I welcome the Government’s decision to remove the requirement for a referendum before devolving powers over income tax to the National Assembly for Wales. I am afraid that I have to take issue with the noble Lord on the Labour Benches, who still sees the need for a referendum.
Our democratic institution, the National Assembly, commenced 19 years ago and successive Bills have conferred increasing powers on it. The aim of this Bill should surely be to further build that democratic institution by providing it with the powers it needs to do its job. Along with those powers, there must also be a means of providing the Assembly’s electorate with the opportunity to hold the institution to account. For me, these two factors—power and accountability—are the basis of democracy. Providing the Assembly with powers over partial income tax devolution, which brings with it the opportunity for transparency and accountability without holding a referendum, should be a mark of the confidence of this House in the Welsh Government’s ability to carry out their functions. The Bill should be about indicating a clear way ahead for the Assembly to provide the people of Wales with the mature and confident democracy we want and deserve, not about placing further obstacles in the path of their progress.
I am tired of living in a country which has had to hold out the begging bowl to the Treasury to enable it to receive funding via its annual block grant. I am tired of hearing Welsh Ministers blame the UK Government for every shortfall in funding. But, most of all, I am tired of there being no means by which I, as a Welsh elector, am able to hold the Government of my country to account for the way they raise and spend their revenue.
I welcome last year’s devolution of powers over business rates to the Assembly and I look forward to stamp duty land tax and landfill tax being transferred in 2018. The addition of a £1.9 billion share of income tax, partially devolved to the Welsh Government, would form the basis of a system the Welsh electorate could scrutinise and on which they could hold the Government to account.
However, I agree with the noble Lord who spoke about the possible difficulties of devolving powers. In their joint report, the Wales Governance Centre and the Institute for Fiscal Studies urge caution in the choice of funding mechanism we employ and note two material considerations: Wales’s,
“relatively slower rate of population growth”,
“the size and distribution of the Welsh tax base”,
“significantly divergent to that of the rest of the UK, with far more lower-income earners”.
These are issues that we should take seriously. The prospect of these two factors having an adverse impact on the funding available to the Welsh Government in future years needs to be fully understood by Members of this House and mitigated against in the fiscal framework now under discussion. I would therefore be grateful if the Minister updated the Committee on the progress of the negotiations on the fiscal framework associated with the Bill. I also seek his assurance that a document will be in the hands of noble Lords before Report, enabling us to come to final decisions on a number of issues based on the evidence in the framework.
Finally, as we debate further amendments in Committee, I will certainly be listening very carefully to the Minister as he seeks to explain the Government’s justification for the inclusion of many reservations to the UK Government. However, on the devolution of income tax powers to the National Assembly without the need for a referendum, I am happy to lend the Government my support.