Wales Bill

David T C Davies Excerpts

Monday 31st March 2014 Commons Chamber

[Mr Jones]

That was some 12 years ago, and, of course, we all change our minds. I am sure that the hon. Gentleman changed his mind in the light of his experiences in the Blaenau Gwent election, the first election that he fought.

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

As one who has not changed his mind, may I ask whether the Secretary of State was as surprised as I was to read in the Western Mail that Opposition Members are offering to give the Assembly the power to raise income tax by up to 15%—and this only a few years after they all seemed to agree that the Assembly had the tools with which to do the job?

[Mr Jones]

Indeed: a Damascene conversion. The hon. Member for Pontypridd (Owen Smith) is a particular enthusiast—he now believes that 15p should be devolved to the Assembly, whereas as recently as 5 February he clearly stated that he did not believe in any tax devolution at all. He will clearly have some interesting explaining to do later in the debate.

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[Owen Smith]

That is a legitimate question. I have said previously that although we will support the devolution of stamp duty land tax and landfill tax and the putting of the income tax question to Wales, we remain concerned about tax competition. Over time, that might result in other parts of Britain wishing for similar degrees of autonomy, thereby reducing the ability of the central Exchequer to pool resources, share risk and redistribute from wealthier to less wealthy parts of Britain. That abiding concern of mine needs to be considered.

[David T. C. Davies]

Will the hon. Gentleman clarify his point? If he believes that the Assembly should have the power to vary income tax by up to 15p in the pound, there will inevitably be some form of tax competition—unless he wants to give the Assembly the power to prevent anywhere else from varying its levels of income tax.

[Owen Smith]

That is not inevitable at all. I shall discuss the issue later in my speech, when I will answer the hon. Gentleman in full.

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[Owen Smith]

I presume the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) is pleased, is he, that the poorest of his constituents in Shrewsbury pay more as a proportion of their income as a result of the VAT increases that his party brought in? Or is he not pleased that they are paying that? [Interruption.] If he wants to intervene, I will happily sit down. I give way to his colleague.

[David T. C. Davies]

I am genuinely confused by what the hon. Gentleman is saying. On the one hand, at the Labour party conference, he went out and said that a Labour Government would give the Assembly the powers to vary tax by up to 15%, which is 15p in the pound. He also made that point earlier on. But now he is saying that he does not believe in any sort of competition and so one would presume that he does not think that the Assembly should be able to vary taxes at all. Unless he is suggesting that the Assembly should now have the power to tell central Government the level at which to set taxation, I do not see how he can hold those two completely contrasting positions. Will he please explain?

[Owen Smith]

With the greatest respect to the hon. Gentleman, it is not hard to get him confused—I say that with full respect and friendship, of course.

We have reason for our concern, because of the way in which the Tory Government have cut taxes. Labour believes that taxes should be fair and progressive, and accepts that it is not unreasonable for the Government, as they hand over borrowing powers to Wales, to draw some connection between the amount of borrowing and the amount of taxes devolved to Wales, especially given the massive cut to the capital budget. That is why we have decided that we will support the question of the devolution of taxes being put to the people of Wales, subject to what we have called a triple lock.

First, there must be an agreement that there will be fair funding for Wales, and an acknowledgment that, as Holtham has pointed out, convergence is a disbenefit for Wales. Secondly, we need an agreement that the proposal will leave Wales better off, not worse off. The Secretary of State read out the mechanics of indexation earlier on, but failed singularly to address the question I asked, which was whether the Government have conducted any sort of analysis as to whether Wales will be better or worse off, over time, given the volatility of taxes in both places. I suspect that he has not done that analysis and that is why he could not answer my substantive question of whether Wales will be better or worse off.

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[Mrs James]

I thank the hon. Gentleman for his intervention and I will look at those figures again. I must say they were a bit of a challenge and I do not consider myself an unintelligent person. I think there are questions we have to ask, and this is the place to ask them. Again, we come back to the Northern Ireland question: why can Wales not be trusted to raise the money it vitally needs and will be needing in the future? When the formula is applied to Wales, the sums simply do not add up. I seek further clarification from the Minister on this matter.

I appreciate that when stamp duty and landfill tax are devolved, that will provide the Welsh Government with an independent revenue stream worth around £200 million a year. However, these taxes will not be devolved until April 2018, four years from now. We have to have the borrowing powers now. We have to have them set at a level that is appropriate for us in Wales and that will allow us to grow and develop. We need those resources as soon as possible to mitigate the effects of Tory cuts to the Welsh budget. As the party of devolution, we cannot accept a settlement that places us in a restrictive position regarding borrowing.

[David T. C. Davies]

I thought I heard the hon. Lady say that there had been Tory cuts to the Welsh budget, but as far as I am aware there have not been any cuts whatsoever to the Welsh Assembly budget; it has remained at the same level over the last few years.

[Mrs James]

Well, out there on the streets life is very tough and I think the hon. Gentleman is wrong. I disagree with him: we are living every day with the effects of Tory budget cuts—long term, every day—and perhaps we should discuss this further in a different debate under different circumstances. I disagree with the hon. Gentleman on that matter.

Wales deserves the very best settlement, so we shall address this Bill positively while being ever conscious that it needs to reflect the evolving demands of an emerging Government. Welsh Labour and the Labour-controlled Welsh Government always have served, and always will serve, the needs of the people of Wales, encouraging greater self-determination for our citizens and ensuring that adequate powers are devolved whenever possible. I welcome the Bill, and I will support aspects of it, but I ask the Minister to address the issue of the borrowing powers.

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

I am not going to be able to give a warm welcome to the Bill; a slightly frosty and formal welcome is probably the best I can manage at the moment. However, I would like to thank the members of the Welsh Affairs Committee, who worked extremely hard throughout January to scrutinise the Bill in time for the Secretary of State to introduce it. I would also like to thank the Secretary of State and his colleagues for accepting some of our recommendations. None the less, we are in a slightly depressing cycle at the moment, in which Members of the Welsh Assembly demand extra powers, a range of non-governmental organisations and other bodies—many of which get some or all of their funding from the Assembly—go along with those demands, then the press jump in, followed by politicians from all the parties.

I was amazed to hear the hon. Member for Pontypridd (Owen Smith) at the Welsh Labour conference the other day making a promise that the Welsh Assembly would have even more powers to raise taxation if he had his way. Today, however, he has come to the Chamber to say that Labour does not like what is on offer, it does not think that there will be a referendum and it does not like tax competition. There is clearly ambiguity there. He is promising greater powers to the Welsh Assembly but at the same time trying to reassure others that those powers would never be implemented. Most people will be able to see through that. At least most parties are able to set out a position.

My own position is clear: I do not want the Assembly to have any kind of tax-raising powers. Members of Plaid Cymru also have a clear position: they want it to have as many powers as possible. We have a right to know what Labour actually stands for in this regard. This worries me, because I know that Labour Members are Unionists, but they do not seem to realise that we are sleepwalking into a disaster. One day, perhaps 10, 20 or 30 years hence, we are going to wake up and discover—[Interruption.] Yes, I will come to the Conservative party in a minute. Hon. Members must contain themselves. We will wake up and discover that we have created de facto independence in Wales simply by giving it one power after another, without making provision to take any of them back.

I am well aware that there are members of the Conservative party, and other parties, who support that course of action. A kind of auction process appears to be taking place, in which one person says, “Let’s give the Welsh Assembly this power”, and all sorts of other people who do not want to be perceived as being opposed to Wales jump on the bandwagon and agree with them. There are members of the Conservative party for whom I have the utmost affection but with whom I completely disagree on this. They seem to take the view that if we give the Assembly enough powers it will hang itself, after which we will be in power. I have a horrible feeling that we might end up dangling alongside it, however, because the Labour party will remain in power to misuse those extra powers, and we will be no better off as a result.

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

I hate to see the hon. Gentleman looking so unhappy. I suggest that the solution comes in the form of two excellent words used by the leader of the UK Labour party at the Welsh conference: “reserved powers”.

[David T. C. Davies]

There is a solution. It is one that we all need to think about, and I hate to say this, but it comes from the Liberal Democrats. It takes the form of a fully federal system. The only way to stop this march towards ever greater powers going to the Welsh Assembly and to Scotland is to draw a line in the sand and say, “Okay, we’re going to give certain powers to Wales, Scotland and Northern Ireland, and maybe to London and other regions of England, but we will not go beyond that line. There will be a federal Parliament in London with fully laid-out powers and a constitutional court to deal with any issues over who has what.” That is the only way of stopping this process. If we do not stop it, I can guarantee that we will wake up in 20 or 30 years’ time to find that the whole of the United Kingdom will have fallen apart. At least Scotland is getting a vote on this. It is having a fully fledged debate on the pros and cons of independence. We are not having that in Wales. Instead, the Welsh Assembly is being given a little bit more power every couple of years, and there is no way of getting any of that power back.

[Wayne David]

The hon. Gentleman has been called early in the debate, so would he be kind enough to clarify whether he is speaking as an individual Back Bencher or as Chair of the Welsh Affairs Committee?

[David T. C. Davies]

Obviously, I am speaking as an individual Back Bencher; it was hard to get any agreement on certain of these issues from the Welsh Affairs Committee. Let me make it clear that I am not speaking for anyone in the Conservative party either—I am entirely on my own on this one, and probably always will be.

I would like to see one improvement that can be made to this Bill. If we consider the powers the Welsh Assembly has already been given, we can see that it has not done terribly well. We have had the sight of the Welsh Minister for Education and Skills apologising, on Boxing day, I believe it was, for the lamentable state of education. As someone who has been through the state school system there, and who has three children in that system, I feel that very strongly. Nor have we seen a good performance from our national health service. Large numbers of people in cross-border areas such as Monmouthshire are desperate to be treated by the coalition Government-run NHS in England. We have even had the spectacle of a Labour Member of Parliament being banned from going before the Health and Social Care Committee in the Welsh Assembly because she was likely to tell a few home truths that members of that Committee did not want to hear. There has thus been a failure even to carry out the proper scrutiny role.

What I would like to see from this Bill is the opportunity not to take powers away from the Welsh Assembly, but to recognise that where there are problems, individuals ought to be given the choice. Somebody in Wales who is ill and wishes to be treated in England should have the right to access the NHS in England, with the cost of treatment being deducted from the block grant. Similarly, if someone in England was happy to wait twice as long as they needed to and be treated in Wales, they could be treated in Wales, with the cost of their treatment being added to the block grant. That would be an excellent way for us to maintain the commitment to devolution while allowing everyone to enjoy the benefits of a national health service.

[Chris Bryant]

The hon. Gentleman thinks it would be much better to move to a federal system. My problem is that that denies the history of all the different parts of the United Kingdom: the whole of Ireland was a kingdom until the partition and so on; Scotland had a completely different legal system even when the Crowns were joined together; and Wales never had a separate legal situation. Asymmetric devolution is actually the most sensible way of progressing.

[David T. C. Davies]

That is a reasonable intervention from the hon. Gentleman. I respond simply by saying that a federal approach is not a perfect solution, but it is probably the least worst solution, and it is better than waking up in 20 years and finding that we have fully fledged independence. Wales has had a slightly separate legal system; I believe that Henry VIII allowed Wales a measure of independence, except for Monmouthshire, which was brought into the Oxford assizes—we do not need to go into that now.

[Hywel Williams]

I do not want to detain the House, but Wales did have a separate legal system for many centuries, codified by Hywel Dda.

[David T. C. Davies]

You rightly told me off last time, Madam Deputy Speaker, for misusing the privilege of being called early and I do not wish to be told off again. What I would say is that I am a democrat and I recognise that much of what has been given to Wales has come about as a result of referendums. What is on offer in the Bill regarding stamp duty and land tax is not that significant. As for giving borrowing powers, I am a pragmatist and if they are going to be used for the M4, I would very much like to see an M4 relief road, so I will willingly go along with that. And of course, income tax powers will not be devolved without a further referendum. I would certainly be encouraging people to vote no in such a referendum, and perhaps for the first time I would be on a different side of the argument from the Secretary of State. Nevertheless, I recognise democracy and I recognise that he is offering a referendum. I appreciate the changes in the Bill which he has made as a result of the scrutiny by the Welsh Affairs Committee. My welcome, frosty and formal as it is, stays in place and I look forward to seeing the Bill progress through the House.

[Mr Peter Hain (Neath) (Lab)]

I rarely agree with the hon. Member for Monmouth (David T. C. Davies), but I always get great entertainment from his sincere and intelligent extremism. He made a very thoughtful speech, for which he deserves credit, but may I correct him on one point about the national health service? I think he will find that more people cross the border from England to be treated in Welsh hospitals than go the other way.

[David T. C. Davies]

That is true, but these people do not do that by choice; they have no choice, and many of them are actively campaigning to be treated back in England and do not want to be treated in Wales.

[Mr Hain]

The facts seem to speak for themselves. We can have an argument about the degree to which people can express a preference, but the hon. Gentleman and his colleagues, led by the Secretary of State and the Prime Minister, persistently rant against the Welsh national health service as part of their war on Wales and completely distort the facts on the ground.

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[Mr Harper]

I agree. All I did at Wales questions last week was raise a perfectly reasonable point on behalf of my constituents. I quoted something that the right hon. Member for Cynon Valley, a valued Opposition Member, had said—it is in Hansard—and then the shadow Secretary of State suggests that I asked something I did not, and pretends that it is all a smear. That is simply not the case; I am a Member of Parliament raising concerns on behalf of my constituents. The previous devolution settlement was not well thought through and I want to ensure that this one is. I am grateful to my right hon. Friend the Secretary of State for taking a great deal of care with the Bill.

[David T. C. Davies]

As a proudly Welsh MP, I am very grateful for all the support we can get in drawing attention to the state of the NHS in Wales. What does my hon. Friend think of the proposal to amend the Bill to allow Welsh patients who wish to be treated by the coalition Government-run NHS to cross the border, with the funding taken off the Welsh block grant?

[Mr Harper]

I have not had time to study that proposal in detail, but on the face of it allowing patients anywhere in the United Kingdom to have choice is very sensible. That is not a policy that the Welsh Government prefer. I think they said in a letter they sent to me that they prefer “Patient voice, not choice.” They will not allow people to have choice, but they can have a voice, which will then be ignored as the Welsh Government proceed as they want to anyway.

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[Mr Williams]

I share that sentiment and referendums can also lead to people in different parties working together to make a compelling case. We would all applaud that, and I think even the good people of Monmouthshire voted yes?

[David T. C. Davies]

No.

[Mr Williams]

Sorry, not quite, but the vote was much better than before. I think there was a bit of a swing of opinion. We certainly welcome the fact that people along the borders voted in bigger numbers for this, although I stand corrected. I am still slightly shocked by the glowing appraisal my hon. Friend the Member for Monmouth (David T. C. Davies) gave of Liberal Democrat policy on federalism; he commended us on that. However, I take on board the point made by the hon. Member for Clwyd South (Susan Elan Jones).

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

It is always a pleasure to follow the hon. Member for Aberconwy (Guto Bebb). It is interesting that he should mention Ukraine at a time when Victor Yanukovych is recommending referendums across Ukraine for more autonomy for its regions.

The Bill is, at best, a pig’s breakfast, but when there is nothing else on the table I guess that the parties will coalesce around it. To be fair, one reason why it is a pig’s breakfast is that the constitutional settlement across the United Kingdom is diverse. The settlements in Northern Ireland, London and Wales—

[David T. C. Davies]

rose—

[Geraint Davies]

I am coming to Monmouth in a moment—and Scotland are very different. It is worth bearing in mind that it might not be timely to make concrete decisions when we do not know the verdict of the Scottish people on becoming independent. We do not know whether that decision will gather pace for the devolutionary process in Wales.

[David T. C. Davies]

I just wondered whether the hon. Gentleman could clarify whether the Bill is a dog’s breakfast or a pig’s ear. I have never heard of a pig’s breakfast before.

[Geraint Davies]

It is a new constitutional phenomenon that I have just introduced. I am sure the hon. Gentleman will delight in it, being a person who indulges in that sort of thing.

If I may reference Scotland for a moment, rational and emotional powers are at play. There are people who thought that Scottish independence was going to go down the tube because of currency, the EU and inward investment, but now, of course, the wind is blowing in a different direction. The people of Scotland feel that they are being told that they cannot live without us and there are the emotions of divorce, so there is a mixture of rational economic argument and emotion. The feeling in Wales is that, rather than facing years and years of Tory austerity, we want to decide our own thing. The reality is that if Scotland leaves the UK we will end up with more Conservative Governments, because of the residual demography, and that will change the appetite for devolution.

Plaid Cymru would obviously like Wales to go down the road of independence and it sees this as a stepping stone. It talks about fair deals and fair funding for Wales even in the knowledge—this is an important point on what is behind the Tory agenda, too—that the difference between taxes raised versus expenditure in Wales is about £15 billion. The Conservative plot is to reduce the number of Welsh MPs, give borrowing and tax raising powers to Wales and forget about giving Wales its fair share of both revenue and capital. In the case of Scotland, the difference, coincidently, is also about £15 billion, but it currently makes up that difference in oil.

We therefore have a situation where it is convenient for everybody to go along this path, but the people of Wales want fair funding now. What that means in relation to the Barnett formula, as has been mentioned, is an extra £300 million a year. Wales should have the same needs-based formula as the English regions. It is not difficult to work that out, so that should just move forward.

With regard to capital, like other parts of Britain outside London and the south-east, Wales gets a small fraction of the investment per head that London gets—London gets about £5,000 per head and Wales gets about £500 per head. That is a problem for everyone outside London. If we migrated some of that investment outside London, we could put pressure on the system to make it more balanced. Britain is quite unusual in that respect. In Germany, for example, Berlin does not dominate Munich or Dusseldorf, so there is no necessity for that balancing.

If the response in Wales is, “Well, we are not getting enough money to do our own thing, so we will have to borrow it,” who will pay for that borrowing? That is the real fear, because there is no money on the table for that. Then there is the false analysis that the borrowing needs to be hypothecated against an income stream from income tax or other taxes, and that the amount of borrowing should be determined by the size of those streams. Frankly, that is just false. It is not the case that in order to justify more borrowing we need more income tax devolution. It is the case that the amount of money Wales will get in future, as the Secretary of State argues, will be broadly the same; it will not be distorted by this method.

My right hon. Friend the Member for Neath (Mr Hain) and I fear that we will end up with less money over time because the tax take per penny of income tax is 70% of what it is in England. If we assume for a moment that the global amount of money remains the same, then where does the extra money for paying back the borrowing come from? Well, it comes from nowhere. The reality is that the money would be paid back by top-slicing revenue, which means top-slicing the amount of money for services. That is what will happen if Wales does not get its fair share of UK funding.

We have already seen the signs and symptoms of the stealthy stranglehold that the Tories want to put on Wales, with the recent U-turns on the valleys lines. All of a sudden we hear, “Here you are. You can borrow some money.” A moment ago there was going to be electrification from Paddington to Cardiff and then through to Swansea, including the valleys, but all of a sudden we are told, “Well, the small print states that the Welsh Assembly has to do that, and it can do that by borrowing.” In fact, the commitment to go through to Swansea is not even fulfilled. The Government said that they would electrify the line from Paddington to Cardiff and then from Bridgend to Swansea, but they will not do the bit in the middle. If the Welsh Assembly Government say that they will not do that because they have another priority, which they might have, as is their right, we will have a bit in the middle that is not electrified, and that is not electrification through to Swansea, so the Government have broken their word.