Balancing the Public Finances

Mark Harper Excerpts

Tuesday 11th July 2017 Westminster Hall

[Joan Ryan (in the Chair)]

If Members wish to remove their jackets, they should feel free to do so, and of course their ties—I have removed mine, as you can see.

[Mr Mark Harper (Forest of Dean) (Con)]

I beg to move,

That this House has considered the matter of balancing the public finances.

It is a great pleasure to serve under your chairmanship in this new Parliament, Ms Ryan. This is the first time I have secured a Westminster Hall debate since the general election. If you will forgive the indulgence, it is also a great pleasure to see the Financial Secretary to the Treasury, my right hon. Friend the Member for Central Devon (Mel Stride), in his place. He served with tremendous distinction in the Whips Office, which I had the pleasure of leading after the 2015 general election, and I am pleased to see him in his current role. I look forward to him responding to the debate.

I am conscious that a large number of Members wish to speak, so I will speak for a little less time than I had originally intended. The first thing worth drawing to the attention of the Chamber, however, is how few Opposition Members are present, which I find astounding. To draw some conclusions from the attendance, we can see that the Conservative party and our allies in the Democratic Unionist party believe in balancing the public finances and making the difficult decisions necessary to ensure that we can grow the economy and create jobs. Judging by the turnout on the Opposition Benches, or rather the lack of turnout, the Labour party is clearly not interested in balancing the public finances or making sensible decisions; all that it is interested in is spending other people’s money until it runs out. Whereas, so many Conservatives are here that they are having to move right around the Chamber and take over the other side.

I will probably have to draw my remarks to a close sooner than I had expected, in order to allow other Members to speak, so let me do a quick précis of my argument. We have come a long way since 2010: we have cut the deficit by three quarters; we have had faster economic growth than almost any country in the G7 largest countries; and we have cut unemployment to levels not seen since I was at primary school in 1975. That is incredibly important, because those are not just statistics; they represent real people getting the opportunities to succeed and thrive.

There are things that we should be proud of, and we could and should have talked about them more during the election campaign. I was very pleased to hear the Chancellor’s outstanding speech in the debate on the Queen’s Speech, in which he set out our economic record and our plans for the future. My central message at the conclusion of my speech today will be that although we face difficult decisions and many pressing needs for spending public money, we need to raise that money while keeping taxes low and economic growth moving along. Those are difficult decisions. The Chancellor is the man who must make those decisions, and he must make them in a balanced way, taking into account all the factors, including economic growth. He needs to make those decisions at the Budget in the autumn, and Conservative colleagues should give him our support in doing so.

[Mr Philip Hollobone (Kettering) (Con)]

I congratulate my right hon. Friend on his excellent speech. Is it not the case that Britain has become addicted to public sector debt? The truth is that since 2002 Governments of both colours have been spending more each year than we have been collecting in taxes. If are to stop doing that in future, it will be a bit like a drug addict coming off drugs.

[Mr Harper]

My hon. Friend sets out clearly what has happened in the past, and I want to spend a little time on the challenges facing us in the future, but it is worth looking at the economic record. We did not make the decisions and get the success we have had easily; they were contested, and our political opponents challenged us every step of the way. But we have been successful, which gives us the credibility to talk about facing the challenges of the future.

When we came to power in 2010, the budget deficit was the equivalent of just under 10% of the size of the economy, at £150 billion a year. According to the most recent set of actual figures, we have reduced the cash deficit to £46 billion—down by 70%—and the deficit as a proportion of the size of the economy is down by 75% to 2.5%. That is a significant achievement, and it means that in this Parliament the size of our stock of national debt as a proportion of the size of the economy will start to fall. That is incredibly important for the future.

[Julian Knight (Solihull) (Con)]

I congratulate my right hon. Friend on securing this incredibly important debate. The impact is not simply one of taxes and of borrowing and spending, but of Government spending on personal finances, which has a massive impact because of interest rates and personal interest rates. If we let borrowing get out of control, interest rates in the real economy would rise. That is when we have repossessions, and that then is when we have a depression.

[Mr Harper]

My hon. Friend is absolutely right. If we let the public finances get out of control, interest rates would rise and hard-pressed families who are having to make difficult decisions would see the cost of their mortgages and other debts go up, which would not make their lives any easier at all.

Let us consider the impact of controlling the public finances on the real economy. If we look at growth, at how fast the economy has grown over the past seven years, we see that our economic performance among the G7 largest countries in the world has been second only to that of the United States. Interestingly, we have grown our economy at almost double the rate of our nearest neighbour, France. In 2014 and 2016 we were the fastest growing G7 country, and the joint fastest in 2015. That is an impressive record. I mention that because our political opponents often pretend that balancing the public finances has not worked, but in generating economic growth it absolutely has worked.

[Craig Tracey (North Warwickshire) (Con)]

I, too, congratulate my right hon. Friend on securing this debate. Will he join me in welcoming the fact that the reduction in corporation tax to 19% has brought in the highest yields ever, bringing another £11 billion into the economy? Does he have any thoughts on what increasing the rate to, say, 26% would have on jobs and, importantly, our ability to reduce the deficit?

[Mr Harper]

My hon. Friend, who makes a good point, tempts me to leap forward to the end of my remarks, but I will say only this about taxes: there is a big difference between rates of tax and how much money is raised. As Conservatives, we believe that the purpose of taxes is to raise money to pay for our public services. The Chancellor made it clear in the debate on the Queen’s Speech that by reducing the tax rate, thereby encouraging businesses to locate here and be more successful, we raised more money to pay for those public finances—I think the Chancellor said £18 billion more.

Looking at that performance, it seems to me likely that if we were to raise corporation tax two things would happen: first, we probably would not raise the money, so although we might pat ourselves on the back and pretend that we were raising taxes, we would not raise the money to pay for public services; and secondly, it is fairly obvious to everyone, or to everyone on the Government side of the House, that those taxes do not fall on businesses at all. When we raise taxes on business, there is no mystical “business” to pay them; those taxes fall either on workers, who will receive smaller pay rises, or on customers, who will see higher prices. Taxes all feed through, so everyone in the economy would pay the price of any corporation tax rises, which probably would not raise any more money to pay for our public services, so we would be shooting ourselves in the foot. My hon. Friend the Member for North Warwickshire (Craig Tracey) makes exactly the right point.

I also want to mention our record on jobs, which is what I am proudest of: 3 million more people are now in work than were when we first came into office. Let me give the specific example—I think this will be heartening—of the impact on young people. In 2010 the unemployment rate among young people in this country was about 20%, which is comparable with that of our neighbours in the European Union and in the eurozone. Since we came into office, to this point, in those countries the unemployment rate among young people has been broadly flat, up a little but still around 20%. In our country it is down six percentage points, to 13%. That is not just a statistic; it means that hundreds of thousands of young people have had the opportunity to get a job when they leave school, college or university.

[Neil Parish (Tiverton and Honiton) (Con)]

I thank my right hon. Friend for securing the debate. We reduced corporation tax from 28% to 20% but actually increased the tax take. As we exit the European Union, we will need to encourage more businesses to come to this country and create more employment, so it is essential that we reduce taxes further, rather than putting them up. That is the difference between the Government and the Opposition.

[Mr Harper]

My hon. Friend makes a good point. As we are going to leave the European Union, we want to be more global and outward-looking and we want more companies to locate in Britain, so it seems to me that this is exactly the wrong time—if there ever is a good time—to increase corporate tax rates.

[David Linden (Glasgow East) (SNP)]

The right hon. Gentleman talks about the importance of what this Government have done for young people, but can he tell us how many people in the figure he mentioned are on exploitative zero-hours contracts? If the Government are so passionate about young people, why will they not pay them a real living wage? Why are they discriminating against the under-25s?

[Mr Harper]

I am glad that the hon. Gentleman raises zero-hours contracts. It simply is not true that everyone on a zero-hours contract is being exploited. There is some good evidence from the Chartered Institute of Personnel and Development. I am not sure whether these data have been updated, but it did a survey in 2014 that showed that around 63% of people on a zero-hours contract—higher than the proportion of people on a permanent full-time contract—were satisfied with their terms and conditions. Most people on zero-hours contracts actually find that they fit their requirements, because they are either students or people with caring responsibilities.

There are of course people who would prefer not to be on a zero-hours contract. That is why I welcome Matthew Taylor’s review, which was published today. He thinks that employees should have the right to ask their company to put them on a permanent contract. Indeed, McDonalds recently offered that to its employees. It is true that some of its staff on flexible contracts said that they would prefer to move to a fixed-term contract, but about 80% preferred to stay on a flexible contract because it suited them. I just do not agree with the contention that a zero-hours contract is by definition exploitative. In many cases, it suits the worker and it suits the business—it is a win-win. But it is completely true that if such contracts do not suit people, it is better that they should have the opportunity to move to a full-time or permanent contract to guarantee them hours. I am pleased with Matthew Taylor’s report.

My final point about youth unemployment concerns what happens to young people’s opportunities in countries that do not deal with their public finances. The most obvious example is Greece, which clearly has not dealt with its public finances, where 47%—nearly half—of young people are without work. Countries that do not deal with their public finances damage young people’s opportunities, probably for their lifetime. I do not want us to go down that road and be that sort of country; I want us to keep focused on balancing the public finances.

There is an interesting factor relevant to my constituency. I looked at a debate in the House in 1983, in which my predecessor but two, Paul Marland, spoke. He pointed out that at that time unemployment in his constituency was 15.3%, which was 2% above the national average. I am pleased that, seven years into a Conservative Government, unemployment in my constituency is 1.6%, which is below the average for the south-west—1.7%—and below the United Kingdom average. Our economic record has not just delivered for the United Kingdom and for the south-west; it has absolutely delivered for my constituents, who now have the opportunity to be in work, which is important for their families.

[Justin Tomlinson (North Swindon) (Con)]

My right hon. Friend is giving a characteristically powerful speech, which is why this debate is so well attended. In my constituency, youth unemployment has fallen by a staggering 61%, making a real difference to people’s lives. That is partly due to the expansion of apprenticeships, which more than 10,000 students have started. Last week I was proud to attend once again the graduation ceremony at Swindon College, where we are equipping young people with the real skills they need.

[Mr Harper]

I am grateful to my hon. Friend for raising that point. He knows—not everyone in the Chamber will—that Swindon is my home town. I actually did my A-levels at Swindon College, so I am particularly pleased to hear that that institution is still delivering opportunities. The opportunities that I got at a comprehensive school in Swindon and at Swindon College meant that I was the first person in my family to go to university, and definitely the first person in my family to make it to the House of Commons. I am pleased to have had those opportunities, and I want every young person in our country to have them too. That is why this matters.

All that I will say about the Opposition—[Hon. Members: “Where are they?”] My hon. Friends make the point that there are hardly any of them here. [Interruption.] An hon. Friend says that they are out spending. They opposed all the reductions in public expenditure over the past seven years. It seems to me, having done a back-of-the-envelope calculation, that the debt would already have been more than £300 billion higher based on the Opposition’s public spending plans, and that if they had carried on spending at the rate they were when they left office, an extra £1 trillion would have been added to the public debt by the end of this Parliament. At the last general election, the Labour party manifesto was just, “Spend, spend, spend other people’s money,” with no credible plan to pay for it. That is not the route that our country should follow. The fact that so few Opposition Members are here to defend their plans tells us everything we need to know.

Having gone through our record and why I think we have been successful, let me say a few words about the challenges we face. Public sector pay is an important topic—in fact, it is what prompted me to call this debate. We all know hard-working public sector workers in our constituencies. It is good to pay them fairly for the jobs they do, but it is also fair that we look at all our constituents—those who work in the public sector and those who work in the private sector. It is worth reminding ourselves that after the financial crash a lot of people in the private sector experienced reductions in their pay, which did not happen in the public sector. According to the Institute for Fiscal Studies, which is a respected organisation, public sector workers are still paid slightly better than private sector workers, even after adjusting for qualification levels. Even after some public sector pay restraint, the levels of pay in the private and public sectors are about the same, and people in the public sector obviously have the benefit of a more generous final salary pension scheme.

We have not talked much about the fact that the 1% pay cap is of course a cap not on individuals’ pay but on the pay scales. Most people will not be aware that, even with that pay cap, many public sector workers have actually seen significant rises in their pay because they have moved up pay bands. I think that half of national health service staff have had a pay rise of more than 3%. Teachers have had an average pay rise of 3%, because many, unless they have a performance issue, move up the pay bands during their career. That is on top of the 1% pay rise. We need to look at all those facts and conduct the debate in the proper spirit.

There are many pressures on public spending. There is public sector pay and funding for our national health service and for social care, and colleagues want more money put into schools. Part of the challenge of being in government is that we cannot say yes to everyone; we have to make choices and set priorities. The right way to do that is to look at the economic growth forecast, at how much tax revenue we think we will have, and at recruitment needs in public services. We have to look at all those things together.

[Mr Gregory Campbell (East Londonderry) (DUP)]

I congratulate the right hon. Gentleman on securing the debate. On the overall issue of rebalancing the public finances, does he agree that there is an example of effective and pragmatic expenditure in the recent announcement by the Prime Minister and the leader of my party? Is not it a good idea to have investment in an area of the United Kingdom such as Northern Ireland, where there has been high dependency on the public sector, in an effort to reduce the debt that is due to Northern Ireland, by the creation of private sector finance and private investment and thus better investment opportunities and more jobs? Is that a good project for the rest of the United Kingdom to follow?

[Mr Harper]

I welcome that intervention, because one of the things that we set out in our manifesto, and that the Chancellor set out in the House of Commons, is our plan to invest across the United Kingdom in infrastructure such as broadband, to help the economy and businesses to be more productive. That is how to raise tax revenue, grow the economy and create the jobs that enable us to spend money on our public services.

[Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)]

I congratulate my right hon. Friend on securing the debate. He is right to highlight the importance of jobs, growth and apprenticeships, which should be at the forefront of any general election debate in a normal time. Does he agree that the public services are under pressure at the moment? We must recognise that. I work in those public services and I see it in my working life. According to the latest forecast, the target—a structural deficit of less than 2% of national income in 2020-21—will be comfortably met by sticking to the current tax and spending plans, so there is about £25 billion of leeway to invest a little more in those important public services, while paying down the deficit in a responsible manner.

--- Later in debate ---

[Mr Harper]

I do not disagree with my hon. Friend about investing in public services. He will know that part of the reason why the Chancellor loosened the target a little in his first Budget last year was to build in some flexibility to deal with the headwinds that we may face in leaving the European Union, and some of the challenges, and I think that was right.

I was going to say—my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) has given me an excellent lead-in—that we can pay for our public services only by raising the money through economic growth, as he suggests, or by borrowing more, which I do not think would be sensible. It would damage the public finances, raise interest rates, as my hon. Friend the Member for Solihull (Julian Knight) said, and put pressure on our hard-pressed constituents. Alternatively, we would have to raise taxes, which I do not think would be the right thing to do either.

When the Chancellor looks at the public finance position in his Budget, he needs to consider the growth forecast from the independent Office for Budget Responsibility—what tax revenues he is likely to have. He then needs to consider the pressures on public servants and public services. He needs to look at all the pressures across the piece and come to a balanced Budget judgment, weighing up all those things. Then we need to back him in those decisions. What we cannot do is have a particular story that goes around each week, or decide that something happens to be the flavour of the month, and discover at the time of the Budget that we have run out of money. That is not the way to run a sensible Government, and that is the message for the Chancellor.

I want finally to consider how we pay for things. I remind my right hon. and hon. Friends that in our manifesto we said that we wanted to keep taxes as low as possible, because taxes are levied on businesses that employ people and on individuals who work hard and face decisions about how to spend their money. We will always be the party that keeps taxes as low as possible, and we want to reduce taxes on businesses and on Britain’s working families. We made it clear that we would deliver an increase in the personal allowance, that we would not increase value added tax, and that we would stick to our plan of reducing corporation tax, because that will bring investment and jobs to Britain. As I have already said in response to an intervention, that approach will raise more money for the public finances, not less. We need to stick with that plan and give the Chancellor the opportunity to act in that way.

Any Government worth their salt need to stick with sound public finances. That is how to get the growth, jobs and investment in the public services that we depend on. There are always more pressures on public spending than can be paid for. It is a difficult job for the Chancellor to balance those things. What we need to do, as his Conservative colleagues, is give him space to listen to the input—we can make our bids to him privately. He then needs to balance those things, taking everything into account, and come up with a balanced Budget judgment in the autumn. We need to back the Chancellor, which will mean we are backing our country and its growth prospects, and backing the prospects for jobs, growth and prosperity for all our constituents.

[Several hon. Members rose—]

--- Later in debate ---

[David Linden]

I will not, because of time pressures.

Austerity strangles the lifeblood out of an economy by exacerbating inequality. The Government’s tax and welfare reforms disproportionately affect the least well-off. Charities have warned that current planned welfare cuts are set to drive a potential fall in incomes of 10% for the poorest third of working-age households and a rise in inequality not seen since the 1980s.

[Mr Harper]

Will the hon. Gentleman give way?

[David Linden]

In conclusion, let us have a debate about balancing public finances but let us be serious and not balance the public finances on the backs of the poorest and most vulnerable.

--- Later in debate ---

[Rachel Maclean (Redditch) (Con)]

It is a pleasure to serve under your chairmanship, Ms Ryan. I commend my right hon. Friend the Member for Forest of Dean (Mr Harper) for securing this much-needed debate and for his excellent points.

I want to focus my comments on one issue only: income inequality, which the hon. Member for Glasgow East (David Linden) referred to. Almost a year ago today, the Prime Minister gave a statement on the steps of Downing Street in which she focused on her aim to make Britain a country that works for everyone by tackling deep-rooted injustices such as income inequality. That is one of the most pernicious issues facing our country, and it lies at the heart of our Prime Minister’s vision for our country. In this Parliament, we are setting out the meaningful ways in which we will effect change.

One thing that came up time and again in my election hustings, and I am sure those of other hon. Members, was the idea of taxing the rich more to pay for all the things on which Opposition Members propose to spend money. In fact, the Leader of the Opposition has proposed that as a highly desirable option, which he thinks would lead to lower inequality in our country. However, far from having the desired effect, would that not have precisely the opposite effect?

Is it not a fact that, under the Conservative Government, the people who pay the highest taxes in actual and relative terms are the rich? In 2016-17, the richest 1% in our country are set to pay 27% of all income tax revenue, a higher proportion than under the Labour Government. The richest 5% will pay 38% of total tax. I welcome that. Never let it be said that the Conservatives shy away from taxing the rich. We do tax them, but we do it in a way that delivers real income to the Exchequer. Labour Members—if they were here—would do it in a way that damages the economy, hurts businesses and jobs, and results in tax hikes for ordinary hard-working people, including my constituents in Redditch. Is it not a fact that, under the Conservatives, people on lower incomes are paying less tax than they did in all the years of the Labour Government?

[Mr Harper]

I will be very brief, but I cannot let what the hon. Member for Glasgow East (David Linden) said go unchallenged, which is why he did not give way to me. Over the years that the Conservatives have been in power, income inequality has reduced. The country has become more equal, not less. That does not support Opposition Members’ arguments, which is why they do not want to hear it, but it is a fact of which Government Members should be very proud.

[Rachel Maclean]

I thank my right hon. Friend—he has managed to make my speech a bit shorter.

I will focus on the lower paid, hard-working earners. For 2017 to 2018, the personal allowance is being raised to £11,500, which means that the amount of tax-free income someone can earn will be more than 75% higher than in 2010. That means more money in people’s pockets to cope with the cost of living, because taking people out of tax has the same effect as giving them a pay rise. We have discussed the importance of giving pay rises to everybody, which I welcome. People are keeping more of what they earn.

I reiterate my right hon. Friend’s comment that income inequality is in fact at a 30-year low. It continues to fall, and we want to see it go further. It is the Conservatives who are on the side of the lowest paid—we have taken them out of tax. We are on the side of those earning the minimum wage, and we are boosting their incomes with the national living wage. We are on the side of hard-working people, and we are stabilising the economy so that it creates jobs for people, and they can go to work and earn a decent living. It is the Conservatives who believe in fairness, because we have delivered the lowest levels of income inequality for 30 years, giving people a sense that our country works for everyone.

--- Later in debate ---

[Mel Stride]

My hon. Friend is absolutely right. If we do not start to see the figure coming down, it can only bode ill for the future. That is why we are so determined to get it down.

Turning to the contributions that have been made, my right hon. Friend the Member for Forest of Dean made important points about our record on growth and jobs, about the threat of interest rate hikes if we fail to get on top of our debt and about keeping taxes low, particularly for our businesses. Many Members have made the point that as we have reduced corporation taxes the actual tax yield has increased, which rather suggests that the Opposition’s policy of raising them would be counterproductive in every sense. He made very important points about public sector pay. Let us not forget that this is not just about controlling public sector pay and spending, but about preserving jobs. The OBR reckons that by sticking to our plans we are protecting about 200,000 jobs in the public sector. When we talk about the 10,000-plus more nurses and 10,000-plus more doctors in the NHS, one of the reasons we have them is that we have given ourselves the room to afford them.

If I may, I will turn now to the hon. Member for Islwyn (Chris Evans), who made an impassioned attempt to take on the powerful arguments from the Government side. He is somewhat outnumbered. He suggested that he was like Lieutenant Custer. Of course, at Custer’s last stand, which was in 1876 at the battle of the Little Bighorn, unfortunately Custer was annihilated: he lost five companies, two of his brothers, a nephew and a brother-in-law to boot. It is remarkable that the hon. Gentleman is still standing after the onslaught from the hordes on our side of the Chamber today.

The hon. Gentleman made one point about the tax gap. He bemoaned the fact that, at £36 billion, it is higher than we would like it to be. That is absolutely true, but what he did not mention is that it represents 6.5% of the tax that we raise and is at the lowest level for very many years. As another hon. Member pointed out, since 2010 we have had about 55 new tax avoidance measures that in total have raised no less than £140 billion, which is three times the size of the deficit we face.

My hon. Friend the Member for Witney (Robert Courts) delivered the essential truth that borrowing must be repaid and the intergenerational unfairness of failing to do so. He made important points about the cost of servicing our debt and that if we lose the confidence of financial markets, those costs will rocket, to our detriment. The hon. Member for Glasgow East (David Linden) referred to Brexit as an ideological obsession, but I say no, actually: it is respecting the democratic will of the people. Although I, probably like him, was on the other side of that argument.

My hon. Friend the Member for Redditch (Rachel Maclean) made some very important points. The Opposition always say that we are looking after the wealthiest in society, but the truth is a long way from that. Some 27% of tax is paid by the wealthiest 1% in this country. A statistic that could also have been used is that the wealthiest 3,000 people in our country pay as much tax as the poorest 9 million. We are doing a huge amount on the issue of income equality.

My hon. Friend the Member for Horsham (Jeremy Quin) made an impassioned speech in which he referred to the importance of keeping interest rates low by keeping on top of the debt. My hon. Friend the Member for South Suffolk (James Cartlidge) finished his contribution on the Queen’s Speech debate today, and I am glad that he did because he made some important points, particularly on productivity, and quite rightly referred to our £23 billion productivity investment fund.

My hon. Friend the Member for Chichester (Gillian Keegan) gave a powerful speech and referred, I think, to the shadow Secretary of State for Education’s performance on “The Andrew Marr Show” on Sunday, when the hon. Member for Ashton-under-Lyne (Angela Rayner) referred to Labour having a large abacus. I have to say that my jaw hit the Stride sofa when I heard her say that it would cost about £100 billion to wipe out student debt and that this was something they were looking at.

[Mr Harper]

The other point that the shadow Education Secretary made was putting her leader straight when she admitted that more working-class children were able to go to university with tuition fees and that it is simply not correct to keep asserting what he says, which is that fewer had done so. The fact that she put her leader right was spot on.

[Mel Stride]

As ever, my right hon. Friend is entirely correct.

My hon. Friend the Member for Dover (Charlie Elphicke) made important points about retaining the confidence of financial markets, and my hon. Friend the Member for South West Bedfordshire (Andrew Selous) talked about the importance of productivity, technical education, infrastructure, housing and all those elements, which matter.

The hon. Member for Aberdeen North (Kirsty Blackman) did at least welcome the personal allowance increases that we have implemented. They are now at £11,500 compared with about £6,500 in 2010, and will increase to £12,500 over the coming period. She made various comments about pressures on pay and wage growth, but one fact that I will share with her is that those in full-time work on the minimum wage have actually seen pay boosted by £1,400 a year going back to 2010. That is an achievement that this Government should be rightly proud of.

I very much welcome the hon. Member for Bootle (Peter Dowd) to his place and look forward to a constructive engagement over the weeks, months and years of this Government. He said that he has read the Conservative party manifesto. I urge him to read it again and again and to learn from it. I am afraid that even though he has read it, he has failed to explain how to square more spending and spending, taxing and taxing and borrowing and borrowing with future sustainable economic success.

May I finish with one overall observation? The Opposition are very keen at every turn to say that our commitment to what they call “austerity” and what I call “living within our means” is some form of harsh, uncaring cruelty. Surely the cruellest cut of all is when a politician struts the stage telling the audience that which they most dearly wish to hear, but knowing in his heart that he has no way of delivering it—knowing in his heart that what he suggests will lead to financial and economic ruin. When we look at that situation, what question do we have to ask? We have to ask: who will be most hurt if we go back to the days of 1976? The answer is the most vulnerable—the poorest—because they are the least nimble and the least well-resourced to get out of the way of the damage. They are the people who lose their jobs and cannot cope. They are the people who see interest rates on their mortgages go through the roof, and struggle to pay as a consequence. As many Members have also said, the others who suffer are the young and the as yet not born—those who end up being saddled with the debt of the profligacy of our generation and have to pay it down themselves.

I thank my right hon. Friend the Member for Forest of Dean for securing this debate. We must stay the course. We must make the hard choices. We must make it the first priority of this Government to have a responsible stewardship of our public finances.

[Mr Harper]

I am particularly grateful to the Financial Secretary to the Treasury for closing his speech so excellently, because it leaves us with this one thought: balancing the public finances and having sound public finances is not an academic exercise; it is about enabling growth and jobs and allowing us to protect the most vulnerable in society, allowing the investment in public services, as my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) set out, and making sure that we can deliver on those important promises. Those who do not want to live within their means—the hon. Member for Bootle (Peter Dowd) spent a lot of money in his speech but did not set out how he could save it—would disappoint people, let them down and fail them. That is not a mistake that we are going to make.

Motion lapsed (Standing Order No. 10(6)).

Points of Order

Mark Harper Excerpts

Tuesday 1st December 2015 Commons Chamber

[Mr Speaker]

I say in response to the hon. Lady that I am not sure that this is an occasion for pronouncing on a reform to the process, as she puts it. It is difficult for the Chair to give a ruling without certain knowledge of the facts, but what I would say at this stage is as follows—and I would welcome any clarification the Leader of the House can provide. The first point is that, as I understand it, it is the Government’s firm intention to ensure that the text of the motion is widely available today. Members can apparently consult it—I cannot say this for certain—now in the Table Office.

[The Parliamentary Secretary to the Treasury (Mr Mark Harper)]

indicated assent.

[Chris Grayling]

indicated assent.

Wales Bill

Mark Harper Excerpts

Tuesday 24th June 2014 Commons Chamber

[Owen Smith]

The latter part of that question would of course be a matter for the First Minister, were those taxes to be devolved to Wales, but I think that I have been absolutely clear that we are not in favour of Wales undercutting the rest of Britain to afford benefits to itself. We do not think that would be beneficial to Wales in the long term. Let me be clear: were that to happen, we do not imagine that Wales would continue to enjoy the same degree of welcome support that we receive from the rest of the UK.

[Mr Mark Harper (Forest of Dean) (Con)]

I am now thoroughly confused about the hon. Gentleman’s position. If he is in favour, as I think he is, of devolving these tax powers, but not of their being used to reduce taxes, he can only be in favour of them being used to put taxes up. Is he really saying that he wants Wales to have tax powers, but only so that people living in Wales can pay higher taxes than those living anywhere else in the United Kingdom?

[Owen Smith]

That is a misrepresentation of my position, but I have come to expect little else from the hon. Gentleman or, as he is also known, the shadow shadow Welsh Secretary—well, shadow shadow Foreign Secretary. [Interruption.] Maybe, but he seems to be auditioning these days for the Welsh Secretary’s job. Perhaps he will move on to the Foreign Secretary’s position at a later stage.

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[Jonathan Edwards]

Enabling the Welsh Government with tax-raising powers would incentivise the Welsh Government to improve the Welsh economy. At the moment, they are a spending body, in essence; there is no incentive for them to improve the economy. That is why these fiscal powers are so important.

[Mr Harper]

It might help the House if we thought for a moment about what Opposition Members mean when they talk about a “race to the bottom”. They mean that we allow hard-working families and other people to keep more of their own money so that they can make decisions about spending it, rather than having it taken off them and spent by the Welsh Government. That is what Opposition Members mean and it indicates all too clearly what they are about.

[Jonathan Edwards]

Well, that is the hon. Gentleman’s position. But if the Labour party’s position were to hold true in Wales, there would be a uniform business rate across the 22 Welsh local authorities. There seems to be a slight misunderstanding in Labour’s position.

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[Mrs Siân C. James (Swansea East) (Lab)]

I wish to speak briefly in support of amendment 13 and against the removal of clause 2. I oppose dual candidacy simply because if a candidate is not elected by a constituency under the first-past-the-post system, it cannot be right for them to be elected under the list system. If the electorate have rejected someone once as their first-choice candidate, it is not acceptable for them to have the opportunity to re-enter the game through the back door. In mainstream society people get one chance at a job; if they are not successful at an interview, they have to accept the decision and they do not go back squealing to the prospective employers saying, “Can we change the rules now? Can I possibly be appointed under different criteria or under a different set of interview processes?” Things should be no different for politicians. There should be no swapping or alternatives; it should be the same for everybody.

Let us examine the attitudes towards dual candidacy. We have heard a lot of pooh-poohing of the Bevan Foundation’s inquiry and report, but my constituency took part in that inquiry and I did not see any party members participating; those who participated all came from local community groups and pensioners groups, were not affiliated to any particular party and were not aligned to any political point of view. Some of them were sceptical about devolution and the political process, whereas others were very supportive of it. Those who participated sent a clear message saying, “We are really concerned about the way politicians are behaving on the dual list system and about what is happening.”

The report found that more respondents said that

“dual candidacy was unfair compared with those who felt candidates should be free to stand in both.”

Someone who was interviewed said:

“I think it is unfair…It’s like people can sneak in the back door.”

Another said:

“It seems unfair in a way, surely if they weren’t popular enough they shouldn’t be able to get in.”

There has also been international criticism of the dual candidacy idea. Moves have been made to improve things in New Zealand and in Canada, and Canadian research states:

“Voters are displeased with the case where a candidate is not successful in a single member constituency, but is elected anyway by virtue of being placed on the top of a party’s list.”

In further support of my argument, I give the example of the unfairness—this has already been mentioned by colleagues—in the Clwyd West constituency. It puzzles most people in Wales that it was possible for all four candidates on the first-past-the post list to end up being elected. When I got into politics, a very wise old bird told me, “Siân, don’t get into politics if you’re not prepared to lose, because there’s only one winner.” We have totally turned that on its head with devolution and now anyone can be a winner, as long as they are at the top of their party’s list. I think the public find that difficult to understand and they are puzzled by it.

[Mr Harper]

We debated this issue at length in Committee. What the hon. Lady is really doing is criticising a closed-list system whereby voters can vote only for parties and have no choice of candidates. She is not really offering a critique of the Bill’s proposals. If she does not like that system, she should remind herself that it was her party that put it in place.

[Mrs James]

I thank the hon. Gentleman for his intervention, but it is not true that I am opposed to the list system. I think it is excellent and that it gives an opportunity to all parties. It is fair and gives a voice to parties that may not otherwise have had a voice in the Assembly. What I oppose is placing candidates at the top of the list so that if they lose in one system they have the chance to win in another. I am not criticising the system; all I am saying is that dual candidacy is not acceptable.

For an individual who is already standing as a candidate on a constituency list to have an opportunity for a second bite of the cherry is political carpetbagging—that’s all it is, pure and simple—and therefore unacceptable.

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[Mr David Jones]

I beg to move, That the Bill be now read the Third time.

We have had a number of productive debates on this Bill, and I would like to thank all right hon. and hon. Members for their contributions. It was in November 2012 that the Silk commission recommended a package of measures to devolve fiscal powers to the National Assembly and the Welsh Government. We have had a number of debates in this House since then on giving the Welsh Government increased borrowing powers; on the devolution of a portion of income tax, subject to a referendum; and on the devolution of taxation on land transactions and landfill. Our debates on the Bill have enabled us to fine-tune those proposals further, and I appreciate the broad support that the Bill has received from all parts of the House. I would again like to thank Paul Silk and his commissioners for their work on their two reports, and also my hon. Friend the Member for Monmouth (David T. C. Davies) and the other members of the Select Committee on Welsh Affairs for their excellent pre-legislative scrutiny of the Bill.

This Bill is a major milestone for Wales, and it demonstrates the Government’s commitment to strengthening Welsh devolution and Wales’s role in the United Kingdom.

[Mr Harper]

In the debate in Committee on 6 May, at column 109, the Secretary of State committed to updating the House, either on Report or on Third Reading, on the conversations he was going to have with the Secretary of State for Health about the health service. Is he able to do that today?

[Mr Jones]

Yes, and I am grateful to my hon. Friend for reminding me about that important point. I can tell the House that I have engaged with the Department of Health, and that NHS England is continuing its efforts to work constructively with the Welsh Government to find a solution to the problems faced by English patients, such as my hon. Friend’s constituents, who access NHS services in Wales. Work on resolving the issues raised by the cross-border protocol is continuing, and it is hoped that this work will conclude by the end of this year.

Oral Answers to Questions

Mark Harper Excerpts

Tuesday 24th June 2014 Commons Chamber

The Chancellor of the Exchequer was asked—

[Mr Mark Harper (Forest of Dean) (Con)]

1. What recent assessment he has made of the effect on the economy of the level of employment.

[Chris White (Warwick and Leamington) (Con)]

12. What recent assessment he has made of the effect on the economy of the level of employment.

[The Chancellor of the Exchequer (Mr George Osborne)]

There are more people in work than ever before, with the latest figures showing the fastest increase in employment since records began. Today we have the very welcome news that Abu Dhabi will be investing £1 billion in building new houses in Manchester. That is a step towards it becoming the northern powerhouse I want to see, and it is a £1 billion vote of confidence in our long-term economic plan.

[Mr Harper]

Between 2003 and 2008 the Labour Government did create jobs, but unfortunately less than 10% of them benefited British citizens. Since this Government have come to power, through our skills, immigration and welfare policies over three-quarters of the 1.4 million new jobs have benefited British citizens. Is that not a long-term economic plan of which to be proud?

[Mr Osborne]

My hon. Friend is absolutely right, and I pay tribute to his contribution in making sure that the jobs that are being created in this recovery are jobs that British people have the skills and incentives to take. It is heartening that three-quarters of these jobs are going to UK citizens, as opposed to the truly staggering record of the last Government, when less than a quarter were taken by British citizens.

Wales Bill

Mark Harper Excerpts

Tuesday 6th May 2014 Commons Chamber

We may hear talk later about parity with Scotland, and in the next few months there will be a great deal of intense debate in Wales on that issue. I note therefore that the Scotland Act 2012 provides for the Scottish Government to introduce new taxes or credits. By incorporating the Silk commission’s recommendation on tax credits in the Bill, we seek that ability for Wales now, too. The impact and compatibility of any new tax or tax credits would of course have to be measured and assessed in relation to the Human Rights Act 1998, European Union state aid rules and other directives, but it would be for the Welsh Government, through a resolution of the National Assembly, to decide what use they wanted to make of an innovative new tax.

[Mr Mark Harper (Forest of Dean) (Con)]

I will speak in more detail in my speech about why I do not agree with the hon. Gentleman’s amendment 33, but may I ask him to clarify whether he envisages the definition of a “Welsh taxpayer” for any of these new taxes being the one set out in clause 8, proposed section 116E? That is relevant to my constituents, who might inadvertently be caught by any of these new taxes.

[Hywel Williams]

The hon. Gentleman raises a point that was made at an earlier time. He has outlined particular difficulties faced by his constituents, with which I have a great deal of sympathy. I might as well concede that this is a probing amendment and I would be interested to hear what he has to say later in the debate. We have a great deal of sympathy with hon. Members across the House who point to the border as a particular problem area; as has been said in the earlier debate, so many of our population live just over the border and vice versa, so I entirely concede that we need to take this issue seriously.

Paragraph 4.6.8 of the Silk commission’s first report states:

“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.”

That is a laudable aim and I urge hon. Members on both sides of the House to support us in order to fulfil it.

Amendment 33 would enable the Welsh Government, by a resolution of the National Assembly for Wales, to introduce a new tax without the need for approval by a resolution of both Houses of Parliament. Obviously, Plaid Cymru’s starting position is that Wales should be an independent country and that it should be for the people of Wales, through our own democratic institutions, to decide how its taxes are structured. However, the amendment would simply tidy the process of bringing in the new tax credits should the Welsh Government, through the National Assembly, decide to do so. I need not remind Members who represent Welsh constituencies or who are interested in the smooth functioning of democracy of the disastrous bureaucratic and constitutional nightmare that was the legislative competence order system. I was involved in that as a member of the Welsh Affairs Committee. Before the successful 2011 referendum on full primary law-making powers, the Government of Wales Act 2006 provided for further devolution, on paper. The reality, I am afraid, was that it came to resemble a Kafkaesque constitutional quagmire when the powers were to be devolved. The Welsh Affairs Committee, reporting in 2010, stated that requests for extra powers from the Welsh Assembly Government, as it was named then, too often disappeared into the black hole of Whitehall.

--- Later in debate ---

[Hywel Williams]

I thank the hon. Gentleman for that point. The contrast between what I propose now and the LCO system is extreme. I think I counted 27 individual stages, but it might have been 28 or 26—the figure is lost in the mists of time. It was an extremely complicated business. To be fair, Members on both sides of the House made positive contributions. I pay tribute to the hon. Member for Aberavon (Dr Francis), who is not in his place, for his skilled chairmanship. We got a lot through, but it was against the odds.

There is a danger that matters get lost in process, are ignored by the government machinery and do not progress at good speed. If we repeated the LCO process, we would be repeating a mistake and would unnecessarily create a drag on the smooth functioning of democracy. Surely the Members of the Assembly, through scrutiny, have, in partnership with the Treasury, the ability to carry out the requisite research, impact assessments and consultation. I hope that that ability is there. The need for a lengthy process of resolution in each of the Houses of Parliament when there is so often a strain on time—perhaps not at the moment, but often there is a strain on time—is surely a bar to the swift adoption of the system once the requisite preparatory work has been carried out in Wales. Surely if a matter is devolved, it should be devolved, and devolved fully and without the Government in Westminster seeking to keep their oar stuck in. As with many of our amendments that were considered in Committee last week, we say that it should be for the people of Wales, through their democratically elected institutions and representatives, to decide on the matters that have been devolved without being harried back and forth. The Government have conceded that Wales should have the power to introduce new taxes, and we are arguing for tax credits as well, as did Silk. That should be done without strings being attached that could prove a restriction and impediment.

Finally, let me return to the LCO process, which operated in much the same way as the new tax process is designed to operate. The Assembly used to submit a request for more powers, which was then scrutinised by the Select Committee on Welsh Affairs before its final approval by MPs and peers. There is no proposal in this case of scrutiny by the Welsh Affairs Committee, and one does not have to be a constitutional expert and/or an accountant to see what a tremendous drag and immensely time-consuming process that might be. At the time, the critics of the LCO procedure maintained that it was cumbersome and opaque, and they were proved right. Sir Jon Shortridge, the former head of the civil service in Wales, said that Wales was often seen as “a complication too far” by London. The Welsh Affairs Committee also said that there was “an unacceptable lack of transparency” in the Whitehall clearance process.

All this talk of the Government of Wales Act 2006 and the 2011 referendum reminds me that Westminster always relinquishes its grip on power with a clenched fist. Where it can, it will inevitably introduce roadblocks or constitutional caveats that mean that the power on offer is never fully recognised at first despite the overwhelming majority of people in Wales being in favour of devolving more powers.

For the smooth functioning of democracy and to save Members’ time in this place in the future, I strongly urge hon. Members to support our amendment should it come to a vote and impress on the Government the need to learn from the mistakes of the past and streamline the process of introducing new taxes and tax credits in Wales.

[Mr Harper]

It is a pleasure to serve with you in the Chair, Ms Primarolo. After the earlier exchange, I feel left out by not having experienced the pleasures of legislative consent orders. They sound absolutely fascinating and were clearly invented by the hon. Member for Caerphilly (Wayne David) so that he could be the self-proclaimed world’s greatest expert in them. I am feeling very left out indeed, but let us return to the matter in hand.

I want to say a little about this group of amendments and new clauses. The hon. Member for Arfon (Hywel Williams) reassured me on one point by saying that he shared my concerns, but I shall talk about that in a moment.

When I read amendment 32, which would allow the Welsh Government to introduce tax credits by resolution of the National Assembly, I wondered whether, as tax credits are an instrument of welfare policy, it would effectively amount to the devolution of that policy. That was perhaps a little unfair, but the hon. Gentleman did go on to talk about universal credit and other areas of welfare policy, suggesting that he would like to see them devolved to the Welsh Government. I do not think I would.

I understand the hon. Gentleman’s view, as he wants an independent Wales and to devolve absolutely everything, but if we devolved every area of tax and spending—welfare spending is, of course, the single largest area of Government expenditure—that would in effect create an independent country. I accept that that is the hon. Gentleman’s ultimate goal, but I suspect that in this Chamber today it is a goal that is not shared by anyone other than his right hon. Friend the Member for Dwyfor Meirionnydd (Mr Llwyd). It certainly is not shared more widely. I would not support it and the hon. Gentleman set out clearly in his opening remarks why this measure on tax credits is a Trojan horse to smuggle through the changes to welfare policy more generally that I, for one, would not want to see introduced.

Amendment 33, also tabled by the hon. Member for Arfon and his colleagues—I am glad to see the right hon. Member for Dwyfor Meirionnydd in his place—concerns a new tax. I asked the hon. Gentleman a question about a matter of concern to me. I said on Second Reading and on the first day in Committee that I was content with the definition of a Welsh taxpayer as set out in the Bill, but this proposal fills me with concern for two reasons. First, it does not say anything about whether the definition of a Welsh taxpayer would remain the same, and I set out in earlier debates my concerns about companies in my constituency employing residents of both England and Wales and the increased complexity. I raised that with the Exchequer Secretary to the Treasury, who was able to reassure me that Her Majesty’s Revenue and Customs would be able to look at such things when it reports both to this House and to the Assembly.

--- Later in debate ---

[Owen Smith (Pontypridd) (Lab)]

The hon. Gentleman is making an interesting contribution. I agree about the need to consider the impact in other parts of Britain, including Northern Ireland, of asymmetry in taxation. He says he is sanguine about the prospect of these powers being exercised in Wales, but would he be sanguine about lower taxes for higher rate taxpayers potentially attracting to Wales higher rate taxpayers who contribute to the local economy of the Forest of Dean?

[Mr Harper]

I have a couple of responses. First, because I was present for our interesting debate on the first day of Committee, I know that the so-called lockstep provisions in the Bill mean—this is my understanding; I am sure the Exchequer Secretary will correct me if I am wrong—that it would be impossible to reduce the higher rate of taxation without also reducing the other rates in lockstep.

I would be delighted if taxes generally were reduced. Government raise too much money and spend too much of people’s money, and I am very pleased that in his recent Budget the Chancellor was able to increase the personal allowance again to allow my constituents to keep more of their money. I think they generally spend it better than even the Exchequer Secretary can spend it. I want my constituents to keep more of their money and keep his grubby mitts off it, but of course we have challenges to deal with, such as the deficit that we inherited, so increasing those tax cuts will not be possible. Cutting taxes generally would be helpful, and if cutting taxes in Wales meant that we saw lower taxes across the United Kingdom, that would be an entirely welcome prospect.

[Owen Smith]

Cutting taxes in Wales would not necessarily lead to lower taxes across the whole of the UK. The hon. Government is right about the lockstep provisions being designed to mitigate the effect of cutting taxes only for the wealthiest. However, if taxes were cut, as the Secretary of State has said he wants to do, for taxpayers in Wales, would that not be a potential disbenefit to the hon. Gentleman’s part of the world, should people move in order to avail themselves of those lower tax rates in Wales?

[Mr Harper]

No. That would create pressure on the Chancellor to make sure that tax rates were lowered. I am grateful to note that the hon. Gentleman appears to have become a convert to lower taxes and that will lead to an interesting conversation with members of his shadow team, who appear to be wedded to higher taxes. Creating an incentive to put downward pressure on taxation not just in Wales but across the United Kingdom would be welcome. There are many pressures from interest groups and from individuals campaigning for Government to spend more money. We all know that there is no such thing as Government money; there is only money belonging to taxpayers. It is either money belonging to taxpayers today that we relieve them of or, if we borrow money, we relieve future taxpayers of money. Lower taxes mean that people keep more of their own money. I am very content with that. I just want to make sure that it works properly.

On the point about higher rate tax, I had an entire debate in Westminster Hall on this to make it clear that I thought the priority for the Treasury when cutting taxes was to focus on those on median incomes—those in the middle. That is why I welcomed the changes to the personal allowance in the Budget, which in the context of the changes that we have made over the past four years deliver more of the benefit to those on middle and lower incomes than those at the higher end. My priority is focusing on those on middle incomes.

[David T. C. Davies (Monmouth) (Con)]

My hon. Friend is making a logical case to give the Assembly powers over taxes, but is not the reality that the Assembly will not behave in a logical fashion? Rather than cutting taxes, as he presumes and as even the hon. Member for Pontypridd (Owen Smith) seems to be suggesting, the Assembly will ratchet up taxes at all levels, and my hon. Friend will benefit enormously because many talented and wealthy people in Wales will cross the border, go and live in his constituency and pay their taxes there, leaving us bereft of the money that we could be spending on public services.

[Mr Harper]

I am grateful for the intervention from my hon. Friend, who chairs the Welsh Affairs Committee. He has put me in two minds. I am not sure whether to welcome his pessimism about the way he thinks the Welsh Assembly Government and the Welsh Assembly will behave, and look forward to the incredible opportunities that he sets out. If the Welsh Government do not learn from history and if they think it sensible to raise taxes, whether landfill taxes, stamp duty land tax or income tax, the flipside of the proposal from the hon. Member for Pontypridd (Owen Smith) is that rather than attracting people to go and work and live in Wales, the effect may be the one that my hon. Friend suggests.

If any businesses currently located in Wales want to relocate to the Forest of Dean, they will be made incredibly welcome. I will personally talk to the local council to smooth their way, and if residents want to come and live in the Forest of Dean, they will find a very good quality of life. If they want to pay their taxes in England, I certainly will not stop them. It seems that I can have it both ways. If the Welsh Assembly behaves in the way my hon. Friend fears, it will be good for my constituency. But to be serious for a moment, he puts his finger on it: he worries about the impact on Wales. I trust to some extent the good sense of voters in Wales.

By not devolving the tax powers that are set out clearly in the clauses that we are debating today, one of the problems is that the Welsh Assembly Government have to worry only about spending money, not about raising it, which leads to the consequences that my hon. Friend sets out. The Welsh Assembly Government do not have to think carefully about the price to be paid. If politicians’ minds are focused on the price to be paid, whether it is individuals choosing to leave Wales or entrepreneurs choosing either not to set up their businesses in Wales or to move existing businesses to more hospitable parts of the United Kingdom, that will concentrate minds well, even if the Government there are not of that mind to start off with. It may also create political opportunities for parties that do behave in such a way to make inroads in the Welsh Assembly elections and in parliamentary elections to this House.

[Owen Smith]

The hon. Gentleman is being generous with his time, even if he is slightly misrepresenting what I said earlier. The proposal to cut taxes in Wales rested on the prospect of a Conservative Government, led by his Front-Bench spokesmen’s colleagues in Wales. As he is talking about inward investment and business investment, would he like to take this opportunity to congratulate the Welsh Government on a 244% increase in foreign direct investment into Wales, higher than in any other part of Britain?

[Mr Harper]

I always congratulate people on bringing investment into the United Kingdom. I am sure that the Welsh Government work hard to do that. But I am also sure that those businesses are mindful of the competitive corporation tax regime created by my right hon. Friend the Chancellor, which has provided a good base in the United Kingdom from which to do business. That competitive corporation tax regime does not just benefit companies in England; it also benefits companies in Wales, Scotland and Northern Ireland. That competitive tax regime is one that we want to see go further.

[Alun Cairns (Vale of Glamorgan) (Con)]

I cannot let the shadow Secretary of State for Wales get away with championing the success of inward investment and talking in percentage terms. We need to recognise the low base and the Welsh Government’s poor performance in recent years in attracting inward investment. Clearly, any growth needs to be recognised, but we also need to recognise the failure over the last decade, which compares significantly with the previous record.

[The Second Deputy Chairman of Ways and Means (Dawn Primarolo)]

Order. We are now going just a touch wide of the amendments, which are specifically about new powers and the process for them. The hon. Member for Forest of Dean (Mr Harper) is also ranging quite widely, so I would be grateful if he addressed the amendments.

[Mr Harper]

I will not dwell at any length on my hon. Friend’s point, but it is always interesting to get that perception of the facts on the record, which is slightly different from that set out by the shadow Secretary of State.

The Minister will doubtless talk about new clause 20 —this probably comes back to the amendment tabled by the hon. Member for Arfon—which limits the ability that otherwise might be there for the Welsh Government to interfere with how HMRC operates, and how they use their powers, unless it is specifically for devolved taxes. I am pleased that it contains the condition that the Treasury has to consent to the provision. I think that this is the response to the concern I raised in my question to the hon. Gentleman on amendment 33, which is that even if the tax falls directly on Welsh taxpayers, there may be effects that range more widely, either on businesses located in England, or businesses that hire people from Wales. The Treasury having to consent to that enables a UK-wide perspective to be applied, allowing Members of this House who represent English constituencies that will be impacted by the tax to have a democratically accountable mechanism for speaking to Treasury Ministers, raising those concerns on behalf of their constituents, and allowing the Treasury to take them into account. I am pleased that that Treasury backstop provision remains there and I would not want to see it removed.

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[Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)]

The hon. Gentleman might be worrying too much about something that is fairly straightforward. In fact, just outside Chester there is a pub that has one bar in Wales and one in England, and it seems to be doing rather well.

[Mr Harper]

I do not doubt that businesses can operate in that way. What I do not want to see is businesses that today are operating perfectly happily, attracting customers from both sides of the border, finding that the Government’s intervention will impose a complicated regime. We all know the refrain, “I’m from Whitehall and I’m here to help you”—I assume that “I’m from Cardiff Bay and I’m here to help you” is greeted with the same warm delight in Wales. If they happen to have land on both sides of what is currently not a border, as far as they are concerned, I do not want them suddenly to be faced with a complicated taxation regime that will require them to hire expensive accountants to deal with it.

My plea to the Minister is therefore this: recognising that we would have to deal with that land in different ways, can we ensure that whatever administrative system is put in place is as straightforward as possible, and not just for HMRC, but for my constituents and those in the constituency of my hon. Friend the Member for Monmouth (David T. C. Davies) who might operate on both sides of the border?

Notwithstanding my concerns about some of the amendments that have been tabled, I generally welcome the devolution of these taxation powers to the Welsh Assembly, because I think that democratic institutions that spend money also ought to raise it.

[Owen Smith]

It is a pleasure to serve under your chairmanship, Ms Primarolo. I rise to speak to amendment 40 to clause 6, which stands in my name and that of my hon. Friend the Member for Llanelli (Nia Griffith); amendments 7 and 8 to clauses 14 and 17 respectively, which deal with minor taxes; and amendment 43 to clause 28, which relates to reserved powers. It is also worth bearing in mind the amendment to clause 28 that we tabled last week, on what we described as the fair funding lock, which is relevant to that part of my remarks today.

All these amendments relate to the theme of stability and symmetry. Our contention is that although devolution has, for all sorts of reasons—historical, political appetite and timing—developed in an asymmetrical fashion across the UK, which has often been desirable and necessary, on both sides of the House we recognise that it is potentially undesirable for that degree of asymmetry to continue in future. It is undesirable because with it has come a certain instability in our devolution settlement. It is not a pressing problem of instability that has in any way threatened the existence of the UK, until recent months and years, but it is increasingly problematic. That instability and asymmetry has traditionally been exploited by nationalists in Wales and Scotland in good faith and with good intentions, from their perspective, but has led them to ratchet up demands for new and varied powers in Wales and Scotland, setting one part of Britain against another in seeking to extract benefit from their objectives of independence for Wales and Scotland through asymmetry of the settlement.

In recent months, another party has joined them in seeking to divide some parts of Britain from others and to separate people in one country of Britain from those in another for party political gain and ideology. That is the Conservative party, which has recently become a zealous if late convert to the cause of tax devolution and competition, and sees an ideological and legitimate benefit for a party that believes in low taxation, the Laffer curve and the logic behind the comments by the hon. Member for Forest of Dean (Mr Harper). It thinks that, from a relatively low political base in Wales, it has the potential to expand its presence by arguing that it is a low-taxation party in Wales.

I was intrigued to hear how sanguine the hon. Member for Forest of Dean is about the prospect of his constituents enjoying higher tax rates than those on the Welsh side of the border in the unlikely event of a Conservative Government in Wales. I am not sure that his constituents would be as sanguine as he is about the difference of a few yards making a 10% difference, potentially, in the tax rate enjoyed by them, compared with their neighbours.

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[Owen Smith]

I am not sure I was rabble-rousing. I would never describe the representatives of the Welsh Labour party as a rabble, although they may have been roused by my speech, and I trust they were. It is fair to say that they were reported as having been roused by my speech and I thank the hon. Gentleman for drawing that to the Committee’s attention. I am happy to repeat the view I expressed in that speech: that our worry is that the Conservative party has an established track record of cutting taxes for the wealthiest people, not just in Wales but throughout the UK, and is increasingly happy to support them and to act on their behalf. In the event of the Labour party winning the trust of people across Britain and winning the next election, we would like a Welsh Government to give the Welsh people, through their Assembly, the ability to deliver a progressive rate of taxation in Wales in keeping with the progressive values of the Welsh people. There is nothing wrong with that.

[Mr Harper]

I want to come back to the hon. Gentleman’s point about whether I would be relaxed about delivering a lower rate of tax. Depending on whether there would then be a reduction in revenues, and that had some consequences, I would have no problem with a lower rate of tax. One of the things my constituents find annoying about the current settlement is that they see money being spent without there being any connection with its having to be raised; it all just comes from the centre. I think that if the taxing and the spending are connected, constituents will be relaxed about it. Given what the hon. Gentleman said, if a Labour Government remain in Wales there is clearly no prospect of lower taxes in any event.

[Owen Smith]

I do not accept the premise of the hon. Gentleman’s remarks. Taxpayers in Wales elect a National Assembly that has a democratic mandate to exercise its powers in respect of taxation, just as his Government do currently. I have never accepted the argument that the only way to give accountability to the National Assembly is through its having powers to raise taxes as well as spend them. I accept that intellectually there is a clear line to be drawn between taxation and representation, and that an increased level of financial accountability is afforded if taxes are being raised as well as spent. That is why we do not oppose that aspect of the Bill. Let me be clear, though, that Labour does not favour—as do, clearly, the hon. Gentleman and his hon. Friends on the Treasury Bench—tax competition within Britain. We are believers in the Union and in the ability to pool risk and share rewards across Britain. That fundamental belief is undermined, in my view and that of the Opposition, by tax competition that would see lower rates set in Wales compared with those in England, Scotland or Northern Ireland.

We are sanguine about supporting these tax powers, given the correlation the Government have drawn with borrowing, which we think absolutely vital. We are equally sanguine about the fact that Wales—given that Scotland has already moved on to this perspective as a result of the Scotland Act 2012, passed by this Government—ought to enjoy similar powers. However, we will not go on to say that we need to cut taxes in Wales to undercut England, because we do not believe in Wales undercutting the English.

[Mr Harper]

Is there not a point about symmetry? The hon. Gentleman seems to be saying that the three parts of the UK with devolved Administrations need to move together in terms of the powers they have and the decisions they make. Surely the logic of devolution, particularly in the way that his party delivered it, was that there was a different settlement in those three parts of the UK. I accept that avoiding asymmetry might be a desirable outcome, but is it not a bit late for him to take that view, given the three different types of devolution that his party delivered in government?

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[Owen Smith]

No, I am not recommending tax competition. If the hon. Gentleman would like a further tutorial later, I will happily give him one on tax policy or anything else he likes.

None of the changes would of course come into effect unless what Labour has referred to as the triple lock is met. First, as the Bill lays out, we would need certainty that Wales was not worse off. We still have serious questions about whether Wales would be worse off—versus the Barnett formula and the block grant that we currently enjoy—if tax powers are taken. Secondly, we would need to be absolutely certain that there was fair funding for Wales, hence our fair funding lock. We are not talking about it today, but we did so briefly during the first day in Committee. For the changes to apply, Welsh Ministers would need to be satisfied that funding arrangements were fair before they triggered a referendum on exercising the powers. Thirdly, we would of course need such a referendum. As I said earlier, if the powers were exercised, they would be designed to mitigate the dangers of further Tory tax cuts for the wealthiest.

Amendments 7 and 8 on minor taxes and their volatility are probing amendments, unlike amendment 40, which we will push to a vote. Fundamentally, we broadly support the provisions—we certainly support the borrowing associated with the devolution of such powers and taxes to Wales—but we have significant concerns about how the powers will work, about the volume of these taxes and about how the Government have drawn a causal link between the devolution of these taxes and borrowing powers. The hon. Member for Forest of Dean raised other questions about the workability of the taxes and the manner in which they would be deployed.

On the connection drawn between powers and borrowing, I said on Second Reading and on previous occasions that the Government have yet to explain why they arrived at a rationale for associating powers with borrowing that is different from the one used in the Scotland Act. The Exchequer Secretary will know that the Scotland Act drew a connection between the capital budget for Scotland in respect of borrowing and the amount of borrowing allowed each year. The overall capital budget for Scotland is £2.3 billion, so borrowing of £220 million per year is allowed up to that ceiling. Why this Bill draws a different line between these taxes and the amount of borrowing has never been explained, and we remain convinced that the figure was just plucked out of thin air. If the Minister wanted to explain where the figure of £500 million came from and the basis from which it was derived, we would be very grateful.

As an indication of how the amount of money is significant—we support it—but perhaps not enough, Jane Hutt, the Minister for Finance, has announced only today an important package of funding on infrastructure, including £220 million for a new specialist cancer hospital at Velindre. I am sure all hon. Members welcome that, but it is a measure of how little £500 million buys these days. It is therefore incumbent on the Government to explain how they arrived at that figure.

We understand that the Government have made provision in the Bill such that the amount of money will not go down, even in the event of a reduction in the amount of taxes taken by the Welsh Assembly—that is guarded against—but the Minister will know that stamp duty and landfill taxes are especially volatile. In particular, stamp duty land tax is extraordinarily volatile year on year. For example, in Wales during the past five years it has been between £55 million and £130 million. Indeed, that difference of 60% occurred in just one year.

[Mr Harper]

On the capital borrowing level of £500 million—I think the hon. Gentleman was asking how the Government had arrived at that figure—I may be wrong, but I believe I touched on this on Second Reading. In the “Wales Bill: Financial Empowerment and Accountability” document, there is a quite extensive section on how the Government arrived at that figure. It was partly through allowing the Welsh Assembly Government to proceed with improvements to the M4. Is the hon. Gentleman seeking further details on that, because I thought the document was quite comprehensive?

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Our point is that there has been a party political attempt by the Secretary of State to stop the Welsh Government taking forward legislation that they feel would be in the interests of people in Wales and, in particular, working people in Wales. An example is the action that he took in respect of the Agricultural Wages Board. The Conservatives were so determined to cut wages for low-paid agricultural workers that he took the Welsh Assembly to the Supreme Court. We await the ruling. We are fearful that it could deal a further significant blow to some of the lowest paid agricultural workers in Wales.

[Mr Harper]

The Secretary of State will no doubt correct me if I am wrong, but it seems to me that all he is doing in referring matters to the Supreme Court is ensuring that the legislative balance between this place and the Welsh Assembly is upheld, and that the legislation that sets out that balance is not trespassed upon. To follow the hon. Gentleman’s logic, he is presumably saying that if, God forbid, he were ever Secretary of State and the Welsh Assembly Government tried to move the devolution settlement unilaterally, he would simply acquiesce and not defend the rights of this place or the primary legislation that it has passed.

[Owen Smith]

That was the justification that the Secretary of State used at the time and he would no doubt use it again today. Our view and the view of many people in Wales is that what he did in respect of the Agricultural Wages Board was a party political attempt to tie the hands of the Welsh Assembly by arguing that it was employment legislation and not legislation that related to agriculture, which is devolved to Wales. Many of the learned counsel who offered their opinions on the matter backed the view of the National Assembly for Wales. We will wait to see what the ruling is. My point is simply that a shift from the conferred powers model to a reserved powers model would militate against such apparent confusion on the part of the Secretary of State and ensure that we had greater clarity about where the line lies between the powers of this House and the powers of the National Assembly.

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[Hywel Williams]

Amendments 36 and 37 would enable the National Assembly to change the way that money for capital expenditure is borrowed, including the issuing of bonds, without the need for the consent of the Treasury or a resolution of the House of Commons. Amendment 35 seeks clarification on the power to issue bonds. Amendment 34 would ensure that when the Secretary of State raises the borrowing for investment limit, it cannot subsequently be reduced.

First, on the issuance of bonds, subsection 32(5) of the Scotland Act 2012 enables the Secretary of State, by order, to change the manner in which Scottish Ministers can borrow money for capital purposes—for example, to permit borrowing by the issue of bonds. Subsection (5) of the Wales Bill contains the same provisions. This amendment seeks clarification on the power to issue bonds.

Following the Scotland Act 2012, the legislation left the door open for the Secretary of State to enable the Scottish Government to issue bonds in future. The UK Government later launched a consultation on bond issuance and announced in February of this year that Scotland is to get the power to issue bonds. There is only one problem: it will have that power only in 2015. In the meantime, the small matter of the independence referendum in September might intrude.

Scotland aside, I refer Members to the cross-party Commission on Devolution in Wales. Recommendation 19 ends with the words:

“We also believe that the Welsh Government should be able to issue its own bonds.”

Given that local government throughout the British Isles can issue bonds, it is an anomaly that the devolved nation Governments cannot also do so.

The Silk Commission’s first report stated that

“while bonds may be more expensive at present, a possible future scenario where they may be cheaper or more attractive to the Welsh Government cannot be ruled out. We therefore see no reason in principle for preventing the Welsh Government from being able to issue its own bonds in addition to borrowing from the National Loans Fund and other sources such as commercial banks.”

Our amendment calls for greater clarification and seeks to expedite the ability of the Welsh Government to issue bonds. We need movement on this issue to enable the Government of Wales, should they choose to do so, to drive investment in infrastructure, and so improve our economy.

[Mr Harper]

If, under the hon. Gentleman’s proposals, the Welsh Government were to issue their own bonds, would the Treasury stand behind guaranteeing the repayment of those bonds, or would that fall to the Welsh Assembly Government?

[Hywel Williams]

My understanding is that the Treasury would be expected to stand behind those bonds. I readily admit that I am not an expert on this matter, but I understand that that is the case for local government as well.

As I have said, we need movement on this matter to enable the Government of Wales to drive investment in infrastructure, and so improve the economy. Wales should have the same powers as Scotland. The Government parties should be held to their word: they agreed, through their representatives on the Commission on Devolution in Wales, that the Welsh Government should be able to issue bonds.

Amendment 5 is both simple and highly effective and would inflation-proof the borrowing limit in the Bill. We are unsure whether the Government have considered this matter, or whether they intend to put in place any safeguards to protect the amount of borrowing written into the Bill. The £500 million borrowing for investment limit is of course welcome. If the money is used wisely and for targeted investment in infrastructure throughout Wales, it would enable job creation, provide a welcome boost to the Welsh economy and drive up Welsh gross value added so that the economy no longer sits at the bottom of the economic league table of UK nations and regions. However, we are concerned that the value of the £500 million limit, written as it is in the Bill, might be substantially reduced in a relatively short time by inflation. We have tabled amendment 5 to inflation-proof the value of that amount. I hope that this was a simple oversight by the Government, rather than any calculated move to undermine over time the Welsh Government’s ability to make full use of the powers proposed.

Inflation at present is fairly low by recent standards, but in the space of a few short months it could jump. Some of us here can recall the ferocious problems faced by ordinary people when mortgage rates rose to 15%. As a dire warning, I have safeguarded my own copy of the Mansion House speech by the former Chancellor and Prime Minister when he praised the banking industry to the heavens—just before the heavens fell in. Inflation could jump as a result of international problems and recessions elsewhere in the world, and the value of the amount available through this Bill should not be diminished as a result of such inflation.

The powers available to the Welsh Government as a result of this Bill will not come on stream until 2017 and 2018—after the 2016 Welsh general election. If the past five years have taught us anything, it is that it is foolhardy to predict how the economy will look at the end of that time.

The borrowing for investment limit available in this Bill is the amount recommended by the Silk Commission. It is the integrity of the cross-party commission’s recommendation that this amendment seeks to preserve and safeguard, as well as to ensure that Wales has the full resources available to it to maximise the number of jobs and the prosperity created.

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Amendments 36 and 37 would allow the National Assembly to change how money for capital expenditure is borrowed, including through issuing bonds, without the need for the consent of the Treasury or a resolution of the House of Commons. I argued this point in the previous debate and our concerns about delay are very clear.

[Mr Harper]

I want to say a few words about clauses 19 and 20 and the overall powers for current and capital borrowing, but let me first touch on the amendments tabled by the hon. Member for Arfon (Hywel Williams). His answer to my question was my reading of the situation, too: the Treasury would, in effect, stand behind any bonds or other such borrowing. That is why, if he were to press the amendments to a vote, I could not support them. If the Treasury is going to stand behind such borrowing, it must have some control over the level of borrowing entered into.

We talked earlier about linking spending and accountability. If Welsh Ministers are to be able to borrow money, they must be accountable for repaying it from a revenue stream, and must be able to persuade the markets, based on the rate of interest they are paying, that they can do so. Alternatively, if the Treasury is going to stand behind such borrowing, Treasury Ministers and this House of Commons must have some control over the level of it. It might be possible to set a framework, and not every individual piece of borrowing might have to be sanctioned, but the Treasury must be in control of the overall level because otherwise, it is a one-way bet: people can just borrow the money and not have to worry about the rates they are paying if they know that the Treasury will pay it back. I can see why a Treasury Minister could not sign up to a blank cheque such as that, but frankly, I do not see why any Member of this House should, either.

In the previous debate, the shadow Secretary of State said that he was not sure how Ministers had come up with the borrowing figures. I briefly alluded to that issue in my intervention, and it was raised by the hon. Member for Swansea East (Mrs James) on Second Reading. Clause 19 amends existing borrowing powers, and clause 20 repeals such powers. Changes are made to current borrowing powers and a new section is inserted that deals with the capital requirements.

I hope you will forgive me, Sir Roger, if I mention an excellent document that is, I suspect, on the Table: the “Wales Bill: Financial Empowerment and Accountability”, published by the Government in March. People often criticise Ministers for not showing their workings—the phrase we used in the previous debate—and although I am financially qualified, I do not think that one has to be to be able to follow the document’s rather sensible reasoning. It deals with the borrowing powers amended in clause 19 and makes it clear that Welsh Ministers have the power to borrow £500 million—the limit previously set in the Government of Wales Act.

Effectively, that is the limit inherited from the previous Government, and within it, the Treasury has agreed that the Welsh Government can borrow up to £200 million each year. As the document says, the Welsh Government’s powers are being extended to comprise both in-year and “across years” current borrowing. As I read it, that extends the Welsh Government’s flexibility to borrow to deal with their current expenditure. The Bill enables Welsh Ministers to borrow money from the national loans fund, to which the hon. Member for Arfon referred, and to deal with differences in the outturn of taxes and receipts for the devolved taxes by borrowing across a number of years. Such “across years” borrowing must be repaid within four years. The overall limit can be varied both upwards and downwards—but not below the initial £500 million limit—through secondary legislation. The £500 million limit inherited from the previous regime is therefore kept in place.

That seems clear, as are the capital borrowing powers. The two taxes we discussed when considering the previous group of amendments—stamp duty land tax and landfill tax—are being devolved. The Government estimate that the revenue stream, which will support the borrowing, will be about £200 million a year. The capital borrowing powers will come in at the same time as the new devolved taxes: in April 2018.

The statutory capital borrowing limit is also set at £500 million—higher, interestingly, than if it had been set solely with reference to the tax-to-borrowing ratio that applies in Scotland. As I said on Second Reading, this is a more generous regime than the one applying to Scotland. The shadow Secretary of State referred in an earlier debate to keeping a symmetrical arrangement between Wales and Scotland. If we did that, using the same tax-to-borrowing ratio, the Welsh Government would be able to borrow only some £100 million. In Scotland, the capital borrowing limit is just over £2 billion, with about £5 billion of tax revenue. The Government have allowed the Welsh Government to borrow £500 million in advance—I think this information was elicited on Second Reading by my hon. Friend the Member for Monmouth (David T. C. Davies), the Chairman of the Welsh Affairs Committee—to enable them to proceed with improvements to the M4, should they choose to do so.

[Owen Smith]

The hon. Gentleman will know, as he has obviously read all these documents extensively, that the documents on the Scotland Act made no reference to the line drawn between the ratio of funds and taxes to be devolved, and the quantum of borrowing. Instead, a direct line was drawn between the capital budget for Scotland and the amount of borrowing. That was the point I was making, so I presume that he, like me, does not understand why a different rationale is being applied in the Wales Bill from that applied in the Scotland Act.

[Mr Harper]

I was listening carefully to the shadow Secretary of State but I did not quite follow him. I set out the Scottish Government’s capital borrowing limit, which is £2.2 billion, and they take responsibility for tax revenues of about £5 billion. The ratio between the two is slightly less than 1:2. If we used the same ratio in Wales, the Welsh Government would have a limit of about £100 million. I accept that the Secretary of State for Wales and colleagues in the Treasury have adopted a more generous approach, but I should have thought that the hon. Gentleman, as a Member of Parliament representing a Welsh constituency and as shadow Welsh Secretary, would welcome this asymmetry rather than—if I am following his argument—being critical of it.

[Owen Smith]

Does the hon. Gentleman accept that if a similar rationale were employed in this Bill to that which was employed in Scotland, the borrowing limit would be nearer £1.3 billion in total—£130 million a year—reflecting the £1.3 billion capital budget in Wales, which, as I say for the fourth time, was the rationale that was employed in respect of the Scotland Act, not the ratio between the borrowing and the amount of devolved taxation, as has been post hoc used as a justification in this Bill?

[Mr Harper]

I do not follow that argument at all. If I may pick up the point that I was making to the hon. Member for Arfon, the point we were debating on bonds was about repaying the money. If Ministers are going to devolve borrowing power to Welsh Ministers, it must reflect the revenue that Welsh Ministers have some influence over; otherwise, it would amount to enabling Welsh Ministers to borrow money, effectively, against taxes raised by central Government, and there is no accountability there. We then get back to the problem that we started with: Ministers could borrow to spend, no doubt on projects that they would deem to be popular, but there would be no accountability because the money would be largely repaid not through the taxes that had been devolved to Welsh Ministers, but through taxes controlled by Treasury Ministers, and that would set up perverse incentives.

If the Welsh Government are to be given borrowing powers, they should reflect the revenue stream that those Ministers are in control of. If the hon. Member for Pontypridd (Owen Smith) is arguing for more borrowing powers, therefore, he would obviously want to devolve some more taxes to go along with them; otherwise, it is just Welsh Ministers writing cheques on UK taxpayers, which ultimately the Treasury has to stand behind.

As I was saying before I gave way to the hon. Gentleman, my understanding was that the increase in the capital borrowing limit was intended specifically to allow the Welsh Government, in advance of the devolution of an element of income tax, to proceed with improvements to the M4, which I remember from Second Reading would be welcomed by my hon. Friends the Members for Monmouth (David T. C. Davies) and for Vale of Glamorgan (Alun Cairns). I am sure that although the hon. Member for Newport East (Jessica Morden) is being very inscrutable, she would welcome such improvements. Oh no, she is shaking her head—she does not welcome improvements to the M4. That will be news to her constituents; I thought she did.

The Bill also contains a power that enables the UK Government to vary—have I provoked the hon. Lady? No, I have not. It enables the UK Government to vary the overall limit both upwards and downwards. A joint process is in place between the two Governments to ensure a level of convergence. That seems sensible. That limit will be set at a level that the UK Government consider appropriate, based on an assessment of economic and fiscal circumstances and the impact of inflation. Amendment 5 has been tabled by Plaid Cymru. Paragraph 91 of the note that the Government have produced states that among the things the two Governments will consider when looking at the borrowing limit will be the impact of inflation on the real value of the limit. Given that both Governments will be participating in this collaborative process, that should mean that the limit can be kept at a real-terms level. I hope the hon. Member for Arfon will welcome that.

The final area is the independent revenue stream over which the Government have control. I argued earlier that borrowing must be related to the level of income.

The Government’s note explains comprehensively how the current borrowing and capital borrowing powers, which are set out clearly in clauses 19 and 20, were arrived at. I think I have set out clearly why I would not support the amendments tabled by Plaid Cymru on the ability to issue bonds, and the ability to keep borrowing levels at real-terms levels is covered in the Government document. I am happy to support clauses 19 and 20 but not the amendments in the group.

[Nia Griffith (Llanelli) (Lab)]

We very much welcome borrowing powers for the Welsh Government, as they will help them progress with investment in vital infrastructure projects and foster growth in the Welsh economy. Borrowing powers may also prove useful in enabling match funding to take advantage of European funds.

The Silk commission argued strongly that the Welsh Government should have

“the capacity to borrow for capital investment on a prudent basis subject to limits agreed with HM Treasury”.

These powers are all the more badly needed as the capital budget for Wales has been cut by one third by the current Government.

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[Alun Cairns]

I want to sound a note of caution. I support the intentions of the Bill and I respect the case that has been made for the amendments, but those amendments could be seen as seeking almost limitless borrowing powers. As my hon. Friend the Member for Forest of Dean (Mr Harper) observed, borrowing powers need to be related to the amount of money that can be raised and to repayment. As we learned from the financial crisis of 2008-09, even when financial matters seem to be positive, changes can occur. Limits must therefore be set and a sensible approach adopted to borrowing across the whole of the United Kingdom, and particularly in respect of any institution that has a relatively limited capacity to raise its own funds, given that some of the Opposition parties do not seek to develop innovative and effective ways of using the extended powers granted by the Bill to raise funds by tax competition.

The £500 million capital borrowing limit set in the Bill, supported and approved by the Treasury, is sensible, amounting to £125 million a year. I want to bring an element of reality to the debate. Much of the focus has been on the need to improve the M4 motorway around Newport.

[Mr Harper]

Given that the £500 million capital limit is in the Bill, and given the strong case made by the official Opposition, it perplexes me that they have not tabled any amendments to change that capital limit, which they spoke so strongly against.

[Alun Cairns]

I am grateful to my hon. Friend for making that point. It is obvious where Plaid Cymru stands on the matter. The hon. Member for Arfon (Hywel Williams) made his case. I disagreed with it, but it is a respectable case which stands with the party’s politics in general. It seems inconsistent to make strong criticisms of an element of the Bill but not to table amendments seeking to improve the Bill or to make it more relevant, according to the Opposition’s argument.

The priority that has given rise to much of the debate about the need for greater capital spend in Wales is the need for improvement of the M4 around Newport. I pay tribute to the Chancellor and his efforts to encourage the Welsh Government to look positively at the need to improve that link. Many Members have spoken of the need for better infrastructure in and out of south Wales.

I remind the Committee that there was a commitment to such improvement pre-1997, by the then Secretary of State for Wales, my right hon. Friend the Member for Richmond (Yorks) (Mr Hague). That was to be funded entirely out of the Barnett block. The Barnett block at that time was £7 billion. It has now grown to about £15 billion. The shadow Welsh Secretary argues that Welsh projects cannot be funded without a significant increase in capital borrowing for such projects. Pre-devolution, without borrowing powers, those projects were to be funded out of the Barnett block as it was.

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[Paul Murphy]

I agree with the hon. Gentleman on that, but I still direct the independent observer, from wherever he or she may come, to the beginning of his speech where he spoke about the benefits of dealing with these things, which the right hon. Member for Richmond (Yorks) (Mr Hague) dealt with before the 1997 general election, out of revenue. That is impossible given the strain on the revenue budget these days in Wales. The capital budget has to come out of a separate pot.

I want to emphasise the points made by my hon. Friends the Members for Pontypridd (Owen Smith) and for Llanelli (Nia Griffith) and others about the calculation of the £500 million.

[Mr Harper]

I would not have intervened but for the right hon. Gentleman’s accusation that I was lukewarm. I made it quite clear that I very much support clauses 19 and 20 and capital borrowing powers being devolved. I was objecting to the idea that they could be unlimited. That is why I argued against the amendments tabled by Plaid Cymru Members. I argued that there should be a role for the Treasury and this House in making sure that those measures were limited, but I absolutely welcome them and I will support them in the event of a Division this evening.

[Paul Murphy]

That is good to hear.

I come back to the issue of how this has been calculated. I was Finance Minister in Northern Ireland, where there is a stream of income from the rates. The household and the business rates go to the Northern Ireland Executive. But I do not believe that the way in which the borrowing powers were calculated for the Northern Ireland Executive were based on the fact that they had an income from rates. I certainly do not believe that the Scotland Act, which allowed Scottish Ministers to borrow 10% of the Scottish capital budget in order to fund additional capital projects, had anything at all to do with funding streams. I am not saying that funding streams are unimportant, but why should Scotland and Northern Ireland have separate calculations in order to determine what they can have, while Wales has to go by a different methodology? That is wrong. It is unfair. There should be fairness and equality in determining the capital budgets for Wales, Scotland and Northern Ireland.

The reason is probably that these things were done over a period of years in different ways. But it is not done with any consistency based on revenue streams. I wish that the Government could rethink that. Amendments have not been tabled because the Opposition support the issue of borrowing. The First Minister and other Ministers in Wales have been saying for at least two to three years now that to have borrowing and to increase their capital spending was the single most important thing they wanted. We welcome that, but we question the method by which the £500 million has been arrived at.

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[Mr Llwyd]

Yes, I agree with my hon. Friend, and not only Plaid Cymru is saying that. In a recent article, Professor Richard Wyn Jones of the Wales governance centre at Cardiff university said that because of the difference of view between Labour colleagues in the National Assembly and those at Westminster, and between Scottish Labour and Scottish Labour Members at Westminster,

“Scottish Labour seem to have no compunction about throwing Wales, one of the poorest parts of the Union, under the bus to shore up their own position… For Wales it is, sadly, a very different story. Yet despite this, the Barnett formula—used to calculate funding for the Scottish and Welsh Governments—operates in a way that ensures per capita levels of public spending is far higher for Scotland than for Wales.”

He develops that theme, referring to the Holtham commission, and continues:

“But what of Welsh Labour? It is surely inconceivable that the Shadow Secretary of State…will have been unaware of the contents of Powers for a Purpose, and its pledge to retain Barnett while rejecting a needs-based replacement. Yet, thus far at least, he has remained resolutely silent in the face of this assault on the long-term interests of Wales.”

And so it goes on: it is a pretty harrowing read, but it underlines the fact that unaligned expert commentators believe that denial of the need to get on with reforming Barnett as soon as possible is undermining the democratic process in Wales and its future.

In our party, at least, we are quite clear. We believe that Wales should be fairly funded on the basis of need, and that the Barnett formula should be recalculated to ensure that Wales does not lose out, potentially on billions of pounds, over the coming decade. We have always maintained that position. However, the thrust of what the Bill offers is, on the whole, a good thing, with greater financial and fiscal powers, despite our disagreement about some of the restrictions and conditions that the Westminster Government have placed on the powers. We are disappointed that they have failed yet again to take the opportunity to address the serious injustice of the lack of fair funding, but the Bill is a means of getting on with the important job of improving the Welsh economy—boosting it and, I hope, creating many jobs in the process through careful investment in infrastructure—because we know that a lot needs to be done.

We know that the Conservative and Lib Dem Government will not commit to reform of the Barnett formula. They have always said that it works, despite the fact that many of their senior figures in Wales have acknowledged that it does not work, but needs reform. This Government can never be trusted to put Wales’s interests first.

[Mr Harper]

Just to be clear, it is not right that the Government have said they will never amend the Barnett formula. They have said that the work on dealing with the deficit has to be the priority, before the Barnett formula can be looked at. They do not have a closed mind on that—they have another priority, which is the right one of dealing with the deficit—as the right hon. Gentleman is suggesting.

[Mr Llwyd]

I appreciate the pressures on the Government caused by the large deficit—that is fairly obvious—but it is not as though the Barnett problem has suddenly come out of the ether. It is a case of jam tomorrow, is it not? We have argued our case for 30 or 35 years, but others who are politically unaligned have now said that we are right. It has been on the table for eight or nine years, with very little movement in any direction and no initiative whatever. However, I accept what the hon. Gentleman says about the deficit.

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[Nia Griffith]

I fully agree with my hon. Friend. Indeed, many of my constituents, who would be the first to criticise if something were wrong with the national health service, were shocked by those comments and deeply outraged at the insult to the many hard-working staff. I am glad that Conservative Members in the Committee have recognised the hard work done by many of our doctors and nurses in Wales, but there has clearly been an unmitigated and quite unnecessary attack. As has been pointed out, if he looked at some of the statistics, the hon. Member for Monmouth would find that waiting times for certain cancer treatments are shorter in his patch than over the border in the Wye valley. It is absurd to state that everybody is hopping across to England. Likewise, the hon. Member for Forest of Dean has tabled one of the amendments, but Gloucestershire Hospitals NHS Trust treats only 82% of its cancer patients within the 62-day limit, whereas in Wales the figure is 91%. Every Welsh trust is outperforming the Gloucestershire Hospitals NHS Trust.

When considering these figures it is easy to pick one number or specialty and to forget that for the vast majority of people in Wales treatment has improved rapidly over the past few years. It is certainly very different to how it was in the 1980s and ’90s, when people waited an extremely long time. The key point to remember is that England too has had a dreadful year for A and E.

[Mr Harper]

The hon. Lady is attacking the NHS!

[Nia Griffith]

I am saying that in England it has been the worst year for decades for A and E, with almost 1 million people waiting more than four hours. It has been much harder to get to see a GP in England since the Government scrapped Labour’s 48-hour appointment guarantee. [Interruption.] I am stating the fact that some things have not gone well in the NHS in England, and I am pointing out the criticisms, including shortages of nurses. In Wales we have 60 nurses per 10,000 people; England has only 50, and shortages in certain departments have been causing particular problems. In Wales, delayed transfers of care and discharges are at an all-time low, whereas in England the number of hospital bed days lost to delayed discharges is at an all-time high. One might ask whether that has something to do with the cuts to local government expenditure that have been experienced in England under this Government.

All in all, the amendment on transferring block funding so that people can shift from England to Wales is, first, not very practical. Secondly, there are already opportunities for people to go across the border where that is the most appropriate treatment. Thirdly, the reform of the system in England will make it extremely difficult for GPs to provide even basic treatment for many of their patients, given the budgets they will be dealing with.

There have already been a number of exchanges on fair funding between the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd) and me, and my right hon. Friend the Leader of the Labour party made it clear this week that we recognise that although the Barnett formula has served the UK well, there is a specific set of issues relating to Wales. As a result, an incoming UK Labour Government would address the issue for Wales without it impacting on Scotland. The right hon. Gentleman refers to not having a piecemeal approach, but I suggest that his amendment is just that and that a more comprehensive look at the issue would be more appropriate.

[Mr Harper]

I will try to be relatively brief although I will say one or two things that I had not intended to say because I have been provoked by the previous contribution. First, the double standards are breathtaking. My hon. Friend the Member for Monmouth (David T. C. Davies) gave a perfectly reasonable speech and made it very clear that he was not attacking doctors and nurses but speaking about senior NHS professionals, yet he was accused of attacking doctors and nurses. The hon. Member for Llanelli (Nia Griffith) then proceeded to criticise standards of health care in England, yet somehow that is okay because she is just pointing out facts. Absolute nonsense. If we see things wrong in our constituencies it is our duty as elected Members to point them out. My hon. Friend was simply pointing out to the Committee problems in his constituency that had been raised by constituents. [Interruption.] I am not surprised that Labour Members do not want to hear this. The NHS is not performing well in Wales, and I will set out why my constituents in England are concerned about that.

I am happy with the confirmation from the hon. Member for Llanelli that if her party is elected to government it will sort out the Barnett formula for Wales and give it more money without that affecting funding for Scotland. As an English Member, it is quite clear to me which way the bill will be coming, so I will be pleased to tell my English constituents that another reason for not voting for the Labour party is that they will be facing a large bill to give more of their taxes to be spent by the Welsh Assembly Government, as well as the money they give to Scotland. I am grateful to the hon. Lady for that campaigning opportunity.

Amendments 12, 13 and 14 have been tabled by my hon. Friend the Member for Monmouth—my constituency neighbour—and my hon. Friend the Member for Aberconwy (Guto Bebb). I listened carefully to their arguments and I am happy to support the amendments as I think the principles they outline are sensible. My hon. Friend the Member for Aberconwy spoke about the Welsh Assembly Government’s policy of voice not choice. That would be fine if, when patients said something with their voice, somebody actually listened to them. The problem is that nobody listens, which is a real issue for my constituents.

[Paul Flynn (Newport West) (Lab)]

Will the hon. Gentleman give way?

[Mr Harper]

No, I will not give way; I will make some progress. [Hon. Members: “Go on!”] Oh, go on then.

[Paul Flynn]

Why does the hon. Gentleman think the Public Administration Committee, which has a Conservative Chair and majority, gave the health service ombudsman in Wales as the model and exemplar to follow? It said that that was the best service of the four countries, and it also recalled that Wales still has community health councils, which act splendidly as a source of receiving complaints and dealing with them.

[Mr Harper]

The hon. Gentleman makes a very good point. Of course, the ombudsman service deals with the things that go wrong, and the points made by my hon. Friends were about the things that go wrong in the health service. It may or may not be true that the ombudsman service is a better system for clearing those things up, but we are trying to avoid them going wrong in the first place. I agree with the hon. Gentleman about community health councils. We used to have them in England and they were abolished by the Labour Government, which was a very bad idea. I suspect that he voted for getting rid of them, and I wish that he had not done so.

On the performance of the NHS in Wales, I shall limit myself to what I said when we debated the issue on Second Reading—[Interruption.] The shadow Secretary of State cannot help himself. All I want to do is point out that I referred to mortality statistics in that debate, and I made the point that they were worse in hospitals in Wales. The Hansard reporters then note an interruption, which was the barracking from Opposition Members claiming that I was smearing Wales—[Interruption.] The hon. Member for Newport West (Paul Flynn) says it again. Actually, if he read the Hansard report for that debate, he would know that all I was doing was quoting the right hon. Member for Cynon Valley (Ann Clwyd), who said:

“The second warning sign, said Francis, is the level of mortality statistics. In fact, they appear to be dangerously high in many hospitals in Wales.”—[Official Report, 5 March 2014; Vol. 576, c. 930.]

All I was doing was putting on the record a fact—the hon. Member for Llanelli said that we are allowed to do that—that was cited by a senior Labour Member, and I am accused of smearing the health service. If that is the level of debate we are going to have, we will not get very far.

[Owen Smith]

Has the hon. Gentleman reflected, in the period since he made those remarks, on the 10-year longitudinal study carried out by the Nuffield Trust? It looked at all the indicators applicable across all four health areas of the UK and concluded that no one country is steaming ahead and no one country is lagging behind.

[Mr Harper]

No, I have not, because all I did was quote a Labour Member. They were not my words, but I was accused of smearing the NHS in Wales, which I did not do.

I was surprised to note that the hon. Member for Llanelli, after we had had our lengthy debate on day one of consideration of the Bill in Committee, tweeted that I was spending a lot of time on the Wales Bill and she wondered what my constituents would make of it. Well, the thousands of my constituents who are forced to be treated by the NHS in Wales against their wishes—that is not my view or assessment of the NHS in Wales—will, I suspect, be grateful that I am raising these concerns in the House on their behalf with Ministers, so that they can get better health care and a choice of where they are treated.

Amendments 17 and 18 are about improving the transparency of the agreements that govern cross-border services—the cross-border principles that were agreed by Ministers in the Department of Health and in the Welsh Assembly Government, together with the accompanying protocol that was sorted out by officials in NHS England and NHS Wales, supposedly based on those principles. The budgetary protocols will improve the transparency of the system.

New clause 3, also in my name, is an exact copy—with the appropriate changes—of the language that is in the Health and Social Care Act 2012. It puts a legal duty on commissioners in England, when making commissioning decisions, to consider the impact of their decisions on the provision of services to people who reside in Wales—and we have heard several examples from Members of constituents who live in Wales and receive services in England. There is no such reciprocal duty, and new clause 3 would provide that Welsh commissioners had to have regard to the likely impact of their commissioning decisions. If my constituents were receiving services in Wales and Welsh commissioners were making decisions that would have an impact on those services, they would have a legal duty to consider how my constituents would be affected. All I am asking for is parity between commissioners.

[Owen Smith]

Does the hon. Gentleman accept that one reason that provision was included in the Act was to mitigate the risk that commissioning groups in England would choose to decommission traditional services being provided by other parts of the NHS in England, such as tertiary care, and choose BUPA, Spire or some other private provider that might not be bound by the same protocols and memorandum of understanding to provide those services to Wales—a significant concern to those of us who looked at the Health and Social Care Bill? It remains a significant concern in a privatised NHS in England.

[Mr Harper]

I do not share that concern. The hon. Gentleman has all these scare stories about privatising the NHS, which are complete and utter nonsense. Since the provision exists, and commissioners in England have to have regard—rightly—to the impact of their decisions on Welsh residents, all I am asking for is a reciprocal duty on commissioners in Wales if they provide services to residents in England. That is nothing more than common fairness.

Hon. Members may be wondering why my constituents would care about the NHS in Wales. I shall set out briefly why it matters. I have some 6,000 constituents who reside in England in my constituency. The only GP surgeries that are conveniently located for them are branch surgeries whose main practices are located in Wales and registered with the NHS in Wales, so even though my constituents go to a GP surgery in England, they are being treated by GPs who are registered in Wales. Following decisions made by the Welsh Government and commissioners in Wales, my constituents find that their choices about where to have secondary care are increasingly limited. That is becoming a real problem. We have made some progress by liaising with the Aneurin Bevan health board, for example, but I am conscious that it could revert at any time to the previous situation. I want the issue to be sorted out permanently.

The cross-border principles that were agreed by Ministers of both Governments provide that cross-border commissioning should reflect the legal rights of patients in their country of residence. That is all I am asking for. What seems to have happened is that the protocol, the detailed arrangements agreed by NHS England and NHS Wales, did not quite reflect what Ministers in both Governments—to be fair—had agreed. My constituents are asking for nothing more than their legal rights under the NHS constitution and according to the Health and Social Care Act 2012. They want to be able to exercise the choice that my hon. Friends the Members for Aberconwy and for Monmouth set out.

My constituents have the option of being treated in Wales and, given what the shadow Secretary of State has said about the quality of services, they may want to be treated in Wales. But what they do not want is to be forced to be treated in Wales if they wish, for whatever reason—better treatment or any other preference—to be treated in England. They are English residents and they should have that right. That is all my amendments would achieve, and I hope that the Minister will address that.

[Owen Smith]

Much as we are enjoying the extended audition by the hon. Gentleman for the post of Secretary of State for Wales, can he point us to the evidence showing that thousands of his constituents are so concerned about treatment in Wales, or is this just an anecdote?

[Mr Harper]

I do not know where to start with that rather childish intervention. There is no vacancy, because my right hon. Friend is doing an outstandingly good job as Secretary of State for Wales, and I hope he continues in his post for a long time. He is doing an awful lot better than the shadow Secretary of State would do if, God forbid, he were ever to get the job.

I am concerned because my constituents are affected by the not very well thought-through devolution settlement—[Interruption.] The evidence is constituency correspondence, a very well attended public meeting with hundreds of local residents, and a very active local campaigning group. This is a real issue in my constituency and thousands of constituents are affected by it. I am doing my job as their Member of Parliament by setting out their views. I have been very reasonable in my argument and I look forward to the Secretary of State’s response. He is a Secretary of State who listens to and deals with issues brought to him by Members of Parliament—unlike the shadow Secretary of State—and I look forward to his response to the debate.

[Paul Flynn]

What is entirely novel in the debate on health, which I have never experienced in my 28 years in this House, is for Wales and the Welsh health service to be used as a political football to kick around to save the skins of Tory MPs and fulfil the ambitions of Lynton Crosby. He is the one who is using the issue not to make legitimate complaints—it is right that hon. Members raise legitimate complaints, as they always have—but for something entirely fresh. At every Prime Minister’s questions, when the attention of the whole nation is on this place, questions are distributed to Welsh Tory MPs, and to non-Welsh MPs who do not know the places they are talking about, that criticise the Welsh health service and create the impression that it is a poor, second-class service. This is a malicious deception: it is not true.

There is a lot wrong with the health service in every part of these islands. There are weaknesses and everyone can provide examples of particular cases, but what is the effect when the impression is given, week after week, example after example, that the Welsh health service is rubbish? What does that do to someone waiting for an operation or treatment to be told, again and again, that the service they are getting is second class? A big part of the healing process is confidence. If confidence is destroyed, that damages the health of the nation on a very deep level. What happens to the people working in the health service who do marvellous but thankless jobs—the jobs we turn up our noses at—when they come home and watch the television at night? There is a hallelujah chorus of Tory MPs saying that the service is bad, not good.

Wales Bill

Mark Harper Excerpts

Wednesday 30th April 2014 Commons Chamber

[Owen Smith]

It is a pleasure to serve under your Bristolian and neighbourly chairmanship, Ms Primarolo.

Clause 1 relates to the timing of elections to the National Assembly for Wales. It is a response to the five-year term that has now been established for elections to this House. Our amendments 9 and 10 are probing amendments that seek to explore the Government’s willingness to concede the principle that the Assembly needs to have greater control and command over elections to it. That is what we are testing with our amendments.

[Mr Mark Harper (Forest of Dean) (Con)]

I am pleased the hon. Gentleman said that these were probing amendments, but I notice that he has not troubled the Committee with an explanatory note, which is disappointing. My reading of the amendment is that it removes any necessity for an election to be held to the National Assembly. It allows the National Assembly for Wales to have no more elections ever. It appears to be the “Labour doesn’t want to have an election ever again in Wales” amendment.

[Owen Smith]

I hoped that we would have a serious debate today and serious interventions from colleagues across the Chamber. Obviously it is not the intention or the effect of the amendment to get rid of elections to the National Assembly for Wales, not least because we want those elections not to coincide with the changes made in the House by the hon. Gentleman when he was pushing through the gerrymandering legislation relating to elections to the House and the five-year term that we now endure. “Endure” is the right word, given how little business is being brought forward by the Government and how little work we have to do in the House. Today we have an important and serious Bill before us and I hope the hon. Gentleman will engage with it in a serious manner.

[Mr Harper]

Will the hon. Gentleman give way?

[Owen Smith]

No. We all want to get on with the serious business before the Committee, not nonsensical point-scoring.

These are probing amendments. They explore the extent to which the Government agree with us that, in principle, it should be with the consent of the National Assembly that changes are made to elections that affect it.

--- Later in debate ---

[Mr Harper]

On Second Reading, the hon. Gentleman responded to a question asked by, I think, the hon. Member for Rhondda (Chris Bryant) by kind of giving the impression that Labour’s policy, if it were returned to power, would be to revert to a four-year term for this House and amend the Fixed-term Parliament Act 2011. Will the hon. Member for Pontypridd (Owen Smith), for the convenience of the Committee, confirm that?

[Owen Smith]

The hon. Gentleman claims that I implied that, but I do not think I have been explicit on the matter, either then or now. When we last debated the issue, we were clear that the majority opinion is that four years is better than five. Another orthodox opinion in Britain and elsewhere is that too many changes to constitutional matters are bad for the electorate and that constantly chopping and changing for partisan reasons—as the hon. Gentleman did when introducing the 2011 Act—is bad for democracy in Britain. In the light of that, and in a period in which people are disengaged from politics, we may choose not to be partisan and not to pursue that sort of strategy when we win the next election.

[Owen Smith]

I believe that the hon. Gentleman is right. Elections have not always been held on a Thursday. However, in recent memory and certainly in the last century, elections have mainly been held on a Thursday, which is why we are sticking to it in amendment 9. That is not the substantive point that we are trying to make; it is an interesting debating point, but not one that we need to bother the Committee with any longer.

With that, I conclude my remarks on our amendments to clause 1. We do not intend to put them to the vote, but we want to hear the Government’s views on the need for them to engage properly with, seek proper consent from and pay proper respect to the devolved Administration in Cardiff.

[Mr Harper]

It is a great pleasure to serve under your chairmanship, Dr McCrea.

I want to pick up the hon. Member for Pontypridd (Owen Smith) on his response to my intervention. I was deadly serious. If he wants to intervene, I will happily take his intervention, but I am afraid that his amendment would do exactly what I said it would do. It would amend section 3(1) of the Government of Wales Act 2006, which states that a poll

“at an ordinary general election is to be held on the first Thursday in May in the fourth calendar year following”

the previous one. In other words, the provision insists that there has to be an election every four years. His and his hon. Friends’ amendment would remove section 3(1) of Government of Wales Act and simply provide that the poll

“at an election to the National Assembly for Wales is to be held on a Thursday on a date to be determined by a Resolution of the National Assembly for Wales.”

That does not leave in the legislation any requirement for a periodic election. If the amendment were put into law and the National Assembly for Wales did not set a date for an election, there would never be such an election. An accurate characterisation of his amendment is that it is a “Labour party governs Wales for ever” amendment. Under his provision, if any party with a majority in the National Assembly for Wales simply does not set a date, there will be no election, and no back-stop in legislation would insist on an election. I absolutely accept that that may not have been the hon. Gentleman’s intention, but that is the effect of his amendment.

[Owen Smith]

As I have said, that effect was not our intention. I will not repeat myself, but I will say that were it our intention to stop more elections to the National Assembly for Wales, that would be a pretty peculiar thing for us to do because although we currently govern as a minority Government in Wales, we of course anticipate governing as a majority Government in Wales in the near future. I look forward to more elections in Wales, especially given the polls showing that both the hon. Gentleman’s party and the Liberal Democrats are failing badly.

[Mr Harper]

I am grateful to the hon. Gentleman for confirming that that effect was not the intention of his amendment. However, as I have said, that would be its effect, and the Committee obviously has to consider the amendment on the amendment paper—the one he drafted and tabled—not one that he probably now wishes he had drafted. As I have said, it is not sensible to give the National Assembly for Wales the power to do exactly what the amendment suggests, which is to have no back-stop at all.

I am now even more confused about the Labour party’s policy on term limits. The hon. Gentleman is quite right that, during the passage of the Fixed-term Parliaments Bill, his party did not disagree with the concept of fixed terms. It was very clear that it did not support five-year terms, but preferred four-year terms. On Second Reading just a few weeks ago, he made it clear in response to the hon. Member for Rhondda (Chris Bryant) that he wanted to move to four-year terms. I suggested that the hon. Member for Pontypridd ought perhaps to have a word with his party leader, and it sounds from his slightly more nuanced response that he has had such a conversation and been told that under no circumstances is he to pledge moving back to four-year terms. That probably also provides an answer to the hon. Member for Ogmore (Huw Irranca-Davies).

I will not say any more about the amendments of the hon. Member for Pontypridd, which he has confirmed are probing amendments, but I want to comment on Plaid Cymru’s amendments 30 and 31, specifically amendment 31. They highlight an important issue, which is one for the Committee to debate, about the coincidence of elections. We discussed that when we debated the Fixed-term Parliaments Bill, and it was one reason why I, as the then responsible Minister, decided to move the date of the National Assembly for Wales election.

--- Later in debate ---

[Hywel Williams]

This is a genuine inquiry. Does the hon. Gentleman recall the election day in Scotland when there were elections for various public offices using different electoral systems? I seem to remember that it was disastrous.

[Mr Harper]

The hon. Gentleman makes a good point. If we have elections on the same day, we certainly need to ensure that there is clarity about the electoral systems and in the design and printing of the ballot papers, so that it is clear for people not just which parties they might want to vote for, which is a decision for them, but the mechanism by which they can do so. A lot of lessons were learned from that process. We had that in mind when we held the referendum on the parliamentary voting system and we tried to ensure that there was not the level of confusion that there had been in the past.

Amendments 30 and 31 are hopeful amendments. Having considered all the evidence, I think that it makes sense to separate the big elections. I am not sure whether six months is long enough. We decided to shift the elections by an entire year to separate the media coverage and the debates so that people could focus on the important issues. The amendments raise some sensible issues. It makes sense to keep the elections to the primary legislative assemblies in the UK—the Scottish Parliament, the Welsh Assembly, the Northern Ireland Assembly and this Parliament—apart. That was the provision that we made in the Fixed-term Parliaments Act 2011.

I am therefore pleased that the Bill presented by my right hon. Friend the Secretary of State permanently makes the terms of the Assembly the same length as those of this House, but offset by a year to keep the elections separate. That will enable a proper debate to take place before elections to this place and will enable Welsh voters to have a proper debate about the issues that the Welsh Assembly and Welsh Assembly Government will focus on.

Finally, if people’s decisions in Welsh elections are indeed made on issues for which the Welsh Assembly and the Welsh Assembly Government are responsible, my reading of the situation, based on how the Welsh Assembly Government are handling the national health service in Wales, which I will not talk about today, but which we will return to on the second day of Committee, is that the Welsh public might reach a different conclusion from that put forward by the hon. Member for Pontypridd. I look forward to their having the opportunity to do so and to the result, because I think that it might shock the hon. Gentleman. He should not be so complacent.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

It is a pleasure to serve under your chairmanship, Dr McCrea, and to speak to amendments 30 and 31, which appear in my name and those of my hon. Friend the Member for Arfon (Hywel Williams) and my right hon. Friend the Member for Dwyfor Meirionnydd (Mr Llwyd). They are both probing amendments and follow the spirit of the contributions by the hon. Members for Pontypridd (Owen Smith) and for Forest of Dean (Mr Harper).

We welcome the fact that we are discussing a piece of Wales-specific legislation. It is only three years since the remarkable referendum in 2011, when the people of Wales voted overwhelmingly in favour of full political sovereignty over the political fields that were devolved to the National Assembly. I have no hesitation in saying that that was one of the proudest days of my political career. The desktop on the computer in my Westminster office has a picture of the referendum count in Carmarthenshire, with the yes votes piled up proudly on the yes table, and a few bundles of no votes on the no table.

--- Later in debate ---

[Owen Smith]

I am grateful to the Minister for acknowledging that our amendments reflect the views of the Welsh Affairs Committee and, indeed, as I said earlier, those of the Welsh Government, and that they were tabled in good faith. I am equally pleased to hear that when it comes to looking at the Silk commission part I report or any legislation that might arise from it or be reflected in the manifestos before the next election, the Government will be open to considering whether the Assembly should be responsible for—or at least have the ability to consent to—when the elections should take place. In the light of the Minister’s remarks, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 ordered to stand part of the Bill.

Clause 2

Removal of restriction on standing for election for both constituency and electoral region

[Mr Harper]

I beg to move amendment 15, page 2, line 33, at end add—

‘(5) The Secretary of State shall make arrangements for an independent review of the—

(a) likely and possible impacts on the effectiveness of the Assembly of the removal of the restriction on standing for both constituency and electoral region. In particular, the review shall examine the implications for the desirable total number of Assembly members and the proportions elected by each route; and

(b) advantages and disadvantages of amalgamating the five Assembly electoral regions into one for the whole of Wales.

The Secretary of State shall lay a copy of the report of the review before each House of Parliament within nine months of this Act receiving Royal Assent.’.

The Temporary Chair (Dr McCrea): With this it will be convenient to discuss the following:

Clause stand part.

New clause 4—National Assembly to set number of AMs—

‘Her Majesty may by Order in Council provide for the transfer of responsibility for setting the number of Assembly Members to the National Assembly for Wales.’.

New clause 6—Transfer of responsibility for determining electoral system—

‘Her Majesty may by Order in Council provide for the transfer of responsibility for determining the system of election of members of the National Assembly for Wales to the Welsh Government.’.

[Mr Harper]

The Committee will be pleased to know, I hope, that I view this as a probing amendment—unless I am provoked. I thought it would be helpful to draw out some of the implications resulting from taking a wider look at the issues about clause 2 that were raised on Second Reading. I shall say a few words of support for clause 2 and its principles and also speak about new clauses 4 and 6.

Amendment 15 is designed to achieve a number of things. Members will remember that the Parliamentary Voting System and Constituencies Act 2011 effectively decoupled the linkage between the geographic constituencies of the Welsh Assembly and the Westminster ones. Although, after the amendment to the Electoral Registration and Administration Act 2013, this has not yet taken effect for the 2015 general election—sadly, in my view—it will of course kick in for the 2020 election unless the primary legislation is changed. It thus seems sensible to look separately at the number of geographic constituencies that we need for electing Members to the Welsh Assembly, to look at the number of regions to determine whether we should have a number of regions or a single region, and to look at the relative balance between constituency seats in the Welsh Assembly and those elected on a list system which obviously affect the proportional nature of the system.

The system that we have now is the one that was set up at the beginning of the process. I think that, following the experience of a number of sets of elections and a number of different Administrations, as well as a change in the powers and responsibilities of the National Assembly, it would be sensible for the total number of Assembly Members and the relative balance between the different election routes to be considered. The setting up of an independent review by the Secretary of State is one possible way of going about that, although obviously there are other possibilities.

[Albert Owen (Ynys Môn) (Lab)]

The hon. Gentleman wants a review because of the additional powers given to the Assembly, and because elections have produced either minority or coalition Governments in Cardiff Bay. Is it his personal opinion that there should be more Members of the National Assembly because of those additional powers? I fear that, rather than ending up with regional Members on the list system, we shall end up with parties choosing from the party list, and that, as a result, Members will come disproportionately from one area of Wales, and will not be representative. The additional Members have constituency work to do, and if the hon. Gentleman’s amendment were passed, that would be diminished.

[Mr Harper]

If the hon. Gentleman reads my amendment, he will see that it is very balanced. It simply calls for an independent review, the report of which would go to the Secretary of State, who would lay it before each House of Parliament so that it could be considered. [Interruption.] The hon. Gentleman says that I have an opinion, and I do, but let me explain what the amendment will do—because Members will want to think about what is on the amendment paper—before explaining my view and what I consider to be the appropriate direction of travel.

The amendment simply suggests that the review should

“examine the implications for the desirable total number of Assembly members”

of the changes that we are making in clause 2—and I think it very sensible to revert to the original position, which the Labour party altered—and also examine the

“advantages and disadvantages of amalgamating the five Assembly…regions into one for the whole of Wales.”

That is because if the number of constituency seats is changed, depending on the number of those seats, it can be difficult to come up with equally sized regions. Alternatively, the regions have to be changed every time the number of constituencies changes.

[Jonathan Evans]

I am seeking to reflect the tone of my hon. Friend’s remarks. I accept that he is only asking for a review. However, before he gives his own view to the Committee, perhaps I can ask him to comment on his experience of the change that took place when the European Parliament moved from a system of individual constituencies to a system of vast regions. I myself have experience of representing the whole of Wales under that system. It has been pretty universally regarded as very difficult for any Member to represent an area of that size, and my hon. Friend must have had the same experience in his own part of the world. Do we really need to review this matter? Perhaps, when he outlines his own view, he will reflect on what I have said.

[Mr Harper]

My hon. Friend has made a very sensible point. The south-west of England is certainly a large region. I think I am right in saying that my hon. Friend the Member for Tewkesbury (Mr Robertson) has put it on record that the distance between one end of the south-west region and the other is greater than the distance between his constituency and the Scottish border. Moreover, the south-west region now includes Gibraltar. It is a very significant region, and a difficult region to represent. I suspect that very few electors in that region could, hand on heart, name any of their MEPs, let alone all of them.

If we are to consider changing the number of Members of the Assembly in the geographic constituencies, we must then ask how the regions are to be grouped, and whether they should end up being equal in size. At present, there are five regions with four seats in each region. That works very well mathematically if there are 20 Assembly Members and half the Members are constituency Members, but if the number of constituencies is changed—and I shall explain in a moment why I think that that should happen—some choices will have to be made about regions.

We may end up with regions that are different in size. If the regions then become too small, with too few seats, the problem is that we do not get the proportionality in those regions that the list system is designed for. We may not want to consider using the whole of Wales and instead consider having just fewer, larger regions, but I accept that pushing against that is exactly the point my hon. Friend makes about the remoteness of elected Members from voters. Two things are pushing in different directions and we have to keep them in balance, which is why we need a review to examine both aspects so that a future Parliament can make a decision.

[Jonathan Evans]

My hon. Friend refers to people having difficulty knowing who their representative is, and I would not claim that everybody in Wales knew I was their MEP. A survey indicated that only two people could be identified as Wales MEPs. One was Glenys Kinnock and the other was Neil Kinnock—mistakenly, most people in Wales thought he was an MEP, too.

[Mr Harper]

My hon. Friend makes a sensible point. My reading of it, as an Englishman, is that there seems to be a surfeit of Kinnocks in Wales at the moment. Labour does not seem to like the hereditary principle at the other end of this building but is keen on importing it into this House and having hereditary MPs—not a practice that I suspect is welcome.

My amendment helpfully proposes an independent review, but there are other ways of examining these issues, and the Minister may have a better and more sensible one. I listened to his response to the debate on clause 1, and it may well be that waiting for part II of the Silk commission and the Government’s response to it is a way of addressing the issues I raise in amendment 15, in which case I will not need to trouble the House by testing its opinion.

[Chris Ruane]

Does the hon. Gentleman agree that many list Members in Wales will be licking their lips at his proposals? A list Member who wants to climb the greasy political pole in Wales and wants a constituency Assembly seat or a constituency parliamentary seat currently sets up their office in that constituency, works just that tiny patch and tries to get their own way. A list Member in north Wales now has a choice of 10 seats, but if the hon. Gentleman has his way they will have a choice of 40 seats. It might work for the individual list Member, but it does not work for democracy in Wales.

[Mr Harper]

The hon. Gentleman is putting words into my mouth, because I made it clear, in response to my hon. Friend the Member for Cardiff North (Jonathan Evans), that my amendment’s position on the regions is balanced. It asks us to look at the “advantages and disadvantages”. I will set out my view on the number of constituency Members and the direction of travel. I was saying that if there are a different number, that presents issues as to how we divide up the regions. It raises questions about whether all the regions can remain equal in size and whether, if we try to continue with the current number, some regions may end up being too small to deliver a proportional result. That is why the issue should be looked at. However, I also acknowledged in my response to him that there is an opposite pressure in respect of making sure that elected Members and their constituents feel close enough to each other. That pushes in the opposite direction and we need to look at all the issues so we can properly weigh them up.

[Hywel Williams]

I am sure the hon. Gentleman would also concede that we must consider the geographical problem of representing Wales from Llanfairynghornwy down to Llanelli or to Caldicot. Unfortunately, I have to do that journey fairly frequently and it is a nightmare just for the ordinary traveller, so trying to represent that entire geographical area is not something to be taken lightly.

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[Mr Harper]

That is a good point. As I said, I am very familiar with it, because colleagues in the European Parliament tell me—this relates to a point my hon. Friend the Member for Cardiff North made—that it can take an extremely long time for someone to get from one end of the south-west of England to the other by road, or even by rail. That is why my amendment suggests that we need to look at the advantages and the disadvantages, so that a proper decision can be taken. We need to think about the regions. As Members will recall—I know this was not popular among those on the Labour Benches—I think we have too many elected Members at the moment. The provisions that I have suggested were to reduce the size of this place, and to ensure that electors in all parts of the United Kingdom were equally represented rather than over-represented as they are at the moment, with the average size of a seat in Wales—in terms of the number of electors—being smaller than the rest of the country.

[Huw Irranca-Davies]

I appreciate the way in which the hon. Gentleman is using his amendment to test and explore the efficacy of a review of the different scenarios that could arise. I am interested to hear his thoughts on another scenario, a wholly different trajectory towards, for example, increasing to 80 the number of Assembly Members who are bound to a constituency. We could have dual Member constituencies so that there was a direct link, but that is not in the review. I put it to him that better than the amendment would be to wait for part II of Silk and for the wider issues around that and to explore all the different options relating to both numbers and structures rather than accepting a slightly partial amendment looking at only a couple of scenarios.

[Mr Harper]

I think I indicated at the beginning of my remarks that this was a probing amendment. I said that I had listened to the Minister’s response to the debate on clause 1, and that that may well be an acceptable solution. The independent review looks at the impact of the removal of the restriction on standing for both constituency and electoral region, which is obviously the specific purpose of clause 2. In particular, it says that we should examine the implications for the desirable total number of Assembly Members and proportions elected by each route. I guess it implies that we will have at least some Members elected by region. I accept the hon. Gentleman’s point that we could move to a wholly constituency-based system. I shall listen to the Minister’s response first, but I am prepared to accept that waiting for part II of Silk and the response to that may well be a perfectly sensible way in which to proceed. I thought that we should have some discussion today rather than focusing narrowly on whether a person can stand for both constituency and electoral region. We discussed that at some length on Second Reading, but I felt that a slightly wider debate would be more helpful.

[Mr Llwyd]

The hon. Gentleman referred to the attempt by the Government to—as he put it—equalise the workload of Members of Parliament. I represent a constituency that runs 100 miles north to south and about the same across, with a population of only 55,000. Other Members may have a constituency of five miles across and a population of 75,000. I argue that that is already an equal situation. It takes me an hour and a half to two hours to get to surgeries, whereas other Members may have to travel only two minutes on the bus, so we are already equal. It is extremely difficult to make judgments without taking a ruler and making the mistakes of previous Governments in terms of dividing up Africa. I strongly believe that we are already equal. I am not being self-serving, because I am not standing again anyway.

[Mr Harper]

I am grateful to the right hon. Gentleman for his intervention. There is a clear principle in our system. Of course we represent localities in one sense, but we represent electors and not big empty spaces and fields full of sheep and other animals—[Interruption.] I ask Members to let me finish my point. I say that because I have a relatively large constituency. It is a pleasant environment with a number of farms. I live next to a farm that has cows and sheep, but the point is that I do not represent them in Parliament; I represent my electors. Even if a Member has a geographically small constituency with 100,000 electors, it is the 100,000 electors they are representing and not the space. Equally, I accept that if a Member has a significantly sized rural constituency, as I and the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd) do, but they have only 50,000 electors and a distance to travel between them, it is the 50,000 electors whom they are representing. In the Parliamentary Voting System and Constituencies Act 2011, we made specific provision for two seats, Orkney and Shetland, but that was based on the fact that they were already recognised in statute as significantly different.

In general, it was accepted that a Member represents the people in a constituency and not the surrounding environment, but I accept the point. There are challenges for Members about how they look after their constituents and there are the burdens of travelling, which I know all too well. I think that I might have provoked the hon. Member for Vale of Clwyd (Chris Ruane), so I shall give way to him.

[Chris Ruane]

I thank the hon. Gentleman for giving way a second time. He says that he thinks there are too many elected Members, and he proposes to cut the number by 50. How does that square with the fact that since the coalition has been in power an extra 150 Lords have been appointed?

[Mr Harper]

I can square that fact very well, as I was also the Minister who introduced proposals in this House, which I supported then and support now, to reform the other place, dramatically reduce the number of Members and make it democratic. I am only sorry that the Opposition would not support the programme motion that would have enabled us to make such a provision and I am afraid that, as I said at the time, if we have a system of having peers who serve for life, as we do, the only way to bring the party balance more into line with the results of the previous election is to keep appointing more peers, which means that the other place continues to get bigger. If, God forbid, the Labour party—

[Chris Ruane]

One hundred and fifty.

[Mr Harper]

The hon. Gentleman says that there are 150, and I do not think that that is actually the number, but the point is that even with the number of appointments we have made, four years into this Parliament the number of Conservative peers has only just equalled the number of peers representing the Labour party, despite the fact that our commitment was to make the other place more accurately reflect the result of the general election. That reflects the enormous number of appointments made by his party when it was led by Tony Blair and the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). That does not detract from my point, however. I wanted to reform the other place and to reduce the number of Members in both this place and the other place. I wanted to reduce the cost of politics and I am sorry that we were not able to do so, but I will not take any lectures from the hon. Gentleman, because he and his party did not support our legislation and they made sure that that reform could not happen—more’s the pity.

[Mr Mark Williams]

I want to return to the issue of the amount of space between electors that was mentioned earlier, not just in relation to our capacity—I have 600 family farms in Ceredigion, which covers a big rural area—but, critically, in relation to our constituents’ capacity to access us. That takes us back to the point about the hon. Gentleman’s amendment. Going down the route of having a list system with a list made up of anonymous people would, I think, be a retrograde step, as evidenced by what the hon. Member for Cardiff North (Jonathan Evans) said about anonymity, distance and how that will ultimately mean that we will fail our constituents.

[Mr Harper]

The hon. Gentleman makes some very good points, and I acknowledged them in response to my hon. Friend the Member for Cardiff North. I said that that was why I wanted the review to consider both the advantages and disadvantages. We need to consider them because the proposals I brought before the House to reduce and equalise the number of Members in this place clearly had an impact on the number of parliamentary Westminster seats in Wales, reducing the number from 40 to 30. We decided to decouple the number of constituency seats for this place from the number in the Welsh Assembly, but it seems to me that if we are going to consider the number of Members and if the trajectory of the number of Westminster Members is going down, we should at least consider how many constituency Members there should be in the Welsh Assembly. If that number moves downwards, as I think it probably ought to, consequences will clearly flow from that for the size of the regions and how we group them. We must also build in a process whereby we can change the number of seats as the population increases, decreases or moves to ensure that that equal representation continues.

Setting up the independent review enables all those issues to be considered properly. A report to the Secretary of State can then be produced and laid before both Houses of Parliament so that a proper decision can be taken. The Silk commission might well be able to consider all these issues in the further work it will undertake, and when I listen to the Minister’s response I might find that the amendment is effectively redundant. However, the issues are worthy of consideration.

[Susan Elan Jones (Clwyd South) (Lab)]

I am absolutely certain that the hon. Gentleman did not intend to raise any North Walean hackles, but he has. Regional representation is hugely important in Wales, because those of us who have always been pro-devolution have always argued that it is fundamental that the different parts of Wales are represented at a regional as well as at a constituency level. I would not want any possible scenario that would see those lists increasingly South Walean-dominated. That would not be right for the future of the devolution settlement.

[Mr Harper]

The hon. Lady makes a good point. I do not want to trespass into North Walean and South Walean rivalries, but I am well aware that, if for no other reason than the geography of Wales, the communication links between north Wales and south Wales are quite difficult, and journey times can be lengthy—as Members have pointed out to me. It is relevant to the health debate next week that there is a lot of east-west cross-border travel between England and Wales to access essential public services, partly for the reason that travelling north-south is not very easy. The hon. Lady makes some good points. My amendment was very balanced, looking at both the advantages and disadvantages of a larger list, so that a properly informed decision can be taken.

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[Owen Smith]

May I just check? The hon. Gentleman referred to the minority parties a moment ago. Is he referring to his own party, the Conservative party in Wales, as a minority party?

[Mr Harper]

No. I was referring to the Labour party’s view, which, when I listened carefully to the debate, seemed to be its definition—not mine; its definition—that a minority party was any party other than Labour. It seemed to me that the effect, and I think the intention, of the change that it made, which this Bill seeks largely to reverse, was a partisan one that was designed to favour Labour and disadvantage all others.

[Mark Tami (Alyn and Deeside) (Lab)]

But does not the hon. Gentleman think it is a strange system where someone could lose their seat, only to get back in by being No. 1 on the list?

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[Mr Harper]

Well, it might be a strange system, in the sense that I am not the greatest fan in the world of proportional representation. The hon. Gentleman knows that, because when I brought in the changes to allow the voters of Britain to choose between the status quo electoral system for this House and the alternative vote system, I made it very clear that although I was facilitating the referendum, I was a strong supporter of first past the post.

However, the decision was taken by the Labour party to have a mixed system in the Welsh Assembly, and we have supported that system. It is perhaps not where I would have started if I had been inventing the system from scratch, but it is what we have. It does have a range of consequences. It has the range of consequences that my hon. Friend the Member for Cardiff North alluded to. Some of the regions are quite large. It is therefore possible to have disconnect between voters and the elected. By the nature of list systems, people are elected because of the party that they represent, not based on any of their individual qualities. So, to take the specific point raised by the hon. Member for Alyn and Deeside (Mark Tami), I am not sure I buy the concept that when people are elected on a list system, if someone loses it has necessarily been a vote against them rather than a positive vote for one of their opponents. [Interruption.] Well, it is a positive vote for their opponent.

[Mrs Siân C. James (Swansea East) (Lab)]

Will the hon. Gentleman give way?

[Mr Harper]

I will in a minute, but I will answer the point made by the hon. Member for Alyn and Deeside first.

When one votes in an election—I had an exchange on this with the right hon. Member for Neath (Mr Hain)—one puts a cross in a box on the ballot for a candidate. Now, I accept that part of one’s motivation may be that one thinks that the candidate is a wonderful person, but it might be dislike for the incumbent, or that one is making a range of judgments on whom one wants to govern the United Kingdom or, in the case of the Welsh Assembly election, Wales. I accept there is a mix of motivations, but even if one accepts the hon. Gentleman’s contention that if an incumbent constituency Member loses their seat—assuming that people’s motivation was wholly negative; that is, they voted for the incumbent’s primary opponent because they did not like the incumbent—and that Member subsequently gets elected on the list, the list simply reflects the party choice that voters made. It is the nature of the list that the person is elected not based on any of their individual qualities—the voter is not able to do that—but based on the party they represent. The fact that they may or may not have won a constituency seat is not relevant to the debate.

I think the hon. Gentleman is just throwing up chaff to obscure the fact that the previous change was a partisan change made by the Labour party, and the clause simply restores the position not to one that we created, but one that Labour made when it invented devolution.

[Mark Tami]

Does the hon. Gentleman not accept that, in most cases, the odds are that the person who is No. 1 on that list, even if they lose their seat, will hold a seat in the Assembly? Why is that a particularly democratic system? How does it tell people out there that it is worth voting if, whether or not they like that person, he or she will almost certainly get back in?

[Mr Harper]

The hon. Gentleman is not making a case about clause 2. He is making a case about whether it is sensible to have proportional representation on list systems. In such a system, someone who is No. 1 on the list is very likely, regardless of what electors think about that person—their particular characteristics—but based on their party, to get elected. We face the same problem in the European elections. I have heard the qualities of individual candidates being debated, but of course voters are not able to pass judgment on a candidate. If I like the Conservative party—I do, of course—and I vote that way in south-west England, I have no ability to make any judgments about the candidates. I will vote for the Conservatives and they will win.

[Mark Tami]

That is a pure list system.

[Mr Harper]

The hon. Gentleman says that, but I do not see that having a mixed system in which someone may be elected on a list and not be elected for a constituency raises any more issues than having a list at all does. It may be that he does not like having a list system and he wishes we did not have one, but we do, so we should try to make it work as well as possible. I think that the changes in the Bill are sensible and I wholly support them. I promised to give way to the hon. Lady.

[Mrs James]

I am sure the hon. Gentleman agrees that the public are very confused by the system. Comments in my constituency range from, “It’s not fair,” through, “Well, it’s getting elected through the back door,” to “They shouldn’t be able to get in in this way.” What does he suggest that the clause is saying to the democratic voting public of Wales, if a person can have two bites of the cherry if they like?

[Mr Harper]

Those are all perfectly valid criticisms of list systems where voters are presented with a party choice, rather than list systems where votes have the ability to order the candidates. The hon. Lady’s point on whether people have proper choices is a valid criticism of every list system in which the voter can vote only for the party and has no ability to rank candidates, because in such systems whoever is at the top of the list will almost certainly get elected regardless of whether voters think highly of their personal qualities, but I do not think it is a valid criticism of the changes in the Bill we are considering today.

Finally—[Hon. Members: “Hear, hear.”] Opposition Members groan, but I have been generous in taking interventions. Had I simply spoken and taken no interventions, I would have been finished some time ago, but that would not have been the right nature of a debate in Committee on an important Bill, so perhaps we could have a little less chuntering from the Opposition parties.

I want to ask a question about new clauses 4 and 6, which were tabled by Plaid Cymru. I was a little confused, because new clause 4 states:

“Her Majesty may by Order in Council provide for the transfer of responsibility for setting the number of Assembly Members to the”

Assembly, which is consistent with the points made by the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) in his earlier remarks on clause 1 about giving the Assembly more control, but new clause 6 would give

“responsibility for determining the system of election of members”

not to the National Assembly but to the Welsh Government. It is almost certainly the case that that is not what was intended and that it was intended to give responsibility to the Welsh Assembly.

[Jonathan Edwards]

I am grateful to the hon. Gentleman for giving way and for giving me the opportunity to respond. We understood from the Clerks that, for drafting reasons, they would prefer to use “Welsh Government” in the Bill, but he is right that the intention is to devolve responsibility to the National Assembly.

[Mr Harper]

I am glad that the hon. Gentleman said that, because although it may be the case that a party with a majority is in effect the Government and can get the Assembly to do what it wants, there is a difference in giving Ministers executive powers to make changes to electoral systems. Systems of election should at least be determined by the Assembly. I have not made a decision on whether responsibility should lie with the Assembly or remain with Parliament, but it certainly should not become an executive decision of the Welsh Government. It was not the intention, but a combination of new clauses 4 and 6 and amendment 9, which was not moved, would have given the First Minister the power not to have any elections at all. If there were elections, he could have decided the system of election and put himself into a powerful position. I am glad that we have discovered that that is the intention neither of the Labour party nor of the hon. Gentleman.

In conclusion, I shall listen carefully to the Minister, but amendment 15 is probing. I strongly support clause 2 and will vote for it to remain part of the Bill. I am grateful for the clarification that the hon. Gentleman has provided on new clauses 4 and 6.

[Jonathan Edwards]

It is a pleasure to speak to new clauses 4 and 6, which are in my name and those of my hon. and right hon. Friends. We intend to press new clause 4 to a vote, but new clause 6 is probing.

If passed, new clause 4 would transfer responsibility for deciding the number of Assembly Members to the National Assembly, as explained by the hon. Member for Forest of Dean (Mr Harper) on my behalf. At present, the National Assembly has 60 Assembly Members, which is same as when it was established in 1999. The Scottish Parliament has well over 100 Members, and I am sure, Dr McCrea, that you could inform me that the number in that fine building in Stormont, which I have visited many times, in Northern Ireland is also above 100. Since 1999, the institution’s legislative competence has grown considerably, particularly after the 2011 referendum, which I referred to in my earlier contribution, resulting in full law-making powers in devolved areas being given to the National Assembly. Common sense would dictate that the Assembly, working with the Boundary Commission for Wales, should now determine the number of Members necessary to ensure its smooth running. I take the point made by the hon. Member for Ogmore (Huw Irranca-Davies) in his intervention on the hon. Member for Forest of Dean, but new clause 4’s intention is that, should the discussions be concluded, it would be a matter for the Assembly to determine rather than this House of Commons.

Increasing the number of Assembly Members has been endorsed by the Electoral Reform Society Cymru, as well as the 2004 Richard commission, which was commissioned by the Welsh Government of the time. The present Presiding Officer of the Assembly, Rosemary Butler AM, has also argued that the institution should have 80 members. The second report of the Silk commission, published in March, argued for the same and stated:

“The size of the National Assembly should be increased, and…most analysis suggests that it should comprise at least eighty Members.”

In October 2013, the Electoral Reform Society Cymru and the UK’s Changing Union project published a report, “Size Matters”, that went further by arguing for an increase in the number of AMs to 100. It based its findings on an evidence-based examination of legislatures across Europe and further afield. It concluded that, as the Assembly now controls a budget of nearly £15 billion and can pass laws on education, health and transport, a larger legislative body is needed to ensure that the law-making is done thoroughly and is not rushed.

The Assembly at present is arguably buckling under the weight of the new powers it has been granted. It would be in the best interests of full and open democracy to ensure that there is an adequate number of AMs to keep the Executive in check. After all, aside from the Welsh Government Members, there are only 42 Back Benchers in the Assembly, which by any standard is not enough. I read with interest the comments of Julie Morgan, the AM for Cardiff North—she served with distinction as a Member of this House for many years—in yesterday’s Senedd debate on the Silk commission. She made the case that the Assembly should immediately set up a Committee to determine how many Members it needs to perform its functions.

[Mr Harper]

I am listening carefully to the hon. Gentleman. One of his arguments for having a larger number of Assembly Members is that the Assembly will need more of them as its responsibilities grow and cover more areas. Given that those powers and responsibilities have effectively been transferred from the UK Government and therefore relate to policy areas that no longer need to be scrutinised in this House, does he think that it follows that increasing the size of the Assembly because of its increasing powers and work load means that there should be fewer Members in this House representing Wales to reflect the smaller work load and lower level of responsibility here?

[Jonathan Edwards]

That relates to some of the points the hon. Member for Ogmore made earlier. My position has always been that any reduction in the number of Members of Parliament must be complemented with the transfer of significant further fields of power to the National Assembly, as happened in Scotland. Perhaps a more interesting context is the Williams commission, which has been set up by the Welsh Government to consider public service governance and delivery across Wales and, in particular, the number of local authorities. There seems to be a move towards reducing the number of councils and, therefore, councillors. Perhaps that might provide a better context for the debate on the number of AMs in Wales, rather than the number of MPs.

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[Owen Smith]

I intend to speak principally to clause 2 and not to amendment 2 or the new clauses. We tabled an amendment to delete the clause, but it has not been selected, so we will push the clause to a vote.

I fear that gerrymandering has been a hallmark of this Government’s legislation on the constitution. We saw it in the Parliamentary Voting System and Constituencies Act 2011 and the Fixed-term Parliaments Act 2011, and the hon. Member for Forest of Dean (Mr Harper) has today sought, in effect, to reintroduce, through the back door, his gerrymandering proposals to reduce the number of Members representing Wales, which would have a consequent effect on the number of Assembly Members. I fear that clause 2 in particular continues in that vein.

[Mr Harper]

I will resist, I hope, being provoked any further, but how can the principle of ensuring that Members of this House represent a broadly equal number of electors be called gerrymandering? Most people would think that it is a matter of basic fairness. We debated this issue at length when the Parliamentary Voting System and Constituencies Act was making its way through Parliament. I understand why Labour Members did not like it, because it had an effect on them, but it is about delivering equality of representation, which I would have thought they were in favour of.

[Owen Smith]

I am grateful to the hon. Gentleman for his intervention, but I think it was made in the same spirit as that with which he has repeatedly made other arguments, which is to cloak his party’s partisan intent in the Parliamentary Voting System and Constituencies Act, the Fixed-term Parliaments Act and, indeed, clause 2 of this Bill with the veneer of a principled objective. That is not true: the rationale for all of those measures was to benefit his party, which is a smaller party—a minority party—in Wales. I intend to demonstrate why that is the case.

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That is an independent observation by a former Speaker of the Scottish Parliament.

[Mr Harper]

Will the right hon. Gentleman give way?

[Mr Hain]

I would like to make a bit more progress, because although the hon. Gentleman was generous in taking interventions, his contribution lasted 40 minutes. I would prefer to be a bit briefer, and I normally am very generous.

The fact that, nevertheless, Scotland has retained dual candidature, in defiance of Lord Steel’s advice, is no reason for Wales to do the same. The Government simply will not acknowledge the fundamental democratic abuse of dual candidacy, which is that losers become winners, and that voters are second-guessed and contradicted by the system, their choices denied. The second significant measure the Scottish Parliament adopted after Arbuthnott tried to increase the accountability of regional MSPs to the electorate by changing the voting system and introducing an open list for regional candidates—not something this Bill provides—to give some measure of control for Scottish voters. That was done because the Scottish social attitudes survey 2003 found a high degree of opposition to the party control inherent in the list system. Voters in Wales enjoy no such privilege and the Government are not proposing to give it to us.

On the issue of dual candidacy, two different paths were followed: in Scotland it was through greater clarification of the roles of Members and by turning to open lists; and in Wales we felt that the ban was the right solution to dual candidacy abuse. Nearly a decade on from the Government of Wales Act 2006 I feel that we made the right choice, but much more must be done to give regional Assembly Members more accountability to the electorate. On candidacy, this Bill does nothing to further the evolution of Welsh democracy—indeed it puts it into reverse.

Over the past 15 years, the Scottish Parliament and Welsh Assembly have both evolved in different ways to better suit the needs of their individual electorates. As the Government’s proposal stands, we will return to some of the absurd anomalies we saw in 1999 and 2003. As has been mentioned, in Clwyd West in 2003 every one of the three losing party candidates nevertheless won. Let us also consider the following cases from the 1999 elections, when 17 out of the 20 regional Assembly Members elected lost constituency elections. Thus, more than three quarters of the regional AMs did not have a democratic mandate to represent people—voters had not voted for them—and 15 of these 20 had offices in the constituencies they failed to be elected in.

In the Conwy constituency the Lib Dem AM Christine Humphreys came fourth in the popular vote—she had less than 10% of the vote in Conwy—yet still became an AM for the North Wales region. In Wrexham the Plaid Cymru AM Janet Ryder came last in the constituency, with 2,659 votes—the constituency AM had 9,239 votes—and yet still became an AM through the back door. In Ynys Môn the Tory AM Peter Rogers won 6,031 votes, which put him third on the constituency list—the Plaid Cymru AM who won a majority had more than 16,000 votes—yet he still became an AM for the North Wales region. It is not a partisan argument but simply a truth to state that those results are fundamentally undemocratic.

In the 1999 election more than 215,000 Welsh men and women voted in the North Wales region. Were we to look at every individual who ran as a constituency candidate in that election and collate their votes, we would find that Christine Humphreys, Janet Ryder and Peter Rogers polled less than 6% of the total regional vote and yet still became AMs for that very same region. After two Assembly elections where this was a regular occurrence, and with almost half the population saying in 2006 that they did not understand how their electoral system worked, we sought to remedy confusion over how AMs could still get in through the back door. The ban on dual candidature was the right choice then and remains so now. We introduced the ban in 2006 to stop these anomalies and the confusion they produced in voters’ minds, but now the Government are proposing to start this all over again.

In 2006, Victoria Winckler, director of the Bevan Foundation, conducted a survey, which found broad support for the ban on dual candidacy. Her report also highlighted the need for greater education and understanding among the general public. This report qualified the findings of previous research into dual candidacy. It said that none of it had been sufficient to make a substantial case on whether or not the public were for or against it in elections, but that it did discover considerable public disquiet on the issue with broad support in favour of the ban.

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When the leader of Plaid Cymru said that she would stand for the Rhondda, it sounded like a brave—some might say foolhardy—move, but then, of course, the Conservatives proposed to bring back dual candidacy and she said that it was likely that she would also stand to retain her regional Assembly Member position on the list. Not so brave after all. When she loses in the Rhondda constituency in 2016—I am afraid that I have to break the news to her that she will lose heavily to the sitting Labour Member, the admirable Leighton Andrews—Leanne Wood will have the lifeline of dual candidacy to fall back on.

[Mr Harper]

On the subject of bravery, will the right hon. Gentleman give way?

[Mr Hain]

No wonder Plaid Cymru is such an enthusiastic little helper to the Government on this clause. We should rename the Bill “Leanne’s lifeline”. I will give way.

[Mr Harper]

I have been listening carefully to the right hon. Gentleman’s argument and I do not understand this concept of the “back door”. I might be wrong— I am sure that Opposition Members will tell me if I am—but surely if party candidates are listed on the ballot paper and electors cast a vote in a regional ballot, which is a separate vote, they know the consequences of that vote. If someone on that list is elected based on the second vote that somebody casts, the voter will have known that that could happen. I do not know how the right hon. Gentleman can describe that as someone being elected by the back door.

[Mr Hain]

I realise that the hon. Gentleman is not a member for a Welsh seat, but the truth is that people in Wales feel that people are being elected by the back door when they turn down a particular individual as their constituency Member only to find that they are elected anyway. This description of such an election as “by the back door” seems to me to be valid.

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[Mr Jones]

Absolutely not. Electors may cast their votes in any way they wish for whichever candidates they wish. That argument is wholly facile.

The right hon. Member for Torfaen (Paul Murphy) seemed to criticise the whole concept of a top-up list. As somebody who is far more supportive of the first-past-the-post system, I have considerable sympathy for that point of view on the basis that one lives by the sword or dies by the sword. However, every party in this House supports some form of proportional election to the Assembly, as he accepted. It seemed to me that his criticisms, and those of the right hon. Member for Neath (Mr Hain), were aimed more at the consequences of the proportional representation system than at dual candidacy. Therefore, we are now legislating to remove that unfair prohibition and to reintroduce the system that was in place and worked well between 1998 and 2006.

The amendment tabled by my hon. Friend the Member for Forest of Dean also proposes that his review would consider the implications of removing the prohibition on dual candidacy for the desirable total number of Assembly Members; the ratio of Assembly Members elected by constituency and from the regional list; and the merits of an all-Wales list, rather than lists in five separate regions.

On the implications for the desirable number of Assembly Members, we set out in the Green Paper on future electoral arrangements that we believe 60 Assembly Members is the right number, and we continue to hold that view. I note that the First Minister said in his oral evidence to the Welsh Affairs Committee during pre-legislative scrutiny of the Bill that the Assembly could “undoubtedly” cope with its new powers without changing the number of Assembly Members.

The Government also believe that under existing arrangements, the current ratio of constituency and regional Assembly Members is right. The Green Paper set out our belief that an all-Wales national list was not desirable as it would place more distance between regional Members and their constituents than the existing five regions—a view that I think is shared across the Committee —and again, our view has not changed.

New clause 4, tabled by right hon. and hon. Members from Plaid Cymru, seeks to establish a mechanism through an Order in Council by which competence could be devolved to the Assembly to determine its size. In a similar vein, new clause 6 would enable devolution to the Welsh Government—I think it actually means the Welsh Assembly—of the power to determine the system by which Members are elected.

Although the Silk commission made no recommendations about the electoral system, it did recommend that the size of the Assembly should be increased so that it might better fulfil its scrutiny role, and new clause 4 would pre-empt that. The commission also acknowledged the practical implications of its recommendation on the electoral system and the need for further consideration. The Government have made it clear in responding to publication of the commission’s report that any recommendation such as that requiring primary legislation should be for the next Parliament, and therefore for political parties to consider when preparing their manifestos for the 2015 general election. Of course, the commission also recommended that consideration be given to increasing capacity in the Assembly in the short term.

Earlier this year an Electoral Reform Society report found that 79% of Assembly Members surveyed believed that plenary time could be used more efficiently and effectively, and in the same survey, 90% of Assembly Members supported a comprehensive review of Assembly procedures. The Assembly and the Welsh Government have the power to change those things through Standing Orders, and I call on them to consider carefully how the Assembly could make better use of its time and the resources already available to it.

I thank my hon. Friend the Member for Forest of Dean for his amendment, which has enabled a full and extensive debate this afternoon on the merits of removing the ban on dual candidacy. I hope I have been able to reassure him, at least, and I ask him to withdraw his amendment accordingly. I also urge right hon. and hon. Members from Plaid Cymru not to press new clauses 4 and 6 to a vote.

[Mr Harper]

I am always glad to have facilitated a wide-ranging debate in Committee, as is proper, and to fully air these issues. My right hon. Friend’s explanation has been sufficient, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question put, That the clause stand part of the Bill.

--- Later in debate ---

[Mr Harper]

I fully support clause 4, but I want to touch briefly on new clause 5, about which the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) has just been talking. I do not support new clause 5, and I am glad that he is not going to press it to a vote. Although he makes the point that the text of the new clause does not pick a particular name, there is a bit of a hint in the title about where he is going. It is, I think, a qualitative difference. The Minister, in setting out the Government’s position, made it clear that the renaming of the Welsh Assembly Government to the Welsh Government is following public opinion and public usage, and simply therefore reflecting the reality of the situation. What the hon. Gentleman and his party are trying to do is the opposite. They are trying to push for changing the name of the Assembly in order to change the nature of the Assembly. Calling it the National Parliament for Wales, which implies a single institution, is clearly part of their campaign to move to a position where Wales ceases to be part of the United Kingdom and becomes an independent country. That is not something I support, which is why I do not support the new clause and why I think it is qualitatively different from clause 4.

[Jonathan Edwards]

I was anxious not to get involved in a debate about the actual name, but the hon. Gentleman will be aware that, in the UK’s tradition, Scotland became a law-making Parliament and was named as such. That is why I make the case for using the term “Parliament”. However, there are individuals, including those in my own party, who would prefer to keep the term the National Assembly. We want to empower the National Assembly to make that decision rather than the House of Commons.

[Mr Harper]

I see that point, but the danger is that the name change becomes part of the campaign to change the nature not just of the institution but of the relationship between Wales and the United Kingdom. That is why I think that the approach the Government are taking in clause 4, which is effectively to reflect popular usage of the term Welsh Government for the Welsh Assembly Government, is perfectly straightforward and sensible. Moreover, that is done through primary legislation and therefore keeps that decision for this House. I do not support new clause 5, which would give that power to the National Assembly.

[Jonathan Edwards]

It would be wrong to describe this as some sort of partisan nationalist plot to change the name of the National Assembly. As I have already said to the Under-Secretary of State, the position of the Tory leader in the Assembly group is to change the name to a National Parliament. Indeed it is even the position of the Presiding Officer of the National Assembly who is, of course, a Labour party Member.

[Mr Harper]

I take that point. I would oppose new clause 5 whoever drafted it, because the whole concept of changing the name to achieve a political outcome is not something that I support. We can have a debate about independence and whether the Welsh Assembly should turn into a Parliament of an independent Wales, but we should have it openly. We should not use changing the name as a surreptitious way of moving along the debate and hope that nobody notices. The hon. Gentleman has cunningly designed the new clause so that it does not say anywhere what the National Assembly should be called, but, as I have said, it is given away in the title as a little hint about where he wants to go. It is whatever the parliamentary equivalent of a Freudian slip is, which gives it away.

[Geraint Davies (Swansea West) (Lab/Co-op)]

I think there may be some confusion here, because of course this Parliament enabled the Scottish Parliament to be so called, and there is no appetite for us to say to the Scottish Parliament that it can call itself what it likes—even the Scottish kingdom. Plaid Cymru is saying that the Welsh Assembly should be able to call itself what it likes, and there is, I understand, a strong case to call the National Assembly the National Parliament of Wales, but there is confusion here about what we are talking about. Scotland has no power to decide the name for itself.

[Mr Harper]

That is a good point. There are two separate arguments, one about what we should call the different institutions and another about which body is the right body to pass the legislation to enact those changes. I think that the Government’s approach in clause 4, which recognises the reality of what we call the Welsh Government and reflects that in primary legislation passed by this Parliament, is the right one, rather than the approach followed by those who have signed up to new clause 5. That is why I will oppose the new clause, but I am glad that the hon. Member for Carmarthen East and Dinefwr is not going to press it to a vote. I hope that the Committee will support clause 4.

[Owen Smith]

I, too, welcome you to the Chair, Mr Chope. It is a pleasure to serve under your chairmanship.

We support clause 4, which renames the Welsh Assembly Government. That is what the Welsh Assembly has long said that it would like to happen and it reflects normal custom and practice across Wales, so we are pleased that the Government have decided to change things and use the term Welsh Government in future.

On new clause 5, we accept that there is a debate to be had about the name. Silk part II refers to the prospect of a Welsh Parliament and it is ironic that the leader of the Conservative party in Wales holds that view. I admire the chutzpah with which the Under-Secretary glossed over that, as it is an irony that the Opposition see clearly. However, this is an area of debate that ought properly to be dealt with in any legislation that reflects Silk part II rather than under this Bill, which properly reflects the preponderance of Silk part I. For that reason, even if the new clause were pressed to a vote, we probably would not support it.

--- Later in debate ---

[Mr Gauke]

I am grateful for that lengthy speech. I may have come late to the debate, but it is perfectly clear that Labour has been all over the place on this matter. I come back to what I said about the advantages of devolving income tax. One of those, very significantly, is that there is much greater accountability for the Welsh Government, because if they are able effectively to use the powers that they currently have to get the Welsh economy to grow, they will benefit from that as a consequence of increased revenues.

[Mr Harper]

Perhaps I can help to answer the question asked by the right hon. Member for Delyn (Mr Hanson). First, my constituents who have to use the NHS in Wales do not want to, would love not to and would like to use the NHS in England. Working with the Secretary of State for Health, I hope we will be able to put that in place by the end of this year, as he has pledged in the House.

Secondly, all UK taxpayers make a contribution to the Exchequer, which supplies the block grant to Wales that, of course, part-funds public services. Given that we are talking about a partial devolution, there is still quite a lot of money coming from the block grant and any of my constituents who are using public services will, of course, have paid their fair share.

[Mr Gauke]

My hon. Friend makes two valuable points. I presume that his very good argument about the block grant would be weakened if the devolved amount was 15p rather than 10p.

--- Later in debate ---

[Mr Harper]

My hon. Friend will know from Second Reading that my concern is about companies based in my constituency that employ people, some of whom are resident in England and some in Wales, because there would be an administrative burden on those companies should there be a Welsh rate of income tax. I think the Minister has addressed this point, but will he confirm whether that burden—to the extent that it exists—will effectively be reported not just to the Welsh Assembly but also to this House? Members who represent English residents have a legitimate interest in how that complexity will hit local firms. If the Minister could be absolutely clear on that, there will be no need to press the amendment to a vote.

[Mr Gauke]

I am grateful to my hon. Friend for that point and I hope I can reassure him. There already exist mechanisms for scrutiny in relation to the Welsh rate by Parliament through existing vires. HMRC’s accounts would contain specific information on the Welsh rate, and they will continue to be laid before Parliament. Hon. Members will be presented with the levels of spending incurred by HMRC in administering the Welsh rate and the amounts of revenue collected. I believe that those existing channels provide an appropriate level of scrutiny for hon. Members in relation to the Welsh rate, and I hope that addresses my hon. Friend’s point.

I also think it right for additional insurance to be provided to the Assembly via the Comptroller and Auditor General’s report, and we anticipate that that report would be produced to a timetable similar to that of the wider report to Parliament on HMRC’s accounts. No doubt my hon. Friend will shortly contribute to the debate, but I have set out the existing mechanisms for scrutiny that will be available to Members of this Parliament, and I hope he is reassured.

On amendments 38 and 39, we have been working closely with the Welsh Government on Welsh funding. In particular, the Government recognise there has been convergence between the levels of funding in Wales and England since devolution, and that this is a significant concern in Wales. As a result, in October 2012 we agreed to implement a joint process to review the levels of funding in Wales and England in advance of the spending review. If convergence is forecast to occur over the course of the spending review period, options will be discussed to address the issue in a fair and affordable manner, based on a shared understanding of all the available evidence.

In advance of the 2013 spending round, a joint review was therefore undertaken by the two Governments and the outcome set out in a written ministerial statement. The review determined that funding levels are not expected to converge during the period to 2015-16, and in fact an element of divergence is forecast to occur. The review also determined that relative funding levels in Wales are within the range recommended by the Holtham commission.

These arrangements assure that we have a shared understanding of funding levels in Wales and a process is in place to consider options should convergence be forecast to resume. In no way would the devolution of income tax have any impact on these arrangements, and it is certainly not the case that income tax devolution would lock in the current level of funding. These arrangements therefore provide a firm basis for proceeding with the new financial powers in the Bill, and I hope that hon. Members will therefore not press amendments 38 and 39. I hope that my comments have been of assistance to the Committee, and that clauses 8 and 9 and the Government amendments will be added to the Bill this evening.

Income Distribution and Taxation

Mark Harper Excerpts

Wednesday 9th April 2014 Westminster Hall

[Mr Mark Harper (Forest of Dean) (Con)]

I am pleased to serve under your chairmanship, Mr Weir, and to welcome my hon. Friend the Member for Loughborough (Nicky Morgan), who is having a double personality day. She started as Economic Secretary and ended as Financial Secretary. I congratulate her on her well-deserved promotion, and I am very pleased that she is still able to respond to this debate. I wrote to her earlier today to congratulate her on her innovative way of avoiding responding to my debate, but she is stuck with me for the next 29 minutes or so.

I secured the debate because, although I touched on the matter briefly in my short contribution to the Budget debate, it was, as you know, Mr Weir, time limited, and I did not have a chance to make all the points I wanted. In the debate running up to the Budget, there was a lot of discussion about “middle-income taxpayers” and what that meant. I want to set out what I think the Government’s priority should be and congratulate them on landing the income tax cuts in the right place on the income scale.

In the run-up to the Budget, a number of newspaper articles—there was one in The Guardian—referred to middle-income earners being dragged into the 40p tax bracket, but that is not a sensible use of “middle income”. Even the Leader of the Opposition used the phrase, saying that

“if you are in the middle, paying 40p, you should be pleased to pay more”.—[Official Report, 19 March 2014; Vol. 577, c. 797.]

He was referring to what he said was someone else’s argument.

In the Labour party’s list of 24 so-called Tory tax rises, four of them are changes to the higher rate threshold. It seemed slightly odd for the Labour party to complain about ensuring that those on higher incomes paid their fair share in dealing with the deficit. While I am touching on that list, it is interesting to note that the spare room subsidy, which is a housing benefit issue—the Opposition insist on calling it a tax—was not on it. That was a very good demonstration of the fact that even they accept in their heart of hearts that it is not really a tax, even though they keep trying to call it that.

That was an aside, but the point I wanted to make about 40p taxpayers is that I am not saying that they are rich; they are not. Equally, they are not in the middle. Looking at the 2013-14 tax year, someone would pay 40p tax only if they had £32,010 of taxable income, which is on top of a £9,440 personal allowance. They would have to earn a gross income of £41,450 to pay that tax rate. In 2011-12—the most recent year for which the detail is available—the income distribution figures show that a higher rate taxpayer is in the top 14% of income earners. For that year, the median income was £20,300. Some helpful projections have been done using the Office for Budget Responsibility’s economic and fiscal outlook. They show that the median income was £21,000 in 2012-13 and £22,200 in 2013-14. That is only just more than half the income someone would have to earn to pay the 40p tax rate.

If I look at the level of income in my not untypical constituency—these figures are for 2011-12, the latest ones available that are broken down by parliamentary constituency—the mean income of all taxpayers is £24,300, and the median income is only £18,800. If the overall national figures have gone up by some 10% since 2011-12, we can use that assumption with the constituency figures, but that would take the median figure to only a little over £20,000. That figure is for total income. If we look at how that is split between the self-employed, the employed and pensioners, the figures present a different picture. However, it is clear that the median taxpayer is not earning anything like enough to pay the 40% tax rate; they are paying basic rate tax. That is why I thought the Chancellor’s Budget judgment was right.

I even looked at parliamentary constituencies that people would generally accept as having a higher than average number of people earning good incomes. A piece of data that is available from the Office for National Statistics shows that even in constituencies with a high level of mean income—Kensington, Cities of London and Westminster and Chelsea and Fulham—the numbers are clearly driven by a small number of well-remunerated people. The median income in those constituencies is: £37,900 in Cities of London and Westminster; £36,200 in Kensington, and £34,300 in Chelsea and Fulham. Even in those constituencies, the median taxpayer is not paying anything close to 40% tax.

The focus should be on delivering tax cuts for the lower paid and those on more modest incomes and that is what the Chancellor did in his Budget. He made it clear that the personal allowance was going to rise in this current tax year, which has just begun, to £10,000 and next year it rises to £10,500, which will lift more than 3 million of the lowest paid out of income tax altogether. He also confirmed, rightly, that the higher rate threshold will rise a little bit as well, for the first time in this Parliament, which means that everyone on incomes up to £100,000 will benefit from some tax cut, but obviously the main benefit is for those on a lower rate.

The list of tax rises that the Labour party put out referred to the higher rate income tax threshold cuts earlier in this Parliament, which were equitable and made to ensure that those significant rises in the personal allowance did not disproportionately benefit higher rate taxpayers. Of course, if the personal allowance is increased and the higher rate threshold is not changed, someone on 40% tax has income moved out of that band into the basic rate band and gets a bigger benefit than someone on basic rate tax. That would be wrong. The judgments that we made earlier in this Parliament, when we had to make difficult financial decisions, to share the pain and have the burden on those with the broadest shoulders, were right. I am pleased that the Chancellor confirmed that.

By virtue of increasing the allowance, the Chancellor was able to show that, looking at this Government’s tax arrangements, compared with the previous Government’s policy, everybody earning up to £100,000 is better off. They have all had a tax cut, but the tax cuts are more focused and bigger for those on lower earnings.

[Mr Andrew Smith (Oxford East) (Lab)]

I congratulate the hon. Gentleman on securing this debate on an important issue. I resisted intervening on the bedroom tax and so on because I wanted to make this point. Does he share my concern, notwithstanding what he said about raising the allowance, that the impact of the tapers on people in receipt of universal credit will be such that, for somebody just above the tax threshold, the rate of withdrawal on both a first and second earner in a family will be as high as 76%? Is there not a danger that that gives people a perverse incentive to work fewer rather than more hours, because they do not reckon that they are being rewarded for the extra hours, or to do undeclared work?

[Mr Harper]

The right hon. Gentleman is right to drawn attention to the tapers and the withdrawal of benefits as people earn income—of course, they are high—but this issue was raised during the Budget debates. However, the fact is that, under universal credit, the withdrawal rates and the tapering arrangements mean that there is a smaller rate of withdrawal of benefit than under the existing levels of benefit. I am sure the Minister will correct me if I am wrong; this is not an area that I have studied in detail. The issue the right hon. Gentleman raises is important, but it is always a challenge to deal with the withdrawal of income-related benefits and to be careful that the effective marginal rate for people is such that it is always worth their while working. Ideally, we want to get that marginal rate as low as possible, but it is expensive to drive it down to a low level. My understanding is that, under universal credit, those withdrawal rates of benefit are lower and therefore more encouraging of people to work, either more hours or in the first place, than under the existing combinations of income-related benefits.

[Mr Smith]

My understanding is that the rates are higher for people working more hours, for 35 hours or more. The hon. Gentleman is right in that the rates are lower for people working fewer hours. That is my worry—the perverse incentive for people to work less.

[Mr Harper]

If I am picking that up correctly, the right hon. Gentleman is saying that at lower levels of earning, or for people who work fewer hours, the effect of universal credit is—

[Mr Smith]

I should correct that. It is not that the rate is lower; it is that people will be better off working fewer hours, as compared with the position under tax credits, whereas those who are working 35 hours or more will be slightly worse off under universal credit than they would have been under tax credits. The withdrawal rate is 76%, just above the tax threshold, under universal credit.

[Mr Harper]

I cannot answer the right hon. Gentleman’s detailed question, because I have not studied the matter, but the other thing that he needs to do—I am not sure whether he has incorporated this into his judgment—is look at the interaction of the tax changes that we have made with the benefit system. Over this Parliament, there will be a significant increase in the personal allowance from what it was in 2010-11 when we came to power, and what it will be when this Parliament finishes, from something in the order of £6,000 or £6,500 to £10,500. A lot of people on lower incomes, such as those on the minimum wage, are moved out of the taxation system altogether. Previously, people could be on a relatively modest income and paying tax, but at the same time getting various income-related benefits.

I think that I have set that out carefully, but if I have not, the Minister will do so in her response. Otherwise, because the debate is not about universal credit and she might not have all those facts at her fingertips, I am sure she is happy to write and to set it out in detail later. I am, however, grateful for the point made by the right hon. Gentleman.

[Mr Jim Cunningham (Coventry South) (Lab)]

I will be quick, as the hon. Gentleman does not have much time. I thank him for giving way, but when the present Government came to power basically someone did not start paying tax until just over £6,000. I do not have the exact figures with me, but if we take into account, for example, 6% inflation over the past four years, the value of the £10,000 threshold that has been introduced drops by £1,200. In other words, had the £6,000 been pushed up for inflation over the past four years, we might arrive at a different value for the benefits to be got out of £10,000 before paying tax.

[Mr Harper]

The hon. Gentleman makes half a sensible point. He is right that the personal allowance would have gone up because of indexation in line with inflation—the statutory provision, unless the Chancellor decides not, in which case he has to set out why—but by only a relatively modest amount. The difference between what it would have gone up to had we simply indexed it and the great increase to £10,500 next year is a significant policy change and has made a real difference to people on lower incomes, many of whom will have been taken out of tax completely.

Finally, to look at the impact in my own constituency, under the tax changes this April a further 381 people are taken out of tax altogether, but 37,223 people benefit from the rise in the personal allowance. If we take the figures for the whole of the Parliament, 4,334 of my constituents will have been taken out of paying income tax entirely by the significant changes in the personal allowance. That significant benefit incentivises people, particularly at the lower end of the income spectrum, to work, and it is why there are several thousand more people in my constituency in work now than there were in 2010, when this Government were elected.

In the environment we are in, where we have a limited amount of money and we cannot cut taxes for everybody, we should focus our help on those who are lower paid and who are genuinely on middle incomes, which, as I said, are incomes of about £20,000, and not numbers beginning with threes or fours. In my constituency, I can see that that is where the benefit should be focused. It should be a priority both for this Government and for our party to make sure that we are delivering benefit to as many people as possible. I am pleased to say that the message I took from the Budget, after listening to the Chancellor’s speech very carefully, was that that was where he has aimed our tax changes.

I agree with the right hon. Member for Oxford East (Mr Smith) about the focus. The welfare changes that we are making, with the benefit cap and the changes to universal credit, which I think, overall, have increased the incentives for people to work, are the right messages. The very simple one is that work should always pay and that we are trying to use our changes to the tax system to benefit the many hard-working families who are trying to do the right thing, but who are finding things difficult—although with the improving economic news, they will see rises in their incomes above the rate of inflation, therefore making them better off in real terms. Those are the people we should focus on and I am pleased that, in my judgment, that is exactly where the Chancellor aimed his Budget. That is why I was very pleased, in my short speech in the Budget debate, to commend it to the House, and why I am very pleased to support the Finance Bill.

Charter for Budget Responsibility

Mark Harper Excerpts

Wednesday 26th March 2014 Commons Chamber

[Mark Reckless (Rochester and Strood) (Con)]

We have to make these cuts because the expenditure has been unmanaged. As my hon. Friend the Member for Ipswich (Ben Gummer) says, for the first time there will be more within the supposed “annually managed” category than the amount that is subject to departmental expenditure limits. The measure that the Chancellor has brought before us today will mean that for the first time this £120 billion of public spending will be properly managed annually by the Treasury and will be subject annually to a vote of this House.

Imagine the Home Office or the Department for Transport letting it slip out that it was spending £1.5 billion more than previously planned. The first thing a Minister must do if a budget is exceeded is bear down on it, find out why, do something about it, and, if necessary, find another area of the departmental budget where savings can be made. If absolutely necessary, they must go to the Chancellor and see whether they can make a case for a proportion of the strictly limited contingency reserve.

[Mr Mark Harper (Forest of Dean) (Con)]

I listened carefully to what the hon. Member for Hackney North and Stoke Newington (Ms Abbott) said and at no point during her speech did she think about the other side of the coin: the people who have to pay the bills. They were the people referred to by my hon. Friend the Member for Harlow (Robert Halfon) and the Chancellor. They have needs and requirements. Many low-paid people have to pay the bills, but she never mentioned them once.

[Mark Reckless]

As we learnt in the Budget, the amount we will spend on benefits for the disabled—as the Minister of State, Department for Work and Pensions, my right hon. Friend the Member for Wirral West (Esther McVey), will know well—is £1.5 billion more than was estimated in the autumn statement just three and a half months ago. In the past, we would have just ignored that and borrowed the extra money without even debating it in this House, but at least now we must have a debate.

The OBR expects that that money will be clawed back over the next couple of years—we will spend a similar amount extra next year, but not the following year. If that estimate is not right, however, surely we as MPs, representing the taxpayer and those who benefit from other benefits and from the NHS, must look into that and ask what we can do about it. Many people who are applying for the personal independence payment or employment and support allowance come to my surgeries and I see cases to which I am sympathetic and in which I think a misjudgment has been made in the assessment. The OBR might be right about what the spending will be—I am not saying that we should reduce eligibility for those benefits or that that is where the reductions must fall—but if it continues to increase we must either borrow the extra money, raise taxes, as the Opposition might wish, or find savings elsewhere.

Constituents of mine who, if they were lucky, were getting a 1% wage increase earlier in this Parliament were seeing people on benefits getting increases above 5%. In the five years since 2007, benefit payments increased by 10% relative to increases for those people who were in work. This year, for the first time, we have a 1% limit. Inflation has come down: it is now 1.7% rather than nearly 3%, as it was when we introduced this measure. I do not want to make further reductions to welfare benefits, but if payments to people who are disabled are £1.5 billion more than we thought they would be this year and if that continues to rise, we must make a decision about the priorities and where we want to make savings. Alternatively, should we just have more taxes and more borrowing, as the Opposition would like?

The other important principle of the measure before us is that the Chancellor is returning the control of spending to Parliament. Parliament used to debate the Government estimates in detail, but now the last thing that we debate on estimates day is anything to do with spending. Between the wars, Parliament lost that power and since then we have seen an explosion in state spending. We are spending £120 billion. It would be good news if spending came in below that, and the Treasury would not have to come to us for permission to spend more taxpayers’ money. But if spending is more than 2% above the projected figure there ought to be a debate and a vote in this House about whether to accept that.