21/11/2012 CF99

Hello and welcome to CF99 for half an hour of debate.

The main topic tonight is power - powers to raise taxes and the power to legislate.

We'll be discussing the findings of the Silk Commission

on the Assembly's financial powers and the Welsh Government's

victory in the Supreme Court today on this place's ability to legislate.

We're joined tonight by Albert Owen MP of the Labour Party, Ieuan Wyn Jones AM of Plaid Cymru, both from

Anglesey, and Iestyn Davies from the Federation of Small Businesses.

-Welcome.

-Who should be responsible for setting income tax?

The Westminster Government at the moment,

but in the future the Welsh Government should share that

responsibility, according to the Silk Commission.

It has just spent a year looking at the Assembly's financial powers.

It's easy for the Welsh Government to spend £15 billion every year, but

how difficult would it be to raise around a quarter of that in Wales?

And do the politicians in Cardiff Bay want that responsibility?

Aled ap Dafydd reports.

A BT apprentice for 18 months,

Lewis Morgan is the latest generation paying income tax.

If the Silk Commission recommendations see the light of day,

a percentage of his future earnings will go to the Welsh Government.

It raises the question, how much tax will Lewis pay in the future?

But what sensible government in Wales would force Lewis to pay

a penny extra in tax to raise £180 million?

You're right and that's why I'm emphasising the fact.

One of the most significant things in what is suggested in this

report is changing the Welsh Government's thoughts,

the parties and the people, to be honest.

We have concentrated on spending money and I understand that,

but now we need to concentrate on growing the economy,

getting more people into work, and raising taxes in other ways.

But that has its risks.

In the four years leading up to 2010, there has been

a fall of 11% in the revenue raised by income tax in Wales.

26% of employment is in the public sector.

How will UK Government cuts affect the workforce and income tax revenue?

Economist Roy Thomas has studied the dangers of trying to increase

the number of people paying income tax rather than changing

the rate in order to add to government coffers.

Up until 2007 and 2008, there is a growth in Wales and the UK.

Wales, if anything,

was doing slightly better than the rest of the UK.

Since then, unfortunately, the graph starts to fall due to the recession.

That is the danger in the future, if that happened again,

the economy weakening.

Under these recommendations, we would be losing out in Wales.

Some in the world of business sense an opportunity to grow the economy.

Devolving four minor taxes, including stamp duty,

is also recommended by Silk.

With house prices in Wales on average 0.7% lower this month, compared

with last year, there are no shortage of ideas on how to boost the market.

I don't think it's fair. The payments over 250, they pay 3%.

I think if they graded it, it would be a lot fairer

and that is one thing the Government could look at.

It's no wonder there is a smile on the face of the Welsh Secretary in receiving the recommendations.

He knows that the Welsh Government will be happy with some elements

and will fight against the public opinion, in being unwilling to

welcome the idea of raising a percentage of income tax.

For the time being, David Jones is playing the diplomat.

The report is important and now the Government will go on to

study the recommendations and will return with an answer.

The parties will also consider the contents.

But Welsh Labour's response will influence the next step.

In order to vary taxes, the Commission

recommends two-thirds of AM support is needed, along with a referendum.

Listening to the First Minister, there is an obstruction to overcome.

There is a trap because if you look at the situation at the moment,

Wales is funded £350 million less than it should.

If we had powers to change income taxes,

that would lock in the fact that we do not receive enough funding.

Today, that message reached the Treasury.

The Commission also says that the formula which funds

Wales should be reviewed

and that devolving income tax relies on there being a new system in place.

I don't think that this argument over Barnett is the most important.

I think the argument set out by Silk is far more important.

At the end of the day,

reforming the Barnett Formula will create around £300 million.

That may sound like a lot, but it's around 2% of the Assembly budget.

With far-reaching decisions to be made, it's not the time for an

apprentice at the helm, but with the economy as it is, who knows whether

Lewis will contribute to the economic success of Wales in the future?

The Latin for tax means "to estimate"

and that's all we can do with the economy as it is right now.

Aled ap Dafydd reporting.

Albert Owen, Carwyn Jones says he welcome the report,

especially as a referendum would be required,

along with a vote here, to transfer powers for income tax.

Do you have the same doubts and the same welcome?

I do welcome it. This is a very good report.

And this is an important step in the devolution process.

The commissioners have looked at this during the past year

and they have produced a good report.

We need a referendum. We need to bring people along with us.

It's great to have this debate in a studio,

on a programme like this, but we must ensure that people

understand the future and how we will raise money in the future.

I welcome this report.

But the problem is we're talking about an economy

in Wales that is weak, historically weak, especially weak right now.

Looking at some of the figures in the report, the base is

so small in Wales.

There are so few people paying the higher rate.

We're talking about raising money from people who are relatively poor.

Local government raises money.

To me, it is sensible to look at how the National Assembly raises

money in the future. This is an important step.

We can't jump into something right now.

We must look at what the Commission has suggested

and cooperate with the Welsh Government

and the UK Government to ensure we get it right.

And we get the right transition, not just jump in.

But this is a good report, so I do welcome it

and I want to cooperate with people on this on the devolution process.

At the end of the day, the Assembly has begun doing a good job

and I think it needs help to raise money, as local government does.

We don't want to just put up taxes.

As we have seen in Scotland, taxes can be reduced.

On the income tax point, Ieuan Wyn Jones, there is a risk here.

Aled mentioned it in the report, as did Roy Thomas.

The UK Government's borrowing figures are out today.

There is less coming in because not as many people are in employment.

How would you fill that black hole?

Well, I see this as an opportunity because at the moment what can

the Welsh Government do help the Welsh economy during a recession?

Not much. All they get is a block grant from London.

This gives you an opportunity to grow the economy.

Vaughan is right.

The tax base right now is low, but there is an opportunity now

to grow the tax base by being careful, if you like,

in the way we raise or lower taxes and give businesses a boost.

Albert is right. You don't have to think of it as raising every time.

If you have a responsibility for business tax, what you can do

is lower taxes for small businesses and grow the economy.

We will discuss business tax shortly.

But I want to raise another tax with you - the flight tax.

Now it's obvious to me that the

reason people want powers for that here is to cut it for flights

to places like Dubai, New York and so on, to boost links.

But you have Bristol Airport saying - we will lose 20% of business

to Cardiff, it's unfair and it goes against European law.

You can do it.

What we have to realise is that so many small countries,

just as small as Wales, you have regions in Switzerland,

with different tax levels and they can cope with that.

In Wales, we are seeing, for example you mentioned flight

tax for passengers, I think that is an opportunity for us.

Bristol will then have to discuss it with the Treasury.

But it gives us an opportunity to move forward.

The important thing is that the economy grows and that we have

more people paying tax, rather than thinking increasing tax.

All the taxes mentioned this week,

everyone is talking about lowering taxes, Iestyn Davies,

including business tax, corporation tax is not part of the package.

But there would be a problem if everything is lowered.

Or would it make Wales so competitive that everyone would come here to live?

The truth is that the report is a reality check.

It's put the figures on the table.

Everyone knows the system needs to be challenged with the economy,

lower taxes, ensure businesses can grow.

But the truth is, not just in terms of the economy

but in terms of politics, there is a huge reality check in the report.

But saying that, we welcome the report.

It gives us an opportunity to think afresh about certain taxes,

but basically we are a small country, we are a poor country,

and we have to do something to ensure we tackle these problems

and that we grow in a sustainable way over the coming years.

Ieuan Wyn Jones, accountability and responsibility,

those are the big words in this report.

You've been a minister

and have had the pocket money from Westminster, however the economy

performs, it is the same amount, so will it change the thought process?

It doesn't continue to be the same amount.

We have seen a significant cut during the recession.

But I welcome the fact there is more accountability

because it means that anyone, nay party in government,

has to justify the spending because people can say - if you're

doing that, you have to raise taxes, and the Welsh Government would

then have to be careful in how it puts forward arguments in elections.

That is a good thing, but at the moment the Government

and the Assembly cannot ensure that you get value for money.

On that point, Albert Owen, more Assembly Members?

That has been discussed this week.

In the future, I see that happening.

We have had a referendum on more powers

and the Assembly is now working harder and I think in the

future we will need more members, but this is part of the debate.

If we want to do it properly, we need more resources.

-But not just members.

-Do the people of Wales want that? More politicians?

Not just members, as I was saying, we need officials that are up to speed on things like this.

It's part of the process. The body is growing.

And I think the reason in having a referendum is to make sure

we take the people along with us when we move forward.

But there are a lot of good things in this report.

It is an important step.

The legislation has not gone through Westminster,

the Treasury has not finished considering the work.

Before the referendum,

we remember that long process of preparing the ground,

Sir Emyr going round the country and his curry nights and so on.

Are we going to see something similar?

Do we need to sell the idea, as Albert is suggesting?

Yes, certainly.

You need that debate. I think we need it in this country.

That is why we had the convention before the 2011 referendum.

I see the same kind of consensus, I hope,

starting to develop regarding moving forward again.

I admit, it is going to happen far quicker than I had imagined,

but I think we must grasp this moment and move to have a political

consensus to ensure we can move forward.

Too soon, Ieuan Wyn Jones?

No because what is interesting is that people in Wales have

moved forward a huge distance since 2011 and we must realise that

people now want to see the Assembly getting these powers.

I agree. When we asked small businesses about the situation,

the question of having these powers is not what they are worried about.

The question is,

is the Assembly prepared to use the powers sensibly and sustainably?

Iestyn, you wrote in the Western Mail today that a referendum

would more or less be a referendum on this place's credibility and ability.

Certainly. All referendums follow that pattern.

You are basically having a referendum on how well people

consider the current government is doing.

That happened in terms of the AV referendum.

And in terms of the last referendum.

It's important now that the current government tackles this

challenge and show how well or badly they perform when using the money.

Thank you. Well, that's the end of part one of the Silk Commission.

Shortly, we'll hear the panel's opinion on what may be

recommended after part two is completed.

Well, it's certain that today's Supreme Court ruling that the first

Bill passed by the Assembly is legal will be noted during that process.

Earlier, I spoke to our political editor, Betsan Powys,

about the Welsh Government's victory.

The Welsh Government has won. It's definitely 1-0.

What the Supreme Court has said is clear.

It's not a matter of looking for grey areas in the middle.

They have said in this case - we agree with the Welsh Government.

The five judges were unanimous. And so it can become legislation.

Carwyn Jones can say a number of commentators in London will

tend to think in such cases that the UK Government is surely right.

Accept that there is a level of expertise in Wales. And we are right.

But it did go to court.

That has never happened with the Scottish settlement.

That leads people to think, as we move on to Silk Two, the next step,

maybe we should change the model to stop this from happening again.

Yes. The response from Welsh Secretary David Jones is - look,

this is how it is.

It was not interfering, this is how devolution works.

Carwyn Jones doesn't agree.

The point he has made again is that it is time to look

again at this as it is not clear.

As you suggested, in Scotland, if something is defined as not

devolved, take it that everything is devolved.

It is the opposite in Wales.

If something is not defined, it is not devolved,

and Carwyn Jones says it is time to review that.

We know that David Jones hopes to have a legislative

slot for the first part of Silk.

Does Carwyn Jones hope to include that change in the measure?

I think the message for Silk was clear. He said this is not news.

I have been saying this for a long time. This is the way it should be.

If so, we need to think ahead, as you are suggesting, and ensure

that the ground is prepared and that the slots are available.

I don't know how hopeful he is of success.

But I think that is the aim.

So if Ron Davies was the architect of devolution,

he was a bit of a Jerry builder!

When someone mentioned another referendum on tax raising powers,

I think many shoulders sank, not just ours!

Yes, Smith and Jones there!

Ieuan Wyn Jones, as a solicitor, I'll begin with you.

I won't discuss tattoo shops in Swansea.

But the London Government was right to challenge this?

If they wanted to choose a case to challenge the Welsh Government,

was this the measure to choose?

It is the first measure, but it's a small measure,

meaning pretty much nothing to anyone outside a small audience.

But it is the principle that is important here.

I know, but if you want to fight a matter, you would not choose this.

And it was on a technical point.

I'm not surprised that the Supreme Court has thrown this out,

saying "Don't waste our time with this kind of thing."

-So it's not much of a victory.

-Well, it is a victory,

in the sense that the Welsh Government has held its ground.

But I'd like to move on to the point Vaughan was making,

if we are to have a new measure to implement the first part of Silk,

we need to include in that measure, we hold back the powers, take

it that matters have been devolved, unless they are exceptions.

-I think that would settle the problem.

-Albert Owen,

it seems that there is a consensus in that, this side of the M4.

Do you share the same opinion, that we need to move towards

a model similar to that in Scotland, not exactly the same powers,

but where the Westminster powers are listed, rather than Wales' powers.

I agree with Ieuan.

This is a waste of time and money going to court like this.

There are tensions between all governments, local government

and the Assembly, for example.

And also between Westminster and Europe.

But running straight to court, people need to grow up.

We need to make sure we get these measures right and the process.

This is a new process, but running straight to court...

And as the court has said, this was a waste of time

and I think this is a message for David Jones too - the Welsh Office

must understand that more powers are going to the Welsh Government.

They need to take another look at things, not just run to court.

Do you blame David Jones for that?

The fact that maybe because he is a solicitor, that he

went through it with a fine tooth comb rather than maybe using goodwill and common sense?

David Jones' record, if people take a look at that,

doesn't sit comfortably with devolution.

But to be fair to him, I'm sure he was advised by Welsh Office

officials and I think he was wrongly advised.

And the court said that is so.

But David Jones must, I think, take another look at the process

and cooperate more with Carwyn Jones, not just talk about it,

but look at these things and not go running to the court.

Iestyn Davies, as someone who is looking at this from outside

politics, would it have been different

if the two governments were the same colour?

Maybe. We've heard of poor relationships in the past

between the Welsh Secretary and the Senedd.

I'm not sure it has anything to do with the parties.

It could have happened on a constitutional level, I think,

but this was not a matter for this action.

I don't think we can say we won't see the same thing happen again.

That will be disappointing for those outside the Assembly.

What business wants is certainty, so we are clear about the

legislation, the situation, who is in charge and making decisions.

If a case needs to be raised, that there

is a definite explanation in response.

But to be cynical, Carwyn Jones did not choose the battle,

but it has turned out well for him.

He has raised this matter, something he wishes to raise,

regarding the powers.

Certainly and I think most people in the world of business

are saying that what we need now is these assurances.

What has been devolved, who is making the decisions,

where does this power sit, not just the Assembly or Westminster,

but in terms of the courts too.

Who is legislating, who is deciding, who will judge these matters?

As far as organ donation, the next controversial legislation,

-do you expect a challenge?

-I don't know.

I think now the government in London will have to be very careful what

they do and I think they will think twice before challenging again.

David Jones has said clearly he is prepared to challenge again.

Well, yes. But does he want this constant battle?

Does he want these arguments in court?

What we need, as Iestyn has said, are assurances.

And if the Welsh Government is advised that what

they are doing is within their powers, they will want to legislate.

-But as a solicitor...

-They are not going to opt out of legislating because David Jones says they can't.

They will do so on the basis of advice they receive.

But as far as new ground and as a solicitor, you know the boundaries must be correct and in place.

Yes. I accept that. And that is why I believe...

We have a challenge, two challenges, one was dropped.

If the next measure faces another challenge,

what are the people of Wales going to think?

Why have we voted in favour of an Assembly with legislative

powers if London goes to court each time?

-Albert Owen, do you think you are more important in London?

-No.

There are bilaterals between David Jones and Carwyn Jones.

And they have an opportunity to sit down

and talk about these things before a measure is brought forward.

So this is out of sync and as I say, both governments need to grow up.

Devolution is here, we need to look at the advice received by both

governments and not run to the court.

On that note, we will end things. Thank you, all three.

-That's all for tonight. We will see you at the same time next week.

-Yes.

-It will be nice to see you again. Good night.

-Good night.