23/11/2016 House of Lords

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mind. I know that the Minister has worked

very closely with Welsh treatment ministers and his officials with

theirs, but it seems to me that there should be no objection on his

part to this amendment. Indeed, I hope he will respond in a

conciliatory way, because on that point I think you will expedite

progress on the bill. Then can I turn to moving amendment 128,

standing in my name and that of my noble friend. It ensures that the

bill cannot come into force unless the Treasury has laid before each

house of parliament a document setting out a fiscal framework for

Wales agreed by the United Kingdom government and the Welsh government.

As your Lordships are aware from my speech at second reading, I am

deeply sceptical that Wales will benefit from income tax devolution

and fearful that it will actually lose out. The Treasury will not

permit much-needed borrowing powers for Wales unless these are set

against the revenue raising powers that this bill provides for. The

First Minister desperately needs that borrowing to invest in

infrastructure from new roads and rail links to relieve chronic

congestion, two new hospitals and schools. What is more, the Treasury

will not otherwise provide the cover it could so easily do at such

minuscule interest rates as exist at the present time for that

infrastructure investment. I think this is financial smoke and mirrors,

Treasury subterfuge, yet the Government has trapped Wales between

a rock and a hard place. My Lords, I am suspicious that Wales is being

badly short-changed by this income tax devolution, which is what I seek

to address in this amendment. Not the substance of the devolution,

because that has already been debated, but actually the fiscal

framework accompanying it. We don't have sight of the fiscal framework

to accompany the devolution, although we are grateful to the

Minister for promising in answer to my question at second reading by we

could scrutinise it very carefully by report stage. And for his recent

letter, I am also grateful on the subject. All I can say is it will

have to be a mighty, mighty generous fiscal framework to Wales to

persuade me to support. The Treasury, in a generous frame of

mind, will be a novel experience for us all. Someone like my noble friend

Lord Murphy, who has negotiated with the Treasury as a cabinet minister

on behalf of Wales. Therefore I wish to put a C was of arguments to the

Minister which will need to be fully addressed by the fiscal framework,

and in the time that he has left tidying up that framework I hope you

will address these. I draw first upon the authoritative 2010 report

of the commission on the financing of Wales. The key point is that the

chair of knowledge specifically the risk that Wales' income tax base may

grow more slowly than the United Kingdom income tax base. That is to

say the risk of differential tax base grows. If this happens, the

Wales budget would shrink relative to the UK as a whole and the degree

of redistribution to Wales from richer parts of the UK would reduce.

He noted that one option could be to index deductions from the block

grant to the growth over time of the devolved tax base in Wales. This

would completely offset a devolved income tax in Wales and eliminate

any risk arising from differential tax -based growth. Other options

would only partially eliminate this. He came up with a compromise,

concluding in paragraph 525, the best compromise appears to be very

increased -- very infrequent reviews of the tax bases of the devolved

administration and a consequent adjustment to deductions from the

block grant. Such reviews and adjustments would

require negotiations between the Wales government and UK ministers.

The chair suggested reviews of every 12 to 15 years. Frankly, my Lords,

that is far, far too longer period, in my view. Especially where the

outlook for the British economy is still uncertain with Brexit, as the

Chancellor confirmed in his statement today.

The chair made no recommendation for any kind of Treasury assurance to

ensure Wales did not lose out. The report simply recommended that

the block grant should be reduced by an equivalent amount in the first

year of the new system and coming quotes, subsequent years the size of

the block grant deduction should be calculated to reflect the relevant

income tax bases across the UK as a whole.

This leaves the Wales budget open to being squeezed due to the Wales

income tax base growing at a slower rate than the UK as a whole, with no

guarantee that the Treasury would top up the block grant to fill the

gap, meaning Wales could certainly lose out.

The chair recommended that the block grant should be based on a needs

-based formula which would determine budgets across England, Wales and

Scotland. The three most relevant factors would be tomography,

deprivation and costs. Based on past spending in England,

Scotland and Wales, he recommended that we'll should receive 100 and

50p per person to spend on De Bult activities for everyone in Japan's

per person spent uncomfortable activities in England -- he

recommended that each person should receive ?110 per person to spend on

De Bult activities. Will Wales be left with the funding gap? The

cherub knowledge that had his needs formula been applied in 2010/11,

Wales would have received only ?112 for every ?100 spent on De Bult

activities -- the chair at knowledge that. This would have liked Wales

with a shortfall, a funding gap of around ?400 million. Will the fiscal

framework eliminate that gap. Can I also refer to the report published

in February this year? In the executive summary on page four it

chillingly once, and I quote, that the method chosen to reduce the

Welsh block grant has the potential to cause losses of hundreds of

millions of pounds each year to the Welsh budget. Hundreds of millions

each year, that is a massive risk, surely? A serious risk of hospitals

and care homes closing, teacher numbers being cut, local government

budgets being savaged still further on top of the current repeated

rounds of austerity. These issues need to be addressed in a fiscal

framework. The Wales Government Centre chores attention. UK

Government decisions to raise the personal tax allowances have drawn

disproportionately more of Welsh income's out of the income tax base

than across the UK as a whole. While the income tax receipts... The UK

income tax receipts have grown by 6% across the UK since 2010/11, the

equivalent figure for Wales is only 2%. Worryingly almost a third of the

UK figure -- only a third. 55% for taxpayers in committing them Wales

come from individuals earning less than ?30,000 per annum, compared

with 42% across the UK. When a November 2015 the previous

Chancellor of the Exchequer announced the Government decision to

drop the referendum requirement for income tax devolution to Wales they

declared they would protect the Welsh budget by introducing the

floor underneath Wales' relative per capita funding to save it from any

so-called Barnett squeeze. But the lack of clarification across this

proposed Barnett floor prevents the Wales Goodman Centre from checking

in detail how that might interact with income tax devolution and

subsequent block grant adjustments. So we just know. The flaw may be

flawed, but nobody can tell. I find Ollett extreme Newbury on, my

lords. Wales is being pushed to take a leap into the economic darkness --

I find that extremely worrying, my lords. The Office for Budget

Responsibility report Economic And Fiscal Output: Devolved Tax Is

Forecast has added to my concern. I repaired -- refer to table 2.6, it

leads to specific questions about the likely squeeze on the Welsh

governance budgeted income tax were to be devolved to which the

government needs to provide cast-iron assurances in the fiscal

framework. How great would be the cut to the

Welsh budget if the trend since 2012 for the Welsh trade income tax to

fall each year? Each year continues after 2019, rather than stabilisers

in three years' time at 1.25%, lesson was in 2012, for the rest of

the forecast period to 2021. What these assumptions are wrong? How

hard with the Welsh budget be hit then? What would be the loss of

income taxed in Wales and the consequential squeeze on the Welsh

budget if productivity growths and the tenderness as a whole assumed a

new report, how much further with the income tax fall due to conquer

sequential rise of the taxpayer income in Wales attributed in

individuals on relatively low incomes? This will surely happen if

investment in Wales falls behind investment in the UK are Brexit hit

the wealth economy harder than hits the UK economy or if London attacks

and ever-increasing share of public spending. The transport Department

have decided to defer electrification of the great Western

rail line to south Wales only days after the infrastructure commission

called for both road and rail links along the Oxford, Cambridge corridor

to be upgraded. The recommendation endorsed by the Chancellor in his

Autumn Statement today, though he made no mention of real

electrification investment to. The latest forecast in table 2.8 of

today's report suggests that a Welsh income tax in 2021 will be 417

million lower than in its November 2015 forecast. That is just over a

year, we have lost 470 million from the income tax take in Wales. How

much greater with the squeeze on the Welsh Government budgets becoming

the absence of the new floor and with Eddie superhumanly protected

floor? Sorry, with Eddie superhumanly protected new fiscal

agreement. I hope the Minister confirmed that belief. Eight months

after it the last forecast, the oh VR is projecting 417 million

reduction in tax revenues. That is a massive amount in terms of the Welsh

Government. This is being driven to shrink the UK state. It is a new

liberal objective stunting the power of the state, in this case stopping

Wales from benefiting from revenues, we distributed from wealthy London

and the south-east of England were 40% is concentrated and therefore

the economy and tax revenues are growing much faster. The north-east

of England has a similar demographic to two worlds, yet it will can to

benefit from that, where Wells will not least with their radical

compensating measures in the fiscal framework. Those measures are as

effective as they should be to top up and protect Wells, then what is

the point of devolution in the first place? Progressives are found on the

labour, Lib Dem, etc, the great fruit are that we have pooled and

shared risks and resources right across the UK to ensure common

welfare and decent life for all citizens regardless of nationality

or where you live. This is part of what it means to be citizens of the

same United Kingdom society. We share the gains and the pains. For

generations as being redistribution to Richard Hooper parts of the UK,

whether former mining communitiess, because not all income tax is being

devolved. The proposed 10p income tax devolution to Wales as the

equivalent of about 20% of the Welsh block, a fifth of the Welsh

Government 's budget. The question is, will that huge amount continue

to be protected through the fiscal framework against the warnings of

the Welsh Government Centre in my own concerns expressed in the last

few minutes or not? That is the really big question for Wales, which

has a large fiscal net deficit. The UK Treasury annually subsidises

Wales by nearly 50 billion. A massive amount. There are immense

dangers to Wales that Welsh voters will be unable to resist without

being deprived of a referendum. In the current climate, Wills is in

danger of sleepwalking into impoverishment. I conclude our mess

and I apologise for my argument being at some length, but I think

the issues raised need to be put on the record. I moved this amendment

and most important agreement to its detailed terms by the Welsh

Government before the Bill can come into force. I very much hope that in

the spirit which the Minister has responded to many of the amendments

moved in the last few weeks that he will be able to accept this

amendment if there are some technical question of around it that

he may well be able to come back at reports stage to achieve the youth

team effects, namely that will have the chance to scrutinising some

detail by the committees of this House as well the nature of the

fiscal framework, water will mean in view of the concerns that I have

expressed and that the Welsh Government Centre has flagged up as

well. I would like to ask a question of the noble lord about his

amendment 117. I am puzzled as to why on the last line of his

amendment he has used the word or and not the word answer. As it is

drafted, it would appear that his amendment would allow either house

of this Parliament to have a statutory meeting Wales. And that

the role of the assembly would be discretionary and I think that seems

to frustrate his own purpose. I am even more puzzled, because in his

amendment 114, he does say and. I would be treat to know why he has

changed the dress ring between one amendment and the other. If I may

turn to the amendments just now proposed by my noble friend, I

simply want to say that I very strongly support his proposition

that this Bill should not become law until a legislative consent motion

has been passed by the Welsh Assembly. It would be ironic in the

extreme if these powers will to be imposed on the Welsh Assembly. I

know the legislation is the product of an enormous amount of

consultation between the Government here in the Government in Wales and

the National Assembly, but it seems to be at the very least a courtesy

and clearly appropriate and within the proper spirit of devolution that

the legislature consent motion should be expected and indeed

required from Wales to endorse this enactment. If I may also say worried

about amendment 120, he has given a very serious and important and

compelling warning as to the dangers for Wales of being charged with

income tax altering powers and perhaps coming under pressure to use

them without there being a reliable guaranteed by the Government of the

United Kingdom that Wales will have the resources to enable it to take

advantage of those powers to alter rates of income tax without it

leading to the fiscal impoverishment of Wales and the wider

impoverishment of the Welsh economy and the Welsh people. I just want to

give my very strong support to the suggestion by my noble friend that

none of this legislation that we'd been debating in this Bill shouldn't

come into force until that fiscal framework is in place. I would like

to go further and I would like to suggest to the Minister that we

should not proceed to reports stage this Bill until we have that fiscal

framework, because it seems to be very difficult for the house

rationally to take decisions about what powers should be reserved on

what should be devolved in the absence of any clearer picture of

what the resources that will be available to Wales following the

expiry of present undertakings from 2020 onwards. The noble lord the

Minister has been highly constructive and very generous

indeed again and again in our debates on the reserve powers in his

willingness to take away the proposals that have been made in

various amendments and consider them further. We know that he seeks to

provide a decent, generous and sustainable provision for devolution

in Wales. I think it would be helpful to the house and helpful to

him if we did not proceed to if further stage in the passage of this

legislation until the Government has resolved these internal discussions

taking place. In my view, this Bill was introduced prematurely to

Parliament. A huge amount of work had gone into it with many radical

revisions of proposals to devolution for Wales in this phase and the

Minister has always played a constructive part. I think it would

be better if there is time within this session of Parliament, having

you would be better for you didn't move hastily to the reports stage

until both issues have been clarified. What would be the fiscal

resources in the longer term? Will be the pattern of resources for

Wales? We should not proceed further with the legislative process and to

the Government is much more clear than has been so far in what exactly

it is at once to devolve. May respond the question at relating to

the amendment standing in my name. In the absence of the effective form

of coal legislative between this has the National Assembly for Wales,

what I have sought to do in the process of this Bill and the

committee, is to present this House under my name, because it was no

other way of doing it, a series of amendments which have been defeated

within the work of the Presiding Officer and in some cases wording

from Welsh Government with their permission. Also wording within the

committee itself. We are thereby offering the Minister as he sits

before me hold choice of alternatives to deal with the issues

that he has created for himself and I hope you will be able to take some

of them up. I hope that answers the question. Look like a Lord is not

only a matter of procedure in the Welsh Assembly and then must

Parliament, but he is most ingenious politically. To support my noble

friend, a tidy amendment if I might the sole comment from a tidy friend

and at the great pleasure of knowing my noble friend for 46 years. I was

in sixth form and he became the Welsh Member of Parliament. I know

he has been hugely constructive during the procedure of this Bill

and we will listen very carefully to the point that he and others made

with regard to that amendment 111. I also want to support the noble

friend and his amendment in the sense that he said the role of the

Secretary of State for Wales has changed radically. When he was a new

Presiding Officer and I was the new Secretary of State, I had a desk in

the seat in the National Assembly and has an office and when I

finished some years later in 2009 has lost both my seat in my office.

I think that was in measure of the SMB growing up in beginning to

understand that we do not want secretaries of state interfering in

what the assembly does any more. I am sure that my noble friend will

want to explain that this happened with the full consent of the

Secretary of State and our relationship was always a great

relationship of positive development. I am grateful to my

noble friend, but particularly I wanted a few moments to support my

noble friend and his two amendments and I reflect that for the whole of

the Labour Government from 1998 onwards, both he and I between us

held the position of Secretary of State for Wales and two things

emerged that he is already touched on, that were themes in a job. One

was in insuring that there were good relations between the assembly in

Cardiff and the Government and Parliament here in London.

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