Owen Smith
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Wales Bill
Owen Smith Excerpts(10 years, 1 month ago)
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Mr Jones
We are skiing somewhat off piste, because that is not within the competence of this Bill, but there is clear correspondence between the Assembly Government and the Department for Transport on how the upgrade would be funded, and it is absolutely clear that the Welsh Government were paying for the upgrade of the valleys lines.
Owen Smith (Pontypridd) (Lab)
Does the Secretary of State wish to deny that he said on several occasions that it was his Government who were paying for the electrification of the railways in Wales, including the valleys lines?
Mr Jones
What I will say is that we made it absolutely clear that this Government were paying, directly and indirectly, for the upgrade of the main line as far as Swansea and for the valleys lines. I think that if the hon. Gentleman has a word with his friend the First Minister, he will find that there was an exchange of correspondence between the two Administrations which made the funding arrangements very clear, as did an e-mail from the Office of Rail Regulation.
Mr Jones
We have made it very clear that we need to rebalance the finances of this country before we will consider that. Let me remind the hon. Gentleman, however, that in October 2012 there was a specific agreement between the Welsh Government and the Treasury that on the occasion of each spending review there would be an assessment of the issue of convergence, and that is indeed what happened on the last occasion.
Owen Smith
The Secretary of State said a moment ago that he would be voting yes and campaigning for a yes vote in a referendum on tax-varying powers. May I take him back to the time when he was a Member of the Welsh Assembly? In his maiden speech, he said:
“We have no tax-raising powers—long may that state of affairs continue.”
When did he change his mind?
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.
Owen Smith
I think that the Secretary of State has just misquoted me. He will know that what I have said previously in the House on several occasions is that I do not believe in tax competition.
Mr Jones
The hon. Gentleman changes his mind with astonishing regularity. For example, on 5 February, in a Welsh Grand Committee debate, he said:
“I do not believe for a moment that having additional responsibility for tax-varying powers would confer any extra degree of accountability on the Welsh people.”—[Official Report, Welsh Grand Committee, 5 February 2014; c. 18.]
However, during last weekend’s speech to the Welsh Labour party conference, he spoke glowingly of the prospect of devolving 15p in the pound and said that that would
“increase both the accountability of the Assembly and its borrowing capacity too.”
He is clearly a bit at odds with himself, and we look forward to hearing what he has to say later on.
Owen Smith
Will the Secretary of State explain how the indexation method works? Has the Treasury done any analysis on whether the Welsh people would be better or worse off if the rates were not amended at all in Wales? At the moment, that is unclear.
Mr Jones
It should be entirely clear to the hon. Gentleman, because the Under-Secretary of State for Wales, my hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb) took the trouble to write to the Chairman of the Grand Committee, the hon. Member for Gower (Martin Caton), on 10 February, setting out these matters in great detail. I know that a copy of that letter was sent to the hon. Gentleman, and he will know, having read it, that the provisions are as follows:
“In the first year of operation (and any transitional years) the block grant adjustment will equal the amount of tax revenue generated by the Welsh rate of income tax set at 10p. It is important to note the following:
This is the amount of income tax forfeited by the UK Government as a result of reducing the main rates of income tax by 10p in Wales. If the Welsh Government sets a rate of 10p then there will be no impact on their budget compared to current arrangements. By setting a rate of, for example, 11p or 9p the Welsh Government can increase or decrease its budget (respectively) compared to current arrangements, as the block grant adjustment will still be based on the 10p forfeited by the UK Government. That means that the higher or lower revenue resulting from a rate of 11p or 9p (rather than 10p) would not be netted off the block grant.”
Mr Jones
Well, the hon. Member for Pontypridd had not read this letter, so I am reading it out to him. It goes on:
“In subsequent years the initial deduction is indexed against movements in the UK NSND”—
that is, not savings, not dividends—
“income tax base. That means that if the UK NSND income tax base contracts by 2%, the block grant adjustment will decrease by 2%; if the tax base grows by 2%, the adjustment will increase by 2%.”
That should have been absolutely clear to the hon. Gentleman, but he clearly did not read the letter, so I am glad to have had this opportunity to acquaint him with its contents. It clearly contains the reassurance that he seeks.
Mr Jones
No, I will not give way.
Subject to the outcome of a referendum, the legislation provides for the introduction of a Welsh rate of income tax. The main UK rates of income tax would be reduced by 10p for Welsh taxpayers, and the Assembly would be able to set a new Welsh rate—a whole number or half a whole number—which would be added to the reduced UK rates. The rest of the income tax structure would remain a matter for this Parliament.
The Silk commission estimated that reducing the Welsh rate of income tax by 1p would cost the Welsh Government around £185 million, without taking account of any gains resulting from people moving to Wales to take advantage of lower tax rates. That is not an insignificant amount of money, but lower rates of income tax would boost the spending power of working people in Wales and bolster growth in the Welsh economy. Stronger economic growth in Wales could deliver a real boost in tax revenues, providing the Welsh Government with more resources to invest in devolved services and infrastructure across Wales.
Some Opposition Members, most notably the hon. Member for Pontypridd, have suggested that the devolution of an element of income tax is some sort of unspecified coalition trap, set to ensnare the Welsh Government.
Owen Smith (Pontypridd) (Lab)
This is an important debate and an important Bill. There are four broad issues under discussion. The Secretary of State has described some of them—some in more detail than others. I shall explain to the House why he glossed over some of them. The four areas I want to discuss are the electoral arrangements, the devolution of the minor taxes, the borrowing powers—the amount of borrowing in particular—and the devolution of income tax varying powers for Wales.
Let me start with electoral arrangements, which the Secretary of State glossed over in just a few phrases. The reason for that will become clear. The changes in the Bill include a reversal of the Government of Wales Act 2006 ban on candidates standing both under first past the post and on the proportional representation list in Wales. The reason that the previous Labour Government decided to introduce that ban ought to be well understood by the Secretary of State, as it stemmed from a Tammany hall-style example of an election that took place in his constituency of Clwyd West in 2003. On that occasion, the winning Labour candidate was elected on first past the post, while the losing Liberal Democrat, Conservative and Plaid Cymru candidates were also all elected, by the back door and on the back list—Tammany hall in Clwyd West. The system was designed by an earlier Labour Government, but we decided that it was clearly at odds with democracy in Wales. We decided that the people of Wales would not understand how losers could become winners.
Jonathan Evans
How can the hon. Gentleman say that that was by the back door? In essence, he is saying that those people who serve on regional lists are lesser Members of the Assembly than constituency members under a system that his Government introduced.
Owen Smith
No, I was not saying that for a moment. I was saying that I thought that the people of Wales looked askance at losers standing on two separate tickets— first past the post and on the list—to get themselves elected. We have seen why the Opposition oppose that; we believe in democracy and we believe in democracy being seen to be done. We also know why the Government want to reintroduce it in Wales and to allow people to stand both under first past the post and on the list. That reason is captured clearly in the explanatory notes to the Bill, which say explicitly that the measure will benefit smaller parties with a smaller pool of candidates—that is, the Tory party in Wales.
Wayne David
Does my hon. Friend agree that the proposed change is in danger of giving the impression that there is somehow a political elite whose members are nevertheless elected even when they lose elections?
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.
Mr Jones
In the first place, let me say that I object quite strongly to the hon. Gentleman’s suggestion that I would ever be involved in gerrymandering, particularly given that it was his party that introduced this atrocity in the first place in the 2006 Act. May I refer him to what Professor Roger Scully said in his written evidence to the Welsh Affairs Committee:
“If parties that are defeated at constituency level can still win representation through the list, then it is difficult to see why that should not also apply to individuals”?
Individuals represent parties; where they happen to be standing makes no difference at all.
Owen Smith
I am just getting over the fact that the Secretary of State referred to what we thought was a fairly simple safeguarding of democracy as an “atrocity”. I am pleased that I let him intervene, because he chose to read out a piece of evidence given to the consultation on the measure. I note, however, that the Secretary of State failed to inform the House that the overwhelming majority of respondents to the consultation were opposed to the measure. Clearly, this is a nakedly partisan reversal by the current Government. Let me be clear with the House: if we get the opportunity to win back power in this place, we will reverse the measure.
Glyn Davies (Montgomeryshire) (Con)
The hon. Gentleman is making the point forcefully against the proposed change. Can he put to us any independent evidence—there is Labour party evidence, yes, but any authoritative independent evidence—that supports what he is saying?
Owen Smith
I put to the hon. Gentleman the impact assessment and the explanatory notes from his own Government. They make it clear that this is a partisan measure that will only benefit the minority parties in Wales, among which we count the Conservative party. That is what this is about.
Chris Bryant
Is it not particularly irritating that Leanne Wood can stand in Rhondda? She has done it before: she stood in 2001 for the parliamentary seat and lost very heavily. The people of Rhondda will, I am sure, return Leighton Andrews in the next Assembly elections, because he is the best Assembly Member in Wales. They cannot prevent Leanne Wood from being elected, however, because they have no means of affecting the order on the Plaid Cymru list. She gets two goes.
Owen Smith
Absolutely. The only thing I would contest in my hon. Friend’s intervention is the suggestion that Leighton Andrews is the best Assembly Member in Wales. That particular accolade goes, of course, to Mick Antoniw, the AM for Pontypridd.
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. It is best if in this Chamber we discuss principles, rather than the party political chances of individual candidates.
Owen Smith
I am very grateful to you, Madam Deputy Speaker. I simply point out that the explanatory notes referred to the rationale behind the measure as being to help the party political chances of the minority parties in Wales. That is clearly what this is about.
Mr Harper
This is not on personalities, Madam Deputy Speaker. I just wanted to pick up on the point helpfully made by the hon. Member for Rhondda (Chris Bryant). Will the shadow Secretary of State tell us whether the Labour party is proposing, for both Westminster and Wales, to revert to elections in four-year terms, or whether it will stick to the five years in the Fixed-term Parliaments Act 2011?
Owen Smith
My hon. Friend the Member for Rhondda made Labour’s position clear. We are opposed to the gerrymandering shift from four years to five years to maximise the amount of time the coalition can hang on to power. However, we accept that the First Minister of Wales and the Welsh Government would like to see the term extended to guarantee, as the Secretary of State put it, that there will not be a clash between elections in Wales and Westminster. In explaining Labour’s position, my hon. Friend the Member for Rhondda is entirely right. We still feel that four years is preferable, and that five is far too long and diminishes accountability. That said, we will accept this shift and we will support this aspect of the Bill.
On double-jobbing, the third aspect of the electoral arrangements, Labour has always been clear. It has always had an internal party position whereby it does not support people having dual mandates, standing for election and holding office in the Assembly and in Westminster. We are therefore pleased that the Government are moving into line with Labour on this and we will support this aspect of the Bill.
Ian Lucas (Wrexham) (Lab)
I am interested in my hon. Friend’s observation on double-jobbing. Does he agree that it is inappropriate for Assembly Members to stand as prospective parliamentary candidates while, at the same time, serving as AMs? In particular, is it not inappropriate for them to open up constituency offices in the seats that they are fighting? Will he support an amendment to prevent AMs from standing as prospective parliamentary candidates?
Owen Smith
I will have to look carefully at my hon. Friend’s proposal and take it into consideration. I would not want to discourage Members from moving back and forth between the Assembly and Westminster, which I think is a positive state of affairs that should be encouraged, but I note the point he makes so eloquently.
Owen Smith
That is a very good point that we ought to consider. I would, of course, not support parliamentary or Assembly expenses being deployed for party political reasons.
I will move on to the minor taxes, particularly stamp duty land tax and landfill tax. We heard very little detail from the Secretary of Sport—[Interruption.] Well, there was very little sport there for anyone to have, to be perfectly honest. Hopefully we will have a bit more sport with the Secretary of State now. We will support the devolution of stamp duty land tax and landfill tax to Wales. However, there are many questions about how that will be implemented, so we will seek clarification during the passage of the Bill. Perhaps he will take note of some of these points now so that his Minister can respond to some of them later.
The first point concerns the suggestion that properties on the border between Wales and England would somehow be split, with stamp duty land tax being charged on the English portion and whatever its successor tax is being charged on the Welsh portion. It is an interesting concept. Will the Secretary of State tell us at some point during the passage of the Bill how many such properties there are on the border, given how populous it is? Will he tell us how the Government propose splitting those properties, as in many instances they are houses straddling the border? Will there be a number of bedrooms in England and a number in Wales? We know that the Government are keen on taxing bedrooms.
The second point relates to the cost of devolving that to Wales. We understand from the Bill that the Welsh Government will be asked to pay for the administration of any new tax, which is fair and just, and that that will be offset by any reduction in the cost to Her Majesty’s Government of administering the taxes as they had previously done in Wales. Given that the Secretary of State and the Treasury—this was confirmed by the Exchequer Secretary—have conducted little or no analysis of the impact of those various schemes in Wales, will he tell us how much he thinks it will cost the Welsh Government to administer and how much the offset will be?
On the even more important question of the reduction in the block grant that will come about as a result of the changes—it will be reduced by around £200 million and reviewed periodically—will the Secretary of State comment at some point during the Bill’s passage on the volatility associated with stamp duty land tax, because that figure of £200 million varies radically over time? Will he also tell us how he will calculate any differential in the rise and fall of house prices in England and Wales? By way of illustration, stamp duty land tax revenues in Wales have varied wildly over the past 20 years. They were £20 million in 1997, up to £95 million in 2003 and £130 million in 2005, and then down to £55 million in 2008-09 and £65 million last year. It is an extremely volatile tax, so I would be intrigued to know how the Treasury will account for it in any indexed reduction in the block grant, because that will have a significant impact on both the borrowing powers and, potentially, the revenues of the Welsh Assembly Government.
Geraint Davies
As I am sure my hon. Friend knows, over the past year house price inflation has been 13.2% in London and 6.8% across the UK. As I mentioned earlier, Boris Johnson is asking for stamp duty in London, where historically prices have always gone up faster. Is my hon. Friend at all concerned about the differential impact of stamp duty revenues, which he has alluded to already, plus pressure from elsewhere in the UK to have that tax resulting in a less fair and more complicated and confusing situation?
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.
Jonathan Edwards
In Scotland, the hon. Gentleman’s party proposes to devolve responsibility for 40% of the Scottish block grant in terms of tax revenues. How does that sit with the doomsday scenario of tax competition that he has just outlined?
Owen Smith
As I will explain later, and as I am sure the hon. Gentleman knows from my speech yesterday, we propose to replicate in Wales what is suggested by my party for Scotland. Wales will have exactly the same powers under a Labour Government. We can trust a Labour Government not to want to cut the top rate of tax and increase the unfairness of our tax system—unlike Plaid Cymru, whose economic adviser, much like the Secretary of State for Wales and the Tory leader in Wales, would like to reduce the top rate of tax.
Stephen Mosley
Tax competition will, of course, have an impact on both sides of the border. That impact will depend on whether the Welsh Assembly Government increase or decrease taxes. Does the Welsh Labour party want higher or lower tax rates in Wales?
Owen Smith
We want fair and equitable tax rates across Britain. That is why we propose to amend the Bill so that, if a Tory Government in Westminster continue to increase the injustice and unfairness of our tax system by making further cuts to taxes on the wealthiest, Welsh values and Welsh beliefs about social justice can implement a decent and equitable rate of taxation.
Owen Smith
No, I am going to move on. If the hon. Gentleman holds his water, I shall come back to income tax later.
Landfill tax is relatively uncontroversial save for the link to borrowing, to which I shall come later. There is also the link to the landfill communities fund. We heard nothing from the Secretary of State about that, but it is paid to communities with landfill sites within their boundaries. Has the Secretary of State done any analysis about the value of that fund to Wales? How much is collected and how much has been spent in Wales? How many landfill sites are there in Wales in comparison with England?
The Secretary of State is proposing that the landfill tax community fund also be devolved to Wales and that Wales should become responsible for meeting the costs of implementing a revised Welsh landfill scheme. Given that elsewhere in the Bill, the Secretary of State proposes that HMRC duties should not be replicated in Wales, why does he think the implementation of the landfill communities fund should be devolved? Is that yet another example of his wishing to pass responsibilities to Wales without there being the requisite resources?
We absolutely support the extension of borrowing powers to Wales. They are vital to make up for the £1.7 billion cut in funding for Wales—an almost 40% cut in capital funds—that the Government have implemented since 2010.
It is crucial that the Welsh Government be given the ability to borrow in order to try to back-fill the enormous holes in their budget left by the Secretary of State and his colleagues.
There are two measures relating to borrowing in the Bill, both with limits of £500 million—one to cover volatility in tax receipts and the other to cover capital. I wish to talk about the latter. The Silk commission, whose recommendations the Secretary of State keeps telling us he has largely stuck to, said that £1.3 billion should be devolved to Wales for capital borrowing, but the Bill limits it to £500 million. The Secretary of State says, as he repeated earlier, that the rationale for that is to draw a connection between the amount of money devolved to Wales—the volume of taxes—and the volume of money that might be borrowed. The Secretary of State says, as does the Command Paper on the Bill, that that is just like the position of Scotland. In fact, the Command Paper goes further than he did in saying that the Bill is generous given that in Scotland over £5 billion of taxes are devolved and £2.2 billion of borrowing is allowed—£220 million each year—and that if a similar ratio were applied to Wales, then Wales would get not £500 million but £100 million.
The problem with that rationale is that it is not true. The Scotland Act does not draw a connection, as the Secretary of State suggests, between the amount of taxes devolved to Scotland and the amount of borrowing. The Command Paper associated with the Scotland Bill said:
“Scottish Ministers will be allowed to borrow up to 10% of the Scottish capital budget any year to fund capital expenditure”—
that is, £230 million of an overall stock of £2.2 billion. The Scotland Act drew a clear correlation between the size of the capital budget and the amount that could be borrowed. The Command Paper for the Wales Bill, which the Secretary of State said was just like that for the Scotland Bill, reads:
“Specifically, the Scottish Government’s capital borrowing limit is £2.2 billion while it is taking on responsibility for tax revenues that are currently worth around £5 billion. Hence the ratio between the two is slightly less than 1:2. Applying the same tax/borrowing ratio in Wales would have given the Welsh Government a limit of around £100 million.”
The crucial question is why the Government have moved the goalposts for Wales. Why cannot Wales have the same rationale for its volume of borrowing as the Scots? That would give us about £1 billion-worth of borrowing—between £1 billion and £1.5 billion—rather than the paltry £500 million on offer.
Moreover, given the volatility of all tax returns, how sensible is it for the Government to draw a direct line between the receipts that Wales receives and the amount it can borrow? What if those receipts declined? What if we were in another recession? We would therefore see, I presume, a reduction in the amount of borrowing that Wales could undertake, which would frankly be economic stupidity.
Geraint Davies
Does my hon. Friend agree that there is a danger of moving the focus from Wales having its fair share of capital investment—for example, on transport, where there is £5,000 per head for transport in London and about £500 in Wales—because as soon as we get more borrowing powers the Government will say, “You pay for the valleys line electrification—you can borrow the money”? Is this not an excuse for making Wales pay out more from less?
Owen Smith
That is absolutely right. That is what we have been most concerned about throughout the passage of this Bill, and we describe it as a trap. The Tory party is seeking to wash its hands of Wales, and it is not interested in funding capital expenditure properly in Wales. We have therefore seen that the valleys line promise was not worth the paper it was written on, and the words of the Prime Minister and the Secretary of State were equally worthless. We are deeply concerned that this will be an excuse for the Tory Government to ask the people with the shallowest pockets in Britain to put their hands deepest into them to fund things that traditionally would have come through general taxation and from the wider benefits of our economic union.
On income tax, let me be clear: we are and remain opposed to tax competition across Britain. We believe in an economic and social union and in the ability of the central state to pool resources, share risk, and share rewards. That is especially true in Wales, as we are a net beneficiary—indeed, the greatest one—of that principle of progressivity and risk-sharing across Britain. That is why we remain opposed to the principle of undercutting one part of Britain with lower taxes in another, which is what the Secretary of State is proposing. We agree with the Government that the principle of progressivity ought to be retained. That is why we agree, broadly speaking, with the notion of the lockstep to tie bands together. But we have deep and abiding concerns about the hidden agenda that the Conservative party has, along with its nationalist colleagues, for greater tax competition in Britain.
We have reason for that concern, because the plans are not terribly well hidden. We have already heard that the leader of the Welsh Conservative group wishes to cut just the top rate of tax and that the economic adviser to the leader of the nationalist party in Wales wishes to do the same, and cut taxes only for the wealthiest in Wales. If we need any further illustration, we simply have to look at this Government’s record: they introduced a millionaire’s tax cut even as they increased VAT, which is paid, regressively, by the least well-off people in Britain.
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.
Owen Smith
If the hon. Gentleman is going to tell us whether Wales will be better or worse off, I will be very grateful to him.
Mr Harper
I was listening carefully to the shadow Secretary of State about being better off and worse off, particularly with regard to those on lower incomes. In the Budget of my right hon. Friend the Chancellor we increased personal allowances for everyone, including those on the lowest incomes. Why did he and his party vote against those tax cuts for low and middle-income earners?
Owen Smith
We will take not a single lesson from any Government Members about how to provide for the most vulnerable people in Britain, because this Government have left people in Wales £1,600 a year worse off and they have overseen the largest reduction in living standards since the 1870s. The last time living standards fell this far was during the time of the Paris commune and the Franco-Prussian war—that is how disastrously this Government have handled the economy in Wales. We will take no lessons—absolutely none—from them.
Given the opportunity, we would put a different question with regard to income tax varying powers for Wales, and we will seek to amend the Bill in order to do so. It would be different in two regards. First, as several Members have suggested, we would increase the amount of money by which tax might be reduced in Wales from 10p to 15p. The two reasons for doing so are very simple. First, we believe it would increase borrowing, given the causal link the Government are drawing between the volume of taxes and the amount of borrowing. Secondly—I would have thought that Members from the nationalist party in Wales would be pleased with this—it would provide a far neater degree of symmetry between what we are proposing for Wales and what we are proposing for England. We remain concerned that constant chipping and changing of the constitution, which the current Government seem keen to allow to continue, is not in the interests of the stability of Britain or Wales. We will seek to legislate to introduce symmetry between Wales and Scotland, both on the model of devolved powers and on taxation.
Jonathan Edwards
We welcome the fact that the hon. Gentleman is proposing to increase the level of income tax, but my understanding of what he said over the weekend is that he wants to keep the lockstep but remove the ability to vary the rate up or down such that it would only to be able to move up. Would he, therefore, label his new policy “lockstep-plus”?
Owen Smith
No, I would label it as a progressive change and I will explain why we feel the need to introduce such a change.
The second way in which we would change the question relates to our concerns about the fact that this Tory Government and an increasingly right-wing nationalist party in Wales are proposing to cut the top rate of tax. [Laughter.] Nationalist party Members laugh, but the economic adviser to their leader says he wants to cut only the top rate of tax. I do not know what we are meant to conclude from that, but it sounds pretty right wing to me. An alliance between the nats and the Tories in Wales seeks to reduce taxes just for the wealthiest, but we feel that that would be entirely out of step with the progressive values of Wales. That is why we will give the Welsh Government the ability to set a progressive rate for Wales, to guard against further Tory tax cuts for the wealthiest and to ensure that those Welsh values of social justice and fairness in taxation can be preserved by the Welsh people in the event of the Tories wishing to increase the injustice and unfairness of the tax system in Wales and across Britain.
Alun Cairns
The shadow Welsh Secretary is giving out so many conflicting messages that I am finding it difficult to follow him. He says that he wants to extend the tax-varying powers by 15%, but he also says that he is against tax competition, and then he says that he only wants to put taxes up. We can have lots of debates about those inconsistencies, but there is one very serious point: every nation and region of the UK is seeking to attract investment. What sort of message is being sent when the shadow Chancellor—[Interruption.] What sort of message is being sent when the shadow Welsh Secretary, who presumably hopes to be a future Welsh Secretary, says that he wants to increase taxes on higher earners?
Owen Smith
It is not too hard to confuse the hon. Gentleman sometimes, either, but I thank him for the promotion. Our position is very clear: we are not in favour of tax competition; we are in favour of increased borrowing powers. The way in which the Government have framed the Bill to draw a connection between borrowing powers and the devolved amount of money paid in tax means that we favour increasing that amount so as to increase borrowing powers for Wales. However, the progressive rate is only to be put up in the event of a Tory Government choosing to deepen the unfairness by making further cuts to the top rate. We should worry about that because the Tory party has form on it. It has already cut taxes for the wealthiest, and we know that it will continue to do so.
Owen Smith
No, I will not.
Our proposal to allow the Welsh Government to set a progressive rate of taxation in Wales would allow power to be transferred to Welsh people to guard Wales against the damage to social justice done in Britain by a Tory Government who propose to cut taxes further. The motivation is similar to that for devolution in its first inception: a Tory Government in Wales exercising—in the miner’s strike, the poll tax and other measures—a political strategy that reveals how they turn their face against social justice in Britain and use Wales as a means to exercise such injustice. We have recently seen that in the war on Wales, and the way in which Grant Shapps, the chairman of the Tory party, and the Secretary of State—
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. [Interruption.] Order. The hon. Gentleman must not appear to be concerned or to question when he is called to order. [Interruption.] Order. I must say that if Conservative Members are not quiet, the shadow Secretary of State will never get to the end of his lengthy speech. In doing so, I trust that when the shadow Secretary of State refers to a Member of this House he does so, as is proper, by their constituency, not their Christian name and surname.
Owen Smith
I am very sorry, Madam Deputy Speaker. I was not, of course, rolling my eyes at your good self, but at the Secretary of State. I put on the record that my inability to recall the name of the constituency of the Minister without Portfolio, might have something to do with the multiple aliases that he deploys outside this House and which make it very difficult to recall how to refer to him within it.
Mr David Jones
I would not want the hon. Gentleman to have wasted his eye rolling. Just for clarification, is it his case that the Labour party wants devolved income tax competence to be able to increase the rate of tax for the 4,000 or so who pay the additional rate of tax in Wales, but not to cut the standard rate of tax for the 1 million-plus who pay the standard rate?
Owen Smith
I have already made that very clear in this House. I take your admonition that I should be coming to the end of my speech in the spirit in which it was intended, Madam Deputy Speaker, although I believe that I have spoken for slightly less time than the Secretary of State. [Interruption.] If it is significantly longer that is perhaps because I have addressed more of the substance of the Bill than the Secretary of State, who glossed over most of the gerrymandering and the other reasons for it.
Let us be very clear that our proposals to allow the Welsh people, if they so choose at a referendum, to give powers to the Welsh Government to set a progressive rate of income tax would guard against a Tory Government with malign instincts reducing the justice of our taxation system in Wales and increasing the outrageous targeting of Wales that has been described and exposed in other areas in recent days. We will not allow such exposure on the economy to be passed on to Wales. We will not allow Wales to be worse off as a result of the measures, and we will scrutinise the Bill extremely carefully.
Mr Hain
I could not possibly comment, but since the Government say that, perhaps it is true on this occasion.
I have quoted a Labour figure, Lord Richard, in support of my case, so I shall now quote a Liberal Democrat. Lord Carlile, the former Welsh Liberal Democrat leader, said in June 2005 that
“many in Wales will welcome...the removal of the absurd dual candidacy opportunity.”
In the same debate in the Lords, the former Conservative Secretary of State for Wales, Lord Crickhowell, said:
“The present arrangements are really pretty indefensible“.—[Official Report, House of Lords, 15 June 2005; Vol. 672, c. 1216-1217.]
A Liberal Democrat, a former Labour Member and a Conservative former Secretary of State all agree with me. I think that that helps my case.
I recall, as Secretary of State for Wales, receiving on 9 January 2006 a press release from Helen Mary Jones, in which she described herself as a Llanelli-based Assembly Member, although she was on the list. In it, she complained about money being spent on a hospital in Carmarthen instead of one in Llanelli. However, as the list Assembly Member for Mid and West Wales, she represented both towns and should really have been supporting both hospitals. Had she been discharging her list Member’s duties properly, she would not have discriminated between the two towns or their hospitals.
Mr Hain
Indeed, why did she? Why, of all the parts of the list area that she represented, did she target the one place where she had only been very narrowly defeated in 2003, invariably describing herself as the Llanelli-based Assembly Member? As it happens, I admire Helen Mary Jones for her ability and commitment, although not for her belief in an independent Wales. The 2006 Act stopped her describing herself as the Assembly Member for Llanelli, because there was one and it was not her. In the meantime, she campaigned hard and won the seat back in 2007.
The list Assembly Member for South West Wales, Bethan Jenkins, is often described as the Neath-based Assembly Member and is more active in the Neath constituency than anywhere else in the region. She has not yet had the courage to stand in the Neath constituency, but if the Bill goes through with clause 2 remaining within it, perhaps she will do so, safe in the knowledge that being defeated in Neath will not prevent her from being elected—[Interruption.] I will not respond to that intervention from the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards).
In a leaked memorandum written in August 2003, a Plaid Cymru list Assembly Member—now the party’s engaging young party leader—Leanne Wood, was embarrassingly blatant in encouraging abuse of the system using taxpayers’ money. Let me quote from that memorandum for the benefit of the House and my case. She urged Plaid Cymru Assembly list Members to concentrate tens of thousands of pounds of their local Assembly office budgets in their party’s target seats. She urged her party’s list Members to do casework only where it might benefit Plaid Cymru in those target seats and to attend civic or other events the constituency only if they thought there were votes in it.
I will now quote directly from that memorandum, entitled “What should be the role of a regional AM?” It perfectly illustrates the problem we faced before the 2006 Act banned dual candidature in Wales. Leanne Wood was hardly shy about her objectives:
“Each regional AM has an office budget and a staff budget of some considerable size. Consideration should be given to the location of their office—where would it be best for the region? Are there any target seats…within the region?”
She went on:
“We need to be thinking much more creatively as to how we better use staff budgets for furthering the aims of the party.”
She finished off with a refreshing burst of honesty:
“Regional AMs are in a unique position. They are paid to work full-time in politics and have considerable budgets at their disposal. They need not be constrained by constituency casework and events, and can be more choosy about their engagements, only attending events which further the party’s cause. This can be achieved by following one simple golden rule: On receipt of every invitation, ask ‘How can my attendance at this event further the aims of Plaid Cymru?’ If the answer is ‘very little’ or ‘not at all’, then a pro forma letter of decline should be in order.”
I could not have presented my case better than she revealingly did.
Geraint Davies
The Prime Minister said that the UK Government would pay for the electrification of the railway lines, which are essentially UK infrastructure. I think that it is disgraceful, frankly, that while £52 billion is to be spent on HS2, the Secretary of State will not even fight for that extra bit of money for Wales. We desperately need it. He should resign.
Owen Smith
I just want to clarify for the House that the Prime Minister said:
“It’s this government”—
I presume he means Her Majesty’s Government—
“that’s putting the money into the electrification of the railway line all the way up to Swansea and, of course, the valley lines.”