Wales Bill

Jonathan Edwards Excerpts

Monday 12th September 2016 Commons Chamber

[Alun Cairns]

I am grateful to the hon. Gentleman for the way in which he has made his intervention, but I would still underline the stability of the existing system and the certainty it provides. The title of the St David’s Day agreement was “Powers for a purpose” and I am still seeking to understand what additional purpose would be provided to anyone living or working Wales should there be a separate jurisdiction.

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

The Secretary of State pointed to the administration of the courts in Wales and HMCTS, which has of course recently decimated court service provision across many parts of Wales, including the magistrates court in Carmarthen. When he talks about the benefits of a single jurisdiction, is that what he has in mind?

[Alun Cairns]

The consequence, of course, would be to spend more money on public sector administration such as that. That would preclude the new innovations the Ministry of Justice is seeking to introduce, and new innovations clearly provide new opportunities. There is the opportunity for new services to be brought closer to communities, should we look at how we can enhance and make the system more efficient.

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[Paul Flynn]

The greatest part of the movement that my party has built on over the years is the co-operative movement and its great pioneers. It is a shame that we have not developed it more as a principle. Here, however, we have the opportunity to advance that principle in relation to the reality of the railways.

The purpose of the new clause is to remove the inappropriate restrictions on the exercise of Welsh Ministers’ powers over the rail franchises when they are devolved next year. Let the Welsh Assembly be free to repeat the success of Glas Cymru. It has been agreed between the two Governments that Executive powers over Wales-only services will be transferred to Welsh Ministers. Once that has been achieved, it is important that they are able to operate the franchise in line with their policy priorities.

As things stand under the provisions of the Railways Act 1993, Welsh Ministers would not be able to open the franchise to public sector operators. Those restrictions no longer apply in Scotland, as was pointed out by my hon. Friend the Member for Neath (Christina Rees), and there is no case for them to apply in Wales. If the power is devolved, there should be no policy restrictions on its exercise. It must be open to Welsh Ministers to maximise the effectiveness and efficiency of public transport in Wales, including ensuring that alternative models are fully considered and that new opportunities are seized. For example, if the Welsh Government want to open the Wales and Borders franchise to domestic public sector operators, that should be a matter for them.

[Jonathan Edwards]

I congratulate the hon. Gentleman on new clause 3—it is strong Plaid Cymru policy—but it is based on the assumption that the franchise will be devolved. There have been warm words in the past, but it is unclear from the Secretary of State’s comments that that would actually be the case—hence my new clause 10. Does the hon. Gentleman know something that I do not? Will the powers definitely be devolved?

[Paul Flynn]

That is for the Government to say, but my understanding is that they will be devolved and that is the basis of new clause 3. Such a change took place in Scotland, where it was recommended by the Smith commission. It was agreed by the UK Government and legislated for in section 57 of the Scotland Act 2016, so if we look forward with optimism, the change will come about. The new clause would make equivalent provision for Wales. In short, there is no reason why the Railways Act’s prohibition on public sector operators should apply to Welsh Ministers.

Looking at the reality of what is happening in Wales, over the last 12 years for which financial information is available, Arriva Trains Wales accumulated profits after taxation of £149 million and paid out dividends of £134 million. An average of 91.7% of profits were paid out in dividends each year, with over 100% being paid out in three of those years. Dividends accounted for a total of 11.9% of passenger income over the 12-year period, meaning that a not-for-dividend alternative to the current fiasco could result in a similar decrease in fares.

Furthermore, public funding through franchise payments from the Welsh Assembly Government far outstripped the passenger income of Arriva Trains Wales, amounting to 160% of the passenger income figure. Alternatively, it could be said that 8% of the huge taxpayer subsidy is paid out as dividends. That makes no sense. We are subsidising dividends and not lowering fares. In summary, a saving of 8% to the taxpayer or a fare reduction of almost 12% could be delivered by adopting a public ownership or not-for-dividend model. I hope that the Government will seize hold of that bold venture

The separation of jurisdictions has been a matter of great discussion and I will not spend too much time on it as I think we are under time pressure. We have been grateful for the authoritative comments and deliberations. We are currently disinclined to support amendment 60, although we are sympathetic towards it. We were told that the Lord Chancellor and Welsh Ministers should keep the justice system under review with input from the UK Government’s proposed official working group, so we proposed the appointment of an expert panel to advise them on practical legal issues. This should be a transparent and sustained road to a solution and is also the desire of the Welsh Government. We would like to maintain the suggestions made by my hon. Friend the Member for Llanelli (Nia Griffith) in the Bill’s earlier stages, but there is so much going on at the moment with Brexit and so on that it would not be sensible to make such changes. It would be rather like trying to change a car’s pistons while the engine is running, so we will not support the amendment but we understand the need for change.

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As my hon. Friend the Member for Swansea East said, the Assembly has already called for powers: last March, it passed a motion calling on the UK and Welsh Governments to work together to devolve more powers over the licensing of gaming machines. It is right that decisions on how to tackle FOBTs are taken in Wales, as is the case in Scotland, and the new clause and associated amendments will allow the Assembly to take a lead in addressing the challenge of problem gambling, which is so associated with those machines. I therefore ask Members to fully support new clause 2.

[Jonathan Edwards]

Diolch yn fawr iawn, Mr Deputy Speaker. Amendment 67 and new clause 10, which are in my name and those of my parliamentary colleagues, would put the devolution of the Wales and Borders franchise clearly in the Bill, fulfilling the UK Government’s promise to do so. Before I get into my speech, may I say that I will gladly not say a word if the Secretary of State or the Minister intervenes to say that they will proceed with that promise and if they outline the legislative vehicle whereby these powers will be devolved to Wales?

[Alun Cairns]

We are negotiating with the Welsh Government over the use of a transfer of functions order under the 2006 Act.

[Jonathan Edwards]

The Secretary of State is telling us that he will introduce a statutory instrument once the negotiations are complete. In that regard, I will not be pressing the matter to a vote. I am glad that it is now on the record that he will keep that promise, which was made to the people of Wales in successive statements in the House by the former Prime Minister. Many people in Wales are slightly confused about why the promise has not been included in the Bill, but that is positive news, so I will cut my speech in half.

I would, however, like to raise an associated point about the way in which the franchise may be altered—or, to put it another way, butchered—by siphoning off the more lucrative routes. The Secretary of State is fully aware that those lucrative routes are very valuable to the franchise. The Welsh Government have to put in a huge subsidy, as I understand it, and £700 million was paid between 2011-12 and 2014-15. If those routes are taken away from the franchise, the public subsidy paid by the people of Wales for that franchise will increase significantly.

[Mr Mark Williams]

The hon. Gentleman makes an excellent point about the finances of any such butchery, as he describes it. Does he agree with the great concern of several of my constituents about the impact of that butchery more generally in west Wales on well-established long-distance trade routes between Aberystwyth and Birmingham International or Manchester?

[Jonathan Edwards]

The hon. Gentleman makes a valuable point. That is why the franchise was constructed as it was, and it would be a travesty if the more lucrative routes were taken away. In his summing up, I would be grateful if the Secretary of State alleviated some of those fears.

Now that the Secretary of State has responded positively to some of the main issues that I wanted to raise, I will quickly turn to some of the other amendments in the group—two tabled by the Official Opposition, and the other by the Government—before I conclude. Plaid Cymru welcomes amendment 2, which would devolve the community infrastructure levy. As the hon. Member for Llanelli (Nia Griffith) said, it is associated with local government functions, and it makes total sense to synergise that levy in a devolved context. If the Labour party decide to press the amendment to a vote, we will support it.

In many ways, the principle behind amendment 2 is the same as that behind the Government new clause on the police and crime commissioner elections: because those elections are reserved, it is necessary to put that in the Bill. Amendment 2 clearly concerns something that is associated with a devolved function. I ask the Secretary of State to reconsider his position, if not today, then when the Bill is debated in the other place.

New clause 3 would remove restrictions in the Railways Act 1993 on certain public sector bodies bidding to operate a rail franchise in Wales. That is a long-standing Plaid Cymru policy. Many Labour Members, not least the shadow Secretary of State for Wales, have made powerful speeches about it, and when the time comes for a Division on the new clause, Plaid Cymru will support it. Based on what the Secretary of State said in his intervention, the new clause is not premature. It is pertinent that we make progress on it, and we will support the Labour party in the Division Lobby later.

Lastly, Government amendment 27 is a technical change relating to the wording around nationally significant infrastructure projects, and we see no reason to oppose it.

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

It is a great pleasure to follow all the hon. Members who have spoken so far. As a child, I was intrigued to discover that it took an elephant two years to give birth, because that always struck me as a rather long time. So it seems with the Wales Bill, too, but it is good to be here at this stage of the journey.

I rise to speak in support of several important but practical new clauses and amendments, including amendment 1 and new clause 2 on fixed odds betting terminals. After the moving speeches by my hon. Friends the Members for Merthyr Tydfil and Rhymney (Gerald Jones) and for Swansea East (Carolyn Harris), I think many of us will feel genuinely fired up about the idea of transferring that power to the National Assembly. This is a power that can change people’s lives. This is a power that can do something about the addictive potential of these machines. I very much hope that amendment 1 and new clause 2 are successful.

I support, too, amendment 2, which would transfer power over the community infrastructure levy to the National Assembly. That will create closer links between planning and infrastructure, and it is a good and sensible place for the levy to be devolved to.

Many of my colleagues, including my hon. Friend the hon. Member for Llanelli (Nia Griffith)—my good friend—spoke in great detail about the new clause on railways. It is totally incongruous. It is a case of “Don’t mention the Germans”, a bit like John Cleese in “Fawlty Towers”. It is extraordinary that the Germans can run our trains, and yet public bodies in Wales do not have the right to bid for the rail franchises. Quite frankly, that is ludicrous.

I would like to make a point about amendment 61 on Welsh language broadcasting, because I am a bit sympathetic towards this. My hon. Friend the Member for Newport West (Paul Flynn) is the author of “How to be a Backbencher”. Now that he has a lot of good colleagues on the Back Benches, he can expect us to have read his book with great care. One of the things that good Back Benchers do is to make independent and pertinent points from the Back Benches.

It is somewhat peculiar that the power for the Welsh language is devolved—as it should be—to the Welsh Assembly, but that that is not the case for Welsh language broadcasting. Of course, S4C and many media organisations would be concerned about the proposal, because of the way in which the funding goes to the fourth channel through the licence fee, and I accept that there are practical difficulties with this. It is not that surprising that colleagues from Plaid Cymru—who, after all, want to devolve the whole of Wales—want to devolve this power, but some of the points made by the hon. Member for Arfon (Hywel Williams) on the matter were very pertinent.

This issue goes back to the last Parliament and the whole business of how S4C funding was dealt with, when a Minister from the Department for Culture, Media and Sport came to the Select Committee to tell us that he had never seen S4C but he had heard of Fireman Sam. To be perfectly honest, we must never go back to that shambles. We must never go back to a situation where there is no collaborative working between us in this House and the Welsh National Assembly. What happened in the last Parliament was not on, and it should never, ever be repeated.

I know that we have all enjoyed the Wales Bill and its numerous sittings. I was intrigued to remember that St David said “do the little things.” In fact, he did not say exactly that; he said,

“do the little things that you have seen me do”,

but I have often thought that if he had just said “do the little things”, it would have been very appropriate for us Members in this House going through the minutiae of the Wales Bill.

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[Mr Mark Williams]

Thank you, Mr Deputy Speaker, for calling me as, I think, the last speaker on the first group of amendments. This Report stage has been characterised by rather more interest—

[Jonathan Edwards]

Apart from among the Tories.

[Mr Williams]

Indeed. There is increased enthusiasm for the Bill, comparing attendance on Report with that in Committee, at least on the Opposition Benches.

I very much concur with the hon. Member for Clwyd South (Susan Elan Jones) on what she said about the particular relevance of some of the amendments, not least the one on betting terminals, amendment 1, as well as new clause 2. A big overarching issue with such Bills is sometimes the question: how is devolution relevant to my life? If there ever was an amendment that would have direct relevance to how people live their lives and are able to be supported in their lives, it is that amendment.

New clause 3 on rail franchising is another such amendment. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) kindly allowed me to intervene on that point. Whether we have the capacity to control the rail network from Aberystwyth to Birmingham International airport will have a direct effect on my local economy, and prove a great convenience or inconvenience to many of my constituents. Such important issues are about making devolution relevant, and about making important decisions that are relevant at the most appropriate level. I therefore very much support at least those two amendments.

I want to say a few words about amendment 60, tabled by the hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts), whom I consider a friend. She serves with great diligence on the Welsh Affairs Committee. Of all the issues we looked at during pre-legislative scrutiny of the now infamous Bill, which had so many flaws, the issue that gained most prominence was that of distinct or separate jurisdictions. The Members who have asked what that actually means should look at the amendment in detail. Indeed, they should also look at the excellent report that the Wales Governance Centre has produced today, which gives a clear indication of why this issue is important.

I happen to share, as does my party, many of the aspirations of my Plaid Cymru friends, but my hesitancy on amendment 60 is about the timing. The executive summary the of Wales Governance Centre report, which is very timely, says that

“the administration of justice will require continuing reform to accommodate increasing divergence between the laws and policies of England and Wales.”

That is a fact. Twenty-four pieces of legislation were passed during the last Assembly term, and there is a growing body of Welsh law that requires attention.

Sadly, the Government have shut the door on the issue. They set up a joint working group. I have seen the terms of reference, but I have not seen any report from the group. We do not know how the meetings have been undertaken, what the outcomes will be or what the outcomes will feed into in the future. That is why I look back with some regret to the Committee stage, during which an amendment calling for a commission on justice in Wales was rejected. As such divergence evolves and a body of Welsh law—it is recognised in this Bill, to the Government’s credit—emerges, there will be nowhere for it to go, which is why the idea of a commission was so important.

My problem with amendment 60 is that, as night turns into day, a great leap will be necessary. As Silk suggested, I think we need to consider a period of review and reflection—not vague, cul-de-sac, long-grass reflection, but something set up in statute, as would have been done by the official Opposition’s amendment in Committee, moved by the hon. Member for Newport West (Paul Flynn). The Wales Governance Centre has endorsed the idea of the need to look at and reflect on these issues, and to return to them in due course. Believe it or not, I suggest this issue will not go away; it will return. To our regret, the Government have shut the door on this issue.

Paul Silk said:

“There should be a review within ten years of the case for devolving legislative responsibility for the court service, sentencing, legal aid, the CPS and the judiciary to the National Assembly.”

His report is now an increasingly dated document. I have referred to it repeatedly, but it was some time ago. When the First Minister produced the Government and Laws in Wales Bill—the Plaid Cymru research department has mischievously used the wording of the Labour party’s Bill, as it was right to do in tabling its amendment—he said something very important when questioned by my colleague Kirsty Williams. He said, in accordance with Silk:

“Let’s not pretend that the devolution of justice is easy or that it can be done quickly. At the very beginning, we have to set up the expertise within Government to deal with issues of justice and to deal with the penal system, and that does take a long lead-in time. So, I think it’s a reasonable period of time—that 10-year period—in order to see justice devolved.”

[Jonathan Edwards]

The hon. Gentleman will be aware that our amendment 60 is, line for line, what the Welsh Government introduced as their alternative Wales Bill.

[Mr Williams]

The hon. Gentleman is quite right. I have studied the amendment very carefully, as indeed I studied the Bill that the First Minister presented to the National Assembly and the exchanges between the party leaders about the wording of the Bill on 8 March. The First Minister laid great emphasis, as did my colleague Kirsty Williams, on the timing, and that is the crucial point. I happen to share the aspiration, but I have concerns about the timing. That is why I cannot support amendment 60 tonight—I will not vote against it—and why I am deeply saddened that the Government have not understood the real importance of the issue.

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[Jonathan Edwards]

I will speak on this issue in detail if I catch Mr Deputy Speaker’s eye later in the debate. The Minister will be aware that those powers were devolved to Scotland a matter of only a year or so ago, whereas the Silk commission reported four or five years ago. Perhaps the Silk commission would have come to a different conclusion if it reported now.

[Guto Bebb]

The hon. Gentleman asks me to comment on a hypothetical assertion. I shall refrain from doing so, but it is important to highlight that the Silk commission considered very carefully the difference between the porous nature of the border between England and Wales and the situation in Scotland. On balance, it is my view that the Silk commission came to the right conclusion, which is why we will reject the hon. Gentleman’s proposals. The Wales Act 2014 legislated for the vast majority of the recommendations in the Silk commission’s first report, and our focus should be to work with the Welsh Government to implement it.

On new clause 8, the youth justice system, as with other elements of the criminal justice system, is not currently devolved, but significant responsibilities in relation to the management and rehabilitation of young offenders are exercised by local authorities in Wales, working in partnership with the police and devolved services such as health, children’s services and education. Devolved and non-devolved services already work successfully together in Wales to prevent youth offending, and to manage and support young offenders in the community. The Youth Justice Board provides national oversight and monitoring of those arrangements, and the Youth Justice Board Cymru has worked closely with the Welsh Government to develop a joint youth offending strategy. That establishes a coherent framework for all those involved in delivering youth justice services and ensures that there is an effective youth justice system that meets the needs of young people in Wales.

The Silk commission noted that many of the causes of youth offending relate to devolved matters, and its recommendation on devolution was aimed at promoting greater integration. However, there was no consensus in favour of devolution when youth justice was discussed as part of the St David’s Day process. The Government believe it is important that legislative competence for youth justice remains reserved to allow us to develop a consistent and coherent approach to criminal justice, and the management of offenders across all age groups, within the single legal jurisdiction. There would be significant practical challenges in devolving responsibility for youth justice in Wales while responsibility for the police, courts and other elements of the criminal justice system are reserved.

We place a high priority on addressing youth offending and maintaining a strong relationship with the Welsh Government on those matters. The Ministry of Justice is currently considering the final report of Charlie Taylor, the former chief executive of the National College of Teaching and Leadership, on his review of the youth justice system. As part of his review, he visited Wales to meet Welsh Ministers and to see local youth offending services. The Ministry of Justice will work closely with the Welsh Government to consider the recommendations made in the final report with a view to publishing the report later this year with plans for reform. Given the co-operation that exists between devolved and non-devolved organisations, which we will seek to maintain in taking forward any plans for reform, we are not persuaded that devolving youth justice to create a separate youth justice system in Wales would result in a more flexible, economical or effective response to youth offending.

New clause 9, proposed by the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), would open the door to the apprenticeship levy becoming a devolved tax. When introducing the apprenticeship levy, the Government wanted to make the system as simple as possible for employers to operate, and to avoid adverse impacts on the integrated UK-wide single market. Operating a UK-wide levy based on the national insurance definition of earnings is the best way to achieve this outcome. In particular, it is applied consistently to employers wherever they operate within the UK single market, while this definition of earnings is something that employers are familiar with and is information they readily have in their payroll. This also avoids considerable practical difficulties that would arise if there were different rates and thresholds of the apprenticeship levy in different parts of the UK, which appears to be the thrust of new clause 9. For example, as the charge is on the employer, it would be necessary to determine how such a system would operate for organisations working across borders. This would create additional burdens for businesses that we believe are sensibly avoided. In addition, the Government have made it quite clear that devolved nations will get their fair share of the levy, and discussions are ongoing.

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[Jonathan Edwards]

I rise to speak in support of new clauses 6 and 7. With your permission, Madam Deputy Speaker, I shall press new clause 6 to a vote at the appropriate time.

This is the fourth occasion since my election in 2010 on which I have tabled a new clause or amendment calling for the devolution of air passenger duty to Wales. I am sure that the House will be extremely relieved to hear that I shall not make a detailed speech, as I have presented my arguments many times before and consider them to be completely bullet-proof. I am grateful for what was said by the hon. Members for Newport West (Paul Flynn) and for Llanelli (Nia Griffith), who made the case for new clause 6 both strongly and eloquently. I will, however, remind the House of the broad reasoning behind Plaid Cymru’s proposal to devolve APD to Wales, and why it is significant to the Welsh economy.

As Members will know, APD has already been devolved to Northern Ireland and Scotland. It was included as a key part of the carefully crafted package of devolved fiscal powers in the Silk commission’s recommendations. Anyone who talks to the commissioners who did that detailed and comprehensive work will be told that the fiscal powers were very much a package. I think it very regrettable that both the Wales Bill and the Finance Bill have subsequently cherry-picked that carefully crafted package. Of course devolving APD would give Wales a competitive advantage, and it was telling that the Minister in his opening remarks said his principal opposition to the devolving of APD was that it would give Wales a competitive advantage. The Wales Office says it is against giving Wales a competitive advantage; I will allow the people of Wales to make up their own minds on that.

[Guto Bebb]

The comment I made very clearly was that the devolving of APD would, according to the surveys we have undertaken, result in damage to the availability and choice for commuters and businesses in south-east Wales.

[Jonathan Edwards]

I am grateful for that clarification.

Plaid Cymru tried to include APD devolution in the Finance Bills of 2013 and 2014, I recall, but we did fall to some very England-centric comments by the Treasury officials at the time. These arguments have not yet satisfied us, or I imagine the 70% of the people of Wales who support the devolution of APD, as reported in recent opinion polls—as I said in Committee, that is an extremely impressive opinion poll rating.

On Second Reading of the Bill, the Minister said it was right and proper for Wales not to have the same rights regarding APD as the other devolved nations, and he has reiterated that this evening. Why would the Wales Office seek to deny Wales the same powers as Scotland and Northern Ireland? Why would it deny our only international airport in Wales the potential to use those fiscal levers to expand and develop, and why would it deny the ability of the Welsh economy to grow?

Clearly, increasing footfall at the airport would generate substantial revenues elsewhere in Wales, primarily by boosting economic performance across the whole of the economy, not least of course in the Secretary of State’s constituency, Vale of Glamorgan. Let us remember also that, as Members have said, Cardiff airport is owned by the people of Wales. The Welsh Government effectively nationalised the airport and this additional lever would further enable them to utilise a huge asset in the direct ownership of the people of Wales. It is highly regrettable that we have an airport in England, Bristol airport, effectively deciding UK policy, to the detriment of Wales.

While on the subject of Bristol airport, perhaps I should correct a statement I made in Committee, and I am happy to do so. I said Bristol airport could not accommodate long-haul flights and therefore there was no reason not to devolve long-haul APD. I received a strongly worded letter from Bristol airport—as we can imagine—a few days after the debate; it can accommodate long-haul flights. I am happy to correct the record, therefore, but what it cannot accommodate is the world’s largest aircraft, which Cardiff airport can, given the length of its runway. With the prospect of Wales being dragged out of the biggest and most successful trading bloc in the world, now, more than ever, it is important that we connect Wales to the world, and clearly devolving APD to Wales would enable the Welsh Government to do that more effectively.

New clause 7, in the names of my parliamentary colleagues and myself, seeks to equalise the situation between Wales and Scotland on VAT revenues. I will not be pressing it to a vote, due to the time left this evening. However, I remind the House that there is a consensus that devolution of public spending responsibilities should be accompanied by the assignment of significant own sources of revenue. That principle has now been accepted as this Bill progresses, and therefore the debate in Wales between the political parties is about what that fiscal package of tax powers should consistent of.

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, VAT should be seriously considered as part of the 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 the 2019-20 financial year. The current UK VAT rate is 20%, and half of all the VAT raised in Scotland will be kept in Scotland. A recent article published by the Wales Governance Centre confirms what I said in Committee, stating 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.”

This is in contrast to the rest of the UK and Scotland, where income tax remains the largest source. The Government Expenditure and Revenue Wales report concluded that around £5.2 billion was raised in VAT revenue in Wales in 2014-15. A similar deal to that of Scotland would mean around £2.6 billion being assigned to the Welsh Government. This would mean that more than a third of total devolved expenditure would be financed by devolved and assigned taxes. By my calculation, that would represent an increase of about 13% compared with the amount to be raised under the current proposals.

I presume that as long as we have a Conservative Government in charge of the Treasury here, economic growth will continue to be driven by consumer spending. If that is the case, it is all the more important that the people of Wales benefit directly from that growth and from their own spending power. By devolving proportionately low revenue yielding taxes compared with the UK average, such as income tax, without devolving proportionately high revenue yielding taxes compared with the UK average, such as VAT, the UK Government are setting the tone in the Bill for an unfair and unstable fiscal position for Wales.

The devolution of VAT rates has been dismissed in the UK in the past on the ground that European Union rules prohibit the variation of VAT rates within a member state. Although we are calling only for parity with Scotland in this instance, the UK’s exit from the EU could open a debate on devolving rate-setting powers to Wales. If, as the International Trade Secretary and the Brexit Secretary seem to want, the UK does not remain part of the single market, that could open up a world of possibilities for fiscal policy. Setting VAT rates could give Welsh Ministers a powerful macroeconomic lever, and could perhaps be used in conjunction with other tax powers in considering the overall progressivity of the tax system in Wales.

[Hywel Williams]

I agree entirely with my hon. Friend. Does he agree that the record of Governments in London, both Labour and Conservative, is not encouraging? Under an agreement made in Helsinki in 2008, states are allowed to vary VAT down to 5% in labour-intensive industries. Were that to happen in respect of, say, tourism and construction in Wales, a huge amount of new business would be generated and the lost tax would be made up very quickly, but this Government and their predecessor did not take advantage of that dispensation. We do not need to wait for Brexit. We could make this change now, but the Government refuse to do so.

[Jonathan Edwards]

I am grateful to my parliamentary leader for that intervention. Plaid Cymru has a long-standing policy to make the case at Budgets and autumn statements in this House for the lowering of the VAT level for the tourism industry in Wales. The all-party parliamentary group on the tourism and hospitality industry in Wales, chaired by the hon. Member for Ceredigion (Mr Williams), has also called for that reduction, which would be of huge benefit to the industry.

The Under-Secretary of State for Wales, the hon. Member for Aberconwy (Guto Bebb), has said tonight that he will not support the new clause because the proposal was not part of the Silk commission’s recommendations. This is a classic case of the UK Government cherry-picking powers as it suits them and using the Silk commission as a justification for omission—in this case in relation to VAT—while dismissing its recommendations for the inclusion of measures on, for example, APD.