357Y The Welsh rate
‘(1) The Welsh rate of corporation tax for a financial year is—
(a) if a resolution of the National Assembly for Wales—
(i) sets a rate under section 357YA for the year, and
(ii) is passed before the beginning of the year,
the rate set by the resolution;
(b) if the Welsh rate for the year is not determined under paragraph (a), but the Welsh rate for one or more earlier financial years was determined under that paragraph, the rate for the most recent of those earlier years;
(c) otherwise, the main rate.
(2) For the purposes of subsection (1)(a)(ii), a resolution passed before the beginning of a financial year is treated as not having been so passed if it is cancelled by a resolution under section 357YA that is itself passed before the beginning of the year.
357YA Power of National Assembly for Wales to set Welsh rate
(1) The National Assembly for Wales may by resolution set the Welsh rate for one or more financial years specified in the resolution.
(2) The Assembly may by resolution cancel a resolution under subsection (1).
(3) A resolution under this section may not be passed by the National Assembly for Wales except in pursuance of a recommendation which is made by Welsh Ministers and which is signified to the National Assembly for Wales.
(4) This section authorises the setting of a nil rate.
357YB Welsh rate supplementary provision
(1) The Secretary of State must lay draft regulations before the House of Commons and the National Assembly for Wales within twelve months of this Act coming into force.
(2) The Secretary of State must seek the consent of the Treasury before laying draft regulations under this section.
(3) The Secretary of State may make regulations under his section only if both the House of Commons and the National Assembly for Wales have approved those regulations in draft.
(4) Regulations under this section may make any necessary provision, including modifying or amending any enactment, that the Secretary of State or the Treasury considers necessary for the introduction of a Welsh rate of corporation tax.
(5) Regulations under this section may, for example, include—
(a) provision for the application of the Welsh rate of corporation tax to Welsh profits;
(b) provision about the operation of certain reliefs for trading losses that are given against profits;
(c) definitions of “Welsh company”, “qualifying trade”, “small or medium-sized enterprise” and “Welsh employer”;
(d) provision about whether a company has a Welsh regional establishment;
(e) rules for determining whether profits or losses of a trade are “Welsh profits” or “Welsh losses”;
(f) rules applying in the case of a Welsh company that is a small or medium-sized enterprise;
(g) rules applying in the case of a Welsh company that is not a small or medium-sized enterprise;
(h) the treatment of intangible fixed assets in relation to Welsh companies;
(i) provision about R&D expenditure credits and relief for expenditure relating to research and development;
(j) provision about relief for expenditure relating to the remediation of contaminated or derelict land;
(k) provision about film tax relief, television production, video games development and theatrical productions;
(l) provision about profits arising from exploitation of patents etc.;
(m) rules for determining whether profits or losses of a trade are “Welsh profits” or “Welsh losses” in the case of a company that is a partner in a Welsh firm;
(n) definitions of “excluded trade” and “excluded activity” (profits of which are not Welsh profits); and
(o) provision about the meaning of “back-office activities” (profits imputed to which may be Welsh profits).’”
This new clause mirrors the approach of the Corporation Tax (Northern Ireland) Act 2015 in defining a Welsh rate of corporation tax, but leaves the details to be set out in secondary legislation.
It is a pleasure to serve under your chairmanship this evening, Sir Alan.
Clause 22, alongside detailed technical provisions in part 2 of schedule 5, devolves onshore petroleum licensing in Wales to Welsh Ministers, fulfilling the St David’s Day commitment. Clause 23 is necessary to facilitate a smooth transfer of existing onshore licences. Clause 24 transfers to Welsh Ministers the regulation-making powers in the Infrastructure Act 2015 with respect to the right to use deep-level land below 300 metres for the purpose of exploiting onshore petroleum.
The St David’s day agreement stated that responsibility for speed limits in Wales should be devolved. It also committed the Government to consider the Smith agreement, to determine which recommendations for Scotland should also apply to Wales. As a result of this work, powers over traffic signs, including pedestrian crossings, will also be devolved. Clause 25 and section E1 of schedule 1 devolve these powers by reserving only powers relating to the exemption of vehicles from speed limits and certain traffic signs—for example, emergency vehicles attending incidents.
Together, the clause and the schedule have the effect of devolving to the Assembly and Welsh Ministers legislative and executive competence in respect of substantially all the provisions of the Road Traffic Regulation Act 1984 that concern speed limits and traffic signs. This means the Assembly will be able to legislate in respect of substantially all aspects of speed limits and traffic signs on all roads in Wales.
Clause 26 fulfils a St David’s day commitment and implements a Silk commission recommendation to devolve the registration of local bus services, including the relevant functions of the traffic commissioner. Devolution of bus registration is achieved by the matter not being listed as a reserved matter in schedule 7A. Clause 26 gives effect to the devolution of the relevant traffic commissioner functions to Welsh Ministers. Clause 27 also fulfils a St David’s day commitment and a Silk commission recommendation by devolving the regulation of taxi and private hire vehicle services in Wales to Welsh Ministers.
This complements the devolution of legislative competence to the Assembly for taxi and private hire vehicle licensing in new schedule 7A. Taxi and PHV services are currently licensed by local authorities under legislation that covers England and Wales outside London. Local licensing authorities set their own policies and standards. I therefore support these clauses standing part of the Bill.
These considerable and weighty clauses will bring significant benefits to the people of Wales. We are grateful for the improvements that have taken place as a result of the Government accepting the criticisms made of the draft Bill. Real progress is being made.
The main issues I wish to raise with this group of amendments involve energy, because there is a great opportunity for Wales to become a powerhouse for energy for the whole United Kingdom. For too long, we have neglected the vast energy of the tide that sweeps around the Welsh coast at different times of the day, providing pulses of energy that could be coupled with demand-responsive schemes such as pumped storage schemes in order to give completely demand-responsive electricity not only cleanly, but by providing renewable power in an entirely predictable way—the tide will always come in.
We have made huge strides in Wales on hydro schemes in Rheidol, Ffestiniog and Dinorwig. The possibility of using the topography of Wales to produce energy has been long neglected. When we look at the problems of the Port Talbot steelworks, we need to realise that washing along the shore of those steelworks is the highest rise and fall of tide in the world. They are in trouble because their energy is so expensive, yet a source of energy is available on their doorstep—free, British, eternal and absolutely predictable.
Amendments 130 to 132 deal with renewable energy schemes. These Welsh Government amendments would create a duty on the Secretary of State to consult Welsh Ministers before establishing or amending a renewable energy incentive scheme in Wales. As drafted, the clause excludes the requirement for the Secretary of State to consult in relation to the creation of a levy to fund an incentive scheme.
The obligation merely to consult is insufficient in respect of this important matter. The Energy Act 2013 provides that the Secretary of State must consult Welsh Ministers before making regulations in relation to contracts for difference. This is a fairly fresh concept, but it has been used widely by this Government and the previous one. Interested parties should also be consulted before a renewables obligation closure order is issued. When the UK Government announced the early closure of the renewables obligation scheme for onshore wind in 2015, there was no prior consultation with Welsh Ministers. We therefore think it essential that, as part of establishing an appropriate devolution settlement for energy, the requirement is put on a firmer and clearer footing. The amendment therefore provides that the Welsh Ministers’ agreement must be sought in relation to renewable energy incentive schemes in Wales either proposed or, in the case of existing schemes, proposed for amendment.
We further propose the omission of clause 46(3), which inappropriately limits the scope of the responsibility of the Secretary of State to engage constructively with Welsh Ministers. We see no reason, and none is offered in the explanatory notes accompanying the Bill, why that engagement should not extend to the consideration of matters relating to levies to fund renewable energy incentive schemes.
Amendments 144 and 147 relate to clause 51. Clause 51 provides the Secretary of State with order-making powers to make consequential provision following the enactment of the Wales Bill. This includes powers to amend, repeal, revoke or otherwise modify primary or secondary legislation as he considers appropriate. Affirmative procedure in both Houses is provided for where the amendment or repeal of primary legislation is envisaged in any such order. There is, however, no provision for Assembly approval of a draft order that would repeal or modify Assembly legislation. Furthermore, as the Bill is drafted, the Secretary of State could propose orders making modifications to the Acts of Parliament underpinning the Welsh devolution settlement without requiring the Assembly’s consent, although parliamentary consent would be needed. Even if such modifications were contained in a parliamentary Bill, the Assembly’s consent would be required. This is wrong in principle. If the Secretary of State wishes to take powers by order to make amendments, up to and including repeal, to Assembly legislation, that should be possible only with the consent of the Assembly itself. If orders are proposed that would make changes to the parliamentary legislation establishing the Welsh devolution settlement, they, too, should require Assembly consent before they can be made. The Welsh Government amendments would give effect to those important principles.
I welcome the agreement in this House across all parties. Plaid Cymru introduced a slightly tribal note by attacking Labour for not going to the same lengths that it has gone to in some of its amendments, but I think Labour has taken a pragmatic view. Where the Government made it clear they are not going to change their minds, we have tried to introduce amendments that are halfway between the Opposition and Government positions, and which might be acceptable to the Government. It should not be concluded from that that we have shown any lack of enthusiasm for the process of devolution.
Plaid Cymru’s amendment 74 relates to energy limits. The Welsh Government would have no powers over schemes above 350 MW. That is a very low level. It would include the tidal lagoon in the constituency of my hon. Friend Carolyn Harris, but it would not include the two tidal lagoons planned for either side—the Cardiff side and the Newport side—of the River Usk. The two schemes have enormous possibilities to produce huge amounts of electricity, particularly if they are linked with pumped storage schemes in the valleys. If the pulse of electricity comes in the early hours of the morning when it is not required, the energy can be used to pump the water up to the adjacent hills very close to the shore in Newport, and then drawn down to produce electricity throughout the day. This is a form of energy production that we have long, long neglected. We have ignored the power of the tide and we have used other, polluting forms of energy.
We are admirably suited in Wales, because of our geography, to hydroelectric schemes. Three splendid schemes already function quietly: Ffestiniog, Rheidol, which is quite small, and Dinorwig. Dinorwig is the great battery of the nation, which is hugely valued by the National Grid. It knows that in times of peak demand, in breaks between television programmes and so on, it can press a button here in London and send the water cascading down the mountain in Dinorwig. These are functions that should be under the control of the Welsh Assembly, where there is the enthusiasm to make Wales the great powerhouse of the United Kingdom with energy that is green, clean, eternal and British.
I rise to speak to my amendments 158, 159 and 160. The Committee knows I have many concerns about the Bill and I have stated them very clearly over the past few weeks and months.
Today, I turn to the devolving of wind energy to the Welsh Assembly, which is of great concern to the people of Brecon and Radnorshire in mid-Wales, whom I represent. This is not a common-sense approach to energy. I was very concerned to hear Paul Flynn state that Wales could be the energy centre of Great Britain. That makes the people I represent fear that the whole of mid-Wales will be covered with wind turbines. I am sure he is referring to other matters—I hope he is—but we have to remember the way that Cardiff Bay has looked at mid-Wales over the years. We are fearful that we will be littered, covered and blanketed with wind turbines.
We all have a great confidence in the Secretary of State, so I would like to see him have a veto over a UK-wide energy plan that is in the national interest. To have powers particular to the Welsh Assembly does not fit in with the strategic plan for power in Great Britain as a whole—that is the underlying concern. Cardiff Bay should not just be able to make those points and make arrangements for Wales; it needs to be done by Britain as a whole. A veto would give local people an appeal over proposals that may not be in the UK-wide interest. It would also allow local people to have a say in local decisions.
Before coming into this place, I was a councillor on Powys County Council. There was a possibility—more than a possibility—that planning permission was going to be granted so that the whole of mid-Wales would be covered in turbines. The council had to contribute £4 million to fight a legal case against the Government of the day. That money would have been better spent—as we know, Powys is under-utilised as far as money from the Assembly is concerned—on providing local services to local people, instead of having to fight a legal case against wind turbines. For many reasons, I would therefore like the Secretary of State to hold a veto. I repeat the fact that we have confidence in him. We had confidence in his predecessors and I have no doubts that we will have confidence in future Secretaries of State, so let the power stay there.
Wales suffered for centuries the dirt, the pollution and the danger of extracting coal from the ground, while the comfort and the money made from it was enjoyed throughout the United Kingdom. Nobody wants to go back to that. The sources of power I specifically mentioned were hydropower and tidal power. They are not only very good neighbours but they can enhance the landscape by providing lakes and other facilities. The hon. Gentleman should concentrate on the wider picture and see the possibilities, through the amendment, that the Welsh Government could develop.
I agreed with most of what the hon. Gentleman said, but I do not think he listened to what I said. I am talking specifically about wind energy, to which my amendment relates, not about hydro-energy, off-coast energy or land energy.
I ask the Secretary of State to retain the possibility of a veto. I will not press the amendment to a vote—I am sure that you and many others will be delighted to hear that, Sir Alan—but I hope that the Secretary of State will look at the clause again.
I want to speak to amendments 74 to 80, 81 and 82, 151 and 154, which I tabled along with my hon. Friends.
I welcome clauses 22, 23 and 24, which confer competence on Welsh Ministers in relation to onshore petroleum licensing, including hydraulic fracturing, or fracking, about which the Welsh people care a great deal. If the people of Wales do not want fracking, our Government should be able to ensure that it does not happen. Given that the Welsh Government and the National Assembly as a whole voted unanimously against fracking in Wales, I hope that the Secretary of State will work with his Cabinet colleagues to ensure that until the Bill is passed, the United Kingdom Government honour that unanimous opposition in Wales and no new licences are issued there. I hope that, at the end of the debate, either the Secretary of State or the Under-Secretary will give some indication that that will be the case.
I also welcome clause 26. Some time ago, I had a meeting with the traffic commissioner for Wales, who was based in Birmingham at the time. He was very unhappy about being traffic commissioner for Wales, and pointed out that not only did he work from Birmingham, but he lived in Derby, which is a considerable distance from Wales. Many years ago, the Welsh Affairs Committee called for the commissioner to be moved to Cardiff, and I am glad that the clause achieves a great deal more than that.
Amendments 74 and 75, and consequential amendments 76 to 80, would remove the 350 MW limit on the Welsh Government’s legislative competence in the field of energy. I would happily put a fiver on what is on the Under-Secretary of State’s notepad: my guess is that he intends to say that the limit was recommended by the Silk commission. I wish I had put that fiver down, because I see that the Under-Secretary is smiling.
Of course I accept that the Silk commission recommended the limit, but let us return for a moment to the purpose and the terms of the commission. It was set up by the coalition Government, with a Conservative Secretary of State for Wales. It consisted of one nominee from each of the four main parties at the time, including the Secretary of State’s and mine, along with various academic and other experts. It consulted widely and extensively with the political parties, civic society, academia and industry experts, as well as the public. Its two reports represented a consensus, reflecting not only the views of the political parties but, crucially, those of the public and of experts—that is, the views of civic society in general.
With that purpose in mind, the players in all four political parties had to compromise, and all four—including the Secretary of State’s party and mine—did so, in order to achieve a national consensus. That was a contrast with the St David’s day process, in which I played a minor part. At the time, the Secretary of State appeared to hand a veto to each party in respect of what it wished to reject. Labour used its veto to the full, which reflected the stance of the then shadow Secretary of State, as a self-confessed “proud Unionist”. It seemed to me that the veto extended to Whitehall Departments, in terms of which matters they wanted to reserve.
As was clear from my earlier intervention on the Secretary of State, I am still slightly unconvinced about this process—
I will gladly give way to him.
I was very glad to play a minor part in the St David’s day process, as was my colleague at the time, Elfyn Llwyd. I think there was a structural deficiency in that process, in that if individual parties wanted to veto a particular matter, they could do so—fine: that was what the process was about—but, to my mind at least, one party made rather a meal of that dispensation, and vetoed a great deal that could quite reasonably have been included. The criticism of the first draft of the Bill reflects that, but the current version is a great improvement, and I am happy to pay tribute to the Secretary of State and his predecessor for their achievement.
Some parties compromised on policing, and some on broadcasting. My party compromised on energy. We have always believed that Wales’s natural resources should be in the hands of the people of Wales, and that the people of Wales are best placed to make decisions about how best to put those resources to use. That is our historic stance. We have never believed in placing a limit on that principle, above which the people of Wales should no longer have a say. We never thought that that was a good idea, and never thought that it was necessary. However, we compromised, for the good of the Silk process and to ensure good order and progress. We agreed to the arbitrary limit of 350 MW in return for the support of others on policing and broadcasting.
The Secretary of State has chosen not to follow that consensual path, and to pick and choose from the Silk Commission’s recommendations which matters to accept and which to forgo. Indeed, he has chosen to ignore the majority of what Silk had to say. He cannot now reasonably defend that Westminster power grab and attack Plaid Cymru by claiming that he is only following the commission’s recommendations. We shall see what the Under-Secretary of State has to say about that one.
Clause 36 must be understood as it stands. Having voted to give Scotland complete control over its natural resources, with no limits, the Secretary of State is proposing to devolve energy in Wales only up to a limit of 350 MW, with anything above that threshold being reserved to Westminster. Why does he believe that Scottish natural resources should be in the hands of the people of Scotland, but Wales’s natural resources, above the limit, should be deemed to be the preserve of Westminster? Does he think that the people of Wales cannot be trusted with any energy projects above 350 MW? Do we suffer from some congenital infirmity in that respect? For that matter, why should it be 350 MW rather than 351, or 349? Perhaps the Under-Secretary of State will enlighten us. What factual evidence has he to justify that figure?
Paul Flynn referred to the Swansea Bay tidal lagoon. It is proposed that the lagoon should be devolved to Wales, but that the proposed Cardiff and Colwyn Bay tidal lagoons, which are identical apart from scale, should be reserved to Westminster. What is the rhyme or reason for that? What practical reasons are there for such a distinction?
Let me give another practical example. In my constituency, there is a great capacity for hydro-electric power. The Dinorwig scheme, which has been mentioned, is a massive scheme that can power Manchester for five hours at the throw of a switch. It takes eight seconds for the turbines to start turning. It is an astonishing scheme, which I think is one of the great energy production secrets of Wales. I understand that the switch is thrown in Connah’s Quay and not in London, and that it controls not only Dinorwig but the Stwlan facility in Blaenau Ffestiniog, as well as Maentwrog. So here we have an astonishingly good scheme and the potential for several more, some of the same scale but also some smaller ones.
A smaller scheme was proposed just outside Llanberis. The proposers came to see me and said that they were going to restrict it to 49 MW. When I asked them why they said that if it was 51 MW, it would get entangled in the processes down in Whitehall. When I met them recently they said that they are now proposing 350 MW. I asked why not 351 MW, and they said, “Because it would get entangled in the processes down in Whitehall.” That is a clear example.
I will give one further example that illustrates this point. When foot and mouth disease was active in Wales, I wrote to the Welsh Minister and the Minister in the Department for Environment, Food and Rural Affairs about the autumn movement of livestock scheme. I got a reply from Cardiff within two weeks, and one in May—it was about the autumn movement of livestock scheme—from London. That is the sort of problem these people thought they might be struggling with. I urge the Secretary of State to reconsider his position on this limit, and unless he comes up with a plausible answer, we will seek leave to divide the House on amendment 74.
Clause 38 is of course linked to clause 36, which we are seeking to amend, and we disagree with Government amendments 47 to 49 because they seek to add the 350 MW limit to clause 38. I welcome clause 39 which devolves power over onshore wind to Wales, but we are not supportive of amendments 158 to 160, which seek to give the UK Government a veto. I do not think we need to spend too much time explaining why that is an unacceptable proposal. Members who have put their names to those amendments are well known for their opposition, which I respect and understand, but I disagree fundamentally with them.
While we welcome clause 46 which requires the Secretary of State to consult Welsh Ministers before establishing or amending a renewable energy scheme as it relates to Wales, we fully support the amendment from the official Opposition which proposes that the Secretary of State should obtain the consent of Welsh Ministers rather than simply consult them. So we would support amendments 130 and 131 and 132. I do not know if it is the intention of Paul Flynn to press those amendments, but our support would be there.
Clauses 48 and 49 are welcome, but we are concerned about Government amendment 60, which again tries to impose this arbitrary limit of 350 MW on the Assembly’s competence. We welcome clause 22, which devolves some aspects of road transport, including speed limits, and likewise we welcome clauses 26 and 27 which devolve some responsibility over bus services and taxi regulation respectively.
I shall now turn to clause 28 and amendment 81, which amends clause 44. Clause 44 refers to sections 114 and 152 of the Government of Wales Act 2006, which gives the Secretary of State for Wales a veto over any Acts or measures of the Assembly that might have a serious adverse impact on water quality or supply in England. This has been referred to in earlier debates. While the expectation was that this Bill would remove these sections from the Government of Wales Act, in fact it seems to extend the power of veto to cover sewerage services in England.
These sections embody the peculiar notion that Wales is somehow incapable of managing its own resources. Once again, it is exclusive to the Welsh settlement. Neither the Secretary of State for Scotland nor the Secretary of State for Northern Ireland have such powers, so why must the Secretary of State for Wales have a veto over Welsh water? It makes Wales a special case—a lesser case. It continues and entrenches the status of Wales in Westminster. It protects the legality of English exploitation of Welsh resources, and avoids recognition of what was referred to earlier as a shameful past. I need not go into the history of the drowning of Capel Celyn in 1965, in which the entire community in that part of rural Wales was flooded, but such events remain perfectly legal. Removing sections 114 and 152 from the Government of Wales Act, as amendment 81 would do, would at long last ensure that the actions of this Parliament in 1965 could never be repeated. I will seek to divide the Committee on amendment 81, as I believe it is of particular importance to the people of Wales. For the same reasons, if called, we will be supporting amendments 125 and 126 tabled by the official Opposition, which seek to achieve the same aim.
Needless to say, we will not be supporting clause 44 stand part. We welcome Clauses 45, 47 and 50. If called, we will support Opposition amendments 144 to 147.
Amendment 82 tabled by Plaid Cymru would ensure that when exercising the power to amend, repeal, revoke or modify any Acts or measures of the National Assembly for Wales, the Secretary of State must seek the permission of the National Assembly as well as both Houses of Parliament. Amendments 150 to 154, in the names of my hon. Friends and myself, are similar to amendment 82, but introduce separate provisions for the amendment, repeal or revocation of Acts of Parliament, Assembly primary legislation and Assembly subordinate legislation. They provide that where the Secretary of State uses the power in clause 51 to make regulations that amend or repeal an Assembly Act or Assembly measure, the regulations must be approved by the affirmative procedure in the Assembly as well as each House of Parliament. They make similar provision in respect of the Secretary of State using the power in clause 51 to make regulations that amend or revoke subordinate legislation made by Welsh Ministers or the Assembly. These regulations would be subject to the negative procedure, rather than the affirmative procedure. They also provide that the Assembly would have no role where the power in clause 51 was used to make regulations that amend or repeal an Act of Parliament or amend or revoke non-Assembly subordinate legislation.
We would be happy to support Government amendments 59, 50 and 51, but we do not see why the Secretary of State should make an exception in respect of when the clause 17 functions of Welsh Ministers should come into force. Why should everything else come into force two months after Royal Assent, but for clause 17 we will have to wait until the Secretary of State says so? Perhaps the Under-Secretary might explain.
We agree with Opposition amendment 12, which is linked with new clause 6, to extend the Welsh Government’s borrowing capacity. It is absolutely right that the Welsh Government should have fiscal levers at their disposal to facilitate economic growth in all corners of our country—and, I stress, all corners not just in the heartlands of south-east Wales.
Plaid Cymru has taken this Bill extremely seriously. We have tabled a great number of amendments. We shall press two amendments to a vote this evening and, with leave, new clause 2 if there is sufficient time. I look forward to hearing the Under-Secretary’s response.
I shall speak briefly in support of amendments 158 to 160 in the name of my hon. Friend Chris Davies. He has dealt very well with the thrust of the amendments and I do not wish to repeat what he has said. However, I would like to focus on proposed new subsection (4D) which provides:
“The Secretary of State may give a direction to Welsh Ministers that applications for consent for the construction or extension of stations generating electricity from wind which would have a capacity less than 51 megawatts must be determined by local planning authorities and must not be called in or determined by Welsh Ministers.”
As I mentioned on Second Reading, there have been unintended consequences of the Energy Act 2016, which is a development of UK Government policy that provides that all applications for onshore wind generating stations should no longer be governed by the Planning Act 2008, but should instead be determined by local planning authorities. This applies also in Wales, but as a consequence of Welsh legislation, the Welsh Government have designated all wind farm developments in Wales as so-called developments of national significance, which fall to be considered by the Welsh Government.
My hon. Friend the Member for Brecon and Radnorshire is right to insert this provision. We both come from parts of Wales where the development of wind farms has caused huge problems. They have been disproportionately scattered across rural Wales and there are large areas that almost literally have a turbine on every hillside. Local communities certainly want these applications to be determined at local level, and it is entirely right that the Welsh Government, having taken it upon themselves to adopt this power, should now have it taken away from them. The power should be returned to local authorities.
As I have suggested, this has been an example of the law of unintended consequences. I am absolutely sure that the Government did not expect that, as a consequence of the Energy Act 2016, all such applications would fall to be determined by the Welsh Government. That is what has happened, however, and local communities have been disfranchised. This proposal is therefore a sensible one, and I ask my right hon. Friend the Secretary of State to give consideration to it. If he cannot accept it this evening, will he take it away and come back with another proposal on Report to address the concerns that I have outlined?
I rise to speak to new clauses 4, 5, 8 and 9. I also refer Members to my speech on new clauses 2 and 3 and income tax during our first day in Committee last week.
New clause 5 would devolve air passenger duty to Wales. In 2012, the Silk commission recommended the devolution of a block of financial powers, including air passenger duty, to the National Assembly. That was a carefully crafted package of measures. Those minor taxes were clearly listed as pressing, and the commission recommended that they be devolved in the next possible legislative vehicle, which happened to be the 2013 Finance Bill. For whatever reason, however, APD was missing from that Bill and a Plaid Cymru amendment that would have included it was defeated.
On the publication of its recommendations, the commission had cross-party and governmental support. However, four years on, I am disappointed that the Government have turned their back on the commission and its recommendations. They are instead simply cherry-picking the amendments that will be the least disruptive to the current devolution arrangement for Wales. In that period, we have had a Northern Ireland Act and two Scotland Acts through which APD was devolved to those countries and, needless to say, Labour and Tory MPs based in Wales supported those Acts. Wales is, once again, getting the short end of the stick when it comes to devolved taxation.
I am disappointed that Jo Stevens is not in the Chamber. Although she is apparently oblivious to her party’s inability to support the devolution of APD twice in the previous Parliament, she has rightly stated:
“Air passenger duty has already been devolved to the Northern Ireland Assembly and…to the Scottish Parliament, but despite this, the Budget did not propose that it be devolved to the Welsh Assembly.”—[Official Report,
She asked for it to be devolved, and that is an unimpeachable argument—I agree with every word she said.
Members of this House argued for devolving air passenger duty to Scotland to encourage investment and the expansion of airline networks and coverage. Furthermore, the reservation of APD was cited in a report by the Northern Ireland Affairs Committee as a “stumbling block” to economic growth. Why are those arguments not good enough for Wales? Why is parity with the other devolved Parliaments not even on the table? The Bill’s failure to include APD in the list of devolved taxes simply proves once again that Westminster views Wales as a second-class nation.
Devolving APD is the best way to develop Cardiff airport and to boost the Welsh economy. Cardiff airport is the fastest growing airport in the UK. It is the only airport in Wales or the west of England that is capable of accommodating transatlantic aircraft. It serves a catchment area of 6 million people and contributes £104 million to the Welsh economy. Devolving APD to Wales would greatly strengthen the airport’s competitiveness, as well as significantly improving its contribution to the Welsh economy. Given that the airport is now owned by the Welsh Government, it seems bizarre that the UK Government are intent on restricting the ability of a Welsh public asset to maximise its potential. Cardiff airport has projected that by devolving APD and then abolishing it, the airport would experience a 27% increase in jobs and a 28% increase in gross value added overall. I am not arguing for complete abolition, but Debra Barber, the managing director and chief operating officer at Cardiff airport, has said:
“APD is a punitive tax that only serves to hinder Cardiff Airport’s ability to continue on this journey of growth and we agree that it should be abolished at the earliest opportunity. We believe that neighbouring airports should work together and complement one another, growing and strengthening side by side for the greater good of a thriving aviation industry across the UK.”
The whole point of devolving APD to Wales is to allow Welsh Ministers to set their own priorities for the aviation industry in Wales. At the end of the day, it will be up to Welsh Ministers to consider the most appropriate APD policy for Wales to maximise revenues from their own public asset. Let us remember that Cardiff airport is owned by the people of Wales. Clearly, increasing footfall at the airport could generate substantial revenues elsewhere, primarily by boosting economic performance across the whole of the economy, especially in the Secretary of State’s own Vale of Glamorgan constituency.
I am not privy to the Cardiff airport’s strategic planning, but my understanding is that the element of APD that the airport is most interested in is long-haul taxation. As I mentioned, the airport has a superb runway that can accommodate transatlantic flights, which Bristol airport cannot. If Cardiff were to develop that angle of its business, that could surely be of use to Bristol airport, if transport links between both airports could be improved. There lies a challenge for the Welsh Government, because our international airport urgently needs public transport upgrades to get people from Cardiff—and indeed Swansea—to and from the airport. The current infrastructure is awful, compared with that of Belfast, Glasgow and Edinburgh.
Recent public opinion polls suggest that 78% of Welsh voters agree that APD should be devolved. That does not quite compare with the percentage who support the introduction of Welsh bank notes, but that incredibly high number is still a clear indication of public opinion. It takes a brave politician to ignore opinion poll figures of those proportions.
Furthermore, the National Assembly should have more responsibility for the money it spends. The Secretary of State for Wales himself has said that increasing its taxation responsibilities makes the Assembly “truly accountable” to the people of Wales, so why not include air passenger duty in the list of devolved taxes? Why continue to limit the financial responsibilities of the Welsh Government? Jane Hutt, the former Minister for Finance and Government Business in the Welsh Government, who I am not in the habit of quoting, has said:
We have seen during the progress of the Bill that what the Labour Government say in Wales does not necessarily translate into voting behaviour where it counts down here in Westminster. Official Opposition Members might be relieved to hear that I do not intend to press the new clause to a Division, but I will return to the matter on Report. I hope that, in the meantime, the Secretary of State will listen to one of the most important strategic players in his constituency and his country, and I look forward to him bringing forward Government amendments to devolve APD before the Bill completes its progress through the House.
I now turn my attention to new clause 4, which would equalise the situation between Wales and Scotland when it comes to VAT revenues. The Scotland Act 2016 stated that revenues from the first 10 percentage points of the standard VAT rate would be devolved by the 2019-20 financial year. The current UK VAT rate is 20% and half of all the VAT raised in Scotland will be kept in Scotland. It is important to note that the Scottish Government will have no ability to change VAT rates.
Sales taxes in the United States are state taxes, not federal taxes, so different states have different levels of their version of VAT. We propose equalising the situation with Scotland because although EU rules prohibit different sales tax levels within the boundaries of a member state, adopting the Scottish model could pave the way, in a post-Brexit scenario, to devolving VAT in its entirety to Wales, to Scotland and to Northern Ireland. In a post-Brexit UK, it seems clear that significant political and fiscal power will have to be conceded by Westminster unless the post-Brexit vision is an even more lopsided state in which power and wealth are even more concentrated in London and the south-east.
The Scottish model has some incentivising benefits as it would help to galvanise the Welsh Government to boost the spending power of our citizens by basing a job creation strategy around well-paid jobs and seriously getting to grips with our low-wage economy. As page 4 of Cardiff University’s excellent “Government Expenditure and Revenue Wales 2016” report states:
“VAT was the largest source of revenue in Wales (raising £5.2 billion), followed by Income Tax (£4.6 billion) and National Insurance Contributions (£4.0 billion). The composition of revenues in Wales is markedly different from the UK as a whole. Large direct taxes…make up less of a share of total Welsh revenue, while a greater share is raised through indirect taxes”.
The report’s point is that indirect taxes such as VAT generate more revenue in Wales than direct taxes such as income tax. The report also indicates that Welsh tax revenues have grown by 12.3% since 2011, the main component of which was VAT revenues.
As long as we have a Tory UK Government, economic growth will continue to be based around consumer spending. If that is the case, it is all the more important that the people of Wales directly benefit from that growth and from their own spending power. Denying Wales the same powers as Scotland on VAT seems to be a deliberate attempt to undermine revenues for the Welsh Government.
New clause 4 is probing, so I will not be pressing it to a vote at this stage, but I look forward to hearing the UK Government’s justification for why they have not given Wales the same status as Scotland, especially considering the good performance of Wales—for whatever reason—in generating VAT revenues. I may return to this matter during the Bill’s later stages.
Similarly probing are new clauses 8 and 9, which would devolve corporation tax to mirror the situation in Northern Ireland. As a proud Welshman, I want my country to succeed. I desperately want our GDP to increase and to close the gap between the GDPs of Wales and the UK. If that is to happen, we unquestionably have to make Wales a more attractive place to do business. I want to make Wales the most attractive place in the UK to do business, and I hope that the Secretary of State for Wales would want the same for his country.
Most other countries are able to set their own rates of corporation tax. It is a lever with which a national Government can influence their country’s desirability to potential investors, but Wales is restricted from doing so. We are forced to compete with the other UK nations with our hands tied behind our backs. Northern Ireland has a huge competitive advantage over Wales, and we know about the rate in the Republic of Ireland, with which we share a sea border. We cannot build a High Speed 2 for Wales. We cannot electrify our railways and we cannot offer tax incentives. We are constantly forced to come to Westminster with a begging bowl. We are still waiting for even an inch of electrified railway. We are still not getting full Barnett consequentials from HS2, let alone getting our own high-speed rail, and we are once again being told that we cannot use corporation tax as a way of attracting business.
I am listening carefully to the hon. Gentleman’s proposal on devolving corporation tax. How would Wales cope with the significant volatility of corporation tax income?
I am grateful for that intervention because it provides a great insight into the Secretary of State’s thinking. If that is his argument on fiscal powers, he should align himself with the Labour party, which opposes Wales having income tax powers for exactly the same reason. This is about whether one believes that the Welsh Government can use such levers effectively to create jobs in our country. That intervention is indicative of the Secretary of State’s mindset.
Given that corporation tax is devolved in Northern Ireland, I hope that the Secretary of State will do his job, stand up for Wales and make it a devolved tax in Wales, as was recommended by the Silk commission’s report.
Thank you, Sir Alan, for calling me to speak in this hugely important debate. All Welsh Members recognise the Bill as an attempt to create a stable, long-lasting devolutionary settlement for Wales that provides financial accountability to the Welsh Government. I associate myself with many of the comments from both sides of the Committee, although I do not agree with everything that has been said.
I want to refer specifically to amendments 158 to 160, which have featured quite a lot in today’s debate. I have been inspired to speak in part by the contribution of the shadow Secretary of State for Wales, in which he was positive about energy. There is real potential for Wales to become an energy giant. I have been to Dinorwig about three times and have been inspired by the history of what Wales has achieved in energy production. We have even had—the shadow Secretary of State will not agree with me on this subject—nuclear energy generation in Wales on a considerable scale. It has formed part of a real decarbonisation effort, which I have supported and which we may well carry on at Wylfa B. We have the Swansea Bay tidal lagoon project and other such projects, and there is wonderful potential for Wales if they go ahead. At this stage, the issue is clearly one of whether they will become financially viable. There is no doubt that the tidal range is amazing, and I certainly hope that those schemes can be approved and that Wales can carry on its history of making a contribution to energy generation.
I am also inspired by those who tabled the amendments, including my hon. Friend Chris Davies and my right hon. Friend Mr Jones. The devolution of energy is a difficult issue for me, and I want to run through the reasons why. My concern is about onshore wind farms and the implications of onshore wind, particularly for my constituency. I am desperately keen to support the devolution process and keen that the Wales Bill be successful, particularly in relation to financial accountability. The Bill will enable the Assembly to become a Parliament and to grow up. However, the Welsh Government’s history when it comes to onshore wind causes huge problems, certainly in my constituency. They are landscape vandals—landscape philistines. That has been the general approach of the Welsh Government to onshore wind in my constituency. There are probably more wind turbines in Montgomeryshire than anywhere else in Wales.
Turning to the scale of what the Welsh Government want, they wanted another 500 turbines and a 40 km, 400 kV cable into Shropshire, which would have devastated my entire constituency. Powys County Council had to spend a huge amount of money simply to defend its constituency. The Ministers know what I am about to say, as they have heard me say it before. The only reason I can support this Bill is, ironically, that the Welsh Government have behaved in a centralising way when the UK Government devolved power to local authorities to decide on onshore wind farms. On the same day they devolved this to local authorities in Wales, the Welsh Government took that power back to themselves, like some old Soviet republic grabbing power to itself and away from the people. It was scandalous but the Welsh Government did that.
This Bill has within it the movement of power over onshore wind to the National Assembly, a change that has already happened through the Energy Act 2016. The part of this Bill that I am more interested in, and the detail I shall want to return to, is any powers we give the Welsh Government as a consultee to influence the subsidising process. That is where I disagreed fundamentally with the shadow Secretary of State, as he seemed to be suggesting that we give the Welsh Government power over that aspect of onshore wind as well. If that were part of this Bill, for me, representing my constituency and facing a Government in Cardiff who wanted to do it great damage, the Bill would be difficult to support.
We have had a decent debate about the issues relating to this group of amendments. Clause 36 is a carefully drafted clause, which, again, gives effect to the St David’s day commitment on energy consenting. The combined effect of subsections (1) to (6) is to disapply the Secretary of State’s power under the Planning Act 2008 to grant development consent for electricity generating stations in Wales and in the Welsh inshore and offshore zones, not exceeding a capacity of 350MW. This is a compromise, but one based on the views expressed by Silk and the St David’s day agreement, which was attempting to reach a consensus. Development consenting for all onshore wind-powered generating stations in Wales has already been devolved through the Energy Act 2016, and I shall say more about that in a moment in relation to some of the amendments put forward by Conservative Members.
Amendments 74 to 80 were tabled by Hywel Williams, and they again seek to reopen the issue of the political consensus we found under Silk and as part of the St David’s day process. It is important that we recognise that the Bill is attempting to move forward on the basis of consensus, whereas the amendments are trying to open up the whole issue once more. Clearly, we have to accept that the electricity transmission system in England and Wales is thoroughly integrated, and we must keep that in mind when we legislate on this issue. It is also important to highlight that the consensus on the 350MW figure is appropriate, given that we are dealing with a system that is interrelated and interdependent. It is moving significant changes and decision-making powers to Wales, but it is also recognising the importance of what might be seen as a strategic energy development. One of more than 350MW is considered to be strategic, whereas one of less than that can be done on a Welsh basis.
We have rightly talked a lot about hydroelectric generation in this debate. I am proud that my constituency has several sites that are open to development for hydro energy production. A 350MW rule would imply that all those developments could be decided upon in Wales, which is a major development. The biggest challenge we would have would be ensuring that the electricity infrastructure to take energy out of the Conwy valley was up to speed.
Perhaps this is a mischievous point, but may I ask the Minister this: if 350MW and over is “strategic”, was 50MW and over strategic in the past? If so, what has changed?
It should be stated that a former Secretary of State for Wales and former leader of this party had long argued that there was a need to look at a higher limit. It is fair to say that the process of devolution is an ongoing one, and it is highly unreasonable to criticise the fact that we are moving towards a situation where very large developments of hydro power in north Wales could be decided upon in Cardiff.
As the process is ongoing, do we not have a responsibility to catch up with information that was not available to the Silk commission? I do not think that the Newport barrage and Cardiff barrage were envisaged at that time. How does it make sense for the Welsh Government to have control over the Swansea lagoon, but not over the Newport and Cardiff lagoons?
I am very sympathetic to the concept of tidal lagoons, but, as the hon. Gentleman will be aware, a review is being undertaken at this time and I would not want to prejudge it. It is being undertaken by Charles Hendry, who is well respected across this House.
Clause 37 allows Welsh Ministers to make declarations extinguishing public rights of navigation, so as to ensure safety out to the seaward limits of the territorial sea in relation to generating stations up to 350MW. Clause 38 aligns, in a single authority, the ability to consent both to a generating station itself and the associated overhead line which would connect that station to the transmission system. It does so by removing consenting applicable requirements under either the Electricity Act 1989 or the Planning Act 2008 for certain associated overhead lines with a transmission capacity of up to 132kV necessary for connecting generating stations of up to 350MW capacity. This is an attempt to generate a one-stop shop for energy opportunities of that size in Wales. The Silk commission rightly identified that a one-stop shop should be developed, and the Bill tries to deliver that in a Welsh context.
Government amendments 47 to 49 correct an inadvertent constraint in the current drafting of clause 38 by removing the presumption that Welsh Ministers are the devolved consenting authority.
On clause 39, the Planning Act 2008 introduced the concept of “associated development”—development that the Secretary of State could consent to as part of the development consent orders which underpin and facilitate major development projects. The ability to grant associated development allows for more of the complete projects to be delivered within a single consent, to try to make the situation easier for developers. In Wales, the benefit of this approach has hitherto been restricted only to certain activities around the construction of underground gas storage facilities. Clause 39 amends relevant definitions in the Planning Act 2008 to extend the scope of associated development in Wales to include activities accompanying generating projects above 350 MW and larger overhead lines connections of 132 kV. Again, it fulfils a St David’s day commitment and implements a Silk commission recommendation.
I think it is fair to say that amendments 158 to 160, tabled by my hon. Friend Chris Davies, seek to re-open matters which have already been debated in the context of the Energy Act 2016. That Act delivered the Government’s manifesto commitment to give local people the final say on wind farm applications. It also ensured that in Wales it is for the Assembly and Welsh Ministers to decide how decisions are taken. I see no basis for rowing back from that position now, but I agree wholeheartedly with my hon. Friend that the Welsh Government should ensure that local people in Wales have the final say on these matters.
In our discussion of the Bill, we have talked about the importance of financial accountability, but this is also a case of political accountability. In my constituency, Aberconwy, we had the development of the Gwynt y Môr wind farm. I think I am right in saying that every single councillor in the Conwy local authority area voted against the development, but it was imposed by diktat by the then Energy Secretary. The important point is that the changes and the power given to local communities as a result of Acts passed by the coalition Government were a direct response to that political need for change. If the Assembly Government are guilty of taking powers into their own hands, there is political accountability there which needs to be challenged and needs to be part of the political discourse in Wales.
The Energy Act has ended subsidy for new onshore wind. If an onshore wind project does not already have planning permission, it is not going to be eligible for subsidy under the renewables obligation. In all the circumstances, therefore, the amendment should not be pressed to a vote.
Clauses 40 and 41 devolve further powers to Welsh Ministers in respect of equal opportunities. The powers follow as closely as possible the approach adopted in Scotland, but the two approaches are not identical. Clause 40 covers the operation of the public sector equalities duty. It removes the requirement in section 152 of the Equality Act 2010 that the Welsh Ministers consult a Minister of the Crown prior to making an order amending the list of Welsh public authorities that are subject to the duty, replacing it with a requirement to inform.
Clause 41 provides for the commencement and implementation of part 1 of the Equality Act 2010 in Wales. Part 1 imposes a duty on certain public bodies to have due regard to socio-economic considerations when making strategic decisions. Clause 41 allows the Welsh Ministers to bring part 1 into force in Wales on a date of their choosing. It also enables Welsh Ministers to amend the 2010 Act to add or remove relevant authorities that are to be subject to the duty, without first consulting a Minister of the Crown.
Clauses 42 and 43 extend Welsh Ministers’ existing responsibilities for marine licensing and marine conservation in the Welsh inshore region to the Welsh offshore region. The clauses fulfil St David’s day commitments and implement recommendations in the Silk commission’s second report.
Clause 44 enables the Secretary of State to intervene on legislation or Executive activities where she has reasonable grounds to believe that these might have a serious adverse impact on sewerage in England. As part of this Bill, legislative competence for sewerage will be devolved, subject to the matters set out in C15 of new schedule 7A. These powers of intervention are similar to those already held by the Secretary of State in relation to water. They may be used where an Act of the Assembly, or the exercise, or failure to exercise, a relevant function might have a serious adverse impact on sewerage services and systems in England.
Amendments 81,125 and 126, tabled by the hon. Member for Arfon, seek to take forward the recommendations of the Silk commission in relation to water and sewerage. The Silk report recognised that water and sewerage devolution is complex and that further work to consider the practical implications was needed. The Government set up the Joint Governments Programme Board with the Welsh Government to look at these issues and report on the likely effects that implementing the commission’s recommendations would have on the efficient delivery of water and sewerage services, consumers and the water undertakers themselves. As my right hon. Friend the Secretary of State explained earlier, that work has concluded and the Government are considering the evidence before deciding whether and how the recommendations will be taken forward. We will consider carefully the interests of customers and businesses on both sides of the border before reaching that decision. It should be stressed that this issue is under consideration.
Will this material be available when we are next discussing the Bill? If I remember correctly, I first heard about that working group when we were discussing the 50 years since Capel Celyn. As we are now nine months down the road, it would be appropriate for it to be reported to the House before the Bill comes to the end of its journey.
I thank the hon. Lady for her question. Her recollection is correct. We have only just received the report, so consideration of it must now take place. It is now with the Wales Office, and, after it has been considered, we will, in the manner described by my right hon. Friend the Secretary of State, discuss the contents of the report with other parties who have an interest in the Wales Bill.
Clause 45 fulfils a St David’s day commitment and a Silk commission recommendation to devolve to Welsh Ministers the power to make building regulations for “excepted energy buildings” such as generating stations and gas storage facilities. Clause 46 formalises the current differing arrangements for consulting the Welsh Ministers on renewable energy incentive schemes.
Amendments 130 to 132, which were submitted by the Opposition, would require the Secretary of State to gain the consent of Welsh Ministers, rather than to consult them. Energy policy is a reserved matter as regards Great Britain. Maintaining consistency provides for workable schemes, certainty to the industry and fairness to consumers. It is right that responsibility for renewable energy incentive schemes should rest with UK Ministers. I hope that that comment has been welcomed by my hon. Friend Glyn Davies.
Clause 47 implements for Wales the conclusions of the HM Treasury review of the Office for Budget Responsibility, published last year. The OBR has a statutory duty to carry out a number of core functions, including to produce fiscal and economic forecasts. This clause ensures that it will continue to receive information from Wales as necessary to fulfil that duty. It reflects the increased fiscal devolution to the Assembly, and the Welsh Government’s competence for economic development. These roles mean that the OBR is more likely to require and use information held in Wales to fulfil its remit.
Clause 48 increases the accountability of Ofgem to the Assembly. Clause 49 provides that where a coal operator wants to mine in Wales, it must seek the approval of Welsh Ministers as part of its application for a licence. Clause 50 increases the accountability of Ofcom to the Assembly and Welsh Ministers. It goes further by giving Welsh Ministers the power to appoint one member to the Ofcom board who is capable of representing the interests of Wales.
Clauses 51 and 52 and schedule 5 and 6 make consequential and transitional provision relating to the Bill. Clause 51 allows the Secretary of State to make consequential amendments by regulations in connection with this Bill, and through amendments 82, 144 to 147 and 150 to 154, the Opposition parties are seeking to give the Assembly a role in approving those regulations. Amendments 144 to 147 would require the Assembly also to approve those regulations where such consequential amendments are within the Assembly’s competence or where they alter the Assembly’s competence. Amendments 82 and 150 to 154 would achieve the same with regard to consequential amendments that amend Acts or measures of the Assembly or secondary legislation made by the Welsh Ministers.
Clause 51 is a fairly typical consequential provision that ensures that the Government are able to tidy up the statute book where required in connection with this Bill. Indeed, similar provisions are included in Assembly legislation as well. Giving the Assembly a role in approving the Secretary of State’s regulations made under this clause would be as unjustified as giving Parliament a role in approving Welsh Ministers’ regulations made under Assembly Acts. It would also make the process far more complicated and time consuming than it needs to be. In reality, we would discuss any proposed changes that impacted on the Assembly’s competence with the Welsh Government before regulations were laid.
Government amendments 50 to 52, 59 and 60 are the result of productive discussions between the Wales Office, the Welsh Government and the Assembly Commission. Paragraph 2(1) of schedule 6 provides that the new reserved powers model will apply only to Assembly Bills that have been introduced, but that have not passed stage 1 in the Assembly’s legislative process before the day on which the reserved powers model comes into force, or that are introduced after that day. Passing stage 1 means that the Assembly has approved the general principles of a Bill.
Paragraph 2(2) of schedule 6 currently provides that an Assembly Bill that has been introduced under the conferred powers model, but that has not passed stage 1 before the day on which the reserved powers model comes into force, would fall. Amendment 59 removes that provision so that a Bill could still proceed under the new reserved powers model, even if it has not passed stage 1.
Amendment 60 introduces tailored transitional provisions into schedule 6 for relevant energy infrastructure applications. Applications that have been formally accepted for examination under the Planning Act 2008 will continue to be determined by the Secretary of State under that Act. Those that have not been formally accepted will be considered by Welsh Ministers under the devolved planning regime.
Amendments 50 to 52 make some sensible and necessary changes to the commencement provisions in clause 53. Let me quickly touch on amendment 52, because the hon. Member for Arfon mentioned it. It ensures that Welsh Ministers’ common law-type powers under clause 17 come into effect at the same time as the new reserved powers model—a change agreed with the Welsh Government.
Clause 53 provides the framework for commencing the provisions of the Bill and for implementing the reserved powers model. Most importantly, subsection (3) provides for the new reserved powers model—at clause 3 and schedules 1 and 2—to come into force on the day appointed by the Secretary of State by regulation. That day is called the “principal appointed day”. The Secretary of State must consult Welsh Ministers and the Presiding Officer before making the regulations that establish the principal appointed day. That is to ensure their views are fully taken into account in determining when the reserved powers model comes into force.
Under subsection (4), the other provisions of the Bill come into force on whatever day the Secretary of State appoints by regulations. That may include the regulations made under subsection (3). Indeed, it is the Government’s intention to bring into force most of the Bill’s provisions devolving further powers to the Assembly and Welsh Ministers at the same time as the reserved powers model—in other words, on the principal appointed day.
Subsection (6) requires the principal appointed day, or a day appointed by regulations made under subsection (4), to be at least four months after the day on which the regulations are made. That is to ensure sufficient time for the Assembly and the Welsh Government to make the appropriate arrangements for the new model. Finally, clause 54 sets out the short title of the Bill as being the Wales Act 2016.
Amendment 12 and new clause 6, which were submitted by the Labour party, seek to quadruple the Welsh Government’s capital borrowing limit, which was set in the Wales Act 2014, from £500 million to £2 billion. There are two considerations in relation to the borrowing limit: ensuring that borrowing is affordable for the Welsh Government and that it is appropriate within the fiscal position of the UK as a whole.
In relation to Welsh Government affordability, it is important to ensure that the Welsh Government have sufficient independent revenues to manage their borrowing costs. We therefore need to consider the balance between devolved tax revenues and borrowing. Had the Wales Act 2014 simply followed the precedent set at the time by the Scotland Act 2012, the Welsh Government would have ended up with a borrowing limit of around £100 million. However, the Government agreed to increase it to £500 million to enable the Welsh Government to proceed with the upgrade to the M4 in Wales—something this Government fully support, although we are still waiting for action from the Government in Cardiff Bay.
The existing borrowing limit is therefore relatively large, compared with the position in the Scotland Act 2012, and I would argue that it goes further. Even taking into account the Welsh rates of income tax, this limit remains relatively large and, therefore, appropriate. The Government do not therefore believe it is right to increase the Welsh Government’s £500 million capital borrowing limit. Even if this position changes in the future, the Wales Act 2014 already provides for the UK Government to increase the Welsh Government’s capital borrowing limit by secondary legislation.
New clause 4, which was spoken to by Jonathan Edwards, seeks to assign a share of the VAT revenues generated in Wales to the Welsh Government in the same manner that a share of Scottish VAT revenues will be assigned to the Scottish Government following the Smith agreement. However, the Silk commission gave full consideration to the case for assigning a share of the VAT receipts generated in Wales, and while it recognised some of the arguments in favour, it ultimately recommended against VAT assignment in Wales. Unlike in Scotland, there is no consensus on this issue. I return to the fact that the Bill is moving through this House on the basis of consensus.
As we committed to do in the St David’s day agreement, the Government are considering the case and options for devolving air passenger duty to the Assembly, informed by a review of options to support English regional airports from the potential impacts of APD devolution. However, it is important to note that, as the hon. Gentleman knows to be true, the Silk commission did not recommend the devolving of APD in full, but the devolving of long haul only. It is important to bear in mind that when legislating on devolving a tax such as APD, we have to take into account the impact on other airports within the United Kingdom. We must also take into account whether, as my right hon. Friend the Member for Clwyd West highlighted, the benefits that might arise for an airport owned by the Welsh Government in south Wales would justify the complexity and difficulties of the devolution process, in the context of the economic development and the transport links of north Wales. I very much doubt that.
We are therefore not of the view that the case has been made for devolving APD at this point, but we will remain open to listening to the arguments in future. I fully understand the importance of the aviation sector for creating jobs and growth in Wales. I think it is fair to say, though, that the hon. Gentleman’s arguments seemed akin to an argument for state aid for a state-owned asset. In the light of the fact that we have just voted to leave the European Union, he seems very keen to adopt the concept of state aid provision. However, the fact that the Welsh Government have decided to buy the airport does not, in itself, make an argument for devolving APD.
New clauses 8 and 9 relate to the devolution of corporation tax. Together, they intend to replicate for Wales the Northern Ireland corporation tax regime, as set out in the Corporation Tax (Northern Ireland) Act 2015, which allows for devolution to the Northern Ireland Assembly of the power to set a Northern Ireland rate of corporation tax for certain trading income. Commencement of this legislation remains dependent on the Executive demonstrating that their finances are on a sustainable footing. Northern Ireland faces a number of unique challenges that Wales does not. In particular, it has a land border with the very low corporation tax environment in the Republic of Ireland. The Northern Ireland corporation tax model has been specifically designed for Northern Ireland’s economy and needs, and would not be appropriate for Wales. Again, we are saying no to the hon. Gentleman’s claims.
I propose that clauses 22 to 54 and schedules 5 and 6 stand part of the Bill, and that amendments 47 to 52, and 59 and 60 are agreed to. I urge Hon. Members not to press their amendments.
Question put and agreed to.
Clause 22 accordingly ordered to stand part of the Bill.
Clauses 23 to 35 ordered to stand part of the Bill.