:00:00. > :00:00.going over to the House of Lords. You can watch recorded coverage of
:00:00. > :00:09.all of today's business in the House of Lords after The Daily Politics to
:00:10. > :00:13.mind. I know that the Minister has worked
:00:14. > :00:17.very closely with Welsh treatment ministers and his officials with
:00:18. > :00:23.theirs, but it seems to me that there should be no objection on his
:00:24. > :00:27.part to this amendment. Indeed, I hope he will respond in a
:00:28. > :00:31.conciliatory way, because on that point I think you will expedite
:00:32. > :00:39.progress on the bill. Then can I turn to moving amendment 128,
:00:40. > :00:44.standing in my name and that of my noble friend. It ensures that the
:00:45. > :00:48.bill cannot come into force unless the Treasury has laid before each
:00:49. > :00:54.house of parliament a document setting out a fiscal framework for
:00:55. > :00:58.Wales agreed by the United Kingdom government and the Welsh government.
:00:59. > :01:03.As your Lordships are aware from my speech at second reading, I am
:01:04. > :01:07.deeply sceptical that Wales will benefit from income tax devolution
:01:08. > :01:11.and fearful that it will actually lose out. The Treasury will not
:01:12. > :01:16.permit much-needed borrowing powers for Wales unless these are set
:01:17. > :01:21.against the revenue raising powers that this bill provides for. The
:01:22. > :01:26.First Minister desperately needs that borrowing to invest in
:01:27. > :01:29.infrastructure from new roads and rail links to relieve chronic
:01:30. > :01:35.congestion, two new hospitals and schools. What is more, the Treasury
:01:36. > :01:39.will not otherwise provide the cover it could so easily do at such
:01:40. > :01:42.minuscule interest rates as exist at the present time for that
:01:43. > :01:47.infrastructure investment. I think this is financial smoke and mirrors,
:01:48. > :01:52.Treasury subterfuge, yet the Government has trapped Wales between
:01:53. > :01:57.a rock and a hard place. My Lords, I am suspicious that Wales is being
:01:58. > :02:02.badly short-changed by this income tax devolution, which is what I seek
:02:03. > :02:07.to address in this amendment. Not the substance of the devolution,
:02:08. > :02:11.because that has already been debated, but actually the fiscal
:02:12. > :02:14.framework accompanying it. We don't have sight of the fiscal framework
:02:15. > :02:20.to accompany the devolution, although we are grateful to the
:02:21. > :02:23.Minister for promising in answer to my question at second reading by we
:02:24. > :02:28.could scrutinise it very carefully by report stage. And for his recent
:02:29. > :02:34.letter, I am also grateful on the subject. All I can say is it will
:02:35. > :02:38.have to be a mighty, mighty generous fiscal framework to Wales to
:02:39. > :02:43.persuade me to support. The Treasury, in a generous frame of
:02:44. > :02:48.mind, will be a novel experience for us all. Someone like my noble friend
:02:49. > :02:51.Lord Murphy, who has negotiated with the Treasury as a cabinet minister
:02:52. > :02:55.on behalf of Wales. Therefore I wish to put a C was of arguments to the
:02:56. > :02:59.Minister which will need to be fully addressed by the fiscal framework,
:03:00. > :03:06.and in the time that he has left tidying up that framework I hope you
:03:07. > :03:11.will address these. I draw first upon the authoritative 2010 report
:03:12. > :03:16.of the commission on the financing of Wales. The key point is that the
:03:17. > :03:22.chair of knowledge specifically the risk that Wales' income tax base may
:03:23. > :03:27.grow more slowly than the United Kingdom income tax base. That is to
:03:28. > :03:32.say the risk of differential tax base grows. If this happens, the
:03:33. > :03:37.Wales budget would shrink relative to the UK as a whole and the degree
:03:38. > :03:44.of redistribution to Wales from richer parts of the UK would reduce.
:03:45. > :03:48.He noted that one option could be to index deductions from the block
:03:49. > :03:53.grant to the growth over time of the devolved tax base in Wales. This
:03:54. > :03:58.would completely offset a devolved income tax in Wales and eliminate
:03:59. > :04:02.any risk arising from differential tax -based growth. Other options
:04:03. > :04:08.would only partially eliminate this. He came up with a compromise,
:04:09. > :04:13.concluding in paragraph 525, the best compromise appears to be very
:04:14. > :04:17.increased -- very infrequent reviews of the tax bases of the devolved
:04:18. > :04:21.administration and a consequent adjustment to deductions from the
:04:22. > :04:25.block grant. Such reviews and adjustments would
:04:26. > :04:28.require negotiations between the Wales government and UK ministers.
:04:29. > :04:34.The chair suggested reviews of every 12 to 15 years. Frankly, my Lords,
:04:35. > :04:40.that is far, far too longer period, in my view. Especially where the
:04:41. > :04:43.outlook for the British economy is still uncertain with Brexit, as the
:04:44. > :04:47.Chancellor confirmed in his statement today.
:04:48. > :04:52.The chair made no recommendation for any kind of Treasury assurance to
:04:53. > :04:55.ensure Wales did not lose out. The report simply recommended that
:04:56. > :05:02.the block grant should be reduced by an equivalent amount in the first
:05:03. > :05:07.year of the new system and coming quotes, subsequent years the size of
:05:08. > :05:09.the block grant deduction should be calculated to reflect the relevant
:05:10. > :05:13.income tax bases across the UK as a whole.
:05:14. > :05:17.This leaves the Wales budget open to being squeezed due to the Wales
:05:18. > :05:21.income tax base growing at a slower rate than the UK as a whole, with no
:05:22. > :05:26.guarantee that the Treasury would top up the block grant to fill the
:05:27. > :05:28.gap, meaning Wales could certainly lose out.
:05:29. > :05:32.The chair recommended that the block grant should be based on a needs
:05:33. > :05:36.-based formula which would determine budgets across England, Wales and
:05:37. > :05:41.Scotland. The three most relevant factors would be tomography,
:05:42. > :05:44.deprivation and costs. Based on past spending in England,
:05:45. > :05:49.Scotland and Wales, he recommended that we'll should receive 100 and
:05:50. > :05:53.50p per person to spend on De Bult activities for everyone in Japan's
:05:54. > :05:59.per person spent uncomfortable activities in England -- he
:06:00. > :06:03.recommended that each person should receive ?110 per person to spend on
:06:04. > :06:07.De Bult activities. Will Wales be left with the funding gap? The
:06:08. > :06:13.cherub knowledge that had his needs formula been applied in 2010/11,
:06:14. > :06:18.Wales would have received only ?112 for every ?100 spent on De Bult
:06:19. > :06:28.activities -- the chair at knowledge that. This would have liked Wales
:06:29. > :06:33.with a shortfall, a funding gap of around ?400 million. Will the fiscal
:06:34. > :06:43.framework eliminate that gap. Can I also refer to the report published
:06:44. > :06:47.in February this year? In the executive summary on page four it
:06:48. > :06:52.chillingly once, and I quote, that the method chosen to reduce the
:06:53. > :06:56.Welsh block grant has the potential to cause losses of hundreds of
:06:57. > :07:01.millions of pounds each year to the Welsh budget. Hundreds of millions
:07:02. > :07:06.each year, that is a massive risk, surely? A serious risk of hospitals
:07:07. > :07:10.and care homes closing, teacher numbers being cut, local government
:07:11. > :07:14.budgets being savaged still further on top of the current repeated
:07:15. > :07:23.rounds of austerity. These issues need to be addressed in a fiscal
:07:24. > :07:26.framework. The Wales Government Centre chores attention. UK
:07:27. > :07:32.Government decisions to raise the personal tax allowances have drawn
:07:33. > :07:36.disproportionately more of Welsh income's out of the income tax base
:07:37. > :07:43.than across the UK as a whole. While the income tax receipts... The UK
:07:44. > :07:50.income tax receipts have grown by 6% across the UK since 2010/11, the
:07:51. > :08:00.equivalent figure for Wales is only 2%. Worryingly almost a third of the
:08:01. > :08:03.UK figure -- only a third. 55% for taxpayers in committing them Wales
:08:04. > :08:10.come from individuals earning less than ?30,000 per annum, compared
:08:11. > :08:12.with 42% across the UK. When a November 2015 the previous
:08:13. > :08:17.Chancellor of the Exchequer announced the Government decision to
:08:18. > :08:21.drop the referendum requirement for income tax devolution to Wales they
:08:22. > :08:24.declared they would protect the Welsh budget by introducing the
:08:25. > :08:28.floor underneath Wales' relative per capita funding to save it from any
:08:29. > :08:34.so-called Barnett squeeze. But the lack of clarification across this
:08:35. > :08:37.proposed Barnett floor prevents the Wales Goodman Centre from checking
:08:38. > :08:41.in detail how that might interact with income tax devolution and
:08:42. > :08:46.subsequent block grant adjustments. So we just know. The flaw may be
:08:47. > :08:50.flawed, but nobody can tell. I find Ollett extreme Newbury on, my
:08:51. > :08:56.lords. Wales is being pushed to take a leap into the economic darkness --
:08:57. > :09:00.I find that extremely worrying, my lords. The Office for Budget
:09:01. > :09:05.Responsibility report Economic And Fiscal Output: Devolved Tax Is
:09:06. > :09:10.Forecast has added to my concern. I repaired -- refer to table 2.6, it
:09:11. > :09:13.leads to specific questions about the likely squeeze on the Welsh
:09:14. > :09:16.governance budgeted income tax were to be devolved to which the
:09:17. > :09:18.government needs to provide cast-iron assurances in the fiscal
:09:19. > :09:30.framework. How great would be the cut to the
:09:31. > :09:36.Welsh budget if the trend since 2012 for the Welsh trade income tax to
:09:37. > :09:42.fall each year? Each year continues after 2019, rather than stabilisers
:09:43. > :09:49.in three years' time at 1.25%, lesson was in 2012, for the rest of
:09:50. > :09:53.the forecast period to 2021. What these assumptions are wrong? How
:09:54. > :09:57.hard with the Welsh budget be hit then? What would be the loss of
:09:58. > :10:06.income taxed in Wales and the consequential squeeze on the Welsh
:10:07. > :10:10.budget if productivity growths and the tenderness as a whole assumed a
:10:11. > :10:16.new report, how much further with the income tax fall due to conquer
:10:17. > :10:22.sequential rise of the taxpayer income in Wales attributed in
:10:23. > :10:26.individuals on relatively low incomes? This will surely happen if
:10:27. > :10:33.investment in Wales falls behind investment in the UK are Brexit hit
:10:34. > :10:39.the wealth economy harder than hits the UK economy or if London attacks
:10:40. > :10:46.and ever-increasing share of public spending. The transport Department
:10:47. > :10:50.have decided to defer electrification of the great Western
:10:51. > :10:55.rail line to south Wales only days after the infrastructure commission
:10:56. > :10:59.called for both road and rail links along the Oxford, Cambridge corridor
:11:00. > :11:03.to be upgraded. The recommendation endorsed by the Chancellor in his
:11:04. > :11:09.Autumn Statement today, though he made no mention of real
:11:10. > :11:17.electrification investment to. The latest forecast in table 2.8 of
:11:18. > :11:24.today's report suggests that a Welsh income tax in 2021 will be 417
:11:25. > :11:29.million lower than in its November 2015 forecast. That is just over a
:11:30. > :11:35.year, we have lost 470 million from the income tax take in Wales. How
:11:36. > :11:39.much greater with the squeeze on the Welsh Government budgets becoming
:11:40. > :11:50.the absence of the new floor and with Eddie superhumanly protected
:11:51. > :11:55.floor? Sorry, with Eddie superhumanly protected new fiscal
:11:56. > :12:03.agreement. I hope the Minister confirmed that belief. Eight months
:12:04. > :12:07.after it the last forecast, the oh VR is projecting 417 million
:12:08. > :12:17.reduction in tax revenues. That is a massive amount in terms of the Welsh
:12:18. > :12:21.Government. This is being driven to shrink the UK state. It is a new
:12:22. > :12:27.liberal objective stunting the power of the state, in this case stopping
:12:28. > :12:33.Wales from benefiting from revenues, we distributed from wealthy London
:12:34. > :12:36.and the south-east of England were 40% is concentrated and therefore
:12:37. > :12:41.the economy and tax revenues are growing much faster. The north-east
:12:42. > :12:47.of England has a similar demographic to two worlds, yet it will can to
:12:48. > :12:50.benefit from that, where Wells will not least with their radical
:12:51. > :13:00.compensating measures in the fiscal framework. Those measures are as
:13:01. > :13:03.effective as they should be to top up and protect Wells, then what is
:13:04. > :13:15.the point of devolution in the first place? Progressives are found on the
:13:16. > :13:19.labour, Lib Dem, etc, the great fruit are that we have pooled and
:13:20. > :13:25.shared risks and resources right across the UK to ensure common
:13:26. > :13:28.welfare and decent life for all citizens regardless of nationality
:13:29. > :13:33.or where you live. This is part of what it means to be citizens of the
:13:34. > :13:38.same United Kingdom society. We share the gains and the pains. For
:13:39. > :13:49.generations as being redistribution to Richard Hooper parts of the UK,
:13:50. > :13:55.whether former mining communitiess, because not all income tax is being
:13:56. > :14:00.devolved. The proposed 10p income tax devolution to Wales as the
:14:01. > :14:05.equivalent of about 20% of the Welsh block, a fifth of the Welsh
:14:06. > :14:11.Government 's budget. The question is, will that huge amount continue
:14:12. > :14:14.to be protected through the fiscal framework against the warnings of
:14:15. > :14:20.the Welsh Government Centre in my own concerns expressed in the last
:14:21. > :14:27.few minutes or not? That is the really big question for Wales, which
:14:28. > :14:31.has a large fiscal net deficit. The UK Treasury annually subsidises
:14:32. > :14:38.Wales by nearly 50 billion. A massive amount. There are immense
:14:39. > :14:43.dangers to Wales that Welsh voters will be unable to resist without
:14:44. > :14:50.being deprived of a referendum. In the current climate, Wills is in
:14:51. > :14:54.danger of sleepwalking into impoverishment. I conclude our mess
:14:55. > :14:58.and I apologise for my argument being at some length, but I think
:14:59. > :15:08.the issues raised need to be put on the record. I moved this amendment
:15:09. > :15:11.and most important agreement to its detailed terms by the Welsh
:15:12. > :15:16.Government before the Bill can come into force. I very much hope that in
:15:17. > :15:21.the spirit which the Minister has responded to many of the amendments
:15:22. > :15:25.moved in the last few weeks that he will be able to accept this
:15:26. > :15:31.amendment if there are some technical question of around it that
:15:32. > :15:34.he may well be able to come back at reports stage to achieve the youth
:15:35. > :15:39.team effects, namely that will have the chance to scrutinising some
:15:40. > :15:42.detail by the committees of this House as well the nature of the
:15:43. > :15:47.fiscal framework, water will mean in view of the concerns that I have
:15:48. > :15:55.expressed and that the Welsh Government Centre has flagged up as
:15:56. > :16:03.well. I would like to ask a question of the noble lord about his
:16:04. > :16:10.amendment 117. I am puzzled as to why on the last line of his
:16:11. > :16:16.amendment he has used the word or and not the word answer. As it is
:16:17. > :16:22.drafted, it would appear that his amendment would allow either house
:16:23. > :16:29.of this Parliament to have a statutory meeting Wales. And that
:16:30. > :16:35.the role of the assembly would be discretionary and I think that seems
:16:36. > :16:43.to frustrate his own purpose. I am even more puzzled, because in his
:16:44. > :16:50.amendment 114, he does say and. I would be treat to know why he has
:16:51. > :16:53.changed the dress ring between one amendment and the other. If I may
:16:54. > :17:00.turn to the amendments just now proposed by my noble friend, I
:17:01. > :17:04.simply want to say that I very strongly support his proposition
:17:05. > :17:09.that this Bill should not become law until a legislative consent motion
:17:10. > :17:14.has been passed by the Welsh Assembly. It would be ironic in the
:17:15. > :17:19.extreme if these powers will to be imposed on the Welsh Assembly. I
:17:20. > :17:22.know the legislation is the product of an enormous amount of
:17:23. > :17:27.consultation between the Government here in the Government in Wales and
:17:28. > :17:33.the National Assembly, but it seems to be at the very least a courtesy
:17:34. > :17:38.and clearly appropriate and within the proper spirit of devolution that
:17:39. > :17:48.the legislature consent motion should be expected and indeed
:17:49. > :18:00.required from Wales to endorse this enactment. If I may also say worried
:18:01. > :18:07.about amendment 120, he has given a very serious and important and
:18:08. > :18:12.compelling warning as to the dangers for Wales of being charged with
:18:13. > :18:19.income tax altering powers and perhaps coming under pressure to use
:18:20. > :18:23.them without there being a reliable guaranteed by the Government of the
:18:24. > :18:29.United Kingdom that Wales will have the resources to enable it to take
:18:30. > :18:33.advantage of those powers to alter rates of income tax without it
:18:34. > :18:36.leading to the fiscal impoverishment of Wales and the wider
:18:37. > :18:44.impoverishment of the Welsh economy and the Welsh people. I just want to
:18:45. > :18:47.give my very strong support to the suggestion by my noble friend that
:18:48. > :18:54.none of this legislation that we'd been debating in this Bill shouldn't
:18:55. > :19:00.come into force until that fiscal framework is in place. I would like
:19:01. > :19:04.to go further and I would like to suggest to the Minister that we
:19:05. > :19:08.should not proceed to reports stage this Bill until we have that fiscal
:19:09. > :19:15.framework, because it seems to be very difficult for the house
:19:16. > :19:19.rationally to take decisions about what powers should be reserved on
:19:20. > :19:23.what should be devolved in the absence of any clearer picture of
:19:24. > :19:30.what the resources that will be available to Wales following the
:19:31. > :19:37.expiry of present undertakings from 2020 onwards. The noble lord the
:19:38. > :19:42.Minister has been highly constructive and very generous
:19:43. > :19:47.indeed again and again in our debates on the reserve powers in his
:19:48. > :19:51.willingness to take away the proposals that have been made in
:19:52. > :19:57.various amendments and consider them further. We know that he seeks to
:19:58. > :20:03.provide a decent, generous and sustainable provision for devolution
:20:04. > :20:07.in Wales. I think it would be helpful to the house and helpful to
:20:08. > :20:12.him if we did not proceed to if further stage in the passage of this
:20:13. > :20:17.legislation until the Government has resolved these internal discussions
:20:18. > :20:21.taking place. In my view, this Bill was introduced prematurely to
:20:22. > :20:30.Parliament. A huge amount of work had gone into it with many radical
:20:31. > :20:32.revisions of proposals to devolution for Wales in this phase and the
:20:33. > :20:36.Minister has always played a constructive part. I think it would
:20:37. > :20:40.be better if there is time within this session of Parliament, having
:20:41. > :20:43.you would be better for you didn't move hastily to the reports stage
:20:44. > :20:52.until both issues have been clarified. What would be the fiscal
:20:53. > :20:56.resources in the longer term? Will be the pattern of resources for
:20:57. > :21:01.Wales? We should not proceed further with the legislative process and to
:21:02. > :21:05.the Government is much more clear than has been so far in what exactly
:21:06. > :21:11.it is at once to devolve. May respond the question at relating to
:21:12. > :21:19.the amendment standing in my name. In the absence of the effective form
:21:20. > :21:22.of coal legislative between this has the National Assembly for Wales,
:21:23. > :21:25.what I have sought to do in the process of this Bill and the
:21:26. > :21:30.committee, is to present this House under my name, because it was no
:21:31. > :21:37.other way of doing it, a series of amendments which have been defeated
:21:38. > :21:41.within the work of the Presiding Officer and in some cases wording
:21:42. > :21:46.from Welsh Government with their permission. Also wording within the
:21:47. > :21:51.committee itself. We are thereby offering the Minister as he sits
:21:52. > :21:54.before me hold choice of alternatives to deal with the issues
:21:55. > :21:58.that he has created for himself and I hope you will be able to take some
:21:59. > :22:04.of them up. I hope that answers the question. Look like a Lord is not
:22:05. > :22:07.only a matter of procedure in the Welsh Assembly and then must
:22:08. > :22:18.Parliament, but he is most ingenious politically. To support my noble
:22:19. > :22:24.friend, a tidy amendment if I might the sole comment from a tidy friend
:22:25. > :22:30.and at the great pleasure of knowing my noble friend for 46 years. I was
:22:31. > :22:34.in sixth form and he became the Welsh Member of Parliament. I know
:22:35. > :22:38.he has been hugely constructive during the procedure of this Bill
:22:39. > :22:43.and we will listen very carefully to the point that he and others made
:22:44. > :22:48.with regard to that amendment 111. I also want to support the noble
:22:49. > :22:54.friend and his amendment in the sense that he said the role of the
:22:55. > :22:57.Secretary of State for Wales has changed radically. When he was a new
:22:58. > :23:02.Presiding Officer and I was the new Secretary of State, I had a desk in
:23:03. > :23:09.the seat in the National Assembly and has an office and when I
:23:10. > :23:16.finished some years later in 2009 has lost both my seat in my office.
:23:17. > :23:20.I think that was in measure of the SMB growing up in beginning to
:23:21. > :23:26.understand that we do not want secretaries of state interfering in
:23:27. > :23:29.what the assembly does any more. I am sure that my noble friend will
:23:30. > :23:32.want to explain that this happened with the full consent of the
:23:33. > :23:37.Secretary of State and our relationship was always a great
:23:38. > :23:41.relationship of positive development. I am grateful to my
:23:42. > :23:47.noble friend, but particularly I wanted a few moments to support my
:23:48. > :23:54.noble friend and his two amendments and I reflect that for the whole of
:23:55. > :24:00.the Labour Government from 1998 onwards, both he and I between us
:24:01. > :24:03.held the position of Secretary of State for Wales and two things
:24:04. > :24:10.emerged that he is already touched on, that were themes in a job. One
:24:11. > :24:15.was in insuring that there were good relations between the assembly in
:24:16. > :24:17.Cardiff and the Government and Parliament here in London.
:24:18. > :24:28.Subtitles will resume on 'Wednesday In Parliament' at 2300.