Finance (No. 2) Bill

Hywel Williams Excerpts

Thursday 18th April 2013 Commons Chamber

[Jonathan Edwards]

It is with pleasure that I introduce my new clause 4 and new schedule 1; I hope to press the new clause to the vote at the appropriate time.

The UK Government’s Commission on Devolution in Wales, headed by Sir Paul Silk, published the first phase of its report in November 2012. This phase concentrated solely on fiscal powers. Here we are, five months later, still waiting for the UK Government response, which was originally said to be due this spring. In a matter of a few weeks, the cricket season will be upon us and it will be summer, yet we are none the wiser about the intentions of the UK Government.

In short, the Silk commission recommended that powers over stamp duty land tax, the aggregates levy, air passenger duty for long haul, landfill tax and business rates be devolved in their entirety and as soon as possible. It also advocated a sharing arrangement for income tax. In addition, it argued—importantly—that should corporation tax be devolved to Northern Ireland, Wales should not be left behind. I reiterate the point that I made on the closing day of the Budget debate—that we are very interested to see the strong lobby, led by the CBI, coming from Northern Ireland. In total, the fiscal powers advocated by Silk for immediate devolution—the minor taxes—together account for about £1.2 billion of the Welsh Government’s budget.

[Hywel Williams (Arfon) (PC)]

Does my hon. Friend find it strange, as I do, that no one representing the Labour party in Wales is present to back the policy of the Labour Government down in Cardiff?

[Jonathan Edwards]

I am extremely grateful for my hon. Friend’s intervention, as we had a debate in the Welsh Grand Committee on this issue, and Labour speaker after Labour speaker lined up to say that they not only were in favour of the Silk recommendations on minor taxes, but wanted them devolved immediately. They went even further, saying that the Finance Bill was the appropriate vehicle for achieving that.

[Jonathan Edwards]

That is the exact point. This was said to be the appropriate legislative vehicle for devolving airport duty to Northern Ireland, and if it is good enough for Northern Ireland, it is certainly good enough for Scotland and Wales.

Needless to say, the proposed powers fell far short of what Plaid Cymru was advocating as a party. We wanted a more comprehensive list of job-creating and economy-boosting powers, including VAT, corporation tax, resource taxes and capital gains tax. In the interest of compromise, however, and not second-guessing Silk, we are happy to proceed as the commission recommended—not least because the fiscal powers recommended by Paul Silk and his team in the commission’s report are desperately needed for the sake of the Welsh economy. The minor tax powers, the income tax sharing arrangement and the borrowing powers that would be triggered as a result would enable us in Wales better to deliver job-creating and economy-boosting measures and policies to help turn around the continuing dire state of the economy.

Yesterday’s unemployment figures showed a small drop in unemployment in Wales, but the number of economically inactive people went up by 7,000. The rate is still 0.4% higher than in the UK, and there are still nearly 50,000 more people unemployed in Wales than there were before the recession began, and another 50,000 more people who are under-employed. That is on top of the extra 50,000 public sector jobs we expect to be lost in the coming years on top of the 24,000 that have already been lost.

Last week’s research by Sheffield Hallam university and the Financial Times, to which my hon. Friend the Member for Na h-Eileanan an Iar (Mr MacNeil) referred, highlighted that more than £1 billion is due to be taken out of the Welsh economy over the next year by cuts to social security. This will have a devastating human cost, which is becoming all too clear.

The private sector is already on its knees in Wales due to the depression caused by the disastrous economic policies pursued by both Labour and Conservative Westminster Governments, which have destroyed the productive economies within the British state. It will deteriorate further as money is sucked out of local economies through further austerity. We are yet to see any realistic plan of how jobs and growth will come about in these depressed areas or any effort to counterbalance the austerity cuts, despite the high rhetoric of geographical rebalancing.

There are three important reasons why the Welsh Government should be empowered with fiscal powers as advocated by the Silk commission and as proposed in my new clause. First, it would make the Welsh Government more accountable. Secondly, it would incentivise the Welsh Government to concentrate on developing the economy to raise the necessary revenue to invest in public services. Lastly, an independent fiscal stream would enable the Welsh Government to access the borrowing powers they have agreed with the UK Government.

Labour’s proposals for substantial cuts in Welsh capital spending in the last Budget that it presented before losing office were supported in the Conservative-Liberal Democrat comprehensive spending review in October 2010, which cut the Welsh capital budget by 42%. Announcements in subsequent UK Budgets or autumn statements have meant that the final cut is about 39%. Although that is admittedly a smaller reduction than the one planned by Labour, it represents a huge hit for economic activity in Wales. The devolution of minor taxes and the triggering of borrowing powers would go some way towards filling the gap, enabling the Welsh Government to invest in infrastructure projects and generate economic momentum.

[Hywel Williams]

I thank my hon. Friend for giving way again; he is being very generous. Does he agree that the term “minor taxes” is a misnomer, given that those taxes constitute a key that could unlock substantial moneys which the Welsh Government could invest in dealing with our economic difficulties?

[Jonathan Edwards]

That is exactly the point. We have experienced twin processes in Wales. We have had the Silk commission, but there has also been a bilateral negotiation between the United Kingdom and Welsh Governments. The consequence of that negotiation was that the Welsh Government would be given borrowing powers if it had an independent fiscal stream. That is why my new clause is so vital for the Welsh economy.

In January, the Welsh Grand Committee debated the commission’s part II recommendations. Although there was a difference of views over the proposals for income tax-sharing arrangements, it was broadly accepted on all sides that the minor taxes recommendations should be implemented as soon as possible. I must confess that during that debate I became slightly confused. Unionist politicians were in favour of full devolution of some taxes, but opposed to a sharing arrangement between the UK and Welsh Governments in relation to income tax. My natural conclusion following the debate was that as there was a consensus at least in relation to the minor taxes, we ought to get on with devolving them swiftly rather than waiting for what could be years for a new Government of Wales Act.

The most prominent of the minor taxes is covered by the air passenger duty recommendation. It is difficult for us to table amendments relating to the other minor taxes at this stage because consideration in Committee is in the hands of the usual channels, from which my party is excluded, but we are at least able to consider the devolution of air passenger duty. I suggest that that should serve as a spur for the implementation of the other minor tax powers recommended by the commission.

--- Later in debate ---

[Sajid Javid]

The hon. Gentleman knows the answer, but I shall provide it anyway. As he knows and as we heard from my hon. Friend the Member for Argyll and Bute, passengers who might go to Belfast have the opportunity to travel to Dublin by car. Clearly, that opportunity does not exist in Scotland.

We are working closely with the Northern Ireland Executive to consider options for rebalancing the Northern Ireland economy, and we are carefully considering the recommendations of the Silk commission in Wales. Any devolution of APD, however, must take into account the broad range of views on this subject. In response to the 2011 consultation on APD, a substantial number of stakeholders raised concerns about devolution complicating the APD system and creating distortions in the markets for flights. This concern was reinforced in a recent report by HMRC suggesting that the devolution of APD could lead to market distortion as a result of passenger redistributions between UK airports, without substantially increasing demand for aviation overall.

In considering whether to devolve APD, hon. Members will surely agree that we must assess the risk of replicating the same problems that Northern Ireland faced from lower aviation taxes in the Republic of Ireland. There is clearly a concern about an immediate cut in APD rates for direct long-haul flights from Wales. The Government therefore believe that the devolution of APD is a subject that requires continued and careful evaluation, if we are to be confident about its potential effects across the country as a whole. In undertaking this evaluation, we should take note of recent data showing that passenger numbers are growing at Scottish airports. Between 2010 and 2011, numbers grew by 5.5% and continued to grow last year as well. In fact, Glasgow airport achieved growth of 4% in 2012, Aberdeen airport recently achieved 24 months of consecutive growth and Edinburgh airport will provide more choice to passengers in 2013 than ever before.

[Hywel Williams]

Will the Minister tell the House what happened to passenger numbers from Cardiff airport over the same period?

[Sajid Javid]

I do not have the numbers to hand for Cardiff airport, but I am sure that the hon. Gentleman knows the answer. If he wants me to find out for him, however, I shall write to him with the numbers, if they are available.

Talking about Wales, we are considering the Silk commission’s recommendations, as I have said, but we must also take note of the concerns of Bristol airport, which has expressed deep concerns to me that devolution to Wales would have a significantly detrimental impact on its business. In presenting his amendments, the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) referred to the report by the CBI in Wales. However, I have an extract from—I believe—the same report he referred to, which says that

“high mobility between Wales and the UK…is a reason for the rate to remain consistent between the countries.”

Our analysis needs to be based on a full examination of the evidence. We will not be rushed or pushed into making premature judgments. On that basis, I ask hon. Members not to press their new clauses.

Briefly, the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) raised the issue of APD rates to the Caribbean. As she rightly said, I recently met a delegation of hon. Members to discuss that important topic. I am the first to accept the valuable contribution that British people of Caribbean heritage make to our country. I have promised to reflect on the important points raised by that delegation and many others that have brought up the same issue.

We have a plan to cut the deficit and we have already cut it by a third. Our country’s credibility comes from delivering that plan. APD revenues make an important contribution to the public finances and this year’s inflation-rate increase is necessary. The extension of APD to business jets makes the tax fairer overall. I therefore urge that both clauses in this group stand part of the Bill and ask hon. Members kindly to consider withdrawing their proposed new clauses.