Wales Bill

Lord Wigley Excerpts

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

Moved by

[Lord Wigley]

23: After Clause 13, insert the following new Clause—
“Apprenticeship levy
(1) In Part 4A of the Government of Wales Act 2006, after Chapter 4 insert—“CHAPTER 5Apprenticeship levy116O Apprenticeship levy(1) The Treasury must make separate provision in regulations for apprenticeship levy charged to a person in Wales with a pay bill.(2) The Treasury must lay an annual report before the Assembly and the House of Commons on the amount of apprenticeship levy raised in each tax year from persons in Wales.(3) The Treasury must consult the Assembly before setting a levy allowance or a relevant percentage applicable to persons in Wales.””

[Lord Wigley (PC)]

My Lords, after that rush of enthusiasm for the Wales Bill, I rise to move Amendment 23, which stands in my name and the name of the noble Lord, Lord Rowlands. It relates to the devolution of the funds generated through the apprenticeship levy. The issue has been raised with me because of the uncertainty experienced by employers based in Wales regarding this matter. The Government’s rather chaotic and haphazard approach to the apprenticeship levy has left all the devolved Administrations scratching their heads. Although the specifics are clear for businesses in England, the way in which businesses and organisations in Wales will be able to access and benefit from the money generated by the levy remains completely opaque.

Of the projected £3 billion in the 2015 Autumn Statement, the Treasury specified that £2.5 billion would be spent exclusively on England while the remaining £500 million would be divided among Wales, Scotland and Northern Ireland. We were told we would have our fair share. Despite the fact that this levy is due to be introduced in April, just five months away, we are left facing more questions than answers on the matter. What is our fair share? Are the receipts going to be Barnettised? What happens if the levy yields less money than projected? Will England’s funding be prioritised at the expense of that which is promised for Wales? The lack of transparency in the Treasury’s funding formula for Wales, Northern Ireland and Scotland is creating practical hurdles for those Governments as they prepare for their own apprenticeship schemes.

Apprenticeships are a devolved matter. So are education and training. Operating at a UK level a levy that is meant to directly fund the devolved function has every potential to cause confusion. I am told that an employer-led institute of apprenticeships is to be set up in April 2017 to advise the Department for Business, Energy and Industrial Strategy on the administration of funding and apprenticeship standards in England. Is this institute specifically for England? If so, where does that leave Wales? Surely a similar institution for each of the devolved areas should have a parallel role in advising the Secretary of State. Are the devolved Governments expected to set up their own bodies analogous to the institute or are they expected to relate directly to an institute whose remit extends only to England?

Online services will apparently be provided to employers in England but will not be available to Welsh employers. Another issue that remains unclear is how the levy will work in relation to companies that have headquarters situated in one country but employ people across the border in the territory of a devolved Administration. Plaid Cymru MPs were given assurances in the other place that the Treasury is working in co-operation with the Welsh Government to determine the implementation of the levy. We are yet to see any development on that front.

The apprenticeship levy status in Wales is reduced to a mere link on the UK Government website directing readers to a nondescript Welsh Government webpage that provides no clarity to those in Wales seeking information. What discussions took place between the UK Government and the Government of Wales before that link was advertised? With apprenticeships and businesses keen to take advantage of the levy in Wales in the immediate future, it is not right that they are left guessing while their English counterparts are able to plan in advance.

The UK Government are introducing legislation that pays no regard to the specific needs of the corresponding system in the devolved Governments. They are England-centric in their planning and implementation and appear to be progressing the matter without any co-ordination with the devolved Governments. More broadly, the patchwork devolution settlement being offered to Wales in the Bill will result in confusion and mismanagement. One solution to this problem, as my amendment today sets out, would be to devolve the apprenticeships levy in its entirety to Wales. This would allow the Welsh Government to administer and control the money raised and to align it with apprenticeship policies. Put simply, it would clarify any doubts over Wales’s fair share of the money raised, and would enable employers and apprenticeships to plan their programmes in a co-ordinated fashion. This is a constructive proposal to address a very real problem. I appeal to noble Lords on all sides to indicate their support for the amendment and I appeal to the Government either to accept it today or to undertake to return on Report with their own amendment to answer these very real difficulties. I beg to move.

[Lord Rowlands (Lab)]

My Lords, I declare an interest as honorary president of the National Training Federation for Wales, and in its early years I was one of its advisers. The federation brings together many or most of the training providers that deliver the apprenticeship and skills policies and funding from the Welsh Assembly Government. I am grateful to the noble Lord, Lord Wigley, for tabling this amendment and bringing to our attention the peculiar and now very difficult situation that has arisen as a result of the introduction of the levy.

I say nothing about the merits of the levy. Frankly, it is a fascinating piece of interventionist politics in the labour and employment market. In fact, it reminded me—although I make no direct comparison—of when I was first in the other place in 1966 and a Chancellor of the Exchequer introduced something called the selective employment tax. I am not sure how many Members still remember that or it its fate. It was a novel tax which did not last; I wonder how long this novel levy will last.

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[Lord Bourne of Aberystwyth]

The noble Lord is right in the sense that the essence of devolution is that if the policy is devolved to Scotland, Northern Ireland and Wales it is a matter for those Administrations as to how the apprenticeship policy is rolled out. The apprenticeship levy discussion will be happening between the Treasury and the devolved Administrations. I will get noble Lords an update on how that is progressing. It will then be for them to decide how the money is spent. The discussion on how the cake is being divided up will be led by the Treasury with the devolved Administrations. That is my understanding of how it will operate.

[Lord Wigley]

My Lords, I will press the Minister further on this. Does he accept that, for the Welsh Government—or, for that matter, the Scottish or Northern Ireland Governments—to roll this out they need to know how much money they are getting; the mechanism for delivering it; the timing of it and the conditions that may be placed on it? It is now over 12 months since this thing was kicked off. Without knowing those details they cannot, with all the good will in the world, meet what is required. Inevitably, companies in Wales are going to be in an inferior position to those in England. Will the Minister also clarify the position of those who are employing people across the border: companies which may be based in England but employing in Wales, or vice versa?

[Lord Bourne of Aberystwyth]

My Lords, this was precisely the point that I was dealing with. As I said, I will get a note round about how the discussion is going on how the policy will be rolled out in terms of the amount of money that will be given to the devolved Administrations. The discussion will go on at that level on how that is being sorted out. As I understand it, the basis on which the policy is rolled out is that the place of employment will be where the policy applies. If a business is in Wales it will be a matter for the Welsh Government to decide a policy which is relevant to it. All the Administrations will want to bear in mind businesses which are on both sides of the border and ensure that there is some consistency in approach. However, that is a matter for them.

Based on my assurances that I will write to noble Lords on how the discussion is going now and that it is a matter for the devolved Administrations to decide the relevant policy—

[Lord Bourne of Aberystwyth]

My Lords, I am not quite sure what my noble friend wants me to say, other than that, as I have just said, I will endeavour to ensure that noble Lords will have the information that is being requested ahead of Report. With that, I ask the noble Lords to withdraw the amendment.

[Lord Wigley]

My Lords, I am grateful to the noble Lord, Lord Bourne, for his response, but he must be feeling a little uneasy with the quality of the brief that he has been given on this. It is recognised the length and breadth of Wales that this is a totally unsatisfactory position which is causing problems for employers and those employees who are hoping to gain benefit from apprenticeship schemes. It is causing problems for the Welsh Government as they forward plan their budget for the coming year. We are talking of a sum of money that may be, let us say for argument’s sake, in the order of £150 million—a significant sum. Whatever the detail on the way in which these schemes are rolled out in Wales, Scotland or Northern Ireland, none the less, if this is the funding arrangement that has been agreed, there should be transparency. We are now in November, and the budget will be coming in April. It is totally unsatisfactory for the UK Treasury and Government to place the devolved Administrations in this position. Whereas the note that no doubt will be sent round will give the fullest information that the Treasury is willing to make available, it none the less may well not answer the serious questions that have been raised.

I am grateful for the contribution of the noble Lord, Lord Rowlands, with his expert knowledge in this area, and to the noble Lord, Lord Crickhowell, for intervening. We need to know. I realise that it is not the tradition to divide the House in Committee. However, if there is not a satisfactory answer from the Treasury and the Minister, I most certainly intend to come back to this on Report and, at that point, to press it. It is just not acceptable that we in Wales are placed in this position. It is not the fault of the Minister personally, but it is certainly the responsibility of the Government and the Treasury. I hope that between now and Report the Minister will have serious discussions with the Treasury, and that if he in his heart recognises that there is a serious problem here, he himself might choose to come back on this. On that basis, however, I beg leave to withdraw the amendment.

Amendment 23 withdrawn.

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Finally, as we debate further amendments in Committee, I will certainly be listening very carefully to the Minister as he seeks to explain the Government’s justification for the inclusion of many reservations to the UK Government. However, on the devolution of income tax powers to the National Assembly without the need for a referendum, I am happy to lend the Government my support.

[Lord Wigley]

My Lords, I am grateful for this opportunity to speak on Clause 17, which the noble Lord, Lord Murphy, opposes. On many matters concerning devolution, the noble Lord, Lord Hain, were he here, would accept that we are usually in agreement. I was a great admirer of the way that he succeeded in getting the 2006 Act on to the statute book, notwithstanding its shortcomings.

Tomorrow is election day in the USA. “No taxation without representation” was the phrase coined in 18th-century colonial America. Today, in 21st-century Wales, we have representation but we do not have powers over taxation. We need both.

As the noble Baroness said a moment ago, the devolution of fiscal powers to Wales establishes an intrinsic democratic link between citizens and the policymakers they elect. Devolving income tax means that we can create better Welsh solutions to the challenges faced by Wales, in both the economy and the delivery of public services.

Although I understand the background to the wishes of the noble Lord, Lord Hain, described by the noble Lord, Lord Murphy, for a referendum on income tax powers, I suspect that another referendum is not really what either of them dreams about at night. Indeed, if they do, they probably have nightmares about the use of this ostensibly democratic tool of government. They both know, as I do, how easily a referendum can transpose itself into a verdict on anything but the issue on the ballot paper. It should be used for only the most clear-cut matters, which the electorate clearly understand and know what the consequences would be. It may be fine for deciding locally whether pubs open or close on a Sunday but it is not an appropriate tool for deciding on taxation policy.

From what the noble Lord, Lord Murphy, said, I think he agrees with me on the need for the Assembly to have some tax-varying powers at the appropriate time for reasons that are becoming increasingly apparent. One of the major challenges for the Welsh Government now is to trigger a substantial capital expenditure programme to develop our industrial infrastructure. Plaid Cymru has called for a national infrastructure commission for Wales, which would enable the Welsh Government to borrow up to £7.5 billion over a 10-year period, and we need a tax-raising facility to fund such a programme. It does not have to be income tax—it could be other taxes, which we will discuss later—but income tax should be available for the Welsh Government, in their wisdom, to decide whether or not to use it.

It has been estimated that the servicing cost of that £7.5 billion would amount to £165 million a year, and it is unrealistic to believe that such a sum could be funded from the minor taxes alone. This is why the devolution of income tax is essential. We cannot call for an expenditure programme without accepting the need to fund it. The two go hand in hand and are essential to build a new forward-looking economy for Wales.

Income tax devolution will be the dawn of a new era of accountability for the National Assembly, reflecting the need for a mature public policy to balance the requirement for resources with the practicality of raising them. It is all too easy—and politically far too facile—for politicians of any party to call for greater spending on this or that element of public services without saying how the money is to be raised. It is equally irresponsible for politicians on the right to call for lower taxes without explaining which public services would lose funding. The acceptance of both as obverse sides of the same coin is a reflection of political maturity. Giving tax-varying powers to the Assembly represents another step to it becoming a genuine home of Welsh democracy. For that reason, I support Clause 17 remaining part of the Bill.

[Lord Morgan (Lab)]

My Lords, I had not intended to intervene in this debate but I should like to make two points. First, I am not persuaded, after what we have experienced in the past few months, that referendums are a source of clear, unambiguous decision. They are disastrous. We have seen that in connection with larger matters than Wales. To have a referendum on the deeply technical issue of the relationships of finance between local and central authorities—a very complicated matter—would resolve into the popular papers of the Welsh press, such as we have, debating whether it would mean income tax going up or down. The idea that fiscal principles would be subject to deep and profound scrutiny is not credible. We have had quite enough referendums as a substitute for democratic decision. They are a bogus form of democracy for the reasons we have seen and I would not want one for this.

Apart from a referendum being an unsatisfactory source of clarity and wisdom, as has been said by other noble Lords, it is an imperative of devolution that the Welsh Government should have some fiscal powers. The Scottish Government have had them since 1997, although they have not used them, and that is perhaps significant for whether the Welsh Government would use them. We do not know.

A devolved democracy that depends on handouts from somewhere else inevitably provokes complaints—as it has done in the history of Wales for decades; Westminster never offers or does enough—and will produce unsatisfactory responses. On the references to the American revolution, the reverse of what was said is profoundly true: if you do not have tax powers or the ability to raise your own revenue, you are not really a democracy because you are in a position of subservience. The whole history of Welsh devolution and other parts of the Bill show—in spite of the excellent intentions of the Minister and others on the Conservative side—that Wales has been treated in an inferior sense. Its status has not matched that of Scotland or Northern Ireland. That is riddled throughout the Bill, nullifying its good and noble purposes. So it is with regard to taxation.

It has been said that we should wait until things sort themselves out and the Barnett formula is removed. Let us wait. It is a temporary stop-gap, as we were correctly told by the noble Baroness. Lord Barnett himself explained what a very bad idea it was, because it was designed to plug what was thought a short-term problem in, I think, 1978, when the distinguished noble and learned Lord, Lord Morris of Aberavon, who is sitting in front of me, was in Cabinet—if I am wrong he can contradict me. Like other stop-gaps, it has survived the decades. It looks remarkably healthy for a stop-gap. A proposal to wait until the Barnett formula is resolved is a way to put off a decision completely. I very much hope we will not have a referendum and that we will bring to further completion the process of democracy in Wales.

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[Lord Kinnock]

I accept the point entirely. I can respond to it only by saying that I await, without bating my breath, for the implementation of this proposition. I can see the attractiveness of it, especially to a party which is self-confessedly populist and has gained great strength by means of offering simple answers to complex questions. That has served that party well for several years—astoundingly well. I await that exercise of the variation under the supplementary powers granted to them and on that occasion, I will withdraw all speculation about Scottish inclinations to vary taxation powers.

[Lord Wigley]

The noble Lord very kindly talked of our consistency on these matters; I also respect his consistency on them from 1979 onwards. Can I press him on the point that he made about exercisable powers? The next bank of amendments will talk about a new exercisable power to have a capital investment fund. Without some ability to vary taxation, how does the noble Lord square that circle or does he not support the demand for a greater capital expenditure fund?

[Lord Kinnock]

I say to the noble Lord, Lord Wigley, who I respect greatly, that it would be—without oversimplifying this—on the same basis as borrowings are undertaken now. He will know of the generous and immensely useful support given to a variety of projects in Wales by the European Investment Bank. Nobody has required the allocation of tax-varying or tax-raising powers to the Welsh Assembly to enable that support. Since there is also a guaranteed income for the Welsh Assembly—inadequate and stunted by the application of the Barnett formula, as he and I would agree—but nevertheless significant, as he and I would agree, nobody lending money for major capital investment projects in Wales, within reasonable limits and according to the required fiscal disciplines, should worry about it because they will be guaranteed a return on their investment. It is not necessary to add to the obligations of the Welsh Assembly to facilitate that—within limited confines, as I say. I will give him an example, which I will pluck out of the air.

If, for instance, a sensible proposal was made for establishing a link between Rhoose international airport and the main train line from London to Swansea, I would certainly support it, or, indeed a spur road from the M4 or even a direct road from the A48 into Rhoose airport in order to enhance the attractiveness of this major infrastructure advantage, substantially, and rightly, supported by the Welsh Government. There is no reason why a guarantee of return on the investment should not be made by the imposition of a small toll on the road or the railway line. It is not unprecedented across continental Europe. If we want to know how successful such arrangements can be, the noble Lord only has to look that the second Severn crossing. A huge capital sum, vastly in excess of anything that would be needed to link Rhoose airport, has been paid off with, in my view, excessive and unfair impositions—I am speaking of the degree, not the principle. The same thing could be done elsewhere. I am not advocating it; I am simply saying that there is a variety of ways of guaranteeing a reasonable return on long-term capital investment without requiring the allocation of fund raising through income tax-raising powers for the Welsh Assembly.

If this removal of a requirement for a referendum is to have a real justification, it has to have evident support from people across Wales. They have expressed no significant demand for, or preference for, the further allocation of such a power to the Welsh Assembly. The maxim employed earlier by the noble Lord, Lord Wigley, which was coined by a Welshman at the time of the American Revolution, “No taxation without representation”, bears an addition in this century. It is: “No further allocated powers of taxation without at least consultation, without at least deliberation, without at least endorsement and, finally, without at least agreement”. That brings us back to the referendum because where there is an absence of demand for this change in the way in which the people of Wales are governed, there has to be a supreme additional justification for allocating a power that is not only not demanded but that we have every reason to assume would not be exercised, a power that would not lend itself to extra accountability or enhance transparency or enrich democracy. I wait to hear from the Minister a justification of the dismantling of the undertakings previously given by all parties and enacted for a referendum as a prerequisite of the allocation of income tax-raising powers to the Welsh Assembly.

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[Lord Bourne of Aberystwyth]

My Lords, I am very happy to supply the information that I gave previously at Second Reading, when I said that I would update noble Lords, before Report, on the progress of the fiscal negotiations that are going on between the Welsh and United Kingdom Governments. As I indicated then, the discussions are progressing well. The ministerial Joint Exchequer Committee has met twice and, according to reports I have had from both the Welsh and UK Governments, it is going well. I am not all over the detail; it would be unwise to be so until they are nearer to a conclusion. There will obviously be a reduction in the block grant because 10p income tax will be raised at the Welsh level. So the discussion is about exactly how we do what is right for Wales and for the United Kingdom within that context. It is good news that progress is being made.

[Lord Wigley]

I will press the Minister for clarification. Of course, if 10p is transferred over there will be a netting off, but if there is an increase of 1p in income tax there would not be a reduction in the block grant because of that.

[Lord Bourne of Aberystwyth]

That is absolutely right. The National Assembly for Wales doing something imaginative to raise income will be to the benefit of the Assembly and of Wales. That is the whole point of what is going on. I take issue with the noble Lord, Lord Murphy, in suggesting that there is something sinister in the change of heart here. Other parties have had this change of heart; it is a recognition that we do not need a referendum. I suspect that many of the people urging it are hoping to delay things—I exempt the noble Lord from this—or, indeed, defeat it. That should not be the aim. The aim should be to do what is right for Wales. I strongly and sincerely believe that if we were to have a referendum, it would be carried.

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[Baroness Morgan of Ely]

My Lords, to me this is one of the key clauses in the whole Bill. I have made no secret of my lack of enthusiasm for the way the Bill has been written, but we are now living in very difficult financial times. The IFS has claimed that there will be a 3.2% cut, in real terms, in the Welsh budget over the next three years. We have little confidence that the UK Government are going to make up the losses that Wales will face as a result of Brexit. The IFS has said that if they do not make up the losses, that will lead to a doubling of those cuts if EU aid is not replaced after Brexit. I am aware that there has been a promise until 2020, but nothing beyond that.

The devolution of tax powers through the Wales Act 2014 will also enable the Welsh Government to borrow in order to invest in capital infrastructure. That will benefit the economy and communities across Wales. The current level of capital borrowing permitted to the Welsh Government is £500 million. That is based on the devolution of two fairly minor taxes: stamp duty land tax and landfill tax. In the Command Paper published alongside the Wales Bill in March 2014, the UK Government committed to reviewing the level of capital borrowing available to Wales if income tax is partially devolved. This Wales Bill will result in the transfer of an additional £2 billion in tax revenue to the Welsh Government, and so will significantly increase the size of the independent revenue stream available to the Welsh Government. In line with the commitment given in 2014, the Bill provides an opportunity to give Welsh Ministers a more meaningful degree of borrowing power to reflect the significant increase in devolved tax revenues under their control.

The Silk commission, of which the noble Lord, Lord Bourne, was a member, recommended that the Welsh Government’s capital borrowing limit should be at least proportionate to the limit agreed for Scotland, taking into consideration the relative lack of exposure to PFI in Wales. With comparable devolved tax powers, the UK Government agreed a capital borrowing limit of £2.2 billion in the Scotland Act 2012. In line with the recommendation from the Silk commission, a capital borrowing limit of £2 billion would therefore be proportionate to that agreed for the Scottish Government, after taking into account the Welsh Government’s lower exposure to PFI. The UK Government’s position that a limit of £500 million is appropriate, as set out in the Government of Wales Act, is contradictory to the approach taken for the Scottish Government in the Scotland Act. At a time when there are significant economic uncertainties, the ability to bring forward additional capital investment would provide a much needed economic stimulus to Wales. With a capital borrowing limit of £2 billion, the Welsh Government would have the fiscal tools available to support the level of investment needed in Wales.

The Welsh Government and Assembly are anxious to grow up, but it is as if the UK Government still want to treat them like children, telling them how much money they can spend and that they are allowed to borrow only if they tell “daddy” what they are going to spend the money on. An increase in the Welsh Government’s borrowing capacity is absolutely critical, and I for one would find it very difficult to support the Bill without that increase. We understand that this will form part of the discussions on the financial framework, but we strongly recommend that both the Welsh Government and the UK Government come to an agreement on this critical area. I ask the Minister to give a commitment that there will be a revision of the amount that is currently in the Government of Wales Act.

[Lord Wigley]

My Lords, I will speak briefly to Amendment 24 moved by the noble Baroness, Lady Morgan of Ely, which seeks to raise the limit on capital expenditure lending from £500 million to £2 billion. We touched on this issue in our debate on the previous group of amendments.

In the economic climate we find ourselves today, with further uncertainties ahead of us, it is more necessary than ever to have available to the Welsh Government a facility to boost jobs and stimulate growth by way of capital investment—in particular, in capital expenditure on infrastructure projects. Many expect the Chancellor to reflect that sentiment in his Autumn Statement later this month. The Bill imposes on capital borrowing the disappointing limit of only £500 million, which is not enough even to pay for the Welsh Government’s M4 relief road scheme—unless they were to adopt a more sensible route than that currently being advocated.