Wales Bill

Lord Hain Excerpts

Committee: 3rd sitting (Hansard - continued): House of Lords
Tuesday 15th November 2016 Lords Chamber

Moved by

[Lord Hain]

66: Schedule 1, page 69, line 3, at end insert—
“Terms and conditions of employment and industrial relations in Welsh public authorities and services contracted out or otherwise procured by such authorities.”

[Lord Hain (Lab)]

My Lords, Amendment 66 stands in my name and that of my noble friends Lord Murphy and Lord Kinnock, and the noble Baroness, Lady Randerson. As Secretary of State, I took through the Government of Wales Act 2006 and I begin by commending the Minister for his empathy, skill and civility in our collective purpose, which is to get a Bill that does the very best for Wales. I hope he will see what we are doing as support for him in battles in Whitehall with some of his colleagues who I do not think really understand the Wales devolution settlement.

This amendment will come as no surprise to your Lordships. Not only did I explain at Second Reading that I would be tabling it, but I and my noble friend Lady Morgan of Ely also explored in detail the issues it raises during the passage of the Trade Union Bill through this House at the beginning of this year. At that time there were many references to the UK Government’s insistence on ignoring their own legal advice, ignoring a legislative consent Motion voted through by the National Assembly for Wales and ignoring the ruling of the Supreme Court in 2014 in relation to the Agricultural Wages Board. The Government’s insistence on pushing ahead with measures that interfere with the functioning—I stress this to the Minister—of the devolved public services in Wales demonstrated an intention to override the devolution settlement. I am sure that the Minister is concerned about that and I hope that he, with his known support for devolution, will change that policy in the Bill and accept the amendment.

The Minister may insist that this reservation amendment is unique: it is the only amendment in which we are seeking to go further than the Scottish settlement. I concede that. This should not, however, be taken out of context. It is precisely because the Government of Wales Act that I took through Parliament in 2006 has allowed the National Assembly for Wales and the Welsh Government to develop and foster unique relationships with public sector employers and trade unions that we find ourselves in this position. The UK Government are making a clear and in some ways remarkably transparent move to go beyond overriding decisions that the Welsh Government have taken since 2011 and deliberately take back powers because they are unhappy about decisions taken and the judgment of the Supreme Court—a matter to which I will return. I believe that this is an attack on the heart of the Welsh devolution settlement. The employment reservation is only one of many that other noble Lords have raised on this deeply flawed Bill—but it is an important one.

Over the past nearly 20 years, the Assembly has earned its place in the public consciousness. As we know from the referendum in 2011, the Welsh public have overwhelmingly endorsed the approach taken by the Assembly and confirmed their desire for public services in Wales to continue to be run from Wales. The Conservative Party supported the 2011 referendum, and the public were asked in that referendum whether they wanted the Assembly to make laws on all matters in the 20 subject areas it had powers for. At the top of that list were education, health, housing and local government—the very devolved areas specifically affected by this reservation. It is incongruous in the extreme to think that the argument put forward in another place by the Secretary of State that—I paraphrase—the 2006 Act never intended to give powers over employment matters in the devolved public services is a reason now to claw them back.

There have been many positive developments by the Welsh Government in their relationships with their social partners in the public services, including the Partnership and Managing Change agreement, signed up to by all public service employers and trade unions, the memorandum of understanding in local government and the implementation of the two-tier workforce code. We have been fortunate in Wales not to have seen a difficult and divisive strike by junior doctors. We might think that to be no accident. It comes out of precisely the culture made possible by the circumstances that flowed from the 2006 Act that this Bill now seeks to reverse.

All of these things have been possible because of the social partnership structures in place to ensure that the difficult decisions facing our public services at a time of austerity are worked through from the beginning with employers and trade unions round the table. All of this has been possible because the legislative framework has permitted this flexibility.

The legislative competence over the delivery of public services is undoubtedly devolved to the Assembly. There is no question about that. The Government’s own legal advice during the passage of what is now the Trade Union Act demonstrated that. The differentiation that must be drawn here is between collective bargaining over employment law matters—which it is widely agreed should be maintained at an England and Wales level—and industrial relations that intimately impact upon the day-to-day discussions to enable change and flexibility in the delivery of the services that affect the people of Wales.

I turn briefly to the Trade Union Act, for it is here that the UK Government appear to have developed their principled opposition by allowing the Assembly to retain its current legislative competence over industrial relations. During the passage of that Act in this House I referred to the Supreme Court judgment on the Agricultural Wages Board in 2014. Their Lordships made crystal clear their view that even though employment law was a reserved matter—I am not contesting that in this amendment—nevertheless the operation of services devolved to Wales, in this case agriculture, was a matter proper to the Welsh Assembly to legislate upon. The Supreme Court upheld that view.

The Welsh Government have made clear their intention to legislate in relation to three devolved aspects of the UK Trade Union Act 2016. The first is the administration costs of check-off, the means by which trade union subscriptions are automatically checked off in the payroll system in devolved public services—and in those services exclusively. The other aspects are the 40% overall support threshold for important public services and powers to regulate facility time. These are all matters that affect industrial relations in Welsh public services. They do not impinge upon employment rights and duties. In other words, the main contours of employment law remain a reserved matter. Rather, the Government are interfering with the legislative competence of the National Assembly and the Welsh Government to deliver effective public services through social partnership. Surely that cannot be right.

The effect of this amendment would be to provide an exception to the legislation as drafted to ensure that the Assembly retains its legislative competence—a competence it now has—over terms and conditions of service for employees in devolved public services and over industrial relations in such services. It is consistent with both the Wales TUC and the Welsh Government’s stated policy, which is not to break up England and Wales collective bargaining and to agree that employment rights and duties remain an area reserved to the UK Government—I stress this point. But it seeks to ensure that the Assembly maintains the legislative flexibility that it currently has to influence employment and industrial relations in the devolved public services over which it and the Welsh Government maintain legislative policy and fiscal control.

I hope that the Minister is listening carefully. I repeat that the amendment does not challenge the Government’s position that employment law covering such matters as strikes, unfair dismissal, health and safety and so on should be reserved. Indeed, it does not challenge the reserved status of any of the 17 employment Acts listed in Section H1 of new Schedule 7A on pages 68 and 69. They are all listed, ranging from employers’ liability to pneumoconiosis, the Trade Union and Labour Relations (Consolidation) Act 1992, the Employment Rights Act 1996 and so on. It does not seek to challenge any of them or to contest that they are reserved matters. I appeal to the Minister to reconsider the Government’s policy and to adopt a practical, common-sense stance in line with that of the Welsh Government and the Assembly.

When the Government claim to be marching in step with the Assembly on progressing greater devolution, surely there is nothing to be gained by confrontation on the matter of how public services in Wales are run. For confrontation between the Assembly and Westminster there will certainly be if the Bill is not amended—almost certainly also leading to another unedifying dispute in the Supreme Court. I hope that the Minister will accept this point and be conciliatory in his response so that we can move forward together, reserving properly reserved matters of employment law to the UK level but ensuring that the Welsh Government can run their public services and the industrial relations that are so crucial to those services in the way they choose to do in keeping with the devolution settlement.

[Baroness Finn (Con)]

My Lords, the key purpose of the Wales Bill is to provide clarity over powers and accountability of those powers. The introduction of the reserved powers model makes clear what is devolved and what is reserved so that people in Wales know who is responsible for what. It is worth emphasising that the need for clarity lies at the heart of the Bill.

Employment law and industrial relations law are clearly reserved matters. It would be unworkable to have different employment laws applying in the different jurisdictions of Great Britain. This issue was also considered by the Smith commission for Scotland, and both the Smith commission and the Silk commission recognised the importance of having a single employment regime. Both concluded that employment and industrial relations law should remain reserved and neither recommended any sort of exceptions.

I appreciate that the noble Lord, Lord Hain, is not asking for the devolution of all employment law, the core issues of which will remain reserved, and I apologise to the noble Lord if I was not clear on this point when I spoke at Second Reading. The noble Lord and the noble Baroness, Lady Morgan, explained during the passage of the Trade Union Act 2016 that industrial relations law in devolved public services is a devolved matter. That Act is about employment law and industrial relations. The Government have consistently argued that these are reserved matters and that the Act will apply consistently across the whole of Great Britain.

This amendment would lead to the unwelcome creation of a two-tier system of employment rights in devolved public services as well as a regrettable reduction in clarity over industrial relations powers. The Wales Bill introduces a reserved powers model precisely to bring more clarity to the Welsh devolution settlement and the effect of the amendment would undermine that primary intent. I therefore urge that the focus now should not be on yet more interminable wrangling about where powers lie. The focus should instead be on the efficient delivery of quality devolved public services on which the Welsh people rely.

--- Later in debate ---

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I thank noble Lords who participated in the debate on this part of the Bill concerning employment law. I thank the noble Lord, Lord Hain, for his very kind words in opening the debate.

To put this in perspective, I think it is common ground between the noble Lord, Lord Hain, and I that employment and industrial relations law is a reserved area. I am not sure that that view is shared by the noble Baroness. She seemed to be suggesting that somehow our reservation meant the end of civilisation as we knew it. It is fundamental to the country that we live in. The UK Government believe that the underlying legislative framework concerning rights and responsibilities in the workplace must be reserved. I believe as much as anyone does in good employment practice. I worked in the public sector in Wales before I went into the Assembly. I was a member of a trade union. I do not think I can still be a member of that trade union or I would be. It is imperative that we have good employment law and good industrial relations. I would not contest this. This is a very important area, but we want a simple, unified system in Great Britain. As the noble Lord acknowledged, this is not something that is devolved to Scotland. It was not considered by the Smith commission or the Silk commission and it was not part of the St David’s Day process.

The system we have allows workers to be clear on their rights, whether they are in the public sector or the private sector, in England or in Wales. This is a fundamental principle and I cannot accept that the law underpinning the terms and conditions of public sector workers should be different from the law that underpins the rights of other workers. Whether that leads to better rights, more rights or worse rights, it seems fundamentally wrong. It is important to have common minimum standards which apply to all workers throughout Great Britain to minimise uncertainty and cost for both workers and employers. This is a matter of employment law; it is not about public service delivery.

Furthermore, it seems clear to me that if public sector employers in Wales, which would include the Welsh Government and public sector authorities, want to grant more favourable wages or more holidays then they are able to do so. They can do that presently and there is no question of it being taken back. Also, the judgment on the agricultural wages Act in the Supreme Court is an exception to the reservation. There is no question of that being clawed back as that specific piece of law remains.

If we had a diversified system of rights, workers might be reluctant to pursue the best progression opportunities in their organisation because they could get better rights in the private sector or the public sector—one or the other. They may find it more difficult to undertake collective bargaining and make their voice heard in isolation from colleagues in similar roles in Wales or the rest of Britain. I certainly believe in having strong industrial rights and strong employment rights—and obligations, too—but this has to be unified. As I said, both the Silk and Smith commissions came down in favour of a single employment regime, such as this, and there is nothing to prevent the Welsh Government or devolved public authorities agreeing specific arrangements with their staff, provided that they meet the requirements of employment and industrial relations legislation which apply across Great Britain.

The noble Lord, Lord Murphy, suggested that this amendment did not concern strikes. I am sure that I heard the noble Lord, Lord Hain, say that it related to altering the threshold, so it is about strikes and, as drafted, would certainly include the possibility of doing that. The Government could not sign up to that, nor to different rights on check-off or facility time. The rights should by all means be generous, but they should be unified across the country. I do not see that insisting on this is somehow apocalyptic in the way that some noble Lords suggested. The reservation of employment law ensures that there is a minimum floor of rights to offer workers key protections. At the same time, it recognises that each workplace is unique by allowing employers to provide additional pay or holidays in the public or private sector, if they want to do so.

Amendment 74 was put forward by the noble Baroness, Lady Humphreys, for the Liberal Democrats, and I have added my name to it for the Government. I am not sure whether that makes it an additional government amendment, but we are in agreement with removing the reservation relating to teachers’ pay. This has been a key priority for the Welsh Government and we are very happy to support this amendment. We have been listening on teachers’ pay and are content to support the noble Baroness’s amendment.

In relation to employment law, because we see specific difficulties regarding different rights in the public sector, some of which relate to the calling of strikes but do not affect pay and holidays—which the public sector can negotiate quite separately, as it does now—I urge the noble Lord, Lord Hain, to withdraw his amendment.

[Lord Hain]

My Lords, can I express my severe disappointment at the change of tone in the Minister’s delivery? The rest of his responses to the amendments moved by my noble friends have been genuinely positive. He has conceded where he could and stood his ground where he could, but within the framework of the devolution settlement in which he believes, as I do. On this amendment, I do not mean to sound insulting, but the way that he came across was, I felt, like he was reading out a prepared text—no doubt supplied by the Wales Office in Whitehall—that simply does not recognise the reality of this amendment.

The noble Baroness, Lady Finn, said along with the Minister that there would be the creation of a two-tier system of employment rights. How is that possible, when the 17 Acts and regulations which are already listed as reserved matters on pages 68 and 69 of the Bill would remain reserved under the terms of this amendment? How is it possible that we would create a two-tier system of employment rights when all the employment rights would remain reserved? We are discussing the operation of industrial relations practice in Welsh public services, not in the Welsh private sector. There is no exception provided for the Welsh private sector, which is the largest area of employment in Wales. The amendment is simply about devolved public services and reserved matters and many others matters covering all the issues. I can read them out to remind the Minister, but they are there.

[Lord Bourne of Aberystwyth]

The amendment would insert:

“Terms and conditions of employment and industrial relations in Welsh public authorities and services”,

so the amendment is not just about industrial relations.

“Terms and conditions of employment”,

is also contained in the amendment.

[Lord Hain]

I understand that. I understand my own amendment. It refers to public services.

The Minister is saying that there should be common standards. Wales already has entirely differently configured public services. That is the beauty of devolution. There is a learning experience between the different constituent parts of the United Kingdom about where best practice occurs. In some areas, it is in Wales. We have not had a doctors’ strike. I do not think we have had the same teachers’ disputes. We have not had the same local government disputes. We have not had the same firefighter disputes. Why is that? It is because these are devolved public areas run in a different way in Wales, with a different system of employee/employer relations provided for—we believed until this Bill tried to overturn the provisions of the Supreme Court ruling—in the devolution settlement. I echo the great eloquence and legal authority of the noble Lord, Lord Elystan-Morgan, in saying that this is massive diminution—to use his phrase—of the authority of Wales. Indeed, it is a direct challenge to the Supreme Court, where it may well end up. As my noble friend Lord Murphy said, I do not think that is where the Minister wants to be in his private view of the future, even if that is where he is going to end up if he sticks to this stance.

The noble Baroness, Lady Randerson, underlined that the Supreme Court caught the UK Government by surprise. She was very frank about that. It perhaps even caught me by surprise by interpreting the devolution settlement in the way that it did in a very convincing way. I hope that the Minister recognises that he is now seeking to undermine that.

I remind the House of what my noble friend Lady Morgan of Ely said; she said that the terms of the Bill will prevent Welsh Government Ministers exercising their legitimate functions in public services in how they treat their employees and how they operate their industrial relations from training time to facility time to all the matters that are essential to running public services in Wales effectively.

My legal advice is that the Minister’s position is flawed. He may deploy government lawyers to contest that, and then we will see in the courts. We will have the Wales TUC and the Welsh Government and, I suspect, all the people of Wales right behind them challenging the UK Government’s position.

The question I shall conclude on is: are public services in Wales devolved or not—not just the policies, but the delivery, which depends on employees and the relationships between employees in the public sector and their managers being very good? That requires good industrial relations, and Wales has been able to achieve that. Wales would continue to be able to achieve it under the devolution settlement if this amendment were accepted.

[The Deputy Chairman of Committees (Baroness Fookes) (Con)]

I am not clear whether the noble Lord wishes to withdraw the amendment or press it.

--- Later in debate ---

[Lord Hain]

I am not going to press it at this hour, but I reserve the right to press it on Report if there has not been a rethink by the Minister.

Amendment 66 withdrawn.

--- Later in debate ---

[Lord Wigley]

My Lords, in view of the time, I shall try to truncate my comments. The amendment would give the National Assembly as of right a proportion of VAT revenues and so give Wales the same tax power in this regard as enjoyed by Scotland. It would also open the possibility, post Brexit, for some variation of VAT levels in Wales to help provide the cash stream needed to service capital investment programmes, as discussed earlier in Committee.

It is widely acknowledged, by the Institute of Welsh Affairs and others, that devolution of public spending responsibilities should be accompanied by the assignment of significant own sources of revenue. Wales’s funding framework has been highly unusual from an international perspective: there are not many Governments in the world with significant legislative and spending powers who do not also have a correspondingly important responsibility for raising tax revenues. If the UK Government are serious about securing a lasting devolution settlement for Wales, the devolution of VAT should be considered as part of a package of devolved fiscal powers.

The Scotland Act 2016 stated that revenues from the first 10 percentage points of the standard VAT rate would be devolved by 2019-20. The current UK VAT rate is 20%, so half of all the VAT raised in Scotland will be kept in Scotland. A recent article published by the Wales Governance Centre states that:

“Welsh VAT revenues have been far more buoyant than other major taxes, such that VAT has become the largest source of revenue in Wales (in contrast to the rest of the UK and Scotland, where income tax remains the largest source)”.

The report entitled Government Expenditure and Revenue Wales 2016 concluded that around £5.2 billion was raised in VAT revenue in Wales in 2014-15. With a similar deal to Scotland, around £2.6 billion would be assigned to the Welsh Government. There would of course be an offset from the Barnett block for however long that remains in its obsolete and unfair current format. Based on the report’s figures, it would mean that more than a third of total devolved expenditure would be financed by devolved and assigned taxes, up from 21% with currently proposed devolution.

I hope that the House will agree that this fiscal lever is essential to secure the success of the Welsh economy. I beg to move.

[Lord Hain]

My Lords, I normally agree with my noble friend on devolution matters, but I want to question the consequences of the amendment. If we look at change in income tax take in the UK and Wales during the past few years—indeed, since 2010-11—we see that income tax receipts have grown across the UK by 6% and in Wales by only 2%. Notwithstanding the noble Lord’s point that VAT represents a much larger proportion of tax receipts in Wales, I would be very surprised given the lower GDP and lower spending per head in Wales if Wales did not do badly out of the devolution of VAT. I have to oppose the noble Lord on that basis. Given his belief in an independent Wales, I understand ideologically why he would want just about everything devolved, but this measure would be folly in the context of the economic, financial and tax realities of Wales’s economy relative to that of the UK.

[Lord Wigley]

VAT is very much more stable and would be less likely to go down by the nature of the expenditure and the pattern of finances in Wales. There is that problem with income tax, but VAT has a much better prospect and I believe that we really should have it.

[Lord Hain]

The noble Lord may have a point in the sense that more VAT proportionately is paid by people on low incomes, and there are relatively low incomes in Wales, but I would want to see the figures. I would want to have the drains up on this proposal before I went anywhere near it, because I would not want Wales to be short-changed by such a reform. On that basis, I oppose the amendment.

[Lord Rowlands (Lab)]

I support my noble friend because I worry about taxation. It can be very regressive in an individual context. There is a history of it, and it could be not only in income tax but in VAT. We should be very careful before we proceed down that road.