuse there. There was widespread abuse in Wales, practised by 15 of the 20 list Assembly Members who used taxpayers’ money to open constituency offices in the very seats in which they were defeated. They then used those resources to try to win at the following election by cherry-picking local issues against the constituency AMs who had beaten them.
Hywel Williams
My job is to represent Wales. The Labour party advertises itself as the unified, indivisible Labour party in England, Scotland and Wales. The hon. Gentleman’s point is bogus.
It is important that we now move forward, whatever the weaknesses hon. Members on both sides of the House might find in the Bill. Realistically, income tax might not be varied for some time, or ever, depending on what happens in the referendum, but the Bill will give access to vital borrowing and investment powers.
The Silk commission produced its second report earlier this month. Plaid Members say that Wales should be moving to a reserved powers model as swiftly as possible. We believe it would make more sense to have a referendum on the Silk part II recommendations. That larger and more substantive referendum would consider both true income tax-varying powers and wider policy powers. We will table amendments to preserve the integrity of the Silk report recommendations. Given that the principle of fiscal devolution has been conceded in respect of the other tax-varying powers, we say there is no need for a referendum on a simple income tax-sharing model. I agree with the hon. Member for Islwyn (Chris Evans), who is in his place, who said today that that should be the case. We will seek to amend the Bill accordingly.
Mr David Jones
At the risk of appearing to carp, I should point out to the hon. Gentleman that, a moment ago, he accused the Conservative party of cherry-picking the recommendations of the Silk commission. Is he not cherry-picking, too, when he says that we should dispense with the referendum, which, after all, was recommended by the commission?
Hywel Williams
Our argument is on a package of measures, but the Government have cherry-picked. Our ambition—I make no apology whatever for it—is to have both Silk I and II and even more implemented.
Simon Hart (Carmarthen West and South Pembrokeshire) (Con)
I welcome the Bill, which contains much that will benefit the residents of west Wales in particular. The more I listened to the speeches today, especially from the right hon. Member for Neath (Mr Hain), the more I came to the conclusion that we must be doing the right thing, given the level of opposition that he expressed.
I probably have more in common with my hon. Friend the Member for Monmouth (David T. C. Davies), the Chairman of the Select Committee, than I should perhaps readily and publicly admit. That is because I am not an anti-devolutionist but I am a reluctant devolutionist. I am pragmatic about it and I accept that we are where we are. I am reluctant because, in the time that I have lived in and represented my area, I have never had a business—small, medium or anything in between—come and tell me about the need for further devolution or for further powers to be devolved to Cardiff. In many cases, I have been on the end of contrary suggestions. Very few people say that the one thing standing between them and sustainability and profitability is more politicians, more devolution and more of the confusion that can sometimes result.
Nor have I heard from many members of the public about the need for further devolution. I suppose that that is a contradictory comment, because when put to the test in a referendum the result is somewhat different, but not many people talk to me about the need to devolve the criminal justice system, the police or other such matters. I therefore come at the issue from a very schizophrenic position, knowing that we are where we are—as the hon. Member for Arfon (Hywel Williams) has just said.
My hon. Friend the Member for Monmouth and I come into step on the danger of mission creep. I do not always admit to sharing the views of the former Prime Minister Mr Blair, but I will on this occasion, because he said:
“I was never a passionate devolutionist. It is a dangerous game to play. You can never be sure when Nationalist sentiment ends and separatist sentiment begins.”
That was not entirely different from what Donald Dewar had said at the time that the Scottish Parliament was set up. He very explicitly said that he saw it as the end of the debate about independence—but a few short years later we are on the eve of a referendum on Scottish independence. That troubles me because—as other hon. Members have said—we appear to be travelling in one direction only, towards independence in all but name. The Bill is a chance to put all that to bed. It strikes the correct balance between practical considerations and ideological objectives. Above all, it is a Bill that has the voter, the ratepayer and the business man and woman in mind, rather than the ambitions of politicians, either here or in Cardiff.
I want to touch on one and a half issues—both constitutional—and I shall be as brief as I can, because the afternoon seems to be dragging on into the night. The first issue is fixed-term Parliaments. When I was on the Political and Constitutional Reform Committee, we looked at this in some detail, and there was very little objection to the notion of fixed-term Parliaments. They were felt to have the potential to reduce uncertainty and instability, to give a clear timetable for the next election, and to provide more effective forecasting and the ability to prioritise more effectively. All of that is a given. There was not quite so much consensus on whether the term should be four years or five. The general view is that we are one of a relative minority of countries across the globe that have opted for five years. Nobody considers it to be much of a problem except when a collision of dates occurs, perhaps between elections to this Parliament and to the Welsh Assembly. Even then, the Electoral Reform Society was not particularly alarmed by the fact that the public may have to make a choice between candidates in Cardiff and candidates in Westminster. I agree: plenty of evidence suggests that people are capable of making an informed and intelligent decision in two simultaneous elections.
I am concerned that if boundaries were to change as a result of future legislation, asking people to vote for candidates on different boundaries might cause confusion, and we would need to guard against that. People ask how likely that is to happen, and it is probably some way off, but there is a more immediate problem. If there were to be—God forbid—a yes vote for Scottish independence in September, the whole basis of our future government could be affected by people who will spend only a few months in this House. The question is—and I suspect that Plaid Cymru Members will sympathise, and perhaps even Members from other parties—whether we could legitimately have an election in May 2015, the outcome of which was decided by people who would not be in this House for very many weeks thereafter. That is an argument—I put it no more strongly than that—for deferring the general election until after those matters have been resolved, which would then bring us into collision with the Welsh Assembly elections, now set for May 2016. Although I do not have too much of a problem with a dual election, we need to consider that that might be an inevitable outcome of a result in favour of independence—albeit unlikely—in Scotland later this year.
I do not intend to say much about double-jobbing, although it is an area of the Bill that I was concerned about until I heard the speech by the right hon. Member for Neath, who compelled us to accept his arguments even though they were at odds with the independent evidence available. As I result, I came to the view that I must be wrong and the Bill must be right. It is a bit rich—and I would say this if the right hon. Gentleman were in his place—for a former Secretary of State, who was partially responsible for the legislation and the problems that he highlighted, to go against the only authoritative independent evidence that is available to us from the Electoral Reform Society and the Electoral Commission. To suggest that they are wrong and he is right is taking the House for fools, so I am completely confident that the inclusion of double-jobbing in the Bill is the right approach.
I shall conclude, as I know that other hon. Members wish to round off the evening with a flourish. The tax position is more an area of expertise for my hon. Friend the Member for Aberconwy (Guto Bebb) than it is for me, but the situation is confused, and it would be further confused if we were to expand—perhaps post boundary reviews and all the elections we have mentioned, and taking into account the evidence provided to the Select Committee on our various visits around the country—the number of Members of the Welsh Assembly. It is an extraordinary suggestion that the Assembly in its current form does not contain sufficient expertise to deal with tax-varying powers, if that is what the Welsh nation wishes. Yet academic after academic, witness after witness, has come to us over the last few months suggesting that that is an inevitable consequence of the passage of the proposal. I think that would cause considerable concern in the minds of the business and voting community in Wales. It would be poor timing to suggest that what Wales needed was more politicians rather than fewer. There are cost and electoral implications and all sorts of economic and social considerations. I very much hope that the Secretary of State or the Minister can reassure us that such an outlandish and inappropriate proposal will not come into effect during our lifetime.
Simon Hart
I was going to finish on that point, but I will take an intervention.
Simon Hart
I thank the Secretary of State for his intervention. The First Minister did, and a number of other canny politicians in the Welsh Assembly also came to that conclusion, but the academic and independent evidence tended to point in a different direction. We used the expression “direction of travel” earlier and there seemed to be a slightly surprising thirst for a larger institution in Cardiff than I was comfortable with. I think the First Minister was just guarding against an unhelpful headline in the Western Mail and was being über-cautious, whereas his academic colleagues who gave evidence to the Committee were a little more forthright.
Mr Williams
Sorry, not quite, but the vote was much better than before. I think there was a bit of a swing of opinion. We certainly welcome the fact that people along the borders voted in bigger numbers for this, although I stand corrected. I am still slightly shocked by the glowing appraisal my hon. Friend the Member for Monmouth (David T. C. Davies) gave of Liberal Democrat policy on federalism; he commended us on that. However, I take on board the point made by the hon. Member for Clwyd South (Susan Elan Jones).
Mr David Jones
It would appear that my hon. Friend’s sole, or at least principal, concern about the Bill is the issue of the referendum, but does he agree that when we are talking about whether Wales should have a different tax basis from the rest of the country, that is something that concerns every resident of Wales and people should have their say on that?
Mr Williams
I do agree with that. I should, perhaps, make it clear that I was warning about referendum fatigue in the future. I have signed up to the Silk package and he has made that recommendation very clearly, as has my right hon. Friend the Secretary of State. We must be very mindful of that fatigue in the future, however.
The hon. Member for Islwyn talked about the Blackwood high street survey that he unofficially—or maybe officially—makes when he is back in his constituency. He said that nobody raises these issues. I would just say that there is a case to be made in respect of our business community. People come to talk to me about business rates and the lack of clarity on responsibility over business rates, and there is a case for fully devolving them to the National Assembly. Over the past nine years I have dealt with many cases involving this subject. I can think of many constituents who have come to me struggling with issues about where responsibility lies. Therefore, I am particularly pleased that decisions will, because of this Bill, be made closer to Wales and that rates can be more responsive to the needs of Welsh businesses.
The Federation of Small Businesses in Wales agrees that businesses in Wales are facing the most onerous business rates of any constituent nation of the UK. We do not have many options available to us, such as using different multipliers for different-sized firms, and it hits our small businesses hard. Small businesses are the backbone of the Welsh, and particularly the Ceredigion, economy.
The Select Committee addressed that issue. Now that the Government have made their position on it clear, I would like to know how they intend to take forward their policy on devolving business rates completely. We need a clear settlement of business rates, which gives politicians the incentive to be creative on business rate policy and to be accountable for it.
I am also pleased about the Government’s views on the full devolution of stamp duty and landfill tax. It is true that those taxes are not massive generators of revenue; they generate about £200 million a year out of an overall budget of £15 billion, which is 0.3%. However, I welcome the fact that stamp duty and landfill tax could be used to encourage inward investment and business generation in Wales, providing a much needed boost to the economy.
Moving on to the key issue of borrowing powers, the Select Committee urged in our pre-legislative scrutiny report that by the time of the publication of the Bill the Government should have set out how they decided the limits of the £500 million current account and the £500 million for capital account borrowing. That was an incredibly worthwhile report, and I think that the Government should acknowledge that there is a need for pre-legislative scrutiny of all Bills of this nature. Comparing the lobbying and transparency Bill with this Bill, the work we have undertaken on the Select Committee will serve the process very well. I remember that the Welsh Liberal Democrat leader, Kirsty Williams, came before the Select Committee and made the comparison between the settlement for Scotland and the settlement for Wales.
We also talked about, and sought clarification on, the issue of bonds, and I am encouraged that the Government seem willing to consider further whether it might be appropriate for the Welsh Government to issue bonds alongside the other measures.
Albert Owen
I do not know who the people were. The hon. Gentleman may well be right, but Labour is obviously the biggest party in Wales and has a strong voice there, unlike some other parties. It was a consultation exercise—[Interruption.] I am getting chuntering remarks from the hon. Member for Carmarthen East and Dinefwr again, but perhaps Plaid Cymru should also have had enough intelligence to do standard letters to put its view across in this open consultation. The point I am making is that this coalition proposal, supported by Plaid Cyrmru, is on the wrong side of the argument. These parties are doing it for their own political reasons. Nobody has said to me, “Wasn’t it terrible what you did in 2006 when you banned the dual mandate?” Nobody has raised the issue and it is right to leave things as they are. I shall be voting against the measure when the time comes, for the reasons I have given.
Individuals have been mentioned, which is wrong, but I must mention the leader of Plaid Cymru who, when she was elected, made a bold statement that she was not going to stand on the list. She made the brave decision to go before the electorate as an individual and leader of her party. She chose the seat for Rhondda, which she had every right to do, but now she has the jitters. She no longer feels secure in her statement, so she wants the lifeboat of a list place to get her into the Assembly for Wales; that is what this is all about. That is why I point to a deal being done. I smell a dirty deal here between the coalition parties and Plaid Cymru.
Mr David Jones
I have to say that the hon. Gentleman has raised a red herring there. I assure him that there has been absolutely no deal with Plaid Cymru. He knows me well enough to know that of all the parties in this House, Plaid Cymru is probably the last one I would ever do a deal with.
Albert Owen
I will take the Secretary of State’s word on that, but he is pandering to its views and helping it out. I certainly will not be doing that when it comes to voting on this Bill.
There are lots of things in this Bill that I do support. I have mentioned some already including the borrowing powers, the landfill tax and the stamp duty measures. I will support the Bill on Second Reading if there is a Division, but I will be working with Members from across the House to scrutinise it so that we get to a position where it is sellable to the people of Wales in a referendum, because I am, first and foremost, a democrat and a devolutionist, and a proud one too.
Guto Bebb
I am grateful to the hon. Gentleman for that intervention. I am sure that the Labour party is a democratic institution; it also believes strongly in the hereditary principle, as we have found out from Aberavon.
The hon. Member for Pontypridd made a clear statement in the Welsh Grand Committee on 5 February that there was no need for fiscal devolution for the Welsh Government to have any further accountability, yet in his speech in Llandudno on Sunday he clearly made the point that the further devolution of income tax varying powers so that they were on a par with those in Scotland was necessary to give that accountability.
Mr David Jones
I think I ought to tell my hon. Friend that I ventured into Llandudno on Saturday and it was reasonably quiet there. Does he not get the impression, as I do, that far from its being a damascene conversion on the part of the shadow Secretary of State, it is more likely that he has been leaned on by his bosses in London and Cardiff?
Guto Bebb
I would not want to offer an opinion on whether the hon. Gentleman has been leaned on or not. There is clearly a significant difference between the comments made in the Welsh Grand Committee on 5 February and the speech delivered in my constituency on Sunday and those differences need to be reflected on, because ultimately I agree with the speech that he made on Sunday. There is clearly a need for fiscal accountability for the Welsh Government. If we are to have grown-up politics in Cardiff Bay, it is important that decisions about spending and raising money should be taken by the elected politicians there. It is a step in the right direction to have a proposal in the Bill that will allow the Assembly, if it so desires, to trigger a referendum to allow a degree of control over income tax to be devolved to the Welsh Assembly in Cardiff. That is the key point about this legislation, which attempts to work with the grain of Welsh public opinion. The income tax variation is not being imposed on Wales; the Welsh Government, or the Welsh Assembly for that matter, are being allowed the ability to ask for those powers and trigger a referendum. The challenge for the Welsh Government will be to ask themselves whether to trigger that referendum or not.
Let me make a brief final point about the tax accountability issue, as I am aware that the debate has gone on for quite a while. The Select Committee had a significant and long discussion about whether we needed a lockstep or not. As some Opposition Members may wish to remind me, we had that debate in the Welsh Conservative party too. My own view is that the lockstep is something I can comfortably live with. The hon. Member for Arfon (Hywel Williams) made an interesting point on the arguments about whether the progressive nature of our tax system would be affected by the lockstep. He argued about whether, if we increased taxes by a penny on the standard rate and a penny on the 40p rate, we would make the system less progressive. The reverse argument can be put. For example, if we reduced the standard rate by 2p and the 40p tax rate by 2p, that would in effect be more progressive because it would give a 10% cut to the standard rate taxpayer and a 5% cut to the 40% taxpayer. As a Welsh Conservative who believes in lower taxes, I am confident that those powers will be necessary to reduce taxes in Wales. If we reduce taxes using the lockstep, the result will be a more, rather than a less, progressive system. The principle of fiscal accountability justifies the imposition of the lockstep at this point in time. As such, I am happy to support the Bill as it stands.
Geraint Davies
Perhaps I have been misinterpreted. There was no small print. There was a big announcement, as my hon. Friend has just said, by the Prime Minister, the Secretary of State and others. The small print I was referring to was the weasel words in the long-winded document that was exchanged between Ministers, which presumably changed the headline proposition. It had been, “We will provide this,” and then the Minister argued, “When we went through it all I found here on page 23 that it says that actually it is interpreted in this way, so according to our lawyers the Welsh Government will have to do that.” That is not what we heard on the radio.
Mr David Jones
The hon. Gentleman will know that there was a letter, signed by Carl Sargeant, the relevant Welsh Minister, confirming that there was an agreement. Is that small print?
Geraint Davies
The Prime Minister said that the UK Government would pay for the electrification of the railway lines, which are essentially UK infrastructure. I think that it is disgraceful, frankly, that while £52 billion is to be spent on HS2, the Secretary of State will not even fight for that extra bit of money for Wales. We desperately need it. He should resign.