Wales Bill

Debate between Sammy Wilson and Stephen Crabb

Wednesday 10th December 2014 Commons Chamber

[Stephen Crabb]

Taken together, these amendments remove the so-called lockstep mechanism from the income tax provisions. By removing that mechanism so that the Bill reflects the Silk commission’s recommendation in its part I report, the National Assembly for Wales will be able to set separate Welsh rates of income tax for each band. Subject to a referendum, all three income tax rates would be reduced by 10p, and the Assembly would decide a separate Welsh rate for each band. Those Welsh rates would be added to the reduced UK rates.

The lockstep is probably second only to dual candidacy as the most debated aspect of the Bill; it has been debated at great length in both this House and the other place. I have been clear throughout the passage of the Bill that I have been prepared to listen to all the arguments and perspectives and, if necessary, to take a different approach on the lockstep. That is exactly what I have done. Before I go any further, I would like again to place on the record my thanks to my right hon. Friend the Member for Clwyd West (Mr Jones) for his hard work and perseverance as Secretary of State for Wales in guiding the Bill through its early stages.

On Second Reading, the hon. Member for Rhondda (Chris Bryant) made a point of counting the number of times my right hon. Friend used the word “accountability” in describing the Bill; I believe that he stopped at 15. Frankly, though, my right hon. Friend could have used it 15 times more because the Bill was, and is, all about accountability. By being made responsible for raising a proportion of the money that they spend, and allowing the people of Wales to judge them on how they spend it, the Assembly and the Welsh Government will become more accountable to the electorate.

In removing the lockstep, we are removing what was widely seen to be a deterrent to the Welsh Government’s accepting the devolution of income tax in Wales. Given the other financial provisions in the Bill and the full devolution of business rates, which, as my right hon. Friend the Chancellor confirmed last week, will be implemented as planned next April, the Assembly would become responsible for raising around a quarter of the money that it spends.

Hon. Members will be aware that last week the Office for Budget Responsibility published a forecast of devolved tax revenues for Wales alongside the autumn statement. That showed that revenue from the 10p of income tax that would be devolved to Wales would net the Welsh Government almost £2 billion in 2014-15—about nine times as much as stamp duty land tax and landfill tax combined. The figures show, in black and white, that through the Bill we are providing the Assembly and the Welsh Government the tools to help grow the Welsh economy and take responsibility for raising a significant portion of the money that they spend. The removal of the lockstep makes it even easier for them to do that.

I welcome the First Minister’s statement in the Senedd last week in which he confirmed for the first time that he would accept income tax devolution. That is indeed progress. But—and there is always a “but”—once again he hid behind the self-imposed “barrier” of funding. I have always said that the powers in the Bill should be as far-reaching and flexible as possible, to provide the Welsh Government with the tools to grow the Welsh economy. Where we have committed to removing obstacles, however, the First Minister continues to erect them. He seems intent on denying the people of Wales their rightful say on whether income tax powers should be devolved, rejecting the opportunity to make the Welsh Government more accountable to those who elect them and refusing to accept responsibility for raising more of the money that they spend.

[Sammy Wilson (East Antrim) (DUP)]

The Secretary of State has outlined the advantages of the devolution of those additional powers. Does he accept that giving more tax-raising powers, and hence reducing other income from central Government, exposes the Welsh Government to greater fluctuations in revenue and makes the long-term planning of services much more difficult?

[Stephen Crabb]

Part of devolving any tax—income tax or any other fiscal power—is the creation of an incentive for the devolved Government. They get an extra tool and an incentive, which they never had before, to grow that portion of their own tax base.

Crucially, the devolution of income tax in Wales will be done in line with what the Holtham commission proposed for Scotland: the indexed deduction mechanism. That would effectively shield the Welsh Government from UK-wide economic shocks but give them the incentive of holding on to the extra Welsh revenue that they were able to generate. That works both ways: if Welsh income tax grows at a slower pace than that of the rest of the UK generally, there will be a loss, but that is exactly what provides the incentive for the Welsh Government to seek to grow the tax base. The issue is about economic development.

--- Later in debate ---

[Stephen Crabb]

It is entirely up to Welsh Ministers how they choose to use these tools. I am surprised by what the hon. Gentleman says, as I would expect him to be the last person to suggest that the Secretary of State should be directing how these powers are used. I am a Conservative, and, to my core, my aspiration is always to see lower taxes rather than higher taxes. That is a difference in values between Government and Opposition Members. We understand that lower taxes generally create the right circumstances for business growth and for growing wealth in an economy—and all Members, on both sides of the House, should be ambitious to see more of that in Wales.

[Sammy Wilson]

Does the Secretary of State accept, though, that unless we have the correct formula for deciding what are national impacts and what are local impacts on the tax revenue raised, there is a great danger that Wales could suffer as a result of the fact that fluctuations in income over the economic cycle tend to be much greater in the regions of the United Kingdom than in the United Kingdom as a whole?

[Stephen Crabb]

I do not dismiss the risk that the hon. Gentleman has outlined, but I think he exaggerates its impact on Wales. Alongside any perception of risk in relation to such fluctuations, there is a powerful opportunity for Wales to take greater control over wealth creation inside the nation of Wales. That is an exciting opportunity for the Welsh people, and it represents the next stage of devolution.

This is all about accountability. The former US President Harry Truman famously had on his desk a card that said, “The buck stops here.” I want to see a Welsh Government who stand up proudly and say, “The buck stops here” rather than “The buck is passed there.” That is what this Bill is all about: it creates that enhanced accountability and enhanced responsibility. I repeat my challenge to the First Minister and the Welsh Government: as soon as this Bill receives Royal Assent, take steps to call the referendum and do it as soon as possible. Let us seize the new tools and powers in this Bill with both hands and move forward.