Wales Bill

Geraint Davies Excerpts

Monday 31st March 2014 Commons Chamber

[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.

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[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.

[Geraint Davies]

Will the Secretary of State give way?

[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.

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[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.

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[Owen Smith]

That is a very good point that we ought to consider. I would, of course, not support parliamentary or Assembly expenses being deployed for party political reasons.

I will move on to the minor taxes, particularly stamp duty land tax and landfill tax. We heard very little detail from the Secretary of Sport—[Interruption.] Well, there was very little sport there for anyone to have, to be perfectly honest. Hopefully we will have a bit more sport with the Secretary of State now. We will support the devolution of stamp duty land tax and landfill tax to Wales. However, there are many questions about how that will be implemented, so we will seek clarification during the passage of the Bill. Perhaps he will take note of some of these points now so that his Minister can respond to some of them later.

The first point concerns the suggestion that properties on the border between Wales and England would somehow be split, with stamp duty land tax being charged on the English portion and whatever its successor tax is being charged on the Welsh portion. It is an interesting concept. Will the Secretary of State tell us at some point during the passage of the Bill how many such properties there are on the border, given how populous it is? Will he tell us how the Government propose splitting those properties, as in many instances they are houses straddling the border? Will there be a number of bedrooms in England and a number in Wales? We know that the Government are keen on taxing bedrooms.

The second point relates to the cost of devolving that to Wales. We understand from the Bill that the Welsh Government will be asked to pay for the administration of any new tax, which is fair and just, and that that will be offset by any reduction in the cost to Her Majesty’s Government of administering the taxes as they had previously done in Wales. Given that the Secretary of State and the Treasury—this was confirmed by the Exchequer Secretary—have conducted little or no analysis of the impact of those various schemes in Wales, will he tell us how much he thinks it will cost the Welsh Government to administer and how much the offset will be?

On the even more important question of the reduction in the block grant that will come about as a result of the changes—it will be reduced by around £200 million and reviewed periodically—will the Secretary of State comment at some point during the Bill’s passage on the volatility associated with stamp duty land tax, because that figure of £200 million varies radically over time? Will he also tell us how he will calculate any differential in the rise and fall of house prices in England and Wales? By way of illustration, stamp duty land tax revenues in Wales have varied wildly over the past 20 years. They were £20 million in 1997, up to £95 million in 2003 and £130 million in 2005, and then down to £55 million in 2008-09 and £65 million last year. It is an extremely volatile tax, so I would be intrigued to know how the Treasury will account for it in any indexed reduction in the block grant, because that will have a significant impact on both the borrowing powers and, potentially, the revenues of the Welsh Assembly Government.

[Geraint Davies]

As I am sure my hon. Friend knows, over the past year house price inflation has been 13.2% in London and 6.8% across the UK. As I mentioned earlier, Boris Johnson is asking for stamp duty in London, where historically prices have always gone up faster. Is my hon. Friend at all concerned about the differential impact of stamp duty revenues, which he has alluded to already, plus pressure from elsewhere in the UK to have that tax resulting in a less fair and more complicated and confusing situation?

[Owen Smith]

That is a legitimate question. I have said previously that although we will support the devolution of stamp duty land tax and landfill tax and the putting of the income tax question to Wales, we remain concerned about tax competition. Over time, that might result in other parts of Britain wishing for similar degrees of autonomy, thereby reducing the ability of the central Exchequer to pool resources, share risk and redistribute from wealthier to less wealthy parts of Britain. That abiding concern of mine needs to be considered.

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[Owen Smith]

No, I am going to move on. If the hon. Gentleman holds his water, I shall come back to income tax later.

Landfill tax is relatively uncontroversial save for the link to borrowing, to which I shall come later. There is also the link to the landfill communities fund. We heard nothing from the Secretary of State about that, but it is paid to communities with landfill sites within their boundaries. Has the Secretary of State done any analysis about the value of that fund to Wales? How much is collected and how much has been spent in Wales? How many landfill sites are there in Wales in comparison with England?

The Secretary of State is proposing that the landfill tax community fund also be devolved to Wales and that Wales should become responsible for meeting the costs of implementing a revised Welsh landfill scheme. Given that elsewhere in the Bill, the Secretary of State proposes that HMRC duties should not be replicated in Wales, why does he think the implementation of the landfill communities fund should be devolved? Is that yet another example of his wishing to pass responsibilities to Wales without there being the requisite resources?

We absolutely support the extension of borrowing powers to Wales. They are vital to make up for the £1.7 billion cut in funding for Wales—an almost 40% cut in capital funds—that the Government have implemented since 2010.

It is crucial that the Welsh Government be given the ability to borrow in order to try to back-fill the enormous holes in their budget left by the Secretary of State and his colleagues.

There are two measures relating to borrowing in the Bill, both with limits of £500 million—one to cover volatility in tax receipts and the other to cover capital. I wish to talk about the latter. The Silk commission, whose recommendations the Secretary of State keeps telling us he has largely stuck to, said that £1.3 billion should be devolved to Wales for capital borrowing, but the Bill limits it to £500 million. The Secretary of State says, as he repeated earlier, that the rationale for that is to draw a connection between the amount of money devolved to Wales—the volume of taxes—and the volume of money that might be borrowed. The Secretary of State says, as does the Command Paper on the Bill, that that is just like the position of Scotland. In fact, the Command Paper goes further than he did in saying that the Bill is generous given that in Scotland over £5 billion of taxes are devolved and £2.2 billion of borrowing is allowed—£220 million each year—and that if a similar ratio were applied to Wales, then Wales would get not £500 million but £100 million.

The problem with that rationale is that it is not true. The Scotland Act does not draw a connection, as the Secretary of State suggests, between the amount of taxes devolved to Scotland and the amount of borrowing. The Command Paper associated with the Scotland Bill said:

“Scottish Ministers will be allowed to borrow up to 10% of the Scottish capital budget any year to fund capital expenditure”—

that is, £230 million of an overall stock of £2.2 billion. The Scotland Act drew a clear correlation between the size of the capital budget and the amount that could be borrowed. The Command Paper for the Wales Bill, which the Secretary of State said was just like that for the Scotland Bill, reads:

“Specifically, the Scottish Government’s capital borrowing limit is £2.2 billion while it is taking on responsibility for tax revenues that are currently worth around £5 billion. Hence the ratio between the two is slightly less than 1:2. Applying the same tax/borrowing ratio in Wales would have given the Welsh Government a limit of around £100 million.”

The crucial question is why the Government have moved the goalposts for Wales. Why cannot Wales have the same rationale for its volume of borrowing as the Scots? That would give us about £1 billion-worth of borrowing—between £1 billion and £1.5 billion—rather than the paltry £500 million on offer.

Moreover, given the volatility of all tax returns, how sensible is it for the Government to draw a direct line between the receipts that Wales receives and the amount it can borrow? What if those receipts declined? What if we were in another recession? We would therefore see, I presume, a reduction in the amount of borrowing that Wales could undertake, which would frankly be economic stupidity.

[Geraint Davies]

Does my hon. Friend agree that there is a danger of moving the focus from Wales having its fair share of capital investment—for example, on transport, where there is £5,000 per head for transport in London and about £500 in Wales—because as soon as we get more borrowing powers the Government will say, “You pay for the valleys line electrification—you can borrow the money”? Is this not an excuse for making Wales pay out more from less?

[Owen Smith]

That is absolutely right. That is what we have been most concerned about throughout the passage of this Bill, and we describe it as a trap. The Tory party is seeking to wash its hands of Wales, and it is not interested in funding capital expenditure properly in Wales. We have therefore seen that the valleys line promise was not worth the paper it was written on, and the words of the Prime Minister and the Secretary of State were equally worthless. We are deeply concerned that this will be an excuse for the Tory Government to ask the people with the shallowest pockets in Britain to put their hands deepest into them to fund things that traditionally would have come through general taxation and from the wider benefits of our economic union.

On income tax, let me be clear: we are and remain opposed to tax competition across Britain. We believe in an economic and social union and in the ability of the central state to pool resources, share risk, and share rewards. That is especially true in Wales, as we are a net beneficiary—indeed, the greatest one—of that principle of progressivity and risk-sharing across Britain. That is why we remain opposed to the principle of undercutting one part of Britain with lower taxes in another, which is what the Secretary of State is proposing. We agree with the Government that the principle of progressivity ought to be retained. That is why we agree, broadly speaking, with the notion of the lockstep to tie bands together. But we have deep and abiding concerns about the hidden agenda that the Conservative party has, along with its nationalist colleagues, for greater tax competition in Britain.

We have reason for that concern, because the plans are not terribly well hidden. We have already heard that the leader of the Welsh Conservative group wishes to cut just the top rate of tax and that the economic adviser to the leader of the nationalist party in Wales wishes to do the same, and cut taxes only for the wealthiest in Wales. If we need any further illustration, we simply have to look at this Government’s record: they introduced a millionaire’s tax cut even as they increased VAT, which is paid, regressively, by the least well-off people in Britain.

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[Mrs Gillan]

I am not going to trade insults with the right hon. Gentleman. He has 57,823 constituents on the roll, as of 1 December 2010. I have never, ever said that a Welsh MP was a second-class MP, as well he knows. However, if he chooses to go down that line, I have to say that the boundary change and the reduction in the number of MPs should have been carried out and I am sorry it was blocked by vested interests.

Let me turn to the financial provisions in the Bill. I have long thought that the Welsh Assembly Government—soon to be known as the Welsh Government—should understand better and share the responsibilities of tax raising that go with the luxury of spending taxpayers’ money. I therefore welcome the steps in the Bill to bring that sense of responsibility and stronger financial accountability for Welsh Assembly Ministers, as well as the option for Welsh residents to make their views on tax powers known through a referendum.

[Geraint Davies]

I have already made the point that the secret plot is to reduce the overall block grant and then give the powers to Wales, but is not part of that plot, as the right hon. Lady is now revealing, to reduce the number of MPs, lower the voice of Wales in this Chamber asking for a fair share of national assets and say, “You can have fewer MPs and you can raise your money yourself,” so that we have a gagged set of Members here? That is all part of what she is saying, is it not?

[Mrs Gillan]

I said that there would be squealing about what I was about to say before I started that passage of my speech, and indeed there has been. The hon. Gentleman really does not do me justice with those remarks.

It has always been the case that no matter how the annual financial settlement fell, it was always possible for the Assembly to aim criticism at Westminster for tightening the purse strings. No matter where the responsibility actually lies for the poor outcomes, the finger has always been pointed towards Whitehall and Westminster. The provisions in the Bill move towards reducing the opportunity for abrogating responsibility, which, particularly in the fields of health and education, lies squarely with the Labour Administration in Cardiff Bay.

The new funding framework moves from almost exclusive block funding to two revenue streams. The block grant part will remain dependent on the Barnett formula, which, even though I believe it is nearing its sell-by date, should remain firmly in place as long as we are required to continue reducing the deficit left by the last Labour Government, particularly in the light of the convergence arrangements from the October 2012 agreement. The new funding stream of business rates and the Welsh landfill and land transaction taxes—coupled with a Welsh rate of income tax following an affirming referendum—means that the Assembly will now have a real incentive to grow the economy and more responsibility for funding its spending. However, it also means that the Assembly will have an independent revenue stream to support capital borrowing—a welcome flexibility, particularly for making decisions on infrastructure funding.

I also welcome the flexibility that the Treasury is giving to the Welsh Assembly Government on borrowing to start the much-needed improvements to the M4, as well as the cash reserve powers. The UK Government will provide the Welsh Government with the ability to pay surplus tax revenues into a cash reserve that can be drawn on when future revenues are lower than forecast. This will provide the Welsh Government with a mechanism to manage the volatility in their budget resulting from the new tax powers.

I also welcome some of the inter-governmental arrangements that spring from the Bill, including the Government’s response to the Silk commission’s part I report, in recognising the need to ensure that institutional and governance arrangements continue to be appropriate as changes are made to the financial powers of the Assembly and Welsh Government—in particular, the fact that the Office for Budget Responsibility has agreed to the Government’s formal request that it starts to forecast Welsh taxes in the autumn statement 2014 and biannually thereafter. I look forward to the Wales Office letting us know the details of the OBR’s relationship with the Assembly and the Welsh Government, which I understand will be subject to further discussions.

The Government have also agreed with the Welsh Government to set up a bilateral ministerial committee to oversee the transfer of these financial powers. I was pleased to note that an early priority for the Committee would be the consideration of further details relating to the operation of the new budgetary arrangements—including the block grant adjustments—that will accompany tax devolution, and the cash management arrangements.

I have long believed that there should be better co-operation between the Assembly and the Government, and I hope that in the future the Wales Office will consider better arrangements both inter-departmentally, within the Government, and with the Assembly. One of my great hopes is that there will eventually be a forum in which Assembly Members and Members of Parliament could sit at the same time and debate subjects that are of interest to Wales. I give the Bill a warm welcome, and I shall be following its progress in the House, because it is a major constitutional Bill for Wales.

Let me end by paying a very special tribute to a man who for many years was my “shadow” in the House of Lords, Lord Roberts of Conwy. Back in 2008, he was asked by the Prime Minister and me to conduct a review of devolution in Wales. Wyn Roberts was a terrific colleague, and he carried out that review painstakingly and after consulting a broad spectrum of opinion. The genesis of much of the Bill, and indeed the Silk commission, was in his work. Following the publication of the report, he said:

“The question of governance in Wales will eventually be settled in the broad public interest and not in anyone's partisan interest.”

I think that the Bill is another building block of Welsh governance, and it has, I hope, been presented to the House in the spirit of Wyn’s wish that the broader interest be served. I wish it a speedy passage through the House, and I offer my congratulations again to the Ministers, the Department’s officials and the Silk commission, who have, I believe, produced it in the interests of Wales.

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[Mr Harper]

I have not had time to study that proposal in detail, but on the face of it allowing patients anywhere in the United Kingdom to have choice is very sensible. That is not a policy that the Welsh Government prefer. I think they said in a letter they sent to me that they prefer “Patient voice, not choice.” They will not allow people to have choice, but they can have a voice, which will then be ignored as the Welsh Government proceed as they want to anyway.

[Geraint Davies]

Will the hon. Gentleman give way?

[Mr Harper]

I will make a little progress before giving way again.

Let me divert a little to address the points on which the right hon. Member for Neath (Mr Hain) focused his speech, which relate to clause 2. I did not follow his argument at all. Although he was making a point about the amendment in the Bill, the thrust of his speech seemed to be a criticism of how the list system operates in Wales. He said that it was a system that we could find only in North Korea, but then he rather shot himself in the foot when he had to admit that he was the system’s author. I know that he is a supporter of proportional representation—

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[Geraint Davies (Swansea West) (Lab/Co-op)]

It is always a pleasure to follow the hon. Member for Aberconwy (Guto Bebb). It is interesting that he should mention Ukraine at a time when Victor Yanukovych is recommending referendums across Ukraine for more autonomy for its regions.

The Bill is, at best, a pig’s breakfast, but when there is nothing else on the table I guess that the parties will coalesce around it. To be fair, one reason why it is a pig’s breakfast is that the constitutional settlement across the United Kingdom is diverse. The settlements in Northern Ireland, London and Wales—

[David T. C. Davies]

rose—

[Geraint Davies]

I am coming to Monmouth in a moment—and Scotland are very different. It is worth bearing in mind that it might not be timely to make concrete decisions when we do not know the verdict of the Scottish people on becoming independent. We do not know whether that decision will gather pace for the devolutionary process in Wales.

[David T. C. Davies]

I just wondered whether the hon. Gentleman could clarify whether the Bill is a dog’s breakfast or a pig’s ear. I have never heard of a pig’s breakfast before.

[Geraint Davies]

It is a new constitutional phenomenon that I have just introduced. I am sure the hon. Gentleman will delight in it, being a person who indulges in that sort of thing.

If I may reference Scotland for a moment, rational and emotional powers are at play. There are people who thought that Scottish independence was going to go down the tube because of currency, the EU and inward investment, but now, of course, the wind is blowing in a different direction. The people of Scotland feel that they are being told that they cannot live without us and there are the emotions of divorce, so there is a mixture of rational economic argument and emotion. The feeling in Wales is that, rather than facing years and years of Tory austerity, we want to decide our own thing. The reality is that if Scotland leaves the UK we will end up with more Conservative Governments, because of the residual demography, and that will change the appetite for devolution.

Plaid Cymru would obviously like Wales to go down the road of independence and it sees this as a stepping stone. It talks about fair deals and fair funding for Wales even in the knowledge—this is an important point on what is behind the Tory agenda, too—that the difference between taxes raised versus expenditure in Wales is about £15 billion. The Conservative plot is to reduce the number of Welsh MPs, give borrowing and tax raising powers to Wales and forget about giving Wales its fair share of both revenue and capital. In the case of Scotland, the difference, coincidently, is also about £15 billion, but it currently makes up that difference in oil.

We therefore have a situation where it is convenient for everybody to go along this path, but the people of Wales want fair funding now. What that means in relation to the Barnett formula, as has been mentioned, is an extra £300 million a year. Wales should have the same needs-based formula as the English regions. It is not difficult to work that out, so that should just move forward.

With regard to capital, like other parts of Britain outside London and the south-east, Wales gets a small fraction of the investment per head that London gets—London gets about £5,000 per head and Wales gets about £500 per head. That is a problem for everyone outside London. If we migrated some of that investment outside London, we could put pressure on the system to make it more balanced. Britain is quite unusual in that respect. In Germany, for example, Berlin does not dominate Munich or Dusseldorf, so there is no necessity for that balancing.

If the response in Wales is, “Well, we are not getting enough money to do our own thing, so we will have to borrow it,” who will pay for that borrowing? That is the real fear, because there is no money on the table for that. Then there is the false analysis that the borrowing needs to be hypothecated against an income stream from income tax or other taxes, and that the amount of borrowing should be determined by the size of those streams. Frankly, that is just false. It is not the case that in order to justify more borrowing we need more income tax devolution. It is the case that the amount of money Wales will get in future, as the Secretary of State argues, will be broadly the same; it will not be distorted by this method.

My right hon. Friend the Member for Neath (Mr Hain) and I fear that we will end up with less money over time because the tax take per penny of income tax is 70% of what it is in England. If we assume for a moment that the global amount of money remains the same, then where does the extra money for paying back the borrowing come from? Well, it comes from nowhere. The reality is that the money would be paid back by top-slicing revenue, which means top-slicing the amount of money for services. That is what will happen if Wales does not get its fair share of UK funding.

We have already seen the signs and symptoms of the stealthy stranglehold that the Tories want to put on Wales, with the recent U-turns on the valleys lines. All of a sudden we hear, “Here you are. You can borrow some money.” A moment ago there was going to be electrification from Paddington to Cardiff and then through to Swansea, including the valleys, but all of a sudden we are told, “Well, the small print states that the Welsh Assembly has to do that, and it can do that by borrowing.” In fact, the commitment to go through to Swansea is not even fulfilled. The Government said that they would electrify the line from Paddington to Cardiff and then from Bridgend to Swansea, but they will not do the bit in the middle. If the Welsh Assembly Government say that they will not do that because they have another priority, which they might have, as is their right, we will have a bit in the middle that is not electrified, and that is not electrification through to Swansea, so the Government have broken their word.

[Albert Owen]

I am a little confused by my hon. Friend’s terminology, because he talks about small print. I do not see any small print. The Prime Minister made a statement to the BBC in which he said that he would pay for electrification to Swansea and the valleys. That was in his statement, not in any small print.

[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.

[Owen Smith]

I just want to clarify for the House that the Prime Minister said:

“It’s this government”—

I presume he means Her Majesty’s Government—

“that’s putting the money into the electrification of the railway line all the way up to Swansea and, of course, the valley lines.”

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[Geraint Davies]

Which valleys was he talking about?

The Secretary of State, in concluding his lamentable speech, said that this bit of legislation would make Wales more competitive, fairer and more accountable and that it would deliver economic growth. If I believed that, I would support the Bill wholeheartedly, rather than in a lukewarm fashion. What is really involved is a “Wonga economics” trick—“You can borrow all this money. Don’t worry, it’ll be all right. You can spend it on the railways and roads. Spend some more and we’ll give you some more and if you tax more you can have more,” and all that. Globally, however, there will not be any more; the money has to be paid back. There will be less overall revenue for core services such as health and education.

Members will be glad to hear that I will not speak for much longer, as people want to wind up the debate, but I want to say that the whole essence of devolving income tax is about competition and confusion. Labour Front Benchers have said that we do not want a competition, and I think it intrinsically wrong to generate more and more different sorts of tax competition across the United Kingdom. It is not healthy and it generates confusion for inward investors. It is not something that we want.

I mentioned the smaller taxes such as stamp duty, which are seen as peripheral and unimportant. However, Boris Johnson has jumped on his hind legs and started squawking that he now wants stamp duty on the back of what we are having in Wales. He wants £1.3 billion. The issue is undermining the national accounts of the United Kingdom. It is no longer about small fry and throwing crumbs to Wales; it is distorting the stability of public economics in Britain, and we need to think about that carefully.

One problem has been that the Silk commission was made up of people who know about the Welsh Assembly and have been inside the system; they were talking to each other and to small groups of people in cold church halls. Questions that were not asked or answered include, “What will happen in a few years’ time if London or Yorkshire wants this? What will it look like?” Some people mentioned cross-border health and education; we can add cross-border tax differences to that. Will such things be a help or hindrance to the people of Wales? There is by no means a clear answer.

The Tories are not generating a regionally balanced economic growth perspective; the majority of economic growth is funded by mortgages and consumer debt in London and we are again seeing the emergence of a twin-track economy. Where will the devolution of different taxes at different rates to different parts of the UK end up, when greedy London wants more than its fair share, gobbling up the core of the resources for Britain as a whole?

Wales is increasingly being pushed into being decoupled from the speed boat of London, which will zoom away. We need to have our fair share of economic stimulus and investment and to a large extent what I have been discussing is a decoy from the real matter at hand, which is to get the right money for Wales now before we talk about the intricacies of tax devolution.

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[Stephen Crabb]

That is not what I am saying. A key principle of the mechanism is creating the incentive for the Welsh Government to create the conditions for the economy in Wales to grow, so that they can reap the fruits and benefits of a growing Welsh economy. The protection kicks in when there are shocks and changes that affect the overall UK tax base. When changes would otherwise have a detrimental impact on Welsh Government revenues, Welsh Government revenues are protected because of the indexation. I shall circulate further information to right hon. and hon. Members.

[Geraint Davies]

Is the Minister saying that there are only upsides? Is he saying that, if the Welsh Government do well and grow the Welsh economy, they get a greater share of overall UK revenue, and if things go the wrong way from their point of view or the UK point of view, they still get that share or more and it never goes down? I cannot believe that.

[Stephen Crabb]

There is a lot of upside in the proposals, which I hope Opposition Members have the intelligence and foresight to recognise. In fact, the Silk commission calculated that Wales would have been better off under the system we are proposing had it been in place in the past decade. That answers the question asked by the right hon. Member for Neath—he asked whether Wales will be better off. The Silk commission estimated that, had the system been in place in the past 10 years, the people of Wales would have been better off. I hope that that also provides assurance to the hon. Member for Swansea West (Geraint Davies), who sees the Bill as a nasty plot and conspiracy.

Some Opposition Members have sought to link the devolution of income tax to so-called fair funding. That is another diversion they are throwing up, and another barrier they are erecting, so that they do not have to contemplate greater and truer accountability for the Government in Cardiff Bay, which they would prefer not to contemplate. The joint statement from the UK and Welsh Governments in October 2012 established a clear process to review relative levels of funding for Wales and England in advance of each spending review. The announcement recognised that levels of funding for Wales relative to England were not currently converging, but that, if convergence in funding is forecast to resume during the period, both Governments are committed to discussing a sustainable and fair solution. The fair funding mechanism agreed with the Welsh Government in 2012 worked very well in practice ahead of the last spending review. I hope that that, too, reassures hon. Members.

Current funding levels are well within the parameters recommended as fair by the Holtham commission. Safeguards are in place to address convergence if and when it resumes. Therefore, the funding regime for Wales should not be seen as a barrier to income tax devolution. That is one more smokescreen the Opposition are throwing up to disguise their basic opposition to, and dislike of, fiscal devolution.

A number of hon. Members mentioned borrowing powers for capital investment. There is clearly a broad consensus on all sides in favour of giving the Welsh Government the ability to borrow to invest in Wales’s infrastructure. Some Opposition Members want the Welsh Government to be able to borrow more than the £500 million permitted under the Bill—some suggested they should be able to borrow a virtually unlimited amount. The UK Government have set the limit considerably higher than we would have if we had used the tax and borrowing ratios we used in the Scotland Act 2012. Had we done that, the borrowing limit would be closer to £100 million, based on the taxes devolved in the Bill. We have set a higher capital borrowing limit of £500 million initially, but with flexibility for that limit to be increased if the Welsh Government gain access to further independent streams of funding, such as an element of income tax. If Opposition Members want to see the Welsh Government have a greater borrowing capacity, they should join us in campaigning for a yes vote in an income tax referendum.

What we are not prepared to accept is reckless borrowing without the means of paying that money back. Borrowing must be commensurate with the independent revenue streams. The Government have not worked hard over the last four years to build a reputation for financial prudence and competence, and tackling Britain’s deficit effectively, only to throw away that hard-earned reputation by allowing the Welsh Government to borrow beyond their means.

The hon. Member for Swansea East (Mrs James) said that she would welcome sight of the “workings-out”—I think that was the phrase she used—to help her to understand how we arrived at the £500 million borrowing limit. I suggest that she looks at pages 26 and 27 of the Command Paper that was published alongside the Bill, which is clear on the rationale and the basis for deciding on the £500 million figure. It is higher than would have applied if we had stuck closely to the Scottish ratios, and that is because we want the Welsh Government to crack on with the job of improving the M4. That was agreed with Welsh Ministers, and it gives them the tools to make progress quickly and to tackle that major infrastructure problem.

The hon. Lady also asked why Northern Ireland’s position was different. Northern Ireland is not a good benchmark for hon. Members to use in comparing borrowing regimes. The Northern Ireland Executive exercise many of the powers and responsibilities that are exercised by local authorities in other parts of the UK. In particular, they collect the equivalent of council tax and business rates and have borrowing powers similar to those held by local authorities.

Opposition Members did not talk much about borrowing, which will have a huge, transformational impact in allowing the Welsh Government to invest in new infrastructure in Wales, and nor did they talk much about the impact of lowering taxes in Wales, creating a low-tax economy and creating new jobs. They saved most of their energy and time for discussing the ending of the ban on dual candidacy. In fact, the right hon. Member for Neath used large chunks of a speech he made in 2006, if my memory serves me right. It has been like “Groundhog Day” as Opposition Members—although I am sure they were reflecting the concerns they have heard in their constituencies—manned the barricades to oppose a sensible measure—