Hywel Williams
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Wales Bill
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Hywel Williams (Arfon) (PC)
Is it the principle of devolution or the practice—the specific nature of income tax devolution—that requires a referendum?
Owen Smith
That is precisely the impression that it gives. The rationale, as I say, is very clear. The policy only benefits the minority parties in Wales—the Tory party, of course, is a minority party in Wales. It specifically benefits Leanne Wood, the leader of Plaid Cymru in Wales, who intends to stand under first past the post and on the list. I put it to the Secretary of State that the people of Wales will not look well on his gerrymandering elections in Wales in this fashion.
Hywel Williams
As we have a unified British Labour party, did the hon. Gentleman make those arguments to the Labour party in Scotland, where a Minister was elected on a dual mandate? Did he campaign to get that Minister sacked?
Owen Smith
I am not talking about Scotland today; I am talking about Wales. I am talking about the Clwyd West scandal, which the Secretary of State oversaw. I am talking about the fact that this measure is clearly in the interests of the Tory party and nationalist allies, which is why our nationalist colleagues are so keen to intervene.
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 Harper
I have listened carefully to both the hon. Gentleman’s points and the one made by the shadow Secretary of State. It seems to me that they were both taking the brave point of view—presumably, it was a commitment from the shadow Secretary of State—that if the Labour party were, God forbid, to win the next election, it would amend the Fixed-term Parliaments Act and reduce the fixed term to four years. I am not sure whether the shadow Secretary of State has consulted his party leader about that, although I hope he has, for his sake. That seemed to be a clear commitment from him. If the Labour party wins the election, we will see whether it reduces its time in office. I know that the hon. Member for Rhondda (Chris Bryant) says that his party voted for a shorter term when in opposition, but I am pretty confident—I said this at the Dispatch Box, I think—that if his party returns to government, it is highly unlikely that it will vote to shorten its term of office. I might be proved wrong, but I doubt it.
I welcome in general the Bill’s proposals on the devolution of tax powers for the clear reason of accountability. As someone with a constituency on the border, I think it wrong that the Welsh Assembly Government, like the Scottish Government, can spend money on enticing business across the border, but are not accountable for raising the money that they use to do that. Proposals to devolve some of the taxes are sensible; it makes absolute sense for there to be more accountability.
On the issue of capital borrowing, I should say that I am sorry that the hon. Member for Swansea East (Mrs James) is not in the Chamber any more. Let me elaborate a little on my short intervention on her. I looked at the “Wales Bill: Financial Empowerment and Accountability” paper that the Government laid before the House. It is a strange plot, to use the word of the hon. Member for Swansea West (Geraint Davies), that is published and laid before Parliament; I thought plots were conducted in secret, but obviously things have changed.
The paper seems clear: it sets the statutory capital borrowing limit at £500 million. That is linked to the £200 million or so of revenue that is initially being devolved. The limit is higher than if it had been set solely by reference to the same tax borrowing ratio that applies to Scotland. In Scotland, there is a £5 billion responsibility for tax revenues, but only a £2.2 billion capital borrowing limit. If my right hon. Friend the Secretary of State had used the same limit in Wales, there would have been a £100 million capital borrowing limit instead of a £500 million one.
My right hon. Friend has met the challenge to show his workings, which were in the paper presented to the House and available to all Members before this debate. He has clearly set out how the Government reached the £500 million limit. As my hon. Friend the Select Committee Chairman said, the limit was increased to £500 million to allow the Welsh Government to proceed with improvements to the M4, should they choose to, in advance of that element of income tax being devolved. The Government judged that such borrowing was affordable for both the Welsh Government and in relation to the UK’s overall position. That seems a sensible position, which has been transparently laid out in the paper.
Hywel Williams
For the sake of completeness, I should say that a Treasury Minister gave the same evidence to the Welsh Affairs Committee. As the hon. Gentleman says, it would be a strange plot that advertised itself so comprehensively.
Mr Harper
I am grateful for that point, which shows that the Government position is joined up across not just the Wales Office but the Treasury. The right hon. Member for Neath showed an astonishing lack of trust in the Treasury led by my right hon. Friend the Chancellor, whose excellent recent Budget cut taxes for those on modest incomes. The Labour party voted against those—against the fuel duty cut and the tax cuts for modest earners. I find that surprising.
Wayne David
The Labour party had in its previous general election manifesto a commitment on modifying the Barnett formula, with the introduction of fair funding and a floor. That is currently Labour’s policy, and I have every confidence that it will be taken forward.
Given the possibility of a referendum on the income tax powers—although that is not very likely—it is rather disappointing that the Government have not learned lessons from previous experience of referendums across the UK, especially in Wales. The Electoral Commission has made the valid point that we need to learn one lesson, in particular, from the previous referendum on whether the Assembly should have law-making powers, when there was no coherent, registered no campaign and therefore there could not be a registered yes campaign. As a result, we did not have the kind of debate on the Assembly’s powers that we should have had, and that is partly why we had such a relatively low turnout. I am slightly concerned that the Government have not learned that lesson and have not reflected it in their legislative proposals.
Hywel Williams
I rather agree with the hon. Gentleman. I was very disappointed that the no campaign did not organise sufficiently last time. The question about the referendum that I have asked a number of times is how on earth we formulate a question about lockstep, because given that, with all due respect, many hon. Members, and even right hon. Members, might not quite understand it, I do not know how we are going to present it to the Welsh public.
Wayne David
That is a fair point that is worthy of debate.
Another significant constitutional measure is the electoral mechanism by which Assembly Members are elected. A number of Members have already referred to that.
Wayne David
I am at a loss to understand the rationale behind that. We live in a democracy and have to accept the system that Parliament agrees. That does not mean that we think it is right, because it is not—it is fundamentally wrong. What is being suggested in the Bill amounts to gerrymandering.
I will give a couple of examples of how the regional list system as it stands at the moment is being abused in an immoral way. There is the case of Mohammed Asghar. He was elected to the Welsh Assembly as one of Plaid Cymru’s regional list Assembly Members, but having been elected as such, then decided to cross the House and join the Conservatives. Why did he join them? Was it a great matter of political principle? No. It is said that there was a disagreement about the employment of his daughter, so he decided to cross the House and use the system.
Another, more relevant and contemporary example is that of an Assembly Member called Lindsay Whittle. Lindsay Whittle was elected to the Welsh Assembly as a Plaid Cymru list Member for South Wales East. However, Mr Whittle is also a member of Caerphilly county borough council. He lives in Caerphilly and appears to spend a disproportionately large amount of time in Caerphilly. [Hon. Members: “He lives there.”] He does live there, but he works there as well, irrespective of the rest of his constituency. I put this to the House: can it be that Mr Lindsay Whittle is so interested in the council and in his own particular locality because he wants to stand in the Caerphilly constituency at the next Welsh Assembly elections in 2016? I think that is quite likely. The point I am making is that democracy in this country is based on representation. If someone does not represent people properly, but instead represents their constituents selectively and picks out who they are going to focus on, it is undemocratic and unfair. It is reprehensible for the individual to behave in that way, but it is also reprehensible that they are able to do that under the political system.
If Mr Whittle does indeed stand for re-election in 2016, his calculation will be, “Yes, I’ll have a go at Caerphilly but I don’t need to worry if I lose because I still have the old regional list system to fall back on.” That is a practical example of this unfairness. I challenge any Member to explain to the people of south-east Wales how that can be justified and how it is an example of democracy as we understand it—it clearly is not.
Hywel Williams
I am slightly curious. The hon. Gentleman seems to be complaining about Lindsay Whittle doing his job effectively, given that, from what I understand, he is a councillor and he lives in Caerphilly. It reminds me of Lord Foulkes’s remarks about how the Scottish National party is going around deliberately improving services in Scotland in order to be popular.
Wayne David
The essential point is that this individual is a councillor representing his small ward on Caerphilly county borough council, but what about the other wards and local authorities in the region that he is also supposed to be representing? What about the other parts of south-east Wales that he is supposed to be representing? The fact is that he has chosen to represent only some people and to pursue their interests for his political advantage. That is not fulfilling a democratic mandate properly.
Hywel Williams
There is a well-established principle in American politics that if someone does not do their job right, they are kicked out—it is the “kick the bums out” principle. If Lindsay Whittle is not doing his job representing people as a list Member, surely the electorate will kick him out.
Wayne David
The whole point is that people cannot pick and choose who they want on the list. The list is drawn up by the party machines—a closed list. That in itself is undemocratic in my view. People cannot pick and choose. If people are not satisfied with the way that somebody on the list is doing their job, they cannot get rid of that person because the system works to ensure that the vested interests of elites are maintained. Most of those are in the smaller political parties.
Roger Williams (Brecon and Radnorshire) (LD)
It is a great pleasure to speak in this debate. Many great political figures in the history of devolution will be very pleased that it is taking place. My predecessor Richard Livsey, Rhodri Morgan, Ron Davies, Lord Wigley and Lord Elis-Thomas will be delighted, although Richard Livsey is in a more elevated chamber than those in the Palace of Westminster.
Although the Conservatives did not embrace devolution to begin with, their contribution has been substantial. I thought that Lord Bourne, who was a regional Assembly Member, might have been based in Brecon and Radnorshire, but he actually lives in Aberystwyth and is now Lord Bourne of Aberystwyth. It is a tribute to this Government that this Bill has been introduced, and that is to be celebrated. I congratulate the Government on moving quickly with the Bill so as to ensure that part I of the Silk proposals can be acted on in this Parliament. That shows real commitment to devolution and I commend it.
My party, both in Wales and across the UK, believes that power and authority derive and flow upwards from the people and that power must be exercised at the most appropriate local level. We have long supported a federal system as part of our vision for the UK’s constitutional future. In order to ensure that our central principles of dispersing power as widely as possible and ensuring that Wales’s distinct challenges can be addressed, we have advocated and supported devolution strongly. We have argued consistently since the establishment of the National Assembly that it should possess additional financial and legal competences. The key to that has been the need to increase the Assembly’s accountability, and I believe that this Bill goes a very long way to doing that.
It is true that a lockstep, which other Members have mentioned, will put some constraint on the ability of whichever Government are in office in Cardiff Bay to use those powers. Although I would prefer not to have the lockstep, the acceptance of the principle of giving income tax powers to the Welsh Government is such an important step that it should not be dismissed.
In their reasoning on the inclusion of the lockstep, the UK Government have argued that the devolution of power to set different rates
“could distort the redistributive structure (or progressivity) of the income tax system and could potentially be detrimental to the UK as a whole.”
I do not want this Bill to be used as a means of establishing tax competition between Wales and the rest of the UK, but we must accept that tax competition is an inevitable consequence of devolution. If we are arguing that Wales should be able to borrow and raise what it wants to spend, it should have the power to tax as it sees fit.
Overall, although I cannot pretend that I would not prefer it if there were no lockstep, under the circumstances I am willing to accept it, if it means the increased accountability and responsibility for the Welsh Assembly that this Bill will deliver.
Hywel Williams
I agree entirely with the hon. Gentleman about the lockstep, but if taxes were reduced across all bands we would retain a certain amount of progressivity. The progressiveness of the system itself can vary depending on whether the rate goes up or down, so the lockstep is not a full answer to the question of progressivity in respect of income tax.
Roger Williams
I accept the hon. Gentleman’s argument, but that is the form in which the Bill appears, and rather than take the risk of losing the powers, my party is prepared to accept it.
On borrowing powers, I share some of the concerns outlined by my hon. Friend the Member for Ceredigion (Mr Williams), who will speak later, on the issue of writing a borrowing figure into the Bill. In the Welsh Liberal Democrat submission to the Silk commission, we argued for borrowing powers equivalent to those proposed for the Scottish Parliament—a capital borrowing limit of 10% of the total capital budget each year, with a cap at about 10 times the amount. We also asked for a very small amount of revenue borrowing, which would be a better, more sustainable approach to the borrowing arrangements.
In addition to the Bill’s financial measures, I welcome a number of constitutional moves, including those on double-jobbing, five-year terms and the lifting of the ban on dual candidacy. The move to five-year terms will help ensure that issues relating to the Assembly will receive the hearing they deserve during election campaigns. In the 1999 Assembly elections, I stood at both constituency and regional level but failed to get elected in either, so it is not a fail-safe system. Those Assembly elections took place at the same time as local government elections and Carmarthenshire had multi-member wards. There were polling booths with the words, “Remember you can vote for two candidates,” written above them. Obviously, that referred to the local government election, but it confused a lot of electors and resulted in an enormous number of spoilt ballots, because they were not aware of the complexity of the system. I think that having separate election days is very important.
When legislating on a ban on dual candidacy in 2006, the then Labour Government said that the process
“devalues the integrity of the electoral system in the eyes of the public and acts as a disincentive to vote in constituency elections.”
However, in reality it has reduced voter choice and undermined the credibility of the electoral system by punishing parties for being successful. I believe that the Opposition’s often used argument that turnout would diminish because voters would be unprepared to vote in elections in which some losing constituency candidates were likely to be elected as regional candidates is unfounded. Dual candidacy is accepted by the electorate in Scotland and, indeed, for the London Assembly.
We heard from Labour’s Welsh conference over the weekend that Labour would like to see Wales’s powers brought into line with those in Scotland and move towards the reserved powers model. I and my Liberal Democrat colleagues would wholeheartedly support that, but I remind the Opposition that they had 13 years to address those issues. In its 2011 manifesto, Labour made a commitment
“not to seek powers to vary income tax”.
That was a straightforward rejection, so I am very pleased to hear that Labour has changed its view and I look forward to the passage of this Bill through Parliament.
Hywel Williams (Arfon) (PC)
I am very pleased to speak in this debate, because we in Plaid Cymru welcome the chance—at long last—to debate the Wales Bill, modest as it is. We particularly welcome the fact that the Bill is a vehicle for implementing greater financial powers for Wales. Those powers need to be looked at very carefully in Committee, and I look forward to such a debate, as does my hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards). However, we cannot help but feel that the Bill is a lost opportunity to implement the full recommendations of the cross-party Commission on Devolution in Wales, chaired by Paul Silk.
I first want to reflect for a moment on the process and the time that it has taken to get to the Bill today. Following the overwhelmingly successful referendum in 2011—we in Plaid Cymru, as part of the One Wales coalition Government, had pushed for it—and realising the growing appetite of the people of Wales for greater control of their lives, as well as perhaps mindful of the growing appetite across these islands for constitutional change, the Westminster Government set up the Commission on Devolution in Wales to consider the devolution of further powers. Each of the main four parties nominated a commissioner. Eurfyl ap Gwilym served with distinction for Plaid Cymru, and I commend his work and that of the other commissioners.
The commission was instructed to produce two reports—the first on financial powers, and the second on wider policy issues. It was specifically instructed not to look at the issue of funding, namely the Barnett formula. As we have already heard, the independent commission headed by Gerry Holtham noted that Wales loses out on about £300 million each year. I take the point made by the hon. Member for Vale of Glamorgan (Alun Cairns), who is no longer in his place, that the figure varies, but if the UK economy takes off, as we all fervently hope and as the Government certainly hope, the loss will be increased.
The commission produced a highly commendable piece of work in November 2012. Its first report was a complex package of recommendations. I use the word “package” advisedly, because part of our concern about the Bill is that the whole package has not been adopted. We in Plaid Cymru wanted more, as our submission to the commission attests, but we gathered round the compromise that had a chance to work precisely because it was a package of reforms. I know that the commission came to its conclusions after a great deal of hard bargaining.
Albert Owen
The hon. Gentleman is making a very interesting point about the balance on the commission, but surely it is the place of Parliament to debate and decide changes in laws, not just to rubber-stamp commissions.
Hywel Williams
I take the hon. Gentleman’s point entirely. However, the commission was set up by the Government to look very closely at the question and it came to a unanimous judgment, but they then decided to adopt only some parts of its report. My point is that I wanted them to adopt the entire recommendations of part I of the Silk report. It is disappointing that they did not, because we can see the package of reforms that the commission came to as its conclusion.
It is also massively disappointing that the Government waited so long to respond to the report. We were told that they would respond in the spring of 2013. Then it was pushed to the summer. I remember making the point in the Welsh Grand Committee, when the Secretary of State said that spring officially ends in June, that July in Welsh is Gorffennaf—gorffen haf—which means the end of summer. We waited, and autumn came. The nights were drawing in, the countdown to Christmas began and, eventually, a full year after the commission produced its report, the Government responded.
Glyn Davies
I am listening to the hon. Gentleman’s speech with great interest, but does he accept that moving forward with a Bill to recommend tax-raising powers for the National Assembly for Wales is a huge advance in devolution that will, if such powers are granted, transform the Assembly’s authority? Does he agree that introducing those powers in a Bill as quickly as the Government have done—we are debating it today with a view to taking it through in this Parliament—is quite a creditable performance?
Hywel Williams
I am indeed very glad that the Bill is before us, as I said at the start of my speech, but I am contrasting the time between the commission reporting and the Government responding. We suddenly have the Bill before us today. I certainly welcome that, but I have no idea why it has appeared so quickly; it is not for me to comment on the lack of other Government business.
I know that the term “a slap in the face for Wales” is very well used, and I hope that it will be reported tomorrow by our friends in the BBC, but I must say that to ignore such a fundamental report—as the hon. Gentleman has just pointed out—for so long is somewhat disrespectful. More importantly for us in Plaid Cymru and for other hon. Members, it is also damaging to the political and economic progress that our country can make. The Welsh Government continue to be denied the powers that they should be able to exercise—they are also denied the funding that they should have—and that were recommended by Gerry Holtham. However, we are where we are—but where are we?
Towards the end of last year, the Prime Minister swept into the Senedd building in Cardiff Bay to a media fanfare and the flashes of cameras, and announced new financial powers for Wales, but the proposals were rather light on detail. Indeed, the Prime Minister had discovered “anti-gravitas”, as I called it at the time, in making a proposal that then seemed to float away. It was not until some weeks later that we learned that all was not as it seemed. The Government had cherry-picked the cross-party Silk commission’s recommendations—accepting some, but only in part, and even omitting others.
The draft Wales Bill was published in January, and the Welsh Affairs Committee, of which I was a member, was tasked with its pre-legislative scrutiny, with a tight turnaround for producing a report. I must say that I enjoyed the process of scrutinising the Bill, and I pay tribute to all Committee members and to the hon. Member for Monmouth (David T. C. Davies), for his chairmanship. Contrary to his rather fierce, if not sometimes eccentric, persona in this Chamber, he was the model of a balanced Chairman, and I was very glad, if slightly surprised, that he acted in that way.
To return to the narrative, the Government then seemed to be in a hurry, and we now have the Bill. The Welsh Affairs Committee sessions took evidence from a variety of independent academics, civil society groups and even elected politicians from both this place and the National Assembly for Wales. Interestingly, even Opposition party leaders from Cardiff graced the Committee’s sittings. That move was not uncontroversial, because the Committee’s purpose is of course to scrutinise the Government at Westminster. Having the party leaders from Cardiff caused a certain amount of head scratching, because it was something of a first. However, it indicated that this was not some humdrum scrutiny exercise of a small Whitehall Department or a minor Bill because, as was pointed out by the hon. Member for Montgomeryshire (Glyn Davies), the Committee was considering part of the blueprint for the next stage in our national political development, and it deserved such a level of scrutiny.
The consensus that began to emerge was that borrowing powers were vital to allowing the Government of Wales, formed of whichever party or parties, to be able to borrow for investment to boost our economy and create jobs. However, the consensus was that the lockstep on income tax rates meant that the provision could not realistically be varied, because the power was unusable. Other than the duo of the Secretary of State for Wales and his Treasury colleague, the Exchequer Secretary—unsurprisingly—all agreed that it would be far better to have the ability to vary each individual income tax band rate.
During sittings of the Welsh Affairs Committee, I pointed out a paradoxical effect of raising or lowering tax rates with a lockstep. If we raise the tax rates with a lockstep, the higher rates are then less progressive than the lower ones: if we raise tax by a penny on the 20p band, we increase it by a twentieth, while if we raise it by a penny in the 40p band, we increase it by a fortieth. We should bear that slightly obscure ratio issue in mind. Equally, a decrease has a similar effect.
The cross-party Silk commission recommended in the first place that we should not have a lockstep. I proposed an amendment in discussions on the Welsh Affairs Committee report—I proposed that the Committee recommended dropping the lockstep. Unsurprisingly, our three friends from the Tories voted against my amendment; the hon. Member for Ceredigion (Mr Williams) and I voted for it; but, unaccountably, Labour members of the Committee managed to abstain. Even though they have publicly declared opposition to the lockstep in the Committee, they did not step up to the plate.
Jonathan Edwards
How baffled is my hon. Friend on the Labour party’s position on the lockstep? The First Minister says he wants to get rid of it. The shadow Secretary of State said today that he supports it. Who speaks for Labour?
Hywel Williams
I remain baffled—that is all I can say. Irrespective of Labour party internal divisions and wrangling, Labour has said that greater financial powers should have been granted, but now it is possibly saying that they should not be. The Tories remain divided on the lockstep. The greater part of the group in the Assembly complains that income tax powers with the lockstep are unusable, but the other part supported the London party and was given the sack.
I referred to the referendum when the hon. Member for Caerphilly (Wayne David) was in his place. The formulation of the question, if we ever have a referendum, will be extremely difficult, but rather than make the point myself, I shall but quote from the widely respected economist, Gerry Holtham, who told the Welsh Affairs Committee that Welsh politicians are being asked to
“fight a highly losable referendum. Tax is not popular, and, to be frank, neither are politicians at the present time. It is most unfair, but there it is. You are asking them to fight a losable referendum for a tax power they can’t use. It doesn’t look like a high-odds proposition to me.”
I tend to agree with him, particular given the possible complexity of the question, and the possible lack of a no campaign, which has been referred to.
The hon. Member for Nottingham North (Mr Allen), the constitutional expert and Chair of the Political and Constitutional Reform Committee, urged members of the Welsh Affairs Committee to seek to amend the legislation so that the lockstep is removed. He has said that the requirement for a referendum on the limited income tax powers is “ridiculous”. The Secretary of State, however, sung the praises of the lockstep, saying that it could be used to vary all rates and would put Wales at a competitive advantage. He has also noted his opposition to the devolution of long haul air passenger duty, as that would put Bristol airport at a competitive disadvantage. On the one hand, he argues against a competitive advantage, but, on the other, he refers to a competitive disadvantage. That does not seem particularly coherent to me, but there we are. In evidence to the Welsh Affairs Committee, the First Minister seemed to say that he wants Wales both to have a tax competition advantage and not to have one, as expertly adduced in a telling question asked by the hon. Member for Aberconwy (Guto Bebb). That incoherence shows that the cherry-picking of the Silk recommendations falls apart. It is a whole package.
On Labour’s new-found conversion to the need for reform of the Barnett formula, Plaid Cymru has been pointing out the consistent underfunding of Wales through the block grant for well over a decade, but successive Labour Secretaries of State have assured us that
“the Barnett formula serves Wales well”.
I am sorry that the right hon. Member for Neath (Mr Hain) is not here, because those are his words. I know them by heart because I have heard them so often. His consistent standpoint is that the formula serves Wales well and we meddle with it at our peril. I will not intrude on Labour’s private grief and confusion, and the further inconsistency on Barnett that Labour’s leader in the Scottish Parliament seems to generate so effectively and so unconsciously. After 13 years in power when Labour could have sorted the formula, it now cries for fair funding—the hon. Member for Pontypridd (Owen Smith) says that income tax powers without fair funding is a “Tory trap”.
Wales should be fairly funded, as Plaid Cymru has long argued, because every day we lose around £1 million in additional funding. Those figures change, as the hon. Member for Vale of Glamorgan has said—he would no doubt jump up and remind me were he in his place. We lose around £1 million every day, which we could spend on improving our health service, tackling the scandal of poverty or building new schools. For now, the Labour position is no fair funding and no income tax powers for Wales. We know why. That is Labour’s position because it fears that, if we address Barnett, its anti-independence campaign in Scotland will be finally scuppered. Oddly, therefore, the Labour party says in Wales that we must reform Barnett, but the very same unified and indivisible Labour party says in Scotland that we must not reform Barnett.
Meanwhile, the UK Government water down the Silk recommendations to conform to their fundamentally anti-devolutionist view that Wales cannot possibly have something that Scotland does not have. As we have seen this past week, events in Scotland may overtake them all.
Albert Owen
May I ask the hon. Gentleman what the view of Plaid Cymru’s sister party in Scotland is? If there is a no vote, which I hope there is, in the referendum in Scotland, will he and the sister party—the Scottish National party—argue for reform of Barnett in Scotland, which could reduce Scottish revenues from the UK Government?
Hywel Williams
My job is to represent Wales. The Labour party advertises itself as the unified, indivisible Labour party in England, Scotland and Wales. The hon. Gentleman’s point is bogus.
It is important that we now move forward, whatever the weaknesses hon. Members on both sides of the House might find in the Bill. Realistically, income tax might not be varied for some time, or ever, depending on what happens in the referendum, but the Bill will give access to vital borrowing and investment powers.
The Silk commission produced its second report earlier this month. Plaid Members say that Wales should be moving to a reserved powers model as swiftly as possible. We believe it would make more sense to have a referendum on the Silk part II recommendations. That larger and more substantive referendum would consider both true income tax-varying powers and wider policy powers. We will table amendments to preserve the integrity of the Silk report recommendations. Given that the principle of fiscal devolution has been conceded in respect of the other tax-varying powers, we say there is no need for a referendum on a simple income tax-sharing model. I agree with the hon. Member for Islwyn (Chris Evans), who is in his place, who said today that that should be the case. We will seek to amend the Bill accordingly.
Mr David Jones
At the risk of appearing to carp, I should point out to the hon. Gentleman that, a moment ago, he accused the Conservative party of cherry-picking the recommendations of the Silk commission. Is he not cherry-picking, too, when he says that we should dispense with the referendum, which, after all, was recommended by the commission?
Hywel Williams
Our argument is on a package of measures, but the Government have cherry-picked. Our ambition—I make no apology whatever for it—is to have both Silk I and II and even more implemented.
Jonathan Edwards
The Secretary of State has cherry-picked the Silk commission’s recommendations on the ability to vary income tax. Because he has cherry-picked, why does he not devolve the lockstep without the referendum, and then have a referendum on removing the lockstep? That would be a practical way of moving forward, and of preserving the Silk commission proposals and recommendations.
Hywel Williams
That might be a way forward, but I have no idea how we would formulate a coherent question on the lockstep, as I have said. We should work towards all parties committing to a tax-sharing model in their 2015 manifestos, so that that could be achieved without the need for a costly referendum. Then in the future we could possibly have a referendum on the power to vary income tax, along with the wider powers expected as part of Silk II.
Plaid Cymru believes that constitutional change should not happen simply for its own sake, but because it represents the means to create a better society in Wales—more prosperous, more just, more equal and more democratic. That is our positive case. The financial powers recommended in the first report by the Silk commission represent some of the means to achieving that. They empower, but with them comes responsibility—a responsibility that Plaid Cymru would welcome.
Most of the debate has been focused on Wales. As a nationalist, I am pleased to quote an English Member—the hon. Member for Nottingham North again. He said:
“I start from the premise that the UK is the most massively over-centralised of all the western democracies and I find that deeply unhealthy.”
That point is about England and devolution all round—if I may use that 19th century phrase. He continued:
“I welcome this Bill very strongly because it is a step, not a leap—it is a step in the right direction.”
Chris Evans (Islwyn) (Lab/Co-op)
It is always a pleasure to follow the hon. Member for Carmarthen West and South Pembrokeshire (Simon Hart). He is always badgering us—ha, ha, ha!—about the Welsh Assembly.
This Bill is a missed opportunity. It is a Bill of nothing but smoke and mirrors. For too long—since 1999—we have been running around having no satisfaction with the Assembly. We had the Government of Wales Act 2006, which did not settle the constitutional argument. We have had Assembly after Assembly and Welsh Members of Parliament wasting their time talking about constitutional matters. Constitutional navel gazing is okay in the ivory towers of academia, but when the cost of the Silk commission is £1 million, the cost of the Williams report is £155,000 and the cost of the 2011 referendum was £5.89 million, it is time to draw a line. This Bill was our opportunity to do that, but we have had a timid response from a Government who have never, ever secured support in Wales.
Hywel Williams
I am slightly surprised that the hon. Gentleman is talking about constitutional navel gazing when all I have heard from Labour Members is speech after speech about the complexities and even the theology of list membership and constituency membership.
Chris Evans
I can only speak from my own experience. I use the Blackwood high street test when I go to Islwyn. If I walked down that street now and asked people what they thought of the Assembly, unfortunately I would be met with disinterest from most of them. If I talked about the constitutional arguments we have had today or to anybody tuning in today, they would wonder why we were talking about the Wales Bill. They would be more concerned about health, education and transport than debating giving further powers to the Assembly. That is the simple fact.
What we see in this Bill is an anomaly. On the one hand, we see the Government lifting the ban on dual candidacy, yet they are also banning double-jobbing. It seems to me that there is something fundamentally undemocratic about the way the Welsh Assembly operates. If there is a vacancy or a resignation under the first-past-the-post system, there is a by-election. That is correct; that is the model we follow in this place. However, as the Secretary of State for Wales will know, if there is a vacancy or a resignation from the list, people move up one. That is not democratic; there is no looking for a further mandate.
There are serious problems with our electoral system. First, it is difficult to understand. People in Gwent will say to me, “Why are thousands of Labour votes thrown away and I have a Tory”—or someone from the nationalist party—“representing me, but I’ve not voted for them? What is the point in voting Labour in the first-past-the-post system, yet voting Labour in the top-up system but getting no Labour AMs?” That is the situation we have to face and we are not talking about it. When we talk about dual candidacy, I think basic fairness says that in a race of four people, somebody has got to win and somebody has got to lose. Nobody gets the consolation prize of going to the Assembly.
The most damning case against dual candidacy appears in the impact assessment, which says:
“The Government of Wales Act 2006 modified the original devolution settlement to ban candidates at an Assembly election standing simultaneously in both a constituency and on a regional list. This provision has been considered unfair on smaller parties in Wales who may have a smaller pool of high quality candidates to represent them in elections.”
What the impact assessment is saying is that smaller parties in Wales, such as the Liberal Democrats or the nationalists, might not have enough high-quality candidates to stand; therefore, we should relax the rules on dual candidacy.
I do believe it is right to end double-jobbing. It makes no sense and it does not allow MPs or AMs to represent their constituents effectively. That part of the Bill is right, but the worst thing about the Bill is that we will have to come here again in a couple of years’ time and debate the constitutional settlement. That is turning people off not only the Assembly, but politics in Wales, because all that Wales is dominated by at the moment is constitutional arguments.
And so we come to the great part of the Bill: the devolution of income tax. The Government accepted the Silk commission recommendation that Wales should have the power to vary income tax, subject to a referendum. However, they did not accept the model presented by the Silk commission, which would allow bands to be varied independently. Instead, they would need to be changed in lockstep. If the Government want to commission a report at a cost of £1 million in these economic circumstances, surely they should have included all the Silk recommendations and we could have debated them on the Floor of the House. The devolution of tax-raising powers is not a priority—we can see that in our constituency postbags every week. We need a triple test. We need to talk about the issue of fair funding and a period of assignment to see whether it is in the interests of Wales and the UK to devolve income tax.
We already know that Wales is underfunded to the tune of £300 million, but varying income tax powers will not address the issue of fair funding. Once the power to partially set income tax rates is devolved, the block grant will be reduced by an amount equivalent to the Welsh share of current tax receipts. To accept this power while the block grant underfunds Wales would be irresponsible and lock in underfunding for ever. The Wales Bill does not commit to reform of the Barnett formula either, even though the Secretary of State himself has said that the formula is coming towards the end of its life. Again, that proves that this is only a piecemeal Bill and that we will unfortunately be back here on the Floor of the House, however boring and irritating we find these constitutional debates.
If we are to devolve tax powers, there needs to be further examination by the Treasury and Her Majesty’s Revenue and Customs to see how that will affect tax rates on both sides of the border. When we talk about jobs and the economy, it is also important to note that they are being created only by private sector businesses. We should therefore be speaking to those businesses and asking how their PAYE and payroll systems would be affected by the devolution of tax, but we are not. When we are varying tax powers, we also have to bear in mind that many more people live close to the Wales-England border and have to cross that border than live close to the Scotland-England border. Nearly half the Welsh population lives within 25 miles of the English border, while 10% of the English population live within 25 miles of the other side. That is 6.3 million in total. In contrast, just 4% of the Scottish population live within 25 miles of the English border.
Nia Griffith
The hon. Gentleman knows full well that the Opposition have very different priorities from the Government in the way that we deal with budgets and decide what our priorities are. Quite frankly, I think that he needs to do a bit more homework before he begins to make these suggestions.
I turn now to income tax. The Opposition do not accept that there is no accountability without the devolution of income tax. The National Assembly for Wales and the Welsh Government are accountable through elections, and Welsh Ministers are subject to the usual scrutiny procedures. Let us look at councils: more of a council’s budget comes through the block grant than from council tax, but nobody says that councils cannot borrow and that council borrowing has to be contingent on further devolution of some income tax powers.
None the less, we accept that the Welsh Government are slightly anomalous in not having the power to raise revenue. The devolution of a number of minor taxes will rectify that anomaly. It should be noted that in their evidence to the Silk commission the Welsh Labour Government did not actually seek the power to vary income tax. However, since the publication of the Silk commission report we have said that we support the recommendation to give Wales the power partially to vary income tax, contingent on a triple lock. That consists of fair funding, agreed by the Welsh and UK Governments; the power being subject to a referendum; and the power being in the long-term interests of Wales—that is to say that it should tested during a period of assignment.
We would like the Secretary of State to give further details on the period of assignment and to provide reassurances about the ability of HMRC to monitor a Welsh rate of income tax. We believe that further examination is needed of the impact of tax competition arising from different rates of income tax on either side of the border. We want to ensure that that looks at the behavioural aspects of what might happen if income tax rates vary on either side of the border.
Turning to the constitutional issues, we believe that the question of five-year terms is a matter for the Assembly. It may not be practical to table an amendment to that effect, but we want to put on record our belief that it should be something for the Assembly to decide.
On double-jobbing, we are very clear that we do not think that an individual should be an MP and an AM at the same time. It is not practical or fair to the electorate and we certainly support the ban in the Bill.
A number of my hon. Friends have referred to dual candidacy and I want to focus on one aspect of it, namely that the impact assessment notes that more people find it confusing and dislike it than those who favour it, and that smaller parties need the system because they are struggling to find candidates. It is pathetic that some of the smaller parties are finding it difficult to find candidates of the right quality. They should be asking themselves why it is that they cannot find anyone. Is the Liberal Democrats’ problem that no young person wants to knock on doors and explain why the Liberal Democrats propped up the Tories to put up student fees to £9,000 in England while in Wales the Labour Welsh Government pegged fees at £3,500? I cannot see any young person wanting to stand for the Lib Dems. Will young people want to stand for Plaid Cymru when they are worried that they might be told, “If you haven’t got two parents who were born in Wales, you can’t represent Wales”?
Nia Griffith
Well, that is the sort of thing we have heard Plaid Cymru say about whether the captain of the Welsh rugby team should be captain or not. [Interruption.] Plaid Cymru Members can shout and protest all they like, but that is what they said only three weeks ago.
Nia Griffith
I am not sure how the Conservative party will find people to stand for it when many of its Members are simply rubbishing Wales in order to further their electoral interests in England. It may be very difficult for the Conservatives to find people, but if they can they should not try to overturn the ban on the dual candidacy. That is the whole point, is it not?