United Kingdom Internal Market Bill

Debate between Lord Wigley and Lord Hain

Committee stage & Committee: 3rd sitting (Hansard) & Committee: 3rd sitting (Hansard): House of Lords
Monday 2nd November 2020 Lords Chamber

[Lord Wigley (PC) [V]]

My Lords, I am delighted to follow the noble Baroness, Lady Finlay of Llandaff. As she has made so many of the points that I intended to address, I shall not repeat them and I shall curtail my comments accordingly. I agree with the telling arguments made by the noble Baroness, Lady Randerson, and the noble and learned Lord, Lord Thomas of Cwmgiedd. I shall also limit my remarks because of the diabolical communications between Wales and Westminster this afternoon. Noble Lords may see this as an ironic reflection on the amendments that we have just been addressing.

I oppose Clause 30 standing part of the Bill and support Amendment 117, to which I have added my name and to which the noble and learned Lord, Lord Thomas, has spoken. Like the noble and learned Lord, I shall desist from being drawn into the argument that Wales has so often been treated as part of England; that is for another day.

In the earlier debate on Amendment 110, the noble Baroness, Lady Bowles, said that the CMA should be equally available to all four nations. During the debate on the last group of amendments, the noble and learned Lord, Lord Mackay of Clashfern, argued that the devolved Governments should have a voice. This is why I have added my name to Amendment 117.

The Bill is reinventing the CMA as a hybrid body with the OIM—very different from the widely respected body that has hitherto existed. The CMA has to be restructured accordingly.

The Bill is bringing the CMA into a highly controversial area, as it will be dragged into polarised arguments between the Governments of the four nations. Several noble Lords have already raised doubts about whether it is in any way appropriate that the CMA should be used in this way. If the CMA is going to act as an adviser to the Government, it has surely to be an adviser to all four national Governments within the UK. It has to be equally responsive to all four Governments and not beholden unto one Government more than the other three.

It is in that context that I support the amendment requiring there to be a nominee of each of the devolved Governments on the CMA board. Unless this is delivered, the CMA will be seen as the referee and as a body beholden unto one of the teams between which it potentially has to adjudicate. This will inevitably lead to conflict, and it is to give the devolved Governments greater confidence in the CMA that Amendment 117 proposes having a nominee of the devolved Governments within its structure. Having rejected earlier amendments to amend the statutory functions to avoid these dangers, the very least the Government can do is accept Amendment 117, or alternatively bring forward on Report an amendment to achieve a similar purpose. I urge the Minister for once to take a sympathetic approach to this constructive amendment.

[Lord Hain (Lab)]

My Lords, it is a pleasure to follow the noble Lord, Lord Wigley, and all previous speakers in the debate. I wish to speak especially in support of Amendments 117, 118, 125 and 131. As Amendment 131 is in the next group, I shall not speak in that debate as I am listed to do.

These amendments concern the future governance of the Competition and Markets Authority—the CMA—and the creation within it of an office for the internal market, or OIM, under the Bill. These amendments seek to ensure that appointments to these bodies are representative of the four constituent legislatures of the UK and that, in overseeing the internal market within the UK, the OIM does not effectively act as an arm of the UK Government and therefore of only one nation, England.

These proposals are important because they are part of the emerging architecture of what Robert Shrimsley of the Financial Times has called the “one-legged economic strategy” of No. 10, namely the “levelling-up” of the UK regions and nations, which appears to mean allowing No. 10 to subsidise favoured industries without any willingness to partner with either the devolved Administrations or, for that matter, regional and local government, such as mayors. In July, the Financial Times quoted an individual close to these discussions as saying:

“The current plan is an odd combination of reserving state aid [for control from London] but then agreeing to a free-for-all. They just want to be able to bung money at things and do not want UK internal market legislation cutting across that.”


The Bill therefore seeks to create a UK-wide, or at least a Great Britain-wide, regime for market access overseen by the new office for the internal market within the CMA that undermines the current devolutionary settlements, certainly for Scotland and Wales and potentially for Northern Ireland, depending on the outcome of the UK trade negotiations.

The provisions of the Bill to curtail the scope of EU state aid rules that could potentially apply through Article 10 of the Northern Ireland protocol, which the Prime Minister agreed to last year, reflect objections by No. 10 to possible “reach back” into the UK by these EU rules. The Government now seek to give the Westminster Government legal powers to control UK state aid, which will potentially replace the estimated £2 billion average annual European Union structural funds previously distributed to the UK’s devolved nations and regions. Just as the Government are resistant to demands by the EU for a level playing field between the UK and the EU, neither do they apparently wish to see the UK’s internal market subsidy regime between England, Scotland and Wales, and possibly in the event of no deal even Northern Ireland, overseen by an independent UK regulator.

The reason why Scotland and Wales in particular are so unhappy about the Bill is that the arrangements proposed are seen by them as undermining the very principles of devolution. This is because the Bill not only curtails devolved competence in specific ways, for example, by making state aid a matter reserved to Westminster, but will ironically also cut much more deeply into areas of devolved competences to regulate economic activity in relation to goods and services than did the previous EU rules. This is because areas of permissible exemptions from similar EU internal market rules, including public health, environmental protection and the protection and promotion of local heritage, do not appear to be exempt from the proposed UK internal market rules. The Bill also gives the Westminster Government new spending powers in devolved areas with no obligations to consult the devolved Administrations.

The previous Conservative Government of Theresa May envisaged that post-Brexit there would be a new legally enforceable regime for state aid under the CMA. However, the arrangement now envisaged for the office for the internal market is that all appointments to its board and the panel of task force members will, like those currently at the CMA, which is a non-ministerial department of the UK Government, be made by Ministers at Westminster and that the role of the new office will be purely advisory.

Amendments 117 and 118 would give each of the devolved Administrations the power to appoint a member of the CMA board itself and would also ensure that the consent of the devolved Administrations is obtained for appointments of the chair and members of the office for the internal market panel. The Bill as it stands provides only for consultation with, as opposed to consent from, the devolved Administrations in relation to such appointments. Amendment 125 would require the CMA to lay its annual plan, proposals for its plan and its annual report before each of the devolved legislatures. Amendment 131—I accept that it is in the next group—contains similar provisions related the involvement of the devolved Administrations in appointments to the OIM and would strengthen the independence and enforcement powers of the OIM so that it would not be effectively an agent of the Crown.

In addition to crucial aspects relating to undermining devolution in the UK, there is an additional disturbing element to what the Government are trying to achieve here. As pointed out by the Institute for Government, under the Bill as it stands the office for the internal market will have very limited powers. Its reports may be useful in gathering relevant information about how the internal market functions, but there is no obligation on any of the Governments to act on them.

In the Conservative manifesto of 2017 there was a promise to use the returning £2 billion average annual EU structural fund money to set up a UK shared prosperity fund. The March 2020 Budget said that the fund would be realigned to match domestic priorities. The Government have yet to publish a consultation on this fund, but the Welsh Government have already made clear that they are strongly opposed to the idea of the fund being administered from Westminster.

The devolved Administrations have vocally expressed their opposition to the proposals relating to the Bill’s blueprint for the future UK economy, which they say was drawn up with no consultation or respect for divergence between the nations. Nicola Sturgeon has pronounced it “an assault on devolution” and the Welsh Government called it

“an attack on democracy and an affront to the people of Wales”.

I have previously argued that the rarely convened Joint Ministerial Committee, which was created to allow the UK Government and the devolved regions to discuss issues relevant to devolution and consider any disputes between the Administrations, should adopt a modified form of the EU system of qualified majority voting so that the Westminster Government would need the support of at least one of the other three nations for a measure to go forward. Such a measure is supported by the Welsh Government, but not—unsurprisingly maybe—by the chair of the committee, Michael Gove.

The Covid crisis has emboldened the UK’s devolved Administrations to make decisions that significantly diverge from those in Downing Street, and they are thought by many to have shown greater surety in their handling of the pandemic than has Westminster. Far from rewarding them for their competence, however, the Government are exploiting Brexit as an opportunity to impose an autocracy on Great Britain, and potentially on Northern Ireland as well, in respect of these internal market rules.

Agriculture Bill

Debate between Lord Wigley and Lord Hain

Committee stage & Committee: 6th sitting (Hansard) & Committee: 6th sitting (Hansard): House of Lords
Thursday 23rd July 2020 Lords Chamber

[Lord Hain (Lab) [V]]

My Lords, I thank the noble Baroness for her comments, specifically those on Amendment 212, standing in my name and that of my noble friend Lord Wigley, which seeks to

“provide for repatriation of the levy collected in the United Kingdom supply chain to the devolved administration of origin.”

The agricultural processing sector in Wales, from whence I am speaking, is relatively small in comparison to the agricultural output of Welsh farms. The red meat sector is the predominant agricultural activity in Wales, and the processing facilities servicing this sector are strategically placed throughout the UK to maximise accessibility in a system that is heavily reliant on roads and HGV transportation for the movement of livestock.

With levy funding allocated according to place of cull rather than an animal’s point of origin, the centralised processing system disadvantages farmers in Wales. Furthermore, key products such as Welsh lamb and beef, which benefit from the protected geographical indication status—PGI—and derive a greater market share due to this status, are culled in other areas of the UK. It is these locations, not Wales, that receive the levy funds. This imbalance, driven by the streamlining and consolidation of the red meat processing and supply chain sector, is causing additional stress on a red meat sector already under significant financial strain in Wales. Levy Boards, with their increasingly important role in promoting the food products of Wales and working with the agricultural sector to improve efficiency and profitability through knowledge and best practice, should receive an equitable share of levy funds that allow them to work effectively in their respective areas of the UK.

As the UK seeks to negotiate new trade deals with other nations, it is the successful marketing and promotion of our flagship products in Wales, such Welsh lamb, 92% of which is currently exported to the European Union, that could deliver transformational change for farmers there. It would be unfortunate if these opportunities could not be delivered due to a poorly structured levy funding mechanism.

The issue of fair levy funding dispersal is also an important consideration when looking at the delivery of sustainable food production in the UK, a point referred to in passing by the noble Baroness, Lady Jones. A proportionately funded levy body could look beyond helping farmers and the supply chain with economic performance towards a focus on environmental and social considerations, especially sustainability.

Looking further ahead, we would all like to see a food supply chain based around local production, processing and consumption; that would provide potential benefits not only for the farmer but for the climate change mitigation agenda, which is so crucial. That is the long-term goal. In the meantime, having resources allocated fairly to the levy bodies will enable them better to support our agricultural producers as they move towards economic and environmental sustainability. I hope the Minister will accept this amendment and indicate that when he comes to reply.

[Lord Wigley (PC) [V]]

My Lords, I am happy to support the amendment moved by the noble Baroness, Lady Jones of Moulsecoomb, and I agree with her comments. I also agree particularly with the noble Lord, Lord Hain, about the sectoral challenges in Wales and the importance of the facilities being available and of directing, as far as possible, resources towards sustaining them.

Slaughter being located close to the point of production is important from the environmental point of view and indeed to sustaining employment in rural areas. This has been challenged in recent years by a number of economic factors which have tended to favour moves towards centralisation. The question of the resources available from the levy has been a burning issue in Wales. I am convinced that Ministers are aware of that; indeed, the Government have acknowledged it. It is therefore important that a guarantee be put into the Bill regarding the availability of such a levy to Wales, as well as to other locations where beef slaughter takes place. For these reasons, I strongly support the amendment.

Government of Wales Act 2006 (Amendment) Order 2019

Debate between Lord Wigley and Lord Hain

Monday 9th September 2019 Lords Chamber

[Lord Wigley (PC)]

My Lords, I welcome this measure. Before going into any detail, I welcome the noble Baroness to her Front-Bench post; we wish her well. We know that she has a tremendous interest in Wales, and I am sure she will stand up for Wales when there are battles that need to be fought. She has a challenging role in following the noble Lord, Lord Bourne, who undertook his responsibilities in an exemplary manner and gained the respect of the whole House. I wish her as much success as he had in fighting Wales’s corner, which can sometimes be an uphill struggle.

I listened carefully to the Minister’s introduction. It explained why the reaction in Wales I was getting was that these powers had already been identified as coming to us, or indeed had already come. The difficulties that have previously been experienced have been met by this order. As the presiding officer, the Welsh Government and the Assembly welcome the order, I of course support it this evening. However, the way the difficulties were addressed by the 2018 provisions underlines the complexity of the devolution model in Wales, with some things being devolved and others reserved. That mixture can lead to the sort of complications we are putting right tonight. It underlines the need for a clear-cut devolution model whereby things are either wholly with Wales or not, with no grey area that can lead to difficulties.

The 2006 Act, which the noble Lord, Lord Hain, was mainly responsible for getting through, was a very significant step forward in its day. I have previously congratulated the noble Lord on getting it through Cabinet, the House of Commons and this House. However, I think he would be the first to admit that requiring an order every time the National Assembly was going to legislate in every function—an order that could be blocked by a resolution in the House of Commons or by the unelected House of Lords—was not ideal. We have moved on from that, but we seem to have a little hangover from that period in the context of what we are discussing tonight.

Finally, that whole subject has a certain resonance for me. I am present in this Chamber only because of that model. As a party, we had never taken seats in the House of Lords. We changed that at the invitation of and under pressure from the Government of the day because, as we saw it—I think rightly at that time—it was quite invidious that the unelected House of Lords could block by order a legislative requirement of the elected Government of Wales. That is why I came here. That is why we were promised at that time that we would have three people in this Chamber—a promise that was never fulfilled by either Government. That may resonate in Wales tonight.

[Lord Hain (Lab)]

My Lords, I very much agree with the points the noble Lord, Lord Wigley, made. I too welcome the Minister to her role. I stress that the noble Lord, Lord Bourne, leaves big shoes to fill, because he spoke on Wales with an intuitive understanding and empathy from his long political experience. Despite our party differences, he spoke with real authority and I thought he was an exceptionally good Minister in this House. I wish the noble Baroness all the best in following that model.

European Union (Withdrawal) (No. 6) Bill

Debate between Lord Wigley and Lord Hain

2nd reading (Hansard): House of Lords
Thursday 5th September 2019 Lords Chamber

[Lord Hain (Lab)]

My Lords—

[Lord Wigley (PC)]

My Lords—

Trade Bill

Debate between Lord Wigley and Lord Hain

Committee: 1st sitting (Hansarad): House of Lords
Monday 21st January 2019 Lords Chamber

[Lord Wigley (PC)]

My Lords, I am grateful to the noble Lord for introducing this amendment. As far as it goes, I support it, but I shall take up a point that was made a moment ago by the noble Lord, Lord Purvis, from the Liberal Front Bench that trade agreements will certainly need not just consultation with, but the agreement of, the devolved authorities. Let us think of, for example, the trade in lamb in Wales and how basic it is to the rural Welsh economy. Pressure is coming from New Zealand, which is threatening to block movement in the international trade discussions on these matters. If New Zealand were pressing for certain agreements that would undermine our Welsh lamb sector, that would be devastating. The devolved authority has responsibility for economic development, agriculture and rural affairs in Wales. That is an example from Wales. I can well imagine examples from Scotland, such as in the whisky sector. There should be more than just consultation. As I said at Second Reading, there should be a requirement for statutory agreement, a statutory endorsement by the devolved authorities in these areas. It may not be necessary in all areas, but there are certainly some where it is needed.

Therefore, between now and Report I hope there will be an opportunity to explore this area more in conjunction with the devolved Administrations to make sure that at this stage, before a specific difficulty arises, these matters are thought through because when a difficulty does arise, the tension builds up and it becomes a battle of attrition. We need a system that avoids that, and now is the time to get the system right.

[Lord Hain (Lab)]

My Lords, I apologise to the Committee for coming into the Chamber just a couple of minutes into my noble friend Lord Stevenson’s speech. I hope that it is in order to continue to make a brief contribution.

I follow the speeches of my noble friend Lord Wigley and the noble Lord, Lord Purvis, as well as that of my noble friend Lord Stevenson, in saying that it is vital that, particularly in respect of the devolved Administrations— I speak as a former Secretary of State for Wales and Secretary of State for Northern Ireland—we do not see an action replay of what we saw earlier in this whole fiasco. I am talking about a power grab by the Government that repatriated to Westminster powers that had already been devolved but were under the European Union’s aegis. That showed a cast of mind in the Whitehall machine of the Government that I encountered as a Secretary of State, whereby the natural instinct of other departments—particularly Defra and the Home Office, although it went more widely—is to centralise, grasp and keep power, not to devolve it. It is essential that, as the amendment seeks, there is a recognition by Ministers that the natural instinct will be to consult the devolved Governments—and in the case of Northern Ireland, whatever is there; maybe senior civil servants, as now. That should be the immediate instinct of every Minister and every senior official in every government department as they process all this.

My second point relates to paragraph (e) in the amendment, which refers to “appropriate consumer groups” and so on. Will the Government consult the CBI, the FSB, the IoD, the TUC and consumer groups, let alone all the other NGOs that might have an interest? Will that be a natural reflex, as in consulting the devolved Administrations, or will they have to come back in right at the end? I hope that the Minister will be able to give us some reassurance on the record about all that.

European Union (Withdrawal) Bill

Debate between Lord Wigley and Lord Hain

Committee: 9th sitting (Hansard - continued): House of Lords
Wednesday 21st March 2018 Lords Chamber

[Lord Wigley]

I have no doubt it had difficulty in passing it. None the less, the objective was a very valid one—to address the problems perceived in Scotland with regard to the level of alcohol consumption et cetera. The proposal was supported by many people in the social sector who wanted to see that sort of change. This is arguable, but the point is that you can have different tax regimes within a single market, as you have within the European single market. You can within the UK single market.

[Lord Hain]

I am sure my noble friend will agree with this point. Mention has been made of Scottish whisky—Scottish single malts and so on—but the best single malt in Britain comes from the Penderyn distillery in Wales.

European Union (Withdrawal) Bill

Debate between Lord Wigley and Lord Hain

Wednesday 14th March 2018 Lords Chamber

[Lord Hain]

If that is the case, as my noble friend has reminded us, then the Government should be supporting this amendment and putting it into statute.

During the referendum campaign in 2016 two former Prime Ministers, Sir John Major and Tony Blair, both of whom made significant contributions to the peace process, gave speeches in Derry/Londonderry, in which they stressed that imposing a hard border between the north and the south of the island of Ireland would threaten the very basis of the peace process and the stability that the island of Ireland has enjoyed. Both have cogently reinforced their case in recent weeks and are as alarmed as any of us privileged to have served as Ministers in Northern Ireland.

There are more crossing points along this 310-mile border than there are along the whole of the EU’s eastern frontier: 257 compared with 137. The border crosses family farms and separates towns and villages from their natural hinterlands. It is both invisible and ever present, both unremarkable and deeply contested. Even the younger generation on both sides of the border associates the very idea of border controls with conflict and collective trauma. As well as the formal movement of goods, there are many services from cross-border medical and pharmaceutical transactions to people and data movements between supply chains north and south and the infrastructure issues: energy, telecoms, air and rail travel, environmental standards and so on. If, as the Prime Minister insists, Brexit means the UK leaving the customs union and the single market—a rules-based legal entity, not just a political agreement—then Brexit would unavoidably mean the introduction of a hard Irish border.

[Lord Wigley]

Is my noble friend aware that the European Parliament has today voted by 554 votes to 110 for a framework agreement that supports seeking UK associate status but that the necessary frictionless trade can be guaranteed only by membership of both the customs union and the single market? That underlines the point he is making.

[Lord Hain]

I understood that this was a proposal being put by, I think, the leader of the European Parliament, Guy Verhofstadt. I am grateful that my noble friend has brought it to the attention of the Committee.

A hard border is one that consists of layers of barriers to movement—that is, tariffs, quotas, bans and regulations—and requires strict conditions and evidence of compliance to cross: declarations, inspections, authorisations, visas and permits. However, while harder borders require greater means of control and management by states, it is not the visibility of a border that determines how hard it is. The experience of a harder border is felt away from the border line in the obstacles faced by an individual or business when seeking to cross it legally to work, trade or operate on the other side. Hard border arrangements therefore threaten the evolution of a successful all-island economy, which is essential to the economic development and long-term prosperity of Northern Ireland.

A combination of the conditions of EU membership and the operation of the 1998 agreement has enabled cross-border economies of scale, supply chains, public service delivery and practical co-operation to flourish. These are particularly essential in areas, such as those in the central border region, which have suffered the consequences of multiple deprivation and conflict.

It is estimated that 30,000 people commute across the border every day. Around 1 million HGVs, more than 1 million vans and 12 million cars move between Northern Ireland and the Republic every year. Northern Ireland is also a vital route to market for goods from the Republic, with the UK acting as a land bridge to markets in the EU 27—some of the goods going through Wales, I might add. Approximately 40% of container movements to or from the island of Ireland go through Northern Ireland.

Also threatened are 142 areas of north-south co-operation that have developed as a result of the implementation of the 1998 agreement. These range from an all-island regime for animal health and welfare to shared infrastructure and emergency healthcare planning and provision. They bring direct benefits to people on both sides of the border, and much of this co-operation relies on regulatory alignment across it. For example, Dublin Airport is the main entry and exit point for air travel for Northern Ireland, around half of whose residents use it for holiday travel. Brexit will also require a new aviation agreement between the UK and EU member states if there is not to be disruption to flights to and from Ireland to the UK.

Wales Bill

Debate between Lord Wigley and Lord Hain

3rd reading (Hansard): House of Lords
Wednesday 18th January 2017 Lords Chamber

[Lord Wigley]

My noble friend is of course far better versed than I am in these matters. It may well be, as the noble Baroness suggests, that the parson’s nose is coming to the fore in my consideration of some of the more controversial aspects of the Bill.

As the Minister knows, the Plaid Cymru group in the Assembly voted against the legislative consent Motion yesterday, for the simple reason that the Assembly is losing some powers, as we noted in a number of debates in the Chamber in Committee and on Report. Some of those powers may well have been assumed or unclear, but none the less they were used, some for substantive pieces of legislation. The existing legislative powers of the Assembly were endorsed by a 2:1 majority in a referendum in Wales in 2011 and some of the powers implicit in that vote are now being retracted. Some of the legislation enacted by the Assembly since that referendum was made using powers that will no longer be available to the National Assembly when the Bill becomes law. That is a perfectly valid basis on which to register a protest vote, as the Plaid Cymru group did in the Assembly yesterday. None the less, I hope that the Government of Wales will make full use of the powers now available to them under the Bill.

Sadly, the Bill does not provide the long-term settlement to which the Minister referred. No doubt in the fullness of time another Wales Bill will clear the uncertainties left by this Bill and address the issues, many covered by the Silk report, that were avoided in this Bill. Undoubtedly, for example, the devolution of police, prisons and justice will drive that demand, as well as more coherent powers over energy. By the way, I noted something that did not come to the fore during our early debates: the Home Office, which was then under Theresa May as Home Secretary, failed to give evidence to the Silk commission on these matters. I am sure that the Minister will recall that from his work on that committee. A whole new debate will arise, post-Brexit, on financial levers and further tax-varying powers.

Finally, I will say a word of tribute to the noble Lord, Lord Bourne, for the way in which he has conducted the passage of the Bill. His has been a stalwart performance—single-handed most of the time—and we admire the way in which he has kept on top of his brief throughout, although at times we disagreed with that brief. His experience, both as a key member of the Silk commission and a former party leader in the National Assembly, undoubtedly stood him in good stead in this matter. Many of us feel that there were times when he had to defend a government line when, in a previous incarnation, he may well have taken a different line. None the less, I hope that he will be recognised by his colleagues for the work that he has done and I hope that they will take note in future of the advice that he gives on matters relating to Wales. I hope that the Bill will help to the extent that that is possible within its limitations. I therefore wish well those who will live within the framework that is now being enacted.

[Lord Hain (Lab)]

My Lords, I echo the remarks of the noble Lord in thanking the Minister for the way in which he has handled the Bill. Its passage would have been a lot bumpier without his conciliatory approach. I also echo what he said about his officials, including the excellent Geth Williams, who once had the dubious privilege of working for me. I am glad that he survived to serve on the Bill, although what he makes of the dog’s breakfast that it serves up we will never know, his being a professional civil servant.

Finally, I appeal to the Minister. In the light of the Division on the question of employment and industrial relations last week, on which there was a tied vote, I have said to him privately and I repeat publicly that there is a way in which the Government could, even at this late stage, when the Bill goes back to the Commons, bring forward an amendment to tweak the amendment that was moved. As I said, there was a tied vote in the Lords last week. He could do that in a way in which the Government could overcome their reservations and satisfy everybody concerned. He will know that the Assembly has since voted on a Bill in this area. The issue is on its way to the Supreme Court. He can avoid that. It is not too late.

Wales Bill

Debate between Lord Wigley and Lord Hain

Committee: 3rd sitting (Hansard - continued): House of Lords
Tuesday 15th November 2016 Lords Chamber

[Lord Wigley]

My Lords, in view of the time, I shall try to truncate my comments. The amendment would give the National Assembly as of right a proportion of VAT revenues and so give Wales the same tax power in this regard as enjoyed by Scotland. It would also open the possibility, post Brexit, for some variation of VAT levels in Wales to help provide the cash stream needed to service capital investment programmes, as discussed earlier in Committee.

It is widely acknowledged, by the Institute of Welsh Affairs and others, that devolution of public spending responsibilities should be accompanied by the assignment of significant own sources of revenue. Wales’s funding framework has been highly unusual from an international perspective: there are not many Governments in the world with significant legislative and spending powers who do not also have a correspondingly important responsibility for raising tax revenues. If the UK Government are serious about securing a lasting devolution settlement for Wales, the devolution of VAT should be considered as part of a package of devolved fiscal powers.

The Scotland Act 2016 stated that revenues from the first 10 percentage points of the standard VAT rate would be devolved by 2019-20. The current UK VAT rate is 20%, so half of all the VAT raised in Scotland will be kept in Scotland. A recent article published by the Wales Governance Centre states that:

“Welsh VAT revenues have been far more buoyant than other major taxes, such that VAT has become the largest source of revenue in Wales (in contrast to the rest of the UK and Scotland, where income tax remains the largest source)”.

The report entitled Government Expenditure and Revenue Wales 2016 concluded that around £5.2 billion was raised in VAT revenue in Wales in 2014-15. With a similar deal to Scotland, around £2.6 billion would be assigned to the Welsh Government. There would of course be an offset from the Barnett block for however long that remains in its obsolete and unfair current format. Based on the report’s figures, it would mean that more than a third of total devolved expenditure would be financed by devolved and assigned taxes, up from 21% with currently proposed devolution.

I hope that the House will agree that this fiscal lever is essential to secure the success of the Welsh economy. I beg to move.

[Lord Hain]

My Lords, I normally agree with my noble friend on devolution matters, but I want to question the consequences of the amendment. If we look at change in income tax take in the UK and Wales during the past few years—indeed, since 2010-11—we see that income tax receipts have grown across the UK by 6% and in Wales by only 2%. Notwithstanding the noble Lord’s point that VAT represents a much larger proportion of tax receipts in Wales, I would be very surprised given the lower GDP and lower spending per head in Wales if Wales did not do badly out of the devolution of VAT. I have to oppose the noble Lord on that basis. Given his belief in an independent Wales, I understand ideologically why he would want just about everything devolved, but this measure would be folly in the context of the economic, financial and tax realities of Wales’s economy relative to that of the UK.

[Lord Wigley]

VAT is very much more stable and would be less likely to go down by the nature of the expenditure and the pattern of finances in Wales. There is that problem with income tax, but VAT has a much better prospect and I believe that we really should have it.

[Lord Hain]

The noble Lord may have a point in the sense that more VAT proportionately is paid by people on low incomes, and there are relatively low incomes in Wales, but I would want to see the figures. I would want to have the drains up on this proposal before I went anywhere near it, because I would not want Wales to be short-changed by such a reform. On that basis, I oppose the amendment.

Wales Bill

Debate between Lord Wigley and Lord Hain

Committee: 3rd sitting (Hansard): House of Lords
Tuesday 15th November 2016 Lords Chamber

[Lord Hain]

Before the noble Lord sits down, is he now saying that he will not be moving his Amendments 58 and 97 on the devolution of the Wales and Borders franchise? I was going to speak about that briefly.

[Lord Wigley]

As I understand it, the Government have moved on the Wales and Borders franchise. Perhaps the Minister can respond and there will be an opportunity for the noble Lord, Lord Hain, to intervene.

[Lord Hain]

I was going to say that I strongly support Amendments 58 and 97, in the absence of an assurance from the Minister to the contrary, because there is a strong case—following the St David’s Day agreement, the work of the Silk commission and, indeed, the logic of the case—that responsibility for this franchise should lie with the Welsh Government. To avoid taking up any more time, I hope the Minister will confirm that it will be devolved and the Government will bring forward an amendment to that effect at some point, presumably on Report.