Commission on Devolution in Wales

Lord Murphy of Torfaen Excerpts

Thursday 3rd November 2011 Commons Chamber

[Paul Murphy (Torfaen) (Lab)]

It is always interesting and a pleasure to follow the hon. Member for Monmouth (David T. C. Davies). I am not a great fan of Henry VIII, for obvious reasons. I agreed with some parts of the hon. Gentleman’s speech and disagreed with others. The thrust of his argument, I think, was that he was not keen on the Silk commission and its activities. I remind him that it was the Secretary of State for Wales who took the responsibility to initiate the commission, as she told us today. Government Members really have to get their act together on what they do and do not want.

I welcome the commission and I certainly welcome its members. I have known Paul Silk for at least a quarter of a century. I know all the other members in one capacity or another. I think that they are excellent people who will doubtless do a very good job. It would have been better, however, if the House of Commons had debated this issue before the commission’s terms of reference had been agreed, so that Members, including me, had the opportunity to contribute the ideas that are put before the House this afternoon.

I warn this House, my colleagues in the National Assembly and, I suppose, the members of the Silk commission that I, like the hon. Member for Monmouth, have some misgivings, warnings and suspicions about what lies behind this initiative. As with the Bible, people have different interpretations. Wars have been fought on interpretations of the Bible, but in this case people have different ideas as to what the Silk commission should or should not do, or as to why it should do it in the first place.

The first point to make is that the Secretary of State mentioned “consensus” at least six times. My right hon. Friend the shadow Secretary of State referred to the fact that there has been no consensus on constitutional issues in this House of Commons since the coalition Government took over. So I find it strange that we are now going to have consensus on this commission, given that we did not have consensus on the most important constitutional development that Wales has seen for generations: the 25% reduction in the number of our Members of Parliament. That is what I am concerned about. How can we accept that the Secretary of State or the Government are serious about consensus given not only that they did not give us time to debate that matter in the Welsh Grand Committee, as she knows we should have done, but when various debates were held in the other place, any sort of so-called consensus fell to bits and the decision was made anyway? Why should we, at this stage, believe that there is consensus on the Silk commission?

[Alun Cairns]

The right hon. Gentleman makes an extremely important point about consensus and it is a strong message that needs to go to the Silk commission, but is not the original root of all these inconsistencies that we now face the lack of consensus in 1997, when Labour let the genie out of the bottle and we started on the devolution road? I am mixing my metaphors, but I hope that I have made the point.

[Paul Murphy]

The hon. Gentleman knows that historically I was opposed to devolution—I changed my mind as the years went by—but we had to accept what the people of Wales decided. In 1997, they decided on devolution, albeit by a small majority—we must remember that the Conservative party did not get a majority of Members of Parliament, but we still have a Conservative-led Government—and in the referendum held earlier this year the overwhelming view of people in Wales was that there should be extra powers. It was the people who decided what they wanted in the end, and I agreed with them this time.

I repeat that we do not want to hear about consensus, given that that was abandoned by this Government when they introduced the Bill to reduce the number of our Members of Parliament. For the first time since 1832 we will have fewer than 40 Members of Parliament representing Wales in this House. I am not arguing about the nature of equal constituencies—that is for another debate—but I am saying that the reduction from 40 to 30 in the number of Welsh MPs reduces the influence of Wales within the United Kingdom. I will address that in a few moments’ time.

Part I of the commission’s remit is to deal with money: the financial responsibilities and the remit of the Welsh Assembly. We are told that this is all about accountability, but the hon. Member for Vale of Glamorgan (Alun Cairns) just referred to the devolution settlement of 1997. Such a settlement also took place in Scotland and later in Northern Ireland, where I played a part. In all those settlements that issue of financial accountability was raised, and it was argued by some, “If a parish or community council can raise revenue, why cannot a Government in Edinburgh, Belfast or Cardiff do so?”

When I chaired the talks in Northern Ireland on whether there should be income tax powers in Northern Ireland, the meeting lasted less than an hour. People in Scotland decided that they would have the possibility of tax-varying powers, but those have never been used. We in Wales rejected this from the beginning, and there was a reason for that: the resource base of Wales is much lower than that of Scotland—the resource base of Northern Ireland is even lower than that of Wales—and therefore the amount of money that could be raised by income tax in Wales or Northern Ireland, and, to a certain extent, in Scotland, is infinitesimally smaller than the amount that could be raised in England. This proposal was therefore abandoned.

The idea of how we finance our devolved Administrations, therefore, came down to the idea of the block grant. That system is not unique. The hon. Member for Monmouth (David T. C. Davies) referred to asymmetrical devolution, and that is what occurs in Spain, except that there they have devolution everywhere. They get their money through a system of distribution of block grants and, as my right hon. Friend the Member for Neath (Mr Hain) said, they are able to ensure that there is proper distribution of money so that poorer areas are helped by richer areas such as Catalonia.

[Hywel Williams]

There is of course the exception in Spain of the Basque country. I am not arguing for us to adopt that model, under which the Basque country is taxed and money is sent down to Madrid, rather than the other way around.

[Paul Murphy]

Yes; I am talking in general terms and that may well be an exception. A block grant, based on need, going to various parts of the devolved administration is the system that was decided on. That is why we have to be very careful; we tinker with this at our peril.

An issue on which the Secretary of State and I had an exchange back in May was about whether, were there ever to be income tax-raising or varying powers in Wales, we should have a referendum to approve that. She stated in her answer to me:

“He is quite right that giving tax-raising powers would involve another referendum”.—[Official Report, 11 May 2011; Vol. 527, c. 1148.]

It would not be constitutionally right or proper for there to be tax-raising or tax-varying powers in Wales, so far as income tax is concerned, without the people’s saying so.

[Roger Williams]

I do not think it has ever been suggested that the block grant should be replaced entirely by tax-raising powers. Most systems rely on a hybrid system, as with local government systems, in which there is a block grant as well as tax-raising powers.

[Paul Murphy]

I think that if the National Assembly for Wales ever had any tax-raising powers, the system would involve such hybridity. However, I say to the hon. Gentleman that there is a concern, which I suspect is shared by people in Northern Ireland, although the comparison between Northern Ireland and Wales can go only so far because there is a land border between Northern Ireland and another sovereign state on the island of Ireland and, obviously, we have no such border. It is suggested that if a corporation tax were introduced in Northern Ireland, although some interesting benefits could result from it, the block grant would be reduced correspondingly. If that is what is happening in Northern Ireland I would say to the Silk commissioners to beware, because the same could happen in Wales. We might be told, “You can have this tax or that tax, but we’ll cut your block grant,” and that will address the accountability gap that has been referred to. That would be dangerous because it would mean that what we are entitled to through the United Kingdom taxation system would be reduced by even more than is the case at the moment.

In recent months, other Members of Parliament have said in the House of Commons, including, doubtless, in this debate, “Wales, Scotland and Northern Ireland do much better than we do in the English regions. Look at the Barnett system that they have had for all these years. Look what they can do in Scotland—they can change student fees and pay to have their old people in homes and all the rest of it.” But those people forget that those countries might not do other things in the way that England does. That is what devolution is all about.

The thrust of that argument is that we in Wales are somehow or other getting more money than any other part of the United Kingdom. That is the case for some parts of the UK, but an interesting fact was referred to by the Holtham commission and in the House of Commons note in relation to the Oxford Economics report, which my hon. Friend the Member for Swansea West (Geraint Davies) mentioned. If we say how much money goes to Wales from central Government and how much money is raised in Wales, of course there will be a deficit. In Wales, the deficit between the money raised and the money going in is £14.6 billion. Some might say that that is a great deal of money, but in the south-west, across the Bristol channel from us, the deficit is £15.6 billion. In the west midlands, across the border from Powys, it is £16 billion, whereas in Yorkshire and Humberside it is £16.9 billion and in the north-west of England it is £23.9 billion. Let no one in this House, or anywhere else, tell us that somehow or other we are getting some sort of better deal in Wales than the English regions. It simply is not true.

There are two other issues on finance including, first, the Barnett formula, on which my right hon. Friend the Member for Neath touched. I cannot for the life of me understand why it is impossible for the Silk commission to consider the Holtham commission and, indeed, what happens to Barnett as part of its remit. I am not suggesting that it should hold up discussions between the Secretary of State, the National Assembly for Wales and the Welsh Government, but to say that a commission that is dealing with the Assembly’s financial responsibilities cannot look at how the block grant is dealt with is daft.

[Roger Williams]

I agree, but it has been suggested that such an approach would not be welcomed by the Welsh Assembly Government.

[Paul Murphy]

That is for the two Governments to discuss. In the House of Commons, we are debating what it is sensible for the Silk commission to consider. I said that I did not want that to hold up any discussions that are under way, because there are implications for Scotland and Northern Ireland, but it is crazy that that cannot be discussed while all the other issues affecting money are being discussed.

I cannot understand from the response of the Secretary of State to the hon. Member for Monmouth the difference between current and future borrowing. Either one agrees with the concept of the Welsh Government being able to borrow, or one does not. The Northern Ireland Executive and the Scottish Government will be able to borrow, and local government can borrow, so why on earth can the Welsh Government not borrow? It is quite incongruous that that is the case, and I am glad at least that they can discuss borrowing, even if they cannot discuss borrowing at the moment.

Part II of the terms of reference is about powers and functions, and I agree that there is a case for looking at incongruous and difficult cross-border issues, which need to be tidied up. Most Members of the House of Commons would be wary of transferring policing and justice to the Welsh Assembly. We have a different system from Scotland, and we are so bound up with the English judicial and legal system that I would not agree with such a transfer. Another issue that will not be discussed at all by the commission—this is why it would have been useful for the House of Commons to discuss its terms of reference before we had the debate—is the way in which the Assembly is voted in. If there is going to be a reduction in the number of constituencies, presumably to 30, with a relationship between Parliament and the National Assembly, which is voted on, it is unusual that that issue should not be debated or discussed by the Silk commission, particularly as any decision on how we elect the Welsh Assembly should be based on a proper mandate at a general election. I hope that the Secretary of State and her Government will not even contemplate discussing those matters until after the next election.

[Nick Smith (Blaenau Gwent) (Lab)]

I am interested in my right hon. Friend’s point about constituencies and coterminosity. Wherever possible, Assembly constituencies should align closely with boroughs and parliamentary constituencies, because that leads to better government, better democracy and better services.

[Paul Murphy]

But the Parliamentary Voting System and Constituencies Bill had nothing to do with better democracy and everything to do with partisanship. The Government were so stubborn in the other place in refusing 10% flexibility that taking local government boundaries into account is hardly possible because of the rigidity that has been introduced in the system. If there had been consensus, that might have been considered, but there was no such consensus.

Finally, we have to be careful that the proposals are not based on a hidden agenda from the Government—what I call the Trojan horse. The hon. Member for Monmouth referred to the West Lothian question, and the Silk commission’s hiving off financial responsibility to the Welsh Assembly, and perhaps—we do not know for sure —taking away the block grant is part of the agenda of the new Conservative party. It used to be the Conservative and Unionist party, but it has long since ceased to be Unionist.

The West Lothian question means that the Government want to have two classes of Members of Parliament, not British-United Kingdom Members of Parliament who speak on everything because we have been elected by our electors to talk about the United Kingdom—every part of it: Northern Ireland, Scotland, Wales and England. I referred to the complaints time and again that we are getting too much money in Wales and Scotland. Perhaps the most obvious thing is that out of 117 Members of Parliament representing constituencies in Wales, Scotland and Northern Ireland, only nine come from the Conservative party. It will probably be wiped out at the next general election in Scotland and who knows where else. The combination of all those things, to me, means that the Conservative party has now become a party of little England. I am sure the hon. Member for Monmouth, who represents a Welsh constituency, would agree.

[David T. C. Davies]

Does the right hon. Gentleman share my concern, then, about colleagues in his own party who refuse to appear before the Welsh Affairs Committee to discuss devolved issues? Does he not think that that smacks of a little Wales mentality?

[Paul Murphy]

No, I do not. I accept, though, that there are people in my own party who may agree with some of the things that I think the Conservative party is guilty of—that is, not being awfully worried if Scotland and Wales left the Union. I have been thinking that for over a year now.

The New Statesman published a very good editorial last week, which finished with this:

“For the Tory right, an independent England—economically liberal, fiscally conservative, Eurosceptic, Atlanticist—is an attractive prospect. The United Kingdom, one of the most successful multiracial, multi-faith, multinational states the world has ever known, remains a cause worth fighting for. Yet, over the past weeks, fixated by the EU, the Conservative and Unionist Party seemed less aware of this than ever.”

The Trojan horse is not Welsh nationalism, but the English nationalism of the Conservative and former Unionist party.

[Mrs Gillan]

I am enjoying the right hon. Gentleman’s contribution and I know that his words will be passed on to the Silk commission. I assure him that I remain a firm Unionist, not the sort of Tory that he describes.

On a point of information for him on the borrowing powers, the Welsh Government have the ability to borrow under the powers that they inherited from the Welsh Development Agency. The bilateral talks on those borrowing powers are about how that borrowing could be used more effectively. What the Silk commission has been entrusted with is examining new borrowing powers in the context of the package of tax and borrowing powers. I hope that that clarifies the position on borrowing, which I know has been the subject of some speculation.

[Paul Murphy]

Indeed; I am grateful to the right hon. Lady for telling the House that. In a sense, it confirms my view that there is confusion about what is happening with regard to Barnett and to borrowing. There appear to be simultaneous discussions on borrowing and on what happens to Barnett on the one hand, and the Silk Commission on the other, whose job it is to look at financial responsibility as well. I am saying, “Don’t stop the talks.” It is obvious that Governments have to talk to each other, particularly as we live in difficult times, but I am also saying—she has clarified the position with regard to borrowing—that it is important for that to be part of the Silk commission’s remit.

Although I welcome the Silk commission, I warn the people of Wales that the position is not as simple as it might seem on the surface. I believe that the Secretary of State is generally in favour of the Union, but—judging by the actions that have been taken in the House of Commons over the past year or so—I do not believe that that is true of much of the rest of her party. Those of us who are genuinely in favour of the Union want the Silk commission to be about helping the people of Wales ultimately to have a better deal from the United Kingdom.

[Roger Williams (Brecon and Radnorshire) (LD)]

It is always a privilege and a challenge to follow the right hon. Member for Torfaen (Paul Murphy). He put forward some considered and powerful arguments that I am sure the commission will read and take into account when they set out their programme for the work that they have to undertake.

As we look forward to Armistice day and remember the men and women who have made a sacrifice for this nation, we also remember the Welsh men and women who are currently serving in the British Army. Just today I had an e-mail from Brigadier Russ Wardle, who recently finished his tour of duty as brigadier of 160 (Wales) Brigade in Brecon. He told me that 40 servicemen are still in Baghdad performing important roles, training the Iraqi army and police in the duties they will take up shortly. I will meet the new brigadier, Brigadier Napier, shortly. I am so pleased the 160 (Wales) Brigade will stay in Wales, contrary to speculation just before the Welsh Assembly election.

I thank the Secretary of State for securing this important debate, which has already proved its worth. It is a great day for Wales. It is fantastic that there is cross-party consensus on the commission’s terms of reference to take a considered view on the funding and future of the Welsh Assembly. Liberal Democrats have consistently supported a commission to look at the funding arrangements between Westminster and Cardiff, and it is to the credit of the coalition Government that the Silk commission will go ahead after 13 years of Labour inaction on this crucial issue. Notably, the three promises on Wales made in the coalition agreement—the housing LCO, the further powers referendum and the commission—have now been met, and I commend the right hon. Lady for that. With good Conservative support, Liberal Democrat policies are helping the people of Wales.

[Paul Murphy]

The hon. Gentleman refers, rather provocatively for him, to Labour inaction and the fact that great events have taken place, but does he accept that it was a Labour Government who brought in devolution in the first place?

[Roger Williams]

I absolutely accept that and am sure that he would accept that Labour had the full support of the Liberal Democrats, including those in Wales. Indeed, my predecessor, Richard Livsey—sadly, deceased—played an important part in that and, I am sure, would have liked to play a part in the Silk commission, too.

That is not to say that the Secretary of State’s work is over; many other things need to be done for Wales, including nurturing and supporting the devolution settlement. I look forward to working closely with her in the near future.

--- Later in debate ---

[Mr Wayne David (Caerphilly) (Lab)]

I am long-standing supporter of devolution. I believe that it is fundamentally correct for decision making to be as close to the people as is practicable. I consider myself to be a proud Welshman, and British, and I am also an internationalist and a European. I see no contradiction between those various identities.

In practical terms, I strongly supported the work conducted by Gerry Holtham, whose report is seminal. In particular, I strongly endorse his recommendation of the introduction of a Barnett formula, and I am pleased that that was in the Labour party’s manifesto at the last election. It would have been appropriate and sensible for it to be part of the wider consideration of fiscal issues. Nevertheless, that does not alter the fact that it is an important statement, and I look forward to its being acted on.

I welcome the establishment of the Silk commission. Like other hon. Members, I have enormous respect for Paul Silk, who has worked in the Assembly as well as in this institution. He is a long-standing occupant of the Welsh Room here in Westminster, and therefore, in some ways, follows in the footsteps of David Lloyd George. I also welcome the appointment of Sue Essex, whom I know personally and who has a profound understanding of finance and devolution. However, like my right hon. Friend the Member for Torfaen (Paul Murphy) and others, I have reservations about what might be the motivation behind some aspects of the establishment of this commission.

I think that the shadow Secretary of State, my right hon. Friend the Member for Neath (Mr Hain), has been very unfair on the Secretary of State for Wales.

[Paul Murphy]

Unfair?

[Mr David]

Yes, very unfair indeed. He asked how a Member from the south-east of England can have a proper understanding of the situation in Wales—but of course, as we all know, Chesham and Amersham is not in the south-east of England; it is in Buckinghamshire, which is a lot closer to Wales. However, I doubt whether that fundamentally alters the lack of understanding, let alone empathy, for the people of Wales on the part of our current Secretary of State. That is clearly shown in the way that the boundary changes that we are soon to see enacted were pushed through the House of Commons against the interests of democracy and without proper discussion in this House. Unfortunately, therefore, when the word “consensus” is used regarding constitutional matters, a question mark has to be put over whether that involves a genuine statement of intent.

I am concerned that the terms of reference are written in such a way that the work of the commission will be conducted within the parameters of the United Kingdom’s fiscal objectives. We all know what those central Government objectives are—to make cuts, cuts, cuts, and nothing but austerity, austerity, austerity. It is important to realise that when we are talking about fiscal matters regarding Wales, we are talking about not increased resources but fewer resources. The question is how that reduction in resources will be introduced.

We all know that Wales is very dependent upon the block grant, which has been cut by 1.3% since the Conservative-Liberal Democrat coalition came to power. The big danger is that there will be bigger cuts before too long, which is why the context of the commission is very important.

Another of the commission’s terms of reference is worth noting—the need to ensure consistency of fiscal powers within the UK. The hon. Member for Monmouth (David T. C. Davies) made the point that devolution, by definition, is asymmetrical, so why does consistency have to be a bedrock principle of the commission? We ought to recognise that whatever is proposed for Wales will be different from what happens in other parts of the UK, and so it should be.

My third and final reservation about the commission is the fact that Wales has historically been, and currently is, very dependent upon public expenditure. We all know that the Barnett formula and the block grant are important, but let us also recognise that there are other elements of public expenditure in Wales, which are often not recognised but are nevertheless crucial to its well-being.

One of the strengths of the United Kingdom is that, contrary to the nationalist interpretation of British history, Wales is not a subjected nation, under the heel of England. The reality is that there have been transfers of resources from the richer parts of the United Kingdom, particularly the south-east of England, to the poorer parts, and that is how it should be. That is the strength of the UK, and I would not like to see any measures adopted that placed a question mark over the integrity of the UK. Anything that did that would be not just a retrograde step for the concept of the United Kingdom, but potentially damaging to the people of Wales.

I mentioned Gerry Holtham, and we must recognise the importance of his in-depth analysis of the possibilities and options for the development of fiscal powers for Wales. In his introduction to that report, he stated:

“To be sure, economic reality and the integrity of the UK impose constraints on what it is practical or advisable to devolve.”

It is extremely important to bear that in mind, not least because he is an eminent economist but also because he is passionately committed to the principle of devolution. He is saying, in other words, that there is no point having devolution for devolution’s sake. We have to take a pragmatic approach of bringing power closer to the people, but we also need measures that enhance the material well-being of the people of Wales.

--- Later in debate ---

[Guto Bebb]

The hon. Gentleman was not in the Tea Room when I was there. I hope that he accepts my apology.

On part I, it is important that we consider the issue of fiscal responsibility. Some of the areas that the First Minister has said are appropriate for change are not acceptable, because they are not significant changes. For example, I do not think that the average person who votes in an Assembly election will be motivated to vote one way or the other because of a slight change in the aggregates tax. We need to look at proper fiscal changes.

[Paul Murphy]

Will the hon. Gentleman give way?

[Guto Bebb]

This will be the last intervention, because I need to finish.

[Paul Murphy]

The hon. Gentleman refers to significant changes. Does he accept that the most significant change in income would arise from income tax? Does he also accept that before that could be introduced, the people of Wales would have to decide on it in a referendum?

[Guto Bebb]

I am not sure whether the most significant change would have to be in income tax. There is an argument for changing the rates of employers’ national insurance contributions, which could be beneficial from a Welsh economic perspective. Whether the changes require a referendum depends on the range and the outcome of the Silk commission. I would not want to commit myself on that at this point in time.

The concept of fiscal responsibility is something that everybody in Wales should welcome. I find it difficult to understand how anybody in this Chamber who believes that the Welsh Assembly should have a degree of accountability to the people of Wales can be opposed to the concept of fiscal responsibility. I look forward to the findings of the Silk commission on part I. I believe that they will contribute to the debate. It is crucial that all stakeholders in Wales contribute to this debate, because otherwise we will end up with a discussion not dissimilar to what the hon. Member for Monmouth described.

Finally, part II deals with constitutional changes and what further boundaries we need to consider, beyond the changes that have already been made. It is important to state that we are talking about boundaries within policy areas, not physical boundaries. Several individuals I know who live in Oswestry are slightly concerned about the comment that we are looking to change the boundaries. Personally, I would be delighted to welcome back Croesoswallt—or Oswestry—to Wales, but I do not think that that is the intention of the Silk commission.

When we talk about boundaries, we are talking about whether there are aspects of the relationship between the responsibilities of the Assembly and those of Westminster that we need to look at again. As has been said, matters such as transport are not fully devolved. That may be a good or a bad thing, but the main arteries going in and out of north Wales and south Wales go from east to west. Therefore, if there were improvements to the A55 in Flintshire they would be wasted unless there were improvements to the M56 in Cheshire. There are clearly transport issues that need to be examined. We have also spoken about the fact that health is not fully devolved.

Finally, we need clarification on energy policy. The opportunity for economic and employment growth in Wales as a result of large-scale energy projects is something that we should all welcome. However, there is confusion over whether permission for such projects is granted by the Welsh Assembly or Westminster. Businesses looking to invest in hydro, wind power or tidal power need clarity about where the permission comes from and where the responsibility lies. That would be beneficial to the Welsh economy. I sincerely hope that that will be considered as the Silk commission moves on to part II.