Barnett Formula

Debate between Lord Wigley and Lord Newby

Tuesday 10th February 2015 Lords Chamber

[Lord Newby]

Well, my Lords, that is exactly what we are doing. The transfer of tax revenue to the Scottish Government means that the block grant, the element to which the Barnett formula applies, is falling by two-thirds from approximately £30 billion to £10 billion.

[Lord Wigley (PC)]

My Lords, does the Minister accept that the comments he has just made about phasing out the Barnett formula will be noted with considerable interest in Wales? Does he understand that on the formula that Scotland is receiving at the moment, adjusted for population, Wales is getting £1.2 billion less than we would if it was calculated on the Scottish basis? When are the Government going to phase in a new arrangement for Wales so that we get a fair deal out of the Treasury?

Barnett Formula

Debate between Lord Wigley and Lord Newby

Monday 3rd November 2014 Lords Chamber

[Lord Newby (LD)]

My Lords, I begin by expressing my personal condolences to the family and friends of the noble Lord, Lord Barnett. Lord Barnett was a delight to have as a sparring partner, and I will certainly miss his presence in your Lordships’ Chamber very much.

The Government are aware of the Welsh Government’s views on continuing the Barnett formula. Although there are no changes to Barnett in prospect, we have agreed with the Welsh Government to revisit the arrangements for jointly considering relative funding in advance of each spending review. The Prime Minister has been clear that Wales will be at the heart of the debate on how to make the United Kingdom work for all its constituent parts.

[Lord Wigley (PC)]

My Lords, I, too, pay tribute to Lord Barnett: a lovely, gentle, intelligent colleague who was among the first to recognise that the funding formula bearing his name by now needs radical reform. Does the Minister accept that if Wales were to receive the same level of funding as does Scotland, relative to population and the portfolios devolved, Wales would now get a staggering £1.2 billion a year more than is currently the case? On what possible basis of equity can Wales be denied parity with Scotland in regard to such funding? Would it not now be a fitting tribute to Lord Barnett if the Government today pledged to revise the formula to deliver for Wales parity with Scotland in funding matters?

[Lord Newby]

My Lords, as the noble Lord knows, a very significant review of funding in Wales was undertaken by Gerry Holtham, which suggested that Wales would be getting a fair degree of funding if it was approximately 114% of that in England or more—I believe that that is the right figure. I believe that, certainly this year and next year, that figure will be met.

Wales Bill

Debate between Lord Wigley and Lord Newby

Wednesday 15th October 2014 Lords Chamber

[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.

--- Later in debate ---

[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.

Wales Bill

Debate between Lord Wigley and Lord Newby

Wednesday 15th October 2014 Lords Chamber

[Lord Wigley]

I am very grateful to the Minister. I certainly welcome his announcement that progress has been made with the bonds issue, and I hope that the National Assembly can move forward rapidly to take advantage of that opportunity.

With regard to borrowing, the capital budget of the National Assembly was reduced by just over 40% when the changes introduced by the Government were brought in. That put an immense squeeze on, among other things, the capital requirements of Governments, such as the Government in Wales, with responsibility for roads, schools, hospitals and all the rest. To get the economy moving, we have to get the capital injection, particularly into the economic infrastructure. I entirely accept that there has to be a cash stream to service this, and the Minister once again mentioned the income tax proposals. As he knows, I welcome those and want to see them used. Are the Welsh Government constrained to income tax? There are other sources of taxation revenue, and there may be other sources of revenue as well. For example, in the next four or five years, the M4 tolls will be reconsidered and renewed. Is it not possible for the Welsh Government to use sources other than income tax to service the capital borrowing that they need? Can the Minister give any indication on that?

[Lord Newby]

As the noble Lord knows, the Bill is permissive in terms of additional taxes being established in Wales. My working assumption would be that if such new taxes were devolved or established, there would be a commensurate rise in borrowing powers. However, many of the taxes that people sometimes talk about do not necessarily raise a huge amount of money. Therefore even if you got a commensurate increase in borrowing it would not necessarily be a transformative amount on its own. However, I think that the principle is very clear. The Bill is permissive in terms of additional tax powers for the Assembly and, as it were, borrowing follows income.

[Lord Wigley]

I am glad that the Minister has emphasised that there is a basket of possible sources of revenue which would justify the capital that is needed. No doubt the Welsh Government will need to use the capital responsibly as it is for capital investment projects and not just to subsidise revenue budgets that are running at a loss. As far as that is concerned we are making progress. Can I just pick him up on the comments that he made about Northern Ireland when he said that the situation there is different. Of course the situation is different from Wales. I understand the historic difference and all the rest but in economic terms the challenges in Wales are just as great as those in Northern Ireland—they are in terms of the income per head, the GDA. Is the Minister aware that the GDA per head in areas such as Kensington and Chelsea is 10 times the GDA per head in the Gwent valleys and Anglesey? That is the scale of the discrepancy. We need to regenerate the economy, otherwise we are always going to be going down this spiral. We need the tools to do the job and quite clearly this will be a responsibility of the Welsh Government. All I would press for is for him to be as sympathetic to the economic needs of Wales as he clearly is to the economic needs of Northern Ireland. I beg leave to withdraw the amendment.

Scottish Independence: Currency Union

Debate between Lord Wigley and Lord Newby

Wednesday 12th March 2014 Lords Chamber

[Lord Newby]

My Lords, before you got to that point, it would require the rest of the UK Government to wish to recommend such an outcome. It is worth quoting the conclusion of the official Treasury study, which says:

“On the basis of the scale of the challenges, and the Scottish Government’s proposals for addressing them, HM Treasury would advise the UK Government against entering into a currency union. There is no evidence that adequate proposals or policy changes to enable the formation of a durable currency union could be devised, agreed and implemented by both governments”.

As a result, I do not think we will get to that point.

[Lord Wigley (PC)]

My Lords, does the Minister accept that, in the event of there being a yes vote for independence, it is in the interests of business not only in Scotland but in the rest of the United Kingdom that there is a parity and stability of currency? How would the Government provide that?

[Lord Newby]

It is always in the interests of all Governments to have a stable currency. The question for the Scottish Government is how they think they would provide that. If they opted to keep the pound outside a currency union, they would face very serious problems in managing their budget and the economy of Scotland.

Public Sector: Debt

Debate between Lord Wigley and Lord Newby

Thursday 23rd January 2014 Lords Chamber

[Lord Wigley]

To ask Her Majesty’s Government what is their latest estimate of the United Kingdom’s public sector debt, and what was the comparable figure in May 2010.

[Lord Newby (LD)]

My Lords, the latest public sector finances statistical release set out that public sector net debt was £1,254.3 billion or 75.7% of GDP in December 2013, compared to £846.4 billion or 57.2% of GDP in May 2010.

[Lord Wigley (PC)]

My Lords, does the Minister accept that that is a serious deterioration in the level of debt, and that UK debt now stands higher as a proportion of GDP than does that of Spain? Do the Government accept that, at some point soon, they will have to start reducing that debt? In so doing, will he give an assurance that they will not continually place the burden on the weakest members of our community, who depend on public services and social benefits, but will, at the appropriate time in the economic cycle, raise taxes, so that those with the broadest shoulders start bearing some fair share of this gigantic problem?

Welsh Government: Comprehensive Spending Review

Debate between Lord Wigley and Lord Newby

Thursday 4th July 2013 Lords Chamber

[Lord Wigley]

To ask Her Majesty’s Government what discussions they have had with Welsh Government Ministers about the effect of the Comprehensive Spending Review on the delivery of devolved services in Wales.

[Lord Newby]

My Lords, Treasury Ministers and officials have regular discussions with the Welsh Government on a wide variety of topics. Finance Ministers from the devolved Administrations met the Chief Secretary in Belfast on 3 June to discuss the forthcoming spending round. We have also received a joint written representation from all three devolved Administration Finance Ministers.

[Lord Wigley]

My Lords, is the Minister aware that Wales has the lowest level of GVA per head of any nation or region in these islands? Does he also accept that the key to regeneration is infrastructure investment, particularly to stimulate local economies? Why was it then that, in the review last week, while Scotland and Northern Ireland received an increase of 2.7% and 1.5% respectively in their capital DELs—departmental expenditure limits—Wales received a paltry 0.3%? As Anglesey has had the lowest GVA per head of any county in the United Kingdom during the past decade, will the Government now find capital funding for a much needed new road bridge over the Menai Strait to Anglesey, both to improve the traffic bottleneck there and to stimulate economic development on the island?

[Lord Newby]

My Lords, as the noble Lord said, the Welsh Government’s capital budget for 2015-16 will increase by 0.3% in real terms, but that is only part of the story in terms of government capital expenditure in Wales. As he knows, south Wales is set to benefit from the electrification of the main line to Swansea and of the valley lines. He will be aware also that the Government have committed to spending £0.25 billion on a major new prison in north Wales.

Northern Ireland: Corporation Tax

Debate between Lord Wigley and Lord Newby

Monday 18th March 2013 Lords Chamber

[Lord Newby]

My Lords, I think that account has been taken of views expressed from many quarters. However, the complication, as the noble Lord will be aware, is that if the Northern Ireland Assembly were to cut the rate of corporation tax significantly, its own budget would have to be cut by an equivalent amount.

[Lord Wigley]

My Lords, will the noble Lord confirm that the Government have taken on board the recommendations of the Silk commission, which, in the context of corporation tax, recommended for Wales that, if Northern Ireland were to have corporation tax powers, so should the National Assembly for Wales? Given that the Government have welcomed the Silk commission’s first report, will he confirm that that will now happen?

Regional Development

Debate between Lord Wigley and Lord Newby

Tuesday 12th March 2013 Lords Chamber

[Lord Wigley]

To ask Her Majesty’s Government how they will reduce the geographic disparity in Gross Value Added per head within the United Kingdom.

[Lord Newby]

My Lords, the Government are committed to supporting sustained economic growth across the UK. Economic development is a devolved responsibility in Wales, Scotland and Northern Ireland. In England we are promoting growth across the regions by creating local enterprise partnerships, giving cities the powers they need to drive economic growth via the city deals, and directly investing in and growing enterprises via the regional growth fund, which has now allocated some £2.4 billion.

[Lord Wigley]

My Lords, is the Minister aware of the figures for the inner London west area that show a GVA per head of over £111,000 compared with a figure of £11,000 or £12,000 for Anglesey, the Gwent Valleys, the Wirral and Durham? Is this not a gross disparity and should the Government not give much greater priority to overcoming this?

[Lord Newby]

My Lords, it is a very great disparity—and a disparity, as the noble Lord knows, of very long standing. The good news in terms of Wales is that in 2010 and 2011 GVA grew faster per head than in either England or Scotland, so there is a bit of progress. However, changing and reversing those regional disparities is going to be a long job and it will take a large number of measures to achieve it.

Bank of England

Debate between Lord Wigley and Lord Newby

Tuesday 22nd January 2013 Lords Chamber

[Lord Newby]

My Lords, the Government will listen to Mr Carney’s suggestions. Mr Carney has said that he will not comment on the position in the UK until he arrives. His key speech on this issue was made in February last year before he was appointed. In that speech, he said among other things that,

“if nominal GDP targeting is not fully understood or credible, it can, in fact, be destabilizing”.

There is no quick and easy answer—

[Lord Wigley]

My Lords—