Autumn Budget as it Relates to Wales

Glyn Davies Excerpts

Wednesday 7th February 2018 General Committees

[Glyn Davies (Montgomeryshire) (Con)]

Diolch, Mr Hanson, am roi’r cyfle i mi gyfrannu i’r ddadl hanesyddol hon drwy gyfrwng y Gymraeg. Dyma’r tro cyntaf i ni ddefnyddio’r Gymraeg yma yn San Steffan—nid yw hyn wedi digwydd o’r blaen—a dyna pam mae’n ddadl hanesyddol.

Yn siarad yn bersonnol, mae’n arwyddocaol fy mod i’n gallu cyfrannu yn Gymraeg. Pan ges i fy ethol i Gynulliad Cenedlaethol Cymru ym Mae Caerdydd yn 1999, doeddwn i ddim yn gallu siarad gair o Gymraeg. Ers hynny, rydw i wedi gwnuud fy ngorau i ddysgu’r iaith—iaith y nefoedd. Roedd bob un o’m hynafiaid yn siarad Cymraeg fel iaith gyntaf. Roedd fy rhieni yn siarad Cymraeg fel iaith gyntaf, ond wedi iddynt briodi symudasant i ran o Sir Drefaldwyn lle doedd neb yn siarad Cymraeg. Yn fwy arwyddocaol, roedd pobl yn gweld yr iaith fel iaith o fethiant—doedd neb ar y pryd eisiau siarad Cymraeg. Mae pethau wedi newid heddiw, ond mae lot o pobl wedi anghofio beth oedd y sefyllfa amser maith yn ôl.

Ni chlywais fy nhad na’m mam yn siarad Cymraeg o gwbl, felly ni allai fy mhump chwaer na fi siarad gair o Gymraeg. Nid oeddwn i’n medru gwneud tan i mi ddod yn Aelod o’r Cynulliad. Ar ôl cael fy ethol i’r Cynulliad, lle mae llawer o Gymraeg yn cael ei siarad, gan gynnwys yn y Siambr, penderfynais fy mod i am ddysgu’r iaith. Gallwch weld felly, Mr Hanson, pam mae’r ddadl hanesyddol hon mor bwysig i fi yn bersonnol, yn ogystal â bod yn hanesoddol o ran San Steffan.

Mae’r ddadl Uwch Bwyllgor Cymreig yma yn rhoi’r cyfle i ni ystyried y Gyllideb a beth mae’n olygu i Gymru. Yn fy mharn i—rwy’n gwybod na fydd pawb yn cytuno â hyn—mae wedi bod yn newyddion da iawn i Gymru. Cynuddodd y Gyllideb yr arian ar gael i Lywodraeth Cymru wario ar wasanaethau cyhoeddus yng Nghymru. Cynuddodd y grym gwario gan £1.2 biliwn bob blwyddyn, sy’n arwyddocaol iawn. Roedd grym gwario wedi codi £1.2 biliwn bob blwyddyn, ac mae hynny’n arwyddocaol. Pan oeddwn yn Aelod yn y Cynulliad, roedd llawer o drafod am y fformiwla Barnett a’r Barnett floor hefyd. Galw am fwy o arian i Gymru, mwy o rym gwario.

Ar y pryd, roedd pobl yn gweld yr Athro Gerry Holtham fel arbenigwr a bob tro roeddem yn siarad am y Gyllideb yn y Cynulliad, roedd people yn dyfynnu’r Athro Holtham. Nawr, ar ôl cytuno fframwaith cyllid gyda Llywodraeth Cymru, mae’r Athro Holtham wedi disgrifio’r sefyllfa fel a very fair settlement. Mae pethau wedi symud ymlaen lot. Mae Llywodraeth Cymru hefyd wedi croesawu’r fframwaith cyllid. Maen nhw’n dweud nawr am long-term fair funding i Gymru. Mae hwn wedi digwydd o dan y Llywodraeth Geidwadol. Rwyf yn falch iawn i glywed pethau fel hyn.

Pwynt arall sydd yn bwysig i mi: yn y Gyllideb roedd y Canghellor yn sôn am gryfhau’r economi ymhob rhan o Gymru. Siaradodd am y Cardiff city deal, y Swansea city deal, am y north Wales growth deal, ac hefyd, am y tro cyntaf, siaradodd am mid Wales growth deal. Mae hyn yn bwysig dros ben; yn hynod o bwysig i mi. Mae’n rhy gynnar i wybod yn union beth mae mid Wales growth deal yn golygu. Mae’n bwysig iawn bod pobl leol yn y canolbarth yn rhoi syniadau. Dyma pam rwyf yn siarad gyda phobl yn sir Faldwyn a thu allan i sir Faldwyn hefyd, yn y canolbarth, a phob corff yn y lle, i gynnig syniadau.

Rwyf wedi bod yn siarad gyda’r Aelod dros Geredigion. Gobeithio byddwn yn gallu cymryd mantais o ymchwil amaethyddol ac amgylcheddol ym Mhrifysgol Aberystwyth a hefyd, gweithio gyda smallholdings ym Mhowys.

(Translation). Thank you, Mr Hanson, for giving me the opportunity to contribute to this historic debate through the medium of Welsh. It is the first time we have been able to use the Welsh language in Westminster. It has not happened before, which is why the debate is historic.

Personally speaking, it is significant for me, too, to be able to make my contribution in Welsh. When I was elected to the National Assembly for Wales in Cardiff bay in 1999, I could not speak a word of Welsh. However, since then, I have done my very best to learn the language—the language of heaven. All of my ancestors were first-language Welsh speakers. My parents also spoke Welsh as a first language, but after getting married they moved to a part of Montgomeryshire where nobody spoke Welsh. More significantly, the Welsh language was seen as a failed language; nobody wanted to speak the Welsh language. Things have changed now, but many people have forgotten the situation of many years ago.

I did not hear my father or mother speak Welsh at all, so my five sisters and I could not speak a word of Welsh. I could not do so until I became an Assembly Member. Having been elected to the Assembly, where a great deal of Welsh is spoken, including in the Chamber, I decided that I needed to learn the Welsh language. So, as you can see, Mr Hanson, this historic debate is particularly important to me on a personal level, as well as being historic in terms of events in Westminster.

This Welsh Grand Committee debate gives us an opportunity to consider the Budget and its implications for Wales. In my view—I know that not everyone will agree—it has been very good news for Wales. The Budget increased the funding available to the Welsh Government to spend on public services in Wales. The spending power increased by £12 billion, which is significant. When I was an Assembly Member there was a great deal of debate about the Barnett formula and the Barnett floor, too. There were demands for more funding and more spending powers for Wales.

At the time, Professor Gerry Holtham was seen as an expert on all of these issues, and every time we discussed the Budget in the National Assembly people would quote Professor Holtham. Now, having agreed a financial framework with the Welsh Government, Professor Holtham has described the situation as a very fair settlement, so things have moved on a great deal, and the Welsh Government have also welcomed the financial framework. They see it as long-term fair funding for Wales, and that has happened under a Conservative Government. I am particularly pleased to hear such comments.

The other point that is important to me is that in the Budget the Chancellor spoke about strengthening the economy in all parts of Wales. He spoke about the Cardiff city deal and the city deal in Swansea. He also talked about the north Wales growth deal and, for the first time, he mentioned a mid-Wales growth deal, which is hugely important for me. It is too early to know exactly what a mid-Wales growth deal will mean, but it is important that local people in mid-Wales bring their ideas forward. When I speak to people in my constituency and outside my constituency in mid-Wales, I will encourage everyone and all the organisations involved to bring forward their ideas, and hopefully we will be able to take advantage.

I have spoken to the hon. Member for Ceredigion. I hope we will be able to take full advantage of the environmental and agricultural research undertaken at Aberystwyth University and also work with the smallholdings in Powys.

[Hywel Williams (Arfon) (PC)]

Mae yna lawer iawn o bobl yn y gogledd eisiau cymryd rhan yn y ddêl ar gyfer twf. Roeddwn mewn cyfarfod diweddar gyda’r brifysgol ym Mangor. Mae ganddynt syniadau da iawn ond fawr o syniad sut i ymgeisio. Mae’r manylion ar sut ddylai’r cynllun yma weithio yn brin iawn. Onid yw hynny’n neges i’r Llywodraeth y dylsant ddarparu’r wybodaeth yma rwan am fod syniadau da allan yno yn barod i fynd?

(Translation) A great many people in north Wales also want to take part in the growth deal. However, having had a recent meeting with Bangor University, where there are very good ideas, I know that it does not really know how to apply the details, which are scarce, of how the deal will work. That is a message for the Government that they should provide that information now, because there are good ideas out there ready to go.

[Glyn Davies]

Fel ddywedais i, yn y canolbarth, mae’n amser cynnar iawn. Mae cyfrifoldeb arnom ni i gynnig syniadau. Rwyf yn credu bydd Ysgrifennydd Cymru yn barod i dderbyn syniadau. Mae’n gyfle i gryfhau’r economi yng ngogledd Cymru ac yn y canolbarth. Mae’n bwysig hefyd i gryfhau’r cysylltiadau trafnidiaeth rhwng y canolbarth a chanolbarth Lloegr. Mae’n bwysig cysylltu gyda’r farchnad yng nghanolbarth Lloegr. Mae’r Newtown bypass yn agor eleni; mae hyn yn bwysig. Mae pont newydd yn symud ymlaen ym Machynlleth, dros y Dyfi.

Y cam nesaf yw cael ffordd newydd rhwng Trallwng a ffin Lloegr yn sir Amwythig. Mae’n bwysig cael cysylltiad rhwng y canolbarth a Lloegr. Mae’r farchnad yn bwysig i ni ac rwyf eisiau gweld y growth deal yn y canolbarth yn canolbwyntio ar hynny. Hefyd, wythnos nesaf, mae £7 miliwn yn mynd i fewn i’r rheilffordd rhwng y Drenewydd ac Aberystwyth. Mae lot yn digwydd. Mae cysylltiadau trafnidiaeth yn bwysig iawn os ydym am weld y canolbarth yn symud ymlaen.

Mae prosiect Pumlumon yn bwysig hefyd. Dydy pobl ddim yn gwybod lot am y prosiect, ond y cynllun yw i dalu ffermwyr â dros 100,000 erw—rhaid i mi edrych i weld os ydw i’n dweud yr un peth yn Gymraeg—i stopio llifogydd yn Lloegr. Mae hyn yn bwysig iawn a bydd yn dda i ffermwyr yn y canolbarth. Bydd yn help mawr i arbed gwario miliynau i stopio llifogydd yn Lloegr. Mae growth deal yn y canolbarth yn beth da ar gyfer hyn. Mae camlas Mynwy yn bwysig, yn mynd dros y ffin, a gobeithio gall y buddsoddiad ynddo fod yn rhan o’r mid-Wales growth deal hefyd.

Rwyf wedi bod yn Aelod yn y Cynulliad ac yn Aelod yma yn San Steffan, ac rwy’n deall bod angen i’r ddwy Lywodraeth weithio gyda’i gilydd i gael yr elw mwyaf. Mae hyn yn digwydd a dyma pam rwy’n optimistig ac yn credu bydd hyn yn parhau trwy berthynas bositif. Dwi ddim yn darllen beth sydd yn y cyfryngau. Mae’r ddwy Lywodraeth yn gweithio gyda’i gilydd ac mae hyn yn bwysig.

I orffen, rwyf eisiau mynd yn ôl at yr iaith Gymraeg a sut mae gwleidyddiaeth a materion cyhoeddus yn cael eu darlledu yng Nghymru. Dylai beth sy’n digwydd yng Nghymru—yn y Cynulliad Cenedlaethol—gael mwy o sylw yn y cyfryngau yng Nghymru. Rydym ni i gyd yma yn dibynnu ar ddarlledu yng Nghymru i gysylltu â phobl Cymru i ddweud wrthyn nhw beth rydym ni’n gwneud yma. Rwy’n dibynnu ar y BBC, S4C a ITV i wneud hyn.

Roedd yn grêt gweld Radio Cymru 2 yn dechrau mis diwethaf. Mae’n bwysig iawn i Gymru a dwi’n llongyfarch Betsan Powys ar ei gwaith. Heddiw, rwyf eisiau dweud fy mod yn siomedig ar ôl clywed bod “O’r Senedd” yn gorffen—mae pawb yn adnabod y rhaglen—a dydw i ddim yn gwybod beth sydd yn dod yn ei lle. Dydw i ddim yn meddwl mai rhaglen sy’n delio â gwleidyddiaeth sy’n dod yn ei lle. Rwyf hefyd yn cofio “CF99”. Os rydym am gysylltu â phobl Cymru, mae rhaglenni fel “O’r Senedd” yn bwysig iawn i ni. Dydw i ddim eisiau gweld yn lle “O’r Senedd” rhyw fath o adloniant; rwyf eisiau gweld y cyfryngau yng Nghymru yn delio â gwleidyddiaeth yma yn San Steffan mewn ffordd ddifrifol. Yr unig ffordd rydym ni yn gallu cysylltu gyda’r bobl yng Nghymru yw trwy’r cyfryngau. Gobeithio, yn lle “O’r Senedd”, bydd rhyw fath o raglen sy’n delio â’r pynciau pwysig i Gymru mewn ffordd ddifrifol.

(Translation) As I said, in mid-Wales it is at a very early stage. There is a responsibility on all of us to bring forward ideas. I think the Secretary of State for Wales is willing to take on board these ideas, and that is where we are at the moment. I see an opportunity to strengthen the economy of north and mid-Wales. I also believe it is important to strengthen the transport links between mid-Wales and the midlands. It is hugely important that we can link up with the markets in the midlands. The Newtown bypass will open this year. That is important, and the new bridge over the Dyfi in Machynlleth is making progress.

The next step is to have a new road between Welshpool and the border with England in Shrewsbury. It is important to have those connections with England. The market is hugely important to us, and I want to see the growth deal in mid Wales focusing on that issue. Also, next week, £7 million will be invested in the railway between Newtown and Aberystwyth.

Also, next week, £7 million will be invested in the railway between Newtown and Aberystwyth. There is a great deal happening. Transport links are hugely important if mid-Wales is to make progress.

The Pumlumon project is also important. I do not know too much about it yet, but as I understand it the plan is to pay farmers—those with 100,000 acres, I think, but I will have to check that figure—to stop run-off from their land. That is hugely important. It will be positive for farmers in mid-Wales, and it will be of huge assistance in saving millions of pounds on flood prevention work in England. The mid-Wales growth deal is very positive. The Montgomery canal is also important, and I hope that investment in that is part of the mid-Wales growth deal, too.

Having been a Member of the Assembly and a Member here in Westminster, I have come to understand that the two Governments must work together if we are to achieve maximum benefit. I think that is happening, so I am optimistic. I think a positive relationship can develop between the Governments. I do not read about what is happening in the media. The Governments are working together, and that is hugely important.

To conclude, I want to move back to the issue of the Welsh language and how politics and public affairs are covered in Wales. What happens in Wales—and in the National Assembly—should get more coverage in the media in Wales. We are all reliant on broadcasters in Wales to connect with the people of Wales and inform them about what is happening here. That is hugely important. I think of the role of the BBC, S4C and ITV in delivering those messages.

It was wonderful to see Radio Cymru 2, a second Welsh-language radio channel, established last month. That is hugely important for Wales, and I congratulate Betsan Powys for the work that she has done. However, I was a little disappointed to hear that the S4C programme “O’r Senedd” is to cease broadcasting. I am not sure what is going to replace it, but I do not think that it will be a programme dealing with politics. I remember when “CF99” was on S4C. If we are to connect with the people of Wales, programmes such as “O’r Senedd” are hugely important. I raise that point because I do not want to see some sort of entertainment provided in place of “O’r Senedd”. I want to see the media in Wales cover politics here in Westminster and at the Assembly seriously. The only way that we can connect to the people of Wales is through the media. I hope that “O’r Senedd” will be replaced by some sort of programme that covers the important issues of the day for Wales.

Taxes on Small Businesses

Glyn Davies Excerpts

Wednesday 18th October 2017 Westminster Hall

[Robert Jenrick (Newark) (Con)]

It is a pleasure to serve under your chairmanship, Ms Dorries. I am grateful to my hon. Friend the Member for St Ives (Derek Thomas) for bringing this matter to the House’s attention. It is an incredibly important subject.

Like a number of hon. Members in the Chamber today, I came to the House having run a business. Not only was I involved in running businesses, but more importantly, I grew up—indeed, spent most of my life from the age of four—involved to a greater or lesser extent in a family business. Having seen a business founded and run from a kitchen table and known that the roof above your head was on the line when the cash flow was short or times were difficult gives you a respect for small business people and entrepreneurs that never leaves you. That helped to forge my politics and make me a Conservative, because it is the Conservative party that has always respected small business and sought to use what levers we have, including the tax system, to incentivise small business people and entrepreneurs, to reward enterprise and to focus enterprise on the things that really matter, not just for them but for the benefit of everyone—the whole of society. I am talking about innovation, research, development and building a vibrant economy that works for everyone.

I want to talk about a few of the tax changes that have been made since the Government first came to power in 2010, which I know, from the small businesses that I speak to in my constituency, and from talking to the businesses that I have been involved in and even my own family business, have made a huge difference. There are the obvious ones to the headline taxes that we have made such a big issue of over the years. I am thinking of the reduction in corporation tax, which has fallen to 19% and will fall again to 17%. That is an incredibly important, landmark reduction in taxes that affects, of course, big businesses and corporations, but also small businesses that prosper—the directors, founders and shareholders want to see a reward for their hard work. That tax would go up under Labour. The Labour party’s manifesto, or the small print of it at least, said that the small profits tax—for those below £300,000—would rise to 21% in 2020-21.

Capital gains tax is another tax that we have reduced. We increased it initially, at the beginning of the coalition Government, and then accepted that we had made a mistake and brought it down again. We have not brought it to as low a level as applied under the last Labour Government, but we have brought it down, which benefits businesses of all kinds. I would be very concerned if a change in Government led to its rising again.

However, taxes that get far less publicity in the main political debate are perhaps my priority. I am talking about those that, in the long term, benefit innovation, investment and research and development. The most obvious one that I have seen succeed is the research and development tax credit. That tax credit enables businesses large and small to claim back against profits, following the latest development, an extra 130% of their qualifying costs. That was on top of the 100% that we had had in the past, meaning a 230% tax credit for research and development by a business. In fact, there is a tax credit even if there is a loss by that business. That is incredibly generously defined and implemented by the Treasury, particularly for small businesses. Businesses involved in manufacturing—like the business that I have been involved in, through my family, for many years—with a high research and development capability, can usually see tax bills as low as 10%. In fact, it is unusual for a business like that—an SME manufacturing business—to have a tax bill above 10%. That is incredibly important because those are the businesses that, across the House, we care about and want to succeed in this country.

The patent box regime introduced by the last Chancellor of the Exchequer for corporation tax relief is incredibly important. It has led to tax reductions for all businesses that develop new products in manufacturing, software and other areas, and has been generously defined so that SMEs can access it and benefit from it without needing the finest lawyers or tax accountants. The innovative businesses that we want to prosper in our constituencies would struggle to pay more than 10% tax as a result of corporation tax, R and D tax credits and the patent box regime. I am concerned that a future Labour Government would abolish those incredibly important reliefs. Will the shadow Minister, the hon. Member for Bootle (Peter Dowd), comment on the Labour party’s position on the reliefs that businesses the length and breadth of the country rely on?

Entrepreneurs’ relief has increased the lifetime limit on gains for entrepreneurs, which I think was £1 million when we came into government, to £10 million—a lot of money to almost anyone, and certainly to people in my Nottinghamshire constituency. Entrepreneurs of any scale can use that relief to ensure that their lifetime’s hard work—the business that they have built up—can be used for their pension or passed on to the next generation. Someone who owns a business, whether it is a highly successful tech business worth tens of millions or a florist’s in Newark that they have devoted their entire life to, can be sure that when they sell it, they will gain the benefit. Enterprise and hard work have their reward. Above all, the entrepreneurs we care about most in society—the ones who do not take out the profits but reinvest them in their business—can have the confidence that they will be able to use that business in retirement as their pension or nest egg. I ask the shadow Minister what the Labour party intends to do about that relief.

For seven years, we have worked hard to close loopholes that were exploited by private equity and others to direct those funds to people that none of us in this House would want them to go to. We want to ensure that genuine entrepreneurs have the confidence not to take out money from their business, which they could easily do when it becomes successful, but to continue to reinvest it and to ensure that that business succeeds. Reinvestment involves employing more people, expanding, creating new opportunities and driving the economy forward. We should be proud of entrepreneurs’ relief and promote it to entrepreneurs, whatever the size of their business, in our constituency.

Although we have cut corporation tax to the lowest level imposed in any major developed economy, the level of business property taxes is still among the highest in the OECD, as we heard from my hon. Friend the Member for St Ives. I agree with him about the effect of business property taxes, not just on the obvious business owners, such as shopkeepers in the small market towns of Newark and Southwell, but on start-ups; on businesses that need a workshop or retail outlet before they build a presence online; on offices; on manufacturers who want factory space; and on businesses making their first expansion by purchasing new sites and renting new premises. Those businesses suffer most from this, and the Treasury should do further work to understand how we can move into the 21st century. Business is going online and we need a level playing field.

All these lower taxes for businesses are in the debit column, but there are some items in the credit column. The introduction of the national living wage means that small businesses must pay their staff more and make pension contributions. There are enhanced benefits; most recently, the Government announced extra bereavement leave. All these policies have almost universal support in this House. I support them all. Most small business owners want their workers to be treated well, paid the living wage, and so on. However, the policies have put pressure on small businesses, particularly in constituencies such as Newark that have high numbers of catering businesses and small retailers.

There is a fine balance between the pressures that important social changes have brought to our small businesses, and the policies that this Government have introduced, and that we support. If we want to ensure that the living wage continues to rise and working people are better supported, we need low taxes on the other side—corporation tax, capital gains tax, entrepreneurs’ relief, the patent box regime. We need the balance to work in favour of entrepreneurs and risk-takers—the businessmen and businesswomen of this country. That is why we should be deeply concerned about a Labour Government, who would not only follow our lead on social reform and treating workers as they should be treated, but risk diminishing and undermining the tax reforms and reductions that small businesses have come to rely on. That would put the enterprising people of all our constituencies at great risk. Enterprise should have its reward. I believe the Conservative party will always provide that reward for the hard-working constituents we represent.

[Glyn Davies (Montgomeryshire) (Con)]

rose—

[Ms Nadine Dorries (in the Chair)]

Order. It is appropriate etiquette for any Member who wishes to speak to rise and catch my eye. Is Mr Davies the only remaining Member who wishes to speak?

--- Later in debate ---

[Glyn Davies (Montgomeryshire) (Con)]

Thank you, Ms Dorries, for calling me to speak in this debate and, indeed, for your generosity in doing so after I was a couple of minutes late in arriving.

I congratulate my hon. Friend the Member for St Ives (Derek Thomas) on bringing this matter forward for debate. I took great interest in his comments about business rates. I cannot say a great deal about business rates, because they are a devolved matter in Wales and it would not be appropriate for me to speak about their effect in Wales here in Westminster. However, I must say that the dramatic changes in terms of revaluation really have put the most horrendous pressure on some of the most important businesses in my constituency.

The one issue that I will raise today is VAT on tourism. It is not a new issue; it has been discussed many times before. However, I want to make sure that it stays on the Treasury’s to-do list, so I have come along to this debate to talk about the impact of that tax on small business.

In Montgomeryshire, and I am sure in most rural areas of Britain, tourism is a massively important industry and a hugely important part of the local economy. Very often, the competition to an area such as my constituency is from overseas. In a lot of overseas countries, which people can choose to go to for their holidays or to visit for a day or a week, the level of VAT is much lower than it is here. The differences might be measured in relatively small amounts of money, but the point is that it is competition and other countries can advertise by saying that they have a lower level of VAT than Britain. The impact of our level of VAT is negative and it is particularly damaging to rural areas that depend on tourism.

As for my constituency, a lot of people know about Powis castle, Lake Vyrnwy and the Lake Vyrnwy hotel, which is a huge attraction, as well as the Montgomeryshire canal and the Welshpool to Llanfair light railway. Those things are why people come and very often they are the reason people come to Montgomeryshire to set up all sorts of businesses. The point that I am making is that tourism is massively important to my constituency, and I am sure that the same is true of every other rural part of Britain.

As I have said, the issue of VAT on tourism, which is at 20% in Britain, has been under discussion for many years and addressing it has been very much part of the work of the all-party group on the tourism and hospitality industry in Wales. Lowering it is one of our major campaigns and has been for a long time. The ambition is to make certain that VAT on tourism is not forgotten. Addressing this issue needs to be part of the Treasury’s considerations.

It would be very enjoyable for me if the Minister stood up today and said that in the Budget in November, the Chancellor will say that he is contemplating a cut in VAT on tourism, but I am not absolutely sure that that will happen. However, it is important that we keep this issue as a consideration for the future. I know it is not a straightforward issue, and that there may well be administrative costs and that we could be accused of having different levels of VAT. We need to know what the benefit to businesses would be of lowering VAT on tourism. Instinctively, we believe there will be a benefit when the competition is lower, but we need to know what that benefit might be.

What I am asking for more than anything else is that the Treasury keeps this issue under consideration, and that we have a proper understanding of and a continuing inquiry into what the benefits of any VAT cut would be, because as we leave the European Union, the freedom to take decisions relating to VAT will change things; it will give us a lot more freedom. Something that I would like to do as a celebration of our leaving the European Union and the ensuing freedom that we will have to vary our VAT is to announce that we are either removing or greatly reducing VAT on tourism in Britain. The economic benefits of doing so would be huge and I hope that it is something the Treasury will keep under consideration.

Oral Answers to Questions

Glyn Davies Excerpts

Tuesday 1st December 2015 Commons Chamber

[Mr Gauke]

My right hon. Friend the Chancellor made it clear that the business rates review, which we have been undertaking in recent months, will be completed next year. Obviously, we are looking at all the representations that we receive in the context of that review.

[Glyn Davies (Montgomeryshire) (Con)]

4. What assessment he has made of the potential effect of the national living wage on wage growth.

[The Economic Secretary to the Treasury (Harriett Baldwin)]

The national living wage will mean that a full-time minimum wage worker will earn more than £4,700 more by 2020—a 40% pay rise. Additionally, owing to the ripple effect of higher wages, up to a quarter of workers will see some benefit. Economy-wide wages are expected to be, on average, 0.4% higher in 2020.

[Glyn Davies]

There has been a widespread welcome for the Chancellor’s national minimum wage announcement. Inevitably, the minimum wage has a major effect on traditionally low-wage sectors, especially social and residential care. Does my hon. Friend accept that the Government and local councils must be mindful of the fact that fees will need to be adjusted to ensure the viability of these hugely important services?

[Harriett Baldwin]

My hon. Friend is right that many of the 900,000 workers in the social care sector will benefit from the new national living wage, including many working in residential care. That is why last week in the autumn statement we made an announcement that councils will have the power over the course of this Parliament to access money that they may need to increase the amount that they pay for social and residential care, with new revenue streams for social care worth up to £3.5 billion by 2020.

Oral Answers to Questions

Glyn Davies Excerpts

Tuesday 16th June 2015 Commons Chamber

[Mr Osborne]

Every single Finance Bill we have introduced has been about tackling tax evasion and tax avoidance. Indeed we have also introduced into this country the diverted profits tax—almost a first in the world—which is tackling those international businesses that move their profits offshore to avoid tax. I can tell the hon. Gentleman that in the Budget we will take further action to clamp down on avoidance and evasion.

[Glyn Davies (Montgomeryshire) (Con)]

T2. Last week, the Chancellor announced a simple new rule to ensure that we run a surplus in normal times. Does he agree that the Opposition’s description of this as no more than a “distraction” proves that no lessons have been learned and that they would make exactly the same mistakes if they were ever given the opportunity again?

[Mr Osborne]

rose—

Barnett Formula

Glyn Davies Excerpts

Tuesday 16th December 2014 Westminster Hall

[Iain Stewart]

As I said earlier, the purpose of the debate is not to say whether Barnett is right or wrong or whether it needs to be changed or not; it is just to help inform a more considered debate about the issues.

[Glyn Davies (Montgomeryshire) (Con)]

Will my hon. Friend give way?

[Iain Stewart]

Certainly. I will complete my tour around the United Kingdom.

[Glyn Davies]

I feel that Wales should have a contribution to this international debate. My hon. Friend is addressing the issue of clarity. In Wales, the lack of clarity in the Barnett deficit is leading the Welsh Government to resist financial accountability. Does he agree that it is vital that we find out what the Barnett deficit is? A whole range of figures have been bandied about. Most of them are untrue, but they are being used to prevent the financial accountability in Wales that we all want to see.

[Iain Stewart]

My hon. Friend makes an excellent point. There is a lot of darkness and cloud about these matters, and if we are to have a sensible debate about the fiscal balance between the component parts of the UK, we need that greater clarity.

--- Later in debate ---

[Mr Gauke]

Let me turn to the issue of fairness for all parts of the United Kingdom, including for Wales—I assure the hon. Gentleman that I will get to that eventually. As my hon. Friend the Member for Milton Keynes South has mentioned, there is a perception, particularly in parts of England, that Scotland is overfunded because it offers generous policies on university tuition fees, for example. However, I must emphasise that devolved Administrations do not receive any additional funding for those policies. They accommodate them within existing budgets by prioritising those policies over others—for example, by not protecting school spending during this Parliament, as we have in England.

One of the purposes of devolution is to allow the devolved Administrations to make different policy choices. That was set out in 1997 in the statement of principles, which states:

“The key to these arrangements is Block budgets which the devolved administrations… will be free to deploy…in response to local priorities.”

In contrast, commentators in Scotland, Wales and Northern Ireland tend to be concerned about the Barnett squeeze convergence property of the Barnett formula, whereby the percentage changes in devolved Administration spending are lower than in England. However, the Barnett formula itself does not change the budgets of the devolved Administrations disproportionately to England’s: an extra pound per head in England means an extra pound per head in the rest of the UK. The so-called Barnett squeeze reflects the higher levels of spending per head in Scotland, Wales and Northern Ireland that have existed over many years, before and since devolution in the 1990s.

I know that some hon. Members consider Wales to be relatively underfunded as its spending has converged towards the level in England. In fact, spending per head there is 11% above England’s and has more than doubled in cash terms since devolution. Wales also benefits from large EU structural fund spending, having been awarded £1.9 billion from 2007 to 2013 and a similar amount for 2014 to 2020.

However, we recognise that there are concerns about relative levels of funding for Wales; that is why we have established a bilateral process to consider that in advance of each spending review. The most recent assessment, before the 2013 spending round, determined that convergence was not forecast to occur through to 2015-16 and that the existing level of Welsh funding was within the range suggested by the Holtham commission. The Government have now further agreed with the Welsh Government to review that process in the light of the tax and borrowing powers contained in the Wales Bill.

[Glyn Davies]

The Minister may have just answered the question I was going to ask, but perhaps he might reassure me on the uncertainty about the size of what I call the Barnett deficit in Wales. Everybody thinks it has decreased substantially over the last few years as a result of the change in public spending levels. Are we moving to a position where we will know precisely what that Barnett deficit is, because it is very important for the discussions that we are having about the powers over income tax that the Welsh Government should be taking on?

[Mr Gauke]

My hon. Friend raises an important point. I know that he has been very active in ensuring that the Welsh Government take advantage of the powers that may be available to them, and I know there is an issue of funding there. I hope that I did address his point by saying that the Government have agreed with the Welsh Government to review the process in the light of the tax and borrowing powers in the Wales Bill. I hope that process will satisfy him by shedding light on the issue that he raised.

I turn to the issue of the needs-based formula. I have heard it said that the Barnett formula does not take sufficient account of needs. The most basic issue here is that no one has been able to say how we would agree a needs-based assessment that would suit every part of the United Kingdom. However, far from being a static formula, the Barnett formula is regularly updated to take account of changes in population and levels of devolved responsibility.

The budgets of the devolved Administrations cover a very wide range of devolved spending programmes. It is, of course, for the devolved Administrations to decide how to allocate their overall budget to individual programmes, reflecting their own policies and their own assessment of the needs of each country. The Barnett formula allows them the freedom to do that.

However, we believe that financial accountability can be improved in Scotland, Wales and Northern Ireland as the devolution settlements evolve. The Government’s record on that speaks for itself. Both the Scotland Act 2012 and the Wales Bill currently in Parliament will devolve new tax and borrowing powers. We have also committed to implementing Lord Smith’s heads of agreement in full. As we devolve further powers, Scotland and Wales will be responsible for raising far more of their funding, so their block grants will become less important. The impact of the Barnett formula on overall levels of funding will decline.

Finally, in highlighting today’s debate in The Daily Telegraph, my hon. Friend the Member for Milton Keynes South set out that the debate would be better informed if we had

“detailed and incontestable territorial public accounts”,

which is a point he made earlier. The Government do not disagree, but this is a complex matter. The Office for National Statistics is considering the development of sub-national accounts as part of its implementation of the European system of accounts, and it is also undertaking work on the comparability of official statistics across the United Kingdom.

It is right that a formula that has set out devolved spending for over a third of a century is continually kept under review to make it fit for the needs of the current day. The three main party leaders have stated that the Barnett formula will continue, and that is therefore what will happen. However, we continue to listen to the strong views on the formula from all parts of the United Kingdom, which have been represented in this debate this afternoon. In that spirit, I thank everyone for their contributions today. I particularly thank my hon. Friend the Member for Milton Keynes South, who has brought to this debate careful, thorough and thoughtful analysis. He has succeeded in shedding some light on an important issue and has highlighted some matters that can often be lost in this important debate.

Wales Bill

Glyn Davies Excerpts

Tuesday 24th June 2014 Commons Chamber

[Owen Smith]

That is a tendentious and off-piste point, and I do not intend to busy the Chamber by bothering to respond to it.

We are still suspicious of the Government’s motives, not least because the leader of the Conservative party in Wales, Andrew R.T. Davies, has said explicitly that he wants to cut taxes for the wealthiest people in Wales. That is what we suspect that the Tory party would do if, heaven forfend, it were ever to assume power in Wales. We also still have suspicions that the Government are not really serious about doing this for Wales; in truth, we feel that it is more evidence that Wales is of interest to them only as a stick with which to try to beat the wider Labour party. We have heard this on health, on housing, and on education. Again, their perspective is to try to drive wedges into gaps that do not exist.

If the Government were serious about this, they would have undertaken some of the work that they have done in Scotland. When we last met here to debate this Bill on 6 May, we were anticipating a report by the Government—in fact, it was late by then—on the costs of implementing a similar scheme in Scotland. It did not come out on 30 March, as promised, but on 6 May—on the day, slightly unfortunately, of our debate. The report is entitled “Second Annual Report on the Implementation and Operation of Part 3 (Financial Provisions) of the Scotland Act 2012”. It contains welcome news, because it concludes that the total cost for Scotland will not be the £40 million to £45 million originally anticipated, but a mere £35 million to £40 million. That is what it will cost not Her Majesty’s Government but the Scottish Government to implement a separate Scottish tax regime.

One would have thought that if the Government were serious about implementing this, the cost to Wales should be measured, but the Treasury and the Wales Office have undertaken no such analysis. That is particularly troubling because of the point made by my hon. Friend the Member for Alyn and Deeside (Mark Tami), who is no longer in his seat. There is more complexity in implementing this scheme in Wales because of the greater population density on the border between England and Wales—on either side of Offa’s Dyke, or the line between life and death, as the Prime Minister refers to it. Just 4% of the Scottish population and 0.5% of the English population live within 25 miles of the Scottish border, whereas 48% of the Welsh population and fully 10% of the English population live within 25 miles of the Welsh border.

In Scotland, such measures would potentially affect just 450,000 people who travel back and forth across the border, whereas in Wales the number is likely to be closer to 6.5 million. The implementation costs for Wales are therefore likely to be greater, if not the volume of communication that the Government will have to undertake. Were they serious about this, we might have heard some analysis from them today, but we have heard not a jot.

[Glyn Davies (Montgomeryshire) (Con)]

I would like some clarity about the Opposition’s position. We are being told that they will vote in favour of the Bill, which is very good news, but the whole discussion on income tax devolution to Wales suggests that they are completely against it. There will inevitably be differences—we know that the border areas are more difficult in Wales than in Scotland—but the Opposition’s entire rhetoric suggests that they are against the devolution of financial accountability to Wales.

[Owen Smith]

I say again that we will support these measures. We will not press amendments 10 and 11 to a vote because we see value in greater accountability and, in particular, in the borrowing powers that are associated with income tax and other taxes. Nevertheless, there are all sorts of reasonable questions to be asked about the impact on the hon. Gentleman’s constituents and mine. The Government are being remiss, if not incompetent, in failing to deal with those questions and failing to come to this House with a proper explanation of what they think the impact will be, as opposed to using the issue merely as a stick with which to beat Labour.

--- Later in debate ---

[Glyn Davies]

I am grateful for being called to speak on an issue that is of great personal interest. As well as being the Member of Parliament for the Welsh seat of Montgomeryshire, I served for eight years representing Mid and West Wales as a regional Member of the National Assembly for Wales. My dominant interests since becoming a Member of Parliament have been Welsh politics, the Welsh economy, Welsh public services and, indeed, the relationship between Cardiff Bay and Westminster as they deal with the devolution process, which will continue for many more years. The nature of such a process is that one does not reach an end stage, a point to which I shall return.

I do not think this a dry debate at all. Constitutional debates tend not to be ones about which we joke and laugh, but as someone who is deeply embedded in Welsh politics, I find a debate about a Bill concerning the future governance of my country hugely interesting, and I have enjoyed the various aspects of it.

I declare my enthusiastic support for the Bill, which is a significant step forward in the devolution process, although there are aspects with which I do not agree. Perhaps I am in a very small minority, but I should refer to those differences alongside my general support for the Bill, to put my opinions on the record for the benefit of anyone in my constituency and indeed the rest of Wales who might want to know what they are.

I have listened to some of the debate; I missed some of it owing to meetings. My general impression is that Labour’s position in particular is confused. Clearly, Members on this side of the House are pleased that Labour will be supporting the Bill—that is a positive move—but the contributions of many Labour Members suggest that they just do not accept the principle underlying the devolution of tax to the Welsh Assembly. Some of their language has sounded more as though they oppose the Bill than support of it.

The Plaid Cymru contributions have been churlish—that is the word that I would use. During this Parliament it was a Conservative Secretary of State who introduced, with very great determination, the Bill that created law-making powers in Wales. I do not believe that it would have been introduced if it had not been a Conservative Secretary of State; I think that a Labour Secretary of State would probably have chickened out. It was a Conservative Secretary of State who established the Silk commission. It has done very good work and, like several other Members, I commend it for that work. It is a Conservative Secretary of State who has introduced this Bill. I perfectly accept that it does not go as far as Plaid Cymru Members may want—one would not expect that—and, indeed, there are differing views on the detail of the Bill in all parties, but nobody can disagree that granting tax-raising powers to the National Assembly for Wales, and the borrowing powers that go with them, is anything but a huge constitutional step forward. On that basis, it might have been at least fair of Plaid Cymru to congratulate the Conservative party on taking us down the road, not as far as it would want, but certainly in a positive direction.

[Mr Llwyd]

The hon. Gentleman said that he had been in and out of the debate, and I accept that—so have I. My colleagues were generous about various parts of the Bill, but nevertheless there are parts about which we are concerned, and that is the nature of politics. Do not call us churlish because we find fault in some way with the Bill. That is just politics, is it not?

[Glyn Davies]

I thank my friend for that; he has been a friend for a long time. It is reassuring that he has decided to intervene and say how supportive he is of what the Conservative Government have delivered in the past few years. I shall read today’s debate in Hansard to pick out all those individual bits that he speaks so enthusiastically about.

There are several elements to the Bill, the most important one by a long way being the tax-raising powers and the commensurate borrowing powers that go with them. There will be continuing debate on that. It may well feature in the manifestos of the various parties leading up to the next general election, and I think it will be revisited in the next Parliament. That is natural in constitutional issues when there is a process. I think there will be a next step to this process, which I look forward to being a part of after the next general election.

Another issue that has caused a lot of excitement is dual candidacy. If there was any political intent to gerrymander, it was on the part of the Labour party when it introduced the ban. No independent body in Wales, including the Electoral Commission, thinks that it is any way partisan to scrap the ban on dual candidacy. It was brought in by the Labour Government in this place with the support of Labour in Cardiff, with the view that it would benefit the Labour party in Wales, and it is truly ironic that it did not. The Opposition should welcome what is a right and proper constitutional change brought in by this Government.

I am not in favour of a referendum; generally speaking, I do not like them. Political parties should tell the people what they intend to do and if the people vote for them at a general election, they can carry that out without a referendum. I accept that I am in a minority in relation to a referendum on tax-raising powers in Wales. The Silk commission recommended it and there was a referendum in Scotland. Apart from this one contribution on this issue, I will have to sneak back into my box rather quietly on that one.

I am also not in favour of a five-year term, and again I might be in a minority. I generally think that four-year terms are right for Parliaments. We have a five-year term here, and I realise that there is a lot of support for a five-year term for the National Assembly. Again, that is another little box that I will have to crawl back into, because that might be a minority view.

But let us not forget what the Bill will do if, as I hope it will, it receives its Third Reading today. This Westminster Parliament is granting to the National Assembly for Wales the power to raise taxes—financial accountability, so that in future a Welsh Government will be accountable to the people whom they represent. There is further to go, but there is an important principle: that a Bill put forward by a Conservative Secretary of State is making a significant contribution to the process of devolution in Wales.

[Paul Murphy]

It is a great privilege to speak on Third Reading of a Bill that my hon. Friend the Member for Pontypridd (Owen Smith) indicated we will not oppose, for a variety of reasons. The Secretary of State referred to this as a milestone Bill. I have sat through 26 years of Welsh Bills, and I have to say that I do not think this is a milestone. There are some good parts to it, but a real milestone was the Bill introduced by the Labour Government after the 1997 general elections, which set up the Welsh Assembly.

The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) suggested in a previous debate that the Westminster parties, by which I assume he meant the Conservatives, Labour and the Liberal Democrats—he is actually a member of a Westminster party, as we meet here in Westminster, rather than Dudley or anywhere else—were obstructive when dealing with devolution matters. Had he said that in 1978, he would have been absolutely right. I was treasurer of the “No Assembly” campaign in Wales and deeply opposed devolution in the late ’70s, but I changed my mind, and for a variety of reasons, including all those years of Conservative government. He and his Plaid Cymru colleagues must reflect on this: no Labour Government would have meant no Assembly and no Welsh Government. Obviously we were helped by the pro-devolution parties—the Liberal Democrats and his party.

The hon. Member for Montgomeryshire (Glyn Davies) suggested that a Labour Secretary of State might have “chickened out” of extending the Assembly’s powers. I see no evidence for that, having been a Secretary of State for Wales twice. I certainly would not have chickened out. Indeed, when this Bill was introduced I enthusiastically supported the previous Secretary of State, who I thought showed great courage in introducing it as a Conservative, and I agreed with her.

[Glyn Davies]

I would like to reassure the right hon. Gentleman that I do not think the Labour party would have chickened out had he been Secretary of State.

[Paul Murphy]

I am grateful to the hon. Gentleman for that.

The devolution of extra powers was supported overwhelmingly by the people of Wales in the referendum, including in my constituency, which, having been one of the most sceptical and anti-devolution constituencies in the whole of Wales, changed its mind. I think that there has been a sea shift in how people perceive devolution. People understand it more, although not completely. We heard earlier about the Welsh television surveys indicating that many people did not know who ran the health service, for example. There will still be some of that, but there has been a change none the less.

To that extent, I welcome aspects of the Bill. The change to the name “Welsh Government” might seem trivial to many people, but it is significant. I think that the fixed terms, the ban on dual membership and other aspects of the Bill are greatly to be welcomed. Even though we disagree on how the business of taxation should be introduced in Wales, the fact that the Government have introduced the idea that we should deal with it is significant. All parties now agree on that, even if we disagree on the method and mechanism by which it will be introduced. However, there are parts of the Bill, including dual candidacy, on which we fundamentally disagree with the Government. There are substantial disagreements, but there are also agreements.

The Bill will now go to the other place, and I think that there is an opportunity for their lordships to improve it. I will refer to just two issues. One relates to reserved powers, which I spoke about earlier. I think that the Scottish referendum—I hope that there will be a no vote—will be followed by extra powers for the Scottish Parliament and that that will be replicated in our Assembly in Cardiff. I hope that the Government will rethink that.

More immediately significant is the issue of borrowing. I think that we are being short-changed in Wales as a result of this Bill. I agree wholeheartedly with the Government that the Welsh Government should be able to borrow, as the Northern Ireland Executive and the Scottish Government can, but I have still heard no reasonable answer to the question that all of us on the Opposition Benches have posed. The borrowing principle was introduced in Edinburgh and Belfast without necessarily any reference to streams of income, even though Scotland theoretically has a stream of income and the Northern Ireland Assembly has dealt with rates for many years. There is a gaping hole there. I think that their lordships would be well advised to examine that issue in the Bill.

--- Later in debate ---

[Mr Mark Williams]

I could not possibly comment, but I will give way to him.

[Glyn Davies]

I would just like to say that the late, great Baron Hooson was a wonderful Member of Parliament who served Montgomeryshire and Wales with distinction for many, many decades; I do not want to be accused of being churlish.

[Mr Mark Williams]

My hon. Friend says that with great sincerity, and I know him to be a sincere man. I just wish to place on the record the fact that the process of devolution has been an achievement of politicians of all parties—Liberals, Conservatives, and friends from the nationalists and from the Labour party—over the years. That process of consensus has to continue if the process of devolution marches on.

The Economy and Living Standards

Glyn Davies Excerpts

Thursday 12th June 2014 Commons Chamber

[Glyn Davies (Montgomeryshire) (Con)]

Thank you, Madam Deputy Speaker, for calling me to speak. This is the first time that I have been called to speak in a debate on the Gracious Speech since being elected as an MP in 2010, and since we are debating the final Queen’s Speech in this Parliament before the next general election perhaps it is the last occasion that I will have a chance to be called; whether I have a further opportunity is a matter for the voters in Montgomeryshire next May. Anyway, thank you, Madam Deputy Speaker, for calling me today.

The Prime Minister began his speech at the beginning of this debate last Wednesday by telling the House that the most important task facing the coalition Government during the next year is continuing the work of restoring our economy. That is absolutely the right approach. There are 11 interesting and important Bills in the Queen’s Speech, but underpinning everything that the coalition Government should focus on in the next year is economic recovery.

While I emphasise the important aim in the Gracious Speech of continuing in a determined way with the task of economic recovery, we should acknowledge what has already been achieved. It is far more than many of us would have expected and it has certainly defied the consistently dire predictions that have been made by the Opposition during the past four years; indeed, my right hon. Friend the Chancellor today listed some of those predictions, which have been shown to be completely false. In particular, the falling levels of unemployment and the rising levels of employment have been nothing short of miraculous. Only yesterday, the employment figures for May were published. Unemployment fell by 161,000 in May. Since 2010, more than 2 million jobs have been created.

In May the number of unemployed people in my constituency fell to 647—just 2.1% of the economically active—which is 270 fewer than a year ago, and 33 fewer than in April. Those are astonishingly good figures, and they are reflected in constituencies right across the UK.

Montgomeryshire is blessed with many dynamic small and medium-sized enterprises across the range of sectors. Over the past few weeks I have visited several of them, accompanied by Ministers from the Wales Office team. We visited Sidoli, Invertec and T. Alun Jones in Welshpool, Makefast, Stagecraft, Quartix and Trax in Newtown, and last Thursday I joined a celebration at Stadco in Llanfyllin as that outstanding company received the Jaguar Land Rover quality standard award. Those businesses, which are mainly in manufacturing, are growing solidly, providing new jobs and creating apprentices, demonstrating their confidence in Britain and in the Government’s long-term economic plan. The last thing they need is a national insurance jobs tax, which the shadow Chancellor so studiously refused to rule out earlier today.

Over recent months the Opposition have made much of the cost of living—they have done so again today—as if Labour’s management of the economy had nothing whatsoever to do with it. Experience teaches us that the only way to create sustainable increases in wages is through the marketplace, through the pressure created by competition for good, well-trained employees who are willing to work. Therefore, it is absolutely right that the coalition Government continue with their brilliantly successful economic plans all the way up to the general election.

In the 20 seconds remaining I want to say that my constituency is rural and depends largely on farming. Currently, the cost of living is being seriously affected by what is happening to the dairy industry. The Government need to tackle that issue and understand why imports are coming in and why the supermarkets are not accurately labelling theme.

Wales Bill

Glyn Davies Excerpts

Wednesday 30th April 2014 Commons Chamber

[Jonathan Edwards]

Well, apart from the Swans staying up this year—another great achievement, which I know the hon. Member for Pontypridd (Owen Smith) shares with me.

Most striking about the referendum result was that it was matched across every county in Wales—apart from Monmouthshire, which only just voted no. When the history of Wales is written, that result will be recorded very strongly when compared with the referendums of ’79 and ’97. It was an earthquake moment, and I remember the shell-shocked faces of many Unionists down in Westminster the week after that historic occasion.

The nature of the game has therefore changed, and subsequent opinion polling clearly indicates that the people of Wales want greater control over their lives. I think they are far ahead of the political class at the moment, and I even include Plaid Cymru in that context. Today we are discussing in historical terms a further milestone on the path towards Welsh self-government, with, for the first time, a national legislature being empowered to have an element of fiscal powers. Needless to say, the Bill does not go anywhere near as far as my party would want in terms of powers for Wales, but as an historian in a previous life I can safely say that when the history of Wales is written, this period will be seen as one of rapid political development for our nation.

As we celebrate the 20th anniversary of the great indie band from Manchester, Oasis, and its first studio album in ’94, I am reminded of one of its best songs, “Little by Little”. I hope sincerely that when we conclude our Committee deliberations we will not be “looking back in anger”—a reference to another of its great songs. Today is therefore another landmark in the political development of our country.

The context of the Bill is interesting in itself, and I get the impression that the Secretary of State would rather walk through fire than deal with the Bill today. I am sure he sees it as a hospital pass from his predecessor. The Bill results, of course, from the UK Government-sponsored Silk commission, in particular part I, and I pay tribute to Sir Paul and his fellow commissioners for their work on both stages of the report. As I said, as a party our evidence to both parts of the commission called for far greater progress than was finally agreed, but we were prepared to compromise to seek agreement and make progress. It is therefore disappointing that we find ourselves presenting amendments in Committee, and endeavouring to preserve the integrity of the Silk commission.

Unfortunately, the Wales Bill has torpedoed the recommendations of the Silk commission, particularly in relation to the lockstep on the income tax powers, which we will discuss later. Even more regrettably, it seems that Labour’s amendments to the Bill, rather than strengthening it as we seek to do, aim to place further roadblocks and move us even further from what the Silk commission proposed.

[Glyn Davies (Montgomeryshire) (Con)]

The hon. Gentleman is running through the parts of the Bill that he disagrees with, and it is entirely possible that people on both sides of the Committee may disagree because it is a wide-ranging Bill. Does he accept, however, that the Bill makes dramatic progress in that it provides the foundation stones for financial accountability to be vested in the National Assembly for Wales? That is a key step forward that makes the Bill hugely important for the interests of Wales.

[Jonathan Edwards]

As I said, I think the Bill will be viewed as an important milestone in the constitutional development of our country, but it will not surprise the hon. Gentleman to hear that my ambition for Wales is greater than what is set out in the Bill.

--- Later in debate ---

[Jonathan Edwards]

Of course the hon. Gentleman is right. We do support the Bill, but we want to use the opportunities provided by the Committee stage to strengthen and improve it. In my view, the lockstep is one provision that needs urgently to be removed. If the United Kingdom Government are determined to introduce it, let us devolve it in the Bill and then have a referendum on its removal. Why have a referendum on the lockstep mechanism?

The Secretary of State has spoken before of his belief that Wales needs the ability to vary income tax in order to be competitive—spoken as a true Conservative—but then does not offer a power that actually allows for any variation in income tax. That is the huge contradiction in the Bill as it stands. It is time for him and his Government to put their money where their mouth is and support our amendments—I am not holding out much hope—and for the Labour Members present to support what their party in Wales is saying by supporting us in the Lobby later.

[Glyn Davies]

This is a very important debate. The Bill is incredibly wide ranging and has lots of aspects to it, but the one issue that dominates it, as much the most important aspect, is the devolution of meaningful tax-raising powers to the National Assembly for Wales, and that involves a significant part of income tax. In doing that, the Bill will deliver financial accountability to the Welsh Government, which has been lacking since the National Assembly for Wales was established.

Let me give some context by saying something about my own background. In 1997, I was opposed to the establishment of the National Assembly for Wales, because I thought we were considering setting up a body that was not meaningful. I recall being at the count in Llandrindod Wells when the result for Carmarthenshire came through, and there were great celebrations because a yes vote had been snatched from defeat at the last minute. I recall driving home and thinking to myself that that was a key moment, and from then on I have taken the view that the National Assembly for Wales should have law-making powers and meaningful tax-raising powers. If we did not have those two powers, we were creating something that was simply not worth while. That is why this Bill is particularly important and we are dealing here with the key part.

It does not make any sense to have a Welsh Government who claim credit and say how good they are whenever they do something the people of Wales approve of but whenever something is done that the people of Wales do not approve of say, “We cannot do that because we do not have enough money from Westminster.” They transfer the blame, and they do not become a meaningful body until they are responsible for raising their own taxation. All of us know that from other things we might have done in our lives. When I was chair of Berriew community council, a very small village council, the biggest debate we had in the year was about whether we should levy 1p on the rates, just as a precept. It was much the biggest debate because it involved balancing what we wanted to spend with the demands on the ratepayers and it made us think clearly about the decisions we were taking. The same thing applied when I was the finance chairman of Montgomeryshire district council. We had an all-day debate every year about 1p on the rates, because again it was about balancing what the council wanted to spend against what we wanted to raise. That is what has always been lacking in the National Assembly.

I was a Member of the Assembly for eight years, at one stage being the finance spokesman, and I would never use the term “budget” as to my mind it was always an annual spending plan. It was not a genuine budget because it was not informing the people that it wanted money from them and that a balance was being struck between spending and demanding money from the ratepayers. So I am strongly in favour of the income tax proposal, because it is hugely important and it is why I really welcome the Bill. There are other parts of the Bill where my support is at varying levels, but the income tax proposal will be crucial.

My right hon. Friend the Secretary of State will know that I have always had some doubts about the need for a referendum. If we believe passionately that a body must have tax-raising powers to be a viable parliamentary body, we should commit ourselves in our manifestos to going forward with this proposal and then delivering it afterwards. I have come to accept that for two reasons, one of which is that there is a general expectation because of the referendum in Scotland that there will be a referendum on income tax-raising powers in Wales.

The second reason is that I want to stay as true as I can to the Silk commission report, which recommended a referendum, and all parties signed up to that. In pursuing this issue, I think I have to accept that there will be a referendum.

There has been a lot of discussion about the lockstep and the lack of freedom for the Welsh Government to vary individual rates. There will be different views on that, but I perfectly accept the rationale of the argument of the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). I must say though that it diverts us from the huge step forward that the Bill represents.

Tomlinson Report

Glyn Davies Excerpts

Tuesday 17th December 2013 Westminster Hall

[Guto Bebb (Aberconwy) (Con)]

It is a pleasure to serve under your chairmanship this morning, Sir Roger.

I am pleased to have secured this debate on the Tomlinson report prior to the Christmas recess, because it is important and touches on a lot of my work on interest rate swap mis-selling. The report’s scope is wider than just the interest rate swap mis-selling scandal, and it looks at how a certain part of the Royal Bank of Scotland, namely the global restructuring group, has been operating in relation to small businesses. It is important to place on the record that Lawrence Tomlinson’s findings reflect what I have seen both as a constituency MP and in my work on interest rate swap mis-selling.

Prior to the report’s publication, Lawrence Tomlinson spoke to the all-party parliamentary group on interest rate swap mis-selling, and it is fair to say that many Members in that meeting were shocked by what they heard about banks’ behaviour. What should concern us more than the fact that Members were shocked by Mr Tomlinson’s comments is that many of them were not surprised. When some of the report’s findings were highlighted, it was concerning to see that such activity was recognised by Members from their constituency casework. If MPs are not surprised by allegations of behaviour that verges on the criminal, there is cause for significant concern about banks’ behaviour.

Since the publication of the report and its findings, there has been a certain degree of blow-back. Elements of the press have suggested that Mr Tomlinson might have a personal agenda or vendetta against RBS. I therefore want to place on the record that I have never banked or had any banking facilities with RBS, and have no vendetta whatever against it. My concern lies with the numerous constituents who have been treated in a manner that I find unacceptable. It is important to highlight what the report found and how it resonates with those of us who have dealt with businesses that have been badly treated by their banks.

The report was met with a significant degree of sympathy when originally published, but concerns have been highlighted since then. I want to examine three key issues of concern today; other Members may have different issues to discuss. First, I want to concentrate on the report’s findings in relation to whether the bank deliberately attempted to engineer situations in which businesses defaulted or breached their banking covenants. One of the report’s key claims is that businesses often found themselves in difficulties due to the bank’s deliberate efforts to ensure that that happened, including through revaluations. Once banking covenants were breached, businesses were placed in the so-called supporting hands of the global restructuring group.

The second question that deserves consideration is about the nature of the support that businesses receive once subjected to the support structure of the GRG. Is it really trying to get businesses back on track, or—as in many cases that I have seen, and in many cases highlighted by Lawrence Tomlinson—are businesses subject to unfair and penal rates of interest and charges, and often asked to pay for reports and valuations that are almost never in the businesses’ interests?

The third question is about the impartiality of the whole insolvency process. The report asks significant questions about whether the process and all the professionals involved actually operate in an independent manner. I have seen a number of cases of valuations changing dramatically because valuers have been instructed to undertake a second valuation by the bank. That raises significant concerns about the independence of those valuations. Consultants, solicitors and accountants have been asked to undertake work, paid for by the business, on the instruction of the banks. Time and again, that work has been less than helpful to the survival of the business.

When I conclude my remarks, I will touch on the selection of Clifford Chance to conduct an internal review of RBS. I have no doubt that Clifford Chance is a reputable firm of solicitors, but I have concerns about whether it will pass the smell test of being impartial enough to undertake such a review, given its links to RBS.

Have RBS and the global restructuring group been guilty of engineering a default or a breach of covenant? There are examples. A constituent of mine had a quarry with landfill rights that was valued at £9.5 million. The bank decided to enforce a revaluation of the asset, which came back at £2.5 million. As one can imagine, the impact of a £7 million reduction in value was an immediate breach of the banking covenant. After long and hard-fought efforts by the company, there was a final agreed valuation of £4.5 million. The company agreed to that simply because it was desperate and wanted to try to keep trading. How can a £7 million reduction in value occur when the company undertaking the revaluation was the same one that made the original valuation only a few months previously? That question needs to be answered. Also, why did the company have to pay £14,000 for a valuation that it successfully disputed?

I was contacted by a business yesterday with a large portfolio of flats, one of which was valued by the GRG at £100,000. A sale price of £145,000 was achieved yesterday, but the bank is still unwilling to make any compromise on the valuation of the entire portfolio. When one flat is sold for £45,000 in excess of the bank’s valuation, one must question why the whole portfolio is not re-examined from a banking perspective. The business is paying penal rates of interests on the basis that it breached its loan-to-value covenant, yet the one sale that has been achieved shows that the asset’s value was much higher than the value that the bank placed on it.

Another example, of a hotel in north Yorkshire, landed on my desk because the business has also been affected by interest rate swaps. The hotel was independently valued by Matthews & Goodman at £3.4 million, but the bank was clearly unhappy with that valuation, which gave the business a healthy loan-to-value position, so it instructed the business to get a second valuation within two months. The business was charged £3,500 for the privilege, and the second valuation came back at £1.65 million. The result was that the business was in breach of its banking covenants. It is unsurprising that the business feels hard done by: an independent valuation suggested a value of £3.4 million, but less than three months later, another valuation, done on the instructions of the bank but paid for by the business, was less than half that.

[Glyn Davies (Montgomeryshire) (Con)]

I thank my hon. Friend for allowing me to intervene. There is a similar example from my constituency. Does he agree that it is often the time scale in which the bank demands a response that kills a business completely? A business in my constituency was given 24 hours to resolve a position that was not a difficulty. The business was bankrupted and its principal has gone to work in the far east, where they have created many jobs and much good business. That has been taken away from mid-Wales.

[Guto Bebb]

That is a fair point about timing. Another of my constituents was told that his bank charges would be increased to a weekly fee of £4,000. The letter informing him of that arrived on 21 December, just before his business closed for Christmas, which I am sure was enjoyable because of that letter. There was nothing to be done until the new year, because the business was closed. There is an issue there. To go back to the hotel I was talking about, as a result of the lower valuation, the business can show on paper that its bank charges over the following six months were £250,000 higher than they had been in the previous six months.

National Infrastructure Plan

Glyn Davies Excerpts

Wednesday 4th December 2013 Commons Chamber

[Danny Alexander]

The hon. Gentleman’s party may not be very good at maths, but I am sure even Labour could work out that when a Government are in their fourth year in office and have promised to update a plan annually, they will give four iterations.

[Glyn Davies (Montgomeryshire) (Con)]

I, too, welcome my right hon. Friend’s statement, particularly his reference to a slight decrease in the strike price for onshore wind. Will he tell us exactly what that strike price will actually mean? Energy companies seem desperate to build wind farms on every hilltop in rural Britain, despite their impact on the landscape and the view of popular opinion. Does my right hon. Friend agree that there is scope for more than just a slight decrease in the subsidies to onshore wind and for a greater increase in those for offshore wind?

[Danny Alexander]

I am grateful for the question. The published strike prices are set out in table 3.D on page 50 of the national infrastructure plan. I do not intend to read out all the numbers, as I am sure you will be pleased to hear, Mr Speaker. The real point is that we are moving to competitive allocations for onshore wind and solar earlier than we thought, precisely because prices are coming down. There is a degree of competition to secure the best and most cost-effective projects, and that should help to secure the objectives that he and I share.