Commission on Devolution in Wales
Bill Presented
1:07 pm

Photo of Cheryl Gillan

Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

I beg to move,

That this House has considered the matter of the Commission on Devolution in Wales.

Before I commence the debate, may I—with the permission of the Speaker, which I sought earlier—say to Mr Hain, who speaks for the Opposition on Wales, that I was shocked to hear of the incident at the Aberpergwm mine at 3 am, but I was also exceedingly glad to know that all three men have been brought out of that mine successfully? It reminds all of us, particularly after the sad events at the Gleision mine, that men are putting their lives on the line each and every day to recover coal. Because both those incidents involved the right hon. Gentleman’s constituency, I thought we should acknowledge that.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I am very grateful, and thank the right hon. Lady for that, as will the families and the individuals involved. I thank her too for her support for the miners appeal fund and for her support over the tragedy at Gleision. Today’s incident, although obviously serious, particularly for those concerned—they have suffered injuries, but fortunately they are okay—is in a very different category from Gleision, which was a major disaster and tragedy. Aberpergwm pit is run extremely efficiently by a company with high levels of investment, recruiting miners and apprentices, and in all respects an admirable company. The incident is rather an exception, but it is the third one in my constituency in the past couple of months.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

The right hon. Gentleman knows that my door is always open. We have already spoken to other Departments from my office and we will continue to deal with these matters on a cross-party and non-political basis, as is the proper and right way to deal with them.

I am pleased that we have been able to give the House an opportunity to debate in Government time the work of the Silk Commission, the commission that I announced on 11 October would examine devolution for Wales.

The coalition agreement contained three specific items on Wales. First, we promised to take forward the housing legislative competence order that had been held up by the previous Government, and I am pleased to say that we delivered on that. Secondly, we promised a referendum on granting primary legislative powers in devolved areas to the Welsh Assembly Government, and we delivered on that, although on taking office I found that preparations were—how shall I put it?—behind the curve.

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Wayne David (Shadow Minister (Political and Constitutional Reform) (Justice); Caerphilly, Labour)

Before the right hon. Lady moves on from the subject of the coalition agreement, may I point out that her party, in opposition, blocked the housing LCO during the wash-up period before the general election?

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

The hon. Gentleman, who was serving in the Wales Office at the time, arranged the timetabling so that the LCO would fall in that period; he could have delivered it much earlier.

Thirdly, we promised that following the referendum we would establish a process for Wales, in the vein of the Calman commission, and I am pleased to inform the House that we have delivered on that.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

Before the right hon. Lady takes credit for every achievement, may I ask her to acknowledge that although the Government put the legislative framework in place, the referendum was delivered by the people of Wales, who voted for it? I am sure she will want to acknowledge that.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

The hon. Gentleman is dancing on the head of a pin. This Government gave the people of Wales the opportunity to vote in the referendum, as indeed they did, and I was pleased by the outcome. It was only as a result of a great deal of work and application by the Wales Office and others in government that we were able to deliver that on time and to the schedule anticipated.

I am pleased that today, before the first meeting of the Silk commission, we have given all Members an opportunity to register their views by allowing a full-day debate. It is fair to say that Westminster politicians rarely get the time to stand back and thoughtfully consider the future shape of our country’s constitution. We react to events, perhaps to political and tribal allegiances and timetables and, as John Major said in his Ditchley Foundation annual lecture, the Union cannot be maintained by constant antagonism—for example, between Wales and London.

Like our former Prime Minister, I opposed devolution because, as a Unionist, I believed it could be the slippery slope to separation. I am now less fearful of separation and more hopeful

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

Not all of you are. What about the others?

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

The hon. Gentleman suggests that not all Members are less fearful. That is fair and, in the spirit of the debate, I want to hear from Members who do not share the views that he and I hold. My fears about separatism, which have diminished, might be reflected in some Members’ contributions. I am more hopeful that there will be a mature debate and reasoned solutions, delivering a degree of self-determination without threatening the strength of the Union. With the advent of the commission, we are getting time to contribute and reflect.

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Geraint Davies (Parliamentary Assembly of the Council of Europe (Substitute Member); Swansea West, Labour)

Is not the real Conservative agenda to offer tax-raising powers in order to freeze the block grant and end up with a semi-detached Wales, with less representation, thereby securing a permanent Tory-run Westminster, fracturing or destabilising the Union?

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

I do not know what torturous mental processes the hon. Gentleman goes through, but I assure him that I have no ambitions in that direction whatsoever. He has been spending too much time with the right hon. Member for Neath, who sees conspiracy theories in every quarter. This is a genuine open consultation, and the hon. Gentleman will hear as I develop my speech

that the Silk commission is giving us an opportunity to reflect and try to shape the architecture of devolution in Wales.

The commission provides a coherent opportunity to review the working of devolution in Wales and the financial accountability of the devolved institution. Assembly Members are accountable to the people of Wales at the ballot box. They are judged on their record, on the decisions they make and on the outcomes of their policy decisions. We all know that government is a difficult business that involves administering complex issues and looking after the totality of the system for the people of Wales. We therefore need the commission to examine how the devolution system is working, and whether changes might improve its performance.

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David Hanson (Shadow Minister (Home Affairs); Delyn, Labour)

Will the Secretary of State ensure that the commission looks carefully at the impact of the border? My constituency, and that of many others, is close to the English border. People who live in my constituency work in England, and people who live in England work in my constituency. The differing rates of VAT, corporation tax and quarrying tax, and of expenditure, are important on both sides of the border. I do not want the commission to look specifically at Welsh issues without taking representations from the English side of the border.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

I could not agree more with the right hon. Gentleman. I refer him to the commission’s specifications, in which we state that it should

“consider and make recommendations on how best to resolve the legal and practical implementation issues from devolving a package of fiscal powers”.

I think that says it all: we are keeping an open mind. The right hon. Gentleman knows that since becoming shadow Secretary of State, I have been concerned about the implications of the permeability of the border. The commission offers us the chance to look not only at recommendations that might be made but at the practical difficulties.

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David Hanson (Shadow Minister (Home Affairs); Delyn, Labour)

Does the Secretary of State agree that one of the factors that the commission should take into account is that Welsh Members of Parliament such as me, whose constituents use hospitals in England and work in English businesses, should have the right to vote on those matters, too?

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

We proposed to hold this debate before the first meeting of the commission to enable Paul Silk and the other commissioners to hear Members’ views. The right hon. Gentleman’s point is well made, and I know that when the commissioners read Hansard they will take it on board. I do not want to tie the commissioners’ hands; they must decide how they will work.

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Alun Cairns (Vale of Glamorgan, Conservative)

Mr Hanson makes a principled point, the logic of which should have been extended to the previous referendums on devolution. Why did that not happen?

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

If I recall correctly, the Richard commission reported before the Government of Wales Act 2006 was enacted. Reaction to the commission—a pick-and-mix

effect—was interesting. The 2006 Act contained some items that had not been telegraphed quite so clearly, and the House certainly did not have the opportunity to debate it as fully as I am trying to ensure that we debate things today and in future. My hon. Friend is quite right about that.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I do not understand whether the Secretary of State is saying that we did not have time to debate the Richard commission, which is a fair point, or that we did not have time to debate the 2006 Bill, which is not a fair point as we had plenty of time.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

I am glad that the right hon. Gentleman agrees that we did not have enough time to debate the Richard commission, which is indeed a fact. I was thinking of the changes to the Assembly’s electoral system, which were not telegraphed extensively and we did not have a chance to discuss—

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

We may have had plenty of time in Committee, but not beforehand, and there was no wide or extensive consultation. I take the right hon. Gentleman’s point, however.

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Hywel Williams (Shadow Spokesperson (Cabinet Office); Arfon, Plaid Cymru)

May I just recommend to the House in general, and perhaps to the Silk commission, that the commission look at the reports of the Welsh Affairs Committee on cross-border issues—which were what started this little exchange? Although the reports recognised that there were problems, they also recognised that there was a great deal of good will across the border, and that the systems were working very well indeed.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

That is a very constructive intervention, and in my experience the system does work exceedingly well in some instances, but that will be a matter for the commission to consider, and it will want to look at examples of what is working well and what needs adjustment.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

I will give way to the right hon. Gentleman, then I must make some progress.

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Elfyn Llwyd (PC Westminster Leader; Dwyfor Meirionnydd, Plaid Cymru)

Further to the point that my hon. Friend Hywel Williams made, the right hon. Lady will be aware that in the most recent referendum the majorities along the border in favour of further devolution were very high, apart from in Monmouth.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

The right hon. Gentleman will be very pleased, therefore, that the Assembly now has primary legislative powers, and I am sure that he will be spending a lot of his time constructively trying to encourage the Welsh Government to come forward with some legislation, because it is now many months since the election, and correct me if I am wrong—I see Mr Llwyd and the hon. Members for Carmarthen East and Dinefwr (Jonathan

Edwards) and for Arfon (Hywel Williams) nodding their heads—but we have not yet seen any draft legislation from the Welsh Government, even though they were well prepared in advance of the referendum.

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David Davies (Monmouth, Conservative)

My right hon. Friend will be aware, of course, that the loyal county of Monmouthshire voted no in the recent referendum, as it always has in previous referendums.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

That shows the advantage of this approach to constitutional change: all hon. Members, no matter where they come from, how they speak and from what direction they approach constitutional matters, will have an opportunity to express their views. I am grateful to my hon. Friend, and I am sure that he will speak later in the debate and let the House know what he feels the Silk commission should consider.

Before I took that series of interventions, I was saying that neither the Assembly nor the Welsh Government are accountable to the people of Wales for the money that they spend on the policies that they implement. The Welsh Government simply receive the Welsh block grant voted by Parliament, and spend it.

That cannot be right. With power comes responsibility, and it is surely better for the devolved institution to be accountable to the people of Wales not just for decisions on public spending in Wales, but by being responsible for raising some of the money needed to pay for those decisions. Even local authorities, despite receiving block grants, have responsibility for raising local council tax, and consequently they recognise the difficulty of raising tax moneys before they spend money. There is no reason why one institution—

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

I have been very generous, and would now like to make some progress.

There is no reason why one institution should be immune from raising taxes, and instead simply spend money and continue to ask for more—but the Labour party seems to think that that should continue. Only last Friday the right hon. Member for Neath said in The Western Mail that seeking more accountability for the Assembly and the Welsh Government was a “curiously disturbing motive”, so I certainly look forward to hearing his further observations in a minute, because I should like him also to explain the contradiction between his position and that of the Labour First Minister, who welcomes the commission and its objectives.

The first part of the Silk commission’s remit is to look at financial accountability. It will consider the case for devolving fiscal powers and recommend a package of powers that could improve the Assembly’s financial accountability. Those powers would need to be consistent with the United Kingdom’s wider fiscal objectives.

The commission will consider the tax and borrowing powers that could be devolved to the Assembly and the Welsh Government. Those include powers in relation to landfill tax, air passenger duty and stamp duty, but they are not limited to those taxes. The commission’s remit, however, is to recommend the devolution only of taxation powers that are likely to have wide support, and it will need to consult broadly to secure that support not only in Wales but in other parts of the United Kingdom.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

I thank the right hon. Lady for giving way again; she is generous. I wish to ask about her position as Secretary of State on a point of principle underlying the Silk commission’s consideration of such fiscal powers. Does she agree that it would be wrong of any review to make recommendations that were to the financial disadvantage of the people of Wales, recognising, good Unionist that she is, that the nature of the Union depends on ensuring that economically disadvantaged areas receive greater subsidy from other parts of the UK? On that point of principle, does she concur that today we should all agree that any review of fiscal union does not disbenefit the status quo in Wales, and should if anything improve its lot?

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

The hon. Gentleman makes a valid and good point, but once again I do not want to pre-judge or tie the hands of the Silk commission, although I cannot imagine a situation in which an agreed solution, as I have anticipated and laid out in the terms of reference, would disadvantage Wales. That is far from my motivation, as he will see as I progress with my speech.

The commission already has contributions to its evidence base from work such as the Holtham commission’s reports, which were prepared to a Welsh Assembly Government remit, but crucially, unlike Holtham, the Silk commission can take things a step further. The terms of reference require the commission to consider implementation and to make recommendations on how best to resolve the legal and practical implementation issues that arise from devolving a package of fiscal powers and having consistency within the United Kingdom.

The commission will aim to report on part 1 of its remit in the autumn of next year, and the Government will consider its recommendations very carefully. Members may wish to contribute directly to the commission as well as in today’s debate, but I very much hope that we will be able to hold a debate, again on the Floor of the House, at some stage following the delivery of part 1 of the commission’s findings, because the intention is to take the matter forward as consensually as possible.

The commission will then turn its attention to the second part of its remit—to look at the current constitutional arrangements in Wales. Specifically, it will consider the powers of the Assembly and the boundary between what is devolved and non-devolved, and make recommendations to modify the boundary, if they are likely to enable the Welsh devolution settlement to work better. Again, the commission will need to consult broadly on its proposals and make only those recommendations for change that are likely to have wide support.

Currently, the Assembly has powers in all 20 devolved areas, and it will be for the commission to decide whether there is a requirement to tidy up the devolution boundary, but any further changes to the settlement will need to be right for Wales and right for the United Kingdom as a whole. I anticipate the commission reporting on part 2 of its remit in 2013.

With the exception perhaps of the right hon. Member for Neath, there is broad agreement on the basis for moving forward and considering issues of both fiscal devolution and accountability. The Government have moved forward collaboratively with all four political parties in the Assembly, in establishing the terms of

reference and the members of the commission, and I thank in particular all four party leaders in Cardiff bay for the positive and co-operative spirit in which they are engaged with me and my office to agree the way forward.

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David Davies (Monmouth, Conservative)

We are at an early stage in proceedings, but will my right hon. Friend and, perhaps, Mr Hain when he speaks explain whether those nominees will be representatives who represent what their parties think, or delegates who simply pass on what their parties suggest?

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

That is a matter not so much for me, but for the right hon. Gentleman, who I am sure will want to deal with it when he addresses the House. As far as the Conservative party is concerned, I want to be as inclusive as I can of people’s views, and that is why I am trying to create a period in which any member can make a contribution. The Conservative party, in particular, will make contributions to the Silk commission’s proceedings.

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Hywel Williams (Shadow Spokesperson (Cabinet Office); Arfon, Plaid Cymru)

I merely wish to note that some distinguished members of the commission are not strictly aligned to political parties. I am sure that they will make a contribution that might even satisfy David T. C. Davies. Given the quality of the representation, it would be strange if they were there merely to be mouthpieces for political parties. Clearly, they have a great deal to contribute as individuals.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

I am about to come to the composition of the commission, and I will pick up the hon. Gentleman’s point then.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

On a point of detail about the possible extension of powers that the Silk commission is considering, will that include energy consents? The matter has been debated a lot recently, as the Secretary of State knows, and it has some support, and opposition, on both sides of the House. Ministers have made it clear that they do not think that it should be part of the commission’s deliberations. Will she clarify the situation?

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

I am grateful to the hon. Gentleman for raising that matter, particularly as before the debate I was looking at the party manifestos for the Assembly elections. He will know that I regularly receive requests for powers over all sorts of areas, and I expect those areas to be looked at. It is fair to say that I expect the commission—this is subject to the way in which it wishes to conduct its business—to consider requests for energy consents for projects of more than 50 MW, and to consider trust ports, rail and separate Welsh legal jurisdiction, all of which have been raised up the agenda by one or other party, or the Welsh Government. It is right that it should have the opportunity to consider energy consents, but I have an extremely long list of things that other parties want fully devolved, which will not stop until the point of separatism is reached. He and I agree that that is not the way to go. The commission may find itself having to consider several other areas, but I am not going to restrict its operation by anything we say in the House. Indeed, I am looking forward to seeing the outcome.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

May I make a little progress? The commissioners bring a wealth of experience to their important task. The commission is chaired by Paul Silk, a distinguished former Clerk to the National Assembly and to this House, and whom we all know. Paul is already getting to grips with his task and introducing himself to those with an interest in the commission’s work.

The hon. Member for Arfon referred to the two independent members, and they are very distinguished. Dyfrig John CBE is chairman of the Principality building society and a former deputy chairman and chief executive of HSBC bank. Professor Noel Lloyd CBE is a former vice-chancellor and principal of Aberystwyth university. Neither is on the commission with a political remit. They are there as independent members to offer their best advice and to support the other members. I am sure that absolutely nothing from them will have a political bias. They will consider matters objectively and with expertise.

There are also four party political nominees on the commission, each nominated by one of the four political parties in the Assembly. Professor Nick Bourne is the Conservative nominee, and former leader of the Welsh Conservatives in the Assembly; Sue Essex is the Labour nominee, and a former Welsh Assembly Government Minister; Rob Humphreys is the Welsh Liberal Democrat nominee, and director of the Open university in Wales; and Dr Eurfyl ap Gwilym is the Plaid Cymru nominee, and best known for giving Jeremy Paxman a run for his money. I am sure that the commission’s debates will be lively. I believe that that is a first-class team, and it will meet for the first time tomorrow to consider how it will work through the next two years. The commission has a challenging brief because, importantly, we hope that it will build consensus on its proposals.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

I will give way first to the hon. Member for Carmarthen East and Dinefwr—I have not given way to him previously—and then to my hon. Friend.

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Jonathan Edwards (Shadow PC Spokesperson (Treasury); Carmarthen East and Dinefwr, Plaid Cymru)

Based on what the Secretary of State says about consensus, which we hope the commission will be able to achieve, will she outline the process, how its recommendations will reach the statute book, and the time frame? No one in Wales is interested in a kicking-into-the-long-grass game.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

It depresses me a great deal to hear hon. Members say that I am kicking the matter into the long grass. I am certainly not. I am trying to take a mature and adult look at the financial structures and the constitutional and legislative structures affecting Wales. However, I will not prejudge the outcome, and I will not be prescriptive, but I have to look at potential timetables. Three have been set out. One has a shorter time scale, which assumes that, whatever the recommendations, no manifesto commitments or referendum would be necessary. In fact, it would be very difficult to produce a Bill by the time of the next general election, and the time scale could be unfeasibly short. However, again, I am not

ruling that out; I am simply saying that it would be difficult. If we did that, and if there were new fiscal and constitutional powers, they would be implemented post-2015.

Another scenario is based on a manifesto commitment and no referendum, which would lead us to believe that there would be legislation after the next general election. However, I do not know what the Silk commission will recommend, or whether it will require both manifesto commitments and a referendum, in which case the time scale would be slightly longer.

I would like the hon. Gentleman to take me at my word. We are taking a long, hard look at the matter in a genuinely cross-party way. I think he knows that I made some effort to ensure that his party was included, because I thought it was important to start as we mean to go on. I hope that we will continue in that vein, although I appreciate that anything could happen at any time.

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Guto Bebb (Aberconwy, Conservative)

I share the view that the membership is impressive and that it will do a good job, but I have been contacted by a small number of constituents who have asked whether it will be remunerated for its work on our behalf.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

My hon. Friend can reassure his constituents that no member of the commission is being remunerated. They have all agreed to waive remuneration, but their expenses will be met from my Department. We have set aside a sum of money over three years to meet those expenses. At this stage, we are not sure how they will pan out, because I want the commission to decide how it will do its work, as it rightly should, and I do not want it to be restricted. He can reassure his constituents that the commission is doing this work for its love of Wales.

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Jennifer Willott (Cardiff Central, Liberal Democrat)

I apologise for my voice being about an octave lower than normal. This is not a point I often make, but there is only one woman on the commission. Will the Secretary of State assure the House that it will take evidence from and talk to a wide range of people to obtain a broad range of views from both genders and across all communities in Wales, including different ethnic minority groups, so that it can take account of different perspectives?

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

That point was well made. I, too, was concerned, and I looked at the gender balance, having been a former Minister for women. I think Sue Essex will be a doughty and robust member—[ Interruption. ] As my hon. Friend Michael Fabricant says, she is equal to two men. I am sure she will give us a run for our money.

I agree entirely that many of the matters that the commission will discuss will be of great interest not only to women, but to ethnic minorities. I am sure that Paul Silk will take on board the concerns of my hon. Friend Jenny Willott.

We now have 12 years of experience of devolution in Wales. That has involved not one but two pieces of legislation that have been used to try to shape devolution to the purposes of the previous Government. There is obviously much that could be said about the effectiveness of the Assembly and the Welsh Government, but that can be better examined and tested with more accountability and the benefit of that experience.

The Government are now trying to ensure that we have a process to assess the position of Wales within the United Kingdom and to take a detailed, objective and structured examination of the architecture of devolution. This is a mature way to ensure that the Assembly and the Welsh Government get the responsibility they need to ensure accountability, and that the dividing lines on devolution benefit Wales and do not leave the Administration perpetually demanding more powers and more money rather than getting on with the business of running the devolved areas for which they have responsibility.

This is also an important statement of intent by the coalition Government. The Welsh Government receive nearly 15 billion a year from the Treasury, but, as I have said, are not accountable for raising a penny they spend. We do not think that is right, and I am certain that taxpayers do not think it is right either. I want the argument, for once, to move away from whether there is enough money to how it is spent and whether it is spent effectively. It is true to say that a Government who take from Peter and give to Paul can always rely on the support of Paul. We are asking the commission to see whether Paul can also make a contribution.

I look forward to hearing Members’ contributions and maintaining an open mind on how we can improve devolution and, through that, the economy of Wales and the well-being of its people. I hope that we will hear moderate, realistic and interesting views on the balance of powers between Westminster and Cardiff. I am sure that everyone in this House will send Paul Silk and the members of the Silk commission their best wishes for the task ahead.

1:41 pm
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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

Let me begin, Mr Deputy Speaker, by welcoming the fact that we have a Welshman in the Chair for this debate—a Swansea boy who is, I am sure, delighted that Swansea City is in the premiership playing some very good football this season.

Just for the record, I cannot let the Secretary of State continue to repeat the fiction that when she arrived at the Wales Office in Gwydyr house in early May, the cupboard was bare and nothing had been done about the referendum. She knows that that is not the case. She will also know that a couple of days before she went up the stairs at Gwydyr house to occupy the office, I had sought confirmation that we could have delivered the referendum by the autumn, if we really had to; it would have been a tight squeeze, to repeat the phrase used. Let us hear no more nonsense from her about that, or about the housing legislative competence order. As my hon. Friend Mr David reminded her, the housing LCO was ready for Royal Assent, and she sabotaged it; the Conservative party refused to carry it through. She knows that that is true, so I am surprised that she is continuing to say these things.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I am happy to take an intervention a little later.

I am intrigued by accountability; that is why I picked up the Secretary of State on that issue in The Western Mail. I am glad that she reads The Western Mail, and

my comments in it, assiduously. It is not for the Secretary of State for Wales to decide in which way the Welsh Government or the Welsh Assembly should be accountable to the people of Wales. The Welsh Assembly is elected by the people of Wales; she is not elected by anybody in Wales. That is the true line of accountability that operates.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

All I can say is that, as my hon. Friend the Under-Secretary once remarked, I am a Welshwoman born in Wales and therefore have a great interest in the land of my birth.

I read the right hon. Gentleman’s article in The Western Mail very carefully, and one of the things I objected to was his fear-mongering among the people of Wales. He gives the impression that we would halve public spending in Wales, and that is absolutely not the case. He should be ashamed of even suggesting that and frightening people in Wales in that way. He knows that this is an open consultation to see how we can do things better. Any fool can spend money, but those who spend money need to have some responsibility for raising it so that they can spend it rightly.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

My, my—the Secretary of State sounds rather furious. I seem to have touched a sensitive spot. I shall deal with this point later.

We welcome the establishment of the Silk commission, which, as the Secretary of State said, has been established on an all-party basis. The Welsh Assembly, which is well over a decade old, is now truly embedded into Welsh civic society, so there may be a case for looking at increasing its financial powers and flexibility. As the First Minister, Carwyn Jones, has indicated, devolving stamp duty, aggregates tax and new borrowing could be advantageous to the Welsh Government and, indeed, to the people of Wales.

I agree that Paul Silk is a very good choice for this task—a distinguished Clerk in this House before he became the first, and even more distinguished, Clerk of the Assembly. I welcome what the Secretary of State has said about wanting to go forward on a consensual basis. It is important that any Bill emerging from the work of the Silk commission is born out of consultation and consensus, unlike the Parliamentary Voting System and Constituencies Bill or the Fixed-term Parliaments Bill, which were forced on Parliament with little or no engagement with Opposition parties, the public or interested groups and experts.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

May I put the record straight? As the right hon. Gentleman knows, I gave every Welsh MP the opportunity to meet the relevant Minister on an open-ended basis. The PVSC Bill was debated on the Floor of the House for 53 hours and 40 minutes; there were plenty of opportunities for Members to contribute.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

Let me say this to the Secretary of State: when in a hole, stop digging. She knows that she denied Members the opportunity of a Welsh Grand Committee debate, which was requested by my right hon. Friend Paul Murphy and by the leader of Plaid Cymru, Mr Llwyd. Every member of the Welsh Labour group and other Members wanted

that debate as well, because Wales is being savagely penalised by this Bill, on which there was no consultation at all.

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Eleanor Laing (Epping Forest, Conservative)

I speak as someone who was here in this Chamber for most, if not all of the 54 hours on the Bill that the Secretary of State mentioned. Does the shadow Secretary of State accept that that Bill, in changing the parliamentary boundaries, affects not only Wales but the whole of the United Kingdom, and that matters that affect the whole of the United Kingdom, including Wales, have to be dealt with in this House?

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

Of course it had to be dealt with in this House, but the impact on Wales received virtually no debate. There is clearly a lot of sensitivity among Conservative Members on this matter, and I am not surprised. The Secretary of State rejected the request for a Welsh Grand Committee to discuss the fact that Wales is suffering a cut of 25%—a quarter—of our representation, which will affect a lot of parties and communities in Wales. That was never debated properly.

May I make one other point—

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

If I am allowed to finish my response to Mrs Laing.

My other point is that such constitutional matters, particularly parliamentary boundaries, have traditionally always been dealt with on a consensual basis. This is the first time that a politically partisan rigging of the parliamentary boundaries has been introduced in this House and forced through.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

This is very pertinent in learning the lessons in terms of how the Silk commission operates. We cannot have a debate when none of the voices are heard. The Secretary of State has said that she wants these voices to figure as part of the work of the commission, but that did not happen in the boundaries review. None of the Welsh concerns was heard and none was acted on; it was a travesty of democracy.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I absolutely agree.

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Nigel Evans (First Deputy Chairman of Ways and Means; Ribble Valley, Conservative)

Order. As was intimated by the intervention by Huw Irranca-Davies, we are now straying off the subject of the Silk commission, so could we get back on to that, please?

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

Indeed, Mr Deputy Speaker, I am happy to, and I will not be led astray any more by interventions from the Conservative Benches.

The previous Labour Government, recognising the call from the majority within the Scottish Parliament, commissioned the Calman report, to instigate a serious and thorough analysis of how a new settlement in Scotland might be achieved. Crucially, it was based upon cross-party consensus, expert analysis and real engagement with the Scottish public. It is fundamentally important that this Government adopt a similar approach to Wales. I am encouraged by what the Secretary of

State said in that respect, but in truth I am deeply suspicious of the real Tory agenda that lies behind the Silk commission.

The commission’s terms of reference state that any devolution of powers must be

“consistent with the United Kingdom’s fiscal objectives”.

Can the Secretary of State explain what is meant by that? I wonder whether, in drawing up the terms of reference, the Chancellor, the Secretary of State and others were thinking of Switzerland, which has a highly federalised and separate tax system in its various cantons, and which demonstrates how such a system can lead to lower public expenditure—not a model that we desire or will accept for Wales. Silk must not become an excuse for this right-wing Government to offload their financial obligations to lower-income parts of the UK, such as Wales.

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Geraint Davies (Parliamentary Assembly of the Council of Europe (Substitute Member); Swansea West, Labour)

Does my right hon. Friend accept that given that gross value added in Wales is 74% of the UK average, and that we therefore have a lower tax base to tax from, if an equivalent to the Scotland Bill passed 10 points of marginal taxation over to Wales, we would end up raising only 74% of the money possible? We could end up with 20p taxpayers contributing only 17.5p in the pound. That may be one of many methods used to reduce the amount of public expenditure in Wales, but the Government could say, “Oh, don’t worry, you’ve got tax-raising powers. You’ll be all right.”

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

My hon. Friend makes a significant point that the Silk commission will need to take account of in its deliberations.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

The right hon. Gentleman asked me a direct question, and I will give him a direct answer. Devolved funding rules, as set out in the statement of funding policy, operate within the UK’s fiscal framework. We therefore expect any changes that come out of the commission’s work or intergovernmental talks to be consistent with that framework, for example as set out in the programme for government. As he knows, that is because macro-economic policy is a reserved matter for the UK.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I am grateful. The Secretary of State is confirming, then—I am not challenging her on this point—that should there be a derogation in the case of, for instance, stamp duty, that would be taken from the Welsh funding block. That is what I understand her reply to mean.

My second element of disappointment is that the Silk commission will not consider the Holtham commission’s proposals for funding reform in Wales. It was the previous Labour Welsh Government who established the Holtham commission, and it produced conclusive evidence that Wales is now underfunded compared with its needs. As I think both Government parties here in Westminster now acknowledge, it was either naive or cynical of them to promise in their manifestos swift and radical reform of the Barnett formula—a promise that they had to betray after just one week in government.

We are aware that Holtham does not offer a quick solution, and that there would be impacts on the other devolved nations and regions. The introduction of a Barnett floor, which was a Labour manifesto commitment

and a proposition featured in the Holtham commission’s two reports, would have ensured that Wales’s position did not become worse. Why have the Government not considered introducing a floor similar to the one that we proposed, which was agreed with the Treasury? It could be implemented relatively straightforwardly, again with the agreement of the Treasury.

The green budget published last year by the Institute for Fiscal Studies entirely vindicated Labour’s approach to the funding of Wales. By showing that the Barnett formula is only now beginning to disadvantage Wales for the first time, it proved that we were right to stick with it until last year, and equally right to proceed with reforming it thereafter. Make no mistake, up until that point the Barnett formula had served Wales well. There is no doubt that had we ripped it up several decades ago, as the nationalists advocated, Wales would have lost out. The collapse of the banks and the scale of the financial crisis suffered by Iceland and Ireland have been devastating to the nationalists’ arguments for fiscal autonomy.

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Elfyn Llwyd (PC Westminster Leader; Dwyfor Meirionnydd, Plaid Cymru)

I take it that the right hon. Gentleman read the deliberations of the Holtham commission. If so, he will have seen that Gerry Holtham opined that the year-on-year underfunding of Wales went back quite a few years. It is absolute revisionism to suggest that it goes back just to the last year of the Labour Government.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

If the right hon. Gentleman looks at the whole Holtham commission report, he will notice that spending was converging with the English average and coming towards the point that it reached last year, when it started seriously to disadvantage Wales. That was the point I was making.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

To the best of my knowledge, the Holtham report did not mention the fact that in successive years of the Labour Administration, it was vital that we recognised Wales’s particular needs through the Barnett-plus funding settlements, which increased funding for Wales from some 7 billion to something in excess of 14 billion—way above Barnett. That reflects how the Labour Government ensured that Wales had the proper funds to do the work we needed to do.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

My hon. Friend is absolutely right. The Welsh budget more than doubled under our Government, and special additional funding meant that it went above what Barnett would have offered.

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Alun Cairns (Vale of Glamorgan, Conservative)

The right hon. Gentleman underlines the fact that the Welsh budget doubled in that period, but will he recognise that Holtham also reported that in a period of spending constraint and public spending reduction, the Barnett formula protects the Welsh budget?

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I accept the hon. Gentleman’s point to the extent that Holtham did recognise that when there is a period of spending restraint, or even cuts, underfunding and funding convergence do not happen to the same degree. However, I am not sure what the hon. Gentleman is arguing. Is he saying that spending cuts and restraint have a good impact on Wales?

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Roger Williams (Brecon and Radnorshire, Liberal Democrat)

Does the right hon. Gentleman agree that reform of the Barnett formula is about not just Wales but Scotland as well? Of course, circumstances are very different in Scotland, and trying to reform the formula when there is a contracting economy would be very difficult for Scotland.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

We are talking about Wales, but I think most people, including the Scots, would concede that Scotland has done pretty well out of the formula compared with Wales. Wales is now losing out under it.

As the Barnett formula reaches the end of its life, now is the time to act. In refusing to address the convergence problem that is now occurring, the Government are penalising and disadvantaging Wales. We always acted responsibly and in the interests of Wales, and we are the only party with a deliverable and fair funding plan for Wales. Silk cannot be used to let the Government off the hook on Barnett. Although we are open to the idea of Wales raising some of the money that it spends—perhaps, as the First Minister has indicated, through stamp duty and aggregates tax—that must not be at the expense of the needs-based settlement that is vital for Wales.

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Jonathan Edwards (Shadow PC Spokesperson (Treasury); Carmarthen East and Dinefwr, Plaid Cymru)

As the right hon. Gentleman knows full well, the issue of Barnett will now be dealt with through discussions between the Welsh Government and the UK Government. Rather than try to undermine the Silk commission, would he not be better off turning his guns on the First Minister so that he gets his act together?

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I do not think I want to turn my guns on the First Minister at all, but I know the hon. Gentleman is fond of doing that. The First Minister is seeking to make progress on these matters, as he has very effectively so far.

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Geraint Davies (Parliamentary Assembly of the Council of Europe (Substitute Member); Swansea West, Labour)

Will my right hon. Friend give way?

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I will make a bit of progress, then I will happily take interventions.

Holtham calculated that approximately 17.1 billion of tax revenue is raised in Wales every year. Total public spending in Wales is about 33.5 billion—almost twice the amount raised. We should not be ashamed or embarrassed by that. Wales’s needs are greater than those of other parts of the UK. We have a history of relatively high levels of ill health, caused by our industrial legacy of mining and heavy industry. Also, we suffered the cataclysmic shock of sudden and mass unemployment, with the wholesale pit and traditional industry closures in the 1980s, which left high levels of economic inactivity and, because the then Tory Government did not drive investment to create new industrial sectors, relatively lower levels of business activity. That is why we should look before we leap. The so-called devolution-max or independence-light settlement advocated by the nationalists—and, I suspect, tempting to the Tories—could be disastrous for Wales.

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Jonathan Edwards (Shadow PC Spokesperson (Treasury); Carmarthen East and Dinefwr, Plaid Cymru)

The shadow Secretary of State is quoting figures from the Holtham commission, but that commission reported that the revenue raised in Wales

by UK-wide taxes was 17.1 billion and that UK expenditure was 25 billion, not the 33 billion that he has been quoting in the press today.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I disagree. I checked with the House of Commons Library, and it was in the same territory as the Holtham commission.

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Alun Cairns (Vale of Glamorgan, Conservative)

I am not sure whether the right hon. Gentleman has a brass neck or simply selective hearing or a selective memory. Does he not recall that Wales, in the 1980s, was not the poorest part of the UK, and that, in spite of Labour Governments in Cardiff bay and a Labour Government in Westminster, Wales is now the poorest part of the UK?

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I am astonished that a Member of Parliament for a Welsh seat is trying to defend the Government’s impact on Wales in the 1980s. As a result of Tory policies, there was mass unemployment and people were smuggled on to incapacity benefit to disguise the unemployment figures and left there—a whole generation of young people—never to work again. I am astonished that he is trying to defend that.

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Geraint Davies (Parliamentary Assembly of the Council of Europe (Substitute Member); Swansea West, Labour)

I have figures from the House of Commons Library on the difference between expenditure and revenue showing net contributions of 14.6 billion in Wales and 14.3 billion in Scotland. Does that not demonstrate that independence for Scotland and Wales would only result in an impoverished Scotland and Wales? We need a fair system based on needs.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

That is exactly what I have been arguing.

Under devolution-max, as we understand it from the Scottish model, Wales would be responsible for raising all its own revenue, but we simply could not do it. It would be impossible suddenly to halve public spending in Wales. With devo-max, income tax and other taxes would literally have to double overnight just to maintain current spending levels, which is clearly a preposterous scenario—if ever implemented, it would have a devastating impact upon the Welsh economy and people’s way of life. However, I can see how it would be an attractive solution to some Tory stockbrokers in the south-east—people in Chesham and Amersham, for example—because it could mean massive tax cuts for them. Devo-max is yet another example of shared interests by the Conservatives and nationalists. It is no wonder that Plaid Cymru is so reluctant to criticise the Government, preferring to focus all its fire on Labour, as has happened in the past few minutes. They have much in common, which explains why they have consistently refused to rule out a coalition in Wales.

We should celebrate both the successes of devolution and the economic, social, cultural and political ties that bind us together—they are probably stronger now than ever before—but devo-max, or independence-light, is not the answer to the economic problems that Wales still confronts. Labour’s vision is of a Britain in which the stronger, richer parts support the weaker, poorer parts—a Britain fairer, more just and more equal, not an unfair, unjust, unequal Britain where the weakest go to the wall. I hope that the Silk commission will take close account of that important principle.

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Guto Bebb (Aberconwy, Conservative)

Is it not the case that, during the 13 years of Labour Government, the Labour party’s ambition for Wales was to create a dependency culture, in which we were given handouts by England, rather than to encourage the entrepreneurial activity that we saw in the 1980s?

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

If that nonsense is true, why did we have record employment under our Labour Government, why were there more jobs in Wales than ever before in our history under our Labour Government and why were there higher levels of business activity under our Labour Government? We had a record of economic success before the global financial crisis that was second to none. I am astonished that the hon. Gentleman is seeking to dispute that.

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Alun Michael (Cardiff South and Penarth, Labour)

Does my right hon. Friend agree that it is amazing to hear Government Members trying to rewrite the history of the ’80s? Many of us entered the House because of the experience of seeing young people abandoned by a Conservative Government and their economic policies so that they were unable to make their way in the world.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

My right hon. Friend makes a powerful point with great passion precisely because he was one of the people who entered Parliament to fight for the rights of young Welsh citizens who were denied by that callous Conservative Government.

I hope that the Silk commission will take account of the principles of fairness and justice in its deliberations. Some resources from the south-east of England are, and in future should still be, redistributed to Wales, the north-east of England and other areas of England with lower levels of economic activity and prosperity in order to help everywhere in Britain to become economically more sustainable. However, I remain suspicious that this right-wing Government do not share this vision for Britain and may exploit the Silk commission for their own ulterior motives.

Compared with Scotland, there is a much more significant amount of commuting across our border with England, as pointed out earlier by my right hon. Friend Mr Hanson. Traffic flows across the Wales-England border are substantial. North-east Wales is highly integrated into the economy of Merseyside and north-west England, while in south Wales the bulk of traffic movement is focused along the M4 corridor. About 80,000 people live in Wales but work outside Wales in the UK, and about 50,000 people work in Wales but live in the UK outside Wales. This gives a total of about 130,000 people who travel across the border to work every day. A little over half of this cross-border traffic is accounted for by people commuting in and out of north Wales. Despite Scotland’s much larger population, the number of commuters crossing its border is roughly one third of the number commuting in and out of Wales.

More than 1.4 million people in Wales—nearly half its total population—live within 25 miles of the border with England, and nearly 5 million people in England live within 25 miles of the border with Wales. In aggregate, 30% of the population of Wales and England—nearly one third, or more than 16 million people—live within 50 miles of the border between the two countries. In

contrast, the number of people living close to the Scotland-England border is much smaller. Only 5% of the combined population of Scotland and England—just one sixth of the equivalent for Wales, or about 3 million people—live within 50 miles of the border between those countries. Given that the Welsh economy is much more closely bound into the economy of England than is the Scottish economy, the potential for economic distortions and tax avoidance as a result of tax devolution is of greater concern in Wales than in Scotland, which is why the Calman agenda cannot simply be transposed wholesale on to Wales. We would like a clearer indication from the Government of how they intend to deal with these crucial cross-border issues, and I hope that the Silk commission will address them.

Something else is not within remit of the Silk commission, however, but the issue is much bigger than the Barnett formula or tinkering with the constitution—it has felt like the elephant in the room during today’s debate. There is a serious jobs crisis in Wales, and the Government need to wake up urgently to that. For example, Tata Steel employs 20,000 people in the UK, of whom 8,000 are in Wales, in overwhelmingly highly skilled, well-paid jobs, with three to four times that number of dependent jobs in the economy outside. In Wales, that means perhaps 25,000 or more jobs. Last week, MPs were briefed by Tata’s European chief executive. He did not mention corporation or any other tax, which the Silk commission is considering. Instead, his overriding criticisms of Government policy, which he worried was threatening the future of steel manufacturing in the UK—at Port Talbot, for example—were very different. He said that the Government had to act on raising demand for UK steel through infrastructure investment—in other words, through more growth and jobs. He also argued that energy costs were far too high—fully half as high again as in France. What are the Government going to do about that? Nothing.

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David Davies (Monmouth, Conservative)

I had similar representations from Tata. The company is clearly worried about energy costs rising as a result of environmental taxes, which are being implemented because of a perception of increased temperatures, which do not seem to be increasing at the moment. Does the right hon. Gentleman think it is time to look at the issue again?

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I know that the hon. Gentleman has a reactionary view on the climate change agenda—perhaps that is reflected in his question—but the briefing that we had from the European chief of Tata Steel was clear. He said that it was overwhelmingly the lack of Government support and investment in the economy—and the demand for steel that comes from thatthat was hitting his industry so badly, along with energy prices, thereby risking future investment. Incidentally, the hon. Gentleman’s question also gives me the opportunity to remind him that although he celebrated the county of Monmouthshire’s no vote, the fact is that 49.36% voted yes, while 50.64% voted no. That does not seem to be a massive rejection of devolution in Monmouth.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

Will my right hon. Friend confirm from the discussions with Tata Steel and others that they are not opposed to environmental taxes per se? They are opposed to the Government’s inept handling of taxes such as the CRC, or carbon reduction commitment,

and the carbon floor price, which are rightly perceived not as stealth taxes—there is nothing stealthy about them—but as a deliberate blow to our energy-intensive users. What they are saying to the Government is: “When you’re dealing with taxation issues”—as the Silk commission is—“you should do it with industry, not tell industry what’s happened to it after the event.”

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

My hon. Friend, who has expertise in this matter from his previous shadow ministerial job, makes a valid point. Indeed, Tata Steel also talked to us about the carbon price element that is threatening the future of its industry in areas such as Llanwern and Port Talbot.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

The right hon. Gentleman will therefore be greatly reassured to know that I was at Tata Steel for our business advisory group meeting at the end of last month, where I had long discussions. I am sure that he would not want to cause any anxiety to the work force. I was pleased to hear that long-term investments continue to be made by Tata Steel and that it welcomes its good relationships and exchanges with my colleagues in the Cabinet on matters pertaining to the success of that business.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I am glad that the Secretary of State had that conversation, but all I can do is report to the House—and it is important that she hears it too—what the European chief of Tata Steel told a group of Members who met him last week, which is as I have described it. He was not concerned about any of the issues to do with the Silk commission, as we are in this debate. It is important for the Government to recognise that they should not ignore the economic realities and flirt with tax devolution—by, for example, devolving corporation tax—when that is not even on Tata’s agenda.

As for investment, Tata Steel’s European chief pointed out that the new and welcome investment at Port Talbot might not have been made had he been aware of the climate now affecting the company as a result of the Government’s incompetence, which is damaging steel production. Instead of addressing that, the Government are, through the Silk commission, considering matters such as devolving corporation tax.

A review undertaken in 2007 by Sir David Varney for the Treasury pointed to academic research that suggested that only about half the impact of a corporation tax cut was usually recovered through increased growth and investment. The question is: would lowering corporation tax in Wales to, say, the Irish level—if the Silk commission is to consider that—generate enough extra tax, including income tax, to compensate for the 400 million or so that is likely to be lopped off the Welsh block grant to comply with European Union state aid rules and compensate the Treasury for lost revenue?

The Secretary of State for Northern Ireland is an enthusiast for devolving corporation tax. Nevertheless, he told me that he thought it would take at least 15 years for the Northern Ireland economy to generate the growth and jobs that he anticipated from halving corporation tax, as is planned there, that would be sufficient to produce an equivalent income to compensate for the loss to the Northern Ireland block grant. What Welsh Government would choose to lose around 400 million now and each year for the best part of two

decades in the hope—and only the hopethat extra inward investment and business activity would eventually make up the shortfall?

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David Hanson (Shadow Minister (Home Affairs); Delyn, Labour)

To return to the cross-border issue, in the event of the Silk commission determining that corporation tax could be varied, would not the north-west of England then make the same demands on the Treasury for varying powers for its region? The point that my right hon. Friend should emphasise to the Secretary of State is that the Silk commission should look at the consequences of those variations for both Wales and the English side of the border.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

My right hon. Friend makes a powerful point that I hope the Silk commission will take account of.

It is simply no answer to offload tax-raising powers to Wales that will at best have a marginal impact and at worst—because of the compensating cuts in the Welsh budget—worsen the prospects for jobs, business and infrastructure investment in Wales. Meanwhile, in the real world, unemployment in Wales is rocketing. Six people are chasing every vacancy—many more in some areas of Wales—and the Government have no plan to deal with the problem. Unless they change course, it will get worse and worse.

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Wayne David (Shadow Minister (Political and Constitutional Reform) (Justice); Caerphilly, Labour)

Does my right hon. Friend accept that a huge problem in Wales is that the private sector is dependent on the public sector, which means that cuts in the public sector affect the private sector as well?

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

Absolutely. I have had many discussions with businesses in Wales that have been severely damaged—some have even been threatened with extinction and bankruptcy—as a result of public spending cuts, because they depend for their activities, whether they be providing services, procurement or whatever, on the public purse.

By all means consider the Silk commission agenda, but unless the Government change course, things will get worse and worse for Wales. It is the most vicious of circles: fewer working means fewer people paying taxes, which means less money to pay off the deficit. As Wales gets poorer, how can it be expected to raise its own money through taxes, as the Secretary of State would like, if the revenue coming in is being cut? There are serious questions for the Silk commission to consider, because the Government’s cuts are choking off growth, and tax revenue in Wales is diminishing substantially. I do not want the Welsh budget to be cut because of what might be deemed to be the gap in the revenue going to the Treasury arising from devolving taxes—which might happen as a result of the Silk commission—only to find that those taxes do not make up that gap.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

Will my right hon. Friend give way?

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I will, but then I had better make some progress, because I have been on my feet for a while.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

My right hon. Friend is generous in giving way again. May I urge him to advocate from the Dispatch Box a tax change that we can introduce right now, namely a national insurance tax holiday for small businesses? That would encourage far more people

to take on more employees, including women, who are significantly disadvantaged at the moment. We do not have to wait for the Silk commission; the Government should adopt our five-point plan right now.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I completely agree, and I have been urging that on the Secretary of State in this debate. Cutting VAT to 5% for businesses involved in home maintenance and repairs could revitalise a building industry that is on its back in Wales. That should be the priority for the Secretary of State.

Families across Wales are struggling with rocketing food prices and electricity, oil and gas bills, and are worried about their jobs and their children’s futures. Far from our economy being a safe haven, our recovery was choked off last autumn, well before the eurozone crisis. Our economy has stagnated for over a year now. However, there is a better way. We need a plan for jobs and growth to get the Welsh economy moving again and help get the deficit down in a steadier and more balanced way. That is what the Secretary of State should be focusing on for Wales, not simply the Silk commission’s tax and powers agenda.

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Jessica Morden (Newport East, Labour)

My right hon. Friend has been generous in giving way, and I agree with him wholeheartedly. What my constituents want more than anything is for the Government urgently to come up with a jobs and growth strategy, which is currently missing. Does he agree that the establishment of the Silk commission, although a great thing in the long run, should not deflect from the urgency of the current situation?

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I completely agree; I could not have put it better myself. I hope that the Silk commission will consider the context in which it is operating, and that, if it does advocate some tax devolution, which I think would be sensible in some respects, it will consider the wider picture and the impact of the lost revenue, indirectly, to the Welsh budget.

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Geraint Davies (Parliamentary Assembly of the Council of Europe (Substitute Member); Swansea West, Labour)

Will my right hon. Friend give way?

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I want to make some progress, if my hon. Friend does not mind. If there is time at the end, I will certainly give way to him.

Labour has set out a clear five-point plan to create jobs, to help struggling families and to support small businesses in Wales. Our jobs plan includes tax breaks for small businesses taking on extra workers, a temporary VAT cut that would give families a boost of around 450 a year, and a tax on bank bonuses to fund jobs and training for young people. I urge the right hon. Lady’s Government to implement it, alongside the work of the Silk commission. If the Chancellor were to come to the House with such a plan for growth, we would support him.

Thanks to devolution, Wales is showing that there is an alternative. The Welsh jobs fund will provide 4,000 job and training opportunities for 16 to 25-year-olds each year, along with an extra 500 police community support officers for safer communities, and support for Welsh students so that they do not have to pay higher tuition fees. Labour First Minister, Carwyn Jones, is proving that, although cuts are unavoidable, they do not have to

be allied to the chaos of a privatisation plan for the NHS, or to a plan to close down opportunities in our universities, or, with the greatest hypocrisy of all, to the simultaneous devaluation of vocational education while making it even harder for young people leaving school to get a job.

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Guto Bebb (Aberconwy, Conservative)

Was it not rather unreasonable of the right hon. Gentleman to say what he did about the health service in Wales, given that the National Assembly is cutting health expenditure in Wales while those cuts are not happening in England? My constituents are very aware that the Betsi Cadwalader health trust is facing serious financial difficulties, not as a result of changes in Westminster but as a direct consequence of choices made by the Labour Government in Cardiff.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

Labour’s Government in Wales are not adopting a back-door privatisation plan for the health service in Wales, thank goodness—unlike what is happening in England. In addition, did the hon. Gentleman not see the important report in the media recently in which leading health officials and clinicians are now stating conclusively that the health service in England is now being cut as a result of his Government’s policies? All services in Wales are having to be reduced, of course they are, but why does he think that is happening? It is a result of the programme of cuts by the Government whom he supports.

Of course our Labour Government in the Welsh Assembly cannot insulate Wales from this Government’s damaging policies. But they can show that, for schools, for hospitals, and for jobs and skills, even in the toughest of times, there is and always will be an alternative to this right-wing Westminster agenda. It was wrong to say that there was no alternative to Margaret Thatcher’s destructive policies in the 1980s. That was paid for by hundreds of thousands of people across Wales in lost jobs, futures and, yes, even lives as that Government systematically undermined the national health service.

In Wales, thanks to devolution, we can protect ourselves just a little from the consequences of Tory-Liberalism. It is not full protection—it never could be—but it makes a real difference, a Labour difference, because the people of Wales voted for the only party committed to standing up for Wales: the Labour party. Wales is an example to the rest of the United Kingdom of devolution working as it should do. We have in Wales a new devolution generation led by Carwyn Jones. That new generation are not devo-sceptics or nationalists, but devo-realists who are at ease with devolution and who recognise the benefits of empowering people.

The strength of Welsh devolution is a testament to Labour’s achievements in office. We should not forget that the Prime Minister and the Secretary of State tried to prevent it from happening. They both stood on an anti-devolution platform as Tory party candidates in 1997. They both voted against the Government of Wales Act 2006, which I brought in as Secretary of State, and which delivered the full law-making powers now enjoyed by the Assembly. Now, in 2011, we will not allow them to use the Silk commission to diminish the devolution project, or to cut Wales adrift to appease the little Englanders on their own Benches. We will give the Silk commission a cautious welcome, but we are suspicious of the Government’s motives, as are the more than

130,000 people in Wales who are now out of work, and who are desperate for the Secretary of State to focus on jobs and growth, not on contriving devices to abandon her responsibilities in Wales.

For us, devolution has always been a means to an end. Labour has never fought elections solely on the issue of constitutional change. That would be a diversion from the real task, which at this moment requires above all taking a stand on the side of the people in the face of the most reactionary Government since the 1920s. Our vision for Wales does not involve a defence of the status quo. Our stance is one of modernisation and progress, even as we face the most difficult of policies inflicted on us by this Government. We urge the Silk commission to join us in standing up for Wales, and not to be seduced by this Government’s real agenda of hiving off their obligations to Wales.

2:25 pm
Photo of David Davies

David Davies (Monmouth, Conservative)

It is always a pleasure to be here on a Thursday discussing Wales. Unlike some Members, I shall not be offering a welcome, cautious or otherwise, to the Silk commission. I have no doubts about the motives or the knowledge of any of those taking part in it, some of whom are well known to me, but I feel that we could save ourselves a lot of time and money by doing away with the commission and getting on with what we all know is going to happen. We know that the commission is going to spend until the summer of 2012 looking into the granting of fiscal powers to the Welsh Assembly. I suspect that all sorts of things will appear in the newspapers and on BBC Wales, and that there will be a debate or two. The usual faces of the great and the good in Wales will be wheeled out in support of all of this, and there will be public meetings on wet weekday evenings in various parts of Wales, to which a small representative sample of the public who all like the idea of giving further powers to the Assembly will turn up. At the end of it all, we will be told that the vast majority of people who responded were in favour of giving further powers to the Assembly, and those further powers will be given. Then phase 2 will begin, in which, I see from the report, we will consider “varying” the powers of the Assembly. Well, we all know what that actually means. It means increasing the powers.

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Hywel Williams (Shadow Spokesperson (Cabinet Office); Arfon, Plaid Cymru)

The hon. Gentleman seems to be taking a rather “conspiratorial” view of these developments in Welsh politics. Does he think that the referendum, too, was a conspiracy?

Photo of David Davies

David Davies (Monmouth, Conservative)

It is not a conspiratorial view; it is a view based on the history of what has been going on. We seem to be locked in a kind of constitutional groundhog day, with the same sequence of political events repeating itself over and over again. The process starts with the Welsh Assembly being granted a whole load of powers and saying, “That’s it, we’ve got all the tools we need for our toolkit.” That seems to be the popular term at the moment. “We’ve got everything we need now. We’re just going to get on with the job.” Then, a few years—or, in this case, a few months—later, it says, “Well, actually, we can’t do the job we need to do. We just need a few extra powers.” Then a commission of the great and the good is set up, often with the same people appearing

time and again. They go off and consider the matter, public meetings are held, and they come back and say, “Yes, we need a bit more.” Perhaps a referendum is held, or perhaps there is just another Act of Parliament or some statutory instrument. The Assembly gets what it is given and everything goes quiet for a few months. Then the whole thing starts up again. We are in the first phase of the cycle at the moment. This is not a conspiracy; it is just how things have been happening in Wales since about 1999.

I would be delighted if we really were going to consider varying the powers of the Welsh Assembly, because I assume that varying can cut both ways. It could mean that, rather than just handing the Assembly new powers, we could look at taking a few powers away from it, once in a while. I suggested that in a Westminster Hall debate a few years ago, when Wales was doing particularly badly on the health service, but it did not seem to meet with much approval from anyone—certainly not anyone in my political party. The very fact that it had been suggested was a source of outrage to many.

The Welsh Assembly can take powers away from local authorities that are failing in Wales and, quite rightly, it has used them from time to time, so I see no reason why the Silk commission should not look realistically at the possibility of removing powers from the Welsh Assembly in devolved areas if standards have clearly dropped below those that all in the United Kingdom are entitled to expect.

Another area that I suspect the Silk commission will not look into—Mr Hain mentioned it—is environmental taxes. To my mind, that would be very interesting indeed. As the right hon. Gentleman rightly said, Tata and other manufacturing companies in Wales that use large amounts of electricity are very angry about the way in which the environment has been used as a means to impose all sorts of extra tax burdens. The issue of the environment is worth exploring, but now is not the time or place—[Hon. Members: “Come on.”] It is very tempting, but I see Mr Deputy Speaker imperceptibly shaking his head at me. It is not for me to pose the question of why the temperature has not got any hotter since 1998, despite the fact that large amounts of carbon dioxide have gone into the atmosphere. That is not a question for today, but it is a very interesting one none the less—and I have never heard a satisfactory answer to it.

Let me move on to a more important question. If we accept that things will at some point start getting hotter because of carbon dioxide, requiring us to put all sorts of taxes on our industries, and if Welsh industries such as steel are affected, surely it is only right that those taxes be applied not just across the whole of the European Union or Europe but across the whole world. If we do not insist on that as a starting point, all that will happen is that those manufacturing industries—so important to us in Wales for jobs—will simply relocate to other parts of the world where those taxes are not being applied. It will not make a jot of difference to global carbon emissions, which will continue to come from wherever those factories relocate, but it will make a different to jobs and the amount of tax that the Treasury

collects within the UK. I would love to see the Silk commission looking into that idea, but I am afraid that I shall probably be disappointed.

You might conclude, Mr Deputy Speaker, from what I am saying that I am in some way against devolution—[Hon. Members: “No, never!”] I am not. I am devo-realist. I was against the idea of a Welsh Assembly and I have voted no at every opportunity ever since, but I say genuinely that I have a very high opinion of the abilities of the individual Members of the Welsh Assembly. I had the pleasure of working with them for eight years. I do not doubt their motives. I do not doubt the credibility of people like Rhodri Morgan, Dafydd Elis-Thomas or Nick Bourne, even though I might disagree with them on many fundamental issues.

My problem with what we are doing is very simple. The West Lothian question is the elephant in the room here. Every time we give further powers to the Welsh Assembly, we are weakening the United Kingdom. I believe that even some Labour Members, in their quieter and more reflective moments, share some of these concerns. Surely the priority for us constitutionally should not be thinking about granting further powers to the Welsh Assembly, but ensuring that all citizens of the UK have the same constitutional powers. The issue is about addressing the fact that we here in the Westminster Parliament vote on how the English run their schools, discuss how the English run their hospitals, yet we do not accept the right of anyone, including Members of Parliament, to have any say in how these issues are dealt with in Wales.

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Jonathan Edwards (Shadow PC Spokesperson (Treasury); Carmarthen East and Dinefwr, Plaid Cymru)

May I take it from the hon. Gentleman’s comments that he is arguing for a fully federal United Kingdom, whereby all the historic nations of the UK are treated on an equal basis?

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David Davies (Monmouth, Conservative)

The hon. Gentleman is right. I have made that view public in the past. I think there is a strong case for looking at some form of English Parliament or some means to prevent Welsh and Scottish MPs from voting on matters that affect only England. I repeat that I have already made that viewpoint public. I do not pretend to know the exact answer, but I am in favour of something along those lines. It might well be that at that point, we would have to consider increasing the powers of the Welsh Assembly in line with those of the other parts of the United Kingdom. The hon. Gentleman will know, however, that that is something that happens in many countries across the world—in Canada, Germany and countries with a Commonwealth tradition such as Australia, for example. If that is thought through properly, it can work. My current difficulty is with the asymmetric nature of our arrangements. Giving further powers to Wales in this way—through the Silk commission if that is what it decides—is going to make them even more asymmetric.

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Mark Tami (Opposition Pairing Whip (Commons); Alyn and Deeside, Labour)

Would the hon. Gentleman not accept that in a border area such as mine, people go across the border to use hospitals, for example, so it is quite reasonable for me to be concerned about what is happening to the health service in England, because many people in my area use it?

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David Davies (Monmouth, Conservative)

Of course I agree with the hon. Gentleman. I live on the border as well. Many of my constituents go across the border, but what right do he

and I have to tell the English how to run their health service if we are not prepared to accept that English MPs whose constituents might come over into Wales should also have a voice over what happens within the Welsh health service?

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

No doubt my hon. Friend will therefore give a warm welcome to the statement made on 8 September by the Parliamentary Secretary, Cabinet Office, my hon. Friend Mr Harper, the Minister responsible for political and constitutional reform, announcing our intention of establishing a commission to look into the West Lothian question. I understand that in the not too distant future there will be further statements on the subject, which will of course address the important questions that my hon. Friend is raising today.

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David Davies (Monmouth, Conservative)

I do indeed welcome that statement, and I look forward to participating, but I hope that we do not end up putting the cart before the horse. I hope that we do not all go off in different directions, rather than getting things done in an orderly fashion. The constitution is a very delicate thing, and it needs to be balanced.

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Peter Hain (Shadow Secretary of State for Wales; Neath, Labour)

I agree with the hon. Gentleman that the constitution is delicate and needs to be balanced, but is not the answer to his question—the answer to the English question, if you like—that we should remedy the asymmetrical nature of devolution in the United Kingdom by devolving powers to the English regions, not just to the London region, which already has considerable powers? [Interruption.] The Secretary of State mutters from a sedentary position that that has been rejected, and I accept that it was rejected under our Government in the north-east referendum, but I felt at the time that that was a very low-grade form of devolution. One of the things that people told me on the doorsteps in such places as Middlesbrough and Tyneside was that they did not believe in another form of regional government if it did not involve any real powers. If it did involve real powers, however, that would be the answer to the hon. Gentleman’s question.

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David Davies (Monmouth, Conservative)

I suspect that there may be something in what the right hon. Gentleman says. The referendum on powers in the north-east took place quite early in the process, and there is now a much wider understanding of the implications of devolution throughout the United Kingdom. Nevertheless, there is still a problem.

We devolved powers to Wales, Scotland and Northern Ireland on the basis of their historical roles as nations within the United Kingdom. I do not see how we can just come along and artificially create nations within England where nations have not previously existed. I also suspect that this is not a debate that any of us here should be having. It must ultimately be for English MPs to decide for themselves whether they are content to remain representatives in England or would prefer to be representatives in the regions thereof. Let us not forget that there are 6 million people in Scotland, 3 million in Wales and 1.5 million in Northern Ireland. We have not so far devolved powers on the basis of the numbers of people in the countries concerned, and we therefore have no real right to say that because there are 50 million

or 55 million people in England, they do not have the right to have a Parliament based on their own historic nation.

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Wayne David (Shadow Minister (Political and Constitutional Reform) (Justice); Caerphilly, Labour)

Does the hon. Gentleman not accept that until now the primary motivation for devolution has been not a recognition of nationhood, but the need to enhance democracy? That is what devolution is ultimately all about. It is not about placating nationalism; it is about enhancing democracy.

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David Davies (Monmouth, Conservative)

There have been several motives for devolution. Nationalists saw it as a stepping stone towards independence—I imagine that they would be fairly honest about that—while others, some of whom are now on the Opposition Benches, were afraid of nationalism, and saw devolution as a way of preventing the nationalist genie from getting out of the bottle. I think that they were mistaken. I fear that some may have taken the narrow political view that Wales would always be dominated by Labour whereas Britain would not necessarily be, and that therefore it would not be a bad idea to carve out little corners of the United Kingdom where Labour could always have an inbuilt majority and a left-wing Government could rule. I dread to think that that is the case, but, being a bit cynical, I suspect that there may be some grounds for believing that it is.

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Owen Smith (Pontypridd, Labour)

The hon. Gentleman is, as usual, being generous in giving way. Does he agree that a further crucial aspect of the rationale for devolution in Wales and Scotland was demand, and that that may have been a greater consideration than nationhood? Does he also recognise that, because of a feeling that—for reasons related to distance and divergence in economic performance—people are getting worse deals from the Government in some parts of England than in others, such as the south-east, there may well be a growing demand in some areas for a fresh look at the possibility of English regional devolution?

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David Davies (Monmouth, Conservative)

The answer to the hon. Gentleman’s first question is that despite the enormous amount of money spent on the referendum in 1999, only one in four people went out and voted yes, so the demand could not have been that great. As for his second question about the issues that are bubbling away in the various regions of England, I do not profess to know the answer, and I certainly will not be trying to pose that question. As I said to Mr Hain, the English will have to work out for themselves whether they wish to base a future settlement on England itself or on regions thereof. It is not for us to tell them what to do.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

It would be wrong for English MPs alone to discuss, and decide on, such matters. As a UK parliamentarian, I agree that English devolution is the great unanswered question. However, Welsh MPs—along with Scottish and Northern Ireland MPs—will want to have a say in that because it will have a considerable impact on the UK as a whole. I ask the hon. Gentleman to consider this point in his peroration, because we would not want non-England MPs to be shut out from the debate on English devolution. Nor would I want

England MPs to be shut out from our debate here today, and it is great that some England MPs are present.

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David Davies (Monmouth, Conservative)

That is a sensible point, but my peroration has become more of a conversation now, and I wish to return to it. I shall think about what the hon. Gentleman has said, however, and I suspect that all of us will want to contribute in various and different ways if and when the England question arises.

The Silk commission is addressing fiscal powers. The leader of Plaid Cymru—I think he is still the leader—said that that could have an historic effect on Wales, by which I assume he means that it will lead to all sorts of extra powers being acquired and Wales heading much further along the road that he wishes to travel down. I am very concerned about the prospect of giving fiscal powers to Wales, however. It is hard to see how we could maintain the integration of the various parts of the United Kingdom if we were all doing different things fiscally. The Silk commission has apparently ruled out borrowing, but I have been told by those in a position to know that it has ruled out only some kinds of borrowing, and anything can be examined. There are certainly ongoing discussions about different kinds of borrowing.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

The Silk commission can look at future borrowing, whereas current borrowing is at present the subject of bilateral discussions between the Treasury and the Welsh Government. The Silk commission can look at future borrowing.

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David Davies (Monmouth, Conservative)

I thank my right hon. Friend for that clarification, but what she says will not help me sleep any more easily tonight.

Before this debate started, an urgent question was asked on the Floor of the House about what has been going on in the eurozone area. That is, in fact, fairly simple to understand. There is a central bank and a currency area with all sorts of individual parts within it—we call them nation states still, although Brussels will probably want to change that in a few years—and those individual parts have all been doing their own thing. The Greeks have been borrowing as much as they wanted, and have been spending it on allowing their civil servants to retire at 50 and on buying off strikes. In short, they have been spending it on doing things we would never even consider doing—filling people’s mouths with gold, as Nye Bevan would have put it. As a result, there is now an enormous crisis across the whole area because the taxpayers of Germany are simply not prepared to bail out nations that have been behaving in an irresponsible fashion.

Yet we in the United Kingdom, having escaped the economic servitude of the euro—which many Opposition Members would have liked to put us into—now seem to want to create a situation whereby exactly the same thing could happen on a smaller scale. We have a central bank and Government responsible for interest rates and general financial policy, but there is now a proposal that the constituent parts of the United Kingdom—specifically, in this instance, Wales—should be free to go off and borrow at low interest rates, knowing that ultimately somebody else could pick up the bill.

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Jonathan Edwards (Shadow PC Spokesperson (Treasury); Carmarthen East and Dinefwr, Plaid Cymru)

Does the hon. Gentleman not recognise that currently local authorities in Wales can borrow and raise their own revenue, so what is the difference?

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David Davies (Monmouth, Conservative)

They can only do so under fairly strict terms of engagement. There is no major difference, but what I am saying is that I do not want any more bodies to be able to do that. I certainly would not welcome the idea of the Assembly doing what Westminster Governments have done before—let us be honest about it—which is wait until a general election is coming along and then suddenly borrow billions of pounds on the international markets knowing that not many people understand the difference between debt and deficit, and are therefore unlikely to be able to work out the probable consequences of what is happening. Governments buy themselves elections in that way. I do not want to put that temptation in front of Members of the Welsh Assembly.

Finally, I am even more concerned about the idea of a separate judicial system for Wales. That would be costly and complex.

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Geraint Davies (Parliamentary Assembly of the Council of Europe (Substitute Member); Swansea West, Labour)

Before the hon. Gentleman leaves the subject of taxation, on the important issue of inward investment and growth, which various speakers have focused on, does he agree that what business needs to provide inward investment is certainty? If there can be changes in corporation tax, income tax and all sorts of other tax, that will put companies off investing in Wales. The only tax that people want to get rid of is the tax that everybody is charged when they cross the Severn bridge—the Severn bridge toll. That is a real barrier to inward investment and trade. We should get rid of that and forget the rest.

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David Davies (Monmouth, Conservative)

The hon. Gentleman knows perfectly well that getting rid of the Severn bridge toll is impossible, because he and I helped to write the report. It is not a matter of law, but a matter of a commercial contract between four companies that came together to build the bridge under certain agreements. There is nothing that we can do about it. Of course the Welsh Assembly, or even the UK Government, could decide to take on the costs of the Severn bridge if they wanted to. However, the hon. Gentleman knows very well that the Government do not have any money at the moment. We have a 1 trillion debt, most of which we inherited from his colleagues in the previous Government, and we are overspending by 168 billion every year. We are not really in a position suddenly to take on the burden of the Severn crossing.

I do praise the hon. Gentleman, however, because he has said something with which I entirely agree: business needs certainty. Businesses are already annoyed that they have to pay the cost of coming over the Severn bridge. The last thing they want is the potential for a load of extra taxes when they come into Wales, and a lack of certainty over whether those taxes may be applied at a later date if they decide to relocate there. To my mind, that is a very good argument for not devolving the power over such taxes to the Welsh Assembly.

I will finish on my point about the judicial system. The last person to toy around with the judicial arrangements in Wales was Henry VIII. He formed a judicial area for Wales, but people in Monmouthshire were so incensed that they decided to opt out of it and in to the Oxford

assizes. That caused confusion all the way through to the local government reorganisation of 1974. Various people passed legislation, and some of it applied to Wales, some to Monmouthshire and some did not apply anywhere. Nobody knew what they were doing. People were driving to Chepstow to get a drink in the pub because the chapels had banned it, or something. It was absolute chaos. The last thing we want is a repeat of that. I say to all Members of the House that Monmouth is an integral part of Wales, Wales is an integral part of the United Kingdom, and for as long as I represent this constituency, long may that remain the case.

2:47 pm
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Paul Murphy (Torfaen, Labour)

It is always interesting and a pleasure to follow David T. C. Davies. I am not a great fan of Henry VIII, for obvious reasons. I agreed with some parts of the hon. Gentleman’s speech and disagreed with others. The thrust of his argument, I think, was that he was not keen on the Silk commission and its activities. I remind him that it was the Secretary of State for Wales who took the responsibility to initiate the commission, as she told us today. Government Members really have to get their act together on what they do and do not want.

I welcome the commission and I certainly welcome its members. I have known Paul Silk for at least a quarter of a century. I know all the other members in one capacity or another. I think that they are excellent people who will doubtless do a very good job. It would have been better, however, if the House of Commons had debated this issue before the commission’s terms of reference had been agreed, so that Members, including me, had the opportunity to contribute the ideas that are put before the House this afternoon.

I warn this House, my colleagues in the National Assembly and, I suppose, the members of the Silk commission that I, like the hon. Member for Monmouth, have some misgivings, warnings and suspicions about what lies behind this initiative. As with the Bible, people have different interpretations. Wars have been fought on interpretations of the Bible, but in this case people have different ideas as to what the Silk commission should or should not do, or as to why it should do it in the first place.

The first point to make is that the Secretary of State mentioned “consensus” at least six times. My right hon. Friend the shadow Secretary of State referred to the fact that there has been no consensus on constitutional issues in this House of Commons since the coalition Government took over. So I find it strange that we are now going to have consensus on this commission, given that we did not have consensus on the most important constitutional development that Wales has seen for generations: the 25% reduction in the number of our Members of Parliament. That is what I am concerned about. How can we accept that the Secretary of State or the Government are serious about consensus given not only that they did not give us time to debate that matter in the Welsh Grand Committee, as she knows we should have done, but when various debates were held in the other place, any sort of so-called consensus fell to bits and the decision was made anyway? Why should we, at this stage, believe that there is consensus on the Silk commission.

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Alun Cairns (Vale of Glamorgan, Conservative)

The right hon. Gentleman makes an extremely important point about consensus and it is a strong message that needs to go to the Silk commission, but is not the original root of all these inconsistencies that we now face the lack of consensus in 1997, when Labour let the genie out of the bottle and we started on the devolution road? I am mixing my metaphors, but I hope that I have made the point.

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Paul Murphy (Torfaen, Labour)

The hon. Gentleman knows that historically I was opposed to devolution—I changed my mind as the years went by—but we had to accept what the people of Wales decided. In 1997, they decided on devolution, albeit by a small majoritywe must remember that the Conservative party did not get a majority of Members of Parliament, but we still have a Conservative-led Government—and in the referendum held earlier this year the overwhelming view of people in Wales was that there should be extra powers. It was the people who decided what they wanted in the end, and I agreed with them this time.

I repeat that we do not want to hear about consensus, given that that was abandoned by this Government when they introduced the Bill to reduce the number of our Members of Parliament. For the first time since 1832 we will have fewer than 40 Members of Parliament representing Wales in this House. I am not arguing about the nature of equal constituencies—that is for another debate—but I am saying that the reduction from 40 to 30 in the number of Welsh MPs reduces the influence of Wales within the United Kingdom. I will address that in a few moments’ time.

Part I of the commission’s remit is to deal with money: the financial responsibilities and the remit of the Welsh Assembly. We are told that this is all about accountability, but Alun Cairns just referred to the devolution settlement of 1997. Such a settlement also took place in Scotland and later in Northern Ireland, where I played a part. In all those settlements that issue of financial accountability was raised, and it was argued by some, “If a parish or community council can raise revenue, why cannot a Government in Edinburgh, Belfast or Cardiff do so?”

When I chaired the talks in Northern Ireland on whether there should be income tax powers in Northern Ireland, the meeting lasted less than an hour. People in Scotland decided that they would have the possibility of tax-varying powers, but those have never been used. We in Wales rejected this from the beginning, and there was a reason for that: the resource base of Wales is much lower than that of Scotland—the resource base of Northern Ireland is even lower than that of Wales—and therefore the amount of money that could be raised by income tax in Wales or Northern Ireland, and, to a certain extent, in Scotland, is infinitesimally smaller than the amount that could be raised in England. This proposal was therefore abandoned.

The idea of how we finance our devolved Administrations, therefore, came down to the idea of the block grant. That system is not unique. David T. C. Davies referred to asymmetrical devolution, and that is what occurs in Spain except that there they have devolution everywhere. They get their money through a system of distribution of block grants and, as my right hon. Friend the Member

for Neath (Mr Hain) said, they are able to ensure that there is proper distribution of money so that poorer areas are helped by richer areas such as Catalonia.

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Hywel Williams (Shadow Spokesperson (Cabinet Office); Arfon, Plaid Cymru)

There is of course the exception in Spain of the Basque country. I am not arguing for us to adopt that model, under which the Basque country is taxed and money is sent down to Madrid, rather than the other way around.

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Paul Murphy (Torfaen, Labour)

Yes; I am talking in general terms and that may well be an exception. A block grant, based on need, going to various parts of the devolved administration is the system that was decided on. That is why we have to be very careful; we tinker with this at our peril.

An issue on which the Secretary of State and I had an exchange back in May was about whether, were there ever to be income tax-raising or varying powers in Wales, we should have a referendum to approve that. She stated in her answer to me:

“He is quite right that giving tax-raising powers would involve another referendum”.—[Hansard, 11 May 2011; Vol. 527, c. 1148.]

It would not be constitutionally right or proper for there to be tax-raising or tax-varying powers in Wales, so far as income tax is concerned, without the people’s saying so.

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Roger Williams (Brecon and Radnorshire, Liberal Democrat)

I do not think it has ever been suggested that the block grant should be replaced entirely by tax-raising powers. Most systems rely on a hybrid system, as with local government systems, in which there is a block grant as well as tax-raising powers.

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Paul Murphy (Torfaen, Labour)

I think that if the National Assembly for Wales ever had any tax-raising powers, the system would involve such hybridity. However, I say to the hon. Gentleman that there is a concern, which I suspect is shared by people in Northern Ireland, although the comparison between Northern Ireland and Wales can go only so far because there is a land border between Northern Ireland and another sovereign state on the island of Ireland and, obviously, we have no such border. It is suggested that if a corporation tax were introduced in Northern Ireland, although some interesting benefits could result from it, the block grant would be reduced correspondingly. If that is what is happening in Northern Ireland I would say to the Silk commissioners to beware, because the same could happen in Wales. We might be told, “You can have this tax or that tax, but we’ll cut your block grant,” and that will address the accountability gap that has been referred to. That would be dangerous because it would mean that what we are entitled to through the United Kingdom taxation system would be reduced by even more than is the case at the moment.

In recent months, other Members of Parliament have said in the House of Commons, including, doubtless, in this debate, “Wales, Scotland and Northern Ireland do much better than we do in the English regions. Look at the Barnett system that they have had for all these years. Look what they can do in Scotland—they can change student fees and pay to have their old people in homes and all the rest of it.” But those people forget that those

countries might not do other things in the way that England does. That is what devolution is all about.

The thrust of that argument is that we in Wales are somehow or other getting more money than any other part of the United Kingdom. That is the case for some parts of the UK, but an interesting fact was referred to by the Holtham commission and in the House of Commons note in relation to the Oxford Economics report, which my hon. Friend Geraint Davies mentioned. If we say how much money goes to Wales from central Government and how much money is raised in Wales, of course there will be a deficit. In Wales, the deficit between the money raised and the money going in is 14.6 billion. Some might say that that is a great deal of money, but in the south-west, across the Bristol channel from us, the deficit is 15.6 billion. In the west midlands, across the border from Powys, it is 16 billion, whereas in Yorkshire and Humberside it is 16.9 billion and in the north-west of England it is 23.9 billion. Let no one in this House, or anywhere else, tell us that somehow or other we are getting some sort of better deal in Wales than the English regions. It simply is not true.

There are two other issues on finance including, first, the Barnett formula, on which my right hon. Friend the Member for Neath touched. I cannot for the life of me understand why it is impossible for the Silk commission to consider the Holtham commission and, indeed, what happens to Barnett as part of its remit. I am not suggesting that it should hold up discussions between the Secretary of State, the National Assembly for Wales and the Welsh Government, but to say that a commission that is dealing with the Assembly’s financial responsibilities cannot look at how the block grant is dealt with is daft.

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Roger Williams (Brecon and Radnorshire, Liberal Democrat)

I agree, but it has been suggested that such an approach would not be welcomed by the Welsh Assembly Government.

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Paul Murphy (Torfaen, Labour)

That is for the two Governments to discuss. In the House of Commons, we are debating what it is sensible for the Silk commission to consider. I said that I did not want that to hold up any discussions that are under way, because there are implications for Scotland and Northern Ireland, but it is crazy that that cannot be discussed while all the other issues affecting money are being discussed.

I cannot understand from the response of the Secretary of State to the hon. Member for Monmouth the difference between current and future borrowing. Either one agrees with the concept of the Welsh Government being able to borrow, or one does not. The Northern Ireland Executive and the Scottish Government will be able to borrow, and local government can borrow, so why on earth can the Welsh Government not borrow? It is quite incongruous that that is the case, and I am glad at least that they can discuss borrowing, even if they cannot discuss borrowing at the moment.

Part II of the terms of reference is about powers and functions, and I agree that there is a case for looking at incongruous and difficult cross-border issues, which need to be tidied up. Most Members of the House of Commons would be wary of transferring policing and justice to the Welsh Assembly. We have a different system from Scotland, and we are so bound up with the English judicial and legal system that I would not agree

with such a transfer. Another issue that will not be discussed at all by the commission—this is why it would have been useful for the House of Commons to discuss its terms of reference before we had the debate—is the way in which the Assembly is voted in. If there is going to be a reduction in the number of constituencies, presumably to 30, with a relationship between Parliament and the National Assembly, which is voted on, it is unusual that that issue should not be debated or discussed by the Silk commission, particularly as any decision on how we elect the Welsh Assembly should be based on a proper mandate at a general election. I hope that the Secretary of State and her Government will not even contemplate discussing those matters until after the next election.

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Nick Smith (Blaenau Gwent, Labour)

I am interested in my right hon. Friend’s point about constituencies. Wherever possible, Assembly constituencies should align closely with boroughs and parliamentary constituencies, because that leads to better government, better democracy and better services.

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Paul Murphy (Torfaen, Labour)

But constituencies have nothing to do with better democracy and everything to do with partisanship. The Government were so stubborn in refusing 10% flexibility in the other place that taking local government boundaries into account is hardly possible because of the rigidity that has been introduced in the system. If there had been consensus, that might have been considered, but there was no such consensus.

Finally, we have to be careful that the proposals are not based on a hidden agenda from the Government—what I call the Trojan horse. The hon. Member for Monmouth referred to the West Lothian question, and the Silk commission’s hiving off financial responsibility to the Welsh Assembly, and perhaps taking away the block grant—we do not know for sure—is part of the agenda of the new Conservative party. It used to be the Conservative and Unionist party, but it has long since ceased to be Unionist.

The West Lothian question means that the Government want to have two classes of Members of Parliament, not British-United Kingdom Members of Parliament who speak on everything because we have been elected by our electors to talk about the United Kingdom—every part of it: Northern Ireland, Scotland, Wales and England. I referred to the complaints time and again that we are getting too much money in Wales and Scotland. Perhaps the most obvious thing is that out of 117 Members of Parliament representing constituencies in Wales, Scotland and Northern Ireland, only nine come from the Conservative party. It will probably be wiped out at the next general election in Scotland and who knows where else. The combination of all those things, to me, means that the Conservative party has now become a party of little England. I am sure the hon. Member for Monmouth, who represents a Welsh constituency, would agree.

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David Davies (Monmouth, Conservative)

Does the right hon. Gentleman share my concern, then, about colleagues in his own party who refuse to appear before the Welsh Affairs Committee to discuss devolved issues? Does he not think that that smacks of a little Wales mentality?

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Paul Murphy (Torfaen, Labour)

No, I do not. I accept, though, that there are people in my own party who may agree with some of the things that I think the Conservative party is

guilty of—that is, not being awfully worried if Scotland and Wales left the Union. I have been thinking that for over a year now.

The New Statesman published a very good editorial last week, which finished with this:

“For the Tory right, an independent England—economically liberal, fiscally conservative, Eurosceptic, Atlanticist—is an attractive prospect. The United Kingdom, one of the most successful multiracial, multi-faith, multinational states the world has ever known, remains a cause worth fighting for. Yet, over the past weeks, fixated by the EU, the Conservative and Unionist Party seemed less aware of this than ever.”

The Trojan horse is not Welsh nationalism, but the English nationalism of the Conservative and former Unionist party.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

I am enjoying the right hon. Gentleman’s contribution and I know that his words will be passed on to the Silk commission. I assure him that I remain a firm Unionist, not the sort of Tory that he describes.

On a point of information for him on the borrowing powers, the Welsh Government have the ability to borrow under the powers that they inherited from the Welsh Development Agency. The bilateral talks on those borrowing powers are about how that borrowing could be used more effectively. What the Silk commission has been entrusted with is examining new borrowing powers in the context of the package of tax and borrowing powers. I hope that that clarifies the position on borrowing, which I know has been the subject of some speculation.

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Paul Murphy (Torfaen, Labour)

Indeed; I am grateful to the right hon. Lady for telling the House that. In a sense, it confirms my view that there is confusion about what is happening with regard to Barnett and to borrowing. There appear to be simultaneous discussions on borrowing and on what happens to Barnett on the one hand, and the Silk Commission on the other, whose job it is to look at financial responsibility as well. I am saying, “Don’t stop the talks.” It is obvious that Governments have to talk to each other, particularly as we live in difficult times, but I am also saying—she has clarified the position with regard to borrowing—that it is important for that to be part of the Silk commission’s remit.

Although I welcome the Silk commission, I warn the people of Wales that the position is not as simple as it might seem on the surface. I believe that the Secretary of State is generally in favour of the Union. I do not believe that much of her party, from the actions that have occurred in the House of Commons over the past year or so. The Silk commission will be about helping the people of Wales ultimately to have a better deal from the United Kingdom.

3:08 pm
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Roger Williams (Brecon and Radnorshire, Liberal Democrat)

It is always a privilege and a challenge to follow Paul Murphy. He put forward some considered and powerful arguments that I am sure the commission will read and take into account when they set out their programme for the work that they have to undertake.

As we look forward to Armistice day and remember the men and women who have made a sacrifice for this nation, we also remember the Welsh men and women who are currently serving in the British Army. Just

today I had an e-mail from Brigadier Russ Wardle, who recently finished his tour of duty as brigadier of 160 (Wales) Brigade in Brecon. He told me that 40 servicemen are still in Baghdad performing important roles, training the Iraqi army and police in the duties they will take up shortly. I will meet the new brigadier, Brigadier Napier, shortly. I am so pleased the 160 (Wales) Brigade will stay in Wales, contrary to speculation just before the Welsh Assembly election.

I thank the Secretary of State for securing this important debate, which has already proved its worth. It is a great day for Wales. It is fantastic that there is cross-party consensus on the commission’s terms of reference to take a considered view on the funding and future of the Welsh Assembly. Liberal Democrats have consistently supported a commission to look at the funding arrangements between Westminster and Cardiff, and it is to the credit of the coalition Government that the Silk commission will go ahead after 13 years of Labour inaction on this crucial issue. Notably, the three promises on Wales made in the coalition agreement—the housing LCO, the further powers referendum and the commission—have now been met, and I commend the right hon. Lady for that. With good Conservative support, Liberal Democrat policies are helping the people of Wales.

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Paul Murphy (Torfaen, Labour)

The hon. Gentleman refers, rather provocatively for him, to Labour inaction and the fact that great events have taken place, but does he accept that it was a Labour Government who brought in devolution in the first place?

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Roger Williams (Brecon and Radnorshire, Liberal Democrat)

I absolutely accept that and am sure that he would accept that Labour had the full support of the Liberal Democrats, including those in Wales. Indeed, my predecessor, Richard Livsey—sadly, deceased—played an important part in that and, I am sure, would have liked to have played a part in the Silk commission, too.

That is not to say that the Secretary of State’s work is over; many other things need to be done for Wales, including nurturing and supporting the devolution settlement. I look forward to working closely with her in the near future.

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Mark Williams (Ceredigion, Liberal Democrat)

Does my hon. Friend take some assurance, as I do, from the Secretary of State’s words on timetables? When questioned by Jonathan Edwards, she set out a range of timetabling scenarios, which was a relief to many of us. There is a hope and expectation that that can be achieved before the general election, but the fact that there is a timetable reassures those of us who were concerned about this being shoved into the long grass or into a cul-de-sac. The Government have proposed that as a real commitment.

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Roger Williams (Brecon and Radnorshire, Liberal Democrat)

I thank my hon. Friend for his intervention, which brings me to a point I had intended to make later. The present coalition agreement sets out the programme for the first half of this Parliament. Work now needs to be set in hand to take forward the coalition for the second half, which will obviously include

proposals for Wales. When Wales said yes to having a Welsh Assembly in 1997, the devolution package was missing one critical element. The Welsh Government have the luxury of spending money handed out by others, but unlike those in Scotland and Northern Ireland they have no power to borrow or raise money; as has been suggested, they have fewer powers than local authorities. I believe that the lack of accountability has led to some irresponsibility in the Welsh Government’s spending of money. Indeed, when the Chief Secretary to the Treasury visited Wales in April he said that the commission

“will aim to develop the financial autonomy of the Welsh Government to give Wales more opportunity to create the right environment for encouraging growth”

and jobs. I thank him for his support. As a Scottish MP, he brought knowledge of the Calman commission to the proposals, the use of which cannot be underestimated. Welsh Liberal Democrats will engage fully and constructively in this process. We will urge the commission to bring more accountability and responsibility to the Welsh Government and to give Wales further power to drive forward economic development, creating jobs and prosperity in Wales.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

I thank the hon. Gentleman for giving way in the midst already of several very good contributions, but will he clarify what he understands by “financial accountability”? We all understand it in broad terms, but will it be financial accountability with some additional tax-raising or tax-varying powers, or accountability from within a deficit that has been lopped off the block grant? Robbing Peter to pay Paul and then asking the Welsh Government to be accountable for money that the UK Government have taken away from them, and for which the Welsh Government are then able to raise taxes, does not seem like real accountability. I want to protect what is already in Wales, and if there is accountability let it be for additionality, not for something that has been taken away from Wales.

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Roger Williams (Brecon and Radnorshire, Liberal Democrat)

I recognise the hon. Gentleman’s first point, but not his second. We would all like to see local authorities raising more of their spending power locally so that they become more accountable, and I believe that the situation would be the same for the Welsh Assembly Government, although I do not see any reduction in the spending proposed for them. I may come on to that later, however.

I thank also the Deputy Prime Minister for his work in broadening the commission’s terms of reference and composition. There were people who wanted a much smaller commission, of perhaps only three people and without political appointees, but I am glad that the consensus was for a much larger and broader one. The political appointees are a huge boost to the commission, and they bring vital political experience to its work.

I commend the choice of Paul Silk to chair the body. Paul has worked in this House, where he had a fine reputation, and in the Welsh Assembly, so he is perfectly placed to understand the workings of both. I cannot think of an individual who is better informed to carry out this important task, and I wish him well. I and my right hon. Friend Simon Hughes went to the same school at the same time as Paul, so I can vouch for his high academic attainment.

Dyfrig John brings to the table 35 years of experience in financial services, and his financial know-how will be invaluable to the commission. He and I were members of the Development Board for Rural Wales, along with Glyn Davies, who was chairman at the time, and Dyfrig was instrumental in maintaining a banking presence in Llandrindod Wells, which on its own would be enough to recommend him for the job.

Professor Noel Lloyd is a distinguished academic from Aberystwyth university, and before he became its highly regarded vice-chancellor he was a practising mathematician, so his ability to do sums means that Wales will not fall into the same trap as Ireland, which underestimated its reserves by €3 billion, or Germany, which did so by €50 billion.

Rob Humphreys, the Liberal Democrat representative, has long been a champion of devolution. He was heavily involved in Swansea’s yes campaign in 1997; he served on the All Wales Convention; and he was the Liberal Democrat representative on the yes campaign steering group in 2011. Rob’s leadership of the Open university gives him a knowledge and understanding of young people and adults, and he will bring real expertise to the commission.

I also pay tribute to Nick Bourne, who served the people of mid-Wales very well during his time as an Assembly Member. His commitment to Wales, all things Welsh and, particularly, the Welsh assembly made him an example to all political leaders in Wales—and I look forward to his memoirs.

It is also great to have the ministerial experience of Sue Essex. She became the Minister for Finance, Local Government and Public Services following the 2003 election, so she has first-hand experience of the financial arrangements between Cardiff and Westminster.

Last, but certainly not least, there is Dr ap Gwilym, whose performance against Paxman showed his commitment to, knowledge of and passion for devolution. It is a dedicated and highly talented team with a range of expertise.

It was almost inevitable that we would talk about the Barnett formula, because it is an essential part of delivering a prosperous Wales. I am disappointed that it is not included in the Silk commission’s remit, but I understand that the Welsh Assembly’s Labour First Minister was not keen that it should be included.

I understand that bilateral discussions are taking place between London and Cardiff, and they will include not only the Secretary of State, but the Treasury.

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Guto Bebb (Aberconwy, Conservative)

I was also surprised by the comments of Mr Hain when he said that the Silk commission’s lack of consideration of the Holtham report is an omission. I, too, have heard the First Minister state categorically that the Holtham report should be subject to bilateral discussion between the two Governments. Are we seeing a split in the Labour party’s approach to the issue?

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Roger Williams (Brecon and Radnorshire, Liberal Democrat)

I am sure that if there is a split, my hon. Friend will comment on it later in the debate.

I understand that bilateral discussions will take place, but I ask for more openness and transparency in that dialogue, because other people can play an important part in that work.

We can learn lessons from the Calman commission, which concluded that the devolution settlement had established a Parliament in Scotland that could be held to account for spending choices, but that lacked accountability in raising revenue. It proposed a reduction in block grant funding from the UK Government to Scotland in exchange for power for the Scottish Parliament to raise its own taxes. The Scotland Bill implements the recommendations and creates a Scottish rate of income tax. That will apply alongside existing UK-wide income tax.

In Scotland, the lower, higher and top rates of income tax will be reduced by 10p. The Scottish Parliament will then make a tax decision to levy an additional rate, which may match rates elsewhere in the UK, or be higher or lower. That will replace the Scottish Parliament’s existing power to vary income tax in Scotland by 3p up or down. Such a change, implemented by a Liberal Democrat Secretary of State, gives Scotland more accountability for its spending, and can be only good for the country. I would be pleased if the Silk commission recommended something similar for Wales.

The Calman commission addressed the rebalancing of the boundaries between devolved and reserved policy matters. It recommended devolution of further powers, including administration of elections, licensing power in relation to misuse of drugs, power to set the drink-drive limit, and power to set the national speed limit. It recommended that some powers be retained by Westminster, including regulation of health professionals and corporate insolvency. Aggregates and air passenger duty are not being taken forward for various reasons.

Luckily, this debate includes hon. Members on both sides of the House with first-hand experience of the devolved Welsh Assembly. They include the hon. Members for Monmouth (David T. C. Davies) and for Clwyd West (Mr Jones) and Alun Michael. I look forward to their contributions, and have enjoyed some of those that have already been made. My hon. Friend Glyn Davies also has considerable knowledge of the matter, but because of his Government role, he will not be able to speak.

Although the new arrangement has been simplified since the referendum, a lot of relevant legislation is spread among many Acts of Parliament. The Government would provide a service if they introduced a consolidation Bill to simplify and make accessible those elements of law that have been devolved, or if there were a 180 turn so that legislation sets out matters that are reserved to Westminster, and all others are devolved, instead of having the present position of legislation setting out devolved matters, and everything else being reserved.

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Mark Williams (Ceredigion, Liberal Democrat)

The hon. Gentleman makes an important point, because there is confusion among the general public about which areas are devolved and which are reserved, as my hon. Friend will know from his constituents, and as I know from mine. We have an important duty to get the message of devolution out there to the general public. Does he hope, as I do, that the Silk commission will also reflect on that?

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Roger Williams (Brecon and Radnorshire, Liberal Democrat)

My hon. Friend makes an important point. Even politicians sometimes have a less than perfect grasp of which issues are reserved and which are devolved.

More importantly, the legal profession finds it very expensive to maintain an up-to-date record, or database, of changes in legislation. If something could be done to simplify that, it would benefit not only the public but the legal profession and people who have to deal with the legislation.

With the commission due to publish in autumn 2012, that leaves two and half years for this Parliament to see the implementation of measures on the issues on which agreement can be achieved. Will the Minister ensure that the report on those issues is produced as quickly as possible?

This is a historic opportunity for Wales. Finally, 12 years after the Welsh Assembly was set up, we can give it the ability and financial responsibility to do that which it was set up to do. It is building a better Wales—a strong nation, firm within the United Kingdom, and active in the European Union and on the world stage.

3:26 pm
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Wayne David (Shadow Minister (Political and Constitutional Reform) (Justice); Caerphilly, Labour)

I am long-standing supporter of devolution. I believe that it is fundamentally correct for decision making to be as close to the people as is practicable. I consider myself to be a proud Welshman, and British, and I am also an internationalist and a European. I see no contradiction between those various identities.

In practical terms, I strongly supported the work conducted by Gerry Holtham, whose report is seminal. In particularly, I strongly endorse his recommendation of the introduction of a Barnett formula, and I am pleased that that was in the Labour party’s manifesto at the last election. It would have been appropriate and sensible for it to be part of the wider consideration of fiscal issues. Nevertheless, that does not alter the fact that it is an important statement, and I look forward to its being acted on.

I welcome the establishment of the Silk commission. Like other hon. Members, I have enormous respect for Paul Silk, who has worked in the Assembly as well as in this institution. He is a long-standing occupant of the Welsh Room here in Westminster, and therefore, in some ways, follows in the footsteps of David Lloyd George. I also welcome the appointment of Sue Essex, whom I know personally and who has a profound understanding of finance and devolution. However, like my right hon. Friend Paul Murphy and others, I have reservations about what might be the motivation behind some aspects of the establishment of this commission.

I think that the shadow Secretary of State, my right hon. Friend Mr Hain, has been very unfair on the Secretary of State for Wales.

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Wayne David (Shadow Minister (Political and Constitutional Reform) (Justice); Caerphilly, Labour)

Yes, very unfair indeed. He asked how a Member from the south-east of England can have a proper understanding of the situation in Wales—but of course, as we all know, Chesham and Amersham is not in the south-east of England; it is in Buckinghamshire, which is a lot closer to Wales. However, I doubt whether that fundamentally alters the lack of understanding, let

alone empathy, for the people of Wales on the part of our current Secretary of State. That is clearly shown in the way that the boundary changes that we are soon to see enacted were pushed through the House of Commons against the interests of democracy and without proper discussion in this House. Unfortunately, therefore, when the word “consensus” is used regarding constitutional matters, a question mark has to be put over whether that involves a genuine statement of intent.

I am concerned that the terms of reference are written in such a way that the work of the commission will be conducted within the parameters of the United Kingdom’s fiscal objectives. We all know what those central Government objectives are—to make cuts, cuts, cuts, and nothing but austerity, austerity, austerity. It is important to realise that when we are talking about fiscal matters regarding Wales, we are talking about not increased resources but fewer resources. The question is how that reduction in resources will be introduced.

We all know that Wales is very dependent upon the block grant, which has been cut by 1.3% since the Conservative-Liberal Democrat coalition came to power. The big danger is that there will be bigger cuts before too long, which is why the context of the commission is very important.

Another of the commission’s terms of reference is worth noting, which is the need to ensure consistency of fiscal powers within the UK. David T. C. Davies made the point that devolution, by definition, is asymmetrical, so why does consistency have to be a bedrock principle of the commission? We ought to recognise that whatever is proposed for Wales will be different from other parts of the UK, and so it should be.

My third and final reservation about the commission is the fact that Wales has historically been, and currently is, very dependent upon public expenditure. We all know that the Barnett formula and the block grant are important, but let us also recognise that there are other elements of public expenditure in Wales, which are often not recognised but are nevertheless crucial to its well-being.

One of the strengths of the United Kingdom is that, contrary to the nationalist interpretation of British history, Wales is not a subjected nation, under the heel of England. The reality is that there have been transfers of resources from the richer parts of the United Kingdom, particularly the south-east of England, to the poorer parts, and that is how it should be. That is the strength of the UK, and I would not like to see any measures adopted that placed a question mark over the integrity of the UK. Anything that did that would be not just a retrograde step for the concept of the United Kingdom, but potentially damaging to the people of Wales.

I mentioned Gerry Holtham, and we must recognise the importance of his in-depth analysis of the possibilities and options for the development of fiscal powers for Wales. In his introduction to that report, he stated:

“To be sure, economic reality and the integrity of the UK impose constraints on what it is practical or advisable to devolve.”

It is extremely important to bear that in mind, not least because he is an eminent economist but also because he is passionately committed to the principle of devolution. He is saying, in other words, that there is no point having devolution for devolution’s sake. We have to take

a pragmatic approach of bringing power closer to the people, but we also need measures that enhance the material well-being of the people of Wales.

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Nick Smith (Blaenau Gwent, Labour)

I, too, support the principle of devolution, but what people in the towns of Tredegar, Ebbw Vale, Abertillery and Brynmawr are interested in at the moment is jobs. With long-term youth unemployment having risen by 60%, they want a Government who deliver real jobs to boost our economy in Wales.

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Wayne David (Shadow Minister (Political and Constitutional Reform) (Justice); Caerphilly, Labour)

My hon. Friend makes a very important point. It is essential that we do not consider this as an abstract constitutional debate, because it has a direct bearing on the well-being of the people of Wales, their economic prosperity and the levels of employment that they enjoy.

I have sought to emphasise the importance of public expenditure to Wales. It remains important and will continue to be so well into the future. We are in the process of changing the nature of the Welsh economy, but by definition that process will take a long time to work through. It is important to recognise that. My hon. Friend Nick Smith is correct, therefore, about the need to ensure that this is not an abstract debate, because it impinges on the lives and realities of the people of Wales.

I hope that this will be the start of the ongoing debate that unquestionably we need to have. I also genuinely hope that if we are to have change, there will be a political consensus, not only in the House, but among our colleagues in the Welsh Assembly and many people in Wales, too. That is a desirable outcome to work for, and I hope that it will be achieved, but at the end of the day, whatever course of action is decided upon, our acid test must be: what is best for Wales and its people?

3:35 pm
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Guto Bebb (Aberconwy, Conservative)

I welcome the opportunity to speak in this debate, which is an important debate—although that could have been questioned last night when I was out dining with colleagues. As some Members will realise, we are on a one-line Whip, but I was explaining to colleagues last night that the Welsh Members were on a three-line Whip and that I had to take part in a debate on the Silk commission. One of my colleagues looked at me in a slightly surprised fashion, before asking, “What has silk production got to do with Wales?” Unfortunately, if we talked about the Silk commission to most people in my constituency, apart from the two or three who contacted me about the remuneration of its members, most people would probably give the same response as my colleague, so we need to get out there and talk about the commission so that people can engage with the process.

I fully recognise the description given by my hon. Friend David T. C. Davies of how devolution has developed in Wales. Too often, something has been asked for as a means to an end, because the Assembly has argued, “If we get a little more power, we will change the situation in Wales”, and time and time again, further power has been given to the Assembly, only for the complaint to be made that more power is needed. It is crucial, therefore, that we have a real public debate in Wales.

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Mark Williams (Ceredigion, Liberal Democrat)

Is the hon. Gentleman reassured by the breadth of the commission and the fact that there are representatives of all four political parties? Is he also reassured by Mr Silk’s assurance that he intends to take the commission out to the different communities in Wales in order to reassure them and further advance the debate?

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Guto Bebb (Aberconwy, Conservative)

I am grateful for that intervention; it is an issue that I shall touch on later, but yes, I welcome the fact that the intention is to ensure significant public engagement. However, we have experience in Wales of public consultation in relation to the Assembly that resulted in a pint and a curry and very few people turning up. It is important, therefore, that we have proper consultation on the commission.

Some of the comments made by Mr David need clarifying. We hear a lot from Opposition Members about the cuts being imposed upon the Welsh Assembly by the Westminster coalition Government, but often those cuts are not placed in any context—no recognition that we face a financial crisis or recognition of the 150 billion deficit this financial year. I do not blame all those things on the previous Labour Government, but to make those comments about the cuts to the Welsh Assembly budget without any recognition of the context is irresponsible.

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Wayne David (Shadow Minister (Political and Constitutional Reform) (Justice); Caerphilly, Labour)

My point is simple. Where there is demonstrable need, as in much of Wales, it is morally wrong for this Government, up here in London, to introduce cuts that will impinge upon the lives of ordinary, decent, hard-working people.

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Guto Bebb (Aberconwy, Conservative)

It is interesting to note that the Labour Government in Cardiff Bay were planning for 3% cuts per year for four years, yet, as we saw from the settlement granted by the coalition Government, the actual cut is in the region of 2% per year. That would be manageable in any small or medium-sized business in Wales, so I see no reason why it should not be manageable for the Welsh Assembly Government.

Some Members will have noticed that when Mr Hain was commenting on the boundary changes, indicating, once again, that Wales was being extremely harshly treated, he refused more than once to allow me to intervene. The reason I wanted to intervene was that I was of the opinion that Owen Smith had been promoted to the Opposition Front Bench as a result of his superb understanding of financial matters, because it transpires that he has written in a pamphlet that there is a need to reduce the number of Welsh MPs. However, the shadow Secretary of State for Wales argues otherwise, so now we understand why there has been a change on the Opposition Front Bench. The reason is simply because of disagreements between the two spokespersons.

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Owen Smith (Pontypridd, Labour)

I would merely ask the hon. Gentleman to clarify this reference, which he appears to have plucked out of thin air.

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Guto Bebb (Aberconwy, Conservative)

The reference is to a pamphlet to which the hon. Gentleman contributed that was quoted at length by Professor Wyn Jones in a recent article in Barn. If he has misquoted the hon. Gentleman, he can

take it up with the professor, but that article has been printed in a taxpayer-supported publication in Wales, and I shall stick by my comments.

We need to ask ourselves a simple question: why are we here today? We are here because the Wales Office has delivered on the promise in the coalition agreement to establish a Calman-like commission to consider how the Welsh Assembly is accountable to the people of Wales. I accept entirely that the Assembly is accountable to the people of Wales because they elect its Members, as several hon. Members have said. However, every Member in the Chamber will also recognise that local authorities are accountable to the electorate because local councillors are elected; yet they are accountable through the council tax increases they impose as well. Therefore, it is certainly arguable that there is a need for some financial and fiscal accountability in how the Welsh Assembly operates. We should welcome the fact that the coalition Government have recognised the need to consider the issue. It is a strength of the coalition that we are willing to look at difficult questions and consider them at length.

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Simon Hart (Carmarthen West and South Pembrokeshire, Conservative)

Does my hon. Friend sympathise with companies such as those in my constituency that have said to the Silk commission, through us, “Please recognise that we are UK companies competing in the UK and global markets. We are proud to be Welsh, but we are UK-based companies when it comes to tendering for important work”?

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Guto Bebb (Aberconwy, Conservative)

I fully accept that. Indeed, I was recently at a CBI event in Flintshire at which exactly the same points were made, albeit not specifically in relation to the Silk commission, about how devolution has to work for Wales, while also recognising that small and large businesses—especially in parts of north Wales such as my constituency, where one can reach the English border in 45 minutes or less—must be treated equally to those across the United Kingdom. The commission that is being established will look into those issues. I would encourage businesses in my constituency and across Wales to engage fully, as I did to the CBI audience in Flintshire recently.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

Does the hon. Gentleman agree that even though the commission’s terms of reference do not include the West Lothian question and the Barnett formula, it would be hard for the commission entirely to ignore them? It must proceed with some cognisance of the additional work being done across Government, because otherwise its conclusions may be aborted before they have even been published.

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Guto Bebb (Aberconwy, Conservative)

I thank the hon. Gentleman for what was again a thoughtful comment. It is recognised that there is a debate to be had on the Barnett formula between the Government in Cardiff and the Government in London. Where the Welsh Assembly wants to speak up on behalf of the people of Wales about the implementation of Holtham, that is the proper way to proceed. I welcome the fact that the coalition Government have announced movement on the West Lothian question. It has received a lot of attention in this debate, but when there was a

Back-Bench motion on the West Lothian question, my hon. Friend Simon Hart and I were the only two Welsh Members present. However, it is important to take the issue into consideration, because ultimately—I think it was Mark Tami who also said this—it is important that, for example, Members from north Wales should have a voice on health issues in England. As someone who is dependent on health services provided in Liverpool and other parts of England, I sympathise with that view. Another argument, however, asks why we should have a voice on the health service in England if we do not allow any English Member to have a voice on the health service in Wales.

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Robin Walker (Worcester, Conservative)

As an English Member, and a member of the Welsh Affairs Select Committee, I recognise that problem. Does my hon. Friend acknowledge that the cuts being made by the Welsh Assembly Government are placing an extra burden on those parts of England whose health services are used by people coming from Wales? Does he agree that the commission should take that into account?

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Guto Bebb (Aberconwy, Conservative)

I agree with my hon. Friend; that issue is being brought into sharp focus by the health service cuts in Wales. We have heard a lot about spending the health pound in Wales, which is something that I generally welcome, but sometimes the expertise for those services happens to exist in Liverpool or Shrewsbury—

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Guto Bebb (Aberconwy, Conservative)

Indeed. In those circumstances, it is crucial to recognise that there is an issue that needs to be addressed.

There are other reasons why we should welcome the Silk commission. When the referendum in 1997 produced a narrow decision by the people of Wales in favour of establishing the Welsh Assembly, Ron Davies, the Secretary of State for Wales at the time, famously said that devolution was a “process, not an event”. The reason for welcoming the commission is that, for too long, the devolution process has been one that has been internal to the Labour party. It has been driven by a need to keep the Welsh Labour party united, rather than by a need to ensure that the people of Wales have the best possible governance.

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Mark Williams (Ceredigion, Liberal Democrat)

One subject that has been mentioned in the debate is the legislative competence orders, which many of us had to endure in the Select Committee. Attempts were made to set them in stone as an illustration of good government, rather than the real devolution that some of us are committed to.

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Guto Bebb (Aberconwy, Conservative)

It could be argued that the legislative competence order procedures and the Government of Wales Act 2006 were very successful in the context of what they were supposed to do, which was to keep the Labour party united. In terms of providing for good governance in Wales, however, they were an absolute disaster, and recognised as such by the people of Wales. The 2006 Act was also a belated party-political attempt to create a situation that was favourable to Welsh Labour. It could be argued that my hon. Friend the Member for

Montgomeryshire (Glyn Davies) lost his Assembly seat as a result of the changes to the way in which Welsh Assembly Members were elected, as implemented by the Act. Those changes were made for internal Labour party purposes, not as a result of any demand by the people of Wales. Not a single individual in my hon. Friend’s constituency argued that he should lose his seat because of changes that had been implemented to keep the Labour party happy.

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Alun Cairns (Vale of Glamorgan, Conservative)

Does my hon. Friend also recall that those changes to the electoral system were introduced against the advice of the Electoral Commission?

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Guto Bebb (Aberconwy, Conservative)

Indeed; we should not be surprised by any of the actions taken by the Labour Administration.

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Wayne David (Shadow Minister (Political and Constitutional Reform) (Justice); Caerphilly, Labour)

The principle that brought about that change was quite simple. It was that an individual should not stand for two types of seat. Why should they have two bites of the cherry? That would be undemocratic.

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Guto Bebb (Aberconwy, Conservative)

The hon. Gentleman should be aware that the system was changed specifically as a result of pressure within Labour party. There was no call for such change from the Welsh public. It has been argued that change should be made as a result of demand from the Welsh people, and I recollect no such demand.

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Hywel Williams (Shadow Spokesperson (Cabinet Office); Arfon, Plaid Cymru)

I am sure that the hon. Gentleman will recall that that kind of dual mandate was allowed in Scotland. In fact, if my memory serves me correctly, I think that there was a Minister who held that kind of mandate when he was in the Labour Government there.

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Guto Bebb (Aberconwy, Conservative)

I thank the hon. Gentleman for that contribution. I do not doubt that his comment is accurate.

Another reason for welcoming the announcement is that it creates a cross-party and non-party commission, which is something very fresh and new in the Welsh context. As I have said, however, it will not work unless the people of Wales take an interest in the issue. I would therefore stress that we, as Members, need to go out and persuade our own electorate to take an interest in the commission and its work.

A second reason why we need to welcome the commission is the fact that although there have been numerous commissions and inquiries into the powers of the Welsh Assembly Government and how it should work, the Silk commission is different because it has been created by the Westminster Government. The Holtham commission produced a superb piece of work. I have read the documentation and the arguments in the research are persuasive, showing that Wales has for several years suffered a degree of unfairness in the funding provided by central Government. The degree of unfairness was not as great as was claimed by Plaid Cymru Members, but the main point—that the Barnett formula was unfair—was, I think, proven by the report.

The Silk commission is different and more advantageous. Because it is a commission established by the coalition Government in Westminster, the ability to act on its findings is stronger. We are still waiting for the Holtham recommendations to be implemented, but our ability to

act on the findings of the Silk commission is clear, which is another reason why we should welcome its establishment.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

I thank the hon. Gentleman for being so generous in giving way. Having praised the Holtham report, as I do, does he agree that in respect of the Silk commission, one thing that we do not need to wait for is putting a funding floor in place to protect the interests of Wales as we go forward? As the Secretary of State said, we could be expecting to receive the Silk commission report just before the next election, perhaps just after it or even a bit longer after it. If we got on with the Holtham recommendations and put the funding floor in place, we would at least be doing our job for our constituents right now.

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Guto Bebb (Aberconwy, Conservative)

I thank the hon. Gentleman for that intervention. Given that an intergovernmental approach has been applauded by the First Minister, it is imperative for him to get down to the Treasury as soon as possible to discuss the issue. We are often told that there is a respect agenda between Westminster and Cardiff. It is not therefore for us to say to the First Minister that he must act now, but I would certainly recommend that the discussions should start—and the sooner they start, the better.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

Let me reassure my hon. Friend that the bilateral discussions on the Holtham floor are already taking place between the two Governments. It is quite right that those matters have been reserved for bilateral intergovernmental conversations.

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Guto Bebb (Aberconwy, Conservative)

I thank the Secretary of State, and I am delighted to hear that those discussions have already started. I take the view that the sooner they are concluded, the better.

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Owen Smith (Pontypridd, Labour)

I do not intend to refer to the quotation in the pamphlet now—I shall do so later, if I may, and perhaps seek to get it withdrawn. I am intrigued to hear the hon. Gentleman say that he thinks the discussions should conclude as quickly as possible. Do I take it that he will urge his right hon. Friend the Secretary of State to do just that—to conclude the negotiations as soon as possible and then to implement them? As my hon. Friend Huw Irranca-Davies has said, we do not need to wait for Silk; we could have this now.

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Guto Bebb (Aberconwy, Conservative)

I am slightly surprised by that intervention, because I thought it was self-explanatory. The sooner the discussions between the Government in Cardiff and the Treasury are concluded, the better. [Interruption.] My understanding is that this is a matter for the Welsh Government and the Treasury. I am sure that the pressure is being brought to bear by my Front-Bench colleagues.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

Will the hon. Gentleman give way on that point?

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

I am genuinely trying to be helpful. I think the hon. Gentleman is saying that he would support the principle of the Holtham commission—

that there should be a funding floor at this time. I understand what he says about the respect agenda. As a strong pro-devolutionist myself, I say that the respect cuts both ways. If parliamentarians like the hon. Gentleman and my hon. Friends were to express our clear opinion today, it would help our Welsh Assembly Government colleagues and the First Minister to come to a rapid conclusion, while also assisting the hon. Gentleman’s Front-Bench colleagues.

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Guto Bebb (Aberconwy, Conservative)

I thank the hon. Gentleman for his intervention. For clarity, let me say that I am previously on record as stating that the Holtham report was persuasive, and the sooner the recommendations were implemented the better—recognising, of course, the financial constraints faced by the Westminster Government. I hope that fully clarifies the matter.

Before I turn to the detail, let me say that when we talk about the process of devolution in the Welsh context, there is often a misunderstanding about exactly what the people of Wales are saying. Many Members will claim that the result of the referendum in March was a clear indication of the will of the people of Wales. Like many of my colleagues, I was surprised by the extent of the support for change, but it must be said that that change happened on the basis of a comparatively low turnout. I am not one to argue that those who do not turn out have an equal voice: democracy means that people must take part in order to ensure that their voices are heard. However, I think it should concern all of us who want to ensure that we have an Assembly that works for the benefit of the people of Wales that only 35% or 36% of the Welsh population turned out to vote in that referendum.

There is currently a disengagement with the political process in Wales, which, unfortunately, is more pronounced in relation to elections to the Welsh Assembly than it is in relation to Westminster elections. For example, I was elected to the Aberconwy constituency on a turnout of 70%, one of the highest turnouts in any Welsh constituency for a Westminster election. The turnout for the Assembly election was about 40%. Those who argue that the voice of the people of Wales was heard clearly back in March are actually arguing that a turnout of 35% and a yes vote of 60% constitute a clear democratic mandate. They do not. A great deal of work remains to be done to persuade the people of Wales that the Assembly is working on their behalf, and I think that the commission will have an opportunity to engage with them.

Other myths are being peddled by those who do not support the Assembly. There are plenty of them in Wales, and they tend to hear what they want to hear. They say that when they mention the Assembly, people complain that it is not delivering on health. I think that that is true, and it is a complaint that we hear on the doorstep. They say that people also complain that educational standards in Wales are extremely poor in comparison with those in England and many other parts of the European Union. I think that that is true as well, and again we hear about it on the doorstep. However, I believe that the enemies of the Welsh Assembly often misunderstand complaints about its performance. They consider those complaints to be an indication that people are fed up with the Assembly and do not want it, but I do not agree.

I think that the people who complain are not dissimilar to a mother who criticises a badly behaved son or daughter. The mother will be more than happy to complain about the behaviour of that son or daughter, because after all she has a right to do so, but when she hears someone else complain about it, she immediately goes on the defensive. I think that the same applies to the attitudes of people in Wales towards the Assembly. Yes they criticise, yes they complain, but ultimately there is a feeling—which I think those who are unhappy about the Assembly must take on board—that it is “our” Assembly. Perfect? No, it is not. Could do better? Undoubtedly. But there is, I believe, an acceptance that it is the Welsh Assembly, and I think that those who are unhappy about the way in which it is developing should engage in the process that we are discussing to ensure that we have a better performing Assembly to serve the people of Wales.

The first part of the Silk commission’s work will relate to fiscal responsibility—an issue that I believe we should consider seriously. Yes, the Assembly has a responsibility to answer to the people of Wales, and yes, its members are elected by the people of Wales, but ultimately we need a degree of accountability for fiscal decisions. Time and again during the 18 months for which I have been a Member of Parliament, we have heard members of Opposition parties criticise the cuts being made at Westminster, and we have heard Assembly Members criticise them as well. It is easy for them to make such criticisms: there is no need for them even to think about the deficit, because it is not the Assembly’s responsibility. The cuts being made in Wales—which are much lower than expected, and lower than cuts in many other parts of the United Kingdom—are being made in a context, and the problem with the current set-up in the Welsh Assembly is that that context is missing from its debates. That is why I think we should think about fiscal responsibility.

Welfare reform provides a useful analogy. The changes proposed in the Welfare Reform Bill, which has completed its passage through the House of Commons and is currently in the other place, are built on the concept of giving people who receive state benefits a degree of accountability and responsibility. There is a difficult argument to be had. I have been talking to housing associations in my constituency about the importance of ensuring that housing benefit is paid directly to claimants, to enable them to have the same respect and dignity as any other member of society in terms of paying rent and taking responsibility for their financial position. The same responsibility should apply to Governments. After all, the smallest community council in my constituency will raise local taxation, and I see no reason why the Welsh Assembly should not have the same degree of responsibility and accountability.

Having said that, it is important to point out that there are difficulties. Mr Hanson is no longer present, but he made an important point about people commuting across the border to work in jobs in north Wales. One of the jewels of the Wales economy is the Airbus factory in Broughton, which is committed to apprenticeships and training, and giving young people from north-east Wales genuine employment opportunities. We should be proud of that, and we should also be proud of the support Broughton has received from the Welsh Assembly, but we cannot

deny the fact that many of the workers at Broughton travel in from England—or that many of the workers at the Ellesmere Port factories producing Vauxhall cars travel in from north-east Wales.

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Hywel Williams (Shadow Spokesperson (Cabinet Office); Arfon, Plaid Cymru)

I am slightly disappointed that the hon. Gentleman and other Members seem to think of such cross-border traffic as a problem. As I have already said, a Welsh Affairs Committee report acknowledged that there were some problems, but noted that in general the arrangements were working quite well. To give just one example, more people from England are registered with GPs in Wales than vice versa. There is a technical reason for that, by my point is that cross-border travel need not be a problem.

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Guto Bebb (Aberconwy, Conservative)

The hon. Gentleman is mixing up the question of fiscal changes, which is what we are discussing, with the issue he raises about GP surgeries. The fact that Northern Ireland has an uncompetitive tax regime compared with that of the Republic of Ireland is a huge political issue, and it is also well known that the republican factions in Northern Ireland have financed themselves through smuggling operations because of the different rates of duty on petrol.

I do not want to overstate this issue, but we should take it seriously. I am sure that we can successfully address it, and the Silk commission has been set up precisely to examine such matters. Members of Plaid Cymru often refer to the Holtham report as a document that is beyond criticism, and it highlights this issue in some detail. I think the Silk commission needs to look into it and come to a conclusion.

On fiscal responsibility, I was intrigued by an article in today’s edition of The Western Mail. I do not read The Western Mail often—after all, I am a north Walian, and we tend to read the Daily Post up in north Wales—but in that article it appears that Jonathan Edwards said that he did not support fully devolving fiscal responsibility and tax-raising powers to Wales at this point in time, as he thinks that would be inappropriate.

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Jonathan Edwards (Shadow PC Spokesperson (Treasury); Carmarthen East and Dinefwr, Plaid Cymru)

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Guto Bebb (Aberconwy, Conservative)

I agree with that; I think it would be inappropriate. We know that there is a huge funding gap between the amount of money raised in taxes in Wales and the public expenditure in Wales. I would therefore ask the hon. Gentleman whether he disowns the policy of his party, which is to call for independence—a policy that I am pleased to say the party never advocated when I was a member of it.

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Jonathan Edwards (Shadow PC Spokesperson (Treasury); Carmarthen East and Dinefwr, Plaid Cymru)

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Guto Bebb (Aberconwy, Conservative)

The question of fiscal responsibility does raise issues, therefore. [Interruption.] I was under the impression that honesty in this Chamber was appreciated. There are issues that we need to consider.

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Hywel Williams (Shadow Spokesperson (Cabinet Office); Arfon, Plaid Cymru)

On a point of order, Mr Deputy Speaker. Do you agree that when a Member mentions another Member, it is usually proper for the Member mentioned to be able to respond?

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Lindsay Hoyle (Chairman of Ways and Means; Chorley, Labour)

That is not a point of order, as the hon. Gentleman knows, but it is a customary courtesy in this House that if a Member mentions another Member they then give way to them. That is up to the Member concerned, however.

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Guto Bebb (Aberconwy, Conservative)

I did not notice that the hon. Member for Carmarthen East and Dinefwr was seeking to intervene. Earlier, I spoke with him in the Tea Room and told him I would be making that comment, and I would be delighted to take an intervention from him.

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Jonathan Edwards (Shadow PC Spokesperson (Treasury); Carmarthen East and Dinefwr, Plaid Cymru)

I thank the hon. Gentleman for his courtesy in giving way. As a former Member of my party, he will know that independence for our country is an aspiration, but that does not mean that we want it tomorrow. One reason for gradually devolving fiscal powers is to empower our economy to be strong enough to achieve that ambition.

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Guto Bebb (Aberconwy, Conservative)

That is an interesting clarification, which is contradicted somewhat by an article by one of the Plaid Cymru leadership contenders that appeared in the Daily Post last week, and in which it was stated that the constitutional aspiration of the party of Wales was clear. It was not a very clear statement, I thought.

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Wayne David (Shadow Minister (Political and Constitutional Reform) (Justice); Caerphilly, Labour)

In case the hon. Gentleman is thinking of joining the Labour party, may I just tell him that it is full?

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Guto Bebb (Aberconwy, Conservative)

I am grateful for that intervention, but the Labour party has no hope of having me as a member.

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Owen Smith (Pontypridd, Labour)

This is not a point of order, but just a request for clarification. Is there a reason why the hon. Gentleman did not approach me in the Tea Room before mentioning me and misquoting me in the Chamber?

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Guto Bebb (Aberconwy, Conservative)

The hon. Gentleman was not in the Tea Room when I was there. I hope that he accepts my apology.

On part I, it is important that we consider the issue of fiscal responsibility. Some of the areas that the First Minister has said are appropriate for change are not acceptable, because they are not significant changes. For example, I do not think that the average person who votes in an Assembly election will be motivated to vote one way or the other because of a slight change in the aggregates tax. We need to look at proper fiscal changes.

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Paul Murphy (Torfaen, Labour)

The hon. Gentleman refers to significant changes. Does he accept that the most significant change in income would arise from income tax? Does he also accept that before that could be introduced, the people of Wales would have to decide on it in a referendum?

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Guto Bebb (Aberconwy, Conservative)

I am not sure whether the most significant change would have to be in income tax. There is an argument for changing the rates of employers’ national

insurance contributions, which could be beneficial from a Welsh economic perspective. Whether the changes require a referendum depends on the range and the outcome of the Silk commission. I would not want to commit myself on that at this point in time.

The concept of fiscal responsibility is something that everybody in Wales should welcome. I find it difficult to understand how anybody in this Chamber who believes that the Welsh Assembly should have a degree of accountability to the people of Wales can be opposed to the concept of fiscal responsibility. I look forward to the findings of the Silk commission on part I. I believe that they will contribute to the debate. It is crucial that all stakeholders in Wales contribute to this debate, because otherwise we will end up with a discussion not dissimilar to what the hon. Member for Monmouth described.

Finally, part II deals with constitutional changes and what further boundaries we need to consider, beyond the changes that have already been made. It is important to state that we are talking about boundaries within policy areas, not physical boundaries. Several individuals I know who live in Oswestry are slightly concerned about the comment that we are looking to change the boundaries. Personally, I would be delighted to welcome back Croesoswallt—or Oswestry—to Wales, but I do not think that that is the intention of the Silk commission.

When we talk about boundaries, we are talking about whether there are aspects of the relationship between the responsibilities of the Assembly and those of Westminster that we need to look at again. As has been said, matters such as transport are not fully devolved. That may be a good or a bad thing, but the main arteries going in and out of north Wales and south Wales go from east to west. Therefore, if there were improvements to the A55 in Flintshire they would be wasted unless there were improvements to the M56 in Cheshire. There are clearly transport issues that need to be examined. We have also spoken about the fact that health is not fully devolved.

Finally, we need clarification on energy policy. The opportunity for economic and employment growth in Wales as a result of large-scale energy projects is something that we should all welcome. However, there is confusion over whether permission for such projects is granted by the Welsh Assembly or Westminster. Businesses looking to invest in hydro, wind power or tidal power need clarity about where the permission comes from and where the responsibility lies. That would be beneficial to the Welsh economy. I sincerely hope that that will be considered as the Silk commission moves on to part II.

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Jonathan Edwards (Shadow PC Spokesperson (Treasury); Carmarthen East and Dinefwr, Plaid Cymru)

I thank the hon. Gentleman for giving way again; he is being extremely generous. He will be aware that his party and the Lib Dems fought the National Assembly election in May on the basis that they would extend energy consenting powers. Does he agree that it is a disgrace that the UK Government down here are ignoring those pledges that were made to the people of Wales less than six months ago?

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Guto Bebb (Aberconwy, Conservative)

I again thank the hon. Gentleman for his contribution. This is a difficult subject. There is clearly a need for clarity for the business community. Having

said that, I would be extremely concerned if I was a resident of Anglesey who supported the new nuclear power station and the issue was completely devolved to the Welsh Assembly, which has a pathological hatred of anything nuclear. Clearly this is an issue that needs to be examined. The point that I am making is that the Silk commission will allow us the opportunity to consider this subject in detail.

Ultimately, what we do have—this is probably why the shadow Secretary of State was so churlish in his response to the announcement of the Silk commission—is a coalition Government who are willing to consult on a cross-party and non-party basis, and to talk to the people of Wales about the way in which Wales should be governed in the future. The Silk commission is being established to try to create real accountability for the Welsh Assembly, and in particular, it is examining the way in which some devolved areas need to be considered again to ensure that we have a settlement that works for Wales. I am astounded that any Opposition Members would oppose a consultation process.

Several hon. Members:

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Lindsay Hoyle (Chairman of Ways and Means; Chorley, Labour)

Before I call the next speaker, I remind hon. Members that we have six speakers and one hour and 20 minutes left. We ought to make sure that we get everybody in, as this is an important debate for all who wish to take part.

4:10 pm
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Hywel Williams (Shadow Spokesperson (Cabinet Office); Arfon, Plaid Cymru)

I am somewhat surprised to be called now. I hope that my hon. Friend Jonathan Edwards will have the opportunity to make a contribution, and I will be very brief.

First, may I apologise to the House on behalf of my right hon. Friend Mr Llwyd, who has had to leave because of a medical appointment? I was glad to hear Guto Bebb expressing his interest in and loyalty to the Assembly. I shall briefly regale the House with a malapropism that came out on Radio Cymru—only the Welsh-speaking Members will understand this. A farmer from Ceredigion phoned in and called the Cynulliad “the cyn lleied” [Laughter.] I will now explain. The Cynulliad is the Assembly whereas “cyn lleied” means so little. By just a simple transposition he was able to make his point.

My party of course welcomes the establishment of the commission. We are very glad that all four parties in Wales are represented, in addition to the distinguished independent members. It is a great improvement on the Calman commission in Scotland, in which, for whatever reason, not all the parties took part. We are seeing some of the consequences of that in Scotland, where there continues to be extreme controversy about the constitutional settlement. I hope that in Wales we are one step ahead of that problem.

As all hon. Members would hope, Plaid Cymru will participate in and contribute positively to the work of the commission, trusting that its recommendations will lead to better governance of Wales, in the gradualist fashion that my party has always followed. Reference has been made a number of times to our ambition for

independence for our country, but I think all hon. Members would concede that in the way we have operated over the years we have been a gradualist party aiming towards independence but prepared to work with everyone else to improve the governance of our country, with growth and prosperity for our country as our aim.

Where others shy away from seeking greater responsibility for the Welsh people and our Government, my party want them to take it. We want them to do so because by taking responsibility for ourselves, we can create and build the better Wales—the Wales that we all want to live in. Devolution should not stop—indeed, it cannot stop, as Ron Davies said all those years ago—and it will not stop, despite the Secretary of State’s apparent call for a moratorium, which I saw in The Western Mail about three weeks ago. It is clear that in respect of the requirements of good governance, this Government take action, as did the previous Government, to transfer powers to Welsh Ministers. We see statutory instruments appearing fairly regularly to transfer powers. They are perhaps minor powers—they are not changes of principle —but that process will continue.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

May I reassure the hon. Gentleman that what I had envisaged was that the major questions—such as energy, ports and the other areas that have from time to time come across my desk, with demands having been made that powers in those areas be passed down—should rightly be looked at by the Silk Commission, but I am certainly not ruling out transfers of administrative matters from time to time where it makes sense? To rule that out would be nonsensical and the door is always open on those issues. I think it is a question of common sense, but we must not undermine what the Silk commission will look at in part II.

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Hywel Williams (Shadow Spokesperson (Cabinet Office); Arfon, Plaid Cymru)

I am grateful to the Secretary of State for making that point because her comments and those of other hon. Members could easily be misinterpreted if looked at briefly.

It seems clear that the current arrangements are not sustainable in the long term. The settlement between London and Cardiff is complicated, but that need not be a bad thing—sometimes complicated is good if the system works very well. The system does seem complicated but it is, thankfully, now much clearer than it was under the highly unsatisfactory legislative competence order system that we struggled with under the previous Government. The Under-Secretary was on the Welsh Affairs Committee with me and I am sure that he was tempted to jump to his feet when the housing LCO was mentioned. However, I shall not intrude into that particular piece of history.

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Roger Williams (Brecon and Radnorshire, Liberal Democrat)

Does the hon. Gentleman agree that the system is not only complicated but is spread over a great body of law, making it very difficult to use that law for its proper purpose? Does he agree that the Silk commission could look at that as well?

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Hywel Williams (Shadow Spokesperson (Cabinet Office); Arfon, Plaid Cymru)

There have been persistent complaints from members of the legal profession in Wales and others, including academic lawyers, who have looked at the changes to the body of law in Wales and found that it is difficult to keep track. There are people who are doing a heroic job of trying to keep track of the implications and I only wish that they were better resourced. Unsurprisingly, my opinion is that there

should be a devolution of jurisdiction to Wales, which would make things rather clearer, but I shall say something about that later.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

Does the hon. Gentleman agree that the Silk commission, whatever its outcome, will not get rid of complexity entirely? Indeed, some complexity is a necessary—if not evil—part of the devolution process. The level of maturity of this stage of devolution means that there is often administrative negotiation, including over aspects that the Welsh Assembly Government want to pass back or to be retained here because it makes more sense to do them on a UK-wide basis. For example, some aspects of marine matters have been devolved, but the Assembly has later returned to say, “Actually, we’d like that little bit to keep being done on a UK-wide basis, because that is where the resources lie.”

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Hywel Williams (Shadow Spokesperson (Cabinet Office); Arfon, Plaid Cymru)

I thank the hon. Gentleman for that intervention. As I said, sometimes complexity is good and necessary. I do not want to appear too Panglossian about this, but it seems to me that we have a system that works fairly well. However, as we say in Welsh, nid da ble gellir gwell—it is not good if it can get better. Certainly that is our ambition.

The principle of the system for Wales inevitably still leads to a lack of clarity and some confusion for the public. I am glad to see that the commission will be looking at systems of devolution in other parts of the world. Roger Williams referred to the Scottish model as one under which everything is devolved other than that which is not, as compared with the situation in Wales, where nothing is devolved other than that which is. There is a great deal to commend that particular system.

I also encourage the commission to look beyond the boundaries of the UK. In an intervention on the former Secretary of State, Paul Murphy, I pointed out that the system in the Basque country, in terms of money, is slightly different to that in the rest of Spain, which generally operates on a block grant principle, whereas the Basques have historically, over many centuries, raised their own taxes and then sent a certain amount of money down to Madrid. That is easier for them given that the gross domestic product in the Basque country is currently 140% of the average across the country, so they are in the rather lucky position of having the money to do that. It is interesting that the Basque country has a steel industry and a history of heavy industry, but seems to have managed to go beyond that with the Mondragon co-operatives and various other methods that it has adopted. The area is similar to Wales in population and culture, with a smallish linguistic minority, but there we are—it seems to be succeeding where Wales is not.

I would say this, but I think that the will of the people of Wales was made clear in the referendum. I take the point made by Guto Bebb about the turnout, but unless we have compulsory voting there will be variations in turnout and I do not think that the lowish turnout for the Assembly elections indicates disenchantment with that body—rather, it is growing in popularity and interest. He made a good point about defending the institution. It may be a body that we are not always particularly keen on, but at least

it is ours, and people must defend it. I hope that the commission’s timetable allows for legislative change before the next election, but I am grateful to the Secretary of State for setting out the options, which will repay close study.

I am conscious of the fact that time is passing and that other hon. Members wish to speak, but I will make a couple of further points. There is plenty that could be done, and I recommend that the commission look at two excellent private Member’s Bills, which happen to be mine: the Bilingual Juries (Wales) Bill, which I introduced in 2007 and which failed abjectly to proceed; and the Jobcentre Plus (Wales) Bill that I introduced earlier this year and which the hon. Gentleman opposed very successfully indeed, along with many of his friends across the border.

Those are two practical changes that could profitably be looked at by the commission, and I am sure that there are more. In my party at least, we have an appetite for change. We have done the work, and we have the imagination to think about what sort of changes might be introduced, so I commend both those measures.

If hon. Members want an example of why the devolution of certain measures is necessary, I refer them to the recent shenanigans of S4C and my early-day motion 2316. The scrutiny of the Public Bodies Bill by the majority of Members from Wales was entirely deficient as far as S4C was concerned. There were five Members from Wales on the Committee that considered the Bill. Two were unable to speak because of the role that they played, but the other three Members worked very hard indeed, and I pay tribute to the hon. Members for Clwyd South (Susan Elan Jones) and for Ceredigion (Mr Williams). We were able to debate the issue at length, and I was glad that we could do so. Subsequently, I secured a Westminster Hall debate on the subject, which was well attended.

When the Public Bodies Bill was on Report, however, we did not, for reasons that I will not go into—I shall not begin to point fingers—reach the amendment on S4C, so the majority of Members from Wales did not have an opportunity to express their opinion. That is one reason why the commission should look at an area that is difficult and complicated to devolve.

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Alun Cairns (Vale of Glamorgan, Conservative)

In view of the fact that the hon. Gentleman is commenting on S4C, will he congratulate the Secretaries of State for Wales and for Culture, Olympics, Media and Sport on the fantastic deal that S4C has secured with funding from the BBC?

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Hywel Williams (Shadow Spokesperson (Cabinet Office); Arfon, Plaid Cymru)

The deal that was eventually reached has pleased no one and has pleased everyone to some extent because S4C has taken a hard hit on money. However, I pay tribute to the Secretary of State, and to Members from all parties, including Lords Wyn Roberts, Dafydd Wigley, Dafydd Elystan-Morgan and John Morris, who pressed the case, along with the BBC Trust member for Wales, Elan Closs Stephens, Cymdeithas yr Iaith Gymraeg, my hon. Friends and, perhaps, me. Everyone is included—success has many parents—so let us leave it at that. All I want to say is that broadcasting should be subject to fair scrutiny.

4:24 pm
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Alun Cairns (Vale of Glamorgan, Conservative)

I am grateful for the opportunity to contribute to this extremely important debate for Wales, for the constitution, and for the stability of devolution, both in Wales and across the United Kingdom.

I congratulate the Secretary of State on securing the debate in Government time and on the way in which she introduced it. This is a genuine debate about the need for greater accountability and stability in the devolution settlement. It will set the scene for the Silk commission. Of course the commission is independent and I congratulate each and every one of its members. They need the freedom to investigate the issues, but this is an important debate about Wales, in Government time, in the Chamber.

In the past the Conservative party and the Conservative Secretary of State have been accused by Opposition parties of being devo-sceptics, but the reality is very different. Few predicted that it would be a Conservative Secretary of State who delivered a referendum on further powers for the Assembly. Even fewer would have predicted that a Conservative Secretary of State would move to advance the settlement to secure its stability over the longer term.

Stability is the key point. Over the past 13 years, Wales has experienced significant constitutional change in a piecemeal approach that has served the interests of the Labour party. There is no doubt about the mess created by the Government of Wales Act 1998. We started off with the National Assembly for Wales. Then we had a change in the voting system, which was opposed by the Electoral Commission. Then we had the Richard commission, which was generally ignored, and the legislative competence model taken from that was unworkable. The Holtham commission’s report has not been debated even in the National Assembly for Wales. That was followed by a second referendum. All that was done to serve the partisan interests of the Labour party and to try and overcome the differences between the Labour Members in the Welsh Assembly and those on the Opposition Benches in the Chamber.

The churlish way in which the shadow Secretary of State responded to the opening comments from the Secretary of State for Wales demonstrated that the Opposition do not know how to react. There is obviously some enthusiasm from the Labour party in Wales for the Silk commission, but Labour Members here are worried about their personal futures, rather than thinking about the needs of Wales and the ability of the Silk commission to address them in order to deliver stability.

In view of the previous constitutional upheaval, the outcome of the Silk commission must be sustainable and must deliver stability, leading to a settlement that will not require further changes for a generation. Such confusing changes over recent years have led to a confused model of accountability. The public find it difficult to understand who is responsible for what because of the changes since the Government of Wales Act 1998, the referendums and other developments. The Welsh Government choose to perpetuate the confusion by blaming Westminster for anything that goes wrong in Wales, regardless of their own responsibility. They have learned from the early Blair years to become masters of spin.

Take the recent controversy over the establishment of wind farms. This is a subject that is extremely important to my hon. Friend Glyn Davies, who is fighting hard for his constituents.

The applications for wind farms in some of the most beautiful parts of Wales stem directly from the First Minister’s technical advice note 8 policy, which established strategic search areas identifying specific parts of the country that would be looked on favourably for wind farm applications.

As soon as the impracticality and unpopularity of the policy was exposed, we had a statement from the First Minister that he wanted to lead the charge to the Westminster Government to try and stop it happening. But the application was rooted in the TAN 8 policy developed in 2005, when Carwyn Jones was Minister for Environment, Planning and Countryside and had responsibility for driving that policy. The Welsh Government enjoy the resulting confusion, blaming Westminster when the responsibility lies on their desk.

That brings me to the respect—or should I say lack of respect?—agenda shown by many Labour politicians in Cardiff Bay. The agenda is a one-way street. Anyone listening to First Minister’s questions on a Tuesday in the Assembly will hear that everything that goes wrong is the coalition Government’s fault, yet it was Labour, here and in Cardiff Bay, that left Wales the poorest part of the United Kingdom and left an education system and standards that trail those in the rest of the UK, an inferior model for cancer care, longer waiting times for any medical interaction and every Welsh economic indicator—inactivity rates or unemployment rates—scoring much worse than those in any other part of the UK. That has not changed over the past 18 months, but anyone listening to First Minister’s questions will recognise the audacity shown by the First Minister, reflected today by the shadow Secretary of State, in blaming Westminster for anything that suits them. Labour is happy to perpetuate confusion and use a publicly funded publicity machine to criticise the Westminster Government.

The reason for the decline in health, education and the economy is that since 1999 the Welsh Assembly Government have chosen to make the argument about structures, strategies and powers rather than deal with the real issues. The Welsh Assembly Government have become unaccountable because they can blame Westminster for anything that goes wrong.

On the economy, we began with the national economic development strategy. A few years later “A Winning Wales” came out. Later, the Assembly came out with “Wales: A Vibrant Economy”. Running in parallel were the entrepreneurship action plan, the European aid programmes, which began with 600 partnership models, and a 90% target for GDP by 2010, which has not been met. The Assembly must be held responsible and accountable.

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Guto Bebb (Aberconwy, Conservative)

Does my hon. Friend agree that, incredibly, politicians in Wales are highlighting the fact that once again Wales will qualify for the highest rate of European intervention as though that was an achievement?

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Alun Cairns (Vale of Glamorgan, Conservative)

My hon. Friend underlines my point about the failure of the Cardiff Bay Government to seek to improve the quality of life: the economy, social care and education standards. In the 1997 referendum and the first Assembly elections in 1999 we were told that the devolution dividend would change all those things. Labour has failed, and it has not changed in the past 18 months. It blames Westminster for the underfunding that Holtham identified.

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Owen Smith (Pontypridd, Labour)

The hon. Gentleman and his colleagues call for accuracy in the context in which we set our remarks about the public spending cuts in Wales, but should they not set themselves the same standards when discussing the profundity of the long-term, systemic economic problems facing Wales, which are reflected in our once again qualifying for objective 1 funding? I profoundly regret that, as I am sure he does, but the fact that we qualify shows how deep seated the problems are.

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Alun Cairns (Vale of Glamorgan, Conservative)

I am grateful for that point, but the hon. Gentleman misses the key issue: Labour’s failure over 13 years. Labour Members salivate in decrying the 1980s. Wales was not the poorest part of the United Kingdom at the time, but it was when they left office. [ Interruption. ] The hon. Gentleman says from a sedentary position, “It is not true”. Well, I will happily hear about the economic indicator that points out that Wales is not the poorest part of the United Kingdom.

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Owen Smith (Pontypridd, Labour)

I did not say, “It is not true”, and the hon. Gentleman makes a semantic point, because we are talking about fractions. Many parts of the UK have not benefited in lots of respects; in fact, they all share the characteristics of being post-industrial parts of Britain with the same deep-seated economic problems as Wales. Those problems are not something to be solved quickly, but the Assembly has worked extremely hard and been extremely effective in all sorts of areas of public life in Wales.

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Alun Cairns (Vale of Glamorgan, Conservative)

I am stunned by the complacency of the hon. Gentleman, an Opposition Front-Bench Treasury spokesman who really should have a better handle on these issues. He talks about semantics and very small percentages, but when Labour left office after 13 years of government Wales was the poorest part of the United Kingdom, despite all the great announcements that we heard during the period, on the Barnett settlement, Barnett plus, European money, match funding, PES—public expenditure survey—cover and how lucky Wales was to have a Labour-run Westminster Government as well as a Labour-run Welsh Assembly Government. The data are quiet clear that there has been blatant failure. They highlight the fact that Wales is the poorest part of the United Kingdom, and I am aghast at the hon. Gentleman’s complacency.

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Guto Bebb (Aberconwy, Conservative)

When the Welsh Affairs Committee visited Germany recently, the business people whom we met had no idea of any business organisation or Welsh Assembly Government Department with responsibility for inward investment, but every single one of them was aware of the Welsh Development Agency, an organisation that served Wales well in the 1980s but was abolished by the Welsh Government on the basis of a personal decision by the First Minister, who did not even have the courtesy at the time to inform the agency’s chairman of his intentions.

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Alun Cairns (Vale of Glamorgan, Conservative)

I am grateful again to my hon. Friend, who highlights an important point. Owen Smith looked on favourably when the Welsh Development Agency was mentioned, and so many businesses in Wales would love to see it returned.

We heard from my hon. Friend Mr Walker earlier. When his father was Secretary of State for Wales, Wales attracted 20% of the UK’s inward investment with just 5% of the population. How great it is to have another Walker family member showing such an interest in Wales. That is the difference—from the time in the ’80s when those jobs were being created and the economy was being restructured, to the failure that we have seen over the past 13 years. I also seem to recall Mr Hain questioning the judgment of the then First Minister, Rhodri Morgan, in seeking to abolish the WDA and bring it into the Welsh Assembly Government.

Those differences are similar to the differences today between Labour Members at Westminster and Labour Members in the Welsh Assembly, who are far more enthusiastic about the Silk commission. Indeed, it is quite obvious that Labour Members here are in an uncomfortable position on Silk. They do not know how to react, and the shadow Secretary of State for Wales, in today’s article in The Western Mail and in his response to today’s debate, has tried to position himself by thinking, “How can we get out of this with some sort of political advantage?”, rather than recognising that Assembly Members need to be more accountable for their policies.

I have listed the failed policies and, ultimately, the one on the economy, and we could go on to health, cancer care or any others that I have mentioned, because Opposition Members need to accept and recognise their part in that failure, rather than simply looking up the M4 and blaming everyone else when they quite honestly know that they are responsible.

Many Members have referred to the need for engagement, and I cannot underline that point any more. Advocates of devolution point to the outcome of the recent referendum, when 63% voted in favour, yet the turnout was only 35%, which demonstrates that a significant number in the population are not engaged. The key challenge for the Silk commission and the Welsh Government is to capture their imagination, hear their concerns and get them involved, because, troublingly, the views of anyone sceptical of devolution are almost dismissed, and I suspect that they make up largely the 65% of people who did not vote at the time.

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Jonathan Edwards (Shadow PC Spokesperson (Treasury); Carmarthen East and Dinefwr, Plaid Cymru)

The hon. Gentleman is using, as did Guto Bebb, the turnout for the referendum as a battering ram to try to hold back the whole process. The referendum was fought on an extremely technocratic question, and I was amazed that more than 30% of the people of Wales voted on a question that hardly anyone understood.

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Alun Cairns (Vale of Glamorgan, Conservative)

I am surprised at that intervention, and the low sights that the hon. Gentleman sets for himself. He was amazed by a 30% turnout. That almost sounds as though he was delighted with it. If that had been the case in the referendums in Scotland and Wales back in the late ’70s, they would have been dismissed.

There is a need for engagement on the issue. I do not for one second use the low turnout as a reason to batter devolution, but it underlines the fact that many people throughout Wales and in almost every local authority area—ironically, the highest turnout was in Monmouth,

at 50%—are troubled about devolution or do not understand it. Their views are as important as those of the strongest advocates, who I suspect are within Plaid Cymru.

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Guto Bebb (Aberconwy, Conservative)

My hon. Friend has explained extremely well the issue of the 65% who did not vote. I reiterate that the 65% should not be taken as a no vote, but that it shows that engagement with the Welsh Assembly needs to be improved dramatically.

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Alun Cairns (Vale of Glamorgan, Conservative)

I could not agree more with my hon. Friend, who further underlines the point.

The key theme is accountability, which was covered extremely well in the excellent report of the Holtham commission, which set the backdrop to the Silk commission, highlighting key issues relating to accountability and some of the points that I tried to make earlier. The report states that the public sector, and I would say the Welsh Government specifically, is

“in some ways detached from the economic circumstances of the citizens it serves”—

that is the need for better accountability—and

“simply blaming Westminster for inadequate resources”

is not an option. That is effectively the position we are in.

The change of Government at Westminster has produced a chorus of an argument from the Welsh Government in Cardiff Bay, to the extent that the level of debate is stymied to mere rhetoric. The best description of the Welsh Government’s approach came from a former Labour Member of this House who said that the Welsh Government is in danger of becoming an

“institutional chip on the Welsh shoulder.”

That encapsulates the approach. The accountability argument must be underlined time and again.

It is too easy for the Welsh Government to play the blame game, and I hope that the Silk commission will consider accountability extremely seriously. The Holtham report offers useful pointers. It states that if it is decided that there is merit in devolving fiscal powers, the tax should be one that

“is paid by a high proportion of Welsh residents…raises substantial revenue”

and

“is ‘visible’ to most citizens”.

It is not surprising, therefore, that in seeking to avoid my accountability argument the Welsh Government and the First Minister call for air passenger duty, stamp duty, aggregates tax, landfill tax, and other obscure taxes. The more obscure they are, the less accountability there is, so they can continue the blame game. That is unacceptable, and I hope that the Silk commission will reject that.

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Owen Smith (Pontypridd, Labour)

Again, I intervene on a point of accuracy. The hon. Gentleman quoted extensively from the Holtham report, which he purports to have read, so he will know that those are the very taxes that Gerry Holtham refers to as potentially being among the minor taxes that would be transferred to Wales.

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Alun Cairns (Vale of Glamorgan, Conservative)

The hon. Gentleman mistakes my recognition of the quality of the Holtham report for an indication that I agree with all its conclusions, and I

simply do not agree with all the conclusions. I said earlier that it is a useful backdrop to the Silk commission. That should be recognised.

To pursue the argument about accountability and the approach taken by the Welsh Government, in a similar vein it needs to be noted that over the past 12 years the Labour party in Wales used council taxes to raise additional funds and then put the responsibility on to local authorities, most of which, as a result of 13 years of Labour Government, were not Labour. The Conservative party ran the same number of councils in Wales as the Labour party, and that is a far cry from how it was at the time of devolution. Most of the funding for local authorities comes from the Welsh Government, so I would suggest that over the past 10 years or so there has been a deliberate strategy of squeezing funding from local government in Wales, forcing local authorities to raise more money in council tax. That is demonstrated by the fact that over the past five years the average council tax increase in England was 2.6%, compared with 3.8% in Wales. That amounts to a plan to make local authorities responsible for the additional revenue that they are raising instead of becoming accountable for themselves. I could go on to talk about the re-banding mistakes that were made in some areas, which squeezed even more council tax out of some of the people who were least able to pay.

I will close by sounding a note of caution about the volatility of many taxes. Whatever the Silk commission develops and comes up with, I hope that it will recognise the volatility between the level of income tax raised three years ago in Wales compared with the level raised now. There is a significant difference, and that will be another important factor for Silk to consider.

Several hon. Members:

rose —

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Lindsay Hoyle (Chairman of Ways and Means; Chorley, Labour)

Order. We have to be very careful about time now; I think that the length of that speech was rather excessive. We still have four Members to get in and roughly 44 minutes left for them to speak.

4:46 pm
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Owen Smith (Pontypridd, Labour)

It is always a pleasure to follow the perfectly formed hon. Member for Vale of Glamorgan (Alun Cairns). I had hoped to follow Guto Bebb, as that would have given me an immediate opportunity to respond to his curious remarks—

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Owen Smith (Pontypridd, Labour)

In a moment.

I could have responded to the hon. Gentleman’s curious remarks about some mysterious article that I have ostensibly written.

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Owen Smith (Pontypridd, Labour)

I will give way in a moment.

The hon. Gentleman said that somewhere in an article I had advocated a reduction in the number of Welsh MPs. If I had been mistranslated, that would have been a different matter, but I have certainly never advocated that. However, the article in question is relevant, and I will talk about it in a moment. Over to the hon. Gentleman.

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Guto Bebb (Aberconwy, Conservative)

I am grateful to the hon. Gentleman for allowing the facts to be stated clearly on the record. The article is called “Towards a New Union” and it was published by Compass. In talking about how to ensure that the West Lothian question is dealt with without moving to federalism, it states:

“Such a reformation of English local government, allied to the reduced number of Welsh and Scottish MPs at Westminster, would go a long way to answering the English Question.”

I think that the article was translated correctly and that my statement was also correct.

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Owen Smith (Pontypridd, Labour)

I suggest that in future the hon. Gentleman needs to do more than take selected excerpts from things. He should read all 5,000 words of the article, in which he would clearly see that I am talking about the fact that we are going to have the number of Welsh MPs reduced—not that it is desirable, not that it is justified, but that it is a matter of fact as a result of the shameless gerrymandering of the electoral map in Wales that we have seen as a result of the Parliamentary Voting System and Constituencies Bill. I suggest that the hon. Gentleman needs to read it all—or if he would like to withdraw his remarks, which are wholly inaccurate, he can do so now.

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Guto Bebb (Aberconwy, Conservative)

I believe that the hon. Gentleman doth protest too much.

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Owen Smith (Pontypridd, Labour)

I do not, at all. I am quoting accurately from my article. I suggest that the hon. Gentleman read it and that in future he does his homework a little better lest he is in danger of misleading the House about my opinions, if nothing else. [ Interruption. ] He can withdraw his remarks whenever he wants.

I thank the Secretary of State for scheduling today’s debate. Labour Members and, I am sure, Members right across the House are extremely grateful that after 18 months we have a debate about a Welsh matter on the Floor of the House. We did not have a substantive one, of course, about the Welsh aspects of the Parliamentary Voting System and Constituencies Bill, we have not had one about growth, and we have not had one about the disproportionate effect of cuts in Wales, but we are having one today, for which I am very grateful.

I asked the Library staff to look into when we last had such a long interregnum between substantive Welsh debates on the Floor of the House, but once they got back to the 1940s I told them to stop bothering.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

The hon. Gentleman will no doubt make absolutely every effort to ensure that the Backbench Business Committee, which is now responsible for scheduling our St David’s day debate, allows us to have it. It did not do so last year, despite my letters to it and despite other Members appearing before it to ask for that debate. If we have that debate, we can cover all the matters that he mentions.

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Owen Smith (Pontypridd, Labour)

With the absolute greatest respect, I find it extraordinary that the Secretary of State should now view it as the job of the Backbench Business Committee to decide whether we have a debate on Wales. I am surprised that she should go to that Committee to request a debate, rather than go to her colleagues around the Cabinet table such as the Chief Whip and ask for a debate in Government time.

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Lindsay Hoyle (Chairman of Ways and Means; Chorley, Labour)

Order. We are having a debate on devolution in Wales, so I am not quite sure whether a future debate is relevant. We ought to stick to the agenda.

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Owen Smith (Pontypridd, Labour)

Indeed, and thank you, Mr Deputy Speaker.

Today’s debate and the Silk commission are extremely important, and I welcome them for two reasons. First, they enable the discussion of issues of genuine magnitude. Part I of the commission’s role on fiscal powers, and part II on the boundaries between the competences of Westminster and Wales, both cover enormously important issues that will have an impact on people in Wales in particular and across the rest of the UK. Secondly, the debate is important because it provides an opportunity to discuss the wider issue of the Union, to which my article referred, and the wider context in which the Silk commission is set. A lot of Members, particularly my right hon. Friend Paul Murphy in his excellent contribution, have taken that opportunity. I wish to talk about that wider context.

Government Members, including the Secretary of State, have looked askance today at Opposition Members who have said that they are suspicious of the motivation that may lie behind some of the remarks that have been made, and perhaps even behind the Government’s whole direction of travel with regard to the Union. We are seeing diminishing support from the Conservative party for the concept of the Union.

Those concerns are not plucked out of thin air, and they are not illegitimate. They are born of our reading and listening to comments made by Conservative Members, and of hearing comments such as those of the former Prime Minister, Sir John Major, who said that Scottish ambition was “fraying English tolerance”. They come from reading the conclusions of the report commissioned by the Prime Minister, when he was in opposition, from the current Justice Secretary. It recommended that the only way to deal with the West Lothian question was to create an English Parliament with English votes on English issues, denying Welsh, Scottish and Northern Irish Members a vote.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

indicated dissent.

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Owen Smith (Pontypridd, Labour)

The Secretary of State shakes her head, but that was the conclusion drawn by a commission led by the Justice Secretary.

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Owen Smith (Pontypridd, Labour)

No, it has not been done, as the hon. Lady says. It is very good to see her today—I am very pleased that we have an English Member taking part in the debate, which is extremely important. However, I say to her that what came out of that report was a commitment in the Conservative manifesto and the coalition agreement, which has now been enacted, to begin a debate on the West Lothian question. We are concerned about the direction of travel and the trajectory that many Members now feel has been set.

In recent debates in Westminster Hall and elsewhere, many Members have referred rather aggressively to resentment felt by English constituents about the supposed unfair stipend or subsidy afforded to, and enjoyed by, citizens in Wales, Scotland and Northern Ireland.

As Opposition Members have tried to point out today, that is not an unfair stipend, but a reflection of the accurate needs, born of the industrial heritage and present problems, of Wales, Scotland and Northern Ireland. Neither, as my right hon. Friend the Member for Torfaen mentioned, is it a reflection of the relative receipt of revenues in Wales versus parts of England where a needs-based formula already applies: for example, greater subsidy—if we want to use that word—and support is afforded to the north-east, the north-west and even the south-west than is afforded to Wales. It is legitimate, therefore, for us to voice our concerns about the Government’s attitude to the Union. That is not scaremongering; it is merely a question and a set of observations on our part.

The other reason we are worried, of course, is that, traditionally, Conservative and Labour Governments have not been partisan in how they have addressed the constitution, but for the first time, judging from how the Parliamentary Voting System and Constituencies Act 2011 was addressed in this place, a partisan attitude has been taken to the constitution. I hold that view absolutely fully. It is a view that I have heard expressed on many occasions by Conservative Members, not in the House, but outside. They view the Act as being underpinned by partisan motivations, and I fear that we might be seeing a similar set of motivations here. I sense that the Tory party has been seduced by the prospect of hegemony in England in the long term, even if it means a truncated, fragmented UK. I, for one, as a Welshman and proud British citizen, do not want that to come about.

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Alun Cairns (Vale of Glamorgan, Conservative)

Speaking as a Conservative Member, I do not accept that point. In my mind, the purpose of the Silk commission is to provide accountability and stability for the long term, but the motives about which the hon. Gentleman talks were behind devolution in 1997, when it suited the Labour party in Wales, rather than Wales as a nation.

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Owen Smith (Pontypridd, Labour)

I wholly dispute that. Devolution in 1997 was born of need and demand in Wales. It had been developing for a long time. It perhaps had not come fully to fruition in 1979, but by 1997 there was a clear demand for it, and that demand has thickened over the past 13 years, right through to the referendum, when we saw it greatly increased.

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Alun Cairns (Vale of Glamorgan, Conservative)

I am grateful to the hon. Gentleman for giving way; he is being extremely generous. If demand was so strong, why was there only a 50% turnout and 7,000 majority? That is how strong his demand was.

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Owen Smith (Pontypridd, Labour)

Several Government Members have talked about what, to put it bluntly, is ancient history now and pointed to the size of the mandate and turnout, but we all know that politics is a precarious, parlous business. The Tory party clearly thought that it had a sufficient mandate at the last election. It did not get a majority, but nevertheless it is the ruling party. We have to bury that argument and move on. Right now, there is clear support for devolution in Wales, as was shown in the recent referendum. That is not in dispute. It ill-behoves Government Members, who purport to support devolution, to keep dredging up these ancient concerns and this

ancient history, because, frankly, it gives us the suspicion that they still have not quite brought into it.

I have a second concern, which, actually, I share with some Government Members—even, perhaps, David T. C. Davies—about the constant, cyclical nature of the interaction between demands and desires, legitimate or otherwise, for additional, incremental powers in Wales, Scotland, Northern Ireland and even, perhaps, England. That is a problem. It leads to perpetual pressure for change and to very few instances in which we—legislators in this place and the devolved Administrations, which have their own particular locus—can put our foot on the ball and contemplate the broader picture, the country’s longer-term trajectory. That is hugely important. The Silk commission ought to consider that wider context.

In particular, however, this House needs to consider that wider context and be the place in our country where we contemplate the aggregate impact of the changes to the particular discrete functions and powers of different parts of the UK and where we think long term about what the benefits and disbenefits might be. That is not to take an anti-devolutionist perspective, however. I am thoroughly committed to devolution and the principle of subsidiarity—pushing down power and democratic accountability as low as we can—which is why I talk in my excellent and recommended article for Compass about reinvigorating local government democracy in England, which would be a jolly good thing. However, I am also British—indeed, proudly so—and I feel that my values and those of the Labour party transcend national boundaries and the identity politics that stem from an obsession with national boundaries. My concern is that the wider picture—the longer-term perspective—is too infrequently considered in this place or, in particular, the devolved Assembly. I do not want Wales to be as politically peripheral in Britain as it is de facto geographically peripheral. I worry that at some point that will be the net consequence—the aggregate impact—of these things.

Let me turn briefly to some of the specificities of what Silk will consider. I will take only one—corporation tax—but for me, they all highlight the risk that we might face. Anyone picking up the Financial Times this morning could have read an article about Peter Robinson, the First Minister of the Northern Ireland Assembly, who has advocated adopting a 10% corporation tax rate to compete with the 12.5% rate in the south. My view is that this would be hugely difficult and dangerous. Although it might be advantageous for Northern Ireland in the short term, we should also consider the risk that it would necessarily lead to arbitrage between the two areas and to different pricing arrangements. If we had variable taxation bands between different parts of the mainland, we would certainly see arbitrage across the borders and we would need internal transfer pricing policy and legislation in this place and the other jurisdictions. Given the difficulties with legislative vehicles to deal with transfer pricing between European countries—the disaster, even—what on earth would they be like within the UK?

Westminster needs to hold the ring. Westminster needs to consider the risks. Westminster needs to be place where this debate is thought about, in conjunction with the discrete and—from the perspective of the local jurisdictions—eminently reasonably changes that may

be wished for. This place also needs to be where the broader economic context is considered, because, bluntly, some of the peripheral changes to taxation that we are talking about and that Holtham talks about—indeed, perhaps even the larger changes too—will not lead to the growth, jobs, wealth and opportunity that would be created by measures that the Government could be implementing right now, such as those in Labour’s five-point plan.

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Nick Smith (Blaenau Gwent, Labour)

I congratulate my hon. Friend on his support for subsidiarity and decisions being made at the right level. The success of the Welsh Assembly, particularly in the last few months, has been based on its good ideas, such as the Welsh job fund and introducing local police support officers, all because people in Wales are fed up with the horrible attacks that we have seen from the Government.

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Owen Smith (Pontypridd, Labour)

My hon. Friend is absolutely right. The Welsh Assembly has understood that in order to stimulate our economy we need a stimulus. We cannot sit on our hands and assume, as the Government do, that laissez-faire economics will drive economic progress in our country.

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Owen Smith (Pontypridd, Labour)

I will not give way; I am going to finish in a moment.

We need a stimulus, which is why the five-point plan that Labour has produced is absolutely what we should consider implementing. It is also why we should be celebrating what Carwyn Jones and the Welsh Assembly Government have done along the same, as it were, Keynesian lines.

I will conclude with the broader economic picture. It is for this place to bring the global and European context to bear in this debate. However, it is ironic that at a time when Members in all parts of the House are advocating greater collaboration and greater cohesion and integration of states’ fiscal powers on the continent—it is particularly ironic that Conservative Members should be doing that at all—we in the UK are contemplating disaggregating those fiscal powers. That is a profound irony—one perhaps borne out of the peculiarity of how our constitutional thinking has developed. It is for us—and, in particular, the Secretary of State for Wales and her Northern Ireland and Scotland colleagues—to ensure that those thoughts are brought to bear round the Cabinet table and to subjugate any party political interest beneath the national interest, for all our citizens right across the UK.

Several hon. Members:

rose —

Photo of Lindsay Hoyle

Lindsay Hoyle (Chairman of Ways and Means; Chorley, Labour)

Order. There are three speakers to go, and we have 25 minutes left for them. If they can divide that time equally, that would be very helpful.

5:05 pm
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Eleanor Laing (Epping Forest, Conservative)

I thank Owen Smith for his kind words in welcoming me to the debate as the only Back Bencher not representing a Welsh constituency. I am here quite deliberately because I agree with the hon.

Gentleman, as well as Paul Murphy and, of course, all my hon. Friends on this side of the House, that it is this Parliament, the Parliament of the United Kingdom, that ought to debate matters concerning the Union. I am very much a Unionist, and I will never be anything else. If we start to draw lines and say that people who are elected to seats in Essex should not speak on Welsh matters, or that those who represent Cornwall should not speak on Scottish matters, we are negating the very concept of the Union, which most of us wish to defend.

I am sorry to see that the shadow Secretary of State, Mr Hain, is no longer here, because I have saved up all my political arguments to put to him across the Floor. He made some appalling remarks in his speech, but it is his right to do so. I can tell the House that, just as he has Scottish roots, my maiden name is Pritchard, and you cannot get much more Welsh than that. I do not think that my father ever set foot in Wales in his life, however, and I do not think that his father, or his father before him, did either. I must have some Welsh blood somewhere, but that is not the point.

The point is that we are the Parliament of the United Kingdom, and the devolution settlement that we have put together for certain parts of the United Kingdom affects all of the United Kingdom. It is like a tube of toothpaste; you cannot press one part of it without making an impression on the other parts. Anything to do with devolution, and anything that affects our constitution in any way, affects the whole of our country. There ought to be more Members from other parts of the United Kingdom here today, so that they might understand that we, as a whole, have responsibility for what happens in any part of the United Kingdom.

I also agree with the hon. Member for Pontypridd—this is getting disturbing—that the distribution of taxpayers’ money to Wales, Scotland and other parts of the United Kingdom is fair because it is based on deciding which part needs the most input from taxpayers’ investment in our country as a whole.

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Owen Smith (Pontypridd, Labour)

On a point of fact, the distribution to Wales is not based on need—that is why we have long argued for a needs-based formula—but it is reflective of need.

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Eleanor Laing (Epping Forest, Conservative)

I appreciate what the hon. Gentleman is saying. I do not believe that we should have a needs-based formula. I would always argue that the Barnett formula distributes taxpayers’ money in a reasonable manner, even though it obviously needs to be reformed and brought up to date. Just as Newcastle does not require the same sort of taxpayer subsidy as Surrey, and just as the centre of Birmingham does not require the same amount as the leafy lanes of Kent, so it is important that we get the balance right in Scotland and Wales.

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Jonathan Edwards (Shadow PC Spokesperson (Treasury); Carmarthen East and Dinefwr, Plaid Cymru)

Does the hon. Lady recognise that London gets a higher percentage of public expenditure per head than any other part of the British state, including Wales?

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Eleanor Laing (Epping Forest, Conservative)

Of course, because some areas of London are desperately in need of help from taxpayers’ money.

There are enormous areas of poverty, deprivation and need in London; that is why it happens. Of course it does. If the hon. Gentleman is not willing to be fair to people who live in London, why should the rest of the country be fair to his constituents?

That brings me to the other points made by the hon. Member for Pontypridd and the right hon. Member for Torfaen. Although I would argue that the distribution of taxpayers’ money is currently done fairly, the democratic balance between different parts of our United Kingdom has not, until now, been fair. It is totally outrageous that the hon. Member for Pontypridd should describe as “shameless gerrymandering” the equalisation of constituencies. In what way is it democratically fair that Pontypridd has 58,000 electors, Torfaen 61,000 and Neath 57,000, while the Secretary of State’s constituency has 70,000 and mine has 72,000?

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Lindsay Hoyle (Chairman of Ways and Means; Chorley, Labour)

Order. We are debating devolution, not constituency size. We are in danger of dragging the debate somewhere we should not be going to at this time of the evening.

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Eleanor Laing (Epping Forest, Conservative)

Of course, Mr Deputy Speaker. I was merely illustrating the balance of fairness, and saying that if we are to distribute funds fairly, we should distribute democracy fairly, too. Many Opposition Members have made that point this afternoon, and it was time for it to be corrected. I am glad you allowed me to do so, Mr Deputy Speaker. I appreciate that we have had a long debate and that Opposition Members still wish to speak, so I shall be brief.

The constitutional development of our country is ongoing and continuous. Like other Members, I was not in favour of devolution to begin with, but I have come to realise the benefits from having devolved government, so I warmly welcome the Secretary of State’s setting up the Silk commission. This is a genuine commission. The Secretary of State has made it clear that she has no “pre-conclusions” about what the Silk commission should do or where it should go. Just as the Calman commission did an excellent job for Scotland, resulting in the Scotland Bill, I am sure that the Silk commission will do the same for Wales.

It is important for the commission to look seriously, as I am sure it will, at the issue of accountability as its first duty. Democratic accountability obviously comes through accountability for spending money and therefore for raising money. At present, the settlement in Wales gives the power to spend without the responsibility to raise taxpayers’ money. I argue that accountability is possible only if there is a link between the casting of the vote, the paying of the taxes and the outcome of the election.

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Owen Smith (Pontypridd, Labour)

Is not the logic of that argument that all spending should be devolved to Wales in order for it to be fully accountable, or is it enough for just a tiny fraction of spending to be devolved? Does that take the trick?

Photo of Eleanor Laing

Eleanor Laing (Epping Forest, Conservative)

No, that is not the logic at all. If the hon. Gentleman argues in that way, he is arguing against himself. He agrees with me and with many of his hon. Friends that it is this Parliament that represents the whole of the United Kingdom, so this Parliament must

have the responsibility not only for raising most taxes but for spending them. He has argued, as have others, that devolved Assemblies and Parliaments must bear responsibility as well as wielding power. As I say, if that is his argument, he is arguing against himself.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

My hon. Friend is making a valuable contribution to the debate. It is interesting to note that regional-level Governments in other countries raise a percentage of their own expenditure. For instance, in Germany regional Governments raise 56% of the 63% that is spent, and in Spain they raise 23% of the 49% that is spent.

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Eleanor Laing (Epping Forest, Conservative)

As ever, I thank my right hon. Friend. Those examples illustrate my argument extremely well.

There is no doubt that there cannot be proper accountability without a well-constructed democratic system involving fiscal responsibility as well as democracy. At present Wales benefits enormously from public spending. The public expenditure cuts in Wales are considerably smaller than cuts in the rest of the United Kingdom, and public spending is currently 12% higher. As I have said, I entirely support that position. No one is trying to do Wales any harm; quite the opposite.

I am pleased that my right hon. Friend has given the Silk commission the duty of examining the future scope of devolution. Wales can learn much from what has happened in Scotland. There is a significant difference between the situation in Scotland and the situation in Wales because Scotland has, historically, its own legal system and other institutions that Wales does not have—I say that as a Scots lawyer who is perpetually confused by English law when we discuss it in the House—but the commission is nevertheless likely to bring Wales great benefits for the future.

5:17 pm
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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

I had intended to speak for about an hour, but I probably intervened for about an hour instead, all told, and I apologise to my colleagues for that. I shall therefore make my speech as short as possible.

Mrs Laing opened her speech by saying that she was she was a proud Unionist. I would describe myself as a proud Unionist as well, but also as a proud devolutionist. I am a Unionist not on the basis of any ideology or fixed arbitrary principle, but in recognition that—as in the old trade union cry, “Unity is strength”—the constituent parts of the United Kingdom together add not only to social cohesion but to economic activity, and to our political clout on the world stage. That should be recognised in today’s debate.

The theme that I want to adopt in my brief speech, and to convey to members of the Silk commission if they hear today’s debate, is that we should not be talking about loosening ties. Instead, we should engage in a mature debate, recognising that there is a positive, welcome tension between our Government and the Governments in Scotland, Wales and Northern Ireland—although I must add, perhaps to the disappointment of my colleagues in the Plaid Cymru camp, that that is not necessarily a recipe for independence. I think that we carry much more clout if we work together. If devolution

constituted a settlement, I think that on the basis of today’s debate we can all agree that it is still settling. If it is a process, I think what we have learnt from the debate is that we need to know where it is processing to.

Let me begin by paying tribute, as others have done, to the calibre and quality of the members of the commission—not least the political appointees, but in particular Paul Silk. He will be known to my right hon. Friend Paul Murphy and other Members not just because of his extensive experience, but because he was a House of Commons Clerk for nearly 25 years during three different periods. He is also a former Clerk of the Welsh Grand Committee. He has lectured and written extensively on Parliament and the constitution; he co-authored the seminal book, “How Parliament Works”. I think we can all agree, therefore, that no one better appreciates the very sensitive balance of our constitutional settlement.

Professor Nick Bourne was a colleague of mine—not political, but academic—at Swansea Institute in my lecturing days. He was also shadow Minister for Finance and Public Service Delivery, in addition to his role as Leader of the Opposition. I am sure he will also make a good contribution to the Silk commission.

Sue Essex is very well known, and there is a huge amount of cross-party support for her on a number of issues. She is a former Minister for Finance, Local Government and Public Services. She is clearly of high calibre, therefore. Dr Eurfyl ap Gwilym is an economics expert and a long-standing adviser to Plaid Cymru. He has for many years advocated revisiting the Barnett formula. Rob Humphreys has been a strong advocate of devolution for many years, and was also a member of the all-Wales convention. The Silk commission is in good hands with them and its other members.

My right hon. Friend the Member for Torfaen gave a warning about a possible Trojan horse. I welcome the fact that we are debating this subject today and that the Silk commission will undertake the work assigned to it, but I suggest to my right hon. Friend that the danger is not so much of a Trojan horse, but of a horse and trap, in that this could lead us into a trap.

The Secretary of State must understand that concern; these are not idle worries. Although there is significant merit in addressing the two matters that the Silk commission will examine—power and fiscal responsibilities—there is a worry that Wales will be done down. To her credit, the Secretary of State has made it clear today that she does not want that to happen, but there is a great deal of concern among Opposition Members that we might end up in that situation, particularly given the coalition’s approach to constitutional affairs since it was formed. The concern is that this process will not be about looking after the best interests of the people of Wales, or even the best interests of the institutions of Wales—that is, in fact, a decidedly secondary consideration—but that instead it will be a way to look as if we are giving with one hand, while in reality taking away with the other. That is a concern, and we must monitor what happens.

Although I welcome today’s debate, it must not be the only one on this topic. We must find opportunities to address it in the Welsh Grand Committee or a different forum, because we need to discuss the burning issues of the day facing Wales, such as the state of the

economy and of society and, as I see in my constituency, the attacks on our communities.

My family has not consistently been on the same side in the devolution debate. My late uncle, the Member for Gower for many years, was a strong defender of the status quo back in 1979, along with many other notable people at that time. Times move on, however, and it is right for us to address this issue again as things progress, and we must also acknowledge that it involves not only the Wales question but the England question too. That also needs to be addressed. I should add that I welcome the involvement of England MPs in today’s debate, and that engagement must continue and deepen.

The England question becomes more important the more Scotland considers its powers in respect of fiscal autonomy and other areas, and the more Wales considers such matters too. If we do not address the England question, there will not only be political asymmetry in the old Celtic and Pictish nations; there will also be asymmetry here in England.

Through the years, numerous suggestions have been made as to how to address the England question, and many of them have been rejected out of hand. The idea of having an England-only Parliament has been proposed, as has the idea of restricting the ability of Welsh, Scottish and Northern Ireland MPs to “interfere”, as some would say, in England-only matters. As we have learned in today’s debate however, there appears to be a general consensus that it is pretty hard to identify England-only matters, and it is also hard to identify Wales-only matters. We need to speak loudly in defence of the ability of this place to continue putting its opinions forward strongly on all matters.

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Alun Cairns (Vale of Glamorgan, Conservative)

The hon. Gentleman is making an important point, which I think is recognised on both sides of the House. Does he think that that principle also needs to apply to his colleagues in the Welsh Assembly, and that they should recognise that the decisions that they take affect policy making here? There therefore needs to be dialogue between the Welsh Affairs Committee and Ministers in Wales, between Back Benchers and Ministers, and between Ministers here and Ministers in Wales.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

Indeed. People who, like me, are very positive about devolution welcome such maturity and two-way engagement. We should look for ways to enhance that. That is to do with respect and, as I said earlier, that respect goes both ways.

Photo of Huw Irranca-Davies

Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

I am sorry, but I will not give way because I need to leave enough time for another person to speak.

I will try to fit in another couple of key points in one minute. We are looking at the reverse of the Boston tea party—the “No representation without taxation” principle. Perhaps that could be called the Bangor tea party, or the Barry tea party. It has been asked what proportion of the fiscal arrangements is needed for financial accountability. Is it a tiny element and just tinkering around the edges, or is it more substantial? I ask the Secretary of State to expand on the timetable. She said

something about it in her opening remarks, but it seems to be in the medium grass, if not the long grass. Perhaps she can say something a little more concrete about when the commission will report and when we might see something in Parliament.

A critical factor that has been mentioned several times is the Holtham commission. It has been praised repeatedly by Conservative Members. In that case I say to them, and to the Secretary of State, let us get on with implementing it, regardless of waiting for the Silk commission. We would do a great service to the people of Wales by implementing it right now. The point has been made that Wales is not over-subsidised compared with other parts of the UK. That has long been a myth, but we are not, we are not, we are not. All we are calling for is fair treatment. Implementing the Holtham report would help us to copper-bottom that.

To add an element of caution, what we do not of course want at the end of this commission is what we might refer to as “Silk cuts”. We want an enhancement for Wales, not a diminution of our financial power or democratic clout.

Finally, the Assembly is only just over 10 years old. It is still, by the standards of democratic institutions, something of a stripling. Let us take these decisions wisely, cautiously and with careful consideration. Just as devolution had many fathers, some of whom were in this House, we need to be engaged as this process goes forward.

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Lindsay Hoyle (Chairman of Ways and Means; Chorley, Labour)

Order. Before I call Jonathan Edwards, I suggest that he can speak until 28 minutes to 6, because of everything that has gone on.

5:28 pm
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Jonathan Edwards (Shadow PC Spokesperson (Treasury); Carmarthen East and Dinefwr, Plaid Cymru)

I am very grateful, Mr Deputy Speaker. I have curtailed my speech a fair bit because of the time constraints, but I am not too upset because most of it was trailed in The Western Mailthis morning. I have no idea how it got there, but perhaps it was lucky that it did.

This is a timely debate and I congratulate the Secretary of State on securing this time on the Floor of the House, because the nature of the British state is clearly changing. The strength of the yes vote in March has given huge momentum to the growth of the political autonomy of our country. Events in Scotland, with the historic victory of the Scottish National party in May, mean that there will be a referendum in the next three or four years on independence for Scotland. I am not a betting man, but I know where I would put my money if I was. There will be serious repercussions for the British state. We know that it will be a multi-option referendum. Even if the SNP does not win the referendum, and I am increasingly convinced that it will, there will be a devolution-max settlement.

There is currently a dual process on the funding of Wales with the Silk commission and the bilateral negotiations on the reform of the funding formula. It is important that we have progress on the latter as we discuss the former, and that the debate is as open as possible. Three parties are included in the debate on the important issue of Barnett reform: the Labour party,

which leads the Welsh Government, and the Lib Dems and the Conservatives, who lead the UK Government. We have been excluded. The information on that debate needs to be open and we need to hear about its progress before we start talking about the fiscal measures that the Silk commission will address.

My party fully agrees with the points made by the Secretary of State and Tory Back Benchers about accountability. Before I came to this place, I served as a town councillor in Carmarthen. We were responsible only for very local matters, but we had taxation powers. For the life of me I cannot understand why anybody would oppose giving the Government of Wales similar powers, as this would, not least, focus the minds of Assembly Members on wealth generation, which is very important. If we are serious about creating a more prosperous and just society, we have to focus on wealth generation, as do the Welsh Government. Giving them tax-raising powers would make them focus more on such issues and on some of the give-away processes that we are seeing at the moment.

Taxation powers and borrowing go hand in hand, and I am grateful that the Silk commission will be able to look at borrowing powers. In a situation where we will have a varying income stream as a result of having taxation powers, borrowing is the best measure for smoothing out those differences, and it is right and proper that the Welsh Government will be able to have those powers if the commission so recommends.

We know that there are two phases to the commission, the first of which will examine taxation powers. We have been scouring the world for best practice in federal states, and I do not think that there is anything new about what is on the agenda. There are many examples from across the world that we could use to best effect in Wales. Any submission that my party gives will be a compromise, because clearly our policy is for the devolution of all taxation matters ultimately. However, we will be trying to engage with this process constructively and we hope that parties from across the spectrum will engage in the same manner.

The second phase of the commission will examine further areas of power. The Parliamentary Voting System and Constituencies Act 2011 has given added momentum to this, because we know that we will lose a quarter of our Members of Parliament. Unless further areas of power are devolved to the Assembly there will be a democratic deficit, because there will be fewer Members scrutinising decisions made on Wales. We argued during consideration of that Bill, with those on the Labour Benches, that it was not proper to cut the number of Welsh seats based on the referendum result. All the referendum did was enshrine sovereignty over current devolved matters. I still hope that Lib Dem colleagues might rebel when the matter comes back to the House and I might be able to keep the constituency of Carmarthen East and Dinefwr. If not, and if my fantastic constituency and the fantastic constituency of Arfon disappear into the annals of history, further fields of power need to be devolved to the Assembly to avoid that democratic deficit.

My last point relates back to my intervention on the Secretary of State. I was grateful to receive a very detailed response, as I did not think I would. If there is a consensus on the commission between the political

parties and among civil society, there needs to be a clear process map to make the recommendations become law.

5:32 pm
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Nia Griffith (Shadow Minister (Wales); Llanelli, Labour)

We have had a long and full debate, and we have wandered over many subjects. We heard David T. C. Davies ensure that we heard a plurality of views. In his own completely inimitable style he told us that the Silk commission should have a remit to consider clawing back powers from the devolved Administration. That view must be unique to him.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

The Silk commission can look at the boundaries, and that means adjustments in either direction.

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Nia Griffith (Shadow Minister (Wales); Llanelli, Labour)

I thank the Secretary of State for that clarification.

My right hon. Friend Paul Murphy, a former Secretary of State for Wales, spoke with passion and conviction, standing up firmly for Wales and pointing out the deep mistrust of the current Government’s attitude to Wales, which is exemplified by the roughshod way in which Ministers are cutting the number of Welsh constituencies from 40 to 30. That fuels deep suspicions about what the Government’s motives are for setting up the Silk commission.

My hon. Friend Mr David stressed the need for a pragmatic approach that brings power nearer to the people but which does the best for the people of Wales. Hywel Williams referred the Silk commission to his private Member’s Bills, the Bilingual Juries (Wales) Bill and the Jobcentre Plus (Wales) Bill. Jonathan Edwards, who had very little time, unfortunately, urged the Lib Dems to rebel on the constituency boundary issue.

My hon. Friend Huw Irranca-Davies stressed the importance of this Parliament in taking decisions for the whole UK and urged that we move forward wisely, cautiously and with careful consideration of the issues. Roger Williams pointed out the importance of the Calman commission and stressed the excellent credentials of its members, and his words have been echoed by many hon. Members.

Guto Bebb—I am not sure whether he is listening—stressed the importance of accountability and talked about practicalities. He spoke of the importance of treating businesses across the whole UK equally, but he then talked about different national insurance rates, so I am not sure quite where he was coming from.

Alun Cairns talked about the need for stability and there being no further changes for a generation. He stressed the need for the Silk commission to consult effectively and to reach out to those who have not been effectively engaged before, pointing out concerns about the volatility of some taxes. Mrs Laing reaffirmed her strong Unionist credentials and welcomed the commission, which she sees as an important step towards accountability.

My hon. Friend Owen Smith referred to the difficulties of having continual

change and to the need to take a long-term view. He also stressed the need for economic stimulus, as set out in Labour’s five-point plan, and pointed out the measures that the Assembly Government are taking to implement elements of that in the areas for which they have responsibility, such as with the successor to the future jobs fund—the jobs growth fund—and with some investment in infrastructure, where they are able to do so.

The Opposition very much welcome the establishment of the Silk commission and the important tasks it has to do. Its first task is to review the case for the devolution of fiscal powers and to recommend ways in which the financial accountability of the Welsh Assembly could be improved. It will no doubt refer to the work done by the Holtham commission in its analysis of some of the possible ways of transferring revenue-raising mechanisms to Wales. It can examine the practicalities and the likely consequences of implementing any such measures. We should not underestimate the complexity of this issue or the dangers of people being, quite naturally, tempted to play the system by switching from one side of the border to the other. That issue has been mentioned by several hon. Members, particularly my right hon. Friend Mr Hanson. Most importantly of all, the Silk commission will need to consult and take account of public opinion. It is vital that a move towards any change has the support and backing of the people of Wales.

We are disappointed that the Secretary of State has decided to make setting up the Silk commission a priority over tackling the challenge of delivering a fairer funding system for Wales—an issue that is specifically excluded from the commission’s remit. If her Government were really interested in delivering the best for the people of Wales, they would have made it a priority to introduce the so-called Barnett floor—a concept that was explored in the Holtham reports and adopted by Labour in our 2010 manifesto as the most practical and immediate step to protect funding to Wales.

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Roger Williams (Brecon and Radnorshire, Liberal Democrat)

Does the hon. Lady agree that the floor has less applicability in these straitened economic times than it would if there were an expanding economy?

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Nia Griffith (Shadow Minister (Wales); Llanelli, Labour)

As the hon. Gentleman will have heard my right hon. Friend Mr Hain explain, we are at a tipping point. Until now, the Barnett formula has served the people of Wales well, but from this year onwards the balance will tip slightly in the other direction. Putting a floor in would offer additional protection and would be a straightforward measure. It could be implemented with the agreement of the Treasury and without having to go into the difficulties of trying to work out a needs-based analysis, which is much more complex but is something that we might wish to see in the long term. So, as Holtham identified, the Barnett formula has served Wales well up to now, but if nothing is done it will begin to disadvantage Wales. The whole point of putting in the Barnett floor is to prevent that from happening and to protect funding. The Holtham commission recommended moving to a needs-based analysis, and it produced evidence of how a needs-based funding system could be made to work in a way that is

fair to all parts of the United Kingdom. In its second report, it demonstrated that a needs-based funding formula that is fair to Wales would deliver 117 to Wales for every 100 that is spent in England on devolved activities. It recognised, too, that moving to a needs-based formula would take time but, in the meantime, the Barnett floor could protect Welsh funding. Instead of making that a priority, as it could be implemented quite easily, the Secretary of State has set up a commission that specifically will not consider the issue of funding reform.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

It is being done bilaterally.

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Nia Griffith (Shadow Minister (Wales); Llanelli, Labour)

I hope very much indeed that that bilateral work is progressing quickly and effectively.

It is small wonder, given the Conservatives’ track record on devolution, that many Opposition Members have expressed suspicions about the Government’s motives for setting up the Silk commission. There are suspicions that the Government might be trying to sell Wales short and push through measures that would seriously disadvantage Wales. The concentration of wealth creation in London and south-east England means not only in Wales but in Scotland, Northern Ireland and the other regions of England that public expenditure is greater than the income from those areas, which are all net beneficiaries of the UK tax regime, while London and parts of the south-east and East Anglia are net contributors.

That is for historical reasons, including the early emergence of London as the commercial capital and its importance as a world financial centre, and it is in contrast to other European countries, where the importance of the city state and, much later, unification has produced different patterns of wealth distribution. The disparities have existed in the UK for many years: they are deeply embedded and cannot simply be eliminated by a few years of regional policy or European funding, helpful as that is to compensate for the differences. Nor can they simply be eliminated by substantial growth in the private sector, vital as that is to Wales and across the UK.

With such deep-seated historical differences in wealth distribution, complete financial independence for Wales, as advocated by Plaid Cymru, is an absolute non-starter. With a gap of 14.6 billion between public spending and the revenue raised in Wales, it would mean every man, woman and child in Wales contributing an extra 4,800—nearly 5,000 each a year just to maintain current levels of spending.

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Jonathan Evans (Cardiff North, Conservative)

The Labour party has been using those figures quite heavily today, and it has based them on the Holtham report, but that is misleading. The report indicates a gap of 6 billion. Will the hon. Lady correct that statement and the statements of Mr Hain?

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Nia Griffith (Shadow Minister (Wales); Llanelli, Labour)

Those figures were recently provided by the House of Commons Library, on 2 November, and I am sure that it has checked them thoroughly.

We are suspicious about the Government’s motives in setting up the Silk commission, whose remit excludes fair funding. It looks as if the Government might be using it as a backdoor to cutting funding to Wales, or seeking to adopt measures that could leave Wales subject

to fluctuations in funding that would be impossible to cope with. The Labour party will strongly resist any moves that would disadvantage Wales.

Many people have been puzzled by the timing of the debate, as the remit for the Silk commission has already been set, so it did not offer an opportunity to influence its terms of reference. Perhaps, when the commission has had a chance to study the issues, it may wish to seek views or raise questions in an interim report, and that would be a more appropriate time for a debate. Having the debate now, before the commission has even begun its work, but after the terms of reference have been decided, is somewhat bizarre. [ Interruption. ] I think that the Secretary of State is trying to intervene, but the point was well made by my right hon. Friend the Member for Torfaen that that does make us question the reason for the debate.

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Cheryl Gillan (The Secretary of State for Wales; Chesham and Amersham, Conservative)

I should like to inform the hon. Lady and the House that the terms of reference were agreed with the Labour party in the Assembly.

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Nia Griffith (Shadow Minister (Wales); Llanelli, Labour)

The irony being that today we have discussed the importance of Parliament; many Government Members have referred to the importance of the commission being set up by Parliament.

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Nia Griffith (Shadow Minister (Wales); Llanelli, Labour)

No, I think that I have made my point. Opposition Members felt that they would have had more chance to influence things if the timing of the debate were different.

Up and down Wales, as far as the person in the street is concerned, the Silk commission is set up and can get on with its work. What those people are worrying about today is the empty order book in their company, the shops that are closing in their high street, the cuts in their council services, losing their job or their home, their children not being able to find work, and the daily struggle to make ends meet as prices for essentials such as food, vehicle fuel and energy bills spiral upwards. They understand something that the Government seem to have forgotten—that before the Government can raise any revenue or talk about any formula to distribute it, they need wealth creation. Indeed, what is the point of talking about taxation without wealth creation?

This week the Government have sent completely the wrong message to potential investors in Wales. Only days after the head of Tata Europe told MPs that he has been having serious doubts about future investment in Wales because of this Government’s lack of a long-term manufacturing strategy, the Government confirm his doubts by trying to sneak out in a written statement yet further cuts to the feed-in tariff scheme, with devastating effects on the industry. This is not about feed-in tariffs. This is not just about manufacturing industry. This is about raising the proper revenue and then being able to do something with it. It is about wealth creation, setting the right long-term strategies that will encourage manufacturing to come to Wales, attracting the investment that we need and providing the wealth so that we can talk about what we do with it. [Interruption.] I still have two minutes to go, I believe.

Why do we remain wary of the Government’s motives and suspect that they might be setting up the Silk

commission to try to reduce funding to Wales? Because daily we see funding being sucked out of Wales, whether in higher VAT, the change from the retail prices index to the consumer prices index for the calculation of pensions and benefits, or the winter fuel allowance being cruelly cut for the over-80-year-olds from 400 to 300 this month, leaving many worrying about whether they can afford to put the heating on. It is this sucking money out of Wales that worries us considerably.

Although we welcome the Silk commission, wish it well with its work and look forward to debating its findings, in the meantime I again ask the Secretary of State to make it a priority to establish the so-called Barnett floor to protect funding for Wales, and I urge her Government to adopt fiscal policies that will stimulate the economy in Wales.

5:46 pm
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David Jones (The Parliamentary Under-Secretary of State for Wales; Clwyd West, Conservative)

This has been an important debate and, as it turns out, one that is particularly well timed because the Silk commission will hold its first meeting tomorrow. I am sure right hon. and hon. Members in all parts of the House will wish it well, and that the members of the commission will be grateful for the opportunity to take into account the numerous points that have been made by Members on both sides of the House this afternoon, not only on the commission’s work but on the matters that it should take into consideration when arriving at its conclusions. I am pleased that so many hon. Members were able to contribute to the debate today and make a variety of important points that I am sure the commission will find extremely valuable.

As the Secretary of State pointed out, this is a Government who have delivered for Wales. Despite the doubters and the nay-sayers, we delivered the referendum on primary legislative powers for the Assembly in March and now we are taking that further by delivering on our coalition commitment to establish a commission to consider, first, the question of the financial accountability of the Welsh Government and of the Welsh Assembly, and secondly, the powers of the Assembly, and to recommend modifications to the present constitutional settlement that may enable Welsh devolution to work more effectively within the context of the United Kingdom.

It is timely that the commission should start this work now. The Welsh Government spend some 15 billion of public money each year. They and the Assembly now have considerable powers, which extend to primary law making in the devolved areas. It is widely accepted not only in the Chamber but outside that that level of power should be matched by accountability to the people of Wales for the money that those institutions spend on their behalf. The issue of financial accountability is a hugely important part of the Silk Commission’s remit. Seeking to build consensus around the extent and form of accountability is a challenging aspect of that remit.

The second part of the commission’s task, which will commence towards the end of next year, is also important. By then, Wales will have experienced more than 13 years of devolution. People will have had considerable time to assess whether the suite of powers vested in the Assembly and in the Welsh Government are working as well as they could be in the interests of Wales and, importantly, in the interests of the United Kingdom as a whole. It

will be an appropriate time to assess whether modifications to the devolution settlement should at least be considered, so the work of the commission is extremely important. As my hon. Friend Alun Cairns pointed out, we will need to listen carefully to the views of people across Wales and the United Kingdom and seek to establish a consensus on the way forward. I am sure that Members’ interesting and varied points will be extremely valuable to the commission as it starts its important work.

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Huw Irranca-Davies (Shadow Minister (Environment, Food and Rural Affairs); Ogmore, Labour)

I am trying to get my head around the idea of the level of financial devolution that will give accountability to the Welsh electorate. In local authorities it is typically up to 20%. Do Ministers envisage such a figure, or 2% or 3%?

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David Jones (The Parliamentary Under-Secretary of State for Wales; Clwyd West, Conservative)

My right hon. Friend the Secretary of State has already indicated the levels of fiscal accountability that are devolved in other parts of Europe. Ultimately, these will be matters for the Silk commission, which, as Hywel Williams pointed out, will no doubt take into account what prevails in other parts of Europe in arriving at its conclusion, as it should.

In the brief time remaining, I will respond to the various points made. The shadow Secretary of State has explained the reasons for his absence, which we fully understand, but was less than enthusiastic about the commission, giving it a “cautious welcome”, which was as cautious as it gets and gave a whole new meaning to “welcome”. Resorting to the oldest rhetorical trick in the book, he set up the straw man of “devo-max”, under which Wales would be responsible for raising all its own revenue. He seemed to suggest that the commission’s recommendations might result in Wales having to raise all its own revenue, as a consequence of which public spending would be halved. I hope that it is unnecessary to point out, but I shall anyway, that the people of Wales should ignore these scare tactics.

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David Jones (The Parliamentary Under-Secretary of State for Wales; Clwyd West, Conservative)

I shall not, as I have very little time left. I am sure my hon. Friend understands.

Fiscal devolution will work only where there is consensus on the powers to be devolved and in circumstances where the transfer of powers does not put unsustainable burdens on either the devolved Administration or the UK as a whole.

The shadow Secretary of State and other hon. Members mentioned Holtham and inquired why it was not being brought within the remit of the Silk commission. Separate bilateral discussions continue between the Government and the Welsh Government on all the Holtham commission’s proposals, including the idea of a funding floor and its wider proposals for reforms—an approach supported by the Welsh Government. The Government and the Welsh Government have started discussions, which will include work to gain a shared understanding of trends in Welsh spending, of previous studies on Welsh needs and of the operation of existing borrowing powers. Once consideration of spending trends and previous needs studies has been completed, and subject to Government and Welsh Government Ministers agreeing

that a problem exists, the next step will be to look at options for reform. I put that on the record because of the concerns that right hon. and hon. Members expressed.

I believe that we must rely on the good sense of the commission, which will seek to find consensus—I make no apology for repeating the word because it is crucial to the commission’s work—on the extent to which the Welsh Assembly and Government should become more financially accountable.

I found the shadow Secretary of State’s negativity and tribalism most disappointing, and it was not typical of the debate. He appeared to have little or no faith in the capacity of the people of Wales to run to any extent their own financial affairs and, perhaps more importantly, to decide whether at an election a politician is making an unsustainable promise, which of course is crucial to what we fall to consider.

I found the contribution of my hon. Friend David T. C. Davies disappointingly and uncharacteristically cynical. [Hon. Members: “Oh!”] I have to say, I found it quite hurtful. He said, almost in terms, that the conclusions of the commission were a fait accompli that would lead inevitably to more powers for the Assembly, but the commission has been asked to consider the boundaries of the devolution settlement and modifications that could work well for the benefit of Wales within the United Kingdom.

I am sorry that Mr Hanson is not here, but he made the important point that significant cross-border issues fall to be considered, and it is well within the commission’s remit to decide that in certain cases powers should be repatriated from the Assembly. That is what the Calman commission found in its consideration of the Scottish devolution settlement, and it is quite open to the Silk commission, which has a wide-ranging remit, to do so, too, so I hope that that offers some reassurance to my hon. Friend—who looks very reassured, I am bound to say.

Paul Murphy praised the excellence of the commission members, and I feel it appropriate to echo that praise: we have a very well constituted commission. He raised the spectre of a Trojan horse, however, and doubted whether there was any real consensus on the commission, so I think it fair to point out once again that all the party leaders in the Assembly, including the Labour First Minister, co-operated in agreeing the commission’s terms of reference, and each party has a political appointee on it. I hope that gives the right hon. Gentleman some reassurance that it is not by any means an evil Tory Trojan horse; it is a genuine attempt to see whether it is possible to arrive at a settlement that will benefit the people of Wales in the long run.

The right hon. Gentleman also raised the issue of whether there will be a referendum on additional tax-raising powers, but that very much depends on what the Silk commission itself recommends. I for one find it hard to see how, for example, if there were recommendations on any significant changes to income tax, it would be possible to go forward without consulting the people of Wales as to whether that was what they wanted; after all, that is what happened in Scotland, and I have no doubt that it should happen in Wales.

Roger Williams took considerable credit on behalf of our

Liberal coalition partners for the establishment of the commission, but I have to point out that it was a joint coalition commitment and one to which the Conservative party is very much wedded. He, too, praised the excellence of the commission members, and he paid tribute to Nick Bourne, the Conservative nominee. I can only echo the hon. Gentleman’s view that Professor Bourne will be an excellent member of the commission.

Mr David did give a welcome, which I believe was genuine, to the commission, and I was very pleased to hear it, but he referred to the terms of reference and queried the reference to the United Kingdom’s wider fiscal objectives, pointing out that we live in a time of stringency that has resulted in spending reductions. Well, of course, it has, and I will not intrude into his private grief by pointing out the reason why we have to cut our public spending, but nevertheless it is quite right that whatever the commission decides should operate within the wider fiscal objectives of the United Kingdom as a whole.

There were excellent contributions also from my hon. Friend Guto Bebb, Alun Cairns, Owen Smith and my hon. Friend Mrs Laing, who came up with a memorable toothpaste tube metaphor, which I shall use regularly when talking about the effect of devolution on the United Kingdom. There was also a supportive contribution from Jonathan Edwards.

This has, as I say, been—

Motion lapsed (Standing Order No. 9(3)).