Wales Bill

Lord Hain Excerpts

2nd reading (Hansard): House of Lords
Monday 10th October 2016 Lords Chamber

[Lord Hain (Lab)]

My Lords, I agree with a great deal of what the noble Lord, Lord Crickhowell, said, especially on transparency over the proposed fiscal framework. That is a critical issue.

Although I welcome parts of the Bill, and although, as the Minister said, the Government responded to very strong objections to the draft Bill, it still feels that the way in which the reserved powers have been drafted repatriates powers back to the United Kingdom, for there are around 190 exceptions to the reserved powers to be granted to Wales. For instance the Assembly’s Agricultural Sector (Wages) Act 2014 would not be permitted under this Bill. Yet the Assembly not only passed it but also overcame a challenge from the UK Government when the Supreme Court found in their favour, enabling it to be placed in statute. How can this be progress towards empowering the Assembly? It seems more like a Whitehall grab-back of powers, as indeed the Welsh Assembly’s Constitutional Affairs Committee argued last week and as, among others, my noble friend Lady Morgan of Ely and the noble Lord, Lord Elystan-Morgan, recently argued publicly.

However, I wish to focus upon my two main objections at this stage to the Bill—objections I raised with the Minister during the courteous briefing that I thank him for providing before the conference recess. First, there is the question that I and my noble friend Lady Morgan of Ely discussed in detail in this House during the passage of the Trade Union Bill: the undermining of the fundamental workings of the devolution settlement by dictating the manner in which industrial relations within devolved public services in Wales are configured. This Bill reinforces that and it is a matter of dispute with the Welsh Government because the Assembly will shortly have before them a Bill which exempts devolved public services from the Trade Union Act. Since that has been supported by Labour, Liberal and Plaid Cymru Assembly Members it will likely be carried by a large majority. I will return to this matter.

Meanwhile, my other major objection is that Clause 17 of this Bill removes sections of the Wales Act 2014—just two years ago—that retain the requirement which has existed since 1997 that a referendum will be required to implement the powers to vary income tax under that Act. That is constitutionally unacceptable, even outrageous. In September 1997, as a Welsh Office Minister I helped to lead the Government’s campaign to win the referendum to establish the Welsh Assembly. With due respect, I do not recognise the comments of the noble Baroness, Lady Randerson, that Labour has been a back-marker on devolution; we introduced the Welsh Assembly and empowered it in the 2006 Act.

There was only one question before voters in 1997: did they want an Assembly or not? There was no second question on whether they wanted income tax devolved, as was specifically and importantly the case in the referendum on a Scottish Parliament. Ministers at the time took the view that to have such a second question in Wales would be to lose the referendum. Given how narrowly it was won, with just 0.2%, how wise that turned out to be. Leading politicians of all parties, including Conservatives, have been crystal clear in the past: to devolve income tax powers to Wales would therefore need another referendum like Scotland had on income tax. Indeed, just last year the 2015 Conservative Party general election manifesto committed to a referendum before income tax powers were raised. If your Lordships’ House were to amend the Bill to reinstate the referendum requirement, we would be doing so in line with the Salisbury convention on a government election manifesto commitment.

The current Secretary of State for Wales, Alun Cairns, was a Government Whip and voted for the 2014 Act which put into statute the necessity for a referendum just two years ago. He argued for that, as did all his Conservative MP colleagues at the time. So why have he and the Government done a U-turn after such a short time, thereby breaking their own manifesto commitment of just last year? There has been no clear explanation by Ministers. Could it be that they are frightened that, if invited to vote, a majority in Wales—perhaps a large one—would turn down the powers? I suspect so; otherwise, why be afraid of trusting the voters?

Could it be that the Government wish to ram income tax devolution through without addressing the irrefutable evidence that the way the Barnett formula has operated has short-changed Wales—by at least £600 million annually—in contrast to Scotland? Without a new “Barnett floor”, which the First Minister has insisted upon, and without the fiscal framework he wants, it would be pure folly for Wales to have income tax devolved. I note the point made very powerfully by the noble Lord, Lord Crickhowell, that there should be full transparency on the fiscal framework before Parliament enacts this legislation, amended or otherwise.

Could it be that the Conservative Government have an ideological objective to shrink the Whitehall state, offloading as much responsibility as possible on to individual citizens to fend for themselves, outsourcing to private providers and sub-contracting tax and spending to devolved legislatures? Having strenuously opposed political devolution in the past, the Conservatives now see the virtues of economic devolution in neoliberal terms. In that respect at least, the outcomes, if not the ideologies, of nationalism and neoliberalism can converge, because under both the redistributive power of the United Kingdom state is either severed or stunted.

The incontrovertible advantage of modern Britain is its 20th-century innovation: the pooling and sharing of risks and resources across the whole United Kingdom to ensure common welfare and decent standards of life for all citizens, regardless of nationality or where they live. At the heart of that pooling and sharing of resources has been a set of path-breaking decisions throughout the 20th century: common welfare standards first introduced by Liberal Governments and subsequently consolidated by Labour Governments up until 2010, ensuring common economic and social standards; common UK-wide old-age pensions; common UK social insurance—sick pay, health insurance, unemployment insurance and labour exchanges; common UK child and family benefits; a common UK national minimum wage; and a UK system of equalising resources so that everybody, irrespective of where they live, has the same political, social and economic rights, not just equal civil and political rights.

Pooling and sharing the UK’s resources has also enabled redistribution from richer to poorer parts of the UK, whether constituent parts of a nation such as the coalfield communities of the south Wales valleys or regions of England such as the north-east. Although the Holtham commission, in its case for devolving limited tax-varying and borrowing powers to Wales, set out complex compensating arrangements which attempted to ensure that Wales did not fall behind richer parts of the UK, it could not guarantee that the Treasury would always deliver this. We wait to see whether the First Minister has been able to secure that in his negotiations with the Government on a fiscal framework.

With around 40% of UK GDP concentrated in London and the south-east of England, I have seen no answer—whether from Ministers or, indeed, in this respect at least, separatists—to what is at the heart of the case for maintaining the integrity of the UK: redistributing resources from better-off to less well-off parts; and guaranteeing equal opportunity and security for all UK citizens regardless of nationality, race, geography, gender, sexuality, age, disability or faith. That has meant, as former Prime Minister Gordon Brown showed in his book My Scotland, Our Britain, that while inside the European Union the average income of the typical citizen of the poorest country is just 20% of that of the richest country, and in the USA the income of the poorest state is 55% of that of the richest, the average income of the typical Scot is 96% of the average income of an English citizen; for Wales, the figure is 87%.

In a post-World War II settlement subsequently maintained by the Conservatives, at least until recent times, Labour created a set of universal rights: free healthcare across the UK in the 1940s; and in the 1990s a UK-wide minimum wage and a tax credits system which discouraged the regions and nations from undercutting each other in a race to the bottom. A cornerstone of our social rights is the common UK welfare system, which transfers resources between individuals, dependent on their circumstances, right across the union. Pooling and sharing of resources at UK nation-state level must be sufficiently strong so as to continue to guarantee free healthcare, the rights to a pension when elderly, help when unemployed, sick or disabled, a decent family income and universal education, as well as defence and security. There is an implicit UK government guarantee that nobody in the union—whether in Wales, Scotland or elsewhere in the UK—can be prevented from accessing those common social and economic rights, and the services that flow from them, by reason of a shortage of resources.

That is why it is right that all UK taxpayers—English, Welsh, Scottish and Northern Irish citizens together—contribute their taxes at a UK level to fund these common rights and services, thereby guaranteeing that the UK Government and, where appropriate, the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly, have the capacity to deliver them. With England constituting 84% of UK population and 87% of UK GDP, it would be mad for Wales to cut itself off from that, just as it would be mad for the north-east of England, with its similar GDP per head and demographic, to cut its income off from the rest of England—especially the south-east, which, as I pointed out earlier, contributes something short of half the UK’s wealth. This is especially serious for Wales, which has a huge net fiscal deficit involving a massive annual subsidy from the UK Treasury, estimated by the Library at £14.7 billion in 2014-15. That total, by the way, is similar to the entire Welsh Government block grant. I believe that this Government are encouraging an offloading of the centre’s responsibility to all its citizens—English, Scots, Welsh and Northern Irish—and, by design or default, encouraging separatism. For if the UK does not offer common rights and resources to enable universal access for each citizen, why should they offer their loyalty to the UK in return?

In making this argument, I remind your Lordships that I have been a consistent devolutionist all my political life. As the author of the Government of Wales Act 2006, I was proud to deliver the full law-making powers that the Welsh Assembly has enjoyed for some five years now, to the great benefit of its citizens. Therefore my objection to Clause 17 repealing the Government’s very own clause of just two years ago, committing to a referendum, is on two grounds. The first is constitutional and democratic. Surely it is not acceptable to move the goalposts from a referendum vote in 1997 by denying Wales the chance to have a vote on income tax, like the Scots did. Why should Welsh voters be treated as second class compared with Scots voters? The second is that, in any case, we step at great peril down the road of income tax devolution, the destination of which could be impoverishment in less prosperous parts of the UK, Wales included. Just in passing, while I certainly do not wish to put any ideas into the Conservatives’ minds, what about VAT if we leave the European Union? Membership of the EU means that it cannot be devolved: what does Brexit mean?

Let me turn to the manner in which the Bill will enable one important part of devolved public services in Wales to be dictated from Whitehall, namely industrial relations. I ask the Government to reconsider the manner in which the Bill reserves all employment law to the UK level in respect of devolved Welsh public services alone—not the private sector but just devolved public services. In doing so, and this may address the concerns of the noble Lord, Lord Crickhowell, let me be clear that I am not asking for employment law as a whole—including strikes, unfair dismissal, health and safety, maternity and paternity rights and so on—to be devolved. I agree that the core issues of employment law should be a reserved matter, not least to prevent businesses or devolved governments competing to undermine basic conditions of work in a race to the bottom.

However, what right does a UK Secretary of State have to impose upon Wales such matters as trade union facility time, training arrangements, arrangements to deduct trade union subscriptions by payroll, the political levy and other industrial relations issues to do with what the Welsh Government, in exercising their statutory powers, deem the best way to deliver effective and efficient public services on the basis of social partnership, which they do? I shall be supporting an amendment to empower the Assembly and the Welsh Government to achieve that, and I ask the Minister to do the same. Otherwise there will be a direct clash with the Welsh Government and the Assembly which will surely undermine the Conservative Party’s new-found and welcome conversion to the cause of devolution. In short, this Bill is fundamentally flawed and could badly short-change Wales. I ask the Government urgently to think again on the matters that I and others have raised.