Wales Bill

Tuesday 6th May 2014 Commons Chamber

[Relevant documents: Fourth Report from the Welsh Affairs Committee, on the Pre-legislative scrutiny of the draft Wales Bill, HC 962, and the Government response, HC 1025.]

Further considered in Committee (Progress reported, 30 April)

[Mr Speaker in the Chair]

Clause 6

Taxation: introductory

Amendment proposed (30 April): 19, page 5, leave out lines 13 and 14.

This amendment and amendment 21 ensure that the overview provision in new section 116A(1) of GOWA 2006 relating to the Assembly power to set a rate of income tax can only come into force, like the other provisions relating to that power, following a yes vote in a referendum.—(Mr Gauke.)

Question again proposed, That the amendment be made.

Amendment agreed to.

16:26

[Hywel Williams (Arfon) (PC)]

I beg to move amendment 32, in page 6, line 20, after ‘description’, insert ‘, a tax credit of any description’.

This amendment would allow the Welsh Government, by resolution of the National Assembly for Wales, to introduce new tax credits.

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following:

Amendment 33, in line 32, leave out ‘, each House of Parliament and’.

This amendment would enable the Welsh Government, by resolution of the National Assembly for Wales, to introduce a new tax without the need for approval by resolution of both Houses of Parliament.

Amendment 40, in page 7, line 13, at end insert—

‘(10) In the event that the power to add new devolved taxes under Section 116C, or the power to add new devolved taxes under Section 80B of the Scotland Act 1998 is used, the Chancellor of the Exchequer must undertake a review of the benefits of symmetry in the devolution of taxes between Wales and Scotland.’.

Clause 6 stand part.

Government amendment 20.

Clause 7 stand part.

Amendment 7, in clause 14, page 19, line 5, at end add—

‘(3) The Secretary of State shall review the historical volatility of stamp duty land tax revenues in Wales, and place a copy of the review in the Library of the House of Commons.’.

Clause 14 stand part.

Clause 15 stand part.

That schedule 2 be the Second schedule to the Bill.

Clause 16 stand part.

Amendment 8, in clause 17, page 20, line 29, at end add—

‘(3) The Secretary of State shall review the historical volatility of landfill tax revenues in Wales, and place a copy of the review in the Library of the House of Commons.’.

Clause 17 stand part.

Clause 18 stand part.

Amendment 42, in clause 28, page 29, line 34, leave out paragraph (2)(b).

Amendment 43, in line 36, at end insert—

‘( ) Part 2, except the referendum-related provisions and sections 19 and 20, will come into force the day after the Secretary of State has laid a report before each House of Parliament on the further legislative steps needed to move to a model of reserved powers for the National Assembly for Wales; the report must be laid within six months of this Act receiving Royal Assent.’.

[Hywel Williams]

Recommendation 11 of the cross-party commission on devolution in Wales states that the National Assembly should be given a power to introduce specified taxes and any associated tax credits in Wales. This recommendation was not included in the Bill. That might have been merely an oversight by the Government, although those of us who are a little more sceptical suspect that they deliberately omitted it from the Bill. Whatever may be the case, amendment 32 seeks to align the Wales Bill more closely with the Silk commission recommendations.

We in Plaid Cymru welcome the inclusion of an ability to introduce specified new taxes. We note that the Silk commission recommendation 11 states that the Welsh Government should retain the revenue from these new taxes without a deduction from the block grant. I hope the Government will ensure that that is indeed the case. Perhaps the Minister will confirm that when replying to the debates.

Although the issue of Barnett was not within the remit of the Silk commission or this Bill, it is a closely related issue and I hope we will be able to debate at least some of it when we look at new clauses. It is important not least because Labour, if I correctly understand its position, has said that Barnett reform is a necessary condition before it will support greater financial powers for Wales. That is a significant statement on its part, I think.

The ability to vary income tax and access to potential borrowing for investments that can boost the economy and create jobs in Wales are the central tenets of this Bill, but there are several areas within the Bill that, if fully developed, could bring real benefits to the Welsh economy. That is why, in addition to the ability to introduce new specified taxes, the ability to introduce associated tax credits is so important. Although much careful research and preparation would be needed before introducing a new tax and associated tax credits, and it would be unwise to pre-judge where and when that might be done, at least giving the Welsh Government the ability to do this would give them much more freedom to act and take greater responsibility for developing our economy, which hon. Members on both sides of the House wish to see. We could raise the revenue, where necessary, and provide tax credits in order to stimulate activity or to provide assistance wherever it was felt necessary, be it for individuals, businesses or areas of industry.

The amendment aims to preserve the integrity of the original cross-party Silk recommendations. For Plaid Cymru it makes perfect sense, and I urge hon. Members on both sides of the House to support it. Should we not press the amendment to a vote, or were we to do so and it were to fall, Government Members might consider tabling their own similar amendments on Report. Given that the principle of new taxes has been conceded in the Bill and that tax credits could be introduced, we would wish that to be the case.

16:30

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.

[Mr Mark Williams (Ceredigion) (LD)]

We agree that we have, on the one hand, the extreme of the LCO system and, on the other, the reserved powers model, which we will come to later in this group. The hon. Gentleman would, I think, subscribe to the reserved powers model.

[Hywel Williams]

The hon. Gentleman surmises correctly. The model is clearer, more elegant and more easily understandable, and we will be able to debate it later.

Going back to the LCO process, the hon. Gentleman will recall, as he participated in those long debates on LCOs—

[Wayne David (Caerphilly) (Lab)]

As the world expert on LCOs, I certainly concur with the hon. Gentleman about the cumbersome system. It is far better that legislative powers are solely with the National Assembly for Wales. Does he agree that despite the faults of the legislative competence order, the House succeeded in improving substantially the suggestions that came from the Welsh Government regarding LCOs and what happened to the legislative process afterwards?

[Hywel Williams]

I certainly do not want to rehearse the discussions and arguments we had on LCOs. LCOs were a curate’s egg—occasionally they went through without touching the sides. I remember chairing the LCO on mental health, which lasted for two sessions. The LCO on the Welsh language took rather longer.

[Mr Mark Williams]

Will the hon. Gentleman remind the House—I think he did some specialised work on this—of the number of hoops we had to go through to achieve legislative competence orders and of the fact that that did nothing to enhance democracy, which, mercifully, this Bill is seeking to remedy?

[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.

16:45

Secondly, I am concerned about allowing the Welsh Government to introduce new taxes because those taxes, even if they are levied on Welsh taxpayers only, might have economic effects on both individuals and businesses based in my constituency in England, who have no democratic control over Assembly Members or over the Welsh Government. That is why I am keen to see the retention of both Treasury control and the role of the House of Commons, one of whose historic functions is controlling tax and spending. Those are checks and balances that I think the hon. Member for Arfon wanted to remove. For those reasons, I do not support those amendments either.

One amendment caught my eye—amendment 40, in the name of the shadow Secretary of State. In the event of these devolved taxes being used, it would place a duty on the Chancellor of the Exchequer to undertake a review of the benefits of symmetry in the devolution of taxes between Wales and Scotland. Both on Second Reading and on the first day in Committee, the shadow Secretary of State set out some concerns about how tax competition might affect Wales adversely by comparison with Scotland. But if I were going to ask the Chancellor to conduct such a review, I would also want the review to cover the impact on Northern Ireland and on England.

I am reasonably relaxed about tax competition, as I said in previous debates, and I support the devolving of tax to the Welsh Assembly and to the Welsh Assembly Government, because I think if a Government and an Assembly have the ability to spend money, it is more democratically sensible if they also have the power to raise it. From a Conservative party perspective, I believe that ensuring that people who spend money are also accountable for raising it is absolutely in our political interest because it makes people think not just about things they want and things they would like to have, but about the cost of them, and how to raise the taxes, and the economic impact of raising taxes.

I suppose, therefore, that if I were urging the shadow Secretary of State to do anything—not that my urging him to do anything will have the slightest effect on his amendment; probably the reverse—such a review would look at the impact not only on Wales and Scotland, but on Northern Ireland and on England, particularly on parts of England that are close to Wales. The hon. Member for Arfon correctly noted that a significant proportion of the population of Wales live close to the England-Wales border and many people commute either side of it for leisure and business purposes and to access public services; and a significant number of people in England who live in those border regions do likewise. That was a sensible point and I am pleased that he accepted that we will have to think more about the impact on those border areas.

[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.

17:00

My final point is on clause 14 and stamp duty land tax, which I referred to on Second Reading. The Bill does not define what is meant by “land in Wales”. We had a slightly amusing knockabout on that on Second Reading, but there was a serious point underlying it. I made the point then that I wanted to ensure that “land in Wales” was not defined using postcodes, which are not very accurate when determining which country particular residences are in, and that we use a definitive mapping system instead.

Will the Minister also touch on what will happen to estates or properties that straddle the England-Wales border? I understand from the Library’s excellent briefing paper that a number of farms have land on both sides of the border and that the value of that land would be apportioned, with stamp duty land tax being paid for one part of it to the Treasury and for the other part to the Welsh Government. I wonder how that would work. What sort of mechanism will be put in place and how straightforward will it be for my constituents?

[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.

[Guto Bebb (Aberconwy) (Con)]

I suspect that my hon. Friend the Member for Forest of Dean (Mr Harper) was relaxed because he had read the hon. Gentleman’s speech at the Llandudno conference in which he said that the 4,000 taxpayers in Wales who are currently paying the 45% rate should be paying a 50% rate.

[Owen Smith]

I will happily restate for the record our view that we ought to have a fair rate of taxation in Britain. That is why we have pledged that the next Labour Government will reintroduce a 50p rate in Wales and throughout the UK. Our proposal is directly relevant to the amendment, which is about symmetry between the powers enjoyed in Wales and in Scotland—

[Guto Bebb]

rose—

[Owen Smith]

I will give way in a moment, if the hon. Gentleman will calm down. I will finish my point and then the Floor will be his.

We want to future-proof the legislation so that, in the event of a Labour Government in Britain—we have already pledged in Scotland to take forward the Scottish devolution proposals and to extend the amount of income tax that can be devolved and the powers relating to that tax—the Chancellor would be forced to consider the benefits of symmetry and extending it throughout the UK.

[Guto Bebb]

Was the hon. Gentleman not rabble-rousing in his speech at Llandudno when he made it clear that a Labour Government in Wales would have the right to increase the tax rate to 50%? If he is concerned about tax competition, surely a 50% rate in Wales and a 45% rate in the rest of the UK would be problematic for the Welsh economy.

[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?

[Owen Smith]

That is precisely what I said in my opening remarks. We have a tradition of asymmetry that results from history and the relative degree of appetite for these powers in Wales, Scotland and Northern Ireland at the point at which we introduced them. Given that the Conservative and Unionist party is increasingly exploiting that asymmetry for narrow party political ends and risking tax competition within Britain, we worry that we need to move towards a more symmetrical system. In truth, that is what this Bill does. It puts Wales and Scotland on a more symmetrical footing in respect of taxation policy. It puts Wales on precisely the same footing that Scotland will be on after 2016. We support that. Our amendment says that if Scotland were to go further, as it would be likely to do under a Labour Government, we would afford people in Wales the ability to move to a similar position.

[Guto Bebb]

I think the hon. Gentleman is either confused or has been misreported. The speech he made in Llandudno specifically stated that Wales would have the power independently to reinstate the 50% tax rate. If he is concerned about tax competition, then surely he can see that a 50% tax rate in Wales—whereas it is 45% over the border, 45 minutes from my constituency—would create a disadvantage for Welsh taxpayers.

[Owen Smith]

I have not been misrepresented or misreported—that is precisely what I said and in no way, shape or form is it confused. It is a reflection of our abiding concern that the Tory party seeks to cut taxes for the wealthiest people in Wales. That is not a progressive tax system and it does not reflect the views and values of the people of Wales. Therefore, if we were in power in Westminster and Scotland took on greater tax powers, we would afford the Welsh people a similar opportunity.

17:15

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

The hon. Gentleman said a moment ago that he did not believe that Wales should undercut England. In other words, he does not believe that Wales should have a lower level of income tax than England. Does he also believe that Wales should not have a higher level of income tax than England?

[Owen Smith]

No. That is why I said what I said and why we have tabled amendment 40. In the event of further cuts by a Tory Government to the taxes of the wealthiest people in Wales and England, we would afford the Welsh people the ability to set a more progressive rate and to reintroduce the 50p rate in Wales, just as we propose to do across the rest of the UK.

We are, of course, discussing a hypothetical point to an extent, because in the event of there being a Labour Government in Westminster—which is the only way Wales would enjoy these additional powers, unless the Secretary of State intends to amend the Bill—we would reintroduce the 50p rate right across the UK. The issue would then be a moot point in Wales.

[Mr Gauke]

This might be a hypothetical point, but it is interesting and revealing that, while the shadow Secretary of State is ruling out ever using income tax powers in Wales to reduce taxes, he is certainly not ruling out using them to increase taxes. As he is well aware, under the powers in the Bill, if he increased taxes at the additional rate, he would also increase the basic rate.

[Owen Smith]

Indeed. That should come as no surprise to anyone. The Exchequer Secretary, in his rather tortuous remarks, is attempting to put words into my mouth. I said in my speech in Llandudno—I say it again today—that in the event of a Labour Government in Westminster, we would afford the Welsh people the ability to put up the top rate of tax and reinstate the 50p rate in Wales. That is very simple.

[Simon Kirby (Brighton, Kemptown) (Con)]

rose—

[Owen Smith]

I will give way in a moment. We are not talking about increasing the basic rate or the top rate; we are talking about increasing the additional rate of tax. [Interruption.] No, it is called the additional rate.

[Mr Gauke]

You mean the higher rate.

[Owen Smith]

From a sedentary position, the Exchequer Secretary draws a distinction between the higher rate and the top rate. I fully accept that what I mean is the higher rate, by which I mean the 40% rate, as opposed to the additional rate of 45%.

[Wayne David]

Does my hon. Friend agree that the essential point is that, although we have asymmetrical devolution in the United Kingdom—there is a great deal of variation between the devolution settlements in Scotland, Wales and Northern Ireland—we still have one British economy? Having variation is one thing, but having huge divergence is something else altogether.

[Owen Smith]

The essential point we are making is that we, unlike the Conservative party, are not in favour of tax competition. We are not in favour of one part of the UK undercutting another, but the Secretary of State and the Tory party are. It is very simple.

[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

Leaving aside the escape route that the hon. Gentleman has prepared for himself with his hypothetical point, is he not recommending tax competition?

[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?

[Owen Smith]

The point I was making—I hesitate to repeat it—was that there is a clear rationale in the Scotland Act 2012: a percentage of the overall capital budget for Scotland could be drawn down every year up to a maximum that was equal to the amount of the capital budget. The difference for Wales is that we have a direct line drawn with respect to the amount of taxes. We heard the Government describe it on Second Reading as relatively generous, because the overall amount of landfill tax and stamp duty land tax is around £200 million a year on average and the amount of borrowing is £500 million, so it could be seen as a 2:1 benefit for Wales. However, as I say, a different justification was used for Scotland, and it has never been clear from where that £500 million figure was derived. I suspect that the £500 million was a read-across from the £500 million previously enjoyed by the Welsh Development Agency, but if the Minister would like to tell us otherwise, we would be grateful.

Landfill tax is less volatile than stamp duty land tax, but in 2009-10 its yield fell by £100 million across the UK and by several million pounds in Wales. The whole point about landfill tax is that it is designed to reduce. As the amount of recycling done by local authorities in particular increases, the revenue from landfill tax will reduce; it is a disincentivising tax. It strikes me as particularly curious to attach a direct line between that particular tax and stamp duty, given its volatility, and the amount of borrowing, given that the Government now concede that the amount required by Wales is significant.

On the complexity of these taxes, I thought that the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd) provided an interesting example of the pub in Chester, which has one bar in one country and another bar in the other. Having sampled the warm welcome of hostelries in Chester, I know that that is an excellent pub doing extremely well, but if the landlord came to sell it, how exactly would the Treasury decide which room was in which country and in which country the relative rate of stamp duty land tax or whatever tax it is in a devolved Administration or devolved setting in Wales would be paid?

There are no estimates of the number of houses in Wales in similar circumstances. Many properties are on one side of the border, but the land attached to them, included when the house is sold, is on the other side of the border. Our view is that the Treasury ought to have done a little more homework on just how many properties will be affected and what the relative degree of difficulty would be in implementation. I see the Exchequer Secretary shaking his head. We know that businesses were consulted on the potential complexities of different rates of income tax, but to my knowledge, no analysis has been undertaken by the Treasury in respect of stamp duty land tax or landfill tax, which I think is a bit remiss on the Treasury’s part.

Amendment 43 on reserved powers simply calls on the Secretary of State to issue a report

“on the further legislative steps needed to move to a model of reserved powers for the National Assembly for Wales”.

The hon. Member for Aberconwy (Guto Bebb), who is no longer in his place, referred to the conference in Llandudno that was addressed by my right hon. Friend the Member for Doncaster North (Edward Miliband), who made a further announcement about our intention to move to a symmetrical model of devolution as between Wales and Scotland.

In effect, that would mean that powers would be assumed to be devolved to the Welsh Assembly unless they were specifically reserved to the UK Parliament. That would hold many benefits for Wales. In particular, it would stop a Conservative Secretary of State, such as the one that we have currently, continually referring Welsh legislation to the Supreme Court. On three occasions, the Secretary of State has either sought to refer or succeeded in referring legislation to the Supreme Court, at a cost of about £150,000 a time. We do not know precisely how much it has cost. The Exchequer Secretary must know, so it would be good if he told us.

17:30

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.

[Mr Mark Williams]

I concur with much of what the hon. Gentleman has said about reserved powers. However, does he agree that the issue is less about party politics than about the clarity in the devolved settlement? That is why some parties are committed to having the reserved powers model in our manifestos. That is the conclusion that most people have reached after Silk II.

[Owen Smith]

Indeed; the hon. Gentleman’s party and my party are committed to having that in our manifestos. We see significant benefits in putting Wales in a symmetrical position to Scotland in respect of powers and in tying the hands of future Conservative Secretaries of State who might employ the same argument to tie the hands of the Welsh Assembly Government.

[Mr Williams]

Will the hon. Gentleman concede that Silk II found that the issue was about the clarity in the devolution settlement, rather than about party political motives and posturing?

[Owen Smith]

Absolutely; Silk said precisely that. I am saying today for the clarity of the Committee that we believe that the current Government employed the argument for party political purposes. They attempted to stop the Welsh Government doing what they wanted to do, which was to maintain the Agricultural Wages Board for Wales. That would have had significant benefits for some of the lowest paid workers in Wales. On that basis, I believe we can say firmly that Wales would be better off if we moved to a reserved powers model, with the greater clarity and additional safeguards that it would bring.

Finally, Madam Chair—[Interruption.] I beg your pardon, Sir Roger; I did not see you slip into the Chair, but it is a great pleasure to serve under your chairmanship once more. On the background to these clauses, we did not have much chance to discuss the so-called fair funding lock. The ability of the Welsh Labour Ministers in Cardiff Bay to determine whether they think the funding settlement for Wales is fair and adequate, in advance of their moving to adopt any of the powers of income tax—or any of the other taxes—is an important test. I hope that the Government will rise to that challenge at some point in the future.

[Wayne David]

I rise to support amendment 7. I recognise that it is a probing amendment, but it is nevertheless important to discuss the volatility of stamp duty land tax revenues in Wales. I will also speak to amendment 43 and the need to move to a reserved powers model for the National Assembly for Wales. I am aware that those two issues are not really related, but both are in this group of amendments, and in my view both are extremely important.

As the Silk report states, stamp duty land tax is a “relatively volatile tax”. Indeed, as the director of CBI Wales said only last year, SDLT raised about £210 million in Wales in 2007, but only £115 million in 2008-09. That is a relatively small amount, accounting for about 2% of the Welsh block grant, but a variation from £115 million to £210 million in two years is not insignificant. As Silk himself stated, the devolution of stamp duty land tax could pose potential risks for the Welsh budget.

Let me be clear: I am in favour of the devolution of stamp duty land tax, but I would like reassurance from the Minister about precisely how that volatility will be managed. The essential point is that devolving SDLT has consequences for the block grant, which would be reduced by the amount of SDLT collected in Wales. I would like a fuller and clearer explanation from the Minister about exactly how the block grant offset will be determined. Will borrowed resources be used to meet any shortfall when the receipts from land tax are less than expected? Does the Minister agree with the Silk report that the value of the deduction should be decided between the UK and Welsh Governments, and not by the UK Government unilaterally? I suggest that the deduction should take into account the volatility of the tax and the forecast revenue in Wales. I would therefore like specific reassurances from the Minister that these admittedly esoteric but nevertheless extremely important issues will be clearly addressed, so that we know precisely what we have before us.

My second point is about whether we move from a conferred powers model of devolution for Wales to a reserved powers model. In my view, there is no perfect model of devolution. In Northern Ireland and Scotland there is a reserved powers model, but—let us be honest—those models have their problems. We will all have heard about Scotland and Antarctica. For those who are not au fait with that problem, there was an issue of whether Antarctica was included in the devolution model for Scotland. It was not on the reserved powers list, and therefore the assumption was that it was devolved to Scotland in issuing licences and permits for people to operate in Antarctica when they were based in Scotland. Of course, that was an oversight by drafters, and it was put right retrospectively. I simply cite that example to show that there is no perfect model of devolution. We can cite other difficulties that arose when Scotland adopted the reserved powers model, but the fact that no model is perfect does not mean that a reserved powers model for Wales would not be a huge step forward. It would be a huge step forward, because we have heard—very eloquently—from the shadow Secretary of State about numerous examples of issues that have been taken to the Supreme Court by the Wales Office. At root, the problem is a lack of clarity, which would not exist if we had more clearly defined the reserved powers model.

We are all concerned about the Conservative party’s determination to prevent the Welsh Government from introducing measures to protect Welsh agriculture workers, and the case for moving to a reserved powers model has been well put by the UK’s Changing Union project. Under the title “The benefits of a ‘Reserved powers’ model of devolution”, it said:

“A ‘Reserved powers’ model of devolution would benefit Wales and the UK as a whole. A ‘Reserved powers’ model would provide much greater clarity about the legislative powers of the National Assembly for Wales. This will benefit civil society organisations, politicians, civil servants and the general public—in short the democratic process as a whole. A ‘Reserved powers’ model would place the relationship between Cardiff and London on a more stable, adult footing and help reduce the number of unnecessary disputes”—

which have been alluded to already in this debate—

“between the two levels of government. A ‘Reserved powers’ model of devolution for Wales would place Welsh devolution on the same footing as devolution for Scotland and Northern Ireland making it far more likely the UK will be able to develop more effective mechanisms to manage intergovernmental relations between central government and the devolved territories.”

That is an effective summation of the strong case for moving to a reserved powers model. I emphasise that there is no ideal model of devolution. Inevitably, devolution is a dynamic, but if we had this model, it would be far better than what we have at the moment.

[Mr Mark Williams]

Would the hon. Gentleman add to that list the availability of maximum flexibility in the future? We had the Government of Wales Act 1998, the Government of Wales Act 2006 and we now have this Bill. This piecemeal, step-by-step approach to what some of us would like to see—home rule in a federal Britain—is going on and on, but a reserved powers model would give us greater opportunities for flexibility.

[Wayne David]

Home rule, of course, was championed by Keir Hardie, who was the first Labour Member of Parliament, representing Merthyr and Aberdare. Home rule is very important and we must look at mechanisms to enhance that principle and take it forward. A reserved powers model would provide flexibility, but it would also provide greater coherence, stability and clarity. On those principles, it is superior to what we have at the moment, but—as I have said—there is no such thing as perfect devolution. Whatever the nature of the devolution settlement, we will always need to discuss, debate and even argue about some issues. On balance, however, I think a reserved powers model would be the right choice.

Do the Government recognise that a cross-party consensus is emerging in Wales that a reserved powers model would be superior to what we have at the moment? I ask the Conservative Minister not to dig his heels in on this, but to recognise that there is a constitutional consensus and that it means something. It is one of the essential underpinnings of a progressive view on devolution. For goodness’ sake, do not give the impression that his opposition to a reserved powers model is all about trying to prevent what we would see as progressive measures to protect agriculture workers in Wales. He is genuinely concerned about constitutional stability and flexibility, as has been said, and about achieving something approaching a cross-party consensus on the way forward for devolution. That is why the amendment is very important indeed. In some ways, it takes us beyond the parameters of the Bill, but nevertheless, if the House were to support it, it would give an important indication of how we all see devolution moving forward. It is therefore very important that we support the second amendment, amendment 43 to clause 28.

17:45

[Mr Gauke]

It is a great pleasure to serve under your chairmanship, Sir Roger, and to respond to the debate.

Part 2 of the Bill introduces a provision to devolve taxes to the Welsh Assembly. Clause 6 introduces a new part 4 to the Government of Wales Act 2006 and confers the required competence on the Assembly to legislate on devolved taxes, including their collection and management. Clause 6 also allows for further taxes to be devolved to the Assembly via an Order in Council and makes it clear that officials working in any body set up by the Assembly to administer the devolved taxes can be designated as civil servants if the Assembly so chooses. This applies whether the body only collects and manages devolved taxes, or is additionally responsible for the existing devolved subject of local government finance, including council tax and business rates.

Clause 7 makes amendments to the commissioners for revenue and customs Acts to allow Her Majesty’s Revenue and Customs to administer devolved taxes on behalf of the Assembly. The clause also amends HMRC’s information powers to allow it to share information with the Welsh Government in relation to devolved taxes.

Clauses 14 to 16 and schedule 2 provide for a devolved tax to replace stamp duty land tax on land transactions in Wales, in line with the recommendation of the Silk commission. Clauses 17 and 18 provide for a devolved tax to replace the existing tax on disposals of waste to landfill sites in Wales, again as recommended by the Silk commission.

Let me address Government amendment 20. In devolving tax powers, our intention is that the Assembly should have a free hand in choosing how it wants its devolved taxes to be administered and by whom. We do, however, recognise that HMRC has many years—indeed, if one includes its predecessor organisations many centuries—of experience in administering taxes within the UK, so we want the Assembly to be able to use HMRC’s services for these purposes if it wishes to do so. The proposed legislation in clause 7 provides for this.

As set out in the Command Paper, though, we believe that this should be on the basis of mutual agreement. The Assembly should not be compelled to use HMRC to administer its devolved taxes, but neither should the commissioners for HMRC be compelled to take on this role. At present, the 2006 Act would allow an Act of the Assembly to modify an existing function of HMRC or confer a new function on HMRC without the consent of the UK Government.

Amendment 20, therefore, amends parts 2 and 3 of schedule 7 to the 2006 Act to make it clear that the Assembly can only confer functions on HMRC and, once conferred, modify those functions if they relate to a devolved tax and the Treasury consents to it. The amendment ensures that the Assembly has the option of using HMRC to administer its devolved taxes, but puts appropriate safeguards in place for the UK Government in recognition of the vital role HMRC plays in collecting tax throughout the UK. I therefore hope that hon. Members will support the amendment.

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

Will the Minister give us any idea of how long he expects the process of seeking the Treasury’s consent to take, and how long it will be before the Welsh Government can use whatever powers it decides to confer?

[Mr Gauke]

All I can say at this stage is that we would consider any such request in good faith. We want to work in a constructive manner, and I believe that the UK Government have a record of doing that when dealing with the Welsh Government. Our amendment certainly does not constitute an attempt to delay matters. The Assembly has the option of using HMRC, but it is not compelled to do so. We think it reasonable, if the Welsh Government wish to use HMRC, for its commissioners and the UK Government to make a proper assessment of the overall impact on the UK.

[Jonathan Evans (Cardiff North) (Con)]

I hear what my hon. Friend says about the use of HMRC, but I think that my constituents would be keen to know whether the tax office in Llanishen in Cardiff in my constituency is likely to be the location where its work is done.

[Mr Gauke]

I am sure that my hon. Friend is right. As I have said, our intention is to work constructively. It will be for the Assembly to choose whether to make use of HMRC’s expertise, which is obviously considerable, but should it wish to do so, I think it reasonable for the UK Government to reserve the right to ensure that no demands are placed on HMRC that could disrupt the important work that it does throughout the United Kingdom, including in Wales.

Amendment 40, tabled by the hon. Member for Pontypridd (Owen Smith), seeks to place a duty on the Chancellor of the Exchequer to review

“the benefits of symmetry in the devolution of taxes between Wales and Scotland”

whenever a tax is devolved to either. It requires the Government to assess whether a tax that is being devolved to Wales should also be devolved to Scotland, and vice versa. I understand the intention of the amendment, but it fails to take into account the fact that key principles of tax devolution already exist. The UK Government have adhered to those principles, and we would expect future Governments to do so. They state that any changes should be evidence-based, and should be considered in a UK context. An assessment of the UK context would include an assessment of whether symmetry with the other devolved Administrations was desirable.

The amendment seeks to impose an unnecessary statutory basis on a process that the Government would undertake as a matter of course when considering the case for devolving further taxes to either Scotland or Wales. It could, indeed, lengthen the process of devolving new taxes in the future by placing a superfluous statutory requirement on the Government. I do not believe that it is necessary, or would improve the procedure for adding new taxes that is set out in the Bill. It may well be that the hon. Gentleman simply wants to probe Ministers to establish whether this or a future Government would take the issue of symmetry into account, but I do not find the argument for a statutory basis persuasive.

[Owen Smith]

We are indeed keen to ensure that the Chancellor has a statutory obligation to consider the benefits of symmetry across the piece on a statutory footing, but let me take up the Minister’s reference to the need for an evidence base to support taxation policy. Does he agree that it would have been wise of the Treasury to undertake some form of detailed behavioural analysis of the impact of tax competition in respect of income tax, or indeed any analysis of the impact that stamp duty land tax or landfill tax might have on behaviour?

[Mr Gauke]

I shall deal with stamp duty land tax and landfill tax later in my speech. As for income tax, I am tempted to explain to the hon. Gentleman yet again about the lockstep attributes of our reforms. He has expressed concern about tax competition, but it seems to me from his earlier remarks that he does not believe in it, and that, if he had a chance to seek greater tax competitiveness for any part of the United Kingdom, including Wales, he would not do so. Indeed, he seems to be advocating a policy of “tax uncompetitiveness” for Wales. However, I must not detain the Committee too long on that subject.

[Wayne David]

Will the Minister give way?

[Mr Gauke]

I will, but I want to make some progress.

[Wayne David]

I realise that the Minister wants to make progress, and I know that he has rejected the suggestion that there should be an analysis of what might happen as a consequence of the Bill, but it would be helpful to have a clear articulation of the Government’s position on tax competition. Does he want tax competition, yes or no?

[Mr Gauke]

What we want is greater devolution in terms of income tax. When we debated the subject last week, I explained in some detail why we thought that it was a good thing, primarily because it would increase the accountability of the Welsh Government to the Welsh people, which I would expect Members in all parts of the Committee to want.

Amendments 32 and 33 were tabled by members of Plaid Cymru. Clause 6 introduces an important new power to devolve further tax powers to the Assembly via an Order in Council. The power has a broad scope, and can apply to brand-new taxes and to existing UK-wide taxes. The clause sets out the process for making such an order, which would need to be approved by both the House of Commons and the other place, as well as by the Assembly. Amendment 33 would remove Parliament from the process, so that the order would need to be passed only by the Assembly.

We recognise that it is important to give the Assembly and the Welsh Government the economic levers that are needed to generate growth in the Welsh economy, including the ability to introduce new taxes. We also recognise that—although this would depend on the proposal under consideration—if we are to proceed in a timely manner, it would be advantageous to be able to devolve further taxes without requiring primary legislation. However, a balance needs to be struck. Tax devolution should not be at the expense of reducing the overall tax receipts or competitiveness of the United Kingdom as a whole.

That last point is particularly important. As we stated in the Command Paper that accompanied the Bill, we would assess any proposals for further tax devolution against a number of criteria. For example, we would consider whether any new tax would affect the UK’s wider economic policy, impose disproportionate burdens on businesses or individuals, or create new tax avoidance opportunities. In short, the criteria would ensure that any new tax would not be to the detriment of the UK as a whole.

It is important for the devolution of further tax powers to take place in the constructive and collaborative manner that led to the Bill. It is therefore right for the resulting legislative process similarly to involve both the Assembly and Parliament, so that the proposal can be considered from the perspectives of both Wales and the wider UK. It would not be right for either to be able to legislate to devolve further taxes without the agreement of the other.

[Owen Smith]

I am grateful to the Minister for giving way to me for the second time. He said a moment ago that the Treasury would be concerned if any reductions in taxes in Wales led to reduced receipts for the Exchequer. Does he not agree with the Secretary of State that a Conservative Government in Wales should cut taxes, or does he think that that would necessarily always lead to higher receipts?

[Mr Gauke]

That is a matter for the devolved Administration, but the design of the income tax powers is such that we believe that we are striking the right balance.

Amendment 32 seeks to extend the power to tax credits. I know there was a little debate earlier as to whether this was about extending powers over the social security system as such, which is not the intention behind amendment 32. That was made clear by the hon. Member for Arfon (Hywel Williams).

18:00

It is worth pointing out that in devolving complete control of taxes relating to land transactions and disposals to landfill, we are giving the Assembly the ability to introduce tax reliefs or tax credits in relation to these devolved taxes. As Members will be aware, the landfill communities fund is an important part of the UK landfill tax system. Under this scheme landfill site operators can contribute a percentage of their landfill liability to be used on projects that will bring about significant environmental benefits. They can then reclaim 90% of this contribution as a tax credit, and I can confirm that it would be within the scope of the Assembly’s devolved tax powers to introduce a similar tax credit scheme in Wales if desired, which I am sure Members would welcome.

Turning to stamp duty land tax in clauses 14 to 16 and schedule 2, clause 14 adds a new section 116L to the Government of Wales Act 2006 which provides that a tax on Welsh land transactions is a devolved tax; in other words, it empowers the Assembly to legislate for the new tax. The clause defines a Welsh land transaction in similar terms to the definition of a chargeable transaction for SDLT purposes. In practice in most cases the new tax will apply to an acquisition of a freehold or leasehold interest in land in Wales. The term “land” here includes buildings erected on the land. Where a transaction includes land that sits astride the England-Wales border, the new tax can only be charged on the part of the land that is in Wales. In these relatively rare cases, the principle is that the transaction is to be treated as two separate transactions, one involving the land in England and the other the land in Wales. The transaction involving the land in England will be subject to SDLT. The Assembly will be able to legislate the new tax as soon as this clause comes into force. However, the tax cannot be charged on any transaction to which SDLT applies. This means the new tax will come into force when SDLT is disapplied in Wales under the provisions of clause 15.

Clause 15 amends the main SDLT legislation at part 4 of the Finance Act 2003 to exclude land in Wales from the definition of a chargeable interest in land for SDLT purposes. The clause also introduces schedule 2 to this Bill, which makes consequential amendments to SDLT legislation. The clause takes effect for transactions where the effective date for SDLT purposes, which in most cases is the date on which the purchase contract is completed, is on or after a date to be prescribed by Treasury order. We intend to set that date in consultation with the Welsh Government to ensure that arrangements for the devolved tax are in place. Subject to this proviso, we expect the date to be 1 April 2018.

Once the devolved tax on land transactions is introduced, clause 16 provides for the supply of information about Welsh land transactions to HMRC. This information is currently supplied by means of the SDLT return. The information is needed to allow HMRC to undertake compliance work in respect of taxes such as capital gains tax and corporation tax, which are not devolved, and to support the activities of the Valuation Office Agency.

Amendment 7 tabled by the official Opposition requires the Government to review the historical volatility of SDLT revenues in Wales, a point also made by the hon. Member for Caerphilly (Wayne David). It is true that SDLT is one of the more volatile taxes, but it is ultimately for the Welsh Government to consider whether they want to review the volatility of SDLT in Wales in order to inform their design work. It is also the case that alongside the devolution of tax powers in the Wales Bill, the Government are providing the Welsh Government with new tools to manage tax volatility, specifically a cash reserve and extended current borrowing powers.

Clauses 17 and 18 provide for a devolved tax to replace the existing tax on disposals of waste to landfill sites in Wales, as recommended by the Silk commission. Clause 17 provides for the new devolved tax, which will mean that the Welsh Government and Assembly will have full control over the design and administration of a Welsh landfill tax. Again, similarly to taxation on land transactions, the clause will come into effect two months after the Bill receives Royal Assent. This will allow the Assembly to legislate for the devolved tax and, subject to that legislation, the Welsh Government to make the necessary administrative arrangements. The devolved tax cannot apply to a disposal if the disposal is made before the date at which the existing UK landfill tax is disapplied in Wales, as provided in clause 18.

Similarly to the official Opposition’s amendment 7, their amendment 8 requires the Government to review the volatility of landfill tax in Wales. I would make similar arguments in that it is a matter for the Welsh Government whether they wish to do so.

Finally, amendments 42 and 43 seek to postpone the commencement of part 2 of this Bill, apart from the referendum provisions and clauses 19 and 20 in relation to borrowing powers, until the Secretary of State has laid a report before both Houses of Parliament setting out the steps needed to move to a reserved powers model of devolution. The report would need to be laid within six months of the Bill’s enactment.

Through these amendments, Opposition Members are seeking to connect directly the commencement of the parts of this Bill that would devolve tax-raising powers to the Assembly to one of the most far-reaching of the Silk commission’s part 2 recommendations. A move to a reserved powers model would be a fundamental change to the devolution settlement in Wales. It should be a matter for party manifestos at the next elections, as the Silk commission itself recognised. As such, I believe there is nothing to be gained by requiring the Government to report to Parliament on the legislative steps needed to move to a reserved powers model. There is certainly no justification for delaying the devolution of SDLT and landfill tax and withholding the transfer of power to the Assembly over its budgetary procedures until such a report is laid.

I fear that this is an attempt by the Labour party to delay the devolution of fiscal powers to Wales—anything to thwart the need for truly accountable decision-making in Cardiff bay, and anything to avoid the Welsh Government having to take responsibility for their actions. This Government, in contrast, are committed to devolving the tax and borrowing powers in this Bill as soon as possible. I invite hon. Members opposite to consider the full implications of their amendments, and to withdraw them.

[Hywel Williams]

I will seek leave to withdraw the amendment standing in my name and those of my party colleagues, but I would like to make a few brief points.

In response to the hon. Member for Forest of Dean (Mr Harper), who suggested our views on tax credits and devolution might be the thin end of the wedge in devolving universal tax credits, I should say that I was quoting from the Silk report that while existing tax credits, such as working tax credits and, in future, universal tax credits, should remain UK-wide, the Welsh Government should be able to introduce their own credits in relation to devolved taxes. That was the point I was making.

The other point I would make is this: the hon. Member for Pontypridd (Owen Smith) said Barnett would not be discussed. There will, I hope, be a debate on new clause 1, which is specifically about that issue.

Finally, we in Plaid Cymru see amendment 40 for what it is, which is an attempt to delay, and we will be voting against it. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 40, page 7, line 13, at end insert—

‘(10) In the event that the power to add new devolved taxes under Section 116C, or the power to add new devolved taxes under Section 80B of the Scotland Act 1998 is used, the Chancellor of the Exchequer must undertake a review of the benefits of symmetry in the devolution of taxes between Wales and Scotland.’.—(Owen Smith.)

Question put, That the amendment be made.

The Committee divided: Ayes 216, Noes 280.

18:08

Division 261

Ayes: 0

---

Labour: 214
Social Democratic & Labour Party: 2
Green Party: 1

Noes: 0

---

Conservative: 232
Liberal Democrat: 41
Plaid Cymru: 3
Democratic Unionist Party: 2
Independent: 1

Clause 6, as amended, ordered to stand part of the Bill.

Clause 7

Amendments relating to the Commissioners for Revenue and Customs

Amendment made: 20, page 8, line 20, at end insert—

‘( ) In Schedule 7 to GOWA 2006 (legislative competence to make Acts of the Assembly)—

(a) in Part 2 (general restrictions), after paragraph 4, insert—

4A A provision of an Act of the Assembly cannot—

(a) remove or modify, or confer power by subordinate legislation, to remove or modify, any function of Her Majesty’s Revenue and Customs, or

(b) confer or impose, or confer power by subordinate legislation to confer or impose, any function on Her Majesty’s Revenue and Customs.”;

(b) in Part 3 (exceptions from Part 2), after paragraph 7, insert—

“Her Majesty’s Revenue and Customs

7A (1) Part 2 does not prevent a provision of an Act of the Assembly—

(a) removing or modifying, or conferring power by subordinate legislation to remove or modify, any function of Her Majesty’s Revenue and Customs, or

(b) conferring or imposing, or conferring power by subordinate legislation to confer or impose, any function on Her Majesty’s Revenue and Customs,

if the following conditions are met.

(2) The conditions are—

(a) that the function relates to a devolved tax, and

(b) that the Treasury consent to the provision.”’.(Mr David Jones

This amendment prevents an Act of the Assembly removing or modifying functions of, or conferring or imposing functions on, Her Majesty’s Revenue and Customs unless the functions relate to devolved taxes. In that case the consent of the Treasury is also required.—.)

Clause 7, as amended, ordered to stand part of the Bill.

Clauses 14 and 15 ordered to stand part of the Bill.

Schedule 2 agreed to.

Clauses 16 and 18 ordered to stand part of the Bill.

Clause 19

Borrowing by the Welsh Ministers

[Hywel Williams]

I beg to move amendment 36,  page 21, line 18, leave out ‘, with the approval of the Treasury,’.

[The Temporary Chair (Sir Roger Gale)]

With this it will be convenient to discuss the following:

Amendment 37, page 21, leave out lines 26 to 31 and insert—

‘(1) On receipt of notice of an appropriate resolution of the Assembly, the Secretary of State shall by order amend subsection (1A) so as to vary, in the manner indicated by the terms of such resolution, the means by which Welsh Ministers may borrow money.”.’.

These amendments would enable the National Assembly to change the way money for capital expenditure is borrowed, including the issuance of bonds, without the need for consent by the Treasury or Resolution of the House of Commons.

Amendment 35, page 21, line 31, at end insert—

‘(6) The Secretary of State shall make arrangements for an independent report to be compiled on the issuance of bonds by Welsh Ministers.

(7) The Secretary of State shall lay a copy of the report specified in subsection (6) before each House of Parliament within three months of this Act being passed.’.

The Scotland Act 2012 enables the Secretary of State, by order and consent of HM Treasury, to change how Scottish Ministers can borrow money for capital purposes, for example, allowing the issue of bonds. Clause 19(5) of the Wales Bill contains the same provisions. This amendment seeks clarification on the power to issue bonds.

Amendment 34, page 21, line 38, at end insert—

‘and if that amount is more than the amount for which it is substituted it shall not thereafter be reduced below that higher amount’.

This amendment would ensure that when the Secretary of State raises the borrowing for investment limit, it cannot subsequently be reduced.

Amendment 5, page 21, line 38, at end insert—

‘(3B) The figure mentioned in inserted subsection (3A) shall be recalculated on an annual basis to maintain its value in real terms against inflation.’.

Clause 19 stand part.

Clause 20 stand part.

[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.

18:31

Amendment 34 would ensure that when the Secretary of State raised the borrowing for investment limit, it could not subsequently be reduced. It would therefore provide the Welsh Government with the necessary clarity regarding their borrowing for investment limit, so they could properly plan their investment expenditure. The ability to raise the amount mirrors the Scotland Act 2012 and we therefore welcome it. It should come as a surprise to no one that we believe as a point of principle that the Government of Wales should decide on all matters pertaining to them.

In the long term, we in Plaid Cymru believe that Wales should gain greater freedom to determine its own financial and economic course, and should not be confined and constrained by the decisions and potentially remote economic policies of the Westminster Government. In the meantime, it does not make sense from the point of view of the prudential planning of expenditure for the Westminster Government to be able to reduce the amount available while the Welsh Government are planning investment, simply because they disagree with certain projects or other ways in which money is being spent.

Amendment 34 is important and I hope that as hon. Members discuss it, they will be persuaded to allow a future Welsh Government of whatever colour to plan for responsible borrowing to invest in infrastructure that will bring returns and public goods such as jobs and wider prosperity.

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.

18:45

The Bill allows the Welsh Government to borrow up to £125 million per year up to a limit of £500 million, but we still question the way in which the Government have determined the £500 million limit. Ministers have said that that figure is generous, and that, according to the powers that Wales is being given, the limit should actually be £100 million. However, contrary to the position in Wales, such capital borrowing in both Scotland and Northern Ireland is not linked to the devolution of taxation powers. Northern Ireland has no revenue-raising powers but still has access to borrowing.

The Scotland Act permits Scottish Ministers to borrow 10% of the Scottish capital budget in any year to fund additional capital projects. That would be approximately £230 million in 2014-15; and they may borrow up to £2.2 billion in total. Based on the Welsh annual capital budget of around £1.4 billion, this same formula would grant the Welsh Government borrowing powers of £140 million annually and a ceiling higher than £l billion.

We do not feel that Ministers have offered sufficient explanation as to why they have decided to use a different formula for Wales from that used for Scotland. That has resulted in a lack of symmetry with Scotland, and means that Wales will have inferior borrowing powers. Why not £1.3 billion, as the Welsh Government’s Finance Minister Jane Hutt has suggested?

We should also remember that Wales has relatively little exposure to private finance initiative debts when compared with Scotland, as was pointed out by the Silk commission. Logically, that means that a more generous settlement could be considered. Instead, Wales is being short-changed by the Government. We are being offered less as the total amount of borrowing, and we have to wait for the devolution of minor taxes to access it. We are also calling for the Government to look at increasing the borrowing limit over time.

The implementation date for the new borrowing powers is 2018. However, before that the Welsh Government will be able to use more limited borrowing powers to proceed with improvements to ease congestion on the M4, one of the main arteries giving lifeblood to the Welsh economy, not just in Cardiff but along the whole of the M4 corridor and onwards into west Wales.

Capital investment in Wales is critical to boosting the economy, delivering jobs and growth. We have seen the impact of investment by the Welsh Government—in my area, for example, there has been investment in the breast cancer unit at Prince Philip hospital, which provides patients from across west Wales with a very prompt and efficient service in state-of-the-art surroundings. We have seen investment in schools: many ageing buildings have been replaced with excellent facilities to foster learning and provide for additional support for families. During a time of economic downturn, Welsh Government building and refurbishment schemes have also provided valuable apprenticeship and training opportunities when there have been few on offer in the private sector.

The investment made to dual the railway line on the Loughor bridge, which will make possible more frequent and efficient services to west Wales, has also been very much welcomed. Today the Welsh Finance Minister announced the much needed improvement to the Heads of the Valleys road, the A465. That is an example of the innovative ways in which the Welsh Government are accessing funds—in this case, through securing £300 million from institutional investment.

I have previously raised the issue of bonds, both in the Welsh Grand Committee and in our scrutiny of the draft Bill in the Welsh Affairs Committee. I now note that in the Command Paper, the Government confirm:

“The Wales Bill also enables the UK Government to change the sources of borrowing available to the Welsh Government without primary legislation, for example if it was decided that the Welsh Government should be able to issue bonds. The Government has recently judged that”

issuing bonds

“is consistent with the Scottish Government’s financial powers and responsibilities set out in the Scotland Act 2012. It is willing to consider further whether this might be appropriate alongside the package of financial powers initially being devolved by the Wales Bill.”

Has further consideration been given, and have the Government, therefore, come to the same judgment as they have for Scotland? We would like to see the statement in the Command Paper result in a reality that gives the Welsh Government the same treatment as the Scottish Government in respect of bonds. On that note, and in reiterating the importance of borrowing to the Welsh Government, I conclude my remarks.

[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.

[Guto Bebb]

My hon. Friend makes an important point in relation to the proposed improvements to the M4. It should be noted that when the Bill was announced, the Secretary of State made it clear that this borrowing power should be for the M4 and also the A55. The Welsh Labour Government in Cardiff keep talking about the M4 and forgetting about the A55 and the needs of north Wales.

[Alun Cairns]

I am grateful to my hon. Friend for making that point. As a strong champion of north Wales he, along with the Secretary of State, will always ensure that improvements to the A55 are considered at the highest level.

[Mr Llwyd]

I, too, stake a claim to represent north Wales. On a point of clarification, the present Foreign Secretary was in post in Wales in 1997, before devolution. Now there is a £15 billion block, but that is to deal with health, transport and myriad other things which the old Welsh Office—not the Wales Office—did not have to deal with.

[Alun Cairns]

I am grateful to the right hon. Gentleman for making that point, but we will have to disagree. The Welsh Office at the time had exactly those responsibilities for transport, health and education. In the first Government of Wales Bill, the powers that the Welsh Assembly inherited were the same powers as had been held by the Welsh Office, which subsequently became the Wales Office. Additional powers have subsequently been granted, but they have been minuscule in proportion to the additional funding that has been provided. Out of a much smaller Barnett block grant, there was ambition for major capital projects. That ambition has gone.

I suspect I know why the right hon. Gentleman is a little bit uncomfortable. It is worth running through some of the history of the improvements that are needed in the M4 corridor. The then Secretary of State, my right hon. Friend the Member for Richmond (Yorks), committed to building that road. It was the right hon. Member for Neath (Mr Hain) who cancelled it after the 1997 general election. It was later proposed by the coalition Administration in Cardiff Bay—the coalition between Labour and Plaid Cymru—and the Transport Minister who cancelled it and who said that the Administration could not fund it was Ieuan Wyn Jones, the Plaid Cymru Assembly Member for Anglesey. That demonstrates the priority that the relevant parties have assigned to that much needed infrastructure improvement.

The Chancellor has pointed out on several occasions the need for improvement. He named the project in statements and in the Budget on one occasion to provide encouragement to the Welsh Government to improve this vital artery into south Wales.

[Owen Smith]

The hon. Gentleman’s argument would have more force were it not for the fact that only today in the Welsh Assembly the Minister for Finance, Jane Hutt, announced £1 billion-worth of further spending on infrastructure, several hundred million pounds on the Heads of the Valleys road, and £200 million on a new cancer hospital at Velindre that will no doubt benefit the hon. Gentleman’s constituents. Far be it from me to suggest that he might be out of date and no longer keeping up with matters in the Assembly, but that would appear to be the case.

[Alun Cairns]

Not at all. I welcome those announcements. I wish there had been an announcement about improvement to the infrastructure in my constituency, and I wish there was to be improvement to the main infrastructure coming into Wales along the M4 corridor, but today’s announcements are obviously positive. However, we need to underline the delays that take place on that artery, that investment is essential and that borrowing powers need to be granted. Improvement should have taken place well before now. The original commitment was made pre-1997 but the Labour Administration cancelled it and the Welsh-led Labour Administration have not built it since. We should consider the delays, the accident records, the damage to the south Wales economy, and the hauliers based in my constituency who have had to set up on the Avonmouth side of the border because of the lack of investment and ambition over the past 15 years on the part of the Welsh Labour Administration.

[Wayne David]

Does the hon. Gentleman not accept that borrowing powers are vital because the Welsh Government’s capital budget has been cut by one third because of central Government cuts?

19:00

[Alun Cairns]

The changes to the capital budget are nowhere near the cuts that the last Labour Chancellor proposed to make leading up to the Budget. We need to compare like with like, and we need to consider the financial circumstances at the time. One of my early points was that limitless borrowing powers simply cannot be granted because of the changes in circumstances that take place. The point has already been made that if we are asking the Treasury to stand behind the debt that is being taken on by the Welsh Government, the Treasury obviously needs to be able to support that and a sensible limit needs to be provided. The capital sum of £500 million is sensible, certainly in the first instance, but we need to be pragmatic about that over time.

Finally, the Administration’s infrastructure commitments, particularly the electrification of the Great Western main line, demonstrate the priority placed by the Government on the east-west link along south Wales, which has not been forthcoming since the M4 was cancelled all that time ago.

[Paul Murphy (Torfaen) (Lab)]

If I was an independent observer listening to the previous two Conservative Members’ contributions to the debate, I would wonder whether they wanted borrowing at all. The hon. Member for Vale of Glamorgan (Alun Cairns) seemed to be very lukewarm on the issue, and questioned whether all this should really come out of the revenue budget. My hon. Friend the Member for Caerphilly (Wayne David) made it perfectly clear: 33% of the capital budget has been cut. There is no question in my view, or in the view of probably all the parties represented in the Assembly, including the hon. Gentleman’s party, but that there is a need for capital spending on infrastructure in Wales, including hospitals, schools and all the rest of it. The hon. Gentleman seems to have a lukewarm attitude towards it.

[Alun Cairns]

rose—

[Paul Murphy]

I will give way in a second because I want to refer to what the hon. Member for Forest of Dean (Mr Harper) said. He did not really like the idea of what he termed “popular” capital projects. He gave the impression that the Welsh Government would go round Wales seeking out the most popular issues with which to woo the electorate. That is a complete load of baloney. There is a consensus among Assembly Members about what they want: the M4 relief road is one and the A55 is another, but there are others too, including the Velindre and other hospitals. I absolutely welcome the clause. The Government have done well in introducing it. The Labour Government should have done it. I was Secretary of State for five years and we should have done it then, but things move on and the Government have done the right thing, although I question the mechanics of it.

[Alun Cairns]

I want to set the record straight. I am merely sounding a note of caution over limitless borrowing powers. The figure of £500 million is sensible and pragmatic, and it needs the Treasury’s support. After the recent financial crisis, we need to recognise the risks of unlimited borrowing.

[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.

[Mr Gauke]

It is a pleasure to respond to the debate, and I thank all right hon. and hon. Members for their contributions. Clause 19 amends the Government of Wales Act 2006 to extend existing borrowing powers in relation to current spending and give Welsh Ministers new capital borrowing powers, and clause 20 repeals the existing borrowing powers that the Welsh Government inherited from the Welsh Development Agency.

Amendments 5 and 34 relate to the capital borrowing limit set in clause 19. Through the Bill, Welsh Ministers will be given new capital borrowing powers that will enable them to borrow up to £500 million. A non-legislative annual limit of £125 million has also been agreed with the Welsh Government. The Government have been consistently clear that borrowing powers must be commensurate with the level of independent revenue that is available to support the costs of borrowing, and a capital borrowing limit of £500 million is substantial relative to the tax powers that are initially being devolved. As hon. Members have already pointed out, if the same ratio between revenue and the borrowing limit had applied in Wales as in Scotland, the overall capital borrowing limit for Wales would have been closer to £100 million. The limit has been increased to £500 million to enable the Welsh Government to start improvements to the M4, should they choose to do so, in advance of a referendum on income tax devolution, and I hope that that flexibility will have the support of Members on both sides of the House. The Government recognise that the £500 million will not be appropriate for ever, but we believe that the arrangements we are implementing provide a more robust mechanism for reviewing and changing the limit than would be the case under the amendments. Specifically, the Command Paper published alongside the Wales Bill sets out the review process that we will undertake at each spending review, and the Bill makes provision for the limit to be changed through secondary legislation.

The UK and Welsh Governments have previously agreed a joint process to review convergence between Welsh and English funding at each spending review. That process will now be extended to ensure that the capital borrowing limit remains appropriate.

The Command Paper committed to consider not only the impact of inflation, but the economic and fiscal circumstances at the time of each spending review and the size of the independent revenue stream available to the Welsh Government. That means we will be considering a much broader range of factors than proposed by amendment 5. For example, if an element of income tax is devolved in Wales, applying the same ratio as in Scotland could suggest an increased limit for Welsh Ministers of around £1 billion.

Following the joint review process, the Bill contains the power for the UK Government to set out a new limit through secondary legislation. Although we have legislated that the limit cannot be reduced below £500 million, legislating that the limit can only be increased in future is not the right answer and could have unintended consequences. For example, consider the scenario in which the UK and Welsh Governments agree that the borrowing limit should be increased substantially. Under our proposals, the limit could be increased accordingly and, if necessary, reduced in future if fiscal conditions deteriorate.

The problem with amendment 34 is that it would act as a disincentive for future UK Governments to agree to increase the limit when fiscal conditions allow, because they would know that the limit could never subsequently be reduced. The UK Government would understandably be cautious about ever increasing it. We do not think that that is the best outcome for Wales, as it might result in unintended consequences.

The Bill provides a capital borrowing limit of £500 million, robust arrangements for jointly considering the limit with the Welsh Government and the appropriate flexibility for changing the limit in future. I hope that the whole Committee can agree with that approach and urge right hon. and hon. Members not to press amendments 5 and 34.

Amendments 35 to 37 cover the sources of borrowing available to Welsh Ministers to fund capital investment and the related powers and responsibilities that should be devolved. As a result of the Bill, Welsh Ministers will be able to borrow from the national loans fund or from banks to fund additional capital investment. The national loans fund is almost certainly the cheapest way for them to borrow, while borrowing from banks provides flexibility.

However, in the Command Paper published alongside the Bill, the Government explained that if a case for Welsh bonds was made, we are willing to consider it. That remains our position. But it is right that the UK Parliament retains the competence over the sources of borrowing available to the Welsh Government so that the UK Government can properly execute their macro-economic responsibilities. For example, it should be for the UK Parliament, rather than the Welsh Assembly, to decide whether it is appropriate for there to be another entrant into the sterling bonds market. As is consistent with that, although we are providing Welsh Ministers with these important new borrowing powers, it is right that the Treasury retains sufficient control over aggregate levels of public borrowing. I hope that this further explanation of our position will allow hon. Members not to press their amendments.

Let me explain the changes we are making in relation to current borrowing. Welsh Ministers can already borrow for in-year cash management purposes. That enables them to borrow up to £500 million from the national loans fund to manage the flow of funding in and out of the Welsh Consolidated Fund while maintaining a working balance. Clause 19 extends those powers by additionally allowing Welsh Ministers to borrow across years to deal with differences between the full-year forecast and out-turn receipts for devolved taxes. A non-legislative limit of £200 million a year has been agreed with the Welsh Government, within the continuing £500 million overall limit.

19:15

That extension in the current borrowing powers provides the Welsh Government with an important tool to help manage the volatility of tax revenues and forecast error. Alongside that, they will also be able to pay surplus tax revenues into a cash reserve, which can subsequently be drawn upon when future revenues are lower than forecast. They will therefore have two new tools to manage their new tax powers. That further justifies our views about volatility—this relates to our discussion earlier this afternoon—particularly in relation to stamp duty land tax, which are very much matters for the Welsh Assembly and Government to address.

Clause 20 repeals the existing borrowing powers that the Welsh Government inherited from the Welsh Development Agency when it was abolished in 2006. As I have just explained, when clause 19 is implemented it will give the Welsh Government extended current borrowing powers and new capital borrowing powers. The purpose of clause 20 is therefore to repeal the existing, more limited, borrowing powers inherited from the Welsh Development Agency. As set out in the Command Paper, we intend to repeal the existing power at the point at which the new borrowing powers are implemented.

In advance of that, the UK Government have agreed that Welsh Ministers can use their existing borrowing powers to begin improvements to the M4, should they choose to proceed with that project. Any amounts borrowed by the Welsh Government for that purpose will count towards the overall £500 million limit, as we are effectively giving Welsh Ministers early access to their new powers. With that explanation, I urge Plaid Cymru Members not to press their amendments and to support clauses 19 and 20 as they stand.

[Hywel Williams]

I am grateful to the Minister for his response on amendment 5 and the point about inflation. However, I think that amendment 35 makes a very reasonable call for an independent report to be compiled on the issuance of bonds and laid before Parliament within three months of the Bill being passed, which would be an aid to all concerned. Therefore, I beg to ask leave to withdraw amendment 36, but I will press amendment 35 to a vote.

Amendment, by leave, withdrawn.

Amendment proposed: 35, page 21, line 31, at end insert—

‘(6) The Secretary of State shall make arrangements for an independent report to be compiled on the issuance of bonds by Welsh Ministers.

(7) The Secretary of State shall lay a copy of the report specified in subsection (6) before each House of Parliament within three months of this Act being passed.’.—(Hywel Williams.)

The Scotland Act 2012 enables the Secretary of State, by order and consent of HM Treasury, to change how Scottish Ministers can borrow money for capital purposes, for example, allowing the issue of bonds. Clause 19(5) of the Wales Bill contains the same provisions. This amendment seeks clarification on the power to issue bonds.

Question put, That the amendment be made.

19:17

Division 262

Ayes: 6

---

Plaid Cymru: 3
Social Democratic & Labour Party: 2
Green Party: 1

Noes: 265

---

Conservative: 224
Liberal Democrat: 37
Democratic Unionist Party: 2
Independent: 1

Clause 19 ordered to stand part of the Bill.

Clause 20 ordered to stand part of the Bill.

Clause 21

Budgetary procedures

19:30

[David T. C. Davies]

I beg to move amendment 12, page 23, line 4, at end insert—

‘(1A) In Part 1, in paragraph 9 (Health and health services), after “national health service” insert—

“Organisation and funding (expenditure and income) of the provision of health services in England to people registered with a GP in Wales and the provision of such services in Wales to people registered with a GP in England.”.’.

[The Temporary Chairman (Sir Roger Gale)]

With this it will be convenient to discuss amendment 13, page 23, line 17, at end insert—

‘(d) the scrutiny of reductions of, and additions to, the block grant to reflect expenditure and income arising from the provision of certain services in England to people resident or otherwise eligible for such services in Wales and the provision of such services in Wales to people resident or otherwise eligible in England.’.

Amendment 14, page 23, line 24, at end insert—

‘(g) a Welsh Minister responsible for a service falling under section 13(d) (definition of budgetary procedures)’.

Government amendment 29.

Clause 21 stand part.

Amendment 17, in clause 22, page 24, line 46, leave out ‘and’.

Amendment 18, in clause 22, page 24, line 46, at end insert—

‘(ae) an estimate of the costs of providing services in Wales to people resident in England; an estimate of the monies received from HM Treasury to fund such provision; and an assessment of the effectiveness of any relevant agreements in place governing cross-border service provision, and’.

This amendment and amendment 17 to Clause 22 are intended to make the operation of agreements that govern cross-border services, such as the NHS protocol, more transparent to residents of both England and Wales.

Clause 22 stand part.

New clause 1—Review of options for Barnett formula reform—

‘(1) The Secretary of State shall make arrangements for a review of options for reforming the Barnett formula in order to meet the objective of calculating the block grant funding for Wales on the basis of need.

(2) The Secretary of State shall lay a copy of the report of the review mentioned in subsection (1) before each House of Parliament within six months of this Act receiving Royal Assent.’.

New clause 3—Cross-border health care—

‘After section 1 of the National Health Service (Wales) Act 2006, insert—

“1A Duty to have regard to impact on services in certain areas

In exercising functions relating to the health service, the Welsh Ministers must have regard to the likely impact of those decisions on the provision of health services to persons who reside in an area of England that is close to the border with Wales.”.’.

This New Clause places a duty on Welsh Ministers to consider the impact of their decisions on the provision of health services to people who reside in England, analogous to a duty already placed on the NHS Commissioning Board in England to consider the impact of its decisions on people residing in Wales and Scotland.

New clause 10—Welsh Government Finance Department—

‘The Welsh Government may, by resolution of the National Assembly for Wales, rename its finance department and this shall be recognised as its official title in all dealings with the Treasury.’.

[David T. C. Davies]

I am grateful for the opportunity to speak to this amendment because I believe in the national health service. I know that I speak for all members of my political party in saying that we believe in having a truly national health service. The changes I am attempting to insert into the Bill would bring back the national health service that we once had but no longer have. At the moment, contrary to what people think, we have a regionalised health service with different systems in Wales, in Scotland, in England, and in Northern Ireland. It is a sad fact that in Wales, under the leadership of members of the Labour party, the Welsh national health service has been failing patients and letting people down. I care about that.

I also care about the patients who come to see in my surgery. They include Mariana Robinson, who has been speaking out in national newspapers over the past few weeks. I did not ask her to go the press; she came to see me to ask how she could tell the story of the scandalous treatment that she has been receiving. She was treated very well in a nearby hospital in England but then told that she could no longer have that treatment because funding was not available and she would have to be treated in Wales.

Only a few weeks ago, I spoke to a patient who had been suffering from cancer. She had been told that she was terminally ill and would not last more than a few months. She believes that she was, in effect, written off by the national health service in Wales. She found out about experimental treatment in England and accessed it. She is still alive. Her cancer appears to be in remission at the moment, and I wish her all the best. She obviously wants to continue to receive this experimental treatment in the same area, Newcastle, yet she too has been told that there will be no further funding for her.

There has always been a problem in getting cross-border funding, but it seems to have got a lot worse in the past 12 months, when a decision was taken somewhere along the line that meant that virtually anyone with an illness in Wales would have to be treated in Wales. I believe that this is part of the whole National Assembly mindset about doing everything in Wales because it feels that it can do it better.

[Mr Mark Williams]

Does my hon. Friend agree that we should not characterise this as an issue that affects only the borders of England and Wales? I can think of examples of constituents in Ceredigion who have been unable to access services in Gobowen and Frenchay hospitals for exactly the reasons he suggests.

[David T. C. Davies]

The hon. Gentleman is absolutely right. He will have to forgive me; I have been looking at this more from the perspective of a Member of Parliament in a border area where many patients find it much easier and quicker to access hospitals in Hereford—as they have for rheumatology, for example—or in Bristol, but it affects the whole of Wales because health care is becoming a more specialised matter. In an area of 3 million people, we will not have all the specialists we would like, and that means that there will always be those who need to travel in order to get access to the best on offer.

[Albert Owen (Ynys Môn) (Lab)]

In his opening remarks, the hon. Gentleman talked about regional differences. Has he carried out in-depth research on the situation in England, where there are issues with different health boards not being able to fund certain operations and services? Many of my constituents get good access to some of the best specialist treatments in the Liverpool and Manchester areas; Gobowen is a third good example of this. I am not quite clear about how he arrived at his earlier conclusions.

[David T. C. Davies]

I do not know whether this will surprise the hon. Gentleman, but I have not carried out in-depth research into every single health board in the whole of England. [Interruption.] No sir, I have not. I do not have the time because I am seeing so many constituents who are trying to get these treatments in England, having looked over the border and seen much higher standards of service.

In Wales, 42% of patients wait over six weeks for diagnostic tests; in England, only 1.8% of patients do so. One in seven people in Wales is on a waiting list. People wait three months longer for hip or knee replacements in Wales than they do in England. People are twice as likely to die of a hospital infection in Wales as they are in England. That is an absolutely shocking set of statistics. No cancer drug programme is available in Wales, unlike in England. People have to wait longer for ambulances in Wales than they do in England. I do not need to go and research the details of every single health board in England because I already know that the standard of service is far higher in England. It is not just me saying that: it has come out in reports such as those by the National Audit Office and, recently, the Nuffield Trust.

[Owen Smith]

The hon. Gentleman is giving an interesting though not entirely factual speech. Does he accept that in respect of cancer waiting times, for example, in his area of Monmouthshire there is a more stringent target for patients starting treatment within 62 days, and a higher proportion of patients meet that target than in England? Further, given that he speaks of information in reports, would he care to reflect on the 10-year study by the Nuffield Trust that concluded only a few weeks ago that everything he has said is untrue—that no one country in Britain is steaming ahead and no one country is lagging behind?

[David T. C. Davies]

The hon. Gentleman ought to be aware that I was citing the Nuffield Trust when I gave the statistics saying, for example, that 42% of patients in Wales have to wait more than six weeks for diagnostic tests as opposed to 1.8% in England. Of course, diagnostic tests are very important in treating cancer.

When it comes to allocating the blame for this, I do not blame doctors and nurses, and it is something of a fallacy to suggest that any Government Member has done so. I blame the leadership of the NHS in Wales and the decisions that have been taken over a period of years by Ministers in the National Assembly for Wales. If we are going to offer some praise to Labour, I will offer it to the previous Labour Government, who pioneered in England some of the reforms that this coalition Government have built on. That Government were happy to bring the private sector into the health service in England.

I recently spoke to a doctor down in Newport who specialises in conducting tests for bowel cancer. He gets a lot of patients coming to him from England whose treatment is being paid for by the NHS. I suppose that it comes down to specialisation. This is what he does, he is good at it, and it is what he specialises in. He gets people in and out quickly and deals with them efficiently and at a cheaper rate than the NHS would be able to. He gets a lot of patients coming in from England, but none from Wales, because of the dogmatic resistance to any use whatsoever of the private sector.

I am often characterised as being a right-wing Conservative—I suppose I am, and I am quite happy with that—but I do not want a privatised NHS or people having to pay to use the NHS. However, as somebody who has had to use it myself on quite a few occasions, I have no problem whatsoever with whether my treatment comes from somebody employed by the state or by the private sector, as long as I am getting the highest possible standard of treatment. That is a common-sense view that most people would adopt.

[Owen Smith]

Does the hon. Gentleman think that his constituents should have a lesser standard of cancer care and a lower target, as they do over the border in the neighbouring English constituency, or does he think it is good that in Wales we have a higher standard and a higher set of targets?

[David T. C. Davies]

I absolutely think that my constituents deserve the highest standard of care possible. There is a very easy way for them to get that, and that is for them to be able to choose it.

[Alun Cairns]

Does my hon. Friend agree that the shadow Welsh Secretary is being somewhat selective in focusing on one element of cancer care? Once the patient has seen the consultant, there is a regular need for medication, and accessing cancer drugs in Wales is much more difficult than in England because Wales does not have the cancer drugs fund. When we are considering cancer care, we need to look at the whole package rather than just one small element.

[David T. C. Davies]

My hon. Friend is absolutely right. Labour Members, or at least their colleagues in the National Assembly for Wales, are incredibly reluctant to deal with the issues and go into the detail in the same way as my hon. Friend. We have seen that in the decision of the Assembly’s Health and Social Care Committee to start taking votes on which witnesses they are prepared to listen to and which they are not. As somebody who has chaired a Select Committee for a number of years, I have heard witnesses give all sorts of evidence. I have often sat through whole inquiries in which I have disagreed with virtually every single word of evidence I have heard, but I never try to prevent people from coming in, because I believe that if people have something to say, we should welcome them, and that if I happen to have a different view, I can put it to them and challenge them on the facts. I have never heard of anything as outrageous as a Select Committee, which is supposed to operate in a non-political fashion, taking votes to bar people from giving evidence. That is absolutely disgraceful behaviour.

That is also reflected in the behaviour of some Assembly Ministers, who, rather than make the arguments the hon. Member for Pontypridd (Owen Smith) is trying to make, decry anyone who criticises the NHS as being anti-Welsh. There is nothing anti-Welsh about Members of Parliament for Welsh constituencies trying to demand the best possible health care for their constituents. I also thoroughly welcome the support I have received from the Prime Minister and the Health Secretary, who have rightly spoken out about this issue because they believe it is wrong and disgraceful that people in one part of the United Kingdom receive health care that is so much worse than that received by people in another part of the United Kingdom.

[Owen Smith]

I am grateful to the hon. Gentleman for giving way; he is being very generous with his time. Would he care to dissociate himself from the Prime Minister’s recent ludicrous description of Offa’s Dyke as a

“line between life and death”?

In the light of the Nuffield Trust report, which suggested that that is absolute nonsense, will the hon. Gentleman dissociate himself from those remarks or will he continue to scaremonger, just as the Prime Minister has done?

[David T. C. Davies]

When people are twice as likely to die of a hospital infection in Wales than they are in England, I am very happy to associate myself with every single word the Prime Minister says and I hope he will continue to draw attention to the shambolic level of health care we are putting up with in Wales.

[Owen Smith]

rose—

[David T. C. Davies]

I will give way one more time, because I am not afraid to have the debate, unlike members of the Health and Social Care Committee in the Welsh Assembly.

[Owen Smith]

Excellent. I am grateful that the hon. Gentleman wants to trade facts. Would he like to commend the National Assembly for Wales for the fact that, on cancer and all the major tumour types, the rate of improvement for one and five-year survival times in Wales has been better than that in England?

[David T. C. Davies]

If the shadow Secretary of State is so confident that things are good in Wales, he will have no problem backing my amendment, because it is very simple. It would mean that any patient in Wales would have the right to seek treatment in England, with the cost of their treatment being deducted from the block grant of the National Assembly for Wales. Similarly, any patient from England who fancied waiting twice as long as their neighbours could seek treatment in Wales and the money could be added to the block grant. This is not about taking powers away from the Welsh Assembly; it is about giving the Welsh Assembly an opportunity to show how confident it really is in the standards of national health care it is delivering. If the hon. Gentleman is so convinced that his colleagues in the Assembly are doing a good job, he will have no problem at all supporting my amendment. It would not result in a problem, would it? There would be no cut in the block grant, because in the hon. Gentleman’s world nobody would try to leave Wales in order to seek treatment in England.

We all know that the reality is that hundreds, even thousands, of people who are currently patients in Wales want to be treated in England. Is it not a disgrace that Mark Drakeford, the Health Minister, is trying to skew the facts by saying, “Well, there are hundreds of people in England receiving treatment in Wales”? There are, but they do not want to have their treatment in Wales. They have set up an action group to demand the right to be repatriated to England, and I am sure my hon. Friend the Member for Forest of Dean (Mr Harper) will address that.

[Owen Smith]

rose—

[David T. C. Davies]

I have given way enough times. I look forward to my amendment receiving the support of Labour Members. It is about creating competition between health services and I do not think there is anything wrong with that. It is about delivering patient choice and, most importantly, it is about recreating a national health service. The Conservative and Unionist party will also be the party of the national health service—the truly national British health service—at the next election, and I look forward to the support of Labour Members.

[Mr Llwyd]

I wish to speak to my new clauses 1 and 10, which are in this group. I was discomfited by what the hon. Member for Monmouth (David T. C. Davies) said, because, to be honest, he was running Wales down. Thousands and thousands of people who work in the NHS in Wales are doing their best at every single level, from the orthopaedic surgeons to those who clean the wards. There are problems, but there are problems in England as well. I was treated in Gobowen recently, not because I was given preferential treatment, but because the Bala practice happens to refer people to Gobowen for certain orthopaedic problems. I was dealt with promptly and well, and I have nothing but respect for those on that side of the border, as well as for those on our side of the border, which is the point on which the hon. Gentleman is lacking.

19:45

[David T. C. Davies]

I made it very clear in my speech that my criticisms are directed entirely at the leadership of the NHS in Wales and the National Assembly for Wales, not at the doctors and nurses who operate that service. I am happy to put that on record again. With all due respect, the right hon. Gentleman’s party has been very critical of the way in which the NHS has been run in Wales. I hope he is not going to fall into the trap—this is, frankly, the attitude of tyrants—of suggesting that any criticism of something is actually an attack on one’s nation. That is not the case at all and it is a dangerous criticism for him to make.

[Mr Llwyd]

I have not been uncritical; it is just that I was taken aback by the vehemence of the hon. Gentleman’s speech. I thought he was talking Wales down—that is my point. Everything is not perfect and I do not pretend it is—only a fool would say as much—but it is not half as bad as the hon. Gentleman alleges.

[Chris Ruane (Vale of Clwyd) (Lab)]

In stressing the positives for Wales, will the right hon. Gentleman welcome the fact that there are 60 nurses per 10,000 patients in Wales and only 50 nurses per 10,000 patients in England?

[Mr Llwyd]

A report I read recently said that if there are gaps in the Welsh NHS, they are being addressed. I am not uncritical of the NHS in Wales but, as I have said, I was disturbed by what I heard earlier.

[Guto Bebb]

rose—

[Mr Llwyd]

I will give way a final time on this point, because I want to speak to my own new clauses.

[Guto Bebb]

I am grateful to the right hon. Gentleman for giving way. Is it not the case that a Member of Parliament has a responsibility to speak up on behalf of their constituents, including people who work in the health service who, time after time, come to me with complaints? They do so quietly and behind the scenes, because they know their positions will be endangered. We have a responsibility to speak up for patients and NHS staff in Wales, who are very aware of the fact that the standard of service is not appropriate.

[Mr Llwyd]

I take the hon. Gentleman’s point. He may know that I was very critical of the Welsh Government for going down the track of closing smaller hospitals, leaving nothing in their wake and pretending that care in the community was available when it was not. I am not uncritical. We should voice concerns when they need to be voiced.

New clause 1 stands in my name and those of my hon. Friends the Members for Arfon (Hywel Williams) and for Carmarthen East and Dinefwr (Jonathan Edwards). If accepted, it would require the Government to review the options for reforming the Barnett formula in order to ensure that Wales is funded on the basis of need rather than population share, as is currently the case. Of course, it is out of the scope of this Bill to seek to change the Barnett formula and make sure that Wales is funded on the basis of need, but the issue of fair funding has become an integral part of the public and political discourse on the powers it offers and we seek to highlight its importance.

Although the need for fair funding—as reform of the Barnett formula has become known in Wales—was not set as part of the remit of the Commission on Devolution in Wales, the cynical among us might view that as a ploy by the Government to continue to ignore the ongoing loss to Wales of between £300 million and £400 million per annum, which is an incredibly large sum of money for such a small country.

Earlier, we debated the need for borrowing and the £500 million limit. We are actually undersold £400 million per annum already, and we do not seem to be too concerned about that or, at least, nobody has been in any great rush to address it. I venture to suggest that if that were put right, the £400 million could be very useful to the Welsh Government immediately.

The so-called formula was devised in the 1970s by Joel Barnett MP, who is now Lord Barnett in the other place. He was a Treasury Minister at the time, and he saw that a simple stop-gap means of funding Wales would be to do so on the basis of its share of population—about 5% of the UK total. However, since the 1970s, Wales’s GVA has fallen as a percentage of the UK’s, and Wales now has a higher number of disabled and older people as a percentage of the population than our friends in England. The formula was intended to be only temporary, before a longer-term and more equitable solution could be found. Politicians of all parties recognise that it is unjust and needs reform, except those in government—whoever is in government at the time.

As part of our One Wales coalition Government agreement in the last National Assembly, Plaid Cymru demanded that an independent commission be put together to examine the shortfall in the funding which Wales evidently misses out on each year through how the block grant is currently calculated. The Independent Commission on Funding and Finance for Wales, expertly chaired by the widely respected Gerald Holtham, entirely vindicated what we have said for upwards of 30 years—that Wales has been losing out. Indeed, the £300 million to £400 million figure has been endorsed by another Committee, the Constitutional Committee in the other place, which separately came to a similar conclusion.

Plaid Cymru has been campaigning for reform of the Barnett formula and to secure fair funding for Wales on the basis of need for more than three decades. In all my time in the House, which spans more than two decades, we have returned to this continuing injustice time and again. If I may reminisce for a second or two, I remember asking successive Labour Secretaries of State for Wales why they would not reform the Barnett formula. I do not seek to embarrass my good friend the right hon. Member for Torfaen (Paul Murphy)—he had to stick to his brief at the time—but there is now an acknowledgment that we are underfunded, and that therefore needs to be put right. As in any other part of the UK, we need to ensure fair funding in Wales, which is something that no democrat would deny.

Imagine my surprise when it emerged that the Labour party had put a caveat on devolving income tax powers for Wales, by stating that it would not hold a referendum until fair funding had been secured. The fact that it wilfully ignored the problem and even denied that there was one during 13 years in power in Westminster must be the symptom of a grave case of collective amnesia. The cynical among us would call that expedient, to say the least, while others might be tempted to see it as a roadblock in the path of greater devolution for Wales, put in place by the anti-devolution tendency that appears to be in the ascendancy among Labour Members from Wales at Westminster.

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

How does the right hon. Gentleman marry his last comment with our very strongly stated support for reserved powers, an innovation about which I am very pleased?

[Mr Llwyd]

I am pleased that the Labour party agreed to the reserved powers model, but I am a little concerned and I will develop my argument about the difference of opinion on when the Barnett formula should be addressed. The hon. Lady’s colleagues in Wales have one view, and her colleagues at Westminster have another. As I have said, the caveat may be a roadblock to further devolution. In fact, according to Labour party policy as it now stands, it will be a roadblock to further devolution.

[Chris Ruane]

While the right hon. Gentleman is handing out plaudits to the Labour party, will he congratulate it on actually bringing devolution about? It included in its 1997 manifesto that devolution would be put to the people of Wales.

[Mr Llwyd]

Yes, I of course agree that devolution would probably not have occurred without that year’s Labour manifesto, and I am obviously very pleased about it.

[Jonathan Edwards]

Is not new clause 1 a credibility test for the Labour party? It has put in place a roadblock on income tax powers, in that their devolution cannot happen until Barnett reform. If it does not support the new clause this evening, that will clearly show that its stipulation is a roadblock to further devolution.

[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.

20:00

More intriguing, I think, is the Labour position on Barnett. In the National Assembly for Wales, Labour says, following the Holtham findings, that it is a disgrace that Wales loses between £300 million and £400 million each year. The First Minister says that income tax powers will not be taken up by the Welsh Government, who can only trigger the referendum through the National Assembly if there is Barnett reform. By the way, the adoption of income tax powers will provide access to increased borrowing for investment limits, which, as I stated a few moments ago, could provide jobs and boost the economy. Members will naturally have concluded that if the Labour party in Wales has predicated more powers and a greater ability to boost the economy on Barnett reform, the party would commit to reforming Barnett centrally if in power here in Westminster. Surely Labour would not say one thing in Wales and do another thing here in a Janus-faced manner—yet that is exactly what it is doing.

The First Minister and the shadow Secretary of State for Wales have been through so many contortions that they should probably see a doctor for the bends! First Minister Carwyn Jones welcomed the Silk Commission recommendations, then the draft Wales Bill and then said a Labour Welsh Government would not accept the income tax powers without fair funding. Meanwhile, the shadow Secretary of State has pointed out that Wales has missed out on more than £300 million a year, failed to persuade his masters of the need for reform, and so gone back to defending the indefensible. All the while, his constituents and mine suffer as a result of services that could be improved through increased funding. For all I know, this could have had a bearing on what the hon. Member for Monmouth (David T. C. Davies) said earlier.

The Labour party in Wales says one thing in Wales, while fully knowing that its masters down here would refuse to commit to fair funding if they formed the next UK Government. Of course, the spectre of Scotland haunts them. If they commit to Barnett reform, the independence campaign will rightly say that they intend to take money away from Scotland. They cannot have it both ways. Needless to say, if I were Scottish, I would be campaigning for independence—a situation that would solve the Barnett question once and for all!

I remind Members that all their parties signed up to the Silk Commission’s recommendations via their representation on it. We in Plaid Cymru have sought, through our amendments, to maintain the integrity of the cross-party commission’s original findings and recommendations. The other parties have since either watered them down or placed restrictions on, or roadblocks in the way of, greater financial powers for Wales. I urge hon. Members, particularly Labour Members, to put Wales first and back up what the party in Wales says about Barnett reform.

[Nia Griffith]

The right hon. Gentleman’s new clause deals with Barnett reform, but if it were reformed, what would the position be in Scotland? Is it in his mind that Barnett reform would increase funding for Wales and decrease it for Scotland?

[Mr Llwyd]

I am in the thankful position of not speaking for Scotland. I have an opinion, however, as I would not like to see our colleagues and friends in Scotland being done down. I pose the question of whether we need a proper root-and-branch approach to the problem—something that will properly deliver. Come September, there may be no need for Barnett reform in Scotland.

[Nia Griffith]

Does the right hon. Gentleman agree with the Labour party’s announcement this week that we want to increase the funding for Wales, but not reform the Barnett formula as it affects Scotland?

[Mr Llwyd]

Asking me to say whether I think it is a good thing to increase funding for Wales is a rather strange question. If that ever happens, it will of course be a good thing, but rather than have piecemeal increases in funding, it would be better to have a lasting and proper formula that everybody could understand and that could stand the test of time—unlike the Barnett formula. Whenever I see the noble Lord Barnett—a wonderful character and a very nice man—he turns away. I hope it is not because it is me, but he always turns away, saying “I’m sorry, I’m sorry; the formula was not meant to be in place now”. He acts as if he thinks I am going to jump on top of him! He realises the point himself, so we really need to get stuck in on this issue. I hope that when the Bill is passed, we can reach an all-party consensus by sitting down and seriously having a go at addressing the Barnett crisis. As I say, rather than have a piecemeal approach to the problem, I would prefer a long-standing approach to which everybody could sign up.

[Chris Ruane]

I thank the right hon. Gentleman for giving way to me a third time. He talks about how Labour has treated Wales. In 1996, the Welsh block amounted to £6.7 billion; by the time Labour left government in 2010, it was £15 billion. Is that not an achievement?

[Mr Llwyd]

It was raised in line with inflation—[Interruption.] Let me finish. Other responsibilities came to Cardiff—virtually all the agriculture, the environment and various other things came in. [Interruption.] I would like to know the percentage, but I am not in a position to determine one way or another whether it amounted to a substantial increase. I do not think it was substantial: it was clearly above inflation, but other responsibilities had been devolved to Cardiff by that time.

Without trying your patience, Mr Crausby, I would like briefly to speak to Plaid Cymru’s new clause 10. The Silk commission’s recommendation 28—a brief one, you will be pleased to hear—states that the Welsh Government should set up a Welsh Treasury to manage the new powers contained within the report. The new clause extends that arrangement to the Bill. It is a simple but important new clause. In the spirit of our other amendments, it seeks to preserve the integrity of the cross-party Silk commission recommendations.

The commission recommended that if the Welsh Government are to be directly responsible for revenue raised in Wales, as will be the case with the advent of the Bill’s powers, they must develop their finance department into a Welsh Treasury. That is a common-sense approach. If the National Assembly for Wales decides to do this, in accordance with its will, so be it. It would avoid the need for inefficient and perhaps time-wasting tidying-up exercises, such as appear in the first part of the Bill. People in Wales have been referring to “the Welsh Government”—a change of name—so there should be no problem with calling the finance department “the Welsh Treasury”. It is common sense for that to happen. I hope that this simple new clause will be supported by both sides of the Committee.

[Guto Bebb]

I shall speak briefly to my amendments 12, 13 and 14, of which I am proud. I associate myself, too, not only with the amendment tabled by the Chairman of the Welsh Affairs Committee, my hon. Friend the Member for Monmouth (David T. C. Davies), but with his speech. There was nothing in it that was an attack on Wales. He was simply highlighting a real concern of our constituents that needs to be addressed. I believe that the amendments provide the opportunity to deal with the fact that we need an NHS that serves the people of Wales.

[Albert Owen]

I take the hon. Gentleman at his word that he is not attacking the NHS in Wales. He has to acknowledge, however, that both his and my constituents already get some of the best specialist treatment over the border in places such as Liverpool, Manchester and Gobowen. That just happens to be a fact of life.

[Guto Bebb]

That is true; the hon. Gentleman makes a statement of the obvious. Before I was elected, I was proud to support the campaign launched by my right hon. Friend the Secretary of State for Wales, who argued strongly that services in Walton rather than services in Swansea should be provided for people in north Wales. What the hon. Gentleman completely misunderstands is the fact that patient choice has been taken away in Wales. People in Wales can be referred to hospitals in England by a GP, but only if the GP makes that referral on the patient’s behalf. The opportunity to make a choice is not available to patients in Wales—very different from the situation that applies to patients in England.

The situation in respect of patient choice in Wales is simple. Some political parties in Wales argue strongly that patients in Wales should have entirely the same right to choose their preferred hospital as patients in England. For some reason, the so-called party of the national health service in Wales is of the view that that right to choose should be denied.

[Nia Griffith]

Will the hon. Gentleman give way?

[Guto Bebb]

I will give way so that I can understand why the Welsh Labour party takes the view that patients should not have a choice that is freely available to patients in England.

[Nia Griffith]

Does the hon. Gentleman not accept that patients in England need a referral from a GP? The way in which the funding is being reformed in England will make things difficult, because some GPs will have to make desperate choices about whose treatment they will fund.

[Guto Bebb]

The hon. Lady is mistaken. The NHS England website poses the question,

“Can I have a GP in Wales if I live in England?”

The answer is:

“Yes you can, but… Patient choice and the NHS Constitution do not apply to the NHS in Wales.”

In other words, patient choice does apply in England, but it does not apply in Wales.

It is important that this issue is debated, because the Government in Cardiff Bay state that the NHS in Wales is as good as the NHS in England. That is exactly the issue that our amendments highlight. They make it very clear that if patients from England elect to use services in Wales, there will be a corresponding change to the funding block, and if patients from Wales elect to use services in England, there will be a corresponding change to the block. If the confidence in the Welsh NHS that Opposition Members express in the media and on television is genuine, they would see no danger in the amendments. The amendments would simply allow patients from Wales who want to be treated in England and patients from England who want to be treated in Wales to have that choice. They are simply trying to ensure that we have an NHS that is national. Why is that so scary to the so-called party of the NHS? That question needs to be answered in this debate.

Secondly, I want to touch on the comments of the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd). I was genuinely disappointed to hear the comments of my hon. Friend the Member for Monmouth described as an attack on Wales. It is important in a mature democracy that we are able to highlight areas where service levels in Wales are not as good as they should be, because we should aspire to have the best. Whether we are talking about the NHS or education, we have a duty to highlight places where Wales is underperforming. To try to kill off that debate by arguing that all Members who highlight concerns on behalf of their constituents are in some way attacking NHS staff is unacceptable.

I might be suggesting that there is a motive where none exists, but perhaps the defensiveness that was articulated by the right hon. Gentleman reflects the fact that patient choice in Wales disappeared as a result of the “One Wales” Government. According to the House of Commons Library, the “One Wales” Government “eliminated patient choice”. Those are not my words, but the words of the House of Commons Library. It states clearly:

“Patients registered with a GP in Wales do not have a statutory right to choose at which hospital they receive treatment.”

The “One Wales” Government moved from patient choice to patient voice. That was a good soundbite that appealed to people who like poems that rhyme. However, in the Betsi Cadwaladr trust, patient voice meant that if somebody made a complaint, they might get a response in six months. Patient choice, which is what these amendments propose, means that patients in north Wales who feel that they would be better served by electing to be treated at a hospital in England would have that choice.

[Mr Llwyd]

Does the hon. Gentleman not accept that I do not have people crowding into my office to say that they were badly treated at the hospitals in Llandudno, Bodelwyddan or Wrexham or at Ysbyty Gwynedd, Bangor? People often come in to say, “If you’re in contact with those hospitals, will you please say that the care was excellent and that I have nothing but praise for them?” I do not recognise the problem that he perceives. I am not sure what I am saying about what he is saying, but I do not recognise the problems that he and the hon. Member for Monmouth have highlighted. I do not see those problems every day. If I did, perhaps I would join them.

20:15

[Guto Bebb]

The right hon. Gentleman makes an important point. When somebody tells me a good news story about the NHS in Wales at a public meeting or an event in my constituency, I am the first to applaud. It is important that we highlight success and great performance when it happens in the NHS in Wales. Unfortunately, I get complaints about the service that people have received in Wales far too regularly. Only three weeks ago, I heard from an individual who suffered from prostate cancer. He had an assessment in Wales that said that he did not have cancer. He was suspicious and booked a private appointment in London. Within 12 hours, he was operated on. He is of the view that the decision to go private saved his life. Is it not disgraceful that a patient in Wales has to have the means to go private to ensure that they get the correct diagnosis?

[David T. C. Davies]

I thank my hon. Friend for giving way and allowing me to put it on the record for the third time that I am criticising not the doctors and nurses in Wales, but the policies of the Labour-run Welsh Assembly Government that are making it difficult for people to see those doctors and nurses quickly enough. That is the problem.

[Guto Bebb]

I accept that point.

I will conclude my remarks because I wanted to be brief and my hon. Friend the Member for Monmouth has highlighted the main issues. The key issue is that our amendments in no way threaten the Welsh NHS if it is a beacon of success, as is claimed by the Opposition parties. If the good practice that I see on a regular basis in the health service in north Wales is replicated across Wales, the amendments should not strike fear into anybody.

I come back to the individual I saw on Saturday morning while I was out canvassing. As the right hon. Member for Dwyfor Meirionnydd will be aware, a significant portion of my constituents have retired to north Wales to live. They often have family members in the north-west of England. Is it not unfortunate that somebody who is facing a significant operation cannot choose to be treated at a hospital near their family? Medical records show clearly that being in close proximity to one’s family, having the support of one’s family and having a daily visit are often the difference between a quick recovery and a long, drawn-out recovery. However, that choice is not available to patients in Wales simply because they live in Wales.

The amendments are a vote of confidence in a national health service. All parties who claim to support the national health service should support them.

[Nia Griffith]

The amendments tabled by the hon. Members for Forest of Dean (Mr Harper), for Monmouth (David T. C. Davies) and for Aberconwy (Guto Bebb) claim that a disproportionate number of Welsh patients use NHS services in England. That is totally groundless. In fact, the number of English patients going to Welsh hospitals has increased by 10% since 2010, while the proportion of Welsh patients using English A and E services has fallen in recent years.

[Guto Bebb]

The point that the hon. Lady has just made is clearly wrong. I just made it very clear that patients in Wales are not able to choose to use hospitals in England, so it is no surprise that the numbers being treated in England have fallen.

[Nia Griffith]

I am coming on to that. I am talking about patients who live in England and come to have treatment in Wales. The implication is that everybody wants to flee from Wales and nobody wants to go there. That is not true.

The issue of choice is key. We all have constituents who go for specialist treatments in England. We all know of emergency cases that have been taken to special care baby units and to hospitals as far away as London. There are obviously issues of funding. Funding does change hands. Amendment 13 suggests that that should be done through the block fund, but it is done from health board to health board.

The hon. Member for Aberconwy ignores the reforms that are being suggested in England, which will mean that instead of a GP making a referral to the hospital that they consider will provide the best treatment for their patient, they will have to consider the GP surgery’s budget and might not be able to afford the treatment. There are hospital consultants in England who are terrified that their services will not be brought in by certain GP practices because of the immense pressure of trying to provide a huge range of services with a limited budget. That is terrifying. Soon someone will not be able to compare like with like, and there will not be a similar situation in England and Wales—it will be very different. I am afraid that the idea of patient choice will vanish in England. It is nice to think it is there and that it will exist in future, but it simply will not be there.

I have heard of many instances of patients who had a certain degree of choice and were able to go to a slightly different hospital than the one first suggested when they made the case and asked for that change. Frankly, I think this amendment has provided the opportunity for an attack on the Welsh health service.

[Guto Bebb]

Not again!

[Nia Griffith]

Absolutely—not necessarily from the hon. Gentleman, but from other hon. Members there has been a blatant and clear attack. I would be the first to make a fuss—indeed, I do—if somebody cannot get a specific treatment, and we all know that in every area, whether in England or Wales, certain specialties may be difficult to cover in certain periods. We all know that we need to fight for certain things for certain constituents. As was mentioned, however, there is no clear winner or loser; there is no clear leader or laggard in the four UK nations in terms of health provision, as shown in a longitudinal study by the Nuffield Trust over a long period.

[Susan Elan Jones]

It is all very well various Conservative Members saying, “We are not making an attack on the NHS”, but the leader of their party went to their Welsh conference and—I have just checked this because it is almost beyond belief that he used this phrase—described Offa’s Dyke as

“the line between life and death”.

I am sorry, but that is offensive. Conservative Members continually play the game, but they are Cameron’s little dogs, nothing else, and they are not prepared to speak up for Wales.

[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.

20:30

[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.

[David T. C. Davies]

Will the hon. Gentleman give way?

[Paul Flynn]

I will not give way. I will speak for only a very short time.

At the Conservative party conference in Wales, the Secretary of State for Wales, Assembly Members, the Secretary of State for Health and the Prime Minister lined up to talk about one subject: undermining the Welsh health service. It is, rightly, called the war on Wales. The damage that that does is enormous, and it is done to the whole reputation of Wales. That is not just happening in Wales; it is happening throughout the United Kingdom. This is how the Tories believe they are going to claw their way back to power, but I have news for them. There are now two Tory parties in Wales: the Joneses and the Farageists. The people will have a choice of which bit of bigotry they want to vote for next time. That will cut the reactionary vote in Wales in half and very few Welsh Tory MPs will be back here. When the Prime Minister says, from his lofty position, that there is a line between life and death at Offa’s Dyke, it will not be forgotten and it will never be forgiven.

[Mr David Jones]

It is a pleasure to serve under your chairmanship, Mr Crausby. It has been an interesting and lively debate. I will speak in the first instance to clauses 21 and 22.

Clause 21 confers on the Assembly the legislative competence to decide its own budgetary procedures. The effect of the clause is that the Assembly will be able to legislate to put in place budgetary procedures that take account of the Assembly’s and Welsh Ministers’ new powers under part 2 of the Bill. Clause 22 sets a requirement on the Secretary of State and Welsh Ministers to publish separate reports on the implementation and operation of the new tax and borrowing powers. Reports must first be published within a year of the Act passing and thereafter before each anniversary of the Act being passed. They must continue until a year after the new finance powers have been transferred fully to the Assembly and to the Welsh Ministers.

20:44

The Silk commission recommended, in its first report, that the Assembly should have control of its own budgetary procedures. The Welsh Affairs Committee made a recommendation in similar terms following its pre-legislative scrutiny of the draft Wales Bill. The Government agree with these recommendations and clause 21 devolves legislative competence to the Assembly to decide on its own budgetary procedures. The current arrangements require the Assembly to pass an annual budget motion. Clause 21 will instead enable the Assembly itself to determine the procedure for setting the annual budget. It will allow the Assembly to put in place a scrutiny process that takes account of the new tax and borrowing powers in part 2 of the Bill. Giving the Assembly the power to legislate for its own budgetary procedures means that it could, if it wished, pass an annual finance Act in place of the current budget motion. Such an Act could include a wider range of fiscal and financial matters than the current budget motion, such as the determination of tax rates for devolved taxes, forecasts of income from taxation and variances from those forecasts, and scrutiny of the Welsh Ministers’ borrowing powers.

The Assembly would be free to decide whether, following a yes vote in a referendum on the devolution of a portion of income tax, an Assembly resolution setting a Welsh rate of income tax should be considered in the context of budgetary procedures. The use of the new tax and borrowing powers we are devolving in the Bill should effectively be scrutinised and it is right that the Assembly should be able to decide how its annual budget is best determined.

Government amendment 29 further expands the competence conferred on the Assembly through clause 21. Section 119 of the 2006 Act requires the Secretary of State to lay a statement before the Assembly each year, including estimates of the total payments into the Welsh Consolidated Fund and the amount of payments that will be made to the Welsh Ministers, the First Minister and the Counsel General. The annual financial statement forms part of the Assembly’s annual budgetary procedures. Given that we are devolving legislative competence to the Assembly in relation to those procedures, it seems only sensible to enable the Assembly to modify or repeal section 119 in so far as it relates to those estimated payments. In so doing, it would be open to the Assembly to implement the Silk commission’s recommendation that the annual financial statement to the National Assembly should be presented by the Welsh Government rather than the UK Government.

The amendment does not, however, enable the Assembly to modify the Secretary of State’s duty to include in the statement how much of the Welsh block grant he proposes to deduct before paying the remainder into the Welsh Consolidated Fund and to include details of how that amount has been arrived at. The amount deducted is, in practice, used to pay the costs of the Wales Office. It is therefore only right that the Secretary of State continues to have responsibility for reporting on this amount to the Assembly and for providing details to support the amount specified. This is a sensible amendment that extends the Assembly’s competence in respect of its budgetary procedures.

New clause 10, tabled by the right hon. and hon. Members from Plaid Cymru, seeks to allow the Welsh Government to change the name of their Finance Department through a resolution passed in the Assembly. The Silk commission recommended, in its part 1 report, that the Welsh Government should set up a Welsh Treasury to manage the fiscal powers it recommends to be devolved. Hon. Members will be aware that the Welsh Government have already started work to establish a Welsh Treasury responsible for financial and fiscal policy in devolved areas. It is, of course, entirely a matter for the Welsh Government to decide how best to structure their finance responsibilities.

We are a Government who believe in decision making at the most appropriate level, and in this case we consider that the most appropriate level is the Welsh Government. There is simply no need to legislate on this, or—as the hon. Member for Arfon (Hywel Williams) put it—for Westminster to stick its oar in. I urge the hon. Gentleman not to press new clause 10 to a vote.

[Mr Llwyd]

Am I to understand that, if they were so minded, the Welsh Government and the National Assembly could call their Finance Department the Treasury, without recourse to Westminster?

[Mr Jones]

That, of course, is entirely a matter for the Welsh Government, but, in practice, that is what they are calling it at the moment.

I thank my hon. Friends the Members for Monmouth (David T. C. Davies) and for Aberconwy (Guto Bebb) for their amendments 12, 13 and 14, and my hon. Friend the Member for Forest of Dean (Mr Harper) for his amendments 17 and 18 and new clause 3. They raise important issues about the provision of cross-border health services in Wales and England, issues which are, of course, vitally important to anyone who lives close to the border—or even not so close, as was pointed out by my hon. Friend the Member for Ceredigion (Mr Williams). Indeed, they are important to anyone who wants world-class health services to be delivered throughout the United Kingdom.

Health is one of the most important services—arguably, the most important service—to be delivered by any Government. We all know that people value the delivery of good health care more than almost every other public service. This is, after all, a service on which we are all likely to call at some stage in our lives. It is therefore essential for any Government to deliver health services which are effective and efficient, and which provide good value for money. In England, the Government will have increased spending on health by about £12.7 billion in cash terms over the lifetime of the current Parliament, delivering an NHS that continues to improve and the health care that people want and deserve. However, none of that would be possible without our front-line NHS teams: the doctors, nurses, and other health care professionals.

As we have heard from Members this evening, the sad fact is that the Labour Government in Cardiff are presiding over a health service in Wales which is declining. My hon. Friend the Member for Monmouth gave some illustrations of that decline. In Wales, Labour has cut the health budget by 8%, despite having been given an extra £1.6 billion in the block grant. The result has been a decline in health services in Wales which is evident for all to see, with unacceptably long waiting times.

[Hywel Williams]

Whether or not one agrees with the policies of the Labour Government in Cardiff, surely devolution means that it is a matter for them and not for the Secretary of State.

[Mr Jones]

Actually, it is for every elected representative to express concern when a service as important as health is affected. When the devolved Administration are not delivering an adequate standard of health care, it is entirely appropriate for every elected representative to draw attention to that.

[Owen Smith]

Does the Secretary of State agree with the Prime Minister that Offa’s Dyke is

“the line between life and death”?

[Mr Jones]

I agree entirely with my right hon. Friend the Prime Minister that in England there is a cancer drugs fund, and in Wales there is not. I can tell the hon. Gentleman—[Interruption.] The hon. Gentleman should listen to this. Constituents of mine have died because they have not had access to cancer drugs, because they live in Wales. If the hon. Gentleman considers that an acceptable state of affairs, shame on him.

There is a significant lack of resources in Wales compared with England. For example, Wales has no cancer drugs fund. As the hon. Gentleman will know, a recent study conducted by Bristol university showed that Welsh patients were seven times less likely to have access to cancer drugs than those in England. There is a litany of failure in relation to Welsh health services. Almost everybody who lives in Wales can give examples of such failures. Only today, the Western Mail reported that complaints to health boards in Wales had increased by more than 40% between 2009-10 and 2012-13.

However, the Labour party is simply not listening. The First Minister and his Cabinet are presiding over what looks increasingly like a shambles. Health care in Wales is moving backwards. That is, quite simply, unacceptable—

[Owen Smith]

Will the Secretary of State give way?

[Mr Jones]

No, I will not. The hon. Gentleman can listen.

Crucially, it is also both alarming and worrying for people in Wales who need to use those services.

The Welsh Labour Government in Cardiff are not only failing thousands of patients in Wales, but failing hard-working professionals who are every bit as competent and dedicated as those in any other part of the country. It is in that context that we are debating the amendments tabled by my hon. Friends the Member for Monmouth and for Aberconwy.

[David T. C. Davies]

I entirely support what my right hon. Friend has just said. I have just received a long e-mail. I shall forward it to my right hon. Friend, but one sentence says it all:

“I run a local veterinary hospital and I am ashamed to admit that the animals under my care are treated more promptly and effectively than the people in Monmouthshire.”

The lady who sent that e-mail made it quite clear that she was criticising not the doctors or nurses, but the system created by Labour Members.

[Mr Jones]

I am grateful to my hon. Friend for that intervention.

Amendments 12, 13 and 14 seek to shine a light on the organisation and funding of cross-border health services—services provided in England to patients living in Wales and vice versa. I shall not dwell on the intended legislative effects of these amendments, but rather on the intentions behind them. I know this is an issue of real importance to many Members who have spoken this evening, and I would like to reassure the Committee that I share the concerns about the operation of the current system.

My hon. Friend the Member for Forest of Dean has also spoken to his amendments 17 and 18, which would require both the Secretary of State and the Welsh Ministers to include in their annual reports on the implementation of the Bill’s financial provisions details on the costs and effectiveness of cross-border services. His proposed new clause 3, which reflects concerns he has expressed over many months to me and my right hon. Friend the Secretary of State for Health, would require the Welsh Ministers to consider the impact of their decisions on the provision of health services to people who live in England but who are registered with Welsh GPs.

Current funding arrangements are set out in the protocol for cross-border health care. I entirely agree that there is concern about the practicality and deliverability of these arrangements as they operate on the ground. Everyone should receive the best possible health care regardless of where they live or where their GP is registered. As we have heard, health services in Wales are falling short in many respects of the standards we expect. That is a matter for the Assembly, and in particular the Welsh Government, urgently to address.

The Welsh Government’s policy of referring patients registered with Welsh GPs for treatment in Wales only created more difficulties for English patients, such as the constituents of my hon. Friend, who are registered with Welsh GPs. I am pleased, however, that following discussions between the Wales Office and the Welsh Government some local health boards in Wales have reviewed this policy and have exempted English residents. I know this falls short of patient choice, but it is at least a step in the right direction.

Improving the cross-border protocol is the responsibility of both the Welsh and the United Kingdom Governments and I can assure the House that this Government are determined to tackle the protocol shortcomings and ensure better cross-border health services. It is only right that we ensure that the health care of people living close to the border does not suffer merely because of where they happen to live. It is in this mechanism that the greatest potential for real change lies, and that is why we are reviewing it to ensure it really does meet the needs of people on both sides of the border. Work is under way, led by the—

[Owen Smith]

On a point of order, Mr Crausby. Is it in order for the Secretary of State—who we have not heard from for, I think, fully 245 minutes—to dwell for almost the entirety of his speech today on continuing the war on Wales and the Welsh NHS, none of which is addressed in this Bill, which is meant to be about the financial circumstances post-the Silk commission as they relate to Wales, not the NHS in Wales?

[The Temporary Chair (Mr David Crausby)]

The Minister is addressing the clauses. It is up to him what he says in his speech.

[David T. C. Davies]

Further to that point of order, Mr Crausby. Given that Labour Members of the National Assembly for Wales’s health Committee are refusing to hear this evidence and are refusing to hear from important witnesses, is it not absolutely right that my right hon. Friend the Secretary of State should continue to raise the issue of the scandalous standards of care in the NHS in Wales?

[The Temporary Chair]

As long as—[Interruption.] Order. As long as the Minister is talking to the amendments, he can say what he likes.

[Mr David Jones]

Thank you, Mr Crausby. It is clear that the hon. Member for Pontypridd (Owen Smith) does not want to hear what we are doing to remedy the problems in the Welsh health service.

Work is under way, led by the Department of Health and the Wales Office, to find practical and durable solutions to the problems which patients living on both sides of the border face on a daily basis. In March, the Secretary of State for Health made a commitment to this House that, by the end of this year at the latest, we would find a solution to the problems faced by English patients who must currently use NHS services in Wales but who would prefer to receive their treatment in England. My right hon. Friend has also asked the chief executive of NHS England to investigate the possibility of the English NHS providing treatment to Welsh patients in areas where the Welsh NHS proves unable to provide the care they need.

21:00

In its second report, the Silk commission made recommendations in this area. The Government have been clear that we do not consider this Bill to be an appropriate vehicle for the implementation of Silk II recommendations, but we are considering carefully those that could be taken forward without the need for primary legislation, with a view to implementing, in this Parliament, those where a good case is made. It is essential that we consider carefully any proposed solutions to ensure that there are no unintended consequences or new layers of bureaucracy created for patients or medical professionals. Our review of cross-border arrangements, coupled with our consideration of the Silk II recommendations, provides the right platform for ensuring better cross-border health provision in future. I would like to thank my hon. Friends for bringing forward their amendments and enabling this Committee—or at least some Members of this Committee—to debate the vital issue of Wales’s health service and the effect on cross-border health care. I do not believe the Wales Bill is a suitable vehicle for addressing the concerns expressed this evening, but I undertake to relay the strength of feeling of Members of this House on the issue of health services in Wales generally, and the organisation and funding of cross-border health services in particular, to the Secretary of State for Health, the First Minister and the Welsh Minister for Health and Social Services. I would welcome this House returning to this issue on Report, to enable me to apprise hon. Members of the progress of the work I have described. On that basis, I ask my hon. Friends not to press their amendments to a vote.

Finally, let me deal with new clause 1, which was tabled by right hon. and hon. Plaid Cymru Members. The Government have been consistently clear that our priority is to reduce the deficit, and so any changes to the Barnett formula must await the stabilisation of the public finances. However, we have been working closely with the Welsh Government on Welsh funding. In particular, the Government recognise that there has been convergence between the levels of funding in Wales and England since devolution, and that is of course a significant concern in Wales. As a result, in October 2012 we agreed a joint process to review the levels of funding in Wales and England in advance of each spending review. If convergence is forecast to occur over the spending review period, there will be a joint discussion of options to address the issue in a fair and affordable manner, based on a shared understanding of the evidence available at that time. In advance of the 2013 spending round, a joint review was therefore undertaken by the two Governments. That review determined that funding levels are not expected to converge during the period to 2015-16—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. The next review is expected to take place in advance of a spending review in 2015.

[Mr Llwyd]

The right hon. Gentleman is describing the process for the Barnett floor, which has been well known for several months. He says that some urgent work is being undertaken by government on this issue. Therefore, it would not be an imposition to expect a review to be forthcoming within six months of this Act coming into force.

[Mr Jones]

I take it the right hon. Gentleman means a review of the Barnett formula itself.

[Mr Llwyd]

indicated assent.

[Mr Jones]

Well, I can only reiterate the point which I thought the right hon. Gentleman had accepted: that our priority is to address the deficit we inherited from the Labour party at the last election. Nevertheless, the next review is expected to take place in advance of a spending review in 2015 and it is likely to be around the time when this new clause suggests the report should be published. These arrangements ensure that we have a shared understanding of funding levels in Wales, and a process is in place to consider options should further convergence be forecast to resume. It therefore provides a firm basis for proceeding with the new financial powers in the Wales Bill, and I hope that the Plaid Cymru Members will therefore not press new clause 1 to a vote. I also ask hon. Members to support clauses 21 and 22 standing part of the Bill and to support amendment 29.

[David T. C. Davies]

Given what I have heard today, I am perfectly happy for now to withdraw the amendment. I look forward to working with the Secretary of State for Wales and the relevant Welsh Assembly Minister in drawing further attention to this issue in Wales and to returning to it on Report. I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: 29, in clause 21, page 23, line 32, at end insert—

‘() in sub-paragraph (2), after paragraph (a) insert—

“(aa) section 119 in so far as it relates to estimated payments for a financial year into the Welsh Consolidated Fund or to the Welsh Ministers, the First Minister or the Counsel General;”;’.—(Mr David Jones.)

This amendment ensures that the Assembly is not prevented from modifying section 119 of GOWA 2006 (statement of estimated payments) provided such modification relates to the estimated payments described in the amendment and not to the Secretary of State’s duty in subsection (3) of that section.

Clause 21, as amended, ordered to stand part of the Bill.

Clause 22 ordered to stand part of the Bill.

New Clause 1

Review of options for Barnett formula reform

‘(1) The Secretary of State shall make arrangements for a review of options for reforming the Barnett formula in order to meet the objective of calculating the block grant funding for Wales on the basis of need.

(2) The Secretary of State shall lay a copy of the report of the review mentioned in subsection (1) before each House of Parliament within six months of this Act receiving Royal Assent.’.—(Mr Llwyd.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

21:06

Division 263

Ayes: 5

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Plaid Cymru: 3
Independent: 1
Social Democratic & Labour Party: 1

Noes: 260

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Conservative: 221
Liberal Democrat: 37
Democratic Unionist Party: 2

Clauses 23 to 29 ordered to stand part of the Bill.

New Clause 7

Crown Estate in Wales

‘Her Majesty may by Order in Council provide for the transfer of legislative responsibility for the Crown Estate in Wales to the National Assembly for Wales.’.—(Mr Llwyd.)

Brought up, and read the First time.

[Mr Llwyd]

I beg to move, That the clause be read a Second time.

[The Temporary Chairman (Mr David Crausby)]

With this it will be convenient to discuss the following:

New clause 8—Crown Estate in Wales: Revenue—

‘Revenue raised by the Crown Estate in Wales shall be paid into the Welsh Consolidated Fund.’.

New clause 9—Crown Estate Commissioner with special responsibility for Wales—

‘(1) In Schedule 1 to the Crown Estate Act 1961 (Constitution etc of Crown Estate Commissioners), paragraph 1 is amended as follows.

(2) After sub-paragraph (3) insert—

“(3A) One of the Commissioners shall be appointed as the Crown Estate Commissioner with special responsibility for Wales, who must be a person who knows about conditions in Wales as they relate to the functions of the Commissioners.”.

(3) After sub-paragraph (4) insert—

“(4A) The Crown Estate Commissioner with special responsibility for Wales shall be appointed on the recommendation of the Chancellor of the Exchequer, who shall consult the Welsh Ministers before making that recommendation.”.’.

[Mr Llwyd]

Everyone will be pleased to hear that I shall be fairly brief. [Interruption.] I sense the disappointment. I am sorry to let the Chamber down at this late hour.

New clause 7 is about the transfer of ownership and control of the Crown estates in Wales, new clause 8 is about the consequent transfer of revenue and new clause 9 is about appointing a Crown Estate commissioner with special responsibility for Wales. As has been said in various debates by various colleagues, we have set about preserving the integrity of the Silk recommendations, so in speaking to these new clauses, which stand in my name and those of my two honourable colleagues, my hon. Friends the Members for Arfon (Hywel Williams) and for Carmarthen East and Dinefwr (Jonathan Edwards), I shall first deal with new clause 9.

New clause 9 is the recommendation of the cross-party commission on devolution, which was chaired by Paul Silk. The recommendation is less than we wanted, but it recognises what was agreed as part of a compromise. That is why it is disappointing to see it left out of the Bill by the Government. The new clause deals with the appointment of a Crown Estate commissioner with special responsibility for Wales.

The Crown Estate has a diverse range of holdings throughout Wales. As well as agricultural land and mineral rights, these include the sea bed out to the 12-mile nautical limit, within which it is responsible for issuing, for example, permits and leases for wind energy creation. However, the Crown Estate is not accountable to the people of Wales, and all profits from its holdings, both onshore and offshore, are passed to the UK Government. These are likely to grow substantially in the future, mainly due to the demand for renewable energy. We in Plaid Cymru believe that ownership and control over the Crown Estate in Wales should be transferred to the Welsh Government. That is the issue we are probing through new clauses 7 and 8.

The Crown Estate in Wales is likely to be increasingly important, especially in the context of its role, as I said, in developing renewable energy. Devolving the Crown Estate is essential in order for Wales to have a say in how energy projects are planned and to see financial gain from the natural riches that are harvested by them, whether that is renewable or other forms of energy.

We welcomed the announcement roughly a year and a half ago by the United Kingdom Government establishing the coastal communities fund, which will increase investment in Wales based on a share of Crown Estate revenues above the existing Barnett formula allocation, but we need to make progress and build on this.

The Silk commission recommendation of a Crown Estate commissioner with special responsibility for Wales was reached as a compromise. We believe that the recommendation should be adopted as soon as possible and the Bill seems to us to be the vehicle for so doing. The London Treasury is the Crown Estate’s sponsor Department, with the Economic Secretary as its sponsoring Minister. The Crown Estate is led and directed by its board of eight commissioners. The board includes a member who represents Scotland, but no other part of the United Kingdom is specifically represented. The Scottish Government are consulted on the appointment of the member representing Scotland.

Although Wales accounts for a relatively small percentage of the value of the Crown Estate’s portfolio, amounting to roughly £8.6 million, we believe that that will increase substantially in the future and that it should be within the control of the Government and the Assembly of Wales. Dr Richard Cowell of Cardiff university suggested in his evidence to the Silk commission that

“bringing ownership of the Crown Estate in Wales to the Welsh Government might enable a better quality of debate about the kind of off-shore renewable energy development pathway that is appropriate for Wales, and open up discussion on how the royalties from resource exploitation should be best invested.”

We believe the Wales Bill, given its financial and taxation remit, should include the same provision as is made for Scotland in the Scotland Act 2012, which provides for a Crown commissioner with special responsibility. Not only should Wales be equal with Scotland in this regard, but all the main parties have agreed to it as part of the recommendation of the Silk commission. Recommendation 17 of the second Silk report states that

“there should be a Welsh Crown Estate Commissioner”

and that

“a Crown Estate office should be established in Wales”.

[Jonathan Evans]

The right hon. Gentleman is putting forward an interesting proposition. May I test the point that he made that the revenue would increase significantly? I hear what he says and I understand the point about the development of renewable energy, but can he share with us any study or analysis that has been done, or is that just an observation?

[Mr Llwyd]

To be frank, it is probably an observation, but one can look at what would have been the Severn barrage; what is going on in Swansea at the moment; various other projects off Ynys Môn, such as wave power; and the way in which the Crown Estate is seeking vastly to increase its mooring fees, for example at Abersoch in my constituency, doubling, trebling and quadrupling the annual fee for mooring a boat, of which there are several hundred in that bay. Fees for mineral exploitation are also being increased and there are common land rights from which it is entitled to receive revenues, which are increasing. Taking all that in the round, and if there is to be further exploitation of natural resources offshore, and indeed onshore—whether that will happen, I know not, but it probably will—I can only conclude that there will be a substantial increase in revenue in the years to come. I cannot give the hon. Gentleman hard figures, but I surmise and I believe that the case is made that there will be a substantial increase in the future.

The new clauses are probing amendments, but I will be very interested to listen carefully to the Minister’s response.

[The Parliamentary Under-Secretary of State for Wales (Stephen Crabb)]

It is a pleasure to serve under your chairmanship for the final part of day two of the Bill Committee on the Floor of the House this evening, Mr Crausby, and I thank the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd) for the way in which he presented the new clauses and the spirit in which he spoke to them. He is always constructive and informed on these matters.

In tabling the new clauses, the right hon. and hon. Members from Plaid Cymru seek to establish a mechanism by which the Crown Estate in Wales can be devolved. New clause 7 sets out a mechanism to devolve the Crown Estate in Wales to the Assembly; new clause 8 requires revenue from the Crown Estate in Wales to be paid into the Welsh Consolidated Fund; and new clause 9 specifies that one of the Crown Estate commissioners shall have “special responsibility for Wales” and

“shall be appointed on the recommendation of the Chancellor of the Exchequer”,

who must consult Welsh Ministers before making a recommendation.

As hon. Members will be aware, the Silk commission made several recommendations in its part II report relating to the Crown Estate in Wales. It recommended that a Welsh Crown Estate commissioner be appointed in consultation with the Welsh Government, that a Crown Estate office be established in Wales, that the existing memorandum between the Crown Estate and the Welsh Government should be published and regularly updated, and that more emphasis should be given by the Crown Estate to the Welsh supply chain.

The Silk commission did not recommend transferring ownership of the Crown Estate to the Welsh Government. Typically, Plaid Cymru seek to go further than the commission recommended, and in doing so are pre-empting proper consideration of the commission’s recommendations. My right hon. Friend the Secretary of State and I have repeatedly made it clear that the Government do not regard the Bill as an appropriate vehicle for implementing Silk II recommendations. It will come as no surprise to Opposition Members that we also do not regard it as a vehicle for going further than Silk recommended.

Silk recommendations that require primary legislation should be matters for political parties to consider in preparing their election manifestos. Those that do not are being actively considered by the Government. I therefore urge the right hon. Gentleman not to press new clause 7, 8 and 9.

[Mr Llwyd]

The new clauses were probing amendments, so I seek leave to withdraw the motion.

Clause, by leave, withdrawn.

The Deputy Speaker resumed the Chair.

Bill, as amended, reported.

Bill to be considered tomorrow.