Lord Hain
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Commission on Devolution in Wales
Lord Hain Excerpts(12 years, 6 months ago)
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The Secretary of State for Wales (Mrs Cheryl Gillan)
I beg to move,
That this House has considered the matter of the Commission on Devolution in Wales.
Before I commence the debate, may I—with the permission of the Speaker, which I sought earlier—say to the right hon. Member for Neath (Mr Hain), who speaks for the Opposition on Wales, that I was shocked to hear of the incident at the Aberpergwm mine at 3 am, but I was also exceedingly glad to know that all three men have been brought out of that mine successfully? It reminds all of us, particularly after the sad events at the Gleision mine, that men are putting their lives on the line each and every day to recover coal. Because both those incidents involved the right hon. Gentleman’s constituency, I thought we should acknowledge that.
Mr Peter Hain (Neath) (Lab)
I am very grateful, and thank the right hon. Lady for that, as will the families and the individuals involved. I thank her too for her support for the miners appeal fund and for her support over the tragedy at Gleision. Today’s incident, although obviously serious, particularly for those concerned—they have suffered injuries, but fortunately they are okay—is in a very different category from Gleision, which was a major disaster and tragedy. Aberpergwm pit is run extremely efficiently by a company with high levels of investment, recruiting miners and apprentices, and in all respects an admirable company. The incident is rather an exception, but it is the third one in my constituency in the past couple of months.
Mrs Gillan
The right hon. Gentleman knows that my door is always open. We have already spoken to other Departments from my office and we will continue to deal with these matters on a cross-party and non-political basis, as is the proper and right way to deal with them.
I am pleased that we have been able to give the House an opportunity to debate in Government time the work of the Silk Commission, the commission that I announced on 11 October would examine devolution for Wales.
The coalition agreement contained three specific items on Wales. First, we promised to take forward the housing legislative competence order that had been held up by the previous Government, and I am pleased to say that we delivered on that. Secondly, we promised a referendum on granting primary legislative powers in devolved areas to the Welsh Assembly Government, and we delivered on that, although on taking office I found that preparations were—how shall I put it?—behind the curve.
Mrs Gillan
If I recall correctly, the Richard commission reported before the Government of Wales Act 2006 was enacted. Reaction to the commission—a pick-and-mix effect—was interesting. The 2006 Act contained some items that had not been telegraphed quite so clearly, and the House certainly did not have the opportunity to debate it as fully as I am trying to ensure that we debate things today and in future. My hon. Friend is quite right about that.
Mrs Gillan
I am glad that the right hon. Gentleman agrees that we did not have enough time to debate the Richard commission, which is indeed a fact. I was thinking of the changes to the Assembly’s electoral system, which were not telegraphed extensively and we did not have a chance to discuss—
Mrs Gillan
We may have had plenty of time in Committee, but not beforehand, and there was no wide or extensive consultation. I take the right hon. Gentleman’s point, however.
Mr Peter Hain (Neath) (Lab)
Let me begin, Mr Deputy Speaker, by welcoming the fact that we have a Welshman in the Chair for this debate—a Swansea boy who is, I am sure, delighted that Swansea City is in the premiership playing some very good football this season.
Just for the record, I cannot let the Secretary of State continue to repeat the fiction that when she arrived at the Wales Office in Gwydyr house in early May, the cupboard was bare and nothing had been done about the referendum. She knows that that is not the case. She will also know that a couple of days before she went up the stairs at Gwydyr house to occupy the office, I had sought confirmation that we could have delivered the referendum by the autumn, if we really had to; it would have been a tight squeeze, to repeat the phrase used. Let us hear no more nonsense from her about that, or about the housing legislative competence order. As my hon. Friend the Member for Caerphilly (Mr David) reminded her, the housing LCO was ready for Royal Assent, and she sabotaged it; the Conservative party refused to carry it through. She knows that that is true, so I am surprised that she is continuing to say these things.
Mr Hain
I am happy to take an intervention a little later.
I am intrigued by accountability; that is why I picked up the Secretary of State on that issue in The Western Mail. I am glad that she reads The Western Mail, and my comments in it, assiduously. It is not for the Secretary of State for Wales to decide in which way the Welsh Government or the Welsh Assembly should be accountable to the people of Wales. The Welsh Assembly is elected by the people of Wales; she is not elected by anybody in Wales. That is the true line of accountability that operates.
Mrs Gillan
All I can say is that, as my hon. Friend the Under-Secretary once remarked, I am a Welshwoman born in Wales and therefore have a great interest in the land of my birth.
I read the right hon. Gentleman’s article in The Western Mail very carefully, and one of the things I objected to was his fear-mongering among the people of Wales. He gives the impression that we would halve public spending in Wales, and that is absolutely not the case. He should be ashamed of even suggesting that and frightening people in Wales in that way. He knows that this is an open consultation to see how we can do things better. Any fool can spend money, but those who spend money need to have some responsibility for raising it so that they can spend it rightly.
Mr Hain
My, my—the Secretary of State sounds rather furious. I seem to have touched a sensitive spot. I shall deal with this point later.
We welcome the establishment of the Silk commission, which, as the Secretary of State said, has been established on an all-party basis. The Welsh Assembly, which is well over a decade old, is now truly embedded into Welsh civic society, so there may be a case for looking at increasing its financial powers and flexibility. As the First Minister, Carwyn Jones, has indicated, devolving stamp duty, aggregates tax and new borrowing could be advantageous to the Welsh Government and, indeed, to the people of Wales.
I agree that Paul Silk is a very good choice for this task—a distinguished Clerk in this House before he became the first, and even more distinguished, Clerk of the Assembly. I welcome what the Secretary of State has said about wanting to go forward on a consensual basis. It is important that any Bill emerging from the work of the Silk commission is born out of consultation and consensus, unlike the Parliamentary Voting System and Constituencies Bill or the Fixed-term Parliaments Bill, which were forced on Parliament with little or no engagement with Opposition parties, the public or interested groups and experts.
Mrs Gillan
May I put the record straight? As the right hon. Gentleman knows, I gave every Welsh MP the opportunity to meet the relevant Minister on an open-ended basis. The PVSC Bill was debated on the Floor of the House for 53 hours and 40 minutes; there were plenty of opportunities for Members to contribute.
Mr Hain
Let me say this to the Secretary of State: when in a hole, stop digging. She knows that she denied Members the opportunity of a Welsh Grand Committee debate, which was requested by my right hon. Friend the Member for Torfaen (Paul Murphy) and by the leader of Plaid Cymru, the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd). Every member of the Welsh Labour group and other Members wanted that debate as well, because Wales is being savagely penalised by this Bill, on which there was no consultation at all.
Mrs Eleanor Laing (Epping Forest) (Con)
I speak as someone who was here in this Chamber for most, if not all of the 54 hours on the Bill that the Secretary of State mentioned. Does the shadow Secretary of State accept that that Bill, in changing the parliamentary boundaries, affects not only Wales but the whole of the United Kingdom, and that matters that affect the whole of the United Kingdom, including Wales, have to be dealt with in this House?
Mr Hain
Of course it had to be dealt with in this House, but the impact on Wales received virtually no debate. There is clearly a lot of sensitivity among Conservative Members on this matter, and I am not surprised. The Secretary of State rejected the request for a Welsh Grand Committee to discuss the fact that Wales is suffering a cut of 25%—a quarter—of our representation, which will affect a lot of parties and communities in Wales. That was never debated properly.
May I make one other point—
Mr Hain
If I am allowed to finish my response to the hon. Member for Epping Forest (Mrs Laing).
My other point is that such constitutional matters, particularly parliamentary boundaries, have traditionally always been dealt with on a consensual basis. This is the first time that a politically partisan rigging of the parliamentary boundaries has been introduced in this House and forced through.
Huw Irranca-Davies
This is very pertinent in learning the lessons in terms of how the Silk commission operates. We cannot have a debate when none of the voices are heard. The Secretary of State has said that she wants these voices to figure as part of the work of the commission, but that did not happen in the boundaries review. None of the Welsh concerns was heard and none was acted on; it was a travesty of democracy.
Mr Deputy Speaker (Mr Nigel Evans)
Order. As was intimated by the intervention by Huw Irranca-Davies, we are now straying off the subject of the Silk commission, so could we get back on to that, please?
Mr Hain
Indeed, Mr Deputy Speaker, I am happy to, and I will not be led astray any more by interventions from the Conservative Benches.
The Labour Government, recognising the call from the majority within the Scottish Parliament, commissioned the Calman report, to instigate a serious and thorough analysis of how a new settlement in Scotland might be achieved. Crucially, it was based upon cross-party consensus, expert analysis and real engagement with the Scottish public. It is fundamentally important that this Government adopt a similar approach to Wales. I am encouraged by what the Secretary of State said in that respect, but in truth I am deeply suspicious of the real Tory agenda that lies behind the Silk commission.
The commission’s terms of reference state that any devolution of powers must be
“consistent with the United Kingdom’s fiscal objectives”.
Can the Secretary of State explain what is meant by that? I wonder whether, in drawing up the terms of reference, the Chancellor, the Secretary of State and others were thinking of Switzerland, which has a highly federalised and separate tax system in its various cantons, and which demonstrates how such a system can lead to lower public expenditure—not a model that we desire or will accept for Wales. Silk must not become an excuse for this right-wing Government to offload their financial obligations to lower-income parts of the UK, such as Wales.
Geraint Davies
Does my right hon. Friend accept that given that gross value added in Wales is 74% of the UK average, and that we therefore have a lower tax base to tax from, if an equivalent to the Scotland Bill passed 10 points of marginal taxation over to Wales, we would end up raising only 74% of the money possible? We could end up with 20p taxpayers contributing only 17.5p in the pound. That may be one of many methods used to reduce the amount of public expenditure in Wales, but the Government could say, “Oh, don’t worry, you’ve got tax-raising powers. You’ll be all right.”
Mrs Gillan
The right hon. Gentleman asked me a direct question, and I will give him a direct answer. Devolved funding rules, as set out in the statement of funding policy, operate within the UK’s fiscal framework. We therefore expect any changes that come out of the commission’s work or intergovernmental talks to be consistent with that framework, for example as set out in the programme for government. As he knows, that is because macro-economic policy is a reserved matter for the UK.
Mr Hain
I am grateful. The Secretary of State is confirming, then—I am not challenging her on this point—that should there be a derogation in the case of, for instance, stamp duty, that would be taken from the Welsh funding block. That is what I understand her reply to mean.
My second element of disappointment is that the Silk commission will not consider the Holtham commission’s proposals for funding reform in Wales. It was the previous Labour Welsh Government who established the Holtham commission, and it produced conclusive evidence that Wales is now underfunded compared with its needs. As I think both Government parties here in Westminster now acknowledge, it was either naive or cynical of them to promise in their manifestos swift and radical reform of the Barnett formula—a promise that they had to betray after just one week in government.
We are aware that Holtham does not offer a quick solution, and that there would be impacts on the other devolved nations and regions. The introduction of a Barnett floor, which was a Labour manifesto commitment and a proposition featured in the Holtham commission’s two reports, would have ensured that Wales’s position did not become worse. Why have the Government not considered introducing a floor similar to the one that we proposed, which was agreed with the Treasury? It could be implemented relatively straightforwardly, again with the agreement of the Treasury.
The green budget published last year by the Institute for Fiscal Studies entirely vindicated Labour’s approach to the funding of Wales. By showing that the Barnett formula is only now beginning to disadvantage Wales for the first time, it proved that we were right to stick with it until last year, and equally right to proceed with reforming it thereafter. Make no mistake, up until that point the Barnett formula had served Wales well. There is no doubt that had we ripped it up several decades ago, as the nationalists advocated, Wales would have lost out. The collapse of the banks and the scale of the financial crisis suffered by Iceland and Ireland have been devastating to the nationalists’ arguments for fiscal autonomy.
Mr Llwyd
I take it that the right hon. Gentleman read the deliberations of the Holtham commission. If so, he will have seen that Gerry Holtham opined that the year-on-year underfunding of Wales went back quite a few years. It is absolute revisionism to suggest that it goes back just to the last year of the Labour Government.
Mr Hain
If the right hon. Gentleman looks at the whole Holtham commission report, he will notice that spending was converging with the English average and coming towards the point that it reached last year, when it started seriously to disadvantage Wales. That was the point I was making.
Huw Irranca-Davies
To the best of my knowledge, the Holtham report did not mention the fact that in successive years of the Labour Administration, it was vital that we recognised Wales’s particular needs through the Barnett-plus funding settlements, which increased funding for Wales from some £7 billion to something in excess of £14 billion—way above Barnett. That reflects how the Labour Government ensured that Wales had the proper funds to do the work we needed to do.
Alun Cairns
The right hon. Gentleman underlines the fact that the Welsh budget doubled in that period, but will he recognise that Holtham also reported that in a period of spending constraint and public spending reduction, the Barnett formula protects the Welsh budget?
Mr Hain
I accept the hon. Gentleman’s point to the extent that Holtham did recognise that when there is a period of spending restraint, or even cuts, underfunding and funding convergence do not happen to the same degree. However, I am not sure what the hon. Gentleman is arguing. Is he saying that spending cuts and restraint have a good impact on Wales?
Roger Williams (Brecon and Radnorshire) (LD)
Does the right hon. Gentleman agree that reform of the Barnett formula is about not just Wales but Scotland as well? Of course, circumstances are very different in Scotland, and trying to reform the formula when there is a contracting economy would be very difficult for Scotland.
Mr Hain
We are talking about Wales, but I think most people, including the Scots, would concede that Scotland has done pretty well out of the formula compared with Wales. Wales is now losing out under it.
As the Barnett formula reaches the end of its life, now is the time to act. In refusing to address the convergence problem that is now occurring, the Government are penalising and disadvantaging Wales. We always acted responsibly and in the interests of Wales, and we are the only party with a deliverable and fair funding plan for Wales. Silk cannot be used to let the Government off the hook on Barnett. Although we are open to the idea of Wales raising some of the money that it spends—perhaps, as the First Minister has indicated, through stamp duty and aggregates tax—that must not be at the expense of the needs-based settlement that is vital for Wales.
Jonathan Edwards
As the right hon. Gentleman knows full well, the issue of Barnett will now be dealt with through discussions between the Welsh Government and the UK Government. Rather than try to undermine the Silk commission, would he not be better off turning his guns on the First Minister so that he gets his act together?
Mr Hain
I will make a bit of progress, then I will happily take interventions.
Holtham calculated that approximately £17.1 billion of tax revenue is raised in Wales every year. Total public spending in Wales is about £33.5 billion—almost twice the amount raised. We should not be ashamed or embarrassed by that. Wales’s needs are greater than those of other parts of the UK. We have a history of relatively high levels of ill health, caused by our industrial legacy of mining and heavy industry. Also, we suffered the cataclysmic shock of sudden and mass unemployment, with the wholesale pit and traditional industry closures in the 1980s, which left high levels of economic inactivity and, because the then Tory Government did not drive investment to create new industrial sectors, relatively lower levels of business activity. That is why we should look before we leap. The so-called devolution-max or independence-light settlement advocated by the nationalists —and, I suspect, tempting to the Tories—could be disastrous for Wales.
Jonathan Edwards
The shadow Secretary of State is quoting figures from the Holtham commission, but that commission reported that the revenue raised in Wales by UK-wide taxes was £17.1 billion and that UK expenditure was £25 billion, not the £33 billion that he has been quoting in the press today.
Alun Cairns
I am not sure whether the right hon. Gentleman has a brass neck or simply selective hearing or a selective memory. Does he not recall that Wales, in the 1980s, was not the poorest part of the UK, and that, in spite of Labour Governments in Cardiff Bay and a Labour Government in Westminster, Wales is now the poorest part of the UK?
Mr Hain
I am astonished that a Member of Parliament for a Welsh seat is trying to defend the Government’s impact on Wales in the 1980s. As a result of Tory policies, there was mass unemployment and people were smuggled on to incapacity benefit to disguise the unemployment figures and left there—a whole generation of young people—never to work again. I am astonished that he is trying to defend that.
Geraint Davies
I have figures from the House of Commons Library on the difference between expenditure and revenue showing net contributions of £14.6 billion in Wales and £14.3 billion in Scotland. Does that not demonstrate that independence for Scotland and Wales would only result in an impoverished Scotland and Wales? We need a fair system based on needs.
Mr Hain
That is exactly what I have been arguing.
Under devolution-max, as we understand it from the Scottish model, Wales would be responsible for raising all its own revenue, but we simply could not do it. It would be impossible suddenly to halve public spending in Wales. With devo-max, income tax and other taxes would literally have to double overnight just to maintain current spending levels, which is clearly a preposterous scenario—if ever implemented, it would have a devastating impact upon the Welsh economy and people’s way of life. However, I can see how it would be an attractive solution to some Tory stockbrokers in the south-east—people in Chesham and Amersham, for example—because it could mean massive tax cuts for them. Devo-max is yet another example of shared interests by the Conservatives and nationalists. It is no wonder that Plaid Cymru is so reluctant to criticise the Government, preferring to focus all its fire on Labour, as has happened in the past few minutes. They have much in common, which explains why they have consistently refused to rule out a coalition in Wales.
We should celebrate both the successes of devolution and the economic, social, cultural and political ties that bind us together—they are probably stronger now than ever before—but devo-max, or independence-light, is not the answer to the economic problems that Wales still confronts. Labour’s vision is of a Britain in which the stronger, richer parts support the weaker, poorer parts—a Britain fairer, more just and more equal, not an unfair, unjust, unequal Britain where the weakest go to the wall. I hope that the Silk commission will take close account of that important principle.
Mr Hain
If that nonsense is true, why did we have record employment under our Labour Government, why were there more jobs in Wales than ever before in our history under our Labour Government and why were there higher levels of business activity under our Labour Government? We had a record of economic success before the global financial crisis that was second to none. I am astonished that the hon. Gentleman is seeking to dispute that.
Alun Michael (Cardiff South and Penarth) (Lab/Co-op)
Does my right hon. Friend agree that it is amazing to hear Government Members trying to rewrite the history of the ’80s? Many of us entered the House because of the experience of seeing young people abandoned by a Conservative Government and their economic policies so that they were unable to make their way in the world.
Mr Hain
My right hon. Friend makes a powerful point with great passion precisely because he was one of the people who entered Parliament to fight for the rights of young Welsh citizens who were denied by that callous Conservative Government.
I hope that the Silk commission will take account of the principles of fairness and justice in its deliberations. Some resources from the south-east of England are, and in future should still be, redistributed to Wales, the north-east of England and other areas of England with lower levels of economic activity and prosperity in order to help everywhere in Britain to become economically more sustainable. However, I remain suspicious that this right-wing Government do not share this vision for Britain and may exploit the Silk commission for their own ulterior motives.
Compared with Scotland, there is a much more significant amount of commuting across our border with England, as pointed out earlier by my right hon. Friend the Member for Delyn (Mr Hanson). Traffic flows across the Wales-England border are substantial. North-east Wales is highly integrated into the economy of Merseyside and north-west England, while in south Wales the bulk of traffic movement is focused along the M4 corridor. About 80,000 people live in Wales but work outside Wales in the UK, and about 50,000 people work in Wales but live in the UK outside Wales. This gives a total of about 130,000 people who travel across the border to work every day. A little over half of this cross-border traffic is accounted for by people commuting in and out of north Wales. Despite Scotland’s much larger population, the number of commuters crossing its border is roughly one third of the number commuting in and out of Wales.
More than 1.4 million people in Wales—nearly half its total population—live within 25 miles of the border with England, and nearly 5 million people in England live within 25 miles of the border with Wales. In aggregate, 30% of the population of Wales and England—nearly one third, or more than 16 million people—live within 50 miles of the border between the two countries. In contrast, the number of people living close to the Scotland-England border is much smaller. Only 5% of the combined population of Scotland and England—just one sixth of the equivalent for Wales, or about 3 million people—live within 50 miles of the border between those countries. Given that the Welsh economy is much more closely bound into the economy of England than is the Scottish economy, the potential for economic distortions and tax avoidance as a result of tax devolution is of greater concern in Wales than in Scotland, which is why the Calman agenda cannot simply be transposed wholesale on to Wales. We would like a clearer indication from the Government of how they intend to deal with these crucial cross-border issues, and I hope that the Silk commission will address them.
Something else is not within remit of the Silk commission, however, but the issue is much bigger than the Barnett formula or tinkering with the constitution—it has felt like the elephant in the room during today’s debate. There is a serious jobs crisis in Wales, and the Government need to wake up urgently to that. For example, Tata Steel employs 20,000 people in the UK, of whom 8,000 are in Wales, in overwhelmingly highly skilled, well-paid jobs, with three to four times that number of dependent jobs in the economy outside. In Wales, that means perhaps 25,000 or more jobs. Last week, MPs were briefed by Tata’s European chief executive. He did not mention corporation or any other tax, which the Silk commission is considering. Instead, his overriding criticisms of Government policy, which he worried was threatening the future of steel manufacturing in the UK—at Port Talbot, for example—were very different. He said that the Government had to act on raising demand for UK steel through infrastructure investment—in other words, through more growth and jobs. He also argued that energy costs were far too high—fully half as high again as in France. What are the Government going to do about that? Nothing.
David T. C. Davies
I had similar representations from Tata. The company is clearly worried about energy costs rising as a result of environmental taxes, which are being implemented because of a perception of increased temperatures, which do not seem to be increasing at the moment. Does the right hon. Gentleman think it is time to look at the issue again?
Mr Hain
I know that the hon. Gentleman has a reactionary view on the climate change agenda—perhaps that is reflected in his question—but the briefing that we had from the European chief of Tata Steel was clear. He said that it was overwhelmingly the lack of Government support and investment in the economy—and the demand for steel that comes from that—that was hitting his industry so badly, along with energy prices, thereby risking future investment. Incidentally, the hon. Gentleman’s question also gives me the opportunity to remind him that although he celebrated the county of Monmouthshire’s no vote, the fact is that 49.36% voted yes, while 50.64% voted no. That does not seem to be a massive rejection of devolution in Monmouth.
Huw Irranca-Davies
Will my right hon. Friend confirm from the discussions with Tata Steel and others that they are not opposed to environmental taxes per se? They are opposed to the Government’s inept handling of taxes such as the CRC, or carbon reduction commitment, and the carbon floor price, which are rightly perceived not as stealth taxes—there is nothing stealthy about them—but as a deliberate blow to our energy-intensive users. What they are saying to the Government is: “When you’re dealing with taxation issues”—as the Silk commission is—“you should do it with industry, not tell industry what’s happened to it after the event.”
Mrs Gillan
The right hon. Gentleman will therefore be greatly reassured to know that I was at Tata Steel for our business advisory group meeting at the end of last month, where I had long discussions. I am sure that he would not want to cause any anxiety to the work force. I was pleased to hear that long-term investments continue to be made by Tata Steel and that it welcomes its good relationships and exchanges with my colleagues in the Cabinet on matters pertaining to the success of that business.
Mr Hain
I am glad that the Secretary of State had that conversation, but all I can do is report to the House—and it is important that she hears it too—what the European chief of Tata Steel told a group of Members who met him last week, which is as I have described it. He was not concerned about any of the issues to do with the Silk commission, as we are in this debate. It is important for the Government to recognise that they should not ignore the economic realities and flirt with tax devolution—by, for example, devolving corporation tax—when that is not even on Tata’s agenda.
As for investment, Tata Steel’s European chief pointed out that the new and welcome investment at Port Talbot might not have been made had he been aware of the climate now affecting the company as a result of the Government’s incompetence, which is damaging steel production. Instead of addressing that, the Government are, through the Silk commission, considering matters such as devolving corporation tax.
A review undertaken in 2007 by Sir David Varney for the Treasury pointed to academic research that suggested that only about half the impact of a corporation tax cut was usually recovered through increased growth and investment. The question is: would lowering corporation tax in Wales to, say, the Irish level—if the Silk commission is to consider that—generate enough extra tax, including income tax, to compensate for the £400 million or so that is likely to be lopped off the Welsh block grant to comply with European Union state aid rules and compensate the Treasury for lost revenue?
The Secretary of State for Northern Ireland is an enthusiast for devolving corporation tax. Nevertheless, he told me that he thought it would take at least 15 years for the Northern Ireland economy to generate the growth and jobs that he anticipated from halving corporation tax, as is planned there, that would be sufficient to produce an equivalent income to compensate for the loss to the Northern Ireland block grant. What Welsh Government would choose to lose around £400 million now and each year for the best part of two decades in the hope—and only the hope—that extra inward investment and business activity would eventually make up the shortfall?
Mr Hanson
To return to the cross-border issue, in the event of the Silk commission determining that corporation tax could be varied, would not the north-west of England then make the same demands on the Treasury for varying powers for its region? The point that my right hon. Friend should emphasise to the Secretary of State is that the Silk commission should look at the consequences of those variations for both Wales and the English side of the border.
Mr Hain
My right hon. Friend makes a powerful point that I hope the Silk commission will take account of.
It is simply no answer to offload tax-raising powers to Wales that will at best have a marginal impact and at worst—because of the compensating cuts in the Welsh budget—worsen the prospects for jobs, business and infrastructure investment in Wales. Meanwhile, in the real world, unemployment in Wales is rocketing. Six people are chasing every vacancy—many more in some areas of Wales—and the Government have no plan to deal with the problem. Unless they change course, it will get worse and worse.
Mr Hain
Absolutely. I have had many discussions with businesses in Wales that have been severely damaged—some have even been threatened with extinction and bankruptcy—as a result of public spending cuts, because they depend for their activities, whether they be providing services, procurement or whatever, on the public purse.
By all means consider the Silk commission agenda, but unless the Government change course, things will get worse and worse for Wales. It is the most vicious of circles: fewer working means fewer people paying taxes, which means less money to pay off the deficit. As Wales gets poorer, how can it be expected to raise its own money through taxes, as the Secretary of State would like, if the revenue coming in is being cut? There are serious questions for the Silk commission to consider, because the Government’s cuts are choking off growth, and tax revenue in Wales is diminishing substantially. I do not want the Welsh budget to be cut because of what might be deemed to be the gap in the revenue going to the Treasury arising from devolving taxes—which might happen as a result of the Silk commission—only to find that those taxes do not make up that gap.
Huw Irranca-Davies
My right hon. Friend is generous in giving way again. May I urge him to advocate from the Dispatch Box a tax change that we can introduce right now, namely a national insurance tax holiday for small businesses? That would encourage far more people to take on more employees, including women, who are significantly disadvantaged at the moment. We do not have to wait for the Silk commission; the Government should adopt our five-point plan right now.
Mr Hain
I completely agree, and I have been urging that on the Secretary of State in this debate. Cutting VAT to 5% for businesses involved in home maintenance and repairs could revitalise a building industry that is on its back in Wales. That should be the priority for the Secretary of State.
Families across Wales are struggling with rocketing food prices and electricity, oil and gas bills, and are worried about their jobs and their children’s futures. Far from our economy being a safe haven, our recovery was choked off last autumn, well before the eurozone crisis. Our economy has stagnated for over a year now. However, there is a better way. We need a plan for jobs and growth to get the Welsh economy moving again and help get the deficit down in a steadier and more balanced way. That is what the Secretary of State should be focusing on for Wales, not simply the Silk commission’s tax and powers agenda.
Jessica Morden (Newport East) (Lab)
My right hon. Friend has been generous in giving way, and I agree with him wholeheartedly. What my constituents want more than anything is for the Government urgently to come up with a jobs and growth strategy, which is currently missing. Does he agree that the establishment of the Silk commission, although a great thing in the long run, should not deflect from the urgency of the current situation?
Mr Hain
I completely agree; I could not have put it better myself. I hope that the Silk commission will consider the context in which it is operating, and that, if it does advocate some tax devolution, which I think would be sensible in some respects, it will consider the wider picture and the impact of the lost revenue, indirectly, to the Welsh budget.
Mr Hain
I want to make some progress, if my hon. Friend does not mind. If there is time at the end, I will certainly give way to him.
Labour has set out a clear five-point plan to create jobs, to help struggling families and to support small businesses in Wales. Our jobs plan includes tax breaks for small businesses taking on extra workers, a temporary VAT cut that would give families a boost of around £450 a year, and a tax on bank bonuses to fund jobs and training for young people. I urge the right hon. Lady’s Government to implement it, alongside the work of the Silk commission. If the Chancellor were to come to the House with such a plan for growth, we would support him.
Thanks to devolution, Wales is showing that there is an alternative. The Welsh jobs fund will provide 4,000 job and training opportunities for 16 to 25-year-olds each year, along with an extra 500 police community support officers for safer communities, and support for Welsh students so that they do not have to pay higher tuition fees. Labour First Minister, Carwyn Jones, is proving that, although cuts are unavoidable, they do not have to be allied to the chaos of a privatisation plan for the NHS, or to a plan to close down opportunities in our universities, or, with the greatest hypocrisy of all, to the simultaneous devaluation of vocational education while making it even harder for young people leaving school to get a job.
Guto Bebb
Was it not rather unreasonable of the right hon. Gentleman to say what he did about the health service in Wales, given that the National Assembly is cutting health expenditure in Wales while those cuts are not happening in England? My constituents are very aware that the Betsi Cadwaladr health trust is facing serious financial difficulties, not as a result of changes in Westminster but as a direct consequence of choices made by the Labour Government in Cardiff.
Mr Hain
Labour’s Government in Wales are not adopting a back-door privatisation plan for the health service in Wales, thank goodness—unlike what is happening in England. In addition, did the hon. Gentleman not see the important report in the media recently that leading health officials and clinicians are now stating conclusively that the health service in England is being cut as a result of his Government’s policies? All services in Wales are having to be reduced—of course they are—but why does he think that is happening? It is a result of the programme of cuts by the Government whom he supports.
Of course our Labour Government in the Welsh Assembly cannot insulate Wales from this Government’s damaging policies. But they can show that, for schools, for hospitals, and for jobs and skills, even in the toughest of times, there is and always will be an alternative to this right-wing Westminster agenda. It was wrong to say that there was no alternative to Margaret Thatcher’s destructive policies in the 1980s. That was paid for by hundreds of thousands of people across Wales in lost jobs, futures and, yes, even lives as that Government systematically undermined the national health service.
In Wales, thanks to devolution, we can protect ourselves just a little from the consequences of Tory-Liberalism. It is not full protection—it never could be—but it makes a real difference, a Labour difference, because the people of Wales voted for the only party committed to standing up for Wales: the Labour party. Wales is an example to the rest of the United Kingdom of devolution working as it should do. We have in Wales a new devolution generation led by Carwyn Jones. That new generation are not devo-sceptics or nationalists, but devo-realists who are at ease with devolution and who recognise the benefits of empowering people.
The strength of Welsh devolution is a testament to Labour’s achievements in office. We should not forget that the Prime Minister and the Secretary of State tried to prevent it from happening. They both stood on an anti-devolution platform as Tory party candidates in 1997. They both voted against the Government of Wales Act 2006, which I brought in as Secretary of State, and which delivered the full law-making powers now enjoyed by the Assembly. Now, in 2011, we will not allow them to use the Silk commission to diminish the devolution project, or to cut Wales adrift to appease the little Englanders on their own Benches. We will give the Silk commission a cautious welcome, but we are suspicious of the Government’s motives, as are the more than 130,000 people in Wales who are now out of work, and who are desperate for the Secretary of State to focus on jobs and growth, not on contriving devices to abandon her responsibilities in Wales.
For us, devolution has always been a means to an end. Labour has never fought elections solely on the issue of constitutional change. That would be a diversion from the real task, which at this moment requires above all taking a stand on the side of the people in the face of the most reactionary Government since the 1920s. Our vision for Wales does not involve a defence of the status quo. Our stance is one of modernisation and progress, even as we face the most difficult of policies inflicted on us by this Government. We urge the Silk commission to join us in standing up for Wales, and not to be seduced by this Government’s real agenda of hiving off their obligations to Wales.
David T. C. Davies
I do indeed welcome that statement, and I look forward to participating, but I hope that we do not end up putting the cart before the horse. I hope that we do not all go off in different directions, rather than getting things done in an orderly fashion. The constitution is a very delicate thing, and it needs to be balanced.
Mr Hain
I agree with the hon. Gentleman that the constitution is delicate and needs to be balanced, but is not the answer to his question—the answer to the English question, if you like—that we should remedy the asymmetrical nature of devolution in the United Kingdom by devolving powers to the English regions, not just to the London region, which already has considerable powers? [Interruption.] The Secretary of State mutters from a sedentary position that that has been rejected, and I accept that it was rejected under our Government in the north-east referendum, but I felt at the time that that was a very low-grade form of devolution. One of the things that people told me on the doorsteps in such places as Middlesbrough and Tyneside was that they did not believe in another form of regional government if it did not involve any real powers. If it did involve real powers, however, that would be the answer to the hon. Gentleman’s question.
David T. C. Davies
I suspect that there may be something in what the right hon. Gentleman says. The referendum on powers in the north-east took place quite early in the process, and there is now a much wider understanding of the implications of devolution throughout the United Kingdom. Nevertheless, there is still a problem.
We devolved powers to Wales, Scotland and Northern Ireland on the basis of their historical roles as nations within the United Kingdom. I do not see how we can just come along and artificially create nations within England where nations have not previously existed. I also suspect that this is not a debate that any of us here should be having. It must ultimately be for English MPs to decide for themselves whether they are content to remain representatives in England or would prefer to be representatives in the regions thereof. Let us not forget that there are 6 million people in Scotland, 3 million in Wales and 1.5 million in Northern Ireland. We have not so far devolved powers on the basis of the numbers of people in the countries concerned, and we therefore have no real right to say that because there are 50 million or 55 million people in England, they do not have the right to have a Parliament based on their own historic nation.