Wales Bill

James Davies Excerpts

Tuesday 5th July 2016 Commons Chamber

[Albert Owen]

It is a pleasure to serve under your chairmanship once again, Mr Gray. Many points that I was going to make have already been raised by other Labour Members, especially by my hon. Friend the Member for Llanelli (Nia Griffith). None the less, I wish to discuss the idea of a referendum on income tax that was raised by my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), who is no longer in his place. The hon. Member for Gower (Byron Davies) talked about the Conservative manifesto, but I am more concerned with the fact that, under the Wales Act 2014, it is clear that if there were to be a referendum on the devolution of powers to raise income tax, it would be held before the powers could be transferred to the Assembly.

I said on Second Reading that I am a devolutionist. I have long argued that major constitutional changes should be made by referendums, and I supported that in 1997 and 2011. However, in recent weeks I have been persuaded by some of the arguments on whether we should hold referendums on this specific issue and a range of others, including on having a go at the Government of the day. I make that point seriously, because I am not convinced that this is the major constitutional change that it once was. The Assembly already has tax-raising powers, but we do need some safeguards, which is why I will support amendment 11.

I know that you will not allow me to digress too much, Mr Gray, but let me say that I used to support the single transferable vote for elections. In theory, it is great textbook stuff, but as someone who has campaigned regularly in the Republic of Ireland, I can say that the practical implication of that has put me off. I have also been put off referendums over the past few weeks. None the less, we do need to move forward on income tax, and amendment 11 is the right vehicle to help us do that. What it suggests is that both Houses of Parliament in London and the National Assembly for Wales in Cardiff Bay would make that decision. They would have a mature debate on income tax, in which we would look at the whole fiscal framework and the settlement that we have at present.

Like my hon. Friend the Member for Llanelli, I am worried that if we were to give the Assembly the power to raise income tax, this Government would say, “There you are. You now have the tools to do the job. Get on with it and start raising your own taxes”, while they cut the block grant and other fiscal measures. Our Welsh constituencies would end up poorer, which worries me considerably.

It would be fair and right to have safeguards, and it is what the people of Wales want. This Chamber of elected Members and the second Chamber should look at the matter in greater detail along with the National Assembly for Wales. It is right to have that consensus and some safeguards to ensure that the people of Wales are not worse off as a consequence of the measure.

We all know that the Barnett formula has a flaw, and we all argued that in the 2015 election—it was in all our manifestos. I have concerns because for every pound that is spent in the UK, Wales gets £1.15 in return. It gets more than England, but not as much as Northern Ireland or Scotland. In the future, if these income tax measures were given to the Welsh Assembly by a Government who were keen to get rid of them without having that proper debate in both Houses of Parliament and the Welsh Assembly, I would worry that the people whom we are here to represent would be in a worse position. I understand the theory, but it is the practice that worries me, and for that reason, I will support amendment 11.

[Dr James Davies (Vale of Clwyd) (Con)]

With regret, I stand to oppose clause 16, which relates to the removal of the requirement for a referendum on the devolution of income tax or a proportion of it to the Welsh Assembly. I want to give my reasons for that. In Scotland there was a referendum before such a change took place. Also, the manifesto on which I stood for election—both the UK version and the Welsh version—reiterated the requirement for a referendum. When I and other members of the Select Committee on Welsh Affairs scrutinised the draft Wales Bill, it contained no such proposals. We must ask ourselves why at this stage we want to remove the requirement to have a referendum. In other words, why do we want to repeal this requirement that is in the Wales Act 2014? It is clear that the Welsh people would not vote in favour of the devolution of income tax, so this is an attempt to circumvent the will of the people, in my eyes.

Why do we wish to devolve income tax? Financial accountability has been talked about, but I believe that unless and until the Welsh Assembly Government levy the vast majority of taxes, they will continue to blame this place for not being in a position to provide them with limitless funding. Of course, any situation whereby they would levy most taxes would equate more or less to Welsh independence, which I feel the Welsh population do not favour.

If these powers are transferred, what will happen to the level of taxes? We are told by some that the powers would not be used, and if that is true then why would we wish to transfer them to Cardiff? Some, of course, fear that tax levels would be increased and, clearly, from my point of view, that would harm the Welsh economy. Some have suggested that tax could actually be reduced. That is highly unlikely, but if it ever occurred it would undoubtedly lead to calls from some nearby English regions for similar reductions. Any competitive advantages would be eliminated.

From a north Wales perspective, there are 50,000 cross-border commutes every day and 1 million people of working age live on either side of the border. This is a political border that does not reflect how people live their lives or how businesses operate, and there is already cross-border disparity in the standard of public services, which leads to much frustration. Why would we want to make the situation worse? I believe that differential tax rates could lead to confusion, further complication of an already complex tax system, additional associated costs, and consequences, intended or otherwise, for where people choose to live and work, whether that is in England or Wales.

We have just undergone the latest Assembly elections and, as in the past, disinterest and disengagement were evident, with votes cast primarily on the basis of politics in this place and with reference to the EU referendum, and I am afraid that sums up the level of enthusiasm for more Welsh devolution, at least in my area. It is clear that there is no call or mandate for additional powers and particularly not for tax-raising powers, and I see this as simply yet another step in the gradual break-up of the UK, which my residents do not want. Indeed, now that the prospect of partial income tax devolution has been raised, we are already seeing calls for further tax devolution. I feel strongly that this is an unnecessary and undesirable proposal and, with great regret, I will have no choice but to vote against the clause.

[Chris Davies]

Last week, I had the great pleasure of congratulating the hon. Member for Newport West (Paul Flynn) on regaining his seat on the Front Bench after a gap of 27 or 28 years. That was in a slightly different role to the one he has taken today, but I am delighted to see him there. I am also more than delighted to see the hon. Member for Swansea East (Carolyn Harris) sitting next to him. Many Members will not know that a certain television company did a programme—it should have been a series—about two MPs trying to get to Westminster. They were me, now the Member for Brecon and Radnorshire, and the hon. Lady. She was my leading lady and I was her leading man, and I am delighted to see that the star is now shining brightly on the Labour Front Bench. That, I am afraid, is where the pleasantries stop, and pleasantries they are, I say to the hon. Lady.

I, too, have reservations and concerns about clause 16. I made my objections clear on Second Reading just a few weeks ago, and here we are, too quickly for my liking, already at Committee stage. I have great concerns about a referendum on income tax. I stood on many a doorstep, on many a street, on many a farm throughout two and a half years of the election campaign, and as we got closer to the election, it was a clear manifesto commitment that we would deliver a referendum on this very important matter. I am deeply disappointed that the Government have decided to do away with that referendum. I have made these feelings clear to various members of the Government and I have made my views clear in this place. Sadly, the Government have decided to go on with the clause and I, too, will vote against it today.