Lord Wigley
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Lord Wigley
Lord Wigley (PC)
My Lords, as well as Amendment 21, I will also speak to Amendments 22 and 23, all standing in the name of my noble friend Lord Elis-Thomas and myself. Amendments 21 and 22 are aimed at allowing the Welsh Government to introduce new tax credits as well as devolved taxes. That would mean that Wales was able to help target areas that require economic stimulation in one form or another.
Paragraph 4.6.8 of the Silk commission’s first report stated:
“In addition to the use of taxes to achieve policy outcomes in devolved areas, credits can also be applied so that activities are effectively subsidised. While existing tax credits such as the working tax credits (and in future the Universal Tax Credit) should remain UK wide, the Welsh Government should be able to introduce its own credits in relation to devolved taxes and through use of devolved grants and subsidies to promote investment and getting people into work”.
I hope that the Government will therefore either accept these amendments or bring forward their own amendments on Report to achieve that end—unless of course the Minister can persuade me that some other power exists or is in the pipeline that will achieve that.
I turn to Amendment 23. At present, any devolved tax to be implemented in Wales must be agreed by each House of Parliament as well as the National Assembly. We feel that it is wrong that a party in the Welsh Government implementing a manifesto pledge should be prevented from doing so by Governments in London. If the objective of this Government is to get the devolved Government to accept full responsibility for their actions then surely they should be given full and undivided authority in such matters. Manifestos and devolved taxes are matters for Wales, and the UK Government should not interfere in them. This amendment therefore removes the requirement for each House of Parliament to agree to the devolved tax so that it is in the hands of the National Assembly. It would mean that the people of Wales were absolutely clear as to where responsibility lies. I beg to move.
Baroness Morgan of Ely (Lab)
My Lords, the tax credits that currently exist are closely associated with welfare payments. The whole issue is integrated into the wider debate about welfare support which provides a basic living standard for people who are working and yet need state help. Introducing any amendment that would erode the provision of welfare in Wales would be a mistake—in particular, without that very comprehensive and structured debate about the implications in Wales. The Minister suggested that the noble Lord is talking about a new kind of tax credit. Could the noble Lord elaborate on what kind of thing he had in mind, beyond what currently exists?
Lord Wigley
If the noble Baroness refers to the Silk report, she will see the arguments made there. The whole point and ethos of the Silk report is to open out as much freedom as possible for the devolved authorities to develop ideas and even experiment with this area to reach the objectives that both she and I would wish they did. It is giving them more tools. I hope that those tools help them do the job.
Lord Howarth of Newport
My Lords, whatever the future structure of the United Kingdom, the union is surely to be based upon twin principles of solidarity and diversity. Tax credits are a principal structure of the welfare state. As my noble friend just now suggested, the welfare state is a fundamental underpinning of that solidarity. Given that in the last figures I saw only about 2% of the people of Wales do not wish to maintain the union, I very strongly suspect that noble Lords are a little bit ahead of themselves—not for the first time—and that the people of Wales would wish nothing to be done that would weaken the welfare state and undermine that principle of social solidarity that ought to underpin the union. I make this point particularly because great figures in Welsh political history were among the leading architects of the welfare state. Whether by accident or design, we should not do anything to undermine the welfare state and the solidarity that binds the people of Wales together with the rest of the United Kingdom through the welfare state and associated principles of fiscal redistribution.
Lord Newby (LD)
My Lords, Amendments 21 and 22 seek to include a reference to “associated tax credits” as part of the power to add further devolved taxes. I thought that the noble Lord was going to discuss tax credits associated with devolved taxes. In respect of landfill tax, at the moment, existing site operators can contribute a percentage of their tax liability to environmental benefits and get a 90% tax credit. As far as devolved taxes are concerned, that ability will still exist. For that type of tax credit, the power is there.
I think that the noble Lord, Lord Howarth of Newport, was talking about welfare benefit payments. Welfare benefits are not covered by the Bill. There has been no proposal to devolve power over welfare benefits to the Welsh Assembly. I thought that the noble Lord made strong arguments about why that might be opposed. The Bill makes no provision for devolving discretion over welfare benefits to Wales for good reason, and the Government are not minded to change their view on that.
Amendment 23 would remove the UK Parliament from the process of creating further devolved taxes. The Bill enables the Government to devolve further existing taxes as well as enabling the Welsh Government to create new devolved taxes. Clause 6 requires that if either of these powers is used the order would need to be approved by this House and the other place as well as by the Assembly.
Lord Wigley
Where powers to devise and implement new taxes in Wales are devolved to the National Assembly and those taxes have an appropriate dimension where tax credits could be introduced, would the powers allow that?
Lord Newby
Yes, they would, just as for existing taxes. The same principle would apply to any further taxes that were devolved to the Welsh Assembly.
Clause 6 requires that if either of the powers devolving further existing taxes or enabling the Welsh Government to create new ones is used, the order would need to be approved by this House and the other place as well as by the Assembly. The amendment would remove the UK Parliament from this process so that the order would need to be passed by the Assembly only. That would mean that the Assembly could pass an order under which existing tax powers would be transferred from the UK Parliament without this Parliament having any say. Clearly, that cannot be right. Surely it is important that the process of tax devolution continues to take place in the constructive and collaborative manner that has led to this Bill. As a mere Englishman now grappling with what we do about devolution within England, I have found the Silk process extremely impressive and one that could possibly be successfully emulated in England. The follow-up to the Silk process, under which there have been discussions with the UK Government and parliamentarians about how to take that forward, has been extremely constructive.
As for how we manage the existing devolution of tax proposals and take them forward, we have established the Joint Exchequer Committee, based on a similar body in Scotland, consisting of leading parliamentarians in Wales and the Treasury, specifically to look at how we implement the existing powers and at what further can be done. That would be one of the ways in which it would be sensible to contemplate adding additional tax powers. If Members of the Welsh Assembly have strong views about additional tax powers—and first they would have to express those views—they will then have a vehicle for discussing them. It seems to me that that is a very sensible way forward. Any change or devolution of powers over tax from the UK to Wales has, at the very least, implications for tax legislation in the rest of the UK, so it is only logical that the rest of the UK is involved in the discussions. It must be right that any future order-making process, whether initiated by the UK Government or the Welsh Government, should involve both the Assembly and Parliament. I hope that the noble Lord will withdraw his amendment on that basis.
Lord Wigley
My Lords, I listened with considerable interest to the responses I have had, and part of the clarification has been helpful. Certainly with regards to the tax credit associated with any new taxes, that may come along. However, may I just say to the Minister and to the House—without in any way wanting to cut across what has been largely a consensus approach to this legislation—that the whole point of giving new powers to the National Assembly for Wales or indeed to the Scottish Parliament is to trust them and enable them to go on with their business. We had for a period after the 2006 Act powers to legislate in Wales but in every instance we had to get orders passed through the House of Commons and the House of Lords. In its wisdom, Parliament has seen that this is probably not the right way to do it—if you have a dog you allow him to get on with it and do not try barking yourself. In this regard as well, if the people of Scotland had been told that any powers that they will get over taxation will be second-guessed at Westminster and orders will need to be put through before they can be implemented there might have been some second thoughts in Scotland as well on 18 September.
I believe that there is a strong opinion in Wales that, while all the details of devolution for Scotland and for Wales may not be at the same place in their development and some details may not even be appropriate, the principle is that the elected Assembly in Wales, the National Assembly, and the elected Parliament in Scotland should have the clear-cut responsibility for what has been devolved and that people should be able to see that. Once you bring in mechanisms to second-guess and to veto you are cutting right across that approach. I realise the Minister will not be in a position to give me any authoritative response with regard to the similarity or contrast between the powers for the National Assembly and those for the Scottish Parliament but it is undoubtedly an issue that will raise its head again, and I invite the Government to give further thought to it. On that basis, I beg leave to withdraw the amendment.
Lord Wigley
My Lords, I am very glad to have the opportunity to speak in this debate and to welcome the step taken by the Government in moving their ground with regard to lock-step. The noble Baroness, Lady Randerson, will well remember that I expressed some fairly strong feelings at an earlier stage with regard to lock-step. We felt that it was an inappropriate restriction and I am delighted that the Government have seen fit to move on it.
Amendment 37, standing in my name and that of my noble friend Lord Elis-Thomas, is included in this bank of amendments. We had a very useful debate on Monday in relation to constitutional principles on which there was a lot of consensus. Although the Government could not necessarily immediately accept the points that we made, they undertook to look at some of them. I hope that the same spirit will be adopted in their approach to other financial matters as has been shown with regard to the lock-step.
Amendment 37 seeks to ensure that the Assembly will be able to levy the three Welsh rates of income tax as it sees fit. The amendment is drafted to ensure that the Assembly will get full responsibility for raising and spending one of the three largest sources of government income alongside national insurance and VAT. If we give the Assembly the power to control these rates, it will enable Welsh Ministers to create additional jobs, which we hope will lead to an increase in the Welsh tax base. That would be an incentive for investment in the Welsh economy—which it certainly needs. As I say, we welcome the fact that the lock-step has been removed, which will give the Welsh Government greater freedom.
Amendment 38 stands in the name of the noble Baroness, Lady Morgan, who will no doubt speak on it in a moment. I will listen carefully to the arguments that she will put forward but I have some sympathy with what appears to be the intention of that amendment. However, I will listen carefully to what she has to say, and will listen to the Minister’s response to Amendment 37 to hear how the Government intend to build on their intention to give maximum flexibility to the Welsh Government.
Baroness Morgan of Ely
My Lords, the Labour Party understands the principle of the need for accountability and the need for the Welsh Assembly politicians to have responsibility not just for spending money but also for raising it. Devolving an element of income tax will undoubtedly increase the financial accountability of the Assembly. It will enable the Assembly to fund more of the spending for which it is responsible and will allow the Welsh Government to vary the levels of tax and spending in Wales and, crucially, it will allow Wales to borrow against tax.
We focus in these amendments on issues of income tax. However, it is worth pointing out that this is just one tax. In context, in 2013 income tax was 26% of the total tax take in the United Kingdom. It is significant, visible and understandable, but it is worth remembering that it is only one tax.
Devolving income tax powers to Wales has never been a priority for the Labour Party and the Welsh Government. However, it is important in terms of positioning the Assembly in the right place in the long term. We should remember that it was the Labour Party which devolved income tax powers to Scotland, but only after asking the Scottish people in a referendum whether they wanted that power. We would have to undertake a similar referendum if Wales were to follow suit. I will elaborate on this further when we discuss that group of amendments.
We will not always be in this situation. We are future-proofing here. I am confident that one day the Welsh economy will grow. There are clear signs that the Welsh Government’s efforts in this area are already bearing fruit. However, we must be aware that the whole principle behind the concept of the UK as a political entity is that we are supported by a social system that is available to all. We must be careful not to erode that basic philosophy and so provide fuel to the nationalist fire. There is a £16 billion annual gap between what Wales raises and what it spends. We must not lose focus on this issue. This is the economic foundation stone of the UK.
What drives us in the Labour Party is not some ideological zeal to create an independent utopia in Wales, but a practical, hard-headed approach to what is best, in particular for those who are struggling on low incomes, are desperate to make ends meet and are often dependent on the state to keep them afloat. We must remember that Wales has a weaker tax base than the UK as a whole. We must be careful when devolving tax powers that we do not lose out. HMRC estimated that in 2010 there were 89,000 higher rate taxpayers in Wales. They represented 7% of all taxpayers and were responsible for 33% of all the income tax revenues raised in Wales. There were only 4,000 additional rate taxpayers paying 45p in Wales. I could practically name them—they were mostly Tories, I will let you know. On the whole, we must understand that our tax base is very weak and we must be careful when we go down this route.
It is also worth noting that a very small proportion of revenues are raised by local taxation and the consequent tendency of Whitehall to wish to dictate how funds from the centre are used has seriously eroded local democracy and accountability. We must be very cautious and note that local revenue-raising should not go too far, since that tends to reinforce the regional disparities of income and wealth.
Tax differentiation can also lead to tax competition. In principle, this is not something that we encourage. We must be clear that we do not want to embark on a race to the bottom in relation to taxation. We are fearful that there is a hidden agenda on the part of the Conservative Party, which is for ever anxious to reduce the role of the state. The Conservative Party is committed to cutting taxes for the wealthiest people. Let us be clear: tax competition will lead to less money in the state pot, which means less money for our schools and hospitals.
The Conservative Leader of the Assembly, Andrew RT Davies, has said that he would like to make Wales into a “low tax economy”. He has pronounced proudly that he wants to cut just the top rate of tax. We must be aware that every time there is a tax cut, it is accompanied by a cut in services. It seems odd to consider this, at this moment in particular, in isolation from the discussions in the rest of the United Kingdom, and we need to consider what is happening in relation to the Smith commission in Scotland. That is why Labour would like to see this discussion occurring in the context of a broader constitutional convention involving the public and representatives of civil society. We must acknowledge that there is a disconnect between politicians and the public, and it is critical that we do not have a conversation about how money is collected and distributed from the distance of an ivory tower. However, the genie is out of the bottle and we need to respond.
Let us be clear that devolving income tax powers will not be a panacea for the economy of Wales. The chances are that income tax variations will not be significant. The previous Secretary of State suggested that he would like to see a 1p cut in income tax rates across the board. Research has suggested that that would cost £200 million. That would mean £200 million in terms of cuts to services—the equivalent of 7,700 nurses losing their jobs—in the hope that the economy would grow. That could happen but in the context of a Welsh Government budget of £15 billion it is hardly going to make a massive impact.
Of course, differential taxation of income would involve the need for a separate Welsh revenue collection mechanism that must be neither inefficient nor costly. The Government do not seem to be clear about the costs involved in establishing this mechanism. In Scotland, it is estimated that differential taxation would cost between £40 million and £42 million to set up. Can the Minister give some indication of how much it would cost to set up in Wales?
In anticipation of the Bill receiving Royal Assent, the Welsh Government have already set out in a White Paper how that mechanism would work. The Welsh Government and the National Assembly will have the ability to develop certain taxes shaped to the needs, circumstances and priorities of Wales. This is the first Welsh tax legislation in modern times. It is both historic and significant for Wales but we need to consider border issues, and I therefore turn to our Amendment 36.
We need to be aware of the complexity of border issues in relation to Wales, compared to Scotland. The Scotland-England border is not nearly as densely populated as the Wales-England border. Only 3.7% of the population of Scotland and 0.5% of the population of England live within 25 miles of the English-Scottish border. In Wales, the situation is totally different, with 48% of the population of Wales and 10% of the population of England living within 25 miles of the Wales-England border. There are more than 130,000 daily commuters. The fact is that introducing a variation in income tax could give rise to the possibility of higher taxpayers moving across the border in one direction or another. My understanding is that no Treasury impact assessment has been undertaken on this matter, although I understand that the previous Secretary of State said that a consultation has happened. Can the Minister confirm whether that is the case and will she commit to a Treasury impact assessment on that border issue?
I turn now to the lock-step issue. The Government have put down an amendment to remove the lock-step, thereby allowing the Welsh Government to vary increases or decreases to individual tax bands independently of one another. Again we would argue that this discussion ideally needs to be set in the context of a UK debate over the organisation of tax across the whole UK. To deal with this in isolation is inviting trouble, and that is why we need urgently to establish the constitutional convention. The public should have a greater say on where power should lie across the UK, including on the nature of tax devolution. Further devolution should not be piecemeal. The Minister referred to that in her comments on Monday. The notion of breaking lock-step is something that needs to be discussed in that broader context
Lord Richard
My Lords, I support my noble friend on this. I am not a tax lawyer and I have given thanks for that ever since I was called to the Bar. I am bound to say that I read this new section with incredulity. It is designed to cover a Scottish parliamentarian as well as a Welsh parliamentarian—Mr Mac ap Jones, I suppose we can call him. That individual is covered here in such a way that it is a masterpiece of almost Proustian complexity. Even for one who is reasonably familiar with looking at legislation, I found it almost impossible to understand. I did what my noble friend did and went to the Explanatory Notes, but they are almost impossible to understand, too. Why on earth are we legislating in this way? Some 40 years ago, I was a member of a committee presided over by the late Lord Renton on the drafting of legislation. It was an interesting committee and we said that the practice of legislating by cross-reference meant that you had to have half a dozen books open at the same time to get even a glimmer of understanding of the subject. We said that that was bad and something should be done about it. Of course, successive Governments said, “Yes, we agree entirely that it should be changed”, but it never is. It just seems to get worse as time goes on—until we arrive at the nonsensical drafting that appears in this Bill.
Perhaps I may make a simple suggestion to the Minister. It is obviously designed to deal with a person who may be working in one jurisdiction and has residency in another. It is meant to make sure that the person does not pay two lots of tax in two different jurisdictions. Why can we not have a simple residence test? I would suggest tentatively that the Minister should look at proposed new Section 116E, which states at the end of page 9:
“For any year, a Welsh taxpayer is an individual”,
and thereafter it sets out an enormously complicated structure. Why can we not say that in any tax year, a Welsh taxpayer is an individual who is resident in Wales? We could have similar rules for Scotland, England and Northern Ireland. With any luck, Mr Mac ap Jones would be successively reinterred and we need not bother about him again. Really, the way this has been drafted is too much. I agree totally with my noble friend that perhaps it is time for this Committee to say, “We do not like this drafting. We don’t understand the purpose of it, and we think it could be simplified so that people can understand it. The Government should take it away and try again”.
Lord Wigley
I want to join briefly with colleagues who have raised these points. Over many years I have often heard the argument made that matters of substance are passed through Parliament by order—by secondary legislation and so on. Here we have the reverse position, where there are matters that should surely be set out in orders. Ministers should be empowered to introduce orders to deal with a variety of circumstances that certainly do not warrant taking up the face of the Bill. If that were the case, there would be flexibility within the orders to deal with other cases which possibly have not been thought of. Putting this in the Bill in this way is surely a nonsense.
Lord Thomas of Gresford
My Lords, I am most grateful to the noble Lord, Lord Rowlands, for drawing my attention to these new sections, in particular new Sections 116G and 116H. I spend around 140 days of the year here, about 60 days in my family home in Scotland and the rest of the time in Wales. On these formulae, I am not liable to pay income tax in Wales, certainly not in Scotland, and possibly not in England, if we have similar provisions. Thank you very much. Devolve away.
Lord Wigley
“(3A) The Secretary of State must lay a draft statutory instrument containing an Order under subsection (1) before each House of Parliament and the Assembly if—
(a) the First Minister or a Welsh Minister appointed under section 48 of GOWA 2006 moves a resolution in the Assembly that, in the Assembly’s opinion, a recommendation should be made to Her Majesty to make an Order under section 12(1), and(b) the Assembly passes a resolution on a vote in which the number of Assembly members voting in favour of it is not less than two-thirds of the total number of Assembly seats. (3B) The Secretary of State must lay the draft statutory instrument specified in subsection (3A) within the period of 30 days beginning immediately after the day on which the resolution under that subsection is passed.”
Lord Wigley
My Lords, this amendment stands in my name and that of my noble friend Lord Elis-Thomas. I will also speak to the associated group of amendments on the Marshalled List. In doing so, I suspect that there may be differences of opinion across the Chamber on some of the matters involved in these amendments.
Amendments 41 to 48 are drafted to ensure that only the National Assembly can begin the process of calling a referendum on the commencement of the income tax provisions in the Bill. Amendment 41 would ensure that a referendum might be called if a two-thirds supermajority of Assembly Members approved it—and that, this being the case, the Secretary of State would be required to make the order within 30 days of it being approved. This is evidently a change from the 180 days in the Bill, which we believe to be an unnecessary delay.
Amendments 42, 43 and 44 are consequential and ensure that although an order would still need to be laid before each House of Parliament, only the Assembly would need to approve the referendum order. We believe that the responsibility should be fairly and squarely on the shoulders of the Assembly in this matter, as in other matters which we debated earlier.
Amendment 45 similarly ensures that there is no unnecessary delay in the proceedings. As currently drafted, Clause 12(6) allows the Secretary of State to consult on the draft order until whatever time he or she considers appropriate. Amendment 45 would remove that provision.
We have laid an amendment arguing that Clause 13 should not stand part of the Bill for the reason that, were our other amendments in this group carried, the provisions in this clause would no longer be necessary. It should be for the Assembly to determine whether a referendum is needed. This decision should not be subject to the approval of the Secretary of State.
Amendments 47 and 48 allow for a supermajority of the National Assembly to decide whether there should be a referendum on transferring income tax powers or whether—I emphasise this—simply to commence the provisions. We believe that if a cross-party consensus were reached in the Assembly, which would be needed in order to achieve a supermajority of Members, that institution should not be compelled to put it out to a referendum. If all the parties agree on these matters, why on earth go to the expense of holding a referendum? Scotland is apparently going to be given far-reaching new taxation powers without such a referendum. Why should we in Wales have one forced on us?
On Monday, I argued that the Assembly should have the power to hold a binding referendum on matters which are already within its competence. A referendum on tax matters should be an available option if the Assembly deems it necessary. That would be for the Assembly to determine. The principle contained in this group of amendments is the same: if the Assembly should determine for itself whether to put a question to the electorate, it should have the power to commence that process itself. Similarly, if it agrees that a referendum on a technical issue such as this should not be necessary, it should be within its power to commence the provisions itself and, at election time, to be held accountable to the Welsh electorate on that basis. I beg to move.
Lord Elis-Thomas
My Lords, this amendment follows the amendments to Part 1 that were debated on Monday. The intention is to establish the constitutional principle that it is by requiring a threshold of a two-thirds majority of Members of the National Assembly present and voting that we can maintain the checks and balances brought about by the change in devolution. Since we debated these matters on Monday there has been rapid movement in the interparty discussions both here in Westminster between the political leaders and, equally importantly—I was about to say more importantly—in Cardiff. Those discussions have resulted in the Motion on the Assembly’s Order Paper which will be debated on Tuesday. It will clearly set out the view of the four party leaders in the Assembly in relation to negotiating with the United Kingdom Government and to the interparliamentary negotiations on some aspects of the procedure that will be required to take these matters further.
The principle of interparty agreement in Cardiff leading to a request to the UK Government, and to the UK Parliament where relevant, should generally be welcome in this place and throughout the United Kingdom levels of government in response to the new times that we are in as regards devolution.
Interparty agreement has been the route that we have taken for the development of devolution in Wales since the conversion of the Welsh Conservatives—I see my friend from the Assembly, the noble Lord, Lord Bourne, sitting on the Front Bench—to a position of embracing devolution. My intention has always been that, regardless of what happened in Scotland or Northern Ireland, that should be the route followed in Wales. Therefore, when there are contentious matters, it is the Assembly, on a supermajority, that should decide these things. It does not need to have it imposed on it by Parliament or, indeed, by political parties outwith the Assembly.
I therefore ask the Minister to consider this amendment in a spirit of agreeing to serious discussions. The Prime Minister has said—we do not need to quote this continually—that Wales should be at the heart of the debate on devolution. If the Assembly’s making a request to the UK Government and Parliament is not the people of Wales speaking through their elected representatives and asking to be part of the discussion on equal terms, what is? How are we to express that will? The expression of that will is essential to the spirit of the new union, as the First Minister of Wales called it today in this city. In that spirit, I ask the Government seriously to consider the direction of our amendment.
Baroness Randerson
I thank noble Lords for their contributions to this debate. The Government have been consistently clear that the decision on whether to trigger a referendum on the devolution of income tax is a matter for the Assembly and the Welsh Government. I say that in response to the noble Lord, Lord Elystan-Morgan. Clause 13 empowers the Assembly to trigger a referendum to ask the electorate in Wales whether they want some of their income tax to be devolved. The Government agree with the Silk commission that the 2011 referendum on full lawmaking powers for the Assembly provides the best model for conducting such a referendum. Clause 13 replicates for the most part Section 104 of the Government of Wales Act. The clause provides for the Welsh Government to move a resolution in the Assembly to trigger a referendum. If the Assembly passes the resolution by a two-thirds majority, the First Minister must ensure that notice of the resolution is given in writing to the Secretary of State. The Secretary of State or the Lord President must lay a draft order before Parliament within 180 days. I refer the noble Lords, Lord Wigley and Lord Elis-Thomas, to Clause 13(3)(a) and (b) on page 18 of the Bill:
“the Secretary of State or the Lord President of the Council must lay a draft of a statutory instrument … the Secretary of State must give notice in writing to the First Minister of the refusal to lay a draft”.
The first thing I asked when I read the Bill was, “In what circumstances could the Secretary of State refuse?”. I was advised that the only sorts of grounds on which a Secretary of State could refuse would be where there was genuine doubt about the procedures of the Assembly that led to the two-thirds majority being obtained or whether it had been obtained.
Lord Wigley
Where in the Bill does it say that those are the only circumstances in which the Secretary of State can refuse to do so? Why must it take up to 180 days for such a decision to be taken?
Baroness Randerson
The Bill does not give those reasons. The legal advice I was given related to tried-and-tested constitutional principles. Dare I say it, the noble Lord is now asking for more to go into the Bill and in the previous debate he was asking for it to be reduced.
Baroness Randerson
That is exactly the view of the Government. The Assembly, as I have just said, is in the driving seat in this process.
I resume my response to the initial speeches in this debate. I point out that by opposing the question that the clause should stand part of the Bill and through Amendments 41 to 45, 47 and 48, noble Lords are of course seeking to remove important parts of a tried-and-tested mechanism which was recommended by the Silk commission. Silk is the basis of consensus. The noble Lord, Lord Elis-Thomas, referred to the importance of agreement, and so on, and the characterisation of consensus as something that the Assembly has sought on many occasions. Silk is the basis of the consensus behind the Bill. I ask noble Lords to recognise that we sometimes need a bit of choreography in order to maintain unity. That means that there has to be agreement to work in unison, although it may not always be exactly what we would prefer at any one time.
Amendments 41 to 45 would remove the need for Parliament to approve the draft order that sets out how a referendum is to be conducted, and the right of the Secretary of State to consult before such an order is laid. I repeat that all this is based on the experience of the 2011 referendum for lawmaking powers. It is the mechanism that has been agreed.
Through Amendments 47 and 48, noble Lords are seeking to provide a mechanism by which the Assembly could resolve to commence income tax provisions in this Bill without a referendum. I realise that there are those who do not believe that a referendum is necessary, but I recognise entirely the arguments put forward by the noble Baroness, Lady Morgan, that the original referendum did not include a tax question. It is therefore important that people are engaged in this debate and given the opportunity to make their voice heard. It is a fundamental, far-reaching issue and therefore the people of Wales need to be consulted.
The noble Baroness, Lady Morgan, was concerned that I had deliberately misunderstood her, which I find a distressing accusation. I invite the noble Baroness to reread what she said earlier in the debate; she might then understand why it is possible to have misunderstood her.
I therefore ask the noble Lord, Lord Wigley, to withdraw the amendment, and not to oppose the question that Clause 13 stand part of the Bill.
Lord Wigley
My Lords, I am grateful to every noble Lord who has taken part in this debate and to the Minister for her response. There has been clarification on some points, such as the 180 days and so on, which is useful.
There is, however, a central point here: whether or not this House trusts the National Assembly for Wales, the elected parliament of Wales, to take decisions such as this. I have every faith in its Members that, if there is doubt as to whether they can carry the people of Wales with them in their decision within the Assembly, they know that they may need to revert to a referendum. Of course, they have as much intelligence to provide that as we do in this House.
Lord Wigley
More, my noble friend says. In many ways, he is right: they are in Wales dealing with the circumstances of Wales. With all the good will in the world, what is done here is done for Wales and what is done in Cardiff is done by Wales. We want to ensure that they take that responsibility on their own shoulders. That is one of the driving forces towards getting a consensus of approach.
The noble Baroness mentioned choreography in getting agreement. There must have been a lot of choreography in getting all four party leaders to sign up to the Motion that is coming before the Assembly next Tuesday. It is a substantial step in the right direction. The way in which we are doing these things in Wales is different to the way in which they are being done in other parts of these islands. I think that, in many ways, we are doing them better and they will stand the test of time. We have to trust the people in a referendum, yes, but also the representatives to come to a sensible decision in regard to such matters.
I accept what the noble Lord, Lord Elystan-Morgan, said about the Barnett formula. We will be coming on to that in a later bank of amendments. Of course there has to be an acceptable basis before one moves into the income tax provisions, but we are going to have to go there. Otherwise we are not going to get the answerability that we need. Any hurdle that we put between the present position and getting those powers means that we are imposing a delay, a built-in roadblock, that stops the movement towards a more responsible and transparent national parliament for Wales. That is the background to the tabling of the amendment, and the Government should take it on board not just in the context of this debate but in the generality of the Bill. On that basis, I beg leave to withdraw the amendment.
Lord Wigley
“Responsibility over fuel duty
Her Majesty may by Order in Council provide for the transfer of responsibility for varying fuel duty to the National Assembly for Wales.”
Lord Wigley
My Lords, I will also speak to Amendments 50 and 51, which each seek to transfer financial powers and hence strengthen the Assembly’s tax base.
Amendment 49 would transfer powers over fuel duty to the Welsh Government, so allowing that institution to address the concerns of the electorate relating to fuel costs, a problem which is particularly stark in rural areas, where people are forced to spend significantly more on fuel than in urban areas. The Office for National Statistics recognises that poorer families in rural areas spend more of their income on petrol than richer families. Plaid Cymru has long pushed for a genuine fuel duty stabiliser to cap prices at the pump when prices rise above expectations.
Amendment 50 provides the mechanism for a review of the tax receipts from Welsh natural resources. We believe that this should include the Crown Estate, which we believe should be the responsibility of the Assembly. Wales is an energy-rich nation, yet too many of its citizens live in fuel poverty. We believe that Wales should be properly recompensed for its natural resources.
Amendment 51 is aimed at transferring powers over corporation tax to Wales, in the event of this power being transferred to Scotland or Northern Ireland. I should point out that the draft Motion, standing in the name of all four party leaders in the National Assembly, supports the approach taken in Amendment 51 in relation to corporation tax, stating:
“The National Assembly for Wales … calls for the UK Government to ensure that the same powers are given to Wales regarding the devolution of corporation tax if they are provided to Northern Ireland and Scotland”.
Those are the words that are supported by all four party leaders in the National Assembly and that will be discussed on Tuesday.
We recognise that the Silk commission in its report did not support the transfer of corporation tax to Wales due to its volatility, but said that it should be considered if corporation tax were devolved to Northern Ireland, which was seen as most likely at that stage. We believe that it would be wholly unacceptable if these powers were granted to other countries and not to Wales. The amendment is drafted to ensure that, if these powers are given to those other countries, the same would happen for Wales to ensure that we are not left behind in this matter. I beg to move.
Baroness Morgan of Ely
I understand that, but I also think that we should be aware of the dangers of a race to the bottom. That is my real concern. We have already seen that it is hard enough to get many of these corporations to pay their taxes at all, so for us to encourage corporation tax competition within the UK would be very problematic. The problem is that if you reduce the tax take, you start to have to cut services, and that becomes a problem. It means that our schools and hospitals have to be reduced.
On the issue of air passenger duty, it is worth noting that this is another issue where there has been cross-party agreement on devolution, on the basis that if this is provided to Scotland and Northern Ireland in the same way as corporation tax is, then we should be allowed to review it in Wales as well. The point is that if they are going to do it, of course we want to be part of that game. What we cannot have is them going off by themselves. That would be problematic. It is why Scottish independence was a problem for us.
Lord Wigley
I am grateful to the noble Baroness for giving way. She has warned about a race to the bottom as a reason to avoid this, but she then says that Scotland might do it, that that is the first step in a race to the bottom and that we should then do it. Is she not embarrassed by the fact that her party leader signed up to this in the Assembly and she has difficulty in selling it to her group here?
Lord Newby
My Lords, I am sure that the Welsh Assembly, which I believe—including the Labour element of it—is in favour of devolution of air passenger duty to Wales, will continue to make the case. However, I am afraid that the Government are not at this point persuaded of it. The situation in Northern Ireland is completely different, in that it shares a land border with the Republic, which has a significantly lower rate of air passenger duty. That is its competitor.
The Silk commission recommended against devolution of fuel duty largely on the basis that member states must set a single rate for each fuel under the EU energy products directive. It also highlighted that fuel duty is a highly mobile tax base—no pun intended. As noble Lords have made clear, we could very easily see queues of motorists across the border if there was a significant disparity, which in itself makes it an unlikely candidate for devolution. So the Government accepted the Silk commission conclusion on that.
The noble Lord, Lord Thomas of Gresford, referred to the issue of whether the rural fuel scheme in Scotland might be extended to Wales. The Silk commission recommended that the Government assess whether the rural fuels scheme should be extended to remote and rural areas of Wales. It now operates in the Scottish islands and the Isles of Scilly. The Government have applied to the European Commission to extend the current scheme to areas on the UK mainland that meet strict criteria around pump price, population density and cost of fuel transportation. However, no areas in Wales were included, because they were not felt to meet the objective criteria. The Government believe that areas should experience similar characteristics to the islands in the current scheme to make the strongest possible case to the European Commission. The Government have yet to receive a response from the Commission to their existing proposal.
Amendment 51 would devolve corporation tax to the Welsh Assembly if it is devolved to either Scotland or Northern Ireland. The Government have been consistently clear that the devolved countries are different and that it is therefore right that decisions on devolution are treated on their own merits. In relation to corporation tax, the Government are committed to making a decision on devolving rate-setting powers to Northern Ireland by the time of the Autumn Statement. However, similar to the position on long-haul rates of air passenger duty, the potential devolution of corporation tax to Northern Ireland is being considered in the light of two unique features. First, Northern Ireland is competing against the Republic, which has a much lower headline rate of corporation tax. Secondly, the stated purpose of tax devolution in Northern Ireland is to help to rebalance the Northern Ireland economy. In Wales, as noble Lords will be aware, the principal aim of devolution is to increase the accountability of the Welsh Assembly and Welsh Government. Different objectives potentially require different decisions on devolution; it is therefore right that the UK Government retain the flexibility to take the right decisions for each part of the UK.
Finally, I turn to Amendment 50, which would require the publication of an independent report on options for the UK and Welsh Governments to share tax revenues from natural resources in Wales. The noble Lord in moving the amendment spoke about the resources available potentially to the Crown Estate and referred to energy. With regard to the Crown Estate, there are no provisions in the Bill to change its status, and I find it difficult to envisage circumstances in which that would happen. Therefore, I am not sure how relevant that is. On energy, I can only agree with the comments of the noble Baroness, Lady Morgan, about the fact that one does not tax wind power in the same way as one taxes a barrel of oil, and it is very difficult to envisage that we ever would do so. So I do not think that an independent report as proposed by the noble Lord would be of any real value.
In the light of my remarks, I hope that all noble Lords who have proposed amendments in this group will feel able not to press them.
Lord Wigley
I am grateful to noble Lords who have taken part in this short debate. On the amendment proposed by the noble Lord, Lord Rowe-Beddoe, on Cardiff Airport, of course we need intervention—that is the whole point of government. If we just leave it to free market forces, those areas that have difficulties with the economy will get worse and worse. I am amazed that the Government look at devolution and powers of the Assembly only in terms of answerability and do not see the central need to have intervention in the economy to build it up. In Wales, the GDP per head is 25% below the UK average, so something is going wrong. If London is not capable of sorting that out, and Westminster is not capable of sorting it out, we have to do the job ourselves. But we need the tools to do that job and to intervene, as the noble Lord, Lord Thomas of Gresford, said. Some tools may be more appropriate than others, but in the case of Cardiff Airport, when all the effort that is being made to rebuild it at the moment is in question, I find it staggering that they want just to turn it down on that basis.
On the other amendments and the reasons given against them, with regard to petrol charges we already have a massive differential. We do not see people queuing from north Wales to Chester to find cheaper fuel because there is a cost involved in travelling. The need to get fair play in rural areas should be recognised by the Government. Goodness only knows that life is difficult enough as it is without the very high petrol taxes that we have.
On the natural resources of Wales, we hear so much about fracking coming along, and we know it is a matter of considerable concern. That is a new source of energy, and it may be something that comes into the purview of government in those terms. We need those powers to be there.
On corporation tax, I again underline that there is unanimity within the Assembly to have those powers, if they are going to Scotland and Northern Ireland, and the Government in fairness should allow it for Wales, which is in competition for inward investment against the Irish Republic. The Irish Republic has this advantage, so why do we not? We need that in order to rebuild our economy. It is something that the First Minister of Wales has very reasonably asked for and I hope that the Opposition Front Bench will support the First Minister in those representations.
I was heartened by the comments made by the Minister that there are provisions for other taxes to be devolved by order. We shall have to look to the order-making system to try to ensure that we have the tools necessary to do the job.
Lord Thomas of Gresford
Does the noble Lord not agree that, if the Welsh Labour Government are not prepared to use the tools, there is no point in having these powers?
Lord Wigley
That is true of all the powers, and we have to look to the Assembly to take a responsible attitude. Obviously there are questions to consider—cross-border questions and all the rest—and the Assembly needs to make these powers work, so it is not going to do stupid things. It will take up the powers and use them in a way that moves our economy forward. I am quite happy to trust that people who give priority to the needs of Wales will do this, from whichever party they come. All I want them to have is the tools to do the job. I beg leave to withdraw the amendment.