Wales Bill

Lord Murphy of Torfaen Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Monday 7th November 2016 Lords Chamber

Debate on whether Clause 17 should stand part of the Bill.

[Lord Murphy of Torfaen (Lab)]

My Lords, I beg to move that Clause 17 does not stand part of the Bill and in so doing apologise for the absence of my noble friend Lord Hain, who is unable to be with us today. I am glad to say that my noble friend Lord Kinnock, who has also signed this Motion, is with us this afternoon.

It is just over 20 years ago now that the people of Wales voted in the referendum to establish a Welsh Assembly. It is just over 20 years ago that the people of Scotland voted to establish a Scottish Parliament. It was at that point, two decades ago, that the people of both countries were asked about the nature of the devolution that they wanted. In Wales, income tax was not an issue. In 1997, when the people of Wales voted, as they did, narrowly for an Assembly, it was not to have a system of income tax. On the other hand, the people of Scotland voted in favour not just of a Scottish Parliament but also of powers to vary income tax in that country, even though they have never done that.

The purpose of this probing amendment—and it is a big probe—is to find out why the Government have changed their mind since the previous Wales Bill. That Bill, just a couple of years ago, said that if income tax powers were to be introduced in Wales then the people of Wales would be asked their views. I suppose, in a way, we have had a lot of referenda of late, which have caused all sorts of difficulties and problems. Nevertheless, the principle of asking the people of Wales whether they want income tax powers for Wales is no different from what was asked in 1997 of the people of Scotland. Now, however, we have a proposal in this Bill to abolish that question. The people of Wales will not in fact be asked to decide whether they want income tax powers for their Assembly or whether they want the Assembly itself to agree to the principle of income tax raising powers for the Welsh Government and Assembly. I want to find out from the Minister why this change took place and, indeed, what mandate there is for this change to occur.

The second reason why this issue is important is that there is a good, sound economic and financial reason why the people of Wales should not be burdened by an extra income tax. I understand the issues of accountability, and that was the main principle that the Government and others have argued: that there should be this income tax provision. However, given the Minister’s vast experience in this area, I am sure he will understand that Wales is not a wealthy country by comparison with England. Probably thousands more wealthy people live in the county of Surrey than in the whole of Wales. Therefore, the resource base in Wales for income tax is very low indeed, but the burden upon the people would be high were an income tax to be raised in Wales alone.

My noble friend Lord Hain is keen to expostulate that, if income tax is levied at a United Kingdom level, it is properly and fairly distributed among the less wealthy parts of our country. Therefore, Wales benefits from that fair distribution because we are not as wealthy as the south-east of England. That is an important issue to consider when we look at whether income tax should be devolved. Also, if income tax were to be raised in Wales—whatever the levy, be it 2p or 3p in the pound—if all that did was plug a gap because the block grant had been reduced, that, too, would be pointless. If income tax is to be raised, it should be extra and above the block grant allocation—the Barnett formula, flawed as it is—as my noble friend Lord Rowlands indicated.

The third and final reason why the Government should say why this change has been introduced is that they are in the middle of negotiations with the Welsh Government on a fiscal framework for Wales. That is a vital discussion and an important negotiation. If income tax is to be partly devolved to Wales, the onus lies on the Government to ensure that the fiscal framework is so devised that that inequality between Wales and the rest of the United Kingdom is recognised and any block grant or Barnett formula ensures that Wales has a fair deal. For those reasons, I ask the Government to rethink this measure and I shall be interested to hear the Minister’s reply.

[Baroness Humphreys (LD)]

My Lords, before contributing to this Clause 17 stand part debate, I apologise to the Committee, and to the Minister in particular, for not having taken part in the debate at Second Reading.

I welcome the Government’s decision to remove the requirement for a referendum before devolving powers over income tax to the National Assembly for Wales. I am afraid that I have to take issue with the noble Lord on the Labour Benches, who still sees the need for a referendum.

Our democratic institution, the National Assembly, commenced 19 years ago and successive Bills have conferred increasing powers on it. The aim of this Bill should surely be to further build that democratic institution by providing it with the powers it needs to do its job. Along with those powers, there must also be a means of providing the Assembly’s electorate with the opportunity to hold the institution to account. For me, these two factors—power and accountability—are the basis of democracy. Providing the Assembly with powers over partial income tax devolution, which brings with it the opportunity for transparency and accountability without holding a referendum, should be a mark of the confidence of this House in the Welsh Government’s ability to carry out their functions. The Bill should be about indicating a clear way ahead for the Assembly to provide the people of Wales with the mature and confident democracy we want and deserve, not about placing further obstacles in the path of their progress.

I am tired of living in a country which has had to hold out the begging bowl to the Treasury to enable it to receive funding via its annual block grant. I am tired of hearing Welsh Ministers blame the UK Government for every shortfall in funding. But, most of all, I am tired of there being no means by which I, as a Welsh elector, am able to hold the Government of my country to account for the way they raise and spend their revenue.

--- Later in debate ---

[Lord Murphy of Torfaen]

Obviously, I shall not oppose the clause standing part, but I shall make two points in response to the debate. First, I have never felt particularly deprived as a Welsh taxpayer and citizen by not having extra income tax for Wales. In the 30 years that I represented a Welsh constituency, not a single representation was made to me about this issue. In the five years when I was Secretary of State for Wales, not one Welsh Minister ever made representations to me about the need for income tax. However, the issue is not about the need for income tax—it is about the need for a referendum. That is what this resolution is about.

[Lord Thomas of Gresford]

The noble Lord seems to think that this is about additional income tax but we are talking about tax-varying powers. They could go up or down or they could stay the same, but they would give a separate stream to the income of the Welsh Assembly, which would assist in borrowing. What disappoints me in the Minister’s reply is not to hear some idea of the fiscal framework. I wonder whether the Welsh Government have ever put forward a variation on the Barnett formula. We all oppose the Barnett formula in one way or another, but I have never heard the Welsh Government suggest an alternative way in which to raise money, other than the Barnett formula. Can the Minister say something about the broader picture?

[Lord Murphy of Torfaen]

I had not quite finished my remarks—I thought the noble Lord was intervening on me. The issue is about the principle of a referendum. Right from 1997, the people of Wales agreed on a devolution settlement. In 1979, my noble friend Lord Kinnock and I disagreed with the idea of a Welsh Assembly. Twenty years later, we agreed with it—and, as the Minister himself said, in 2011 there was a referendum to change that settlement. I approved of it, I agreed with it and I supported it. That gave legitimacy to the change, because at the end of the day the people of Wales agreed.

I suspect there has been a change in the past 18 months because, after all, this is about a change in the current law. It is not about introducing something but about abolishing something: the right of the people of Wales to have a referendum on income tax. My guess is that it has nothing to do with the spread of devolution or the other issues to which the Minister referred; it is about their thinking that they would not win it. But the principle of the referendum would give it that legitimacy. Indeed, if the Government and others thought it would be hugely popular, what is wrong with a referendum on it? If we had one on the powers, we can have one on income tax. The Minister has not explained why the Government have changed their mind about the principle of a referendum in under two years. That is a pretty rapid change, and there must be other reasons lying behind the Government’s views. At the end of the day, if the people of Wales want income tax variation—and, by the way, it is not extra money. I reject that idea; I do not think for one second that any income tax powers will produce a penny more for the people of Wales, because the block grant will be reduced. That imposition has been put on a country that is poorer than England. Having said all that, I shall not push this to a vote this evening.

[Lord Thomas of Gresford]

In Committee, I think I am entitled to speak as many times as I wish. I apologise to the noble Lord, Lord Murphy, for interrupting him in full flow, but I still look to the Minister to give us some idea at this stage of how he sees it. What is the future fiscal framework? What does he have in mind? Will it be a deduction from the block grant, as the noble Lord, Lord Murphy, suggests, or will it not?