Wales Bill

Lord Murphy of Torfaen Excerpts

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

In the meantime, however, because of the structural disequilibrium between Welsh tax growth and all-England tax growth, the very least that we should be seeking is fair comparisons between areas in England of similar industrial and economic structure and history to those in Wales, or, even more directly—and much more simply—we should make the comparison between Welsh rates of income tax growth and the English rate. Unless this basic equilibrium is addressed structurally and constitutionally, the disparities will continue to grow and, with them, the great disadvantages and some of the economic disincentives. So I ask the Minister, who I know is deeply committed to the basic well-being and future development of Wales, to give the most positive consideration to the proposal made by my noble friend.

[Lord Murphy of Torfaen (Lab)]

My Lords, as a co-signatory to my noble friend Lord Hain’s amendment, I support everything that my noble friend Lord Kinnock just said about the need to review the operation of devolving some income tax to Wales.

I congratulate the Minister and the Welsh Government on producing the fiscal framework. I defy anyone to understand it on their first or indeed second reading of it, but by the time you get to the third you get the general impression that it is an improvement in the finances for Wales over the last number of years. An improvement indeed: I have been living with the Barnett formula for three decades, and there is no question in my mind that the fiscal framework now before us is an improvement. However, there is no point in improving on the block grant if you then start losing out because of the income tax side of it, and that is the point that my noble friends have put. The important issue, as I am sure the Minister would agree, is that in the annual review of financing for Wales the impact assessment of this change will be very seriously examined. I am convinced that the comparisons between Wales and the whole of England mean that Wales could be disadvantaged unless we redress that in some way.

I support noble Lords who have dealt with the issue of Cardiff Airport. My noble friend Lord Kinnock, a former European Commissioner for Transport, put it distinctly: if we could give some advantage to Cardiff with regard to long-haul flights, that would not just be a benefit for Wales; it would benefit a whole swathe of England as well. I cannot for the life of me understand why the Bristol versus Cardiff argument applies in this case. Bristol has no runway capable of taking these long-haul flights. Cardiff has, and it is a very good runway. That could help the rest of the country as well as Wales, and I think the Minister must be persuaded that right across the House today people have said that this is a reasonable amendment that would not affect the Government’s position with regard to air passenger duty generally. I think the Government are wrong on that, by the way; if you devolve it to Northern Ireland and Scotland, you should devolve it to Wales too. Still, if Bristol is blocking this proposal, in the case of long hauls there is no block that the Government can actually agree to.

I hope the Minister will look favourably on all the different points that have been made today because they are made with the knowledge that over the last weeks and months the Government have accepted different points that have been put by Members of the House across the political spectrum. The Government have conceded on many issues, and I see no reason why they could not concede on this small but important point.

[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords who have participated in the debate on the amendments in this group. Much of their contribution has been persuasive and helpful.

I thank those who have acknowledged the progress made in relation to the fiscal framework and the agreement. I stress that the agreement has been made between the UK Government, by the Treasury, and the Welsh Assembly Government, via the Finance Minister and the Welsh Ministers in the Welsh Government. To that extent, this is something that the Welsh Government have welcomed. The noble Lord, Lord Hain, in a very fair analysis, said I had welcomed this agreement for the long term, which indeed I have. More importantly, perhaps, it was welcomed for the long term by Mark Drakeford, who said he regards the agreement as ensuring there will be,

“fair funding for Wales for the long term by implementing the funding floor recommended by the Holtham Commission”.

Those are his words. He is yet to give a full analysis, to be fair, but that is the press statement that he put out and it is notable that that is the view of the Welsh Government. I also stress that the Welsh Assembly will of course be having a say on the legislation in general when it considers the LCM, so no doubt we will be giving a view on this important part of the legislation, as well as the rest of the legislation, when it delivers that view. That is something that we anticipate.

I turn to Amendment 143A in the names of the noble Lords, Lord Hain, Lord Kinnock and Lord Murphy, which all three noble Lords have spoken to very persuasively. As I have indicated, we have a requirement under existing legislation, which we will take forward in relation to this new legislation, of an annual report that happens in November/December each year. We will seek to ensure that the impact assessment—the information that the noble Lords are seeking—is incorporated in that report. As I have indicated, it is partly the Treasury, partly the Wales Office and partly the Welsh Government; all three contribute separately to that report. I will seek to ensure that that information is there because noble Lords have made a very fair point. The Government have already published two such reports, so there is a template. Of course, I appreciate that the significance of the new income tax powers makes the next report somewhat different in nature.

--- Later in debate ---

[Lord Bourne of Aberystwyth]

I am sure I can and I will make endeavours to do so. Clearly, this is related to the way in which the levy operates. This is a matter being conducted from Westminster, so I will endeavour to get this information for noble Lords. What I cannot do is indicate how it will be spent. This is a matter for the Welsh Government and the National Assembly for Wales.

I turn now to Amendment 80 on air passenger duty. In doing so, I wish to say how sorry I am that the noble Lord, Lord Rowe-Beddoe, is not in his place because of indisposition. I am sure we all wish him a speedy recovery. I know that he has very strong views on this issue; I have discussed it with him on many occasions. The amendment was spoken to formidably by the noble Baroness, Lady Finlay, with other noble Lords speaking in support.

The Government have considered the case and options for devolving APD to the Assembly, as we committed to do in the 2015 St David’s Day agreement. From extensive debates in Committee, noble Lords will be aware that there is an issue about state aid, particularly in relation to but not limited to Bristol. The noble Lord, Lord Kinnock, correctly indicated a competitive element with Birmingham. There is a competitive element with airports in the United Kingdom which is obviously accentuated with those that are geographically proximate. While we remain members of the European Union there is clearly an issue with regard to state aid rules that cannot be lightly ignored. I assume that that will not be the position once we complete the Brexit discussions and implement it, but that is some way into the future. I put that important issue on one side.

[Lord Murphy of Torfaen]

Is it not the case, though, that the state aid argument would apply equally in Scotland and Northern Ireland?

[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.