Wales Bill

Lord Kinnock Excerpts

Report: 2nd sitting (Hansard): House of Lords
Tuesday 10th January 2017 Lords Chamber

[Lord Rowlands (Lab)]

I shall speak to Amendment 74, proposed by the noble Lord, Lord Wigley, to continue to clarify the issue of the apprenticeship levy. I express my gratitude to the Minister for his letter on this issue in November, which was extremely informative and helpful. It spelt out how the Treasury was going to Barnettise the levy, which was very helpful, but I would like to press him a little more on the mechanics of this arrangement. I put this in the form of a question, because it has been hard to get anything factual. Under the Barnett formula before the levy, am I right in thinking that it was the budget of the department for business that was responsible for expenditure on apprenticeships? Are we now going to see an exchange—a replacement of BIS with Revenue and Customs—which is not an addition but just a transfer of responsibility for organising the Barnett formula in relation to apprenticeships? Am I right in thinking that that is the mechanics of this case?

Of course, the apprenticeship levy came out of the blue and without consultation—a point that we made very forcefully in an earlier debate—when the Assembly had already devised a very positive and constructive apprenticeship policy, envisaging no fewer than 100,000 places over the Assembly period and a budget of some £110 million. Now I understand that—and I am grateful if this is the case—as a result of the announcements and the fact that the Assembly knows that some of the apprenticeship levy money is going to be Barnettised, it has increased the present budget from £110 million to £125 million. That is a significant and important additional contribution to the Welsh economy. So on that side, I can welcome what has happened. But alongside that, we still do not know what the cost of the levy will be to the companies, public bodies and major utilities operating in Wales and how much of it they will be able to recover, one way or another. Yet again, I put the point in the form of a question because I have heard of some of these figures only at second hand. I hope the Minister, when he comes to reply, will be able to give us a much more authoritative account.

As I understand it, one assessment has been that the apprentice levy is going to cost the public sector in Wales some £30 million. In fact many organisations, public utilities, public bodies and companies, frankly, are treating the levy as an employment tax. They cannot see how they can retrieve the sorts of sums they are going to be levied with in any form of apprenticeship scheme that is going to be available. For example, what is the cost of this levy going to be to our 22 local authorities? Am I right in thinking that a county such as Pembrokeshire is going to pay some £750,000 a year as a result of the levy, and Powys about £600,000 a year? Multiply that by the 22 local authorities and you wonder how those authorities can possibly reclaim, through the levy, anything like the amounts of money they will pay. Can the Minister clarify and identify for us what the cost will be to a whole range of public bodies, utilities—I am going to refer to utilities in a minute—local authorities, the National Health Service and the Welsh Government themselves, which are all going to pay this levy? I fail to see how, somehow or other, we are going to be a beneficiary of this arrangement.

I raise one other major anomaly. We have very large national utilities that stretch across Scotland, Wales and England. According to one figure I have seen, some 75% of the employees of these major utilities—the energy companies, et cetera—are in the devolved Administrations. That means they can claim only 25% of the apprenticeship levy that they are going to pay through the English voucher system. Again, I would like to know how this is going to be sorted out. The situation is muddled and lacks the transparency the noble Lord, Lord Wigley, spoke about. We are flushing out greater transparency but it is still not sufficient, and I hope that we can use the opportunity of debating this amendment to seek much greater clarification.

[Lord Kinnock (Lab)]

My Lords, I shall follow on from my noble friend Lord Rowlands on the issue of the apprenticeship levy and very briefly and simply make the case for reconsideration of the policy being implemented now by the Government in both the public and private sectors.

I believe that within the formulas currently being employed—and this applies very particularly to Wales because of our substantial local government and public sector, for various historic and structural reasons—there should be better treatment for both private and public employers who are already proven good trainers. There is insufficient discrimination in the way the system is intended to operate now to give higher rebates or greater inducements to improve apprenticeship training, numerically and in qualitative terms, because those who are already good trainers, who have the custom and habit of making substantial provision for the training of new generations of skilled personnel, are simply not getting rewarded as they should for good performance, and for their strong intention to continue with that good performance, by comparison with employers who are and will be levy payers who have a much weaker record of the employment and development of apprenticeship skills. I make that plea in the context of this Bill because it has direct relevance.

There was a time, a very long time ago, in the early 1990s, when I had various obligations in my mid-life crisis of being leader of the Labour Party. We developed an apprenticeship levy scheme that was deliberately constructed in order to reward public and private sector companies and institutions with good records of apprenticeship performance and to finance their bonus, as it were, out of the levy on those with weaker performances. So there was a dual spur of inducement to improve apprenticeship performance in rewarding those who had good records—and intended to improve upon them—and in the minor penalty, but nevertheless a penalty, on those who had no such record of good performance. There was an inducement for them to reduce their levy obligations by improving their performance.

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[Lord Bourne of Aberystwyth]

The rules certainly apply equally throughout the EU but you have to establish that there is a competitive element. The distance from Edinburgh to Newcastle, which would be the next nearest airport where there is no devolution of APD, is considerably longer—and, I think, is a considerably tougher journey—than that between Cardiff and Bristol. I think noble Lords would accept that. I suspect that it is longer than the distance from Cardiff to Birmingham as well, so there is that difference. In Northern Ireland there is a different issue. The issue there concerns the presence of an airport in a different member state rather than within the same member state. Therefore, the rules are the same but obviously the geographical issue is somewhat different.

[Lord Kinnock]

I say to the Minister as a matter of record that I would gladly continue with the situation of the UK being subject to the state aid rules of the European Union, and retain membership, than have any other kind of relationship. That being said, however, the point made by my noble friend is absolutely valid; namely that within the United Kingdom a disparity of treatment is allowed under state aid rules because the authorities concerned have been able successfully to argue—rightly, in my view—that the market is not distorted by having arrangements in Scotland and Northern Ireland which differ from those in the remainder of the United Kingdom. Given the argument to which I referred in passing about the area to be served particularly by Cardiff if it were able to dispense with the passenger levy, I believe that under the current state aid rules it could certainly be argued that there is no distortion of the market because the form of competition that exists between international airports is not such as to be distorted by the operation of a different levy system in Cardiff.

[Lord Bourne of Aberystwyth]

My Lords, I hear what the noble Lord says. I think he would accept that it is a case of defining where there is a competitive market. The point I was making is that I think it would be much more difficult to suggest that there is a single market between Edinburgh and Newcastle in relation to air travel than there is between Bristol and Cardiff. I think that, factually, that must be the case. If you live in a suburb of Edinburgh, I do not think you would lightly consider going to Newcastle to catch a flight whereas, if you live in a suburb of Bristol, you might consider going to Cardiff and vice versa.

However, as I say, that is not the only argument that I am deploying. The point about giving a special tax status to Cardiff is the issue here. The Government cannot subscribe to that. However, we acknowledge that we will revisit air passenger duty at some stage. It may be appropriate to do so and decide how we approach it across the whole country as Brexit approaches, and in the light of decisions made on Heathrow and Gatwick. However, in relation to the specific issue, I am afraid that I cannot give any comfort to noble Lords who want me to move further than I have indicated.

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[Lord Kinnock]

My Lords, there are many issues on which I find myself in agreement with the noble Lord, Lord Balfe. There used to be more, it must be said, in a different political lifetime, but I greet with some dismay the fact that I have to diverge from him on this issue, simply because he is wrong. I particularly pursue the point made in her intervention by my noble friend Lady Morgan. The noble Lord, Lord Balfe, used the term “mission creep” to describe Amendment 90. Of course, that can be employed as a derogatory description of any development. If we put it in the context of devolution, however, we could categorise devolution entirely as “mission creep” because the whole proposition on which it has been based in this country—and perhaps, indeed, in biology, from which it derives—is that there will be an accretion of competences as time passes and the sophistication of devolved Administrations and legislatures takes place.

[Lord Balfe]

I wonder if the noble Lord recalls our jointly campaigning on the Welsh referendum in the 1970s. We were on the same side, of course, but presumably where he is now is the definition of mission creep.

[Lord Kinnock]

No, it is the definition of the fact that when confronted with reality, I try to make it work. Consequently, while I retain some reservations about the whole way in which devolution is taking place in the United Kingdom, I am utterly in favour of decentralisation of administration and decision-making, which any democrat must be, but would quarrel with the sectional and selective form of devolution that is taking place. I would argue on another occasion that, had we undertaken in 1979, let alone in the 1990s, the form of devolution that I and some of my colleagues, including my noble friend from Pontypool, were then advocating, there would have been devolution throughout the whole of the United Kingdom. Perhaps we would not be confronted with the constitutional mismatches and disequilibria that confront us now, especially when we are faced with the prospect of the disaster of Brexit. I will return to that on a different occasion.

I say to the noble Lord, Lord Balfe, that the accretion of competencies that has taken place is in the nature of devolution. Indeed, the Minister could take justifiable credit for producing a Bill that assists in the clarification and strengthening of the whole devolution process. I hope that the noble Lord, Lord Balfe, will welcome the redemption of the Conservative Party, which, back in 1979, took a view that was almost as enlightened as mine on the issue. The most important point—and it is fundamental to this amendment and this Bill—is that the argument in favour of Amendment 90 is that those powers currently exist and they manifestly work. I am therefore employing, in a sense, a conservative argument in saying, “If it works, don’t fix it”.

What happens in Wales—and has happened for several years past—is that the powers advocated for retention in this current set of arrangements for devolution should remain: not that there should be mission creep, but restoration of the status quo. I say to the noble Lord, Lord Balfe, that surely, in his changed political prism, he would recognise and wrap his arms around the principle of the maintenance of the status quo that works. It is on that basis that I hope the Minister will give further consideration to these arguments and retain a set of arrangements that work, that are warmly endorsed by everybody involved in Wales, and that do not constitute the difficulty of definition suggested by the noble Baroness, Lady Finn, in discriminating between public and private employers. The terms on which this measure, if accepted, would be retained, properly describe where the responsibilities and obligations would lie and be exercised. It works now; do not fix it.

[Lord Bourne of Aberystwyth]

My Lords, I thank all noble Lords who participated in the discussion on these amendments. I will begin with Amendments 75 to 77 and 79, which seek to broaden the circumstances in which the Assembly could legislate in relation to reserved matters. I will first deal with an issue that was raised by the noble Lord, Lord Wigley, concerning the phrase,

“ancillary to a provision of any Act”.

I took him to mean that this was not provided for in the Bill. It is in fact expressly provided for in Clause 3, in subsections (3)(a) and (b) of new Section 108A. It says,

“subsection (2)(b) does not apply to a provision that —

(a) is ancillary to a provision of any Act of the Assembly or Assembly Measure or to a devolved provision of an Act of Parliament, and

(b) has no greater effect otherwise than in relation to Wales, or in relation to functions exercisable otherwise than in relation to Wales, than is necessary to give effect to the purpose of that provision”.

So there is express provision in relation to “ancillary to” and how that would operate, and I hope he finds that of some comfort.