Wales: Devolution

Lord Wallace of Tankerness Excerpts

Thursday 19th July 2012 Lords Chamber

[The Advocate-General for Scotland (Lord Wallace of Tankerness)]

My Lords, I start by joining others who have contributed to the debate in congratulating my noble friend Lady Randerson on securing it. It has been a welcome debate with welcome contributions from all sides of the House. I certainly know from recent debates in the Moses Room that there has been an appetite among a number of noble Lords who have contributed today for a debate on a Welsh issue in your Lordships’ Chamber. I therefore welcome this particular debate, which is very timely. I also welcome the constructive tone of my noble friend Lady Randerson, who herself had distinguished service in the Welsh Assembly, and in the contributions from noble Lords in all parties and the Cross Benches.

The Commission on Devolution in Wales, commonly known as the Silk commission, was set up by my right honourable friend the Secretary of State for Wales in October 2011 to review the present financial and constitutional arrangements in Wales. The commission has met nine times to date, most recently last week in Cardiff.

The noble Lord, Lord Howarth, queried the commission’s terms of reference. It is fair to point out that the Government sought to work collaboratively—indeed, succeeded in doing so—with the party leaders in the Assembly to establish the commission. It is supported by all four parties in the commission. The terms of reference were agreed by all four party leaders in the Assembly. They are similar in many respects to many of those of the Calman commission on devolution, on which I was privileged to serve during the previous Parliament. However, the Silk commission has a considerable benefit over the Calman commission as it has buy-in from all parties in the Assembly. Rather regrettably, the Calman commission did not have buy-in from the SNP Government in Scotland when it deliberated.

As has been indicated, the first part of the commission’s remit concerns improving the financial accountability of the National Assembly. The commission is looking at the case for devolving tax-raising powers to the Assembly and the Welsh Ministers. While Members of the Assembly are accountable to the electorate via the ballot box every four years, the Welsh Government and the Assembly as a whole are not accountable to Welsh electors for the money that they spend. They simply spend what they are given. This point was very graphically made by a number of contributors to the debate, not least my noble friend Lord Thomas of Gresford and the noble Lord, Lord Rowlands, who talked about representation without taxation.

The public, it is fair to say, have placed their trust in the devolved institutions in Wales in the 13 years since they were established. During that time, the Assembly has been seen to mature, culminating in the overwhelming yes vote in the referendum on further law-making powers in March 2011. However, as my noble friend Lord Roberts of Llandudno graphically reminded us, the original vote in 1997 was on a knife edge. I remember watching it on television in the small hours of the morning. The point made by the noble Lord, Lord Rowlands, is important: over time a consensus has emerged. That is probably reflected in the fact that all four parties were able to agree on the terms of reference and the setting up of the Silk commission.

However, the financial accountability of the devolved institutions in Wales has not changed. That cannot be right. My noble friend Lord Roberts of Conwy drew attention to the fact that existing bodies such as the National Audit Office and the committees of Parliament already exist. Obviously there is a role for them, and perhaps it is a role that has not been developed as much as it could be in achieving greater accountability for the way in which money is spent. With power comes responsibility. With the powers that the Assembly has acquired, Welsh Ministers should be responsible not just for spending the money but for raising some of the money needed to pay for the decisions which they make.

A number of comments have been made about the survey carried out by ICM on behalf of the commission and published earlier this week. It appears that the Welsh public agree with the need for greater accountability. I share my noble friend Lord Roberts of Conwy’s view that it is not always clear precisely what was said, given that a number of the findings do not seem to quite add up. Nevertheless, there was quite a clear finding that 66% of those surveyed were positive about the Welsh Government having the right to change the level of taxation in Wales, and 56% believed that doing so would make the Welsh Government more accountable.

The commission itself has a wealth of experience, being chaired by Paul Silk, a former clerk in both the Assembly and this Parliament, and comprises nominees from each of the four political parties in the Assembly: Sue Essex, the Welsh Labour nominee; Nick Bourne, the Welsh Conservative nominee; Rob Humphreys, the Liberal Democrat nominee; and Dr Eurfyl ap Gwilym, the Plaid Cymru nominee. In addition, there are two independent members, who are equally experienced: Dyfrig John CBE, chairman of the Principality Building Society; and Professor Noel Lloyd CBE, former vice-chancellor and principal of Aberystwyth University.

As we have debated, the commission has been looking at the possible tax and borrowing powers that could be devolved to the Assembly and the Welsh Government. These include powers in relation to landfill tax, air passenger duty and stamp duty, but they are in no way limited to those taxes. The commission’s terms of reference require it to make recommendations that are likely to have a wide degree of public support. In announcing the commission, my right honourable friend the Secretary of State for Wales acknowledged that it would have to consult widely to secure that support, not just in Wales but throughout the United Kingdom.

The commission’s call for written evidence closed in February this year and there has been a series of public meetings throughout Wales, starting in March in Swansea, ending in Flint in May and including every local authority in Wales in between. The commission has received written and oral evidence from a number of cross-border bodies—some referred to by the noble Lord, Lord Rowe-Beddoe—such as the Confederation of British Industry, the Institute of Directors and the Federation of Small Businesses. It has also held drop-in sessions to allow representations from Members of your Lordships’ House and of the House of Commons.

Further afield, the commissioners have met legislators and interest groups in Scotland and Northern Ireland to discuss the implications of ongoing developments in these countries on the commission’s work. These included, in Scotland, Sir Kenneth Calman, Scottish Government officials, members of the Scottish Parliament’s Finance Committee; and in Northern Ireland, the First Minister and Deputy First Minister and the Committee for Finance and Personnel.

I have no doubt that, in addressing its work, the commission will take into account some of the very important considerations that have been raised during our debate: issues such as tax competition and—as mentioned by my noble friend Lady Randerson and graphically illustrated with figures by the noble Lord, Lord Rowlands—the practical problem of the percentage of the population living very close to the Welsh-English border. This is much greater than the equivalent on the Scottish-English border, which itself brings its own implications and considerations when looking at tax. Indeed, the noble Lord, Lord Rowlands, mentioned the impact of using a tax-varying power of 3p in the pound on the purchasing power of poorer communities. That is the sort of consideration that one would expect that the commission might take into account.

As I said, the commission is expected to report on part 1 in late autumn this year, and the Government will consider its recommendations very carefully. The noble Baroness, Lady Gale, asked for a further debate. As she knows, that is not in the gift of Ministers, but no doubt the usual channels will look at this. My own view, and clearly that of the opposition Front Bench, and I am sure others in the Chamber too, is that it would be useful. Once we have some concrete proposals, having a debate would be a useful part of considering them.

My noble friend Lord Roberts of Conwy asked about a referendum. We think that this is probably jumping the gun at the moment, given that we do not actually know what the proposals might be. However, it is obviously an issue that would have to be considered in view of any decisions which the Government came to on the commission’s findings. Certainly at the moment, we believe it is premature.

After publication of part 1, the commission will begin work on part 2, which will look at the powers of the Assembly and modifications that may be needed to the boundary between what is devolved and what is non-devolved. The aim here is to simplify the settlement where possible and to make it work better. Again, the commission will need to consult widely and make recommendations only where they are likely to have a wide degree of public support. As we know, the Assembly has powers in 20 devolved areas, and it is for the commission to decide where there is a requirement to tidy up the boundary of the settlement. Any further changes to the settlement must be right for Wales and for the United Kingdom as a whole. In the course of this debate, we have heard references to water, prisons, police, local government finance and broadcasting. I do not think that there will be a shortage of matters for the commission to consider, but it would certainly be inappropriate to comment on these at this stage.

My noble friend Lady Randerson also talked about the structures of the different devolution Acts. There was a difference between the Scotland Act and the original Wales Act, subsequently the Government of Wales Act; and a different settlement again in the Northern Ireland Act. I did not wholly agree with the noble Lord, Lord Elystan-Morgan, when he said that the reservations in the Scotland Act were all relatively simple. Part of my job is to look at these regularly, and sometimes it can be quite difficult to interpret them. Indeed, a case has recently been referred to the Supreme Court on the extent of some of the reserved functions, so it is not straightforward.

[Lord Wigley]

The Minister will have noticed that several noble Lords raised the issue of borrowing powers. He is coming to that in a moment, I gather. When he does, will he address the question of the Welsh Assembly’s existing powers to borrow via the Welsh Development Agency Act? The problem is that the full sum is placed against the DEL allocation by the Treasury. If that could be lifted, it would enable that power to be used as it is now available in Scotland.

[Lord Wallace of Tankerness]

Almost on cue, I was about to turn to a number of the specific points that noble Lords raised in the course of this debate. What was described by at least one noble Lord as the elephant in the room is the Barnett formula. This, of course, is not part of the remit of the Silk commission, nor of the Calman commission.

I know it will disappoint noble Lords, but the Government made it very clear in the coalition agreement that the priority is to stabilise the public finances and that no replacement to the Barnett formula will be considered until the nation’s finances are back on track. However, I could not fail to hear the comments of everyone who contributed to the debate, I think without exception. Someone pointed out, although admittedly not in the context of what appears in the coalition agreement, that the Secretary of State for Wales had said that the Barnett formula was coming to the end of its life. However, I reiterate that the Government’s position is that the priority must be the stabilisation of the public finances.

[Lord Anderson of Swansea]

The Minister has said that the Barnett formula will be reconsidered only when the economy is back on track. Recently, the Prime Minister said that austerity will last until 2020. Does that mean there will be no substantial revision of the manifest injustices resulting from the formula until that time?

[Lord Wallace of Tankerness]

My Lords, I have described what was said in the coalition agreement for this Parliament. I do not think that anyone would be wise enough to predict the policy of any Administration, of whatever hue, in a subsequent Parliament. My noble friends Lord Forsyth and Lord Roberts of Llandudno were right to point out that the previous Administration did not address this either. Indeed, in their response to your Lordships’ Select Committee report, they stated that the Barnett formula:

“has a number of strengths”.

[Lord Forsyth of Drumlean]

There is unanimity throughout this House that Barnett has to be changed. Will the Minister explain the logic of the coalition agreement? What on earth has dealing with Barnett got to do with dealing with the deficit? Surely the Government are capable of doing more than one thing at the same time. I cannot see the linkage between addressing the Barnett formula and dealing with the deficit. The Barnett formula, if it is changed, is simply about the distribution of existing resources. It does not affect the deficit in any way. When the coalition agreement was drafted, what on earth was in the minds of the four people who did it?

[Lord Wallace of Tankerness]

My Lords, I am not a mind reader. It does not necessarily follow that it is a zero-sum game, as my noble friend would consider. I have heard people make this case before and no one has suggested that it should be a “beggar my neighbour” approach, which could actually lead to an increase in expenditure.

In a debate on a commission that does not have the Barnett formula in its remit, the Government’s position is not going to change. I have indicated the Government’s position, but there are intergovernmental talks, which have been referred to, and the Government indicated that they would engage in them. I was asked a number of other questions, initially raised by my noble friend Lady Randerson. The talks between the United Kingdom Government and the Welsh Government are looking at all aspects of the Holtham reports, including the extent of convergence between the trends of devolved funding and equivalent funding for England, and how need might be best measured. The commission is not considering, as I made clear, the fundamental overhaul of the Barnett formula. However, as I indicated, it is looking at these issues, such as convergence—although at the present time it is divergence rather than convergence—and how the need might best be measured.

My noble friends Lord Maclennan and Lady Randerson asked about borrowing and the state of discussions, as did the noble Baroness, Lady Gale. The Silk commission is looking at the case for borrowing powers for Welsh Ministers as part of its consideration in part 1. The bilateral talks between the United Kingdom and Welsh Governments are looking at how the latter might best use their existing powers—I hope that this refers to the point raised by the noble Lord, Lord Wigley—which were inherited by Welsh Ministers on the abolition of the Welsh Development Agency. They are, admittedly, relatively limited, but this is part of the ongoing discussion between the two Governments. Indeed, my right honourable friends the Chief Secretary to the Treasury and the Secretary of State for Wales have each met Jane Hutt, the Welsh Finance Minister, in the past fortnight, so these talks are very much alive and active.

The noble Lord, Lord Anderson, asked how the recent initiative to encourage the banks to lend more, announced by the Government this week, would impact on Wales. The funding for lending scheme is designed to boost lending in the real economy, making mortgages and loans cheaper and more easily available to families and businesses right across the United Kingdom. Wales will be as entitled to apply and take advantage of that as any other part of the country. The scheme opens on 1 August for 18 months.

Another important point, which was raised by noble friend Lord Maclennan and then spoken to by the noble Lord, Lord Rowe-Beddoe, is that there have been a number of different commissions. They asked whether there was a possibility of taking a more strategic look. Very recently, the Prime Minister indicated that there will be a need for an open, involved and comprehensive conversation about what kind of union we want to see, and—almost 15 years after the process of devolution started in the United Kingdom—that we should consider the best way of having such a conversation. However, the Prime Minister made it clear that that should await the outcome of the Scottish referendum, which is likely to be in 2013-14. That view was reflected in at least one speech in your Lordships’ House today. We will certainly be arguing for the integrity of the United Kingdom and for Scotland to remain part of it. That is the first and foremost objective and focus of not just the Government but the Labour Party in Scotland and across the United Kingdom. The point is one that I suspect will feature in more of our debates in the weeks and months to come.

In conclusion, I indicate that in introducing the debate my noble friend asked how we might take forward the comments made in it. I certainly undertake to write to Paul Silk, drawing the commission’s attention to the fact that the debate has taken place and to the comments that have been made. It is also pertinent to say that not only to the commission but within government. Points have been made in this debate on which I am sure some of my colleagues in government will wish to reflect.