Wales Bill

Jonathan Edwards Excerpts

Wednesday 10th December 2014 Commons Chamber

[Stephen Crabb]

Part of devolving any tax—income tax or any other fiscal power—is the creation of an incentive for the devolved Government. They get an extra tool and an incentive, which they never had before, to grow that portion of their own tax base.

Crucially, the devolution of income tax in Wales will be done in line with what the Holtham commission proposed for Scotland: the indexed deduction mechanism. That would effectively shield the Welsh Government from UK-wide economic shocks but give them the incentive of holding on to the extra Welsh revenue that they were able to generate. That works both ways: if Welsh income tax grows at a slower pace than that of the rest of the UK generally, there will be a loss, but that is exactly what provides the incentive for the Welsh Government to seek to grow the tax base. The issue is about economic development.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

My reading of the Office for Budget Responsibility figures, published last week, was that the Welsh devolved tax take is projected to increase by half a billion pounds over the next Parliament. If the powers are not fully adopted by the Welsh Government, what would be the increase in the Welsh block during that period?

[Stephen Crabb]

I cannot provide a specific analysis in line with the question, but I agree with the general thrust of the hon. Gentleman’s point. There are distinct advantages, not only for the Welsh Government, but for businesses in Wales, which want the Welsh economy to grow through the devolution of these taxes.

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[Owen Smith]

I am happy to agree that that is how the article went on, but it did indeed describe devolution as “constitutional vandalism”. I shall not forget that, and nor should the country of Wales, for which the right hon. Gentleman is now Secretary of State.

The Government have undertaken a U-turn on this. Let me refresh the House’s memory. Just a few months ago, the Secretary of State’s party wholly opposed the removal of the lockstep. In fact, his Department and the Treasury produced a substantive Command Paper, Cmd 14, which said:

“The Government is firm in its view that the income tax structure is a key mechanism to redistribute wealth across the whole of the UK, which is why the ‘progressivity’—

a word I think they made up—

“of this system is properly determined at the UK level.

The inclusion of the lock-step is also consistent with the principle that fiscal devolution should not benefit one part of the UK to the detriment of another—this could occur if the Welsh Government is able to set a substantially lower rate for higher/additional taxpayers without needing to change the basic rate”.

That is what the Secretary of State seems to be suggesting —that we set lower rates in Wales than in England.

We do not demur from the sentiment expressed in the Command Paper, but nor do we greatly object to the Government changing their mind on this issue. That is partly because they are reflecting the views of all parties in the National Assembly—it is appropriate and good that the Secretary of State has listened to them on this —and partly in the light of the Smith commission findings, which have shifted the debate significantly by proposing 100% devolution of income tax to Scotland. In fact, it could be argued that there is now a case for going further than is proposed in the Bill. It seems unlikely to me that the people of Wales would find it acceptable to be asked in a referendum about having lesser tax varying powers than those on offer in Scotland.

Many of us in the House now recognise that perhaps one of the mistakes of the previous Government was to allow asymmetry to develop between different parts of the UK in earlier rounds of devolution. That has driven pressure for greater change in Wales to reflect changes in other parts of the country. In fact, the case has now clearly been made for a constitutional convention to consider all the issues in the round and to try to derive a lasting settlement acceptable to all parts of the UK.

The Government have not yet agreed to a constitutional convention, and in its absence we must still consider the Welsh Government’s rationale for taking up powers to raise taxes, if those powers were accepted at a referendum.

[Jonathan Edwards]

Labour’s policy is to have a constitutional convention. Is the hon. Gentleman saying that, in the event that we have a Labour UK Government, there will be a constitutional convention, and if so, would it halt the Smith process and the proposed Bill for Scotland?

[Owen Smith]

No. I am saying that if there were a Labour Government, we would have a constitutional convention to look at the whole of the UK. Therefore, wherever we were in the Smith commission proposals, which will continue on their course, that would need to be fed into the convention. A constitutional convention would not need to slow down or stop further devolution to Scotland, but it would have to take cognisance of what was happening in Scotland.

Whatever further changes are made in Wales should reflect what happens in Scotland, because the willingness to accept asymmetry has diminished in Wales and elsewhere. Many of us feel that such asymmetry inherently leads, over time, to instability in the existing settlement.

In the absence of a convention, we must consider why the Government think that Wales should take up the new powers. I want to start not with Labour, but with the current Government. Why do they now feel that the Labour Welsh Government should have an unfettered ability to raise taxes or to lower them to levels below those in England? The Secretary of State has made a couple of soundbites or comments today to illustrate why he thinks we should do so—he talked repeatedly about accountability and responsibility—but I must say that none of them was quite as blunt and honest as the rationale he gave to the Institute of Welsh Affairs a few weeks ago. He said clearly that his objective in providing the tax varying powers was to

“end the politics of the begging bowl in Wales”—

[Interruption.] The Secretary of State says, “Absolutely,” but I find that quite an offensive position for him to take. He should not describe Wales as, in effect, a supplicant, and nor should he suggest that we are a scrounger or a shirker asking for handouts. It is not for him to suggest that the cure for the

“politics of the begging bowl”,

as he injudiciously puts it, is to force the Welsh people to raise taxes within their own borders. I do not espouse such a dog-eat-dog, race-to-the-bottom version of Britain, and nor should he.

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[Jonathan Edwards]

I watched with great interest the hon. Gentleman’s prophecy of doom on “Sunday Politics”. I have also read the OBR report and looked at all the tables on the Welsh devolved figures, and they do not reflect his claims about a £1 billion loss. Indeed, the only table on this issue in the report suggests that the Welsh devolved tax base will increase over the next five years by £500 million. The shortfall that he mentions might be as a result of the raising of income tax personal allowances that has been announced by the UK Government, but the Silk commission made it clear that the indexed deduction method for the partial tax raising arrangement in the Bill means that that would not come into effect. Is not the hon. Gentleman guilty of scaremongering? Project fear is alive and well in Wales once again.

[Owen Smith]

No, it is project reasoned analysis of the numbers, and that project shows clearly a £66 billion shortfall over the past five years and a projected further shortfall across the UK over the next five years. We will see a worse performance in terms of corporate and income tax receipts across the UK as a result of the low- wage, deeply insecure, second-rate economy that the Tory Government are building. Wales has been particularly ill served by what has happened because of the additional fragilities of our economy due to our industrial heritage and the preponderance of low-wage jobs in Wales.

The reality is that—[Interruption.] The Secretary of State shakes his head, but he should think about this. He said earlier that the indexed method cited in Holtham means that Wales would effectively be incentivised to grow its tax base at a faster rate than England’s to enjoy uplifts under these powers. The truth is that over the past five years the Welsh tax base has declined at a faster rate than that of England, as the figure is 4.8% in Wales whereas the UK average is 4.2%. That means that Wales would have been worse off under the indexation had the provisions applied in the last five years, which is a further illustration of the need for the Government to undertake some proper, detailed analysis to let the Welsh people know whether we would be better or worse off.

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[Glyn Davies]

I would be more encouraged if I thought the day of the week was the reason. I think it is a desperate attempt to find one more hurdle to prevent us from moving towards financial accountability.

During the passage of the Bill, I accepted it would include a commitment to a referendum on devolution of income tax levying powers. It was a recommendation of the all-party Silk commission, and in 1997 there was a referendum on this issue in Scotland. In my view, however, the Silk commission was wrong, and weak in its recommendation on this point. Devolving income tax powers is not as big a change as is being made out, and it is entirely appropriate that it be decided at a general election; it does not need a referendum. If a Welsh Labour Government acted irresponsibly, which they might well do, they would quickly be turfed out of office. It is much easier to sit in blissful impotence, complaining.

I would like to see manifesto commitments by my party, the Liberal Democrats and Plaid Cymru to revisit this issue, perhaps in a Wales Bill early next Parliament and before the Assembly elections in 2016, and to devolve income tax. We should put an end to Labour’s easy ride in Wales and make the Welsh Government properly fiscally accountable to the Welsh people. Only then will devolution grow up and reach its inevitable, logical conclusion.

[Jonathan Edwards]

It is a pleasure to make a short contribution to this debate, primarily to welcome these Lords amendments, which mirror amendments that were tabled by Plaid Cymru when the Bill passed through the Commons and which conveniently the three Westminster parties voted against at the time—they say a week is a long time in politics, but we are only a few months down the line and there has been a complete change of position. In that regard, I congratulate the new Secretary of State on being far more progressive than his predecessor.

[Mr Mark Williams]

The hon. Gentleman will remember that there were exceptions. I was pleased to support Plaid Cymru’s lockstep amendment. I would not profess to be Mystic Meg or a trailblazer, but people listened to the message put forward by him and others, and to their credit, the Government changed their mind.

[Jonathan Edwards]

I stand corrected. To be fair to the hon. Gentleman, he has voted with us several times and broken his party Whip.

The lockstep, of course, was a handcuff measure that would have made the powers in the Bill unusable—the only plus side was the extra borrowing capacity it would have given to the Welsh Government—and removing it creates greater flexibility, which is obviously to be welcomed. When we were debating the Bill in the Commons, however, I warned the Government that events in Scotland would supersede it, and that has indeed been the case. The Union survived by a thread, and even then only following the famous vow promising home rule, devolution max or something as close to federalism as possible. In that regard, the Smith commission was extremely disappointing.

Westminster has one chance left to save the Union, or the British state as it is currently constituted, but the Smith commission is playing into the hands of pro-independence campaigners in Scotland. It nowhere near delivers the powers promised in the vow, but it is far in advance of what the UK Government are offering to Wales in the Bill. The signature policy of the Smith commission is 100% income tax devolution and the ability of the Scottish Executive to set as many bands as they want at whatever level they want. Indeed, my party put forward such an amendment during proceedings on the Wales Bill in the spring.

[Ian Lucas]

If the Smith commission is not in accordance with the vow that was given, why did the Scottish National party agree to it?

[Jonathan Edwards]

The commission’s remit is not one of its own choosing, but the SNP decided to act in the best interests of the country and move the process forward. Making out that the Smith commission proposals are what were included in the vow is not right. It was essentially home rule or devolution max, and on any definition of devo max, it means the full devolution of all powers apart from defence, foreign affairs, the monarchy and military policy. That is not included in the Smith commission proposals, which were less significant than what was promised to the people of Scotland on the eve of the referendum.

As I was saying, the Smith commission is vastly more progressive in its trajectory of travel, offering 100% of income tax in comparison with the Wales Bill offer of only a paltry income tax sharing arrangement—and even then, only following a referendum many years down the line.

[Geraint Davies]

(Swansea West) (Lab/Co-op): Does the hon. Gentleman accept that if Wales has its own powers to set both a higher and a lower rate of tax and it chooses to reduce the higher rate so that a lot of millionaires move to Monmouthshire, the overall tax take to the United Kingdom would be dramatically reduced because those people would all evade tax by moving to Wales? Does he think that is a good thing to set in motion, and does he have any idea whether the Government have calculated the cost of that possibility?

[Jonathan Edwards]

I am interested in this line of tax harmony across the UK being put forward by the Labour party. In Wales, of course, we had at the last count 22 local authorities all setting different rates of council tax, and we are a key part of a single market across the European Union with its different members setting different tax rates. If Labour Members’ arguments were to hold water, surely they would argue for tax harmonisation across the whole of local government in Wales and across all member states of the European Union. It does not make much sense to me.

[Geraint Davies]

Will the hon. Gentleman give way again?

[Jonathan Edwards]

I think I have answered the hon. Gentleman’s point.

In conclusion, the general election is fast approaching, and I can assure this House and the people of Wales that Plaid Cymru will fight that election on the basis that we will not allow our country to be treated as a second-class nation by the Westminster establishment.

[Geraint Davies]

I come here with an open mind about these tax issues, but I must confess that I have major concerns because I fear that the incentive for the Government to devolve tax powers is not one of freeing the nation of Wales to make its own decisions, but one of distracting attention from the fact that Wales is grossly underfunded both in revenue under the Barnett formula by some £300 million and in capital receipts. If we had our fair share of HS2, for instance, we would have an extra £2 billion.

[Jonathan Edwards]

The hon. Gentleman and I are both Swansea city supporters and I am grateful that he has been kind enough to allow me to intervene.

[Geraint Davies]

I can see that the hon. Gentleman is wearing black and white.

[Jonathan Edwards]

This is my wedding suit, or rather the suit I had with my wedding suit. It has led to much comment. [Interruption.]

[Madam Deputy Speaker (Dame Dawn Primarolo)]

Order. I have no idea what is being talked about here. We are not discussing Swansea football club and we are not discussing suits or weddings. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) is supposed to be making an intervention on the tax-raising powers in the Wales Bill. Perhaps he could face me, so I could hear him; and, secondly, he could make sure that his intervention is in order.

[Jonathan Edwards]

I am grateful to you, Madam Deputy Speaker, for saving me because my good friend was distracting me on the basis of some spurious points. Is it the position of the Labour party, should it form the next UK Government, that HS2 will be seen as an England-only project and not a UK-wide project, thus giving Wales its rightful consequentials of £2 billion, which the hon. Gentleman mentioned?

[Geraint Davies]

rose—

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[Alun Cairns]

The hon. Gentleman makes an important point. I am not familiar with that organisation, so it would not be right for me to endorse its activities at this stage. Clearly, however, any activity that encourages people who are eligible to vote to do so is broadly positive, and I would encourage the Welsh Government, the Assembly and the UK Administration to engage with a range of organisations and bodies to support that aim further.

[Jonathan Edwards]

The Minister is right to say that the referendum in Scotland reinvigorated the political process there, but that is because it was on a definitive issue. The proposed referendum for Wales is on a very technical point—the partial income tax arrangement—and is it not a danger that that is hardly going to excite the masses? Does that indicate that if we are to have another referendum in Wales, it has to be on something meaningful which is going to alter radically the devolution settlement?

[Alun Cairns]

We spent the earlier part of this debate discussing Lords amendments relating to the referendum, and I believed that the hon. Gentleman, in his usual positive way, as well as Liberal Democrat and Conservative Members, thought that the referendum on income tax varying powers would be definitive. It gives a great opportunity for political parties to sell the great prospect that lower taxes could bring to Wales, and the resulting wealth-creating opportunities.

[Jonathan Edwards]

My point is that if we are to have a referendum, it needs to be on a point of principle, and the principle of fiscal devolution has been conceded already in the Wales Bill with the devolution of the minor taxes.

[Alun Cairns]

I am not sure where this is going, but I accept that the engagement of young people is exceptionally important. The purpose of this Lords amendment is to devolve the power for the referendum to the Welsh Assembly, and it can therefore make judgments accordingly.

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[Nia Griffith (Llanelli) (Lab)]

I am pleased to put on record Labour’s support for the Lords amendments to clause 13 and schedule 1, which will enable the Welsh Government to set a voting age of 16 in a future referendum on income tax powers. Labour believes that the National Assembly for Wales should have responsibility for its own electoral arrangements. Lords amendment 14 will insert a new subsection (1A) into clause 13 to provide that if the First Minister or a Welsh Minister moves a resolution in the Assembly under clause 13(1)(a) requesting that an order be made under clause 12 to cause an income tax referendum to be held in Wales, that resolution must state whether the voting age at such a referendum is to be 16 or 18.

I have long been a supporter of votes at 16, on which Labour Members have provided a strong lead. I pay tribute particularly to Julie Morgan, a former MP and now Assembly Member for Cardiff North, and to my hon. Friend the Member for Kingston upon Hull North (Diana Johnson) for their campaigning on the issue. We saw the success of allowing 16 and 17-year-olds to take part in the Scottish independence referendum. Following the Smith commission, responsibility for electoral matters is on the cards to be devolved to Scotland. My right hon. Friend the Member for Doncaster North (Edward Miliband), the leader of the Labour party, has urged the UK Government to ensure that that happens in time for the 2016 elections to the Scottish Parliament. Control over electoral arrangements should likewise be devolved to Wales and Northern Ireland.

The Lords amendments reflect our belief that electoral arrangements should be devolved to Wales and our commitment to extending the franchise for all elections to 16 and 17-year-olds. Furthermore, this week my right hon. Friend made it absolutely clear that a future Labour Government would legislate to lower the voting age to 16, and it would be interesting to hear the Minister’s position on that issue. We would also legislate to devolve electoral arrangements to the Welsh Assembly.

[Jonathan Edwards]

Plaid Cymru tabled amendments similar to those that the hon. Lady mentions during the Bill’s passage through this House, but I do not recall Labour supporting us. Has there been a sea change in Labour party policy since then?

[Nia Griffith]

I have made it clear what our policies are.

With the advent of individual voter registration and the worry that many people, including many young voters, will fail to register under the new rules, which was a point raised by my hon. Friend the Member for Vale of Clwyd (Chris Ruane), lowering the voting—